CenterPoint Energy Stock

Good morning, and welcome to CenterPoint Energy's Third Quarter 2026 Earnings Conference Call with Senior Management. [Operator Instructions]

I will now turn the call over to Ben Vallejo, Vice President, Investor Relations and Corporate Planning. Mr. Vallejo, please go ahead.

Good morning, and welcome to CenterPoint's Q3 2026 Earnings Conference Call. Jason Wells, our Chair and CEO; and Chris Foster, our CFO, will discuss the company's third 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 10-Q, other SEC filings and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statements other than as required under applicable securities laws.

We reported $0.50 per diluted share for the third quarter of 2026 on a GAAP basis. Management will be discussing certain non-GAAP measures on today's call. When providing guidance, we used the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. 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.

Now I'd like to turn it over to Jason.

Thank you, Ben, and good morning, everyone. On today's call, I would like to address 3 key areas of focus for the quarter. First, I will briefly touch on our strong third quarter financial results and the increase to our 2026 non-GAAP EPS guidance range we announced this morning. Second, I will discuss how the accelerating and diverse customer-driven growth in our Houston Electric service territory is driving the $4 billion increase to our capital investment plan and the acceleration of another $1.5 billion into the first 5 years of our plan. And with more growth expected, today's increase reflects only a portion of the opportunity in front of us as we continue to see at least $10 billion of additional investment opportunities through 2035.

And finally, I'll discuss how the strength and visibility of our growth across our service territories gives us the confidence to extend our long-term earnings outlook. We now expect to deliver non-GAAP EPS growth at the mid- to high end of our 7% to 9% annual range for another 2 years through 2030. I will also cover our 2027 non-GAAP EPS guidance of $2.07 to $2.09 representing 9% growth at the midpoint from our increased 2026 guidance.

I will start with our strong third quarter financial results. This morning, we reported third quarter 2026 non-GAAP EPS of $0.53. Our continued strong execution brings us to nearly 80% of the midpoint of our original full year guidance range of $1.89 to $1.91. Our outstanding year-to-date results gives us greater confidence and visibility to raise our 2026 non-GAAP EPS guidance range to $1.90 to $1.92. At the midpoint, this new and higher range would represent nearly 9% growth from our 2025 delivered results and would mark the 5th year of more than 8% growth since 2020. It also resets our earnings base higher from which we intend to compound future growth as we seek to create durable value for our investors year after year.

I'd now like to turn to the accelerating and diverse customer growth that is driving today's announced $4 billion increase to our capital investment plan and the acceleration of an additional $1.5 billion of investments. Greater Houston's growth continues to accelerate, demonstrated by approximately 14 gigawatts of customer demand we submitted as eligible load for ERCOT's Batch Zero process.

As we continue to work with stakeholders on our Batch Zero submissions, we remain highly confident in the 10 gigawatts of baseload demand we outlined on our previous call, and we now expect approximately 2 gigawatts to remain at studied load. Combined with our smaller transmission and distribution customers growth, we expect to energize at least 14 gigawatts by the end of 2030. This incredible demand is creating a powerful multiplier effect as large industrial expansions drive broader commercial growth across our service territory. Notably, industrial and commercial leasing activity in the Houston area is up more than 30% from last year. We are seeing that momentum firsthand with nearly 1 gigawatt of distribution level load request received in the last year.

Houston Electric's more than 10 gigawatts of existing system capacity helped attract this demand by enabling fast, efficient and cost-effective interconnections, giving Greater Houston a compelling speed to market advantage over competing regions across the country. This growth strengthens the regional economy while also supporting customer affordability. Notably, at least 14 gigawatts of demand anticipated through the end of the decade are expected to generate $5 billion in customer savings across Texas over the next 10 years.

Serving this growth absorbs the capacity that helped attract it. To replenish that capacity and sustain the region's competitive advantage for the next wave of demand, earlier this year, we began an internal transmission study focused on increasing load serving capacity in 3 key areas: first, import transmission capacity; second, system stability, and third, intra-regional transmission capacity. To date, that work has identified more than a dozen projects across these 3 areas required to add incremental load serving capacity. This capacity is needed in the near term as we already have requests for significant additional demand that we anticipate submitting in Batch One next year.

Together, these projects represent approximately $5.5 billion of investments in 2 categories. First, $4 billion for newly identified projects not previously included in our 10-year plan, and $1.5 billion of projects accelerated from the back half of the plan into the first 5 years through 2030. We will efficiently fund this growth with a modest $1.6 billion increase to our equity financing guide below our 47% rule of thumb for financing incremental investments. Chris will cover the timing of our capital investment and equity financing needs, including opportunities to reduce the amount of equity financing in his section.

Combined with the sufficient financing, the increased and accelerated investments will strengthen the earnings power of the company and are expected to drive an enterprise rate base CAGR of more than 14% through the end of the decade. We will continue to advance our transmission study to identify the additional infrastructure needed to meet the region's accelerating growth, which will likely inform additional incremental investments. Beyond today's $4 billion increase, we continue to see at least $10 billion of additional investment opportunities through 2035, driven by 3 categories.

First, additional transmission infrastructure to support Greater Houston's accelerating customer demand. As we continue to advance our transmission study process, that will likely inform incremental investments needed to enable the next phase of growth in Greater Houston. We expect to be in a position to share our next update in this process in the first half of next year.

Second, along these growth investments, we will advance additional resiliency initiatives that build on Houston Electric's nearly 40% improvement in reliability over the past several years. We expect greater visibility into these incremental investments in the second half of next year and are targeting filing our next System Resiliency Plan by the end of 2027.

Third, we continue to see large load opportunities in Indiana where we anticipate signing a deal with a large load customer by the end of the year. These incremental opportunities combined with the investments announced today reinforce our confidence in delivering sustained double-digit rate base growth over the course of our 10-year plan while supporting long-term reliability, resiliency and economic competitiveness across our service territories.

In closing, we continue to believe that we have one of the most customer-driven and durable long-term growth plans in the industry. The scale and pace of the customer-driven growth in Greater Houston is already driving today's announced $4 billion increase in our capital investment plan and reinforcing the long-term earnings power of our company. These needed investments provide the visibility to extend our expectation for non-GAAP EPS growth at the mid to high end of our 7% to 9% annual guidance range through 2030.

The opportunity extends well beyond today's planned update. We continue to see at least $10 billion of additional capital investment opportunities through 2035, supporting economic growth, customer affordability and safe and reliable service in the communities we serve.

With that, I'll now turn it over to Chris to cover the financials in more detail.

Thanks, Jason. This morning, I will cover 4 areas of focus. First, I will walk through our strong third quarter results, which brings us to nearly 80% of our full year guidance and supports raising our 2026 non-GAAP EPS guidance range from $1.89 to $1.91 to $1.90 to $1.92 as well as our extended outlook to grow at the mid- to high end of our 7% to 9% range through 2030.

Second, I will detail the customer-driven $4 billion increase to our 10-year capital plan from $66.7 billion to $70.7 billion through 2035, and the $1.5 billion of accelerated investment that together drive an enterprise rate base CAGR of more than 14% through 2030.

Third, I'll discuss our updated financing plan including a modest $1.6 billion increase in equity financing to fund 40% of the $4 billion capital plan increase to support strong credit metrics, a healthy balance sheet and a pathway to higher long-term growth.

And finally, I'll provide a brief regulatory update, including progress on timely recovery of our investments through our interim capital trackers.

Starting with our third quarter results on Slide 4. On a GAAP EPS basis, we reported $0.50 for the third quarter of 2026. On a non-GAAP EPS basis, we reported $0.53 for the quarter. Our non-GAAP results exclude the impacts of our temporary generation units, which are no longer part of our regulated utility business. We are actively marketing these units for sublease or sale and any resulting gain will also be excluded from our non-GAAP results.

Now taking a closer look at the drivers of our strong third quarter results. Compared to the third quarter of 2025, growth and rate recovery contributed $0.09 of favorability driven by a full quarter of updated rates from interim filings that became effective in June. Weather and usage were $0.03 favorable driven by hotter weather and higher usage across our Texas and Indiana service territories. O&M was flat for the quarter, and we remain on track to reduce O&M by 1% to 2% from the prior year. Year-to-date, we have already achieved a 1% reduction as we continue to take costs out of the business for the benefit of all stakeholders. Other items were $0.05 unfavorable, primarily due to a onetime deferred income tax remeasurement benefit recorded last year as part of our efforts to optimize our tax structure.

Higher financing costs were $0.04 unfavorable, $0.03 from approximately $3 billion of new debt issuances net of maturities and $0.01 of dilution from modest equity financing. We've also now completed our financing needs for the year. These results bring us to nearly 80% of our original full year guidance and give us confidence in delivering our increased 2026 non-GAAP EPS guidance range of $1.90 to $1.92, nearly 9% growth at the midpoint over our 2025 results.

Supported by the incremental investments I will detail in a moment, we now expect to grow non-GAAP EPS at the mid- to high end of our 7% to 9% annual range through 2030 and 7% to 9% annually through 2035. Our 2027 non-GAAP EPS guidance of $2.07 to $2.09 or 9% growth at the midpoint reflects that momentum.

Turning now to our capital plan, which reflects a $4 billion increase and $1.5 billion of accelerated investment to serve the customer growth already underway. As Jason outlined, we are increasing our 10-year capital investment plan by $4 billion to $70.7 billion. Combined with our earlier 2026 updates, we have now increased the plan by $5.7 billion or nearly 9% since our 2025 Investor Day. We are also accelerating $1.5 billion of projects originally planned for after 2030 to prepare the system for diverse customer demand. Approximately 85% of the initial projects identified in our transmission study are brownfield projects within existing rights of way providing a more straightforward path to expanding system capacity.

We will begin deploying this capital in 2027 and scale the investment in the years that follow, deploying $4.5 billion of the incremental and accelerated investments by the end of 2030 and driving an enterprise rate base CAGR of more than 14% through 2030. We expect to efficiently recover these investments through our existing transmission and distribution capital trackers.

Importantly, this is just the initial phase. As our transmission studies continue, we expect future capital updates as we build the system needed to meet the unprecedented demand growth across the Greater Houston area.

Turning briefly to the 2026 capital execution. We invested $4.1 billion through the third quarter for the benefit of our customers and communities. We expect full year capital investment to come in modestly below our $6.8 billion target due solely to project timing, which we expect to recover in the first quarter of 2027.

Turning now to how we will fund the incremental investments announced today. We are increasing our remaining 10-year equity financing guide by $1.6 billion to $4.5 billion, well below our previously communicated 47% funding guide for incremental capital investment. We expect to issue approximately $4 billion from 2027 through 2030, including $500 million to $700 million of common equity in 2027. Across the $5.7 billion of capital plan increases announced this year, incremental equity represents only about 25% of the funding requirement, demonstrating the efficiency of our financing plan. As a reminder, cash flow benefits from Treasury's corporate alternative minimum tax clarification enabled us to increase our capital plan earlier this year without additional equity financing.

Looking ahead, we see additional financing tailwinds that we believe could either: one, reduce our updated equity guide; or two, fund incremental capital investment at amounts less than our 47% equity rule of thumb. I'll highlight a few examples.

First, a sublease of our temporary generation units could provide cash flow tailwinds through 2029, while a sale could generate upfront proceeds to reinvest immediately in our regulated businesses.

Second, we will continue to evaluate our portfolio and financing needs to efficiently fund both our current plan and future opportunities. The recently completed sale of our Ohio gas LDC business reflects our continued focus on optimizing our portfolio and allocating capital efficiently across our jurisdictions.

And third, we continue to work with stakeholders to reduce regulatory lag and secure more timely recovery of our investments, supporting efficient financing for customer-driven growth.

Building on our financing plan, I want to touch on our credit metrics and balance sheet. At the end of the third quarter, our adjusted FFO to debt ratio under Moody's methodology was 13.7%. Two developments since quarter end should further strengthen this metric. First, we completed the sale of our Ohio gas LDC business on October 1, receiving approximately $1.4 billion in proceeds. Had those proceeds been reflected in our trailing 12-month metrics, our adjusted FFO to debt ratio would have improved by approximately 50 basis points.

Second, earlier this month, we filed for a refund of previously paid Corporate Alternative Minimum Tax. Following clarification this year that we are not subject to that tax. We expect the refund to improve our full year 2026 credit metrics by an additional 60 basis points. Neither benefit is reflected in our trailing 12-month metrics. Together, they reinforce our confidence in ending the year towards the higher end of our targeted 100 to 150 basis point cushion, above the Moody's downgrade threshold. And following Moody's revision of our outlook to stable, we now have stable outlooks across all rating agencies, reflecting our strengthened financial position.

Lastly, turning to regulatory matters. Our frameworks across our service territories continues to support timely, efficient recovery of our customer-driven investments as reflected in this quarter's updates. At Houston Electric, we filed our second distribution capital tracker or DCRF, requesting a $73 million revenue requirement increase. Interim rates were approved and implemented at the end of September, with a final order expected this month. In addition, we filed our second transmission capital tracker or TCOS in August and have since received a final order approving a $29 million revenue requirement increase which is now reflected in customer rates.

Outside of Texas, we expect to file a 3-year forward-looking rate case for Minnesota gas within the next week, reflecting investments to modernize our system, through pipeline and gas meter replacement and provide safer, more reliable service for our customers. In December, we plan to file a combined rate case for our North and South Indiana gas service territories. And as previously communicated, we expect this approach to result in a bill decrease for a significant number of our residential customers. Across all our service territories, we remain laser-focused on keeping our service affordable for customers.

In summary, our strong year-to-date execution supports our increased 2026 non-GAAP EPS guidance of $1.90 to $1.92 and reinforces our confidence in the outlook ahead. The $4 billion increase to our capital plan and $1.5 billion of accelerated investments position us to serve the customer demand already here and drive enterprise rate base growth of more than 14% through 2030. Our disciplined financing plan funds this growth efficiently while preserving our long-term balance sheet strength.

Together, they support our 2027 non-GAAP EPS guidance of $2.07 to $2.09 and our expectation to grow at the mid- to high end of our 7% to 9% annual range through 2030 and 7% to 9% annually through 2035. Our strong execution, disciplined financing and clear growth visibility position us to deliver sustained earnings growth and create durable value for all our stakeholders.

With that, I'll turn the call back to Jason.

Thank you, Chris. In closing, our strong year-to-date execution gives us confidence in delivering our increased 2026 non-GAAP EPS guidance, putting us on track for a fifth year of more than 8% growth since 2020 and our 2027 guidance of $2.07 to $2.09 builds on that momentum. That momentum is being matched by growth that is already here. Unprecedented customer demand in Greater Houston is already requiring a $4 billion increase to our capital investment plan and $1.5 billion of accelerated investment efficiently funded in driving enterprise rate base growth of more than 14% through 2030. And there's more to come.

With a line of sight to at least $10 billion of additional customer-driven investment through 2035, today's update captures just a portion of the opportunity in front of us. The strength of this growth gives us the confidence in our ability to deliver non-GAAP EPS growth at the mid- to high end of our 7% to 9% range through 2030 and 7% to 9% annually through 2035 through investments that strengthen reliability, support affordability and power economic development across our service territories for the benefit of our customers.

Thanks, Jason. Operator, I'd like to turn it over for Q&A.

[Operator Instructions]

Our first question comes from Shar Pourreza with Wells Fargo Securities.

Pretty solid update. First off, I just want to reconcile the updated rate base growth and the EPS CAGR. Rough math, the equity piece is like 200 basis points of dilution. I guess what's driving the other 300 bps of delta between rate base growth and EPS growth? And could any of that delta kind of reverse as we're going through the plan?

Thanks, Shar, for the question. Yes, obviously, as we've reported today, our focus is delivering consistent and durable financial results. I think the 14% rate base growth through the end of the decade provides, as you're pointing out, incredibly strong support for the extension of our guide to the mid- to high end of our range through 2030. Clearly, there's going to be a modest amount of equity dilution, as you mentioned, but we've historically been able to convert that rate base growth into earnings growth with about a 200 basis point delta. So this gives us incredibly strong foundation for continued strong delivery of EPS results through the end of the decade.

