CenterPoint Energy, Inc. (CNP) | The Buildout — AI Infrastructure
The Verdict
CenterPoint Energy is a regulated utility holding company whose Houston Electric subsidiary owns and operates the transmission and distribution system in the Greater Houston area. That wires-and-grid role places it at the physical point where hyperscale data centers and other large-load customers connect to the ERCOT grid; Indiana Electric and natural gas distribution are secondary operations. The company's AI-infrastructure relevance is not as a supplier of chips or power electronics, but as the utility that must interconnect, host, and transmit power to new data-center load.
| Market Cap | — |
| Revenue (TTM) | $9.6B |
| Revenue Growth | +7.1% |
| EBITDA Margin (TTM) | 40.6% |
| Net Debt | $24.6B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Houston Electric has approximately 10 GW of existing hosting capacity; management estimates incremental system upgrades for the 14 GW batch-zero-eligible portfolio at less than $60 million per gigawatt.
- The 14 GW expected batch-zero-eligible load represents more than a 65% increase over Houston Electric's current 21 GW system peak, with about 10 GW base-load eligible after both required studies approved.
- The 14 GW tranche is backed by a signed facility extension agreement and roughly $900 million of customer cash commitments and security already received.
- The 10-year capital plan was raised to $66.7 billion without incremental equity; approximately 85% of investments are recovered through capital trackers.
- Indiana is an emerging second platform: about 1.5 GW, about $1 billion of capital, and $250 million of projected residential savings, with work already begun on customer commitments.
What We’re Watching
- 3 GW of submitted batch-zero projects did not receive ERCOT study approval; management says the forward path is unclear.
- The 4 GW studied-load tranche depends on ERCOT's allocation process, which is expected to conclude in April 2027.
- Moody's negative outlook remains unresolved, and Indiana generation/transmission expansion is likely to require some equity.
- Transmission cost assumptions of $8 million per mile sit inside a stated $5 million to $20 million range; route-specific visibility is expected in Q1 2027.
The thesis is strengthening. Large load moved into a formal ERCOT batch-zero process with 14 GW expected eligible, the capital plan rose by $1.2 billion without incremental equity, and adjusted FFO/debt improved to 13.4%. The open question is whether the energization path holds—about 3 GW in 2027 and nearly all 14 GW by end-2030—given unresolved approvals and the April 2027 studied-load allocation.
Earnings
The latest quarter is Q2 2026. Revenue was $2,152 million, gross margin was 86.9%, and EBITDA was $979 million (45.5% of revenue). Net income was $244 million on a GAAP basis. The quarter's standout disclosure was ERCOT batch zero: 17 GW submitted and 14 GW expected eligible, supported by about $900 million of customer cash commitments and security.
| Metric | Q2 FY2026 | Q1 FY2026 | Q2 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $2.2B | $3.0B | $1.9B | +10.7% |
| Gross margin | 86.9% | 67.4% | 28.7% | +5820bps |
| EBITDA | $979M | $1.1B | $787M | +24.4% |
| EPS | $0.37 | $0.48 | $0.30 | +21.0% |
| Adjusted FFO/debt, Moody's methodology | 13.4% | 12.5% | n/a | — |
14 gigawatts of these submissions 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.— Jason Wells, CEO, July 28, 2026
Management tone: Management's commentary shifted from a broad confidence in the Houston pipeline to specific ERCOT batch-zero validation. On hard questions, management was direct: it acknowledged the 3 GW ERCOT study-approval problem, said Indiana generation/transmission would likely require equity, and declined to set a Moody's timing while saying progress was expected "here relatively soon."
Management Guidance
Management reaffirmed 2026 EPS guidance and the 2026 capital plan of $6.8 billion. It reiterated long-term EPS growth. The 10-year capital plan was raised to $66.7 billion, with the $1.2 billion increase requiring no incremental equity.
Trajectory
Trailing revenue grew 7.1% year over year, but the quarterly sequence decelerated, with Q2 revenue of $2,152 million below Q1's $2,975 million. Gross margin moved from 67.4% in Q1 to 86.9% in Q2, while Q2 EBITDA margin printed at 45.5%. The mix is shifting toward Electric: Q1 Electric segment revenue rose 13.4% while Natural Gas revenue fell 4.8%, reflecting divestiture and throughput declines in gas.
The Model
The model projects FY+1 revenue of $9,700 million and EBITDA of $3,870 million (39.9% margin), and FY+2 revenue of $10,020 million and EBITDA of $4,148 million (41.4% margin). The near-term anchor is the regulated rate-base and large-load conversion story; the FY+2 step reflects incremental energization of the Houston batch-zero pipeline and continued capital recovery.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $9.4B | $9.7B | $10.0B |
| YoY Growth | — | +3.7% | +3.3% |
| EBITDA | $3.6B | $3.9B | $4.1B |
| EBITDA Margin | 38.9% | 39.9% | 41.4% |
Projections are the median of 5 independent model runs. The model’s revenue sits 3.5% below analyst consensus.
Management reaffirmed 2026 EPS guidance and the 2026 capital plan of $6.8 billion. It reiterated long-term EPS growth. The 10-year capital plan was raised to $66.7 billion, with the $1.2 billion increase requiring no incremental equity.
What Could Go Right — and Wrong
- The 14 GW batch-zero-eligible load energizes on the schedule management describes—about 3 GW in 2027 and nearly all by end-2030—adding demand charges of about $6 million per GW per month that are not yet in the plan.
- The April 2027 ERCOT allocation clears the 4 GW studied-load tranche, de-risking additional load.
- The second-half 2026 transmission study adds a material new capital layer beyond the $66.7 billion base plan.
- The Indiana large-load project moves from early work to a definitive update before year-end 2026, formalizing about 1.5 GW and about $1 billion of capital.
- Adjusted FFO/debt continues to improve from 13.4%, and Moody's resolves its negative outlook.
- The 3 GW submitted but not ERCOT-approved remains blocked with no clear path, keeping that load outside the 14 GW framework.
- The 4 GW studied-load tranche slips past April 2027 or receives a smaller allocation than expected.
- Transmission costs trend toward the top of the $5 million to $20 million per mile range, above the plan's $8 million assumption.
- Customer load ramps delay energization beyond the 2027 and end-2030 targets, deferring demand-charge cash flow.
- Moody's negative outlook persists, or Indiana's generation/transmission build requires more equity or a Genco structure if demand exceeds 1.5 GW.
Looking Ahead
The next 12 months are anchored by the second-half 2026 transmission study, the October 1, 2026 Ohio LDC close, and an Indiana large-load update targeted before the end of 2026. In early 2027, the company expects transmission routing cost visibility and the April 2027 close of ERCOT's studied-load allocation for the 4 GW tranche. Management has also reaffirmed the $6.8 billion 2026 capital plan and its 2026 EPS guidance.
- Q3 2026CAMT refund benefit — Tests FFO/debt improvement of roughly 30 basis points expected this quarter.
- October 1, 2026Ohio LDC sale close — Tests completion of portfolio simplification and equity-derisking structure.
- H2 2026Comprehensive transmission study update — Tests whether a material new capital layer gets added beyond the base plan.
- Before end of 2026Indiana large-load update — Tests whether about 1.5 GW and $1 billion become formalized backlog.
- November 2026DCRF delivery charge update — Tests tracker recovery for the $73 million revenue requirement request.
- April 2027ERCOT studied-load allocation — Tests de-risking of the 4 GW studied-load tranche.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $8.6B | $9.4B | $9.6B | +8.3% |
| Gross Margin | 46.5% | 28.9% | 54.1% | 1,753bps |
| EBITDA | $3.4B | $3.6B | $27.8B | +6.2% |
| EBITDA Margin | 39.7% | 38.9% | 40.6% | 77bps |
| Net Income | $1.0B | $1.1B | $1.1B | +3.2% |
| Free Cash Flow | −$2.4B | −$2.4B | −$13.4B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)54.1%
- EBITDA Margin (TTM)40.6%
- Net Margin (TTM)11.6%
- ROIC4.9%
- FCF Conversion-69.1%
- SBC / Revenue0.0%
The Company
CenterPoint Energy is a public utility holding company whose reportable segments are Electric, Natural Gas, and Corporate and Other. Electric includes Houston Electric, which provides regulated transmission and distribution service in Texas, and Indiana Electric, which provides regulated transmission, distribution, and generation in Indiana. Natural Gas provides regulated intrastate gas sales, transportation, storage, and related home services.
The center of gravity is Houston Electric. Management says the company represents about 2.5% of Texas geography but 25% of electric demand, and approximately 85% of investments are recovered through capital trackers. Large-load interconnection work is customer-funded, and portfolio simplification is near completion: Louisiana/Mississippi is divested and the Ohio sale is expected to close October 1, 2026.
Business Segments
Competitive Landscape
CenterPoint's competitive position is territorial. The source material describes Houston Electric as holding a service area that represents about 2.5% of Texas geography but 25% of electric demand, with roughly 10 GW of existing hosting capacity that enables faster connection of large load. The provided source material does not identify specific competitors or direct head-to-head share loss.
Supply Chain
CenterPoint sits between wholesale fuel and power supply and end-use load: it buys coal and natural gas, contracts for solar and wind power, and delivers electricity through Houston Electric's wires. No neighbor transcript mentioned CenterPoint by name.
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