Q4 2019 Earnings Call

At this time all participants are in listen only mode. After the speaker presentation, there will be a question and answer session.

Good question. During this session you want me to press Star one on your telephone. Please be advised of today's conference is being recorded.

Require any further assistance. Please press star Zero I would now we see in the conference over to your Speaker Mr., David Boyer Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us.

We will begin today with comments from Entergys, chairman and CEO the older adult and that drew March our CFO will review results.

In an effort to accommodate everyone who has questions. We requested each person ask no more than one question and one follow up.

Today's call management will make certain forward looking statements actual results could differ materially from these forward looking statements.

A number of factors, which are set forth.

Earnings release, or slide presentation, and or as you see pharmacies.

That's what he does not assume any obligation to update. These forward looking statements management will also discuss non-GAAP financial information.

Reconciliations to the applicable GAAP measures are included in todays press release and slide presentation.

Which can be found on the Investor Relations section of our website.

And now I will turn the call over to Leo.

Thank you David and good morning, everyone.

Today, we are reporting strong results for another very successful year.

Our adjusted earnings per share is $5.40 in the top health the guidance range that we raised last quarter.

Our financial results combined with our operational achievements once again show that we deliver on what we set out to do.

Everything we accomplished in 2019 also reinforces our confidence in our continued success into the future.

This past year, we saw solid achievements in all aspects of our utility business.

In power generation, we placed into service to clean efficient and modern CCG cheese totaling 1800 megawatts.

Louisiana, The Saint Charles Power station came online in May affirming our track record of completing major generation projects on time and on budget and sometimes better.

In a few months later entergy, Mississippi purchase the Choctaw generating station.

These resources are part of our portfolio transformation strategy to replace older generation would cleaner more efficient assets.

They improve system reliability reduce costs for our customers and produce significantly fewer emissions further advancing our sustainability goals.

Renewable energy is another key component of our portfolio transformation.

We currently have close to 400 megawatts of renewable capacity that are in operation and nearly 2000 megawatts of additional renewable projects in various stages of development.

About half of those are specific projects that we've already discussed with you.

The other half or potential new projects. We're currently evaluating.

I will share more details with you at the right time.

We are committed to providing our customers with renewable power options and test technology and economics continue to improve we expect to meet even more of our supply planning needs with renewables.

Also in generation, we recently commissioned a 7.4 megawatt battery at her Perry Bill station in Louisiana.

This is an innovative application of battery technology that will allow entergy, Louisiana to start a 150 megawatt combustion turbine without grid power.

It will support grid reliability and resiliency.

In 2019, we invested a billion dollars in our transmission infrastructure.

During the year, we completed several projects, including phase one of the Western region economic transmission project in Texas, The southwest, Louisiana improvement project and auto transformer projects in little rock and Central Mississippi.

Our transmission investments benefit our system and our customers as they reduce congestion enhance system reliability efficiency and resiliency.

And support the economic development of our jurisdictions by enabling service to new customers.

In distribution, we're now one third of the way through the installation of 3 million advanced meters across our service area.

Complement this effort, we're investing in an improved digital platform to create a multichannel experience for our customers, a new outage and distribution management system and enterprise asset in work management system and increased automation on our grid.

This technology platform not only provides customer usage insights today, but also lays the foundation for advanced capabilities over time.

And with billions of real time data points available, we'll be able to glean new insights that will drive fundamental change in the way we serve our customers while they consume the least amount of energy resources.

Our customers' expectations are evolving and we're preparing to meet them.

Instead of simply providing an input electricity or gas, we're thinking about the outcomes, our customers need and desire from their power consumption.

With new technologies and capabilities deployed we'll be able to anticipate their needs and offered tailored solutions.

In 2019, we formed key string labs, or innovation center to engage with stakeholders and develop new solutions that address our customers desired outcomes and make their lives better.

Example, we've developed a backup generator offering for commercial industrial customers called power through.

We installed our first one megawatt generator a grocery store in Texas the resources available to the store in the event of a power outage and it's available to the utility at other times, both parties share the cost, which makes it economic for everyone and mutually beneficial.

Entergy, Texas has already utilize this resource providing cost effective and efficient power back to the grid.

We also have line of sight on additional projects in December we received approval from the Mississippi Public Service Commission to deploy 20 generators in the state and we are actively working with our regulatory teams to introduce power through across all our jurisdictions.

Keith string labs is also working on solutions to expand beneficial electrification of sectors that currently use fossil fuels.

This is an important pillar of our broader strategy to reduce the sidled carbon emissions beyond our own footprint.

This is a practical and environmentally responsible way to help customers and other industries meet their sustainability goals by relying on introduce grid power instead of higher admitting fossil fuels.

We recently launched utility scale shore power project that extends our distribution system to marine vessels imports are first shore power project went into service just last month, which we estimate.

Well achieve up to 42% net reduction in carbon emissions, a 48% net reduction in sulfur oxides and 98% reduction in nitrogen oxides.

We believe we have significant opportunities to deploy shore power projects as we have 37 ports in our service area seven of which are among the 20 largest point ports in the United States.

These are just some of the innovative projects, we're working on across the organization and we are excited about the opportunities that lie ahead.

Customer solutions will be an important part of our business and we will continue to explore opportunities to improve our customers everyday lives through new technology data analytics innovation and creative solutions.