Got it. Perfect. And then just lastly, on funding, I mean, obviously, you're talking about the equity dilution a little bit. And you do have a good amount of equity. You've added some through 2030, but your CapEx needs keep going higher. I mean that's a key message on the call today. And it seems like you're potentially signaling new deals prospectively. As we think about sort of the remaining footprint, is there kind of any OpCos, Jason, that present substantial dyssynergies in the sale or is the entire footprint outside of Texas potential opportunities for you?

Yes. Thanks, Shar. I think what's important here is just the explosive growth, in particular, the Greater Houston region is experiencing. As we talked about today, with a transmission update, this only helps us serve about half the capacity that we are currently anticipating in our Batch One request. So there's clearly more tailwinds from a CapEx standpoint. As we've got a track record here of doing, we're going to focus hard on raising whatever the equity needs are efficiently. That may include portfolio optimization among the other things that Chris mentioned in his prepared remarks.

As it relates to dyssynergies, I think we've got a great track record of leaning in addressing any dyssynergies that may result from a transaction. I'd expect us to do the same moving forward. So our focus is on enabling the incredible and explosive growth that we're experiencing and doing so efficiently for our shareholders.

Our next question comes from Nick Campanella with Barclays.

I just wanted to ask, you kind of said that you still expect an Indiana large load customer by the end of the year. Can you just remind us what the size of that could be, whether that's going to get absorbed with current system capacity or new build and then just regulatory strategy as well?

Yes. Thanks, Nick, for the question. I continue to be very pleased with our progress. I think most importantly, we want to bring economic development to that region. It's been nearly 25 years since a large industrial customer has relocated to that region. And so our focus is really delivering that economic kind of opportunity for the community that we have the privilege to serve up there.

As it relates to the size, as we've talked about in previous calls, the team has done great work to free up about 700 megawatts of existing capacity in our system. And with some modest transmission upgrades, conversion of our simple cycle plant, we have the ability to scale to about 1.4 gigawatts with very modest levels of investment. Our focus is again on delivering that economic win, utilizing that capacity.

In particular, what I would say is, and I've suggested this on previous calls, what we continue to see is that many of the large hyperscalers are long chips and short power. So having 700 megawatts that is readily available, is incredibly attractive. We look at -- we're looking to secure that and then grow from there in the region. If the total demand is that 1.4 gigawatts or less, there's no reason for us to sort of complicate this with a generation company type approach. However, we continue to see strong interest in that region. If it exceeds that 1.4 gigawatts, and we're building incremental generation, I think it's a great way to isolate those new incremental assets. And so in that case, we would pursue a Genco.

Our focus is on continuing to make progress. We feel optimistic around our ability to secure an economic win for the community by the end of this year, and then over time, grow this for the benefit of all stakeholders in that region.

Very clear. And then on the $4.5 billion raised to the 5-year plan, just how much of that is falling under kind of current tracker mechanisms or it requires like a more formal rate process? And just acknowledging you kind of talked through ROE lag, an improvement of lag as something that could decrease equity needs on the other side. Are you going to be lagging the plan now because you're investing so much capital? And is there a window or anything that we could look forward to that could change that?

Sure, Nick. The simple way to think about this is the CapEx addition, nearly all are inclusive of capital tracker mechanisms that are recoverable, nearly all of them twice a year. So you're going to experience very limited lag there from the CapEx positions we referenced in the plan today. As part of kind of as you step back, the beauty of a lot of the current states we operate in, we're -- well over 80% of our recoveries do come through these capital tracker mechanisms. They're highly efficient and more affordable for our customers.

Our next question comes from Steve Fleishman with Wolfe Research.

So just on the transmission that's been added to the plan. Is this all lower voltage transmission, i.e., not additional 765 kV? And just maybe the latest, I know you guys were not in the first round of 765 kV, just latest thoughts on kind of your plans there, which I think kick off next year?

Steve, that's exactly right. The transmission that we announced today is lower voltage, 345 kV, 138 kV. Importantly, what we highlighted in Chris' prepared remarks, is about 85% of this work is brownfield. I think this is really kind of a hidden asset of the company that can't be understated. We've got significant right of way and opportunity to exist -- to utilize existing assets, which minimizes any disruptions to the communities we serve. It allows us to build faster, and it really gives us our competitive advantage on the speed to power basis.

Equally, and I think this has been a unique strategy for the company, every time that we took a plant outage on our transmission system, we'd use that to reconductor and expand capacity. And this is why, again, we have the ability to attract these large loads, interconnect them more favorably than anywhere else in the country.

So I don't look at this transmission announcement today as one that is disruptive with respect to the ongoing conversation around landowner rights. I think as we look forward, you mentioned that we do plan in the first half of next year to file for 765 kV. We outlined earlier this year, our 10 commitments to Texans around responsible development. Our commitment is to work proactively with these landowners to find optimal routes that respect the history of their property, minimizing disruptions to the communities we serve, making sure that we are doing so utilizing as much as possible local resources.

And so I think this commitment will help us as the state continues to look at ways to balance obviously, an incredibly important part of landowner rights with the need to continue this Texas economic miracle, and we look forward to working with all stakeholders proactively next year as we file for the 765 kV submissions.

Okay. And then just on the change in your load plan, it looks like you had some come out of the Batch Zero studied and growth development. Is that just some of the customers that kind of just did not necessarily feel like they were going to make the cut there?

Yes. We were very disciplined in terms of what we put forward overall base in Batch Zero. We continue to say we're incredibly confident about the 10 gigawatts of base load. There were approximately 2 gigawatts of studied load that -- as the state was conducting its audit process as those customers were finalizing all of their details, they've decided to withdraw their investment. I think what's important here, though, is we continue to see and have a high degree of confidence in the 10 gigawatts of baseload. We're seeing, as we highlighted, more distribution growth that we have ever experienced before. That more than offsets what fell out of studied load.

And I would tell you today, the early work that we're doing on Batch One submissions is already trending to be higher than what we submitted in Batch Zero. So I wouldn't look at this as anything other than the process working for the State. The State really only wants to advance projects that are going to be good partners in their communities, advance economic interests in an appropriate way. And I think that's what we have found as we've worked through the Batch Zero process. So the process is working as designed.

Okay. One more question, just going back to Shar's first question, the differential between the 14% rate base growth and the earnings growth target. So you mentioned 200 basis points of equity, maybe it's a little more in the near term, I don't know. But just, is there any other kind of financial factors there or just general kind of conservatism across your plan to kind of reconcile that?

It's definitely more of the latter. Really, again, we're building a plan that we can consistently deliver and enhance for the benefit of our stakeholders. I think what's important here, and as you think about the reconciliation between the rate base growth and the EPS guide, we have consistently built a track record where we rebase future earnings off of the higher delivered earnings, so much so that there has been a 15% increase in the earnings power to date as a result of that positive rebasing for outperformance. This gives us the ability to make sure that we deliver. And as we as we deliver, there is a compounding element to our stakeholders over time.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Nicely done. Maybe just rewinding back to where we started on the financing front. Just ask how do you think about addressing potentially with equity alternatives here, the $1.6 billion of equity you talk about here? I mean you guys have very effective track record of chipping away at that over time. And while I'll acknowledge at the outset, this is a fairly low ratio of incremental equity versus CapEx, even at the outset here. How do you think about what is and what is not included in terms of levers against that $1.6 billion? Just -- I know you have a number of tools that you've alluded to even in the prepared remarks. Is it -- are any of those that you've already highlighted, not included against that $1.6 billion?

And then more to the point, how do you think about incremental asset sales and/or other tools that you haven't alluded to, maybe like mobile gen, et cetera?

Julien, sure, happy to hit that for you and happy to walk through a few things that are not reflected in the updated plan today. First out of the gate would be the opportunity associated with the temporary generation units. Recall that those would return to the company by the end of calendar Q1 next year. So there, you've got the opportunity for an ongoing cash flow stream from an ongoing sublease or of an upfront opportunity to then reinvest if we were to just transact them fully. So we are in active conversations there on those now.

The second would be the customer demand charges. Jason referenced that the interest that we're already seeing in Batch One has the opportunity to exceed what we had in Batch Zero, right, and recall that with those opportunities come demand charges of roughly $6 million per gigawatt per year, so also not included in plan.

The third I would point out, you mentioned it yourself, is portfolio optimization. We're going to continue to evaluate those opportunities. They're highly efficient for our customers and stakeholders as we've executed those in the past. We continue to be supportive of running excellent businesses, but you saw recently the benefits from Ohio close as well.

And then finally, we'll also consistently evaluate opportunities to reduce cash lag as well associated with the financing from regulatory improvement that we can make either through our rate cases or potential legislative opportunities. So those are the four I would highlight for you.

Got it. And then just can you unveil a little bit more as to how you think about what the prospects are from Batch One here on and the additional transmission study? If I'm hearing you right, it could be a pretty substantive further expansion of your transmission system and you could get some details here as soon as the first half of '27. I just want to make sure I'm putting the pieces together correctly here.

Yes, Julien, you've got that right. I think there's really 2 things to focus on here. So as I mentioned, the transmission study that we announced today only represents about half of the needed capacity that we anticipate for Batch One. And we are early in the Batch One process. So in the first half of next year, we will update the transmission study again for incremental capacity. At the same time, we're continuing to work with customers. And so I would expect Batch One to grow from where we are today. And that could also provide a further tailwind for even more incremental transmission beyond this time horizon of the first half of the year.

What we're seeing, there's really a number of trends that I can't kind of understate enough that are driving this economic growth. As global trade and traditional energy refining capacity are getting redefined globally, Houston is one of the best places in the world for -- to take advantage of this. We've got the largest port by tonnage in the U.S. That port is expanding. We have a State that is focused on facilitating economic development. And so we are seeing tremendous growth on the advanced manufacturing, traditional energy data center front.

On the data center front, in particular, as much of the focus there starts to trend towards inferencing and cloud, there's no better spot than Houston. It's the fourth largest city, soon to be third, youngest population of any major city, home to the second most Fortune 500 companies. It is the ideal spot when you think about inferencing and cloud computing being a longer-term trend beyond training. And so again, I'll say that we've got to close the gap and what we already see in Batch One, we'll provide that transmission update in the first half of next year. We'll continue to likely see an increase in Batch One demand, which will necessitate even more transmission construction beyond that update in the first half of the year.

Excellent. Got it. And just to clarify, you made a comment earlier about 1 gigawatt of distribution load. Again, we don't often focus on this. Do you want to elaborate a little bit on what you're seeing on that front in terms of potentially seeing new "large loads" or data center loads specifically manifest through distribution requests and what that means for your margins because you guys provided that ratio earlier about what that could mean for your revenue requirement? I imagine it might be a little bit more outsized on that front. And how that could change, right? We're seeing -- we're hearing more about this, this is first I've heard across companies on this.

Yes. I think this is an incredibly exciting time. So much of the industry has been focused at the transmission level. And I think we are seeing a fundamentally different trend at the distribution level. We've always [ benefited ] from about 2% population growth. That continues to be a solid foundation for that distribution growth. What we are seeing and one of the things we tried to highlight is this sort of carryover effect from the large load development, particularly on the commercial warehouse side.

We set a record here in Houston in the third quarter for leasing of new commercial warehouse, it's up 30% this past quarter alone, and we don't see that trend slowing down. In addition, we continue to see advanced manufacturing of that sub 75-megawatt level. We're seeing significant interest in distributed and more modular distribution level data centers for inference. The totality of this economic activity beyond just the first order customer, but their second and third order sort of suppliers and associated sort of ecosystem is what's really fundamentally driving this acceleration at the distribution level. And as you said, the distribution rates do provide a different economic opportunity from an earnings standpoint than transmission.

Our next question comes from Jeremy Tonet with JPMorgan Securities.

Just wanted to kind of walk through the potential for higher interest rates here. How you see that impacting the business, particularly the holdco clearly with so much cushion between rate base CAGR and EPS CAGR, more than enough cushion there. But just wondering if you could talk to that broadly speaking, as it relates to refinancing or anything else?

Sure. Happy to hit it. And you can imagine, I mean, certainly, the higher rates we're seeing are a bit of a headwind for the entire sector. But I do think we're well positioned here in the near term. If you think about it, first, we've only got about $300 million of maturities in 2027. I also talked earlier about the benefits we've seen in terms of the Moody's upgrade on the outlook recently. And in fact, at CERC, we also had a specific upgrade there, which is going to reduce our borrowing costs. And that's an entity that's looking to raise $500 million to $800 million every year as we go.

Then beyond that, I think you're going to see that we've got that -- we talked about this earlier, but ongoing rate recovery through capital tracker mechanisms will help as we go. And then we're also going to continue to focus on taking costs out of the business. We did report today that we're on track to reduce that 1% to 2% that we talked about previously. And certainly, as macro economically, we see these impacts, we're going to have to focus on our own business to keep costs affordable for customers.

Got it. That's very helpful there. Yes. And I just want to kind of maybe pick up the last point there with affordability. Again, not CenterPoint specific, more industry wide. But as it relates to increasing CapEx, just wondering, I guess, how the conversation might go with stakeholders in the different states? You have the audit in Texas, Indiana, a lot of focus on affordability and just wondering any thoughts you could share there as far as bill outlook and conversations there?

Yes. The path to affordable rates is through growth. That is what over decades in this industry has helped sort of moderate the impact of investment. It just gives us the opportunity to socialize what our largely fixed cost over ever widening base. And I think each of the states, we have the privilege to operate in, understand that. Each of the states are extremely focused on helping facilitate economic growth. And so we work with local and state leaders to advance each of these interests.

I mean I think the best possible representation of this is what we see here at Houston Electric. Just given what has historically been outsized growth relative to the rest of the country, we have been able to maintain effectively flat rates since 2014, in large part because of all of that incremental growth. And so each of the states want to make sure that they're putting in place protections for residential customers. We fully support that. As we talked about, I think the process is working well here in Texas, as we've seen 2 of the study load customers fall out. But what we've got is really a commitment from those that remain in Batch Zero to work effectively with their communities on all fronts, including putting downward pressure on utility rates.

Got it. That makes sense. Clearly, Houston has unique benefits there that helps CenterPoint.

Our next question comes from Richard Sunderland with the Truist Securities.

I wanted to pick up the transmission update a little bit more. You're thinking about that $4 billion moving into the plan today. And then if I'm following correctly, I guess it's only half of the Batch One need or the potential Batch One need. When you think about the 2027 CapEx update for that component specifically, does it scale ratably or are there different, I don't know, brownfield versus greenfield considerations when you think about addressing more of that Batch One capacity need?

Yes, I appreciate the question. And I wouldn't say that it necessarily scales ratably. It's clearly much more efficient to construct brownfield and there is going to be a need for new greenfield import lines. But right now, we continue to work and think creatively around different assets that, maybe non-wires alternatives. We talked about some of the stability related investments that we're making. I would expect to see increases there, particularly as we bring larger loads online. And so it's just really hard to create a rule of thumb.

But what I would say is over time, as we exhaust what our current sort of brownfield opportunities and we lean more into greenfield, there will be an upward bias on future transmission CapEx revisions.

Got it. That's helpful. And then regulatory lag, I guess, both on a cash recovery side and on an earnings basis as well. I know that's been one of the talking points you hit in the script and in Q&A. Are there any either active efforts you have an eye to or kind of anticipated actions in the upcoming rate case filings or I guess, even legislative work in '27 on this front? Anything you'd highlight specifically right now?

Yes, a couple of different things that I'd point out. We talked about filing a 3-year rate case up in Minnesota. That will allow us to effectively apply for forward test year adjustments in each of the 3 years. Historically when we were filing 1 or 2-year cases, we always had a year that -- where we had flat or no sort of revenue increase. And so that's an example on the regulatory front.

On the legislative front, look, we're excited to work with all stakeholders around sort of consistent stakeholder engagement that again, balances sort of the rights of property owners with a need to build transmission to help facilitate and continue the Texas economic miracle. As part of working through maybe some of those changes on stakeholder engagement, I think it's important for the state to also revisit the potential for interim recovery of transmission-related investments, right? We're moving to a point where a higher portion of our CapEx is going to be long-cycle work.

