Entergy Q1 2024 Earnings Call Transcript

Hey, good morning.

Constantine, yes from a capital plan, we did get $1.9 million approved. We had $900 million through this outlook period. Of the $1.9 billion approved, about $1.5 million of that is in that same three-year period. So that's an increment of about $700 million for Louisiana. The Louisiana portion of that $900 million was $800 million. So that's an incremental $700 million how that rolls out through the capital plan, we'll update all that in -- at Analyst Day, along with the effects of the rider and any other changes to our capital and our financing plan.

We don't see any needed change in equity. We had already reserved a substantial portion of the income tax or the deferred tax effect for New Orleans, we did increase that, but it's -- the return period is a pretty long period. And so there's no effects in the outlook period, no material effect on the outlook period.

Good morning. It's Rod. I think I can say, look, five weeks ago, we filed -- we suspended the procedural schedule to facilitate settlement. If you think about the date of May 21, when staff and intervenor testimonies do, in the next three weeks, I think it's reasonable to assume that one or three things will happen. We either announce the settlement. We'll mutually agree to extend the dates procedurally to facilitate settlement or pivot back to a procedural schedule with the resiliency docket addressed last week, I think the next three weeks will be telling about the progress we make. But we're -- we're comfortable that the stakeholders in Louisiana are now focused on settlement discussions.

Thank you.

Good morning. Jeremy.

I think -- this is Rod. I can touch on that and certainly Kim really can follow. But beyond the AWS transaction in Mississippi, we're continuing to see significant interest in the data center sector both hyperscale as well as colocation in Arkansas, Louisiana and Mississippi. But we continue to see strong interest from the metal sector as well, specifically aluminum and steel with projects in various stages of development you can add in there with the IRA developments are showing up in blue ammonia in addition to the conversations around carbon -- carbon capture. And that's not to exclude what we would consider to be our traditional sectors of growth in the service territory around refining and petrochemicals. We plan to give more color, of course, at Analyst Day, but I didn't want to suggest that there was one specific sector. There's a fair amount of diversity in our backlog and growth outlook.

And Jeremy, just to add to that for the $0.15 for this year, you can think about that specifically as our historic industry along the Gulf Coast, and those industrial customers are online and taking power currently.

Well, I mentioned a few of them in my remarks earlier around -- some of the things that Rod just discussed and the opportunities that we see for growth from a sales perspective and where that's coming from some more color and depth to that conversation. Certainly, more clarity around the kinds of investments that we plan to make. And that includes the generation side as well as the poles and wire side, we're talking about reliability and resilience. Some of the work that we are doing to drive productivity internally. From a data perspective, we'll be giving a more robust outlook that goes out to five years. That will include capital and earnings, and we'll make clear, as Kimberly just mentioned about our expectations from a financing perspective. And also, since we'll be in New Orleans, we'll have a number of our leaders here with us, and you'll get the ability to access the broader segments of our management and leadership team that you normally do when you just see Rod and Kimberly and Bill Abler and myself out on the road. So you'll get to see what we are seeing in our various jurisdictions and getting more boots on the ground view of how things are progressing.

Yes. And I think the -- you're right, being in a position where we can say comfortably that roughly 85% of the SERI risk has been addressed through settlement. It does lend itself to what I would think would be a compelling case to resolve the rest with the State of Louisiana. We can't speak and don't speak around the nuances of negotiations in any period. But we do believe that the fact that New Orleans is now off the table, it gives us a shot to pursue some with Louisiana near term.

Yeah, it's Rod again. We're going to make that filing in the second quarter, and some of the considerations around the amount will be influenced by how we think about the contribution to the resilient spend from the state grant program, not to mention, to your earlier point, how the capital would flow through the recovery mechanisms affecting both affordability and credit. But we'll make that filing before the end of second quarter. I'll add that, as you probably recall, the Texas part of the resilience investment was pushed back a little bit because we have a lot of growth upfront and so we probably won't see as much. And that's where the grant piece comes in. And also the mechanism, as we've talked about before, since we have all of this growth in our service territory, the mechanism doesn't work as well from a credit perspective for us. So we're working on that. We have another legislative session coming up, but you'll see all of that reflected in our ultimate resilience filing.

Yeah. As far as the $411 million that is included in our capital plan from a protection, it's a technology that's been used elsewhere. It's -- and certainly just not necessarily in this area up along the east coast. And certainly is expected to be resilient in heavy winds and storms.

And I'll just -- just to be clear, it's not out in the middle of the ocean. It is on land, but it's in a canal so that it can float with the storm surge so that's really what we're talking about here, not an oil rig out in the middle of the Gulf.

Good morning.

Yeah, thanks for the question, Nick. When you think about the Mississippi data center it ramps up over time. So you're not going to see a lot of that in the three year outlook period. We can talk more about what that means over the five year that Drew referenced it at Analyst Day. But you're right, when you think about AGM on that sort of customer, you are also putting in infrastructure to support it. So there is -- you saw a shift in spending in the fourth quarter update where we added incremental renewables, for example, in Mississippi. So those investments and the associated costs associated with those investments will offset some of that from a bottom line perspective and then financing costs for those type of things as well. But again, you will see most of that effect outside the three-year outlook period.

Yeah. It's -- the investment is the thing that will ultimately go to the bottom line. The AGM is there to support that incremental investment. So we think it's really important and it demonstrates the growth opportunity that's out in front of us and the demand from our customers to help them meet what they want to do.

We certainly have regular conversations with the rating agencies and they are constructive conversations about what's happening in the business. If you look at our underlying calculation, the FFO trailing twelve months for the quarter was similarly strong to what it was at the end of the year and then we issued more debt in this quarter. As I mentioned in my comments, that would balance out over the course of the year, putting us strongly in the rating agency's expectation at 14% or better. So strong discussion. Certainly the rating agencies have to do their evaluations and make those decisions, but hitting that threshold for 2023, which we did, and then continuing to execute on that, and as we work to build towards 15% are important to us.

Thank you.

Short answer is no. We're pursuing our efforts today with stakeholders on settling both, and the interest being avoiding any litigation associated with either. So short answer is no. There's nothing preventing us from pursuing settlement on both issues, regardless of federal versus state jurisdiction.

The gas LDC, as I mentioned, is on schedule. We have -- there's more details in the appendix, and so I think that at the LPSC, it's moving on quite quickly. The timeline's a little longer in New Orleans, but at this point, we don't see anything that's impeding the progress and the ultimate completion of the transaction. So we're firmly confident there is a possibility that it could move up a little bit. But at this point, we're sticking with our -- by third-quarter 2025 timeline.

Thank you.

Probably not. That's a new transformer. And as you -- I know you're aware there's a backlog for large transformers like that, and we don't have one of that size as a spare. So we do have the interim transformer ready to go, and it should be ready by summertime. That gets us back to about 90% and so the plant should be online this summer, but we won't have full deliverability out of the plant until we get a new transformer in place.

Yeah, correct.

I believe that they are expecting to put something out late this year, but the timelines have moved around a little bit for them. But I think that was the previous expectation. You're talking -- just to be clear, you're talking about the long term planning piece of it, right?

Yeah. Yeah. I think they're -- as you know, they've been in MISO north for a while working on stuff, and I do believe that they plan to put out some expectations later this year.

That's absolutely correct, Steve. And the cogen sales were for the quarter, but that's really a volume difference, slight EPS difference. But as we discussed, incremental industrial sales certainly support that, helping us achieve our objectives at the end of the year.

Thank you.

Good morning, Angie. Yes, when you think about data centers, they certainly are requiring infrastructure to support them. And so we are ensuring that the pricing of those customers priced in a way that support those customer coming, but also support the rest of our customers and the infrastructure build that's needed. When you reference Mississippi specifically, we worked closely with the legislature to ensure that we had the ability to add the infrastructure that we needed, but also that we protected all of our other customers through the contract. And so it was a benefit both to add the customer to the system, but also to the State of Mississippi and all of our other customers. And I would think about it the same way for future data centers that add to our service territory.

Yeah, that's a good question, Angie. And we are thinking about various potential solutions there. Right now, the output of those facilities are contracted for the life of the unit to each of the operating companies that participate. So I don't think that there's any room for data center pieces, but we are looking at all other alternatives in order to try to mitigate that future potential litigation risk. That is definitely on a radar screen, although we don't have anything to discuss about that right now.

Thank you.

Yeah. This is Rod again. And I think Kimberly alluded to it. The example in Mississippi, I think serves as a blueprint for other states. When you think about how we shaped both the legislation from the actual state, the contractual guarantees, if you will, from AWS, and the regulatory outcomes that facilitated our ability to meet AWS's needs, I think plays well. It would certainly focus around job creation and economic development from a stakeholder engagement standpoint, similar to the way that we did in Mississippi. I see that being very relevant in, say, Louisiana and Arkansas. Certainly, there's going to be an expectation regardless of where these data centers are cited that there's rate protection for the other customers in the service territory.

Notwithstanding any conversation around the green or the clean dynamics, we are going to serve that customer's needs and the attributes that are important to them. But here's the piece that I think becomes really important as we are engaging our regulators and our customer stakeholders. What Mississippi was able to do was to expedite the CCN approval process to help us build the infrastructure around transmission and generation to serve that load and also providing credit accretive, for instance, in Mississippi, allowing for cash CWIP during the construction of those facilities, allowing us to finance those projects and lower the overall cost for customers. If you think about those dimensions, the rest of the states are taking notice of the success in Mississippi from purely a competitive standpoint or trying to figure out how to replicate that -- those types of frameworks in their jurisdictions. But we think it's a blueprint that really projects well for other states.

Yeah. And I'll just add that given what Rod just outlined, our regulators and our communities are excited about these potential investments. They are large investments that are going to throw off a bunch of tax and hollers and provide some really good jobs. And we are -- areas in Central and Northern Mississippi, Northern Louisiana and in Arkansas, there's a lot of rural space out there that data centers can go to and those jobs are meaningful in those areas. So they're really excited about the opportunity for those investments and the economic activity that comes along with them. That's why, as Rod said, they're competing to figure out how they can serve these potential customers.

Yeah, that's a great question. And where we are along the coast in Texas, a lot of the resilience investments and the wildfire investment is going to be very similar and overlapping. So yes, that is going to be part of it. I'm sure that wildfire is going to be a part of the conversational legislature coming up early next year. And so we do anticipate that there will be some overlap there. I'll just mention, further away from the coast in Mississippi, Northern Louisiana, Arkansas, we are also thinking about wildfire mitigation investment there to complement all the things that we've already done to monitor and prepare, and respond to potential wildfires and all the community work that we're doing. But we realize that the next piece of that is investment to mitigate or eliminate wildfire risk. And so that conversation is ongoing with our stakeholders. And so we'll be looking to create opportunities to manage those risks for all of our stakeholders in the near future.

Thank you.

There's both there, Travis. The transmission certainly generally is less than the generation, but some of it is timing. When you think about we have long-term supply plans and where we may have had generation in a plan and perhaps there's some earlier execution of it in order to meet that demand. And as you know, we're in MISO, so transmission is planned through MISO as well. And so we also have long-range planning on the transmission. So I don't have the exact split and I know you can get with Bill and get that specifically. But generally, when you think about the data centers probably heavier weighted to generation into transmission.

In Mississippi, the legislation enabled us to -- it effectively gave us CCN authority to build what was needed for that data center to meet their timeline. And so that doesn't require an RFP process. Some of our jurisdictions have RFPs and others don't. I think it comes down to a customer timeline and how you work with all your stakeholders to bring the customer on the timeline they're looking for and then what that requires to ensure that we are building strong appropriate assets in order to support the customers overall.

Yeah, I mean the data center is [Speech Overlap] sorry, the data center is unique and then it's a larger customer coming in at one time on a faster timeline, but I would think about the planning principle for same for all of our customers.

Absolutely. Thank you.

Thank you. And thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on May 10th and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles. Also, as a reminder, we maintain a webpage as part of Entergy's Investor Relations website called regulatory and other Information, which provides key updates of regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information, you should not rely exclusively on this page for all relevant company information. And this concludes our call. Thank you very much. [Operator Closing Remarks]