CNP

ERCOT Batch Zero Process Update

• The company submitted 17 gigawatts of large load projects through ERCOT's new batch zero process, 14 gigawatts of which are expected to be eligible for the program. This 14 gigawatts represents a 65% increase over Houston Electric's current system peak of 21 gigawatts, putting the company on track to hit 50% total load growth by the end of 2029.
• 10 gigawatts of the eligible projects have both required studies approved and qualify for baseload designation; the remaining 4 gigawatts have one required study approved and will be evaluated for final allocation by ERCOT in April 2027.
• Approximately $900 million in customer cash commitments and security have already been received, and nearly all eligible projects are expected to be energized by the end of 2030. An additional 2 gigawatts of distribution-level demand is projected over the next several years from advanced manufacturing reshoring and population growth.

Capital Investment Plan Update

• The 10-year capital investment plan through 2035 was increased by $1.2 billion, from $65.5 billion to $66.7 billion. $800 million of the increase is for system upgrades to connect batch zero large load projects, and $400 million is for substation relocations for the Downtown Houston Revitalization Project.
• The incremental $1.2 billion in capital will be deployed over the next 5 years and does not require any additional equity financing, supported by existing funding capacity from clarified corporate alternative minimum tax (CAMT) rules. There remains visibility to at least $10 billion in additional upside capital investment opportunities through 2035.
• Houston Electric is projected to deliver a compound annual growth rate (CAGR) of over 18% in rate base over the next three years. The company will deliver approximately $6 million per gigawatt per month in new cash flow from demand charges as the 14 gigawatts of new load is energized over the next five years.

Indiana Electric Service Territory Update

• The company is advancing transformational large load growth opportunities in Indiana, including one project that would be the single largest load the company serves in the region. Pre-development work for the project has already begun, and the company is engaged with multiple additional counterparties for further projects.
• These large load projects are expected to deliver over $250 million in residential customer savings over 15 years by spreading fixed system costs across a larger customer base, improving long-term affordability.

• Management reiterates the full-year 2026 non-GAAP EPS guidance range of $1.89 to $1.91, with the midpoint representing 8% growth over 2025 actual results.
• The company maintains its long-term target of 7% to 9% annual non-GAAP EPS growth through 2028, and 7% to 9% annual growth thereafter through 2035, with management expecting growth to land in the mid to high end of this range.
• Full-year 2026 planned capital investment remains on track at $6.8 billion, consistent with prior guidance.

The transcript does not provide full financial performance data broken out by individual product segment, including absolute figures and revenue contribution percentages for each segment. Aggregated second quarter 2026 results are: GAAP diluted EPS of $0.37, non-GAAP EPS of $0.40. Total year-to-date capital investment through Q2 2026 is $1.5 billion, representing 40% of the full-year 2026 planned capital spend of $6.8 billion. Key regulatory updates by business unit include: Houston Electric filed a $73 million revenue requirement increase for distribution capital tracker, with an expected transmission capital tracker filing in August 2026; Texas Gas received regulatory approval for a $62 million revenue requirement increase, with new rates effective June 2026; Minnesota Gas and combined North/South Indiana Gas rate cases are scheduled for filing by the end of 2026, representing less than 20% of the company's total earnings power.

• Forward-looking projections for large load project approvals, construction timelines, and earnings growth are subject to uncertainty, including ERCOT process outcomes, permitting and administrative delays, and regulatory policy changes.
• Transmission capital investment costs per mile are currently estimated at $8 million, within a broader industry range of $5 million to $20 million. Final costs will not be confirmed until route engineering is completed in Q1 2027, creating potential for cost variability.
• 3 gigawatts of viable large load projects did not receive required ERCOT study approval and remain pending; ongoing appeals for these projects could create process uncertainty.
• Growth in transmission development faces ongoing legislative and community scrutiny in Texas, which could impact routing and timelines for future expansion projects.

Q: Analyst asks if the historical $8 million per mile transmission capex estimate and $6 million per gigawatt per month demand charge cash flow projection remain accurate, and how the $1.2 billion capex increase will be funded without additional equity. / A: The $8 million per mile estimate is still in the observed $5 to $20 million industry range; final costs will be confirmed in Q1 2027. The $6 million per gigawatt per month cash flow projection remains accurate, with significant cash tailwinds accelerating in 2027-2029. Multiple existing tailwinds, including CAMT rule changes, proceeds from the upcoming Ohio Gas LDC sale, potential monetization of temporary generation units, and new demand charge cash flows, will fund the incremental capex without requiring additional equity or undue balance sheet expansion. Asset recycling is not needed for near-term funding but remains an option for long-term growth. (368 words)

Q: Analyst asks for an update on the large Indiana data center opportunity, how incremental generation investments for the project will be funded, and what to expect from the upcoming August affordability technical conference. / A: The project continues to make meaningful progress, and the company has identified existing near-term system capacity to support it. Incremental generation capex for the project is not included in the current capital increase, and would require a small amount of new equity if advanced. The company will maintain its existing regulatory filing timeline for Indiana gas and electric cases, and will focus the conference on highlighting that large new loads improve long-term affordability by spreading fixed costs and expanding the local property tax base, consistent with the company's past affordability-focused actions in the state. (312 words)

Q: Analyst asks when the comprehensive transmission plan update will be released, whether legislative scrutiny of transmission will delay the plan, and how much existing financing latitude from new large load revenue is already reflected in the current updated plan. / A: The comprehensive transmission study update will still be released in the second half of 2026. Texas state leadership remains aligned on supporting continued economic and load growth, so growth is not expected to slow, even with ongoing conversations about transmission routing. None of the benefits from new large load demand charges, temporary generation unit monetization, or CAMT refunds are reflected in the current updated plan; all three are unpriced future tailwinds for the balance sheet. (257 words)

Q: Analyst asks if the 65% peak load growth from batch zero includes distribution-level customer growth, and if a more definitive update on Indiana large load opportunities will be available by the end of 2026. / A: The 65% growth only includes batch zero large load projects and does not include additional distribution-level demand, so total growth will be higher than this figure. Management expects to provide a full, definitive update on Indiana large load projects before the end of 2026, with the initial project already projected to deliver $250 million in residential customer savings over 15 years, with potential for additional savings from further projects. (198 words)