If you couple that with some of the lower equity ratios that transmission and distribution utilities have here in Texas, that could put a potential strain on the balance sheet. And so I think it is in everybody's interest to think about interim recovery of transmission-related CapEx to make sure that we're growing responsibly and helping support, again, the continuation of Texas economic miracle. So those are a couple of examples, both on the regulatory and legislative front. We'll continue to work with all stakeholders to minimize regulatory lag, whether it's earnings or cash.

Our next question comes from Anthony Crowdell with Mizuho.

Thanks for the update. Just I guess one housekeeping -- one question on housekeeping item. You talk about 14% rate base CAGR. Have you removed the Ohio LDC sale? Or could that rate base CAGR be even greater because you have that headwind of the sale?

Anthony, simple answer there is we have removed the Ohio sale.

Great. And then I guess as a follow-up, maybe the last 2 questions. You talked about the distribution opportunity like Julien was really harping on, the transmission is going really strong. How do you guys determine what segment to allocate CapEx to given the strength across maybe all the platforms, including some of the gas, like how do you make that decision where you want to focus the CapEx? Or it's, I don't want to say unlimited CapEx, but just the opportunity is just so great, you're able to spread it through all the different business segments.

Our job is really not to pick winners and losers. It's to facilitate this economic growth. I think more so than ever, customers have more opportunity to choose where they locate their business. And so at the distribution level or transmission level, we want to incentivize those customers to locate and grow their businesses here in the Greater Houston region. So we are advancing both the investments on the distribution system for capacity as well as the transmission system for capacity. I don't see it as an either/or. I see it as -- our competitive advantage is our -- is system capacity and moving quickly at the customer's pace to connect them.

And so I really see sort of, again, stronger tailwinds for upward revisions to CapEx on the electric side. I think we have found a really good rhythm on the gas side with respect to pipeline modernization. There are a couple of opportunities on that front that are in our customers' interest that we've talked about before, in particular, creating kind of a transmission loop around the Greater Houston region. But again, I really think that the CapEx upward bias is in electric, and it really comes from trying to facilitate economic development, both at the distribution and transmission level.

Our last question comes from Ross Fowler with Bank of America.

Most of my questions have been asked and answered. I just wanted to pick on a couple of things -- add a couple of things, I think. Temporary generation, are you meaning any particular way lease versus sale there? And can you remind us of the timing of that decision?

Sure, Ross. At this point, again, we're in some active conversations, so we're going to keep our alternatives open. Again, just that we have an existing sublease opportunity through 2029, so you should think about that as an ongoing cash flow opportunity if we take that path. The other would just be an outright transaction. In that case, you can imagine we would just have the benefit of the upfront cash to be able to redeploy into the business.

Timing wise, again, these units are currently serving the San Antonio area and would be coming back to us by the end of March of 2027, is the way to think about that timing. So looking to either path we take, right, provide a cash tailwind to 2027, if not beyond.

Okay. Makes sense, Chris. And then just maybe following up a little bit on Julien and Steve's questions. Jason, you expressed a great degree of confidence in that 10 gigawatts in Batch Zero. And obviously, that's going through the audit process at ERCOT now. We'll find out more on December 10. So we're sort of close dated to that. Can you kind of, maybe kick off or check box why you have such confidence in that versus the audit parameters and the requirements that the audits have and what those projects have in sort of detail that gives you that degree of confidence?

Yes. I mean these are customers that we've been working with for the better part of a year, 1.5 years. The elements of the audit process were all elements that these customers were proactively pursuing independent of that audit. And so it was easy for them to pivot and provide evidence that they were going to be able to comply with the rules here. Effectively, these are customers who had seen sort of the evolution in development of either data centers or advanced manufacturing facilities, and we're proactively adopting improved ways to work with communities that they operated in. And so in part, they were, I would say, ahead of the process, and so that's the reason they fully embraced the audit when it came out, and we were able to quickly work with them to meet those requirements. It's what continues to give us the high degree of confidence.

This concludes CenterPoint Energy's Third Quarter 2026 Earnings Conference Call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to CenterPoint Energy's Second Quarter 2026 Earnings Conference Call with Senior Management. [Operator Instructions]

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 10-Q, other SEC filings and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statements other than as required under applicable securities laws.

We reported $0.37 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, we use the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. 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.

Now, 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 4 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 emissions 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 5 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 4 gigawatts of submissions are positioned to qualify a studied load because they have 1 of the 2 required studies already approved by ERCOT. The 4 gigawatts of study 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 systems 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 baseload 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 3 gigawatts of Batch Zero submissions represent additional customer demand that is pending ERCOT approval of the required studies. We will continue working closely with our customers in ERCOT to advance these projects to support our customers' desired energization time lines.

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 4 years. We will also continue to work with customers on projects that remain eligible for study 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 baseload 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 2 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 is 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 2 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 base CAGR of over 18% over the next 3 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 Indiana Electric Service territory. We continue to make progress advancing large load opportunities in our Indiana Electric Service Territory, 1 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, strengthening the economies of our service territories and improving affordability for our customers while maintaining our focus on delivering safer and reliable service.

With that, I'll turn it over to Chris to cover the financials in more detail.

Thanks, Jason. This morning, I will cover 4 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, I will touch on our regulatory progress through the first half of the year as we continue to execute on the timely recovery of our customer-driven capital investments. Third, I'll provide additional details on our positively revised $66.7 billion 10-year capital plan, which, as Jason highlighted, will not require additional equity financing. And finally, I will give an update on our derisked financing plan, balance sheet health and credit metrics.

Now, starting with our strong financial results on Slide 5. On a GAAP EPS basis, we reported $0.37 for the second quarter of 2026. On a non-GAAP EPS basis, we reported $0.40 for the quarter. Our non-GAAP EPS excludes expenses related to our LDC divestiture activity, including the tax expense associated with the gain on sale of our Ohio Gas LDC, which is required to be recognized over the full year of 2026 and restructuring costs in connection with our Louisiana and Mississippi divestitures given the recent expiration of our related transition service agreement.

In addition, we continue to exclude the impacts of removing our temporary generation units from base rates, as they are no longer part of our regulated utility business. As a reminder, we will be marketing these units for either a sublease or sale and will also exclude the associated income resulting from these transactions.

Taking a closer look at the drivers of our second quarter earnings. Growth in rate recovery contributed $0.10 of favorability when compared to the same quarter last year, driven by a full quarter of impact of updated rates reflecting rate case implementation and the interim filing mechanisms that went into effect in the first quarter as well as the partial quarter benefit from updated rates reflecting filings made earlier this year that became effective in June.

Additionally, O&M was $0.02 favorable for the quarter, as we continue to drive efficiencies in our accelerated peer-leading vegetation management program we started last year. Weather and usage were $0.01 unfavorable when compared to the comparable quarter last year, driven by milder weather across our Texas and Indiana service territories. Higher interest expense was $0.01 unfavorable, reflecting new issuances, slightly offset by lower commercial paper balances. These results reinforce our confidence in delivering our full year 2026 non-GAAP EPS guidance range of $1.89 to $1.91.

The accelerated growth that Jason highlighted and the work we've done to derisk our financing needs are additional tailwinds that further position us well to deliver as we move through the 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% long-term annual guidance range through 2028 and 7% to 9% annually thereafter through 2035.

Now, turning to a broader regulatory update. As a reminder, we recover approximately 85% of our investments through capital trackers. We continue to make progress recovering capital on customer-driven investments across our service territories. In our Houston Electric business, we recently filed our second capital tracker for distribution investments, or DCRF, requesting a $73 million increase in revenue requirement. We expect customer delivery charges to be updated in November of this year.

In addition, we also expect to file the second capital tracker related to transmission investments, or TCOS, next month. Additionally, during the quarter, we filed a settlement agreement related to our temporary generation filing that will allow us to reduce customer electric delivery charges by nearly 3% from a rate that is already more than 5% less than the next lowest Texas peer electric utility.

Turning now to Texas Gas. We received approval of our annual capital investment recovery filing, or GRIP, that requested a revenue requirement increase of approximately $62 million. New rates went into effect in June. Outside of our Texas businesses, we are preparing to file forward-looking rate cases for Minnesota Gas and a combined filing for North and South Indiana Gas by the end of this year, which together represent less than 20% of the earnings power of the company.

Turning to our capital plan. We continue to execute against our planned 2026 investments as shown on Slide 6. We invested $1.5 billion in the second quarter and have now completed approximately 40% of our planned capital spend through the first half of the year, consistent with the typical seasonal timing of our investments. We expect larger projects to be placed in service in the second half of the year and remain on track to execute $6.8 billion of planned capital investment this year for the benefit of our customers and communities.

In addition, and as Jason highlighted, we are updating our 10-year capital plan from $65.5 billion to $66.7 billion, reflecting a $1.2 billion increase driven by large load system upgrades and the progress made related to the Downtown Revitalization Project. We expect to fund these incremental investments without issuing additional equity, supported by the existing funding capacity as a result of the clarification in the corporate alternative minimum tax rules earlier this year. As such, our planned equity remains unchanged. This lower equity profile is also supported in the near term by a recent transaction related to our Ohio Gas LDC. There, we remain on schedule to close the sale on October 1 of this year after receiving regulatory approval last month.

Looking further out, we anticipate additional potential financing tailwinds from the marketing of our temporary generation units before the end of Q1 next year when the units return. The transacting of these units could provide additional flexibility to fund incremental capital investments without increasing our equity financing guide.

Lastly, as a reminder, we expect meaningfully higher cash flow from new demand charges of approximately $6 million per gigawatt per month as we energize the anticipated 14 gigawatts of new load over the next 5 years. Outside of today's update and potential future financing tailwinds, we will continue to target funding incremental capital investments consistent with our consolidated capital structure of approximately 47% equity and 53% debt.

Lastly, I want to touch on our credit metrics and balance sheet. As of the end of the second quarter, our adjusted FFO to debt ratio based on Moody's rating methodology was 13.4%. This represents a nearly 100 basis point improvement from Q1, and we anticipate continued expansion of the cushion represented here, in part due to a tax refund related to the previously paid corporate alternative minimum tax, a portion of which we anticipate to receive in the third quarter of this year. This alone could add roughly 30 basis points of improvement to our metrics.

In summary, we are confident in our ability to execute this year and beyond given anticipated future financing tailwinds and continued visibility to customer-driven growth opportunities. We are 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.

And with that, I will now turn the call over to Jason.

Thank you, Chris. In closing, we have made meaningful progress advancing the significant growth opportunities across our service territories. The progress we are making in Houston underscores the strength of our service territory and our ability to serve large load customers quickly and affordably. At the same time, the opportunities we are pursuing in Indiana represent a step change in growth, which will meaningfully drive economic development and improve customer affordability. This growth, combined with our consistent execution and proactive efforts to derisk our regulatory profile and financing plan increases our conviction that we have 1 of the most compelling affordability profiles and 1 of the most tangible and executable long-term growth plans in the industry.

Thanks, Jason. Operator, I'd like to turn it over for Q&A.

[Operator Instructions] Our first question coming from the line of Shahriar Pourreza with Wells Fargo Securities.

Just on the transmission study, as you're thinking about sort of the size and cash benefits, on the CapEx side, historically, you guys have referenced $8 million per mile while I think the market range is anywhere from $5 million to $20 million depending on routing and land. And on the cash benefit side, you've talked about $6 million per gigawatt per month. Are these still kind of relevant in any sense of timing here?

Yes. Thanks, Shar, for the question. From a CapEx standpoint, yes, that's generally the range we're seeing sort of that $5 million to $20 million. Our plan assumes $8 million. We'll likely have a better view of the actual cost per mile in the first quarter of next year as we complete more of our route-related work. So potentially could be a tailwind as we enter next year. But that's the summary on the CapEx side.

From a cash flow standpoint, yes, we continue to see about $6 million a month per gigawatt in terms of cash flow from demand charges from these related customers. And as you can see from the growth that we announced today, that really is growth that's significantly accelerating over '27, '28 and '29. So very significant cash tailwind in those coming years.

Got it. Okay. And then just -- obviously, previously, you guys framed the AMT benefit as kind of unlocking about $1 billion of incremental CapEx with no additional equity. And this morning, you added about $1.2 billion to plan, deployable within 5 years with sort of no change on that equity guide. That's kind of the key message. But Back Zero transmission studies et cetera, could be kind of fairly material. I guess, how do you -- how should we be thinking about this funding needs or the cash benefits from these investments enough to offset those funding needs as well?

Look, we're going to always seek to most efficiently finance or fund our CapEx growth, we've got a history and track record of doing so. We're not going to lean on our balance sheet. We want to maintain a healthy cushion from an FFO to debt standpoint, but we're going to continue to think creatively. I think some of the cash flow tailwinds that Chris mentioned, the opportunity to remarket the temporary generating units, the cash flows from the incremental demand charges from this Batch Zero are all great tailwinds as we look at incremental CapEx on the transmission side to replace this import capacity to create more intra-regional transmission capacity and certainly to help make stability-related investments on the transmission level.

So that comprehensive transmission plan that we are updating really has a number of different elements that we can lean on to efficiently fund that growth without, as I said, unnecessarily leading on the balance sheet.

Got it. And further asset optimization, is that part of the lever or not anymore?

We'll always look to create value for our stakeholders. And if that requires asset recycling, we may consider that. As you recall that with the Ohio transaction that we announced, we've staged that sale with a seller new and have sold equity forward really eliminating kind of any equity needs for the near future. So I think we're in a good position, not having to lean on asset recycling in the short term, but we'll always like to most efficiently fund our growth long term.

Our next question coming from the line of Nick Campanella with Barclays.

Maybe just -- you kind of talked about this data center opportunity in Indiana on the last call. And can you just give us an update on where you stand on that? And if you need to invest in incremental generation for that, does that get included in this no equity comment? Or how should we kind of think about that? .

Yes. I continue to remain very optimistic around the work that we're doing up in Indiana. We're continuing to make, I think, very meaningful progress. A couple of things to point out up in Indiana, as the team has done some more work around our system, we've found the ability to unlock incremental capacity sort of short and medium term, that gives us more optionality up there with respect to helping serve large loads. And as I alluded to in my prepared remarks, we've already are well underway from an engineering, ordering all lead time materials securing our spot in the MISO queue for these connections. So really making meaningful progress making sure that we have near-term capacity to support those opportunities.

With respect to incremental generation costs, that's outside of the CapEx update today. We will, as I said, look to most efficiently fund any incremental CapEx increase going forward. That said, as we look at transmission-related opportunities, generation in Indiana, there's likely some equity that will be needed to support that level of incremental CapEx growth for those different CapEx drivers.

And then, I mean, maybe sticking with Indiana, just there's been the affordability report that was issued, and I think there's going to be a conference on August. Just anything that you're expecting from that broadly? What you expect that to address? And then, obviously, you're just maintaining the current filing path for the state on both the gas and the electric side, just to confirm. .

Sure, Nick. It is true for the last part of your question that we'll maintain the current time frame for the consolidated gas cases by the end of this calendar year. The current timing for our electric case would be the first quarter of 2028. And then, as you look at the technical conference that's coming up on August 7, I think it's our current understanding, you're likely to see a series of different topics referenced there really to bring about future meetings, where they'll discuss those topics in more detail.

For us, just stepping back, I think the key thing to remember is that our focus is on encouraging and enabling economic development for the area. It's by far the best way to allow for ongoing affordability for our customers from those new loans that are attracted to spread the costs, help enhance the property tax base, and that really helps the community grow for the long term.

We've also taken, as you know, a number of steps really in the last few years that have been affordability focus for our customers. The first was the $50 million of O&M related to the retirement of our coal facilities up there. Second was the returns that we essentially pass back to our customers related to the securitization of the coal plant. And then finally, we've had a commitment here that's very focused on keeping our electric rate stable up to 2027. This is my way of saying we'll be able to contribute additional thinking for incremental ideas associated with the affordability technical conference and looking forward to the conversation.

Our next question in queue coming from the line of Julien Dumoulin-Smith with Jefferies.

Appreciate the opportunity. Perhaps just keep it on going in the same direction that the prior questions were, can we kick off a little bit on the timing of the transmission update? You made allusion that later, I think you said specifically this year, you'd come back with some updates. How do you think about that against the backdrop of greater legislative scrutiny, in particular of transmission here, and how that might kick out plans into potentially '27? If you can try to square what we're seeing from a political perspective on both data centers and transmission of late against your commentary about coming up -- coming back to update transmission.

