Chris Foster
Executive Vice President & Chief Financial Officer at CenterPoint Energy
Thanks, Jason, and thanks to all of you for joining our 2023 2nd quarter call and my first earnings call as CFO of this great company. Although I only recently joined the CenterPoint team, I can certainly say that I've enjoyed meeting more of my coworkers, digging into the long-term plan and representing the company to the investor community while also getting my family settled here with me as a new set of Houston residents. And I'm really pleased to see the recent outcomes the team has achieved, knowing we still have a number of long-term opportunities that are still very much in front of us. Today, I'll cover three areas of focus. First, our earnings progress, then a financing update, including our Energy Systems Group transaction and further reduction in floating rate debt. And finally, as Dave introduced, a positive revision to our capital plan. Now let's start with the financial results on Slide 8. As mentioned, we are reaffirming our full year 2023 guidance range of $1.48 to $1.50 of non-GAAP earnings per share which reflects 8% growth over full year 2022 non-GAAP EPS of $1.38 when using the midpoint. On a GAAP EPS basis, we reported $0.17 for the second quarter of 2023.
Our non-GAAP EPS results for the first quarter removed the results of our now divested nonregulated business, Energy Systems Group. On a non-GAAP basis, we reported $0.28 for the second quarter of 2023 compared to $0.31 in the second quarter of 2022. Combined with the first quarter, we have now achieved 52% of our full year guidance at the midpoint. Growth in rate recovery contributed $0.07, largely driven by continued recoveries through our electric DCRF capital tracker filed last year and our electric transmission tracker or TCOS in our Houston Electric territory, which went into rates last November. In addition, we continue to see strong organic growth in the Houston area, extending the long-term trend of 1% to 2% average annual growth. O&M was flat for the second quarter and $0.02 favorable year-to-date when compared to the first half of '22 as we continue to find ways to operate more efficiently to target O&M reduction by 1% to 2% per year on average while remaining focused on meeting our customers' needs. These favorable drivers were offset by an $0.08 increase in interest expense. The continued rising interest rate expense on short-term borrowings was the primary driver for this unfavorability when compared to the second quarter of last year.
However, we continue to make progress in reducing our short-term floating rate debt exposure, which I will discuss in more detail shortly. We believe our plan has sufficient conservatism built in to help us overcome these ongoing pressures. Weather and usage were $0.02 unfavorable when compared to the same quarter of 2022, primarily driven by a combination of sustained record-breaking temperatures during Q2 of 2022 when compared year-over-year to the milder April and May weather in both our Houston and Indiana Electric territories this year. However, this trend did change in Houston in mid-June. Next, I'll cover some financing and credit-related topics on Slide 9. As of the end of the second quarter, aligning with Moody's methodology, our FFO to debt was 13.9% as reported. We remain focused on the balance sheet as we target 14% to 15% through 2030. Essentially, we are targeting around 150 basis points of cushion from our downgrade threshold of 13%. And we will continue to explore opportunities to strengthen the balance sheet in this rising rate environment. Another area in which we've been executing well is in the reduction of our exposure to floating rate debt.
In the first quarter, we reduced floating rate debt by nearly $2 billion through the receipt of Winter Storm Uri proceeds and refinancing floating rate debt to fixed term issuances at the operating companies. We carried this momentum into the second quarter as we reduced floating rate debt by an additional $200 million to approximately 14% of total debt outstanding. That's nearly a 50% year-to-date reduction relative to where we ended 2022. The primary drivers of this reduction for the receipt of the approximately $340 million in securitization proceeds related to the retirement of A. B. Brown, the proceeds of the previously mentioned Energy Systems Group, along with the collection of elevated gas costs incurred in the latter part of 2022. As a reminder, we are carrying approximately $400 million of debt at the parent, which was issued to fund our higher equity layer at Houston Electric and Texas Gas as we head into rate cases. And as we get to the other side of the rate cases, we will either begin recovering at this higher equity content or delever. From the moment I arrived here at CenterPoint, one of my primary areas of focus as we work through our industry-leading growth plan is maintaining the strength of the balance sheet especially in the current interest rate environment.
I look forward to working with the team here not only to execute one of the most tangible long-term growth plans in the industry, but also maintaining a strong balance sheet. Coming back to the divestiture of Energy Systems Group. We divested one of our few remaining nonregulated businesses, Energy Systems Group, or ESG, and closed the transaction within Q2, ESGs and energy services business that implements efficiency solutions through infrastructure and other solutions. It was acquired in the Vectren acquisition in 2019 and was part of its nonregulated portfolio. However, as we've sharpened our focus on our regulated utility businesses, it made sense to find a more natural owner for this business. As a result of this divestiture, today, nonregulated businesses account for less than 5% of our earnings. We're grateful to the employees for their tremendous work and believe they'll have further success under their new owners.
We received after-tax proceeds of $121 million from the sale of ESG. The combination of these proceeds as well as those received from the Indiana securitization will help to reduce near-term floating rate debt exposure as well as provide incremental financing flexibility to help fund our capital plan including the additional $400 million capital investments we anticipate making this year. Let me now focus a bit on our capex enhancements on Slide 10. For the benefit of our customers and communities, we invested $1.2 billion this quarter and $2.3 billion year-to-date across our various service territories. This represents 64% of our beginning of the year target of $3.6 billion for 2023. We are updating our 2023 capital target from $3.6 billion to $4 billion. This results in an increase to $43.4 billion for our 10-year capital plan target that goes through 2030. This capital increase is a result of having greater visibility operationally to resource additional work and improvements to financing and recoveries.
As it relates to the remainder of the balance of the $2.6 billion in incremental capital opportunities, that we have not yet incorporated into the plan, as Dave said, we are now confident in our ability to identify opportunities well beyond this amount. We have communicated that we will include incremental amounts when we can operationally execute, efficiently fund and efficiently recover. We have also stated that the previous $43 billion capital plan we set forth through 2030 does not require external equity funding. The remainder of the incremental amounts beyond today's increase will require some additional financing that is not currently contemplated or reflected in our plan. As we continue to evaluate when to fall in the remaining $2.6 billion and beyond, we will also target the optimal way to finance such investments. Our focus on delivering work affordably has not changed, and we will seek to continue to prudently deploy this capital while being mindful of customer charges. We continue to target our customer charges at Houston Electric to be equal to or less than the historical inflation rate of 2%.
We believe we are able to achieve this through Houston's tremendous organic growth, securitization charges rolling off the bill later next year and our plan to reduce O&M 1% to 2% per year on average. I'd like to reiterate the earlier point that while these incremental investments undoubtedly add to the earnings power of the company, this management team will continue to be conservative as it relates to updates to earnings guidance. We are focused on delivering industry-leading sustainable earnings growth year-over-year through 2030. As stated, looking beyond 2023, and from the reaffirmed 2023 non-GAAP EPS guidance of $1.48 to $1.50, we continue to expect to grow non-GAAP EPS 8% in 2024 and at the mid- to high end of 6% to 8% annually thereafter through 2030. Those are my updates for the quarter. And before turning it back over to Dave, I want to say again how excited I am sitting in my new seat here at CenterPoint. I felt so welcomed by the excellent management team here. I believe that even with some of the headwinds our sector is facing, our tailwinds exceed the headwinds, and we have a tremendous amount of opportunity in front of us.
I'll now turn the call back over to Dave.
