CenterPoint Energy beats Q2 estimates, shares slip premarket

CenterPoint Energy reported second-quarter results that beat analyst estimates, though shares slipped in premarket trading. The Houston-based regulated utility also detailed a $1.2 billion increase to its 10-year capital investment plan, driven by large-load growth and a downtown revitalization project.

CFO Chris Foster said higher rate recovery added $0.10 per share year over year during the quarter. Operating and maintenance expense was $0.02 favorable, attributed to efficiencies in the vegetation-management program. Milder weather in Texas and Indiana reduced results by $0.01 per share, and higher interest expense was a $0.01 unfavorable factor.

Large-load growth in Texas

CenterPoint Energy submitted more than 17 GW of prospective large-load projects through the Electric Reliability Council of Texas (ERCOT) Batch Zero process. Of those, 14 GW remain eligible, representing more than 65% of Houston Electric's current 21-GW system peak. According to Wells, approximately 10 GW of eligible projects have both required studies approved and qualify for base-load designation, and another 4 GW has one study approved and may qualify as studied load, subject to ERCOT's allocation process expected to conclude in April 2027.

The company expects nearly all of the 14 GW to be energized by the end of 2030. The projects are backed by approximately $900 million of customer cash commitments and security already received. CenterPoint expects to connect 3 GW in 2027. Targeted system-upgrade work for base-load-eligible projects has begun and is expected to continue over the next four years.

Houston Electric also anticipates an additional 2 GW of distribution-level demand over the coming years, driven by advanced manufacturing, population growth and other development. Wells noted that the 65% growth figure tied to ERCOT Batch Zero does not include distribution-level customer growth.

The $1.2 billion increase to the capital plan includes $800 million for targeted system upgrades associated with the 14 GW of Batch Zero-eligible projects and $400 million for the Downtown Houston Revitalization Project. Houston Electric has roughly 10 GW of existing hosting capacity. CenterPoint estimates system upgrades can be completed at less than $60 million per gigawatt. Additionally, the company identified approximately $700 million of potential investment opportunities to serve about 3 GW of additional demand not currently eligible in the Batch Zero process.

Financial details and outlook

CenterPoint added $400 million to the plan following final site selections for two substation relocations tied to the Downtown Houston Revitalization Project. Houston Electric's rate base is expected to grow at a compound annual rate of more than 18% over the next three years. The revised capital plan does not require additional equity financing, according to Foster. The sale of the Ohio Gas local distribution company is expected to close on October 1 after regulatory approval, and planned equity issuance remains unchanged.

Foster said the company expects about $6 million per GW per month in demand-charge cash flow as the 14 GW of new load is energized over the next five years, but these benefits have not yet been incorporated into the plan. He estimated the addition of 14 GW could save residential and commercial customers more than $5 billion over the next decade, reflecting large-load customers absorbing system costs that otherwise would be borne by smaller customers—roughly $500 million in annual savings over 10 years.

Indiana opportunity

CenterPoint is advancing a large-load opportunity in Indiana that could be the single largest load served in its Indiana Electric territory. Engineering work has begun, long-lead materials ordered, and a place secured in the Midcontinent Independent System Operator (MISO) interconnection queue. System analysis has identified incremental short- and medium-term capacity to support discussions with multiple potential customers. The company previously estimated initial Indiana demand could provide about $250 million in residential savings over 15 years. Wells said if demand exceeds approximately 1.5 GW, the company could consider pursuing a generation-company structure.

Regulatory and capital activity

CenterPoint recovers approximately 85% of its investments through capital trackers. It filed a distribution capital tracker seeking a $73 million revenue requirement increase for Houston Electric, with customer delivery charges expected to be updated in November. A transmission capital tracker is expected to be filed next month. The company received approval for a Texas Gas capital investment recovery filing seeking approximately $62 million in additional revenue requirement, with rates taking effect in June. Plans are set to file forward-looking rate cases for Minnesota Gas and its North and South Indiana Gas operations by year-end.

CenterPoint invested $1.5 billion during the second quarter and completed about 40% of its planned 2026 capital spending through the first half. It remains on track to invest $6.8 billion this year. The adjusted funds-from-operations-to-debt ratio under Moody's methodology was 13.4% at the end of the second quarter, nearly 100 basis points higher than in the first quarter. Foster said a portion of an expected Corporate Alternative Minimum Tax refund could add roughly 30 basis points to that ratio in the third quarter.