Then if you have any comments about the substance of anything going on in Texas vis-a-vis timing of the large loads, I'd be curious as well.

Julien, we are excited with the growth that we announced, and as we've talked about previously and referred on this call, we intend to provide a more comprehensive transmission study update in the second half of this year. Look, I think it's incredibly important to do so. We've seen more growth than was anticipated originally out of Batch Zero. We see no indication that growth is slowing here in Texas. On that point, what I want to emphasize is, outside of the Batch Zero large loads, we are seeing an uptick interconnection request at the distribution level.

As you know, if the load request is less than 75 megawatts, it doesn't necessarily need to go through Batch Zero, and as a result, what we're seeing already year-to-date is 500 megawatts of distribution-related requests just below that threshold really to help enable advanced manufacturing, more distributed inference-related data centers, energy-related logistics-related industries. And so we don't see growth slowing down. Sort of coming back to the point that's being raised around a larger debate around 765 kV, I don't think that the conversation really is should Texas slow down. I think the conversation is how do we most effectively work with communities to enable this ongoing growth in a constructive manner. And obviously, we will take a lead with state leadership in that regard. But I think the state is still aligned around continued growing. We see tailwinds accelerating, not decelerating.

We represent about 2.5% of the geography of Texas, 25% of the electric demand today, that's only growing. So we need more import capacity. And again, we will happily support the direction of the state heads and the way to most efficiently support that continued economic growth. So we'll put our updated transmission study out in the second half of this year and engage to follow the direction of the state on how to enable that.

I think, as it relates to this overall large loads in Texas, look, our focus is on enabling our customers here in the Greater Houston region. We feel like we are in a unique position having had 10 gigawatts of existing capacity on our transmission system, we can move quickly. I think that was a differentiator. During this ERCOT Batch process, we could with modest incremental capital investments unlock another 4 gigawatts through -- which is the 14 gigs that we think will be eligible for Batch Zero that we've identified today. And look, as I said, it's not slowing down. And so back to the original question, that's why we need to continue to rebuild transmission capacity to support the next round of growth.

Just a quick clarification. In terms of financing and financing latitude, you particularly provide the sensitivity about what large loads can do in terms of incremental revenues. Can you just clarify how much of that latitude is reflected in this updated plan here? Just how much of it are you using and reflecting in the outlook in as much as that's a pretty meaningful quantum of incremental revenues to come from large loads, especially as the large loads themselves accelerate? And obviously, I think to be very clear, that comes in tandem with the mobile gen cash flow uptick that is not reflected in the outlook still as well, right? There's several different buckets that are not reflected.

Sure, Julien. That's correct. Maybe there's probably a third category I would add to, but the short answer is we have not yet pulled in the benefit from the demand charges from these large customer loads. It's also true that we've not yet folded in benefit from resolving the potential transaction related to temporary generation units. We've indicated there, we'll certainly have insight ahead of the end of Q1 timeframe when those units do come back.

And then the third 1 I would just emphasize again, this is more near term, it's the likely prior historical recovery of the additional corporate alternative minimum tax amount that would likely come through in 2027. And so those are the 3 components, all representing tailwinds to planned.

Yes, precisely. But all of the incremental large load not reflected. So we'll see when you provide that comprehensive update.

Our next question coming from the line of Steve Fleishman with Wolfe Research.

Just on the Indiana customer, do you think -- will there be ability to get more visibility on that by the end of this year, both in terms of investment opportunity and also the potential savings for customers?

Yes, Steve, I mean, we'd certainly like to give a more definitive update before the end of this calendar year. We continue to work and make progress. So we'd love to be in a position before the end of the calendar year to give that update. Obviously, these things just take a little bit of time, as we've talked about are already working on advancing the actual work for the interconnections, and we hope to provide a more comprehensive definitive announcement before the end of the year.

As we've already announced, we believe that at least the initial level of demand in Indiana could support about $250 million of residential customer savings over the next 15 years. And as we look to work with multiple parties, hopefully, we can continue to expand on that and give even more customer benefit down the road. So continuing to work it, and hopefully, we'll have this finalized before the end of the calendar year.

Okay. And then -- and maybe in Texas, so just to kind of make sure I've got the growth rate, the 65% that you talk about growth, is that just from the large load and that does not include the growth coming from kind of distribution level customers?

That's right, Steve. This is just Batch Zero and does not include what we would see from distribution level customers, and as I have indicated, we're actually seeing an uptick in distribution level demand. So growth will be well north of this. We just wanted to provide the Batch Zero update given the processes concluding here this summer.

Our next question coming from the line of Jeremy Tonet with JPMorgan.

Just want to come back. I think you had talked about earlier in Texas, $5 billion of customer savings for the 14 gigawatts Batch Zero, I think there. And so I was just curious, I guess, if you could expand on that a little bit more. What does it look like for like annual monthly savings? I'm just wondering, I guess, how this influences the tone of conversations with stakeholders?

Sure, Jeremy. I can help unpack that for you. If you look at just the rule of thumb on this, it's 14 gigawatts as we've referenced, in baseload and study loads. And so from that, again, the key thing to keep in mind here and why it's important from an affordability standpoint is that these large load customers would basically absorb the cost rate of the system so that we reduce costs for our residential and small commercial customers.

So if you just do the math on it, roughly 14 gigawatts is around $800 million of revenue requirement. You multiply that by the number of industrial and commercial customers we've got to 65% takes you to that just over $500 million a year, times 10 years gets you to the $5 billion of savings statewide for our customers. So hopefully, that helps give you the color there and why it is not only impactful from a customer bill standpoint, it's also the localized benefit that can occur in some of these communities as it relates to property tax benefits and other benefits as well.

Got it. And then maybe same question towards Indiana. I think you referenced beyond the initial large load customer, the potential for more in the future here in -- just wondering, I guess, economic development and affordability are top of mind in Indiana, and given this large potential here that could hit on both, just wondering how that impacts stakeholder conversations across the state?

Yes. I think in both states, both Indiana and Texas, there's alignment at state leadership level through the local level that continued economic development is the path to the strongest customer affordability profile that we can provide. I mean, there's no better case study than what we are seeing here in Texas with the growth in Houston, effectively keeping rates essentially flat for over a decade.

Indiana has not seen the level of growth that Texas has, but state leadership understands the opportunities that sit in front of us, and we are all working both at the state, local and utility level to deliver economic growth for our customers and our communities. It's clearly the path that keeps rates more affordable for our customers over the long term. I think it's well understood, as I said, in both states.

And should the sufficient demand materialize in Indiana as such, I guess, how would that influence your thoughts on the potential for Genco and whether that would be worthwhile beneficial to all stakeholders?

As we said in the past around the Genco structure, I think it's a very innovative structure. It wasn't necessarily needed for us if we're talking about serving 1.5 gigs or less. We have that incremental capacity in our system without significant generation investment on our side, as we work with multiple customers in that region, and demand may exceed that 1.5 gigawatts. I think the generation -- the Genco structure could be something that we pursue. Our focus right now is landing the large load customers. And again, if it's on the -- if it exceeds that 1.5 gigawatts, we may pursue a Genco structure down the road.

Our next question coming from the line of Richard Sunderland with Truist Securities.

I'll stick with the Indiana side for now. Could you parse a little bit more around that short- and medium-term capacity unlock reference in the sprit? Would that all be to the benefit of the first customer? Or is that accelerating discussions with a potential second customer opportunity? I guess I'm curious how that element specifically is impacting conversations overall.

More than latter in terms of unlocking multiple conversations with customers that would generally follow a similar time line in terms of interconnections. It's capacity that exists. We want to serve and land large loads to help support economic development. If it's 1 customer -- and 1 customer is interested in that capacity, that is great. If it's multiple customers, that is also great. Our focus is ensuring that, that capacity is utilized. And so right now, it has unlocked multiple customer conversations, but we're just looking to do the right thing for the community and land those large loads.

Got it. That's helpful color there. And then turning back to Texas, there were some discussions throughout around kind of the 765 kV efforts. And I think you said working with communities to enable this growth is what you see as a focus. How do you see that backdrop and that overlay impacting your routing work right now and the potential outcome of that routing update on 1Q? Are you thinking about the routing work in any different fashion? Any other thoughts there would be helpful.

Yes, absolutely. We're thinking about the routing in a different way. We've been, I think, sort of on the front end of engaging communities in a different manner, webinars to sort of presoak the idea of these projects, working with elected officials on the basis for these, the potential routes, narrowing the number of routes that we'll propose to limit the impact to landowners to obviously the town halls and workshops that we have. We really want to work constructively in these communities, demonstrating sort of the value of the local benefits of the construction and ongoing property tax work. We want to work with the land owners to find optimal routes that create the least amount of disruption. And so we have taken a very community-centric approach, as we've started to embark on the routing work that will be finalized, as I said, sometime in the first quarter next year.

Our next question coming from the line of Sophie Karp with KeyBanc.

So to go back to Indiana, I guess, are you thinking that you will be able to show customer benefits in some tangible way when you have your first customer they are signed up? Or will that come later as an offset to future capital needs as you begin to add to your base there to service those customers?

Sophie, thanks for the question. No, we will begin to be able to show immediate customer benefits because we have existing capacity on our system today that once we interconnect a large load, we'll start to be absorbed by that new large load customer as opposed to by our existing customers. So it doesn't require significant incremental investment down the road to unlock that customer. It's immediate as we get the large load online.

Right. So will that flow with bill credits or just as a reduced bill, I guess, I can just trying to understand how visible will that be for ratepayers?

It's more of the latter. It offsets.

Got you. Got it. Got it. Okay. And then just on the time line of Batch Zero process and the connection of all those projects, do you -- what do you anticipate in terms of the time line? I guess, I don't want to put the words in your math in terms of how long until shovels go into the ground from this? Because there can be so many administrative and the permit and delays. So I'm just kind of curious to see what the anticipated time line is from paper here into shovels in the ground.

We've got work well underway. As we've indicated here on 1 of our slides, we're anticipating connecting 3 gigawatts in '27. And so that work is underway from construction, as you said, shovels in the ground out in the field. As it relates to the work on 2028, we're well down the road in the engineering. We've secured long lead time materials. That work will begin here shortly.

In terms of what we're looking for -- on August 7, we should have a confirmation of the megawatts -- or sorry, gigawatts that are in base load. I think that will start in earnest the field construction work really beginning site preparation, civil work, et cetera. There will be some of the Batch Zero study load projects that we'll likely want to understand the amount of energy they are allocated, which won't be finalized until April of 2027. Some of those projects, as a result, may be delayed from a construction standpoint. But at this point, just given this compressed time line of the majority of this coming online before the end of the decade, we are starting engineering. We are -- we have secured long lead time materials, and we're ready to begin construction when the customer gives us notification to advance.

Now last question will come from the line of Anthony Crowdell with Mizuho Group.

Just a follow-up to Sophie's question and another question, just on the Batch Zero process. For the customers that don't get selected, maybe they applied, they thought they were going to get selected, they, for whatever reason, then qualify. Is there an appeal process for them? And does that have the potential to maybe slow anything down?

Yes. Thanks, Anthony, for the question. As we've indicated here, we have 3 gigawatts of very viable projects that would like to move forward, submitted their studies. Unfortunately, those studies were not approved by ERCOT. And so that's why we haven't classified them as either baseload or study load. We continue to advocate on behalf of those customers, those customers continue to advocate the good faith exemption that ERCOT announced is not necessarily oriented towards addressing those customers who have not had a study approved by ERCOT. But this is very meaningful growth for our communities, and so we will continue to work with our ERCOT, our customers to advocate to find a path to energization. It just at this point, it's unclear what that path exactly looks like.

Great. And I know Chris because I've said when he doesn't get a question, but just, Chris, credit cushion is getting larger, but the Moody's outlook remains negative. Just curious on your conversation with the agency of any timing or time frame or maybe when they give an update or just any latest conversation with the agency?

Well, thank you, Anthony, for the question. So short of it is, you're right. When we came through Q1, we had mentioned that we were going to be relatively light on FFO to debt. We've spent time with Moody's on that. But we've been through really all the key issues that they wanted to see progress on. I really do think it's meaningful that we delivered almost 100 basis points of improvement quarter-over-quarter here. And that cushion is only going to grow because, again, keep in mind, I referenced, and we spent time at Moody's on this. We referenced roughly 30 basis points of improvement that's coming here in Q3 alone that wasn't previously in plan related to that corporate alternative minimum tax amount. So -- excuse me, in short, confident we'll be able to make progress. I can't certainly give specific timing for Moody's, but here relatively soon.

I am showing no further questions at this time. Ladies and gentlemen, this concludes CenterPoint Energy's Second Quarter 2026 Earnings Conference Call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to CenterPoint Energy's First Quarter 2026 Earnings Conference Call with Senior Management. [Operator Instructions] 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 Q1 2026 Earnings Conference Call. Jason Wells, our Chair and CEO; and Chris Foster, our CFO, will discuss the company's first 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 10-Q, other SEC filings and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statements other than as required under applicable securities laws.

We reported $0.48 per diluted share for the first quarter of 2026 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. For information on our guidance methodology and a 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.

Now 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 4 key areas of focus for the quarter. First, I'll walk through our strong first quarter financial results. Second, I'll provide an update on our load outlook for Houston Electric, including yet another significant increase in our firmly committed load forecast to 12.2 gigawatts of new industrial load. Third, I will cover how our continued and accelerating growth in the greater Houston area to provide incremental capital investment opportunities and further support customer affordability. And lastly, I'll touch on our growing optimism for transformational load growth opportunities for our Indiana electric service territory, which would similarly provide for incremental capital investment and support customer affordability.

I will start with our strong first quarter financial results. This morning, we reported non-GAAP EPS of $0.56 for the first quarter of 2026. Chris will walk through the details of these results, but I want to highlight that our execution through the first quarter positions us well for the remainder of the year. With that said, we are reiterating our full year 2026 non-GAAP EPS guidance of $1.89 to $1.91, which, at the midpoint, would represent 8% growth over actual 2025 delivered results.

As a reminder, we rebase our long-term earnings guidance from each year's actual results. This approach provides our investors with the direct benefit from compounding effect of the earnings we have consistently delivered. In addition, this approach helps contribute to the durability of our earnings profile, underscoring our commitment to delivering value through disciplined execution and sustained growth 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.

I would now like to provide an update on the accelerating growth our Houston Electric business continues to experience and our strong execution, which enables us to take advantage of the growth in the near term. As we shared on the fourth quarter call, we have meaningfully accelerated our load growth outlook, bringing forward our forecast for a 50% increase in peak demand by a full 2 years. Our conviction in that accelerating time line was grounded in 7.5 gigawatts, a firmly committed load that we expected to be energized by 2029, including 2.5 gigawatts that was already under construction as of our last update.

Since then, we have made significant progress in executing against our prior forecast, while adding additional customers. As a result, we now have clear line of sight to 12.2 gigawatts of firmly committed load. With the team's disciplined execution, we have already secured ERCOT approval for 3.2 gigawatts of this load. 2.5 gigawatts was approved since our last earnings call alone and within less than 80 days of filing for approval. We expect to submit the remaining 9 gigawatts of projects to ERCOT for approval within the next few weeks.

Importantly, this firmly committed load is highly diversified, spanning more than a dozen unique customers across nearly 20 distinct projects. We believe these projects are manageable in size with 90% representing 0.5 gigawatt of demand or less. That, along with our utilization of existing capacity and our customer selection of project sites near substation allows for quick and efficient interconnections.

Our focused execution over the last few months has also provided us with a clear path to energization. Notably, we are positioned to energize approximately 8 gigawatts of this firmly committed load by 2029, which is 80% of our 10 gigawatt increase we originally forecasted to be energized by the end of 2031. This diversified growth and economic development has another key benefit to the Greater Houston area, which helps us keep electricity delivery charges affordable. The Greater Houston area is no longer an emerging destination to site new data centers. It is now firmly established as a location of choice for some of the world's largest hyperscalers and developers. However, this is only one facet of Houston's multidimensional growth.

