���������ֳ�

���������ֳ� - New York - 09 Aug 2023: ���������ֳ� has assigned a 'BBB' rating to CenterPoint Energy, Inc.'s (CNP) $400 million 5.25% senior unsecured notes due 2026. CNP's Long-Term Issuer Default Rating (IDR) is 'BBB'/Outlook Stable. Net proceeds will be used for repayment of a portion of outstanding commercial paper as well as for general corporate purposes.

Key Rating Drivers

Supportive Rate Regulation: CNP's gas operations benefit from diversified service territories in six states and overall supportive cost recovery mechanisms such as decoupling, weather normalization, the Gas Reliability Infrastructure Program (GRIP) in Texas and Compliance and System Improvement Adjustment (CSIA) in Indiana. Most of CNP's gas utilities enjoy above-average allowed equity ratios (at or greater than 50%) other than Indiana, and authorized ROEs ranging from 9.3% to 9.8%. ���������ֳ� believes the Texas Natural Gas Securitization Finance Corporation's recent issuance of bonds to securitize storm costs incurred by CNP's Texas gas local distribution company (LDC) is a credit supportive development. ���������ֳ� expects CNP subsidiaries will file rate proceedings in 2023/2024, including base rate electric filings in Texas and Indiana and gas filings in Texas and Minnesota.

Electric T&D operations in Texas are not exposed to commodity risks and do not have provider-of-last-resort obligations. Mechanisms such as the Transmission Cost of Service (TCOS) and Distribution Cost Recovery Factor (DCRF) allow frequent recovery with no caps between rate case filings, providing a reasonable opportunity to earn the authorized returns. The utilities can now file DCRF twice per year, instead of once a year previously.

Indiana Senate Bill 251 allows recovery of approved environmental compliance costs. In ���������ֳ�'s view, approved rate riders and other cost recovery mechanisms facilitates timely costs recovery minimizing regulatory lag in Indiana.

Elevated Capex: ���������ֳ� expects CNP's capex spending will be elevated over the next five years. CNP's current plan incorporates approximately $20.7 billion capex in the next five years, or $4.1 billion on average per year, compared to average $3.4 billion annually from 2020 to 2022. Despite the large capex program, CNP expects customer rate pressure to be mitigated by cost control efforts, strong customer growth, gas supply hedges and roll-off of CenterPoint Energy Houston Electric, LLC's (CEHE; BBB+/Stable) securitization bonds in 2024.

Utility Focused Strategy: CNP continues to focus on its regulated business. The company completed divestiture of all of its remaining common and preferred Units of Energy Transfer L.P (ET, BBB-/Stable) in 2022. In 2Q23, CNP closed the sale transaction of Energy Systems Group, which was a non-regulated operating subsidiary and part of the Vectren acquisition. CNP is nearly a fully regulated utility holding company, with regulated businesses comprising more than 95% of their earnings. ���������ֳ� favorably views CNP's recent sale of the non-regulated businesses.

Improving Credit Metrics: In the last few years, CNP's FFO leverage was elevated due to several factors including an unfavorable rate case outcome in CEHE's last rate case, poor performance of its former midstream business and significantly elevated fuel costs due to Winter Storm Uri. FFO leverage was pressured in 2022 by tax impacts from asset sales, including gas LDC operations in Oklahoma and Arkansas and its midstream assets. FFO leverage is expected to improve to approximately 5.5x. Parent-only debt approximates 29% of total, down from 35% in 2019 and is expected to remain below 30% during the forecast period.

Parent-Subsidiary Rating Linkage: There is parent subsidiary linkage between CNP and its rated utility subsidiaries, CEHE and CenterPoint Energy Resources Corp. (CERC; A-/Stable). ���������ֳ� determines CNP's standalone credit profile (SCP) based on consolidated metrics. ���������ֳ� believes CEHE and CERC have higher SCPs than its corporate parent. Emphasis is placed on the subsidiaries' status as regulated utilities. Legal ring fencing is considered porous given the general protections afforded by rate regulation. Access and control are porous. CNP manages the treasury function for its subsidiary utilities and is the sole source of equity; however, CEHE and CERC issue their own short-term and long-term debt. CEHE and CERC do not guarantee the debt obligations at CNP. Due to these considerations, ���������ֳ� generally limits the IDR notching difference to two.

Derivation Summary

CNP is well-positioned compared to its peers. CNP's exit from midstream sector has improved the utility holding company's operating risk profile. More than 95% of CNP's operating income is derived from regulated utilities. In comparison, regulated utilities contribute 100% and approximately 80% of NI's and Sempra Energy's (Sempra, BBB+/Stable) earnings, respectively. CNP and Sempra's operating scale is much larger than NI. Their gross revenue is approximately twice as much as that of NI.

CNP's utilities are more geographically diverse and less exposed to aggressive renewable standards and wildfire risks than Sempra's California utilities. Compared to NI's utilities, CNP's primary service territory in Texas enjoys robust customer growth. CNP's FFO leverage is estimated to be in the mid-to-high 5x in the next few years, more in line with NI's mid-5x, but, weaker than Sempra Energy's mid 4x.

Key Assumptions

--Annual customer growth of approximately 1% for CERC and 2% for CEHE;

--Total capex of $20.7 billion from 2023-2027.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--FFO leverage below 5x on a sustained basis and continued supportive rate regulation.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--FFO leverage above 6x on a sustained basis;

--Significant, unexpected deterioration in CNP's regulatory environment.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.

Liquidity and Debt Structure

Adequate Liquidity: CNP and its subsidiaries have adequate liquidity. In December 2022, CNP, CERC and CEHE replaced their existing revolving credit facilities with three revolving credit facilities totalling $3.75 billion in aggregate commitments. In addition, SIGECO entered into a new revolving credit facility totalling an additional $250 million in aggregate commitments. The aggregate amount of commitments among the four credit facilities total $4.0 billion. As of June 2023, CNP has $11 million LC and $1.655 billion CP outstanding. The credit facilities mature on Dec. 6, 2027.

CERC and CEHE participate in a money pool. CERC and CEHE can borrow and invest in the money pool. CEHE borrowed $110 million in the money pool as of June 30, 2023.

Issuer Profile

CenterPoint Energy Inc.'s operating subsidiaries own and operate electric transmission, distribution and generation facilities and natural gas distribution facilities and provide energy services and other related activities.

Date of Relevant Committee

22 March 2022

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. ���������ֳ�'s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ���������ֳ�'s ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

Additional information is available on

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Corporate Monitoring & Forecasting Model (COMFORT Model), v7.9.0 (1)

ADDITIONAL DISCLOSURES

• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS