As CenterPoint Energy Inc. exits the midstream sector and prepares for a cleaner energy future, the company plans to double its electric and gas utility earnings, rate base and dividend over the next decade.

CenterPoint executives on Sept. 23 announced the company is targeting an increased 8% annual utility earnings growth rate from 2021 through 2024 with 6% to 8% expected annual EPS growth from 2025 through 2030.

"[O]ne thing I learned early on is growth always matters ... and we've got that growth," CenterPoint President and CEO David Lesar said at the company's analyst day in Houston.

To drive this growth, CenterPoint is increasing its five-year capital plan to more than $18 billion, up from more than $16 billion in planned capital spending announced in December 2020. In addition, CenterPoint announced a 10-year capital plan with more than $40 billion in capital investment opportunities. CenterPoint also has identified another $1 billion of reserve capital outside of the 10-year investment plan.

"It will be biased toward electric but a significant amount will go into our gas businesses," Lesar said.

CenterPoint identified $23 billion in spending opportunities in the electric business through 2030 focused on system growth, resiliency and investments in renewables as well as grid improvements for "accelerated" electric vehicle adoption. On the gas side, CenterPoint sees more than $16 billion in "sustainable capital investments through 2030" focused primarily on system modernization and improvement, including replacing more than 10,000 miles of legacy steel and plastic pipe.

"This spend doesn't rely on any big bets," CenterPoint Executive Vice President and CFO Jason Wells told analysts and investors. "This is routine spend consistent with what our customers are asking for."

'No equity needs'

Lesar said the management team expects "this 10-year plan can be fully executed with the liquidity that we will have on hand after we close" the merger of Enable Midstream Partners and Energy Transfer LP and the sale of the Arkansas and Oklahoma gas distribution companies.

"It is not dependent on nor does it require the sale of any other pieces of our business," the CEO said. "However, as we've said, given the high prices that we got for the gas LDCs, we will be open to additional sales if we can see a way to continually and efficiently recycle capital through our business if new opportunities arise for us."

CenterPoint owns a 53.7% limited partnership interest in Enable and expects the deal to close in the fourth quarter of the year. The company plans to complete its exit from the midstream business by the end of 2022, executives said.

Lesar and Wells added that "there is no rebasing" of the expected annual growth rate.

In addition, there are "no equity needs" in the 10-year plan.

"This is possible because we can efficiently recycle the proceeds from the sale of the gas LDCs and [the Energy Transfer merger], take the increased cash flow we're going to get from our business, plus an allowable amount of regulated debt and that will be what we need to execute this plan," Lesar said.

Under this 10-year financial plan, CenterPoint expects to grow its rate base to more than $37 billion by 2030, up from more than $16 billion in 2020, increase utility earnings to $2.38 per share in 2030 from $1.17 at the end of 2020, and grow the dividend to $1.21 from 60 cents per share in 2020.

"We have runway for capital spending well beyond this 10-year horizon," Lesar told analysts and investors. "Bottom line, there is no capital spending cliff at CenterPoint as we go forward."

"We have outlined a plan that we are absolutely confident we can achieve," Wells said. "Our focus is on under-promising and over-delivering."

CenterPoint on Sept. 23 also reaffirmed its $1.25 to $1.27 utility EPS guidance for 2021 and announced utility EPS guidance of $1.35 to $1.37 for 2022.

Cutting emissions

At the analyst day, CenterPoint executives also announced the company's plan to target net-zero direct carbon emissions by 2035.

"This goal will be almost 15 years ahead of ... the peer average of utilities that own generation today," Lesar said.

Wells noted that CenterPoint is targeting net-zero Scope 1 and Scope 2 greenhouse gas emissions by 2035 and plans to reduce Scope 3 emissions by 20% to 30% by 2035. CenterPoint also plans to "reduce our methane emissions by about one-third by 2035," Wells said.

CenterPoint will retire coal units in Indiana, add renewable generation and focus on modernizing its natural gas distribution pipelines with enhanced leak detection.

CenterPoint, which combined and rebranded its electric utilities after the acquisition of Indiana-based Vectren Corp., has forecast the retirement of both A.B. Brown coal units and the 90-MW F.B. Culley coal unit 2 in 2023. The utility intends to exit its 150-MW stake in the Warrick coal plant in 2023 and will address plans for its 270-MW F.B. Culley unit 3 in the next integrated resource plan in Indiana.

The company's preferred portfolio outlined in 2020 calls for adding 700 MW to 1,000 MW of solar and storage in the 2023-2024 time frame and two natural gas combustion turbines totaling 460 MW in 2024.