The region's growth is being propelled by significant investments in life sciences, energy, energy exports and advanced manufacturing. With this growth comes new jobs in an influx of new residents, which has fueled a 2% annual residential growth, the areas experienced for the last few decades. The expansion of the economy and increase in population have significant affordability benefits for our customers. Notably, we expect that utilizing 10 gigawatts of existing system capacity to provide approximately $4 billion in aggregate savings for Texas residential and commercial customers over the next 10 years. supporting affordability and creating headroom for future customer-driven investments.

This affordability profile is one that very few areas in the country can offer as our charges are 11% below the national average and the lowest in ERCOT. Looking ahead, we believe this growth will continue for years to come, requiring the further expansion of our system to support growth beyond the near term. We are making steady progress on a refresh load study that will inform our transmission planning process. and we expect to complete the study later this year.

In Indiana, we are increasingly confident in our ability to secure potentially transformational opportunities to support local economic growth and address affordability. We continue to make considerable progress in our conversations with a large load customer on a project that would represent our single largest load in our Southern Indiana service territory with substantial upside for additional growth. Beyond the significant economic development benefits this opportunity would bring to the local community, it represents a powerful lever to enhance affordability for our customers. We estimate that this initial incremental load could enable $250 million in savings to our residential customers over 15 years, meaningfully reducing customer bills with the opportunity for even greater savings as potential upside for growth materializes.

In closing, we continue to believe we have one of the most tangible and executable long-term growth plans in the industry. We are uniquely positioned to move at the speed of business to execute on near-term customer-driven opportunities. while also delivering our service affordably. We are laser-focused on making longer-term investments to enhance growth across all of our service territories while also improving customer outcomes.

With that, I'll turn it over to Chris to cover the financials in more detail.

Thanks, Jason. This morning, I will cover 4 areas of focus. First, the details of our strong first quarter financial results and how they position us for the rest of the year. Second, I'll provide a brief regulatory update and our progress with respect to timely recovery of our capital investments through the filing of our interim capital trackers. Third, I will touch on our planned capital deployment in 2026, which is right on track as we target to invest $6.8 billion this year for the benefit of our customers and communities. And finally, I will provide an update on our derisked financing plan, balance sheet health and credit metrics.

Now starting with our strong financial results on Slide 6. On a GAAP EPS basis, we reported $0.48 for the first quarter of 2026. On a non-GAAP EPS basis, we reported $0.56 for the quarter. Our non-GAAP EPS excludes the impacts from the tax gain and other expenses related to the sale of our Ohio LDC, which is on track to close in the fourth quarter of this year. In addition, we continue to exclude the impacts of removing our temporary generation units from base rates as they are no longer part of our regulated utility business. As a reminder, we expect to start marketing these units for either a sublease or sale later this year in anticipation of getting those units back no later than spring of next year.

Taking a closer look at the drivers of our first quarter earnings. Growth in rate recovery contributed $0.11 when compared to the same quarter last year. driven by a full quarter impact of updated rates, reflecting the interim filing mechanisms that went into effect late last year. Weather and usage were $0.02 unfavorable when compared to the comparable quarter last year, driven by milder weather across our Texas and Indiana service territories. Additionally, higher interest expense was $0.04 unfavorable, reflecting new issuances, slightly offset by lower commercial paper balances and favorable pricing on the convertible debt we issued during the quarter. O&M was flat for the quarter as we continue to accelerate our peer-leading vegetation management program to enhance the customer experience, and improve customer outcomes during severe weather events.

Lastly, the absence of earnings from our Louisiana and Mississippi businesses post divestiture resulted in $0.05 of unfavorability when compared to the first quarter of 2025. The divested rate base has already been replaced by the acceleration of investments in our Texas businesses. These results reinforce our confidence in delivering on our full year 2026 non-GAAP EPS guidance range of $1.89 to $1.91.

The accelerated growth that Jason highlighted and the work we've done to derisk our financing needs and more efficiently execute are additional tailwinds that further position us well to deliver and could continue to provide upside as we move through the 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% long-term annual guidance range through 2028 and 7% to 9% annually thereafter through 2035.

Now turning to a broader regulatory update. As a reminder, we continue to recover approximately 85% of our investments through capital trackers, several of which we filed this quarter. I'll start with Houston Electric. In February, we submitted the first of our 2 permitted filings of our Distribution Capital Recovery Factor, or DCRF, and our Transmission Cost of Service tracker or TCOS. The DCRF filing requested a revenue requirement increase of approximately $108 million, capturing incremental distribution investments over the last 6 months. I'm pleased to share that we entered into a settlement agreement earlier this month and requested new rates to be effective in June, ahead of our planned timing.

The TCOS filing requested a revenue requirement increase of approximately $36 million, incorporating transmission investments made between July and December of last year. During this quarter, the filing was approved and new rates went into effect just last week.

Turning now to Texas Gas. In February, we also filed our annual capital investment recovery mechanism, or GRIP, requesting a revenue requirement increase of approximately $62 million, capturing capital investments made through 2025. Pending approval, we expect these investments to be reflected in customer rates in June. Lastly, as a reminder, we plan to file rate case applications for our gas businesses in Minnesota and Indiana later this year, which in the aggregate, represent less than 20% of the earnings power of our consolidated base.

Next, I will touch on our continued execution against our planned capital investments for 2026 as shown on Slide 7. We invested $1.2 billion in the first quarter for the benefit of our customers and communities. The quantum of capital deployed in the first quarter is consistent with the seasonal timing of our capital plan as we expect larger construction and resiliency projects to ramp throughout the year. In short, we remain firmly on track to execute the $6.8 billion of planned work this year as we continue to make investments to strengthen our system, improve customer outcomes and build the most resilient coastal grid and safest gas systems in the nation.

Beyond our base 10-year $65.5 billion plan, we will continue to fold in the over $10 billion of incremental capital investment opportunities as we gain better clarity on project costs currently embedded in our plan. as well as line of sight to new projects required to meet the unprecedented load growth across our service territories. And in addition, we'll potentially discover more capital investment opportunities as we refresh our transmission planning later this year, which we are targeting to complete in the second half of this year. These additional investments will continue to provide upside to our over $65 billion base plan through 2035, further increasing the earnings power of the company.

Lastly, I want to touch on our credit metrics and balance sheet. As of the end of the first quarter, our adjusted FFO to debt ratio based on Moody's rating methodology was 12.5%. This metric reflects temporary timing pressure from opportunistically pulling forward planned debt issuances in the quarter to take advantage of attractive market conditions. As that capital is deployed and financing normalizes, we expect this impact to reverse over the course of the year. And as a reminder, we expect to end the year at the high end of our targeted cushion in light of the corporate AMT revised guidance.

Importantly, we have filed for a refund of some of the previous paid cash taxes and expect to receive a refund later this year. We expect to incorporate the impacts of this favorable guidance into our financing plan later this year. Overall, from a financing standpoint, we have completed nearly 70% of our planned 2026 financing needs, significantly derisking this year's financing plan. I also want to highlight that the $650 million convertible debt issuances we executed in February has allowed us to reduce near-term exposure to floating interest rates.

I would like to highlight that our commercial paper balance at the parent at the end of the first quarter was 0 compared to our normal average balance of approximately $1 billion. In summary, we are confident in our ability to execute in the near term and beyond given the derisked nature of our plan. We are 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 investing to improve customer outcomes and enabling growth across the states that we have the privilege to serve.

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

Thank you, Chris. In closing, with our focus on disciplined execution, we have made meaningful progress in enabling more growth faster. -- particularly in our Houston and Indiana electric service territories. We believe that our ability to attract and serve large load customers will unlock the potential to transform the communities we have the privilege to serve. This growth, combined with our delivery of strong and consistent results in our proactive efforts to significantly derisk our regulatory profile and financing plan. increases our conviction that we have one of the most compelling affordability profiles and one of the most tangible and executable long-term growth plans in the industry.

Thank you, Jason. Operator, I'd now like to turn it over for Q&A.

[Operator Instructions] Our first question coming from the line of Shahriar Pourreza with Wells Fargo Securities.

Just first, just there's obviously more specificity around the Houston Electric load, including the 12 gigs of firmly committed demand and the 8 gigs of data center load expected online by 29. Can you just help us bridge how much of that committed load is already embedded in the current plan versus what could represent incremental upside and of the projects not embedded. I guess what are the gating items to include it in plant?

Thanks for the question, Shar. The model in ERCOT is a little bit different than the rest of the country. We just provide transmission and distribution service. From a CapEx standpoint, the incremental system modifications, switchyard and substations that are needed to connect these customers timely are paid for by the large load customer. So I wouldn't look at this as necessarily a direct impact to the CapEx plan. There are 2 though tailwinds to the financial plan that I think are important.

The first is despite the fact that there is not significant CapEx again, the customer is paying for the modifications in the interconnection, it does represent a significant amount of incremental demand charges, Probably the way to think about this is it's about -- for every 1 gigawatt of industrial load that we add to our system, it's about $6 million a month of incremental demand charges. So that provides a pretty significant tailwind both from an earnings standpoint but also a customer affordability benefit. And then indirectly related to CapEx is the need to replace that capacity on the system.

And that's what we've been highlighting in terms of the trendy working through right now. That will result in the second half of this year in incremental projects to effectively replace the capacity and make sure the system is able to accommodate future load growth. So again, I wouldn't think about the 12 gigawatts of firmly committed load is directly driving CapEx. What it does is it directly drives demand charges that are outside of the plan. So that's a tailwind from an earnings and an affordability standpoint, and then indirectly supports the need for future CapEx that we will roll into the plan later this year.

Got it. Got it. And then just maybe just kind of correlated to the first question is just with ERCOT's new preliminary long-term forecast that projects now like 278 gigs of total demand by 29% and $3.68 by 2032. But both obviously ERCOT and PUCT have indicated that those forecasts likely overstate. I guess, remind us how you're using this kind of in your planning process? And should we think about it as mostly supportive of Houston's growth or as something that could ultimately drive incremental wires investment above what is already embedded in your current plan through '26?

Yes. As we've highlighted on previous calls and what you've seen in our ERCOT emissions, we are much more disciplined in terms of load that we submit to ERCOT for planning purposes. The loan that we submitted to ERCOT in this most recent study was effectively consistent with the load that we have under construction. We submitted about 3.6 gigawatts. And as we're reporting today, we have 3.5 that we're actively under construction in terms of committing. We will be filing with ERCOT, as I said, another 9 gigs in the coming couple of weeks. From a CapEx standpoint, again, I think the real opportunity here is replacing the capacity for future growth. And so in the second half of this year, you'll see an update from us where we articulate the new projects that will be needed to support future growth, the dollars associated with those. And then I think this continues to be a tailwind for the continued buildout of the 765 kV system on what I would call more of a medium-term, longer-term opportunity.

So again, the growth is fantastic and the fact that it provides significant customer affordability benefits by effectively spreading the fixed cost of our system out over a much larger customer base provides near-term opportunities for earnings for incremental demand charges and then sets us up for incremental transmission projects that likely will need to be executed before the end of the decade and again, supports the buildout of the 765 KV system early into the next.

Our next question coming from the line of Steve Fleishman with Wolfe Research.

Just wanted to go to the commentary on Indiana, and it sounds like things are maybe getting closer there. Could you talk to -- I think you've talked in the past about the potential to turn your CT into a CCGT? And I don't know if there's other investments if you were to land this customer. Could you give us some sense of the investment opportunity there, both physically and then also in dollars?

Yes.. No, absolutely. Steve, happy to provide that color. So if you've looked at the MISO Q, we have a transmission project that we've filed for to provide incremental capacity in that region. And in our integrated resource plan filing that we that we recently filed with the commission, we've got a scenario that supports the potential for a large load customer. Effectively, we've got existing capacity on our system today. We can enhance that with the new transmission investments that are articulated in that MISO Q. We can also then as you mentioned, provide incremental capacity by converting our simple cycle to a combined cycle facility up there. All of that unlocks at least 1.5 gigawatts of incremental capacity for a large load customer because we have existing capacity because we have the simple cycle plant already, Bill. I would think about this as more around about $1 billion opportunity as opposed to several billion dollars just to put some scale around the incremental CapEx.

Again, this is I think an incredible opportunity for our customers up in that region. It allows us to provide customer affordability benefits that will be significant. It will provide incremental earnings from those sales and it will provide tailwinds around about $1 billion of incremental CapEx. Outside of that initial $1.5 billion -- 1.5 gigs, we are continuing to evaluate the opportunity to support future large load customers and that could result in even more incremental CapEx down the road.

Would the $1 billion opportunity be kind of by 2030 or after 2030?

No, no. This is all -- Yes, definitely within '27, '28, '29.

Okay. And then I guess just on the -- I just want to clarify on the ERCOT. So that number that we got from ERCOT last week on demand, that huge number. Your what the numbers that you have for your region territory within that, they're consistent with what we heard today? Or is there like a bigger number based on however they ask the data to be given to them, that matches up with their total number?

Yes. Our total submission as part of that process for large loads was roughly 4 gigawatts. That was included in those reported tables. Outside of -- and that was effectively the large load customers that we were currently and actively constructing transmission modifications, interconnection facilities. Outside of the number that was picked up on that table, we also filed a large load study that incorporated continued residential growth, the potential for large load customers. And that was a little bit more than 11 gigawatts. Those weren't picked up in ERCOT's numbers, but were filed with ERCOT.

Today, what we're doing is updating those numbers. So this is in excess of what ERCOT just reported. We felt that given the methodology that ERCOT asked us to submit the customers, the 9 gigawatts that we will be filing for in a couple of weeks didn't meet that criteria back earlier this year. But certainly, we made a significant amount of progress in these 9 gigawatts that we will be filing in the coming weeks, meet all of the related commitments under the batching process for ERCOT, and we feel confident our committed load firmly to be low customers. So this is an incremental amount to what was reported by ERCOT.

Our next question coming from the line of Richard Sunderland with Truist Securities.

Just circling back to this transmission commentary, I want to understand what you're studying for that 2H update it sounds like if I was following you earlier that the transmission need is all this decade. Could you maybe frame what's in flight now and what it's doing for capacity that's being utilized by this new load and what that might mean for this next batch of transmission out of the study? I'm just trying to think about total dollars that might come this decade that aren't reflected in the plan right now.

Yes. As we've been talking about on previous earnings calls, we think probably the most important aspect to focus on for large load is existing hosting capacity. These large load customers need to connect in any power timely. For us, we have existing capacity on our system of roughly 10 gigawatts. We also have about 9 gigawatts of generation that wants to connect it, is in the process of connecting to our system here in Houston. We're using that capacity to satisfy those customers that we talked about today. Part of the transmission plan that we have outlined in our $65 billion includes projects to make sure that we have the existing capacity where we need it.

So think about that as sort of like intra-regional investments to move power around the greater Houston region. Also in the $65-plus billion CapEx plan, we have increased import capacity, primarily through the 765 kV lines that really will start to come online in '31 and '32. And so this transmission study that we've been alluding to really seeks to kind of fill a gap around '29, '30 and '31, where we see existing capacity being exhausted and before those new 765 kV projects provide incremental import capacity.

So again, it will be increasing our capacity at the tail end of this decade and then there will be incremental projects to move this load around the Houston region to where it's needed. And there will likely be system stability investments to make sure that the system can accommodate the number of large load customers that are being proposed here. So it should be a fairly significant set of new transmission projects that we'll be able to highlight in the second half of this year.

Understood. That's very helpful commentary. And then I realize [indiscernible] was briefly referenced in the script, but just thinking high level here with all of this load commentary you've been offering today, how are you thinking about the market opportunity around those units as it stands now versus, say, a year ago? .

Sure. We are in the market actually on the -- some of the smaller units at this stage and already seeing very strong market receptivity. As you can imagine, when we first took these units under lease, this was back in 2021. So you can imagine just how much of the demand has changed since then. So we're really seeing directionally almost double the original lease rates that we had in place. So the way to think about this at a high level for those larger units, as you know, those are currently serving the San Antonio area. At this stage, the back-end data when they return to the company from when we could start to market those units would be by the end of March 2027. So at this point, our focus would be on getting ready, being prepared ahead of that to make sure that we can take advantage of what would probably be a cash upside to the company's plan.

