RISK FACTORS
In addition to the following information about risks, you should consider carefully the risk factors identified in Part I, Item 1A
Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (2023 Form 10-K) and in Part II, Item 1A
Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (2nd Quarter 2024 Form 10-Q), as well as risks arising
from any legal proceedings identified or referenced in Legal Proceedings in Part 1, Item 3 of our 2023 Form 10-K and in Part II, Item 1 Legal Proceedings of our Quarterly Report on Form
10-Q for the quarter ended March 31, 2024 and our 2nd Quarter 2024 Form 10-Q, as they may be amended, supplemented or superseded from time to time by other reports
that we subsequently file with the Securities and Exchange Commission (the SEC), together with the other information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus, before making an
investment in our common stock.
Risks Related to the Company
Hurricane Beryl caused severe disruptions to our operations, customers and markets in certain of our service territories and could have a material
adverse impact on our financial condition, results of operations, cash flows and liquidity.
In July 2024, Hurricane Beryl made
landfall in Texas, bringing sustained winds, storm surges and torrential rain, which impacted our operations, customers and personnel in our Texas Gulf Coast markets. Hurricane Beryl caused significant damage to Houston Electrics electric
delivery system, resulting in a substantial number of its customers (peaking at more than an estimated 2.26 million customers out of 2.8 million customers) being without power, many for extended periods of time.
The total cost for the restoration of Houston Electrics electric delivery facilities as a result of Hurricane Beryl is currently
estimated to be in the range of $1.2 billion to $1.3 billion, but such estimate is preliminary and restoration costs ultimately incurred could vary from that estimate. Houston Electric believes it is entitled to recover prudently incurred
storm restoration costs in accordance with applicable regulatory and legal principles. However, neither the amount nor timing of the recovery is certain. Houston Electrics failure to recover costs incurred as a result of Hurricane Beryl could
adversely affect our liquidity, cash flows and financial condition.
Various federal, state and local governmental and regulatory agencies
and other entities, such as the Texas Governors office, the Texas Legislature and the PUCT, have called for or are conducting inquiries and investigations into Hurricane Beryl and the efforts made by Houston Electric to prepare for, and
respond to, this event, including the electric service outage issues. Moreover, additional governmental and regulatory agencies and other entities may conduct such inquiries and investigations, as well. Additionally, on August 2, 2024, Texas
Lieutenant Governor Patrick publicly announced a letter that he sent to the PUCT urging the PUCT to claw back $800 million that we were approved to recover from ratepayers pursuant to Texas legislation relating to emergency responsiveness and
the leasing of mobile generation units. There are significant uncertainties around these inquiries and investigations and potential results and consequences, including whether any financial penalties will be assessed or changes to Houston
Electrics system, service territories, operations and/or regulatory treatment will result therefrom. If these or other inquiries, investigations or reviews ultimately result in changes to Houston Electrics system, service territories,
operations and/or regulatory treatment, such changes could have a material adverse impact on our business, results of operations, cash flows and financial condition.
We and Houston Electric are subject to current and potential future litigation and claims arising out of Hurricane Beryl, which litigation and
claims could include allegations of, among other things, personal injury, property damage, various economic losses in connection with loss of power, unlawful business practices, and others. Several lawsuits have been filed against us and/or Houston
Electric, including three putative class actions claiming losses due to power outages following Hurricane Beryl and each seeking damages in excess of $100 million for, among other things, business interruption, property damage and loss, cost of
repair, loss of use
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