CenterPoint Energy Financial Model

• Total assets: Approximately $40 billion.
• Key asset categories: Property, Plant and Equipment (PP&E) makes up over 70% of total assets. Regulatory Assets (deferred fuel costs, storm recovery costs) are also highly material.
• Goodwill & intangibles: Minimal, typically less than 5% of assets.
• Working capital profile:
• DSO: 30-45 days.
• DIO: 15-25 days (natural gas in storage).
• DPO: 30-45 days.
• Net working capital: Typically negative or near zero. Utilities do not fund growth from working capital; they fund it through external capital markets.
• PP&E: Consists of electric transmission lines, distribution poles, substations, and natural gas pipelines. Depreciated over 30 to 50 years.
• Right-of-use assets: Immaterial compared to PP&E.

• Capex as % of revenue: 50-60% (utilities are extremely capital intensive).
• Maintenance vs. growth: Approximately 30% maintenance, 70% growth and modernisation.
• Major capex programmes: $65.5 billion 10-year plan (2026-2035), including a new 765 kV import line in Texas and systemwide resiliency upgrades.
• Capitalised software: Immaterial relative to hard infrastructure.
• M&A pattern: Currently a net seller of assets (divesting Louisiana, Mississippi, and Ohio gas LDCs) to fund organic electric rate base growth in Texas.

• Total debt: Approximately $18 to $20 billion.
• Debt/EBITDA ratio: 5.0x to 5.5x (standard for regulated utilities).
• Credit rating: Baa2 (Moody's) / BBB (S&P).
• Key debt instruments: First mortgage bonds (secured by utility assets), holding company senior notes, and non-recourse securitisation bonds (for storm costs).
• Maturity profile: Laddered long-term maturities, average life of 10+ years.
• Interest rate profile: Predominantly fixed rate.
• Covenants: FFO to Debt target of 14% to 15% to maintain current credit ratings.
• Share repurchase programme: Inactive. The company issues equity (via ATM and forward contracts) to fund its massive capex plan.
• Dividend policy: 60-70% payout ratio of non-GAAP EPS, growing at 8-9% annually.

• Operating cash flow conversion: OCF is typically 2.0x to 2.5x Net Income due to massive non-cash depreciation and deferred taxes.
• Free cash flow margin: Deeply negative. The company spends significantly more on capex than it generates in OCF.
• Major non-cash items: Depreciation, deferred income taxes, and equity earnings from unconsolidated affiliates.
• Working capital cash flow impact: Highly seasonal due to winter gas purchases, but neutral over a full year.
• Capex intensity: $5.4 billion spent in 2025; planned $6.8 billion in 2026.
• Cash tax rate: Near zero. The company utilises accelerated depreciation and alternative minimum tax credits, pushing cash taxes far below the statutory rate.

1. Assumptions: Hardcoded drivers for rate base growth, ROE, cost of debt, and capex.
2. Scenarios: Base, Bull (higher load growth), and Bear (regulatory lag) toggles.
3. Income Statement: Segmented revenue (Electric, Natural Gas), pass-through fuel costs, O&M, D&A, and interest expense.
4. Balance Sheet: PP&E, Regulatory Assets, Securitisation Debt, and Equity.
5. Cash Flow Statement: OCF, Investing (Capex, Asset Sales), and Financing (Debt issuance, Equity issuance, Dividends).
6. Rate Base & Capex Schedule: Roll-forward of Electric and Natural Gas rate base (Beginning Balance + Capex - D&A = Ending Balance).
7. Debt & Interest Schedule: Tranches of first mortgage bonds, revolver draw, and securitisation debt.
8. Regulatory & Securitisation: Tracking of storm cost recovery bonds and deferred fuel balances.
9. DCF Valuation: Unlevered free cash flow, terminal value, and WACC calculation.
10. EPS & Dividend Output: Non-GAAP EPS calculation, dividend payout ratio, and FFO/Debt credit metric tracking.

1. "Electric Rate Base (End of Period) = Electric Rate Base (Beginning) + Electric Capex - Electric D&A"
2. "Natural Gas Rate Base (End of Period) = Natural Gas Rate Base (Beginning) + Natural Gas Capex - Natural Gas D&A"
3. "Electric Operating Income = Average Electric Rate Base * Allowed Electric ROE * Equity Thickness"
4. "Natural Gas Operating Income = Average Natural Gas Rate Base * Allowed Natural Gas ROE * Equity Thickness"
5. "Total Revenue = Electric Revenue + Natural Gas Revenue"
6. "Electric Revenue = Electric Operating Income + Electric Interest Expense + Electric O&M + Electric D&A + Electric Taxes + Pass-Through Fuel"
7. "Funds From Operations (FFO) = Net Income + D&A + Deferred Income Taxes"
8. "FFO to Debt Ratio = FFO / Average Total Debt"
9. "Dividends Paid = Prior Year Non-GAAP EPS * Target Payout Ratio * Shares Outstanding"
10. "External Financing Need = Cash Flow from Operations + Cash Flow from Investing - Dividends Paid"
11. "New Equity Issued = External Financing Need * Target Equity Thickness"
12. "New Debt Issued = External Financing Need * Target Debt Thickness"

The Rate Base & Capex Schedule is the engine of the model. It feeds PP&E on the Balance Sheet, D&A on the Income Statement, and Operating Income on the Income Statement. Net Income feeds the Cash Flow Statement, which calculates the External Financing Need. This shortfall feeds the Debt & Interest Schedule and Equity Issuance lines. The new debt balance feeds Interest Expense on the Income Statement, creating a circular reference that must be managed with a toggle.

• Revenue, operating income, and net income are positive.
• Expenses (O&M, D&A, Interest, Taxes) are negative.
• Capital expenditures and dividends paid are negative.
• Debt issuance and equity issuance are positive.
• Balance sheet assets, liabilities, and equity are positive.

• Modelling fuel costs as a margin driver. Fuel is a strict pass-through; an increase in natural gas prices inflates revenue and COGS equally but does not increase operating income.
• Failing to remove the Ohio, Louisiana, and Mississippi gas LDCs from future projections. The model must account for the lost earnings and the cash proceeds from these divestitures.
• Miscalculating the FFO to Debt ratio. Rating agencies exclude non-recourse securitisation debt from this calculation; the model must separate corporate debt from storm recovery bonds.
• Ignoring regulatory lag. Utilities rarely earn their exact allowed ROE due to the delay between spending capital and getting it approved in a rate case. The model should apply an "earned ROE" discount (e.g., 50-100 bps below allowed ROE).
• Overestimating cash taxes. Accelerated depreciation generates massive deferred tax liabilities; cash taxes are negligible.
• Circularity in the financing schedule. The model must use an interest switch to break the loop between debt issuance, interest expense, and net income.
• Misaligning equity issuance. CenterPoint issues equity to maintain its 50/50 capital structure as rate base grows; failing to model this will artificially inflate leverage and EPS.
• Forgetting the Allowance for Funds Used During Construction (AFUDC), which flatters net income but does not provide immediate cash flow.

• "FFO to Debt must remain between 13.5% and 15.0%; flag if it drops below 13.0% (downgrade risk)."
• "Electric Rate Base CAGR should be approximately 10-11% based on management guidance."
• "Dividend payout ratio must remain between 60% and 70% of non-GAAP EPS."
• "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
• "Effective tax rate should be 15-20%, but cash tax rate should be less than 5%."
• "Earned ROE should not exceed the allowed ROE of 9.8% (Electric) and 9.5% (Gas)."
• "Total Capex for 2026-2035 must sum to approximately $65.5 billion."

• Filings: SEC EDGAR (CenterPoint Energy Inc. 10-K, 8-K for LDC sales).
• Presentations: CenterPoint Investor Relations (Q4 2025 Earnings Presentation, Systemwide Resiliency Plan filings).
• Peers for Benchmarking: Sempra Energy (SRE), WEC Energy Group (WEC), Xcel Energy (XEL), CMS Energy (CMS).
• Industry Data: Public Utility Commission of Texas (PUCT) dockets, ERCOT load forecast reports.

• CenterPoint Energy Q4 2025 Earnings Release and Investor Presentation (centerpointenergy.com)
• CenterPoint Energy 2024 Annual Report on Form 10-K (sec.gov)
• Indiana Utility Regulatory Commission (IURC) Rate Case Settlements
• Seeking Alpha: CenterPoint Energy Analysis and Financial Summaries