Our next question is coming from Jeremy Tonet with JPMorgan.

Just wanted to kind of go to the credit side, if I could. I was just wondering if you might be able to expand a bit more on the timing of the trajectory of the credit metrics here and how you expect to exit '26 at this time?

Sure thing. This is purely [indiscernible], a function of timing. So we're still highly confident that we will end the year at the high end of the cushion that we talk about relative to the Moody's methodology. So it's 150 basis points of cushion. And so the why behind that is a couple of things. First, from a timing perspective, we pulled forward a substantial amount of debt issuances in the plan. So now we've got 70% of our planned 2026 financing needs taken care of.

The other attribute I would remind you of is just that -- just before our prior earnings call, there was a treasury related announcement associated with the corporate alternative minimum tax. And there, there's a very good outcome, right? We'll have the opportunity to no longer be a cash taxpayer, which was previously on the order of roughly $150 million a year.

So we'll get that benefit, right, in the form of a refund that will occur here in the next few months. Beyond that, what I think is also less appreciated is that we will also pursue some prior period recoveries, which would allow for even more cash improvement once we see those refunds. So those elements really give us good confidence at a year-end again, we will be at the high end of that range.

Got it. That's very helpful. And I just wanted to expand the conversation a little bit. A lot has been talked about data centers here. But just wondering, I guess, if you could talk a bit more on traditional large load drivers in the Gulf Coast and Houston area. And I guess, maybe how you see that trending?

Absolutely. Look, I think a lot of this has been oriented to data centers, but really when we talk about the large load customer updates today, it includes both advanced manufacturing and data centers. As you know, as we've talked about on previous calls, [indiscernible] is becoming kind of an epicenter for advanced manufacturing, basically manufacturing almost the entirety of the equipment, except for the chips that are going into these data centers. There's also advanced manufacturing on the life sciences front. These types of facilities are heavy users of electricity and power, they themselves run their own data centers to tune their advanced manufacturing facilities. And so while it's not data centers for the market, they're heavy users of electricity for their function.

So we see this growth really driven again by advanced manufacturing data centers. We continue to see significant activity on the energy and energy export side of things. Really, I want to continue to underscore, I think the diversity of economic and load growth drivers is really what sets this region apart. We don't see any slowdown in any of the large industries that are driving propelling Houston's economic development.

Our next question coming from the line of Bill Appicelli with UBS.

Just a question on the batch study review process or COD. And maybe you could just expand on how the firm load commitments you guys have fit within that framework that they are in the process of reviewing?

Yes. So as I mentioned, we've got about 3.2 gigawatts already approved through the ERCOT process that will likely show and qualify for the baseline concept. The 9 gigawatts that we're filing for will likely qualify for batch 0. There's effectively 2 load studies that we have to have approved by ERCOT to qualify for Baxter, one of those 2 need to be approved to the steady state load study. We're on track to have those submitted to ERCOT. In a time period that would allow ERCOT to again, approve those to be included in bags. As I've mentioned, we have had very successful approvals of our previous submissions anywhere from 55 days to just under 80 days.

So outside of kind of the interconnection and load studies that are required, the customers here have the land they're prepared and ready to pay all of the associated fees. We have the equipment, all of the long lead time equipment, in particular for us, this is the high voltage breakers and transformers, customers that will actually utilize the power or signed up. And so all of the definitions that are going to be required to be either a baseline or back 0 customer.

Okay. And then shifting gears a little bit, I mean -- what are you guys seeing in terms of the penetration of battery storage in your service territory and what kind of impact is that having from your view? I know you realize that you're responsible for on the T&D side, but just curious, you've seen a big uptick in storage in ERCOT broadly. And so just curious from your perspective what the impacts are and the outlook there?

It has been -- I mean -- and you know the numbers, a significant level than battery investment in the state that is all but sort of changed the summer peak pricing in the ERCOT market as batteries have helped really kind of smooth that summer peak demand. What we see kind of going forward, as I mentioned, from our vantage point, we've got about 9 gigawatts of incremental generation that is connecting to our [indiscernible] Greater Eastern region. And that is largely solar and batteries almost exclusively. We continue to see a high degree of interest in -- for the solar projects in particular to qualify for the tax credits before they expire.

As a result, many of -- most of these projects are co-locating batteries. And so we continue to see batteries as effectively a tailwind to keeping energy costs low for customers for at least the next couple of years. And then we know that there are some incremental gas development that will really help after the tax credits expire and potentially, we see sort of a slowdown in the solar and battery build-out as we approach sort of the end of the decade. So we believe that strongly the generation is going to be there for this growth. Battery is going to help moderate the cost of electricity for customers, and we continue to see a robust pipeline connecting to the system over the next 2 years.

Our next question is coming from the line of Julien Dumoulin-Smith with Jefferies.

I'll move on to the next questioner. Our next question coming from the line of Anthony Crowdell with Mizuho Group.

I know Julian does 3 calls at once, so he's probably a little tied up. Just -- I don't believe it's apples-to-apples. Apologies for the question. Just when I look on Slide 4, and you talk about the 8 gigawatts of data center load expected to be energized by 2029. Is that the same 8 gigawatts that in fourth quarter slide deck you guys are focused on getting that on by year-end '28. I mean -- my question is that load getting pushed back a year or it's actually not an apples-to-apples comparison?

Anthony, let me just go and lay off for you. In the prior quarter, we had talked about 7.5%. That number is now going to 8%. And it's by the end of 2028 is the way to think about it. So apples-to-apples, that's the number from 7.5% to 8%. What we provided this morning, though, is that the firmly committed top line number is actually going to 12.2 gigawatts.

Perfect. Great. And then just lastly, a quick follow-up on -- you talked about -- I think you going to file Minnesota and Indiana gas cases later this year. Any -- is it just infrastructure investment that's driving that filing or anything else in those -- in either of those 2 filings?

Sure. Pretty straightforward. Definitely, it's really about replacement CapEx in Minnesota on a very straightforward program to focus on safety and reliability. As it relates to Indiana, there, what I think is important that we have already signaled is our focus on affordability. In particular, we are evaluating actually, Anthony combining what are currently 2 gas rate cases up there into 1 which we would likely file in Q4 of this year. By combining the cases, we're likely to see a customer build benefit explicitly for those customers that we serve in Southwest Indiana as a result of the cost allocation changes. And so excited to be able to put those forward. Both of those, I think you should anticipate for Q4 of this year, both Minnesota and Indiana.

Our next question coming from the line of Andrew Weisel with Scotia Bank.

First question is you've talked about the utilizing 10 gigawatts of existing system capacity around Houston to generate those $4 billion of savings, but you now have over 12 gigawatts of committed mode -- obviously, no 2 projects are the same, but do you have a rough ballpark number of what would be required or cremental gigawatt of demand going forward? I know you alluded to some new transmission projects that may be you'll announce later this year. I'm asking more like a sensitivity in terms of assets and CapEx needs and then what kind of impact would that have on the rest of the customer base? Would it bring further customer benefits? Or should we think about it more like net neutral going forward?

Yes. Ultimately, I think about it as further customer benefits. I think we have been in a very unique position in holding our rates relatively constant since 2014. And and that largely has been a function of the economic growth in Houston. I can't size for you kind of $1 per gigawatt for incremental because it is going to be so unique. What's the cost of and the length of the import lines, where specifically are the intra-regional lines needed what's needed from a system stability standpoint. Those are all the things that we're evaluating as part of the transmission study.

This will create incremental capacity at a cost, but -- the way that I would think about it is it unlocks the benefit of future economic growth for the region. And just as we've invested in capacity in the past, that's been utilized and kept our rates flat. The same will happen here. And ultimately, the single biggest lever for affordability of utility service is economic development. and we are laser-focused on continuing to make sure that we support the greater Houston region, Indiana and Minnesota's economic development opportunities.

Okay. directionally helpful. Then second, in terms of the balance sheet, on cash taxes, I know you mentioned you'll be getting some refunds and you expect to see lower cash tax outflows going forward. Do you see that as being meaningful enough to reduce the guidance calling for $4 billion of common equity. Obviously, that will depend on CapEx, which is constantly rising. But all else equal, would that be meaningful enough to impact equity? And then please remind me, was the convertible already embedded in the assumptions? Or could that also imply some downside?

Sure. So thanks for the question. On the convert, you can imagine that helped reduce kind of near-term floating rate pressure. So that was a nice add to the plan. As I think about the corporate alternative minimum tax benefit, what we had shared is that not only will you get the refund improvement for this year, right? So just think about that as roughly in line with that $150 million a year of cash tax payments that would go away, you would keep that benefit, right, as you go forward, right? So that roughly $150 million a year. So what we've shared actually is that can provide us the equivalent of adding an incremental $1 billion of CapEx to the plan with no incremental equity.

And so as you can hear from what Jason has shared this morning, certainly, there are multiple opportunities. So that's how we've tried to share that. Actually, we've got even more CapEx we can add to the plan without adding incremental equity.

I see there are no further questions in the queue at this time. Ladies and gentlemen, this concludes CenterPoint Energy's First Quarter 2026 Earnings Conference Call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to CenterPoint Energy's Fourth Quarter and Full Year 2025 Earnings Conference Call with Senior Management.

[Operator Instructions]

I will now turn the call over to Ben Vallejo, Vice President of Investor Relations. Mr. Vallejo?

Good morning, and welcome to CenterPoint's Q4 2025 Earnings Conference Call. Jason Wells, our Chair and CEO; and Chris Foster, our CFO, and 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. We undertake no obligation to revise or update publicly any forward-looking statements 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 fourth quarter of 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. 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. Now I'd like to turn it over to Jason.

Thank you, Ben, and good morning, everyone. I'd 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's 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 million 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'd like to address 3 key areas of focus. First, I'll 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 5 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 2 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 million of incremental capital to our 10-year $65 billion capital investment plan to fund an additional 765 kV import line.

We continue to see CapEx upside in excess of $10 billion 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. Chris 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 to 2035.

I'd 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 a 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%, 2 years earlier than originally planned. Looking further ahead, this continued growth and significant acceleration of pace gives us even greater confidence in our forecast that low 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 projections 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 pace of this large load growth combined with the ordinary population of 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 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 on 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 million, bringing our 10-year total to more than $65 billion. Beyond this increase announced today, we continue to see over $10 billion of incremental opportunities. We will fold these incremental opportunities into our 10-year investment plan when we are confident we can execute the work for the benefit of our customers. These additional investments will provide further upside to our over 11% rate base growth through 2030. Before I hand it over to Chris, I want to thank our teams for continuing to execute for our customers and communities and delivering on our strong 2025. With 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, Chris will walk through the financials in more detail.

Thanks, Jason. This morning, I will cover 4 areas of focus. First, the details of our fourth quarter and full year financial results; second, I'll provide a brief regulatory update. Third, I'll touch on our capital deployment execution, including the $500 million positive revision of our 10-year capital investment plan. And finally, I'll provide an update on where we stand with respect to the balance sheet and our financing plan. Let's now move to the financial results, beginning on Slide 5. On a GAAP EPS basis, we reported $0.40 for the fourth quarter and $1.60 for the full year 2025. $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 $3.3 billion in debt issuances.

I'd now like to touch on our recent regulatory activity. During the quarter, we received a final order in our Ohio gas LDC rate case, which continues our track record of constructive outcomes. The order made slight modifications to the settlement agreement, approving a modestly lower revenue requirement of $53.1 million 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 those cases, the closer we get to their respective filing dates.

Outside of those 2 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. Next, I'll touch on our capital investment execution for 2025 and our increased 10-year capital plan, as shown on Slide 9. Through the end of the fourth quarter, we invested $5.4 billion for the benefit of our customers and communities. This exceeded our already positively revised 2025 plan of $5.3 billion which incorporated a $500 million increase over our initial capital investment profile as we accelerated certain investments related to our system resiliency plan. This increased level of investment 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 10-year plan at $6.8 billion 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 million increase to our long-term capital investment plan, bringing the total to over $65 billion through 2035. Knowing the time lines on these electric transmission projects, we anticipate the CapEx to be added towards 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 points. We believe we are well positioned to be within our target cushion, in particular, given the updated rulemaking provided by the U.S. Treasury Department just yesterday that I'll provide more color on shortly.

We see further improvement in our metrics through the remainder of the plan as well as we've signaled previously, given we anticipate significant cash proceeds from the issuance of securitization bonds related to Hurricane Beryl and the closing of our Ohio gas LDC sale later this year. Our execution remains on track as just yesterday, we priced roughly $1.2 billion in securitization bonds. With these proceeds, we will look to extinguish a $500 million term loan at Houston Electric and reduced commercial paper. In addition, we expect to receive cash proceeds net of tax of $800 million 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 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 million. And while we're still analyzing the impacts of the notice, we now believe that our annual federal income tax cash tax liability should be near 0 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 billion of customer-driven capital investments into our now over $65 billion 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.

As a reminder, we estimate approximately $150 million 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. And with that, I'll now turn the call over to Jason.

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 in 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 low growth fundamentals, constructive jurisdictions and derisk financing plan, we continue to have 1 of the most tangible and executable growth plans in the industry.

Thanks, Jason. Operator, I'd like to turn it over for Q&A.

[Operator Instructions]

And our first question comes from David Arcaro with Morgan Stanley.

Jason, I think you mentioned updating the transmission planning 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's still ahead.

Yes. Thanks, David, for the question. I would separate the $500 million of additional capital we announced related to that 765 kV line this quarter from the incremental transmission work that will be needed as a result of the acceleration of the large loads that I mentioned. The third and 765 KV line that we introduced this quarter had been in the works, had been part of ERCOT's planning for a while. We had just gotten to the point that where we confirm the need on our system and a file for it at ERCOT, which is why we included it as an update to the 10-year CapEx guidance.

Separate from that, as we're seeing this large load accelerate, we have internally accelerated our annual transmission planning I expect we'll 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're seeing with respect to these new large loads, as I said, they're coming faster and also importantly, they're 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 intra-regional transmission projects to make sure that we have capacity where we need it within the Houston region. As I said, we'll likely be able to provide an update on what that means from a CapEx standpoint in the second half of the year.

Got it. Okay. That makes sense. That's helpful. And then Chris, apologies if I missed it, but just as you reflect on the repairs adjustment now in the AMT, does that could that potentially formally reduce the equity needs in the plan versus what you've got baked in there? When might we learn more in terms of how the balance sheet impacts might flow through.

Sure thing, David. And again, as you may have seen, it just came out actually yesterday afternoon. So I think ultimately, it is in line with where our expectations were and it will have a couple of benefits. First, remember that the general profile we talked about, it was about $150 million per year. So what this will do is really 2 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 billion of CapEx that we could also add to the plan without adding any incremental equity.

Our next question comes from Shar Pourreza with Wells Fargo Securities.

Good morning. I just wanted to tease out a little bit of David's question that he had on sort of the growth and stuff. I mean just the 2 years ahead of schedule, that's just massive amount of growth, it could be sizable, obviously, to the current guide. Can you just help us frame just maybe a little bit with more specitivity just what this means in terms of timing and scale of CapEx and maybe how we should think about year 7 to 9, especially since you're already near the top end of that trajectory. I guess, how do we sort of think about what this could mean to the ultimate trajectory?

Ultimately, I just think this is another very strong tailwind for the company on an already great industry-leading plan. But let me try to provide a little bit more color. We are able to accelerate this these large load interconnections because we have existing capacity in our system. I think that, that is a unique asset for us. Many of these companies are [indiscernible] advanced manufacturing data centers are looking for power over the next 2 years, and we're uniquely positioned to connect them over that period of time.

Those projects don't require significant incremental capital. It's 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 intra-regional transmission ties to make sure we're 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, well, impact sort of CapEx guidance I would estimate at this point towards the tail end of this decade into next. I wouldn't 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 exceptional -- exceptionally strong tailwind to an already great plan.

Got it. Okay. That's perfect. And then just lastly, on ERCOT's batching and study process changes, there's kind of a view out there that it can affect timing and certainly for new interconnections and upgrades. Do you sort of expect any approval slowdowns or delays within service dates, especially with this accelerated load you're targeting? Or is the impact kind of manageable?

I definitely think it's manageable. We support the overall direction of batching I think it will help provide relief in the overall ERCOT market. But as a quick reminder, we're pretty unique here in Houston. We've been very disciplined in what we've put in the ERCOT [ queue ] and our large load in our connection applications have been processed within 70 days. So we don't see the backlog that many regions have. And as ERCOT transitions to this batching process, we're still operating under those current rules that exist today when we've been, as I said, achieving reviews and approvals within 70 days.

Many of these firm projects will follow that time line. And again, I think it will -- whether they are approved under the current rules that are in a factor as part of Wave 0, [indiscernible] so we feel like we can bring these projects online, really in the '27 and '28 time line. 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.

Our next question comes from Steve Fleishman with Wolfe Research.

Just following up on the low growth in transmission capacity. Jason, how would you kind of think about how much excess do you have left, if at all? Are you kind of filling that up with these 2 buckets that you laid out?

Good morning, Steve. We're certainly making a pretty big debt in the excess capacity I have today, but not fully exhausted it. If you recall for the investor update this past fall when we rolled out the $65 billion 10-year CapEx plan. Included in that plan, we're a little more than 200 transmission projects that were geared at keeping pace with the growth. What we're seeing here with an acceleration is it's 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're estimating we have roughly a little shy of 10 gigs of existing capacity, but we're already working on the transmission projects that will unlock more capacity as we bring these large loads on. And so I don't see -- foresee at this point a challenge with not only accommodating these projects, but additional large loads that we're working with.

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

That's it. This is phenomenal opportunity for our customers and communities because the existing capacity is there today, we're going to be spreading those fixed costs out over a wider base driving down customer bills. We've been connecting large loads before it was cool for the industry. This is what has kept kind of 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 or they not only help with the tax base in this region, but back to the point that you're making, and they help us keep our rates affordable. So we continue to project that we'll now keep rates flat through 2028 as a result of this incremental load.

Okay. And then 2 more quick ones, I guess. Just on the One last one on the data center opportunity. You have mentioned in the past potentially looking at something in Indiana. Is there any update on that?

We continue to have very active conversations up there. I remain very optimistic that we'll be able to finalize those opportunities that we're 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're not trying to optimize over the next 2 years. And Texas is one of the few areas of the country where we have capacity at scale and can move quickly, which is why we've 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're seeing today is really this pursuit of existing capacity in Texas.

Okay. And then lastly, just on the balance sheet with [indiscernible] benefit and then you mentioned [ Boral ] and the LDC sales. So if you don't change your capital plan, where would FFO to debt be by, I don't know, end of '26 or '27?

I think you probably -- sure, Steve. I think if you just kind of hold everything constant, we'd probably be on the order of roughly 15% directionally is the way to think about that. So it's definitely a good outcome in terms of the new regulation coming out.

Our next question comes [indiscernible] from [indiscernible]

Team, thank you very much. I appreciate the time. Maybe just to come back to a couple of subjects. First, a little bit of detail, but we've seen ONE Gas update their guidance here on the Texas legislation from last year. Can you comment a little bit about the deferrals and any opportunities there? How are you leveraging that versus your peers? We see [ Atmos ] also reflected pretty meaningfully -- just would love to hear your latest updated thoughts on that and to what extent it's perhaps just within the range of guidance? Or is that something that's perhaps not fully utilized thus far?

Julian, thanks for the question. It is in the guidance that we've currently issued thus far. As you know, we were out in kind of front of this issue. I really think it makes sense from the standpoint of helping reduce regulatory lag, which is both helpful for our customers and our shareholders. We pursued this because we -- 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 in the guidance that exists.

Got it. Yes, I know you guys did it last year. I just wanted to make sure that it was more fully utilized. And then separately, if I can come back to the batch process conversation, I know it's gotten a lot of attention here. Can you comment a little bit about just when it kicks back off here later this -- in June or whatever they ultimately move, is there any risk that you perceive on timing here ultimately? Or is the intent by moving into June or later [indiscernible] to really sidestep some of the delays that you could conceivably or at least are perceived to be feared to be pushed out.

Thanks again for the question. I mean I think we're all waiting kind of for the revised timing. But backing up from what has been signaled as sort of a summer adoption. 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 are -- those customers that we've been working with that have already fully completed their large load requests inclusive of the timing of the ramps. So I don't see any challenge with getting those requests into the ERCOT queue and getting it moving again, either under the existing rules as part of batch which will be consistent with the timing that we've outlined here.

So we've been working constructively to, again, continue connect large as we haven't had the issue of the backlog than many of the other regions in ERCOT have experience. We'll continue to do that, and then we will work with ERCOT as they transition this summer to the vast process.

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 -- just should we expect sort of 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, right, in identifying transmission needs? Or is it going to continue to be sort of 1 off and to us?

We think it makes sense to be conservative. We've identified a number of 765 kV opportunities that are included in the $10 billion 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 are the best support kind of the growth of the Greater Houston region. And that's what occurred here.

ERCOT proposed this third line. We needed to assess it. We agreed with the assessment. We filed for it, and that's why we're 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.

Our next question comes from Nicholas Campanella with Barclays.

I like the tagline connecting large [ lows ] before it was cool. I appreciate that. So just one for me. A lot of good questions have been answered, but just -- you guys have a track record for consistently kind of raising CapEx every quarter here, it seems, and it's great to see the $500 million increase to the 10-year plan. Just when you think about like executability, supply chain, labor constraints, like what is the ability to bring more into the 5-year plan? Or is that kind of fully baked at this point? I know you have a bunch of items kind of listed on the slide that are incremental and it does seem like some of these transmission connections are in the '27, '28 and beyond time frame. But just maybe kind of frame how much capital you can actually facilitate bringing into the next 5 years versus the 10 years?

Yes. Given the fact that some of these large loads are in new regions in the Greater Houston area. So historically, we've connected a lot of these large loads near the ship channel, the petrochem complex. We're now seeing kind of different areas within Houston, really target accommodating kind of these large log requests. We are going to need more intra-regional transmission capacity. That is work that will need to be done in the first 5 years of the plan.

Import lines generally take a little longer. I'd expect those to kind of really be hitting sort of towards the tail end of the decade, early part of next. But we undoubtedly will need more transmission in their Greater Houston area in the first 5 years. We have capacity to accommodate that. Again, since we've been connecting large loads for such a long time, we have had purchasing spots and all of the critical equipment, high voltage breakers and transformers. We've had relationships with third parties. We can move quickly, the pace of our customers to connect these loads. So I don't see materials being a constraint. I don't see labor being a constraint. I think really, what we need to do is continue to finalize the details of our PowerFlow study, propose these projects. and begin working on them. I think some of that's going to come in the first 5 years, and some of it will be a tailwind into the next decade.

Our next question comes from Jeremy Tonet with JP Morgan Securities.

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 time line can look there and what the size of the opportunity as you see it now?

Sure. Jeremy, the short of it is, I think there's opportunity here, maybe bridging off the last question, too, maybe even in 5-year plan as well. So the short of it is on the new smart meter program, we're probably going to be looking to file in Q4 at the PUCT, that's a natural time. We'll be able to give you insight there for the more potential CapEx upside to the plan. I think the other one maybe to touch on, which makes sense is a really important project again for the city of Houston, it's this downtown revitalization effort, as we've talked about.

Here, we're going to be in a position to update probably second half of this year. due to the fact that at that stage, we're spending the time now to work with the city to talk about where -- what locations make the most sense to relocate and cite our new substations. So those will be 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 system resiliency plan is probably going to be 2028. So the -- excuse me, yes, 2028. So really, it's about feeding the back half of the plan, 2029, 2030 and 2031, for potential upside there as well.

Got it. That's helpful. 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 and looks like it continues to be. Just wondering how deep do you see that well at this point, given how much has been accomplished.

I think we're still in early innings. I really proud about the progress the team has made driving efficiency. But when we continue to look at system. I think we've got further opportunity. Just sort of case in point, I highlighted in my prepared remarks, the fact that we saved 100 million outage 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're 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 haven't seen here in Houston since 2014. And since 2014, we've added north of 1 million metered homes and businesses. And so as I said, we're just getting started. So as we continue to drive down outages, improve and increase the automation in our system. We're going to reduce the amount of trouble work. And it is just an example of another, I think, tailwind with respect to O&M for the company.

Our next question comes from Anthony Crowdell with Mizuho.

Just one quick question. I think earlier, Chris, you talked about the additional balance sheet capacity you guys had with change in the recent decision? Just other items. I think you talked about maybe 15% FFO to debt. You've 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 now this additional balance sheet capacity maybe delay future divestitures at the gas business and given you also have this substantial growth still in front of you?

Anthony, we're going to constantly look at what makes the most sense. The capital recycling we've done has been highly efficient in feeding growth that's primarily been occurring here in the Greater Houston area. Ultimately, we're going to stay very open-minded to what makes sense. What Jason was getting at earlier, is, certainly, there's balance sheet help here in the next few years from really multiple things. The Ohio gas LDC sale, we've referenced was $400 million 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 certainly hear us saying at the back end of the decade, right, we could have substantial CapEx opportunities, which we're required to have us, again, look at the most efficient way to finance that growth. So we're always going to stay open-minded on that front.

And our last question comes from Andrew Weisel with Scotiabank.

Two quick ones, please. First, on the fourth quarter, electric volumes, I noticed that the total throughput was down modestly. Residential was up 4%, and we've seen positive C&I trends in the last few quarters. Just wondering if there's any noise in the data or anything to call out? Obviously, you're bullish on the long-term trends. Just was wondering what's going on in the near term.

Sure, Andrew. I think what the takeaway there is we continue to see more of a weighting towards the commercial and industrial growth. among our overall base. I'll think I'll put it that way. If you just look across all of 2025, we're talking about roughly 7% industrial growth. It's pretty dramatic. I think what you're also hearing us allude to is we're highly confident in the long-term growth potential, including because these opportunities we've 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 billion investment that Eli Lilly has referenced for the Greater Houston area, it's pretty incredible that will represent thousands of jobs to come with it as well as the loans that we're 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 is really about production and manufacturing of the components that go in the data centers, that means 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.

Okay. So not to worry about the 4Q number then, in other words?

No, sir.

Okay. Very good. And then lastly, in terms of the CapEx update, you're increasing the overall plan, thanks to the 765 kV line. It looks like, if I'm getting the numbers right, that was an increase of $800 million then you lowered the gas spending by about $300 million 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've got the puts and takes there, right? I mean, largely, the increase is driven by the 765KV line, as you mentioned. We're always constantly looking at the execution of our integrity management work. We were able to pull forward some of that here into 2025, gave us a little bit of an opportunity to be flexible on the gas side. And in the outer years. We'll always tune the portfolio based on kind of executability, kind of where we're seeing demand. I wouldn't look at that as a signal of a long-term trend.

Thank you. This concludes CenterPoint Energy's Fourth Quarter 2025 Earnings Conference Call. Thank you for your participation.

Good morning, and welcome to CenterPoint Energy's Third Quarter 2025 Earnings Conference Call with senior management. [Operator Instructions] I will now turn the call over to Ben Vallejo, Director of Investor Relations and Corporate Planning. Mr. Vallejo?

Good morning, and welcome to CenterPoint's Q3 2025 Earnings Conference Call. Jason Wells, our CEO; and Chris Foster, our CFO, will discuss the company's third quarter results. Management will discuss certain topics that will contain projections and other forward-looking information and statements that are currently 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-Q and other SEC filings as well as 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 diluted earnings per share of $0.45 for the third quarter of 2025 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.

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. Now I'd like to turn the call over to Jason.

Thank you, Ben, and good morning, everyone. On today's call, I'd like to address 3 key focus areas for the quarter. First, I will briefly touch on the 10-year financial plan update we introduced just weeks ago. Second, I will walk through our strong third quarter financial results. And lastly, I'll discuss our announcement from earlier this week regarding the sale of our Ohio gas LDC. Last month, we introduced an ambitious 10-year plan focused on supporting economic development, delivering strong customer outcomes, reducing O&M through operational efficiency and driving value for our investors.

Our capital investment plan of at least $65 billion is supported by some of the fastest-growing demand for energy anywhere in the country. Importantly, we also have visibility to at least $10 billion of incremental capital investment opportunities over the course of the plan, particularly in Texas, given the dramatic growth the communities we serve continue to experience. Specifically, in our Houston Electric service territory, we forecast peak load demand to increase by 10 gigawatts in 2031. This forecasted growth would represent a nearly 50% increase in peak demand over the next 6 years.

Additionally, through the middle of the next decade, we estimate the electric load demand on our system will double to approximately 42 gigawatts. This level of demand will continue to support a strong investment profile. Our capital investment plan through 2030 drives a projected rate base CAGR of over 11% through the end of the decade and the potential for double-digit rate base growth through the middle of the next decade. The Greater Houston area is thriving, powered by what we believe is the most diverse set of growth drivers in the sector. It is not relying on any single industry and the results speak for themselves. This growth isn't aspirational. It's already here.

Notably throughput in our Houston Electric business were up 9% year-to-date. This strong growth is anchored by our surge in industrial customer class throughput, which are up over 17% quarter-over-quarter and up over 11% year-to-date. This incredible growth provides a solid foundation for our earnings guidance. Specifically, we have strong conviction in our ability to achieve non-GAAP EPS at the mid- to high end of our 7% to 9% annual growth guidance from 2026 through 2028, and 7% to 9% annually thereafter through 2035.

I continue to believe we have one of the most differentiated plans in the industry because of our unique combination of the diversity and pace of electric demand growth, a derisked regulatory and financing profile and our ability to continue investing affordably for the benefit of our customers. These attributes set us apart from our peers and enable us to continue to deliver value for all our stakeholders over the next decade and beyond.

Now moving to our strong third quarter financial results. This morning, we reported non-GAAP EPS of $0.50 for the third quarter, representing a 60% increase over the same period last year. As we signaled last quarter, 2025 earnings reflect a more back-end weighted profile for the year, consistent with our return to traditional capital recovery mechanisms now that the bulk of our rate case activity is behind us. I'll let Chris cover the details in his section, but we remain well positioned to execute on our recently increased 2025 non-GAAP EPS guidance.

As such, we are reiterating our full year 2025 non-GAAP EPS guidance range of $1.75 to $1.77, which would represent 9% growth over 2024 delivered results of $1.62 per share. Additionally, we are also reiterating our 2026 non-GAAP earnings guidance we initiated a few weeks ago. As a reminder, we are targeting at least the midpoint of $1.89 to $1.91 per share. At the midpoint, this range would represent an 8% increase over the midpoint of our 2025 non-GAAP EPS guidance range.

Further, 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 from 2026 through 2028 and 7% to 9% annually through 2035. As a reminder, our guidance is based on actual delivered results as we continue to execute and deliver value for our shareholders each and every year.

I'd now like to discuss the recent announcement regarding the sale of our Ohio gas LDC. Earlier this week, we announced the signing of our Ohio gas LDC transaction, which is expected to generate approximately $2.6 billion in gross proceeds, representing a significant milestone in executing our 10-year financial plan. The strong valuation of approximately 1.9x 2024 rate base underscores the exceptional demand for U.S. natural gas LDCs.

This outcome once again demonstrates our ability to efficiently finance our growth investments, this time by recycling the transaction proceeds of a high-quality business at nearly 2x book value and reallocating capital into our remaining portfolio at 1x book value. The after-tax net cash proceeds of approximately $2.4 billion will be redeployed into higher growth jurisdictions to efficiently fund our capital investment plan. Importantly, the proceeds should also provide additional flexibility in funding for future incremental capital investments.

The transaction is expected to close in the fourth quarter of 2026. Chris will go into the details of the transaction, including its structure, which will allow us to more smoothly redeploy capital while maintaining a strong earnings profile. It has been a privilege to serve the customers and communities in our Ohio gas business, and we are committed to a smooth transition for our customers. This is a tremendous business with fantastic employees, and we know they will continue to provide great service to the 335,000 meter customers in Ohio.

This transaction reflects our continued commitment to disciplined capital allocation as we seek to further enable growth, especially in Texas and long-term value creation for all stakeholders. Our growing capital investment opportunities are supported by accelerating and diverse set of load growth drivers. This, coupled with our ability to efficiently finance our plan continues to support our conviction that we have one of the most tangible long-term growth plans in the industry. And with that, I'll hand it over to Chris.

Thanks, Jason. This morning, I will address 4 key areas of focus. First, I will review the details of our third quarter results. Second, I'll discuss the transaction structure of the recently announced sale of our Ohio gas LDC. Third, I'll highlight our progress on the execution of our 2025 capital investment plan. And lastly, I'll provide an update on where we ended the third quarter with respect to the balance sheet.

Let's now move to the financial results shown on Slide 5. On a GAAP EPS basis, we reported $0.45 for the third quarter of 2025. On a non-GAAP EPS basis, we reported $0.50 for the third quarter of 2025 compared to $0.31 in the third quarter of 2024. Our non-GAAP results removed $0.03 of charges, primarily consisting of tax true-ups related to the sale of our Louisiana and Mississippi businesses and transaction costs in connection with our announced Ohio gas LDC sale. In addition, it removes $0.02 related to our temporary generation units as these units are no longer part of our rate-regulated business.

These strong results give us confidence in meeting our positively revised 2025 non-GAAP EPS guidance of $1.75 to $1.77.

Now taking a closer look at the drivers of our third quarter earnings. Growth and rate recovery when netted with depreciation and other taxes were a favorable variance of $0.07 when compared to the same quarter of last year. This positive variance underscores the strength of our interim capital tracker mechanisms, which continue to support the efficient recovery of our investments. We expect these tailwinds to continue driving earnings through the remainder of the year.

During the quarter, we filed for our second set of interim capital recovery trackers at Houston Electric, the TCOS and DCRF mechanisms, which support the timely recovery of transmission and distribution investments, respectively. Our TCOS filing, which included a $15 million annual revenue requirement increase was approved and reflected in customer rates on October 10.

Our DCRF filing, which includes a $55 million annual revenue increase is on the PUCT open meeting agenda for later today with updated rates expected to take effect in December. Weather and usage were $0.01 favorable when compared to the comparable quarter last year, driven by fewer outages across our Houston Electric service territory related to storm activity. O&M was $0.12 favorable compared to the third quarter of 2024. This significant improvement in O&M is primarily driven by last August vegetation management and other storm-related costs, where we spent approximately $100 million to accelerate work and improve customer outcomes.

Additionally, we had $0.03 of favorability in other, which is primarily driven by an income tax remeasurement. This reflects our continued efforts to optimize our tax structure to align with the evolving composition of our portfolio, which after the closing of our Ohio transaction, will skew more heavily towards Texas. These favorable drivers were partially offset by $0.04 of higher interest expense and financing costs, primarily due to incremental debt issuances since the third quarter of 2024.

Next, I'll go through the details of our recently announced Ohio gas LDC sale. As many of you may have seen earlier this week, we announced the sale of our Ohio gas LDC, which is expected to generate gross sale proceeds of approximately $2.62 billion, garnering a multiple of nearly 1.9x 2024 year-end rate base. We anticipate total net proceeds of roughly $2.4 billion after taxes and transaction costs. This is an outstanding outcome. This result exceeds what was contemplated in our financing plans, underscoring the conservative approach we take to our planning process.

As such, the transaction will be accretive to both our plan and alternative financing sources. In the near term, these proceeds will serve to further strengthen our balance sheet. And over the long term, as Jason alluded to, this transaction will allow for greater financing flexibility and may enable us to fund incremental capital investments with less equity than the 47% rule of thumb we provided at our September investor update.

Transaction proceeds will be redeployed into higher growth jurisdictions to support near-term capital investments in our Texas Electric and Gas businesses. Notably, after the close of this transaction, Texas will represent 70% of our investment portfolio. In connection with the transaction, we will enter into a 1-year seller's note with a 6.5% annual coupon, which will help support earnings in 2027. As a reminder, last quarter, we announced an increase to our 2025 investment plan as we continue to make targeted system enhancements. These incremental investments will help partially offset the loss of Ohio investments upon the close of the sale. The transaction is expected to close in the fourth quarter of 2026, aligning with our financing plans and long-term value creation goals.

Next, I'll touch on our capital investment plan execution through the third quarter, as shown here on Slide 7. For the quarter, we are right on track to meet our positively revised 2025 capital investment target of $5.3 billion. In the third quarter, we invested $1.3 billion of base work for the benefit of our customers and communities, which, combined with the $2.4 billion we invested in the first half of the year, represents approximately 70% of our total year target. In short, we remain well positioned to achieve our investment targets for 2025.

Now moving to an update on our balance sheet and credit metrics. As of the end of the quarter, our trailing 12 months adjusted FFO to debt ratio based on the Moody's rating methodology was 14% when removing transitory storm-related impacts. We anticipate these credit metrics could be further improved by early next year as we expect to issue securitization bonds in connection with Hurricane Barrel in the first quarter of 2026. We continue to target 100 to 150 basis points above our Moody's downgrade threshold of 13% as we remain laser-focused on efficiently financing our robust capital investment plan.

Earlier this month, we once again illustrated our commitment to a strong balance sheet through our $700 million junior subordinated note issuance, which provides 50% equity credit. Our common equity guide through 2030 remains unchanged at $2.75 billion. As a reminder, we have derisked over $1 billion of these equity needs through the forward sales we executed earlier this year, and we do not anticipate common equity needs beyond those forward sales from now through 2027.

We believe we are well positioned to execute the remainder of the year and beyond, and we are reaffirming our 2025 non-GAAP EPS guidance range of $1.75 to $1.77, which equates to 9% growth at the midpoint from our delivered 2024 non-GAAP EPS of $1.62. Additionally, we are also reiterating our 2026 non-GAAP earnings guidance we initiated a few weeks ago at our investor update from the midpoint of our new and higher 2025 range.

For 2026, we are targeting at least the midpoint of $1.89 to $1.91. At the midpoint, this would represent an 8% increase over the midpoint of our 2025 non-GAAP EPS guidance range. 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. After 2028, we will target growing earnings annually at 7% to 9% through 2035. We look forward to executing our plan that delivers on the most diverse growth drivers in the country, fueling economic development for years to come. And with that, I'll now turn the call back over to Jason.

Thank you, Chris. I'm proud of the team's continued execution over the past quarter and the results that firmly put us on track to deliver our guidance this year. This management team will work to not only execute the ambitious targets we set forth in our new industry-leading 10-year plan, but we will also work to enhance the plan for the benefit of all of our stakeholders.

Thanks, Jason. Operator, I'd now like to turn it over to Q&A.

[Operator Instructions] Our first question is from Nick Campanella of Barclays.

I just wanted to ask, Chris, you talked a little bit about it in your prepared remarks on balance sheet capacity here from the Ohio transaction. How are you kind of viewing it on like an FFO to debt improvement basis versus the plan? You mentioned financing maybe less than the 47% equity assumption. Is that now 30% or 15%? Is there any kind of way to further quantify that?

Sure. Nick, if I could just maybe take a step back. And as you look at the transaction, there's really a couple of things going on. One is, over time, you've seen us continue down this path of increasing really the focus on the portfolio where we're reducing also earnings and cash lag where we can. So maybe that kind of goes to your FFO to debt point. As you look at the total outcome as we do sources and uses, you'll probably see us initially step into reducing the OpCo debt that's there. So that's roughly $800 million if you base it on a year-end '26 rate base of $1.6 billion.

And then as we look at our plan overall, you're probably looking on the order of $400 million of benefit net to plan. So ultimately, what this puts us in a position to do, as you can imagine, is we'll evaluate both the improvement to the balance sheet here in the near term. And then as we go forward, it could allow us to deploy additional CapEx to the plan in an accretive way.

Okay. Great. Appreciate it. And then just maybe on the deal, just any update on how local feedback has been on the ground and reception to the deal from state leadership since it was announced?

Yes. Nick, it's Jason. Reception has been great so far, very supportive. Don't anticipate any challenges and obviously going to work with our counterparty to successfully transition this business and continue the track record of great service in Ohio.

Our next question is from Steve Fleishman with Wolfe Research.

Just maybe, Jason or Chris, more color on the sales growth in Texas, which obviously that's very strong. Just what sectors are driving the industrial sales so much higher this year?

Steve, thanks for the question. I think the throughput growth quarter-over-quarter, year-over-year really reflects the diversity of drivers that we have here in the Greater Houston area. We've already connected this year alone over 0.5 gig of data center activity. Much of that is on the transmission sort of industrial rate side. We continue to see very strong demand from energy, refining, processing and exports.

And I think what we really saw as a differentiator this quarter was the increase in activity at the Port of Houston. It's the largest port by waterborne tonnage in the world. And we saw about an 18% increase quarter-over-quarter in exports. So it's really just a diversity of drivers. This isn't growth that we're anticipating coming down the line. This is growth across a number of different industries that we're experiencing today.

Okay. Great. That's helpful. And then just any update on prospects of data center activity in Indiana. And I don't know if you want to share any thoughts on how you're feeling about the regulatory environment in Indiana. I know you don't have any cases there right now, but just thoughts there.

Yes. We continue to actively work on data center opportunities in Indiana and feel well positioned to deliver on that. As we've talked about in the past, I think we're pretty uniquely positioned in the fact that we've got excess capacity today in the system that allows us to move quickly. It's an area that is very constructive, both from a cost of and availability of land, water, et cetera. And we've just brought online our simple cycle plant that was built to be easily converted to combined cycle that would allow us to efficiently increase the level of capacity available.

So we continue to feel good about the prospects of bringing data center activity to Southwest Indiana. Stepping back on kind of a broader basis, we are all focused on affordability of our service up there. We, like many of the other Indiana utilities had a fairly significant step-up in rates last year as a result of a long-term trend of closing some very old generating facilities.

As we project forward, though, we don't -- we see our rates growing in line with inflation over the remainder of this decade. We've taken some steps to help kind of mitigate the impact. We've canceled about $1 billion of renewable projects and we'll push out the retirement of our third and final coal facility a few more years. And so I think at the end of the day, we, like other utilities, are taking proactive steps to make sure that we moderate the pace of rate increases, but working constructively to bring economic development activity to the state. And I think that's very much aligned with the state leadership goals.

Our next question is from Jeremy Tonet with JPMorgan Securities.

Chris, thanks for the comments there on the asset sale. I was just wondering if you might be able to expand a little bit more. It sounds like a nice credit accretive properties to the final deal terms versus expectations. I'm just wondering if you could expand a bit more, I guess, on whether you see this being accretive to the earnings over time or any thoughts on that side?

Sure. I think, Jeremy, a couple of ways to look at this. We do see it as directly beneficial to the financing plan, as I mentioned, and helpful from an earnings standpoint, too. A thing to keep in mind is, as we looked at the sale here of Ohio specifically from a -- as we reallocate spend, we're going to be in a situation where we're experiencing 25% to 30% less cash lag just on a historical basis. So I think that's certainly helpful as well.

Going forward, we'll be putting those dollars to work, as Jason mentioned, certainly heavily in our Texas Gas and Electric business, including in a set of Texas gas projects that we're excited about really for years to come, where it really is a great business, as you know, coming out of the rate case last year there. So I think well positioned both financing-wise and from an earnings standpoint.

Keep in mind, I alluded to this in my prepared remarks, but I would just emphasize here, too, as we're stepping into making sure that we were managing any otherwise earnings impact, we've already deployed about $500 million this year that we expressed in our plan. And keep in mind, as I mentioned earlier, this is about $1.6 billion of year-end '26 rate base. So you should assume that we're also going to accelerate another roughly $1 billion in 2026. That means that here, we're going to fully replace that rate base by the beginning of 2027. So overall, positions us well going forward.

That's very helpful. And just one more, I guess, on the seller's note as you guys are receiving in the deal as far as how you think about how that helps facilitate the plan and what value, I guess, that brings to CenterPoint here being able to layer that in and how that allows you, I guess, to manage earnings going forward, but it sounds like the capital plan, as you said, really is a big offset there.

Yes. Certainly, from a capital allocation plan, we've been prefunding thoughtfully. What I would say on the seller note is it's a pretty straightforward instrument there where we'll have that opportunity for the second year to 2027, having that 6.5% coupon associated with it on just over $1 billion. And so it allows us, again, to have good clarity. It also settles on a quarterly basis, I think, which is nice, too. So there's no real lag there. So straightforward instrument, one that it's a helpful component of the plan as well.

Our last question comes from the line of Julien Dumoulin-Smith with Jefferies.

Jason, quickly, a couple of things to follow up on. First off, I know you alluded to it a few weeks ago here, but how do you think about the AMI and rollout and the time line on that front? I mean, certainly, it seems like this is a multiyear project here. But certainly, within the scope of the 5-year plan, how do you think about the cadence of that rolling in? When do we start to get some visibility around that and contributions?

Yes, Julien, thanks for the question. This next generation of AMI investments really will start to fold into the plan in '26. Maybe taking a step back for a second, as we released the new $65 billion 10-year CapEx plan we identified more than $10 billion of upside. I would consider one of these projects as one of the upside opportunities to that plan.

I think coming back to the timing, the most important thing that we can do is run a pilot in '26 to prove the use case and benefits for our customers. And then I would really look at that once we have that pilot in hand, making a filing with the PUCT and really starting to kind of work this project in earnest beginning in 2027 and beyond. I think there are very real benefits for our customers.

As we've talked about in the past, when we experienced Winter Storm Uri, because of the generation of meters we had at the time, we could not use those meters for load shed-related activities. Instead, we had to shed load at the circuit level. This next generation of smart meters would allow us to do that at the home and I think would allow us to be much more targeted and allow for even more rolling of power if an event like Winter Storm Uri was to occur again. So a number of benefits to our customers. We need to prove those out with a pilot in '26 and then look towards more fulsome deployment beginning in '27.

Excellent. And then if I could pivot in a slightly different direction, obviously, kudos on the transaction here. The other item, if I were to think about like what's not in terms of included in the formal guidance on cash flows is mobile gen. I perceive that the economics and price points there continue to improve as evidenced maybe by some of the folks out there like Fermi talking about this. But how would you characterize today where you are around that and the opportunities that exist more in the longer term, obviously, is that it's less committed in terms of the existing units and your exposure to some of that improved market pricing?

Yes. There's really 2 aspects to that, Julien. There's first, we've got what we call medium-sized units, just a little bit larger than 5 megawatts a piece, 5 units, 5 megawatts a piece that currently we have the ability to market and are actively doing that. The market for those units remains very strong and would be a potential cash flow tailwind to the plan. On a larger basis, we have 15 units that are roughly kind of call them, 30 megawatts a piece that are now actively supporting the grid outside of San Antonio until either kind of late '26, early '27 at the latest, at which time then we'll be able to remarket those units.

As you said, the market remains strong. If anything, it is improving modestly. That will become a cash flow tailwind when we can release those units from the support of the ERCOT grid in San Antonio and remarket those again probably likely around spring of '27. So we continue to work with brokers, third parties to keep a pulse on the market and think about how we can kind of derisk and take advantage of this growth. But obviously, more to come here as the quarters unfold and as we get closer to those -- the release of those units.

Excellent. Sorry, nothing to, but one final detail here. HB4384, right? So that's -- your peers in the state, your peer gas utilities in the state have been talking a good bit about this. I know that you all in the interim have talked up even more gas investments in your plan a few weeks ago. Is the scope of the contribution from that legislation fully included in the plan? And to what extent is there anything else that we should be considering here given your expanded investment in gas in recent weeks?

Yes. We think that was a very constructive piece of legislation to help sort of reduce regulatory lag. What I would say is the benefit of that legislation is incorporated in the plan that we released with respect to the investments that we have identified as we continue to look at enhancing the plan, and we've alluded to the $10 billion plus outside, there is opportunity as we fold gas-related capital in that the plan could be enhanced further with the benefit of that legislation. So partially in the plan has the opportunity to be improved as we fold more capital in.

Thanks, Jason. Operator, this concludes our call. Thank you all for joining.

This concludes CenterPoint Energy's Third Quarter 202 Earnings Conference Call. Thank you for your participation.