Over the last several years, we have built constructive relationships with our regulators that have enabled the development of progressive regulatory mechanisms across our jurisdictions.

We have formula rate plans in four of our five jurisdictions, Arkansas, Louisiana, Mississippi and New Orleans.

Entergy, Arkansas and Entergy, Louisiana, we'll file this year to request renewal for their current fr piece.

Entergy, Texas as cost recovery factors for transmission and distribution investments. They also have a rider for am I recovery in 2019, new legislation directed the public utility Commission and Texas to establish a rider for generation investments.

That rider is currently being developed through a rule, making process, which we expect to be finalized in the third quarter.

In New Orleans, the City Council approved a rate reduction that reflects a 9.35% our OE and caps Entergy, New Orleans equity at 50% we.

We have appealed that decision and we continue to work with council members to reach a fair outcome.

As a result, a collaborative work with our regulators, 90% of our three year capital plan is expected to be recovered through timely progressive regulatory mechanisms.

For the last several years our strategy to manage risks has included the planned orderly exit from our merchant business. This past year, we sold Vermont Yankee and Pilgrim.

And with a final and sale agreement in place for Indian point, we are well underway to complete our E.W. see exit.

Our leadership in sustainability and environmental stewardship has been a hallmark of who we are for nearly two decades and it remains a key focus for us today.

In 2019, we were named once again to the Dow Jones Sustainability North America Index. We are the only electric utility to received this honor 18 years in a row.

We're very proud of this recognition as DJ ESI is one of the most respected independent sustainability measures in the world.

We aren't perfect scores in the areas of climate strategy, corporate citizenship and philanthropy policy influence materiality and water related risks.

This past year, we released our climate scenario analysis, we outlined a role in meeting the imperative to reduce risk posed by climate change, we announced a new greenhouse gas emissions goal to reduce our CEO to emissions rate to 50% below your 2000 levels by 2030.

I'm proud to say that today, we are already one of the cleanest large scale generation fleets in the country. According to the 2019 MJ Bradley benchmarking Air emissions report.

This independent third party analysis confirms that up the top 20 privately or investor own power producers in the United States Entergy has the fourth lowest cotwo emissions rates in the nation.

In addition, we have limited coal resources, which produce only 6% of our 2019 energy Miss mix.

We have definitive plans to retire the majority of those resources by the end of 2030, and we are evaluating options for the rest.

We've worked hard over the last 20 years to ensure that we are one of the cleanest utilities, you amongst our peers and our renewed environmental commitments will ensure that we remain so for years to come.

Beyond environmental efforts Entergy has established a legacy of corporate citizenship.

We make an impact.

Our communities through a combination of philanthropy and volunteerism and advocacy.

We've earned national recognition for our efforts in improved education, and workforce development eradicate poverty and protect the environment.

Our people and our culture are critical to our success acquiring retaining and developing the talent we need to meet today's business needs and to prepare for the workplace of tomorrow are important components of our business strategy.

We have received many workplace awards and recognition for diversity employee resource groups and disability inclusion.

I encourage you to visit the sustainability and corporate social responsibility sections of our website, where we provide comprehensive information, but our actions and strategies that create sustainable value for our stakeholders.

The fundamentals the underlie our steady and predictable growth are strong.

We have a robust earnings per share growth trajectory.

We have among the lowest retail rates in the country, we have progressive regulatory mechanisms. The states we serve benefit from strong industrial growth and we are an industry leader in sustainability.

Our solid base plan that we've laid out will upgrade the service level, we provide to our customers while growing their bills at or below inflation and that alone makes entergy a compelling investment today.

But.

We want to do even better.

With no shortage of customer centric investment opportunities, we are making continuous improvement of core value at our company.

We are working smarter and more efficiently to improve our business. These efforts will enable additional investments that will further elevate surface and reliability without significantly affecting customers bills that is our objective to allow our customers to achieve their most ambitious goals at the lowest.

Possible costs.

2019 was a very successful year for our company and Entergy is well positioned for continued value creation that benefits all our stakeholders.

We are taking our business to the next level by executing on our customer focused investment plan.

Testing in our people and our culture and maximizing growth opportunities through continuous improvement in innovation.

We are excited by what lies ahead.

Before I turn it over to drew I'm happy to announce that we will host our analyst Day Conference in New York City on June 18th.

Main objective will be to give you a view of our five year outlook. We will continue the conversation on key areas of focus for our company. So stay tuned for more details.

Well now turn the call over to drew.

Review, our 2019 financial results 2020 guidance and our outlooks.

Thank you Leo good morning, everyone.

As we have stated we are reporting strong results for another very successful year.

Any 19 adjusted earnings per share were $5.40 and the top half of our guidance range that we raised last quarter.

These results keep us firmly on track to achieve our longer term growth aspirations.

I'll begin with a review of results for the fourth quarter, and then move to the full year.

Divide an overview of our guidance I'll also provide an overview of our guidance for 2020.

Starting with the quarter on slide five on a per share basis Entergy adjusted earnings were 68 cents slightly below fourth quarter 2018.

Turning to the utility on slide six rate actions in Arkansas, Louisiana, Mississippi, and Texas contributed positively to the quarter's results.

Regulatory charges and provisions recorded last year also contributed to the quarter over quarter variance.

Our retail sales volumes and higher operating expenses, primarily depreciation in though one of them partially offset the increase.

A higher share count also affected this quarter's results on a per share basis.

Moving to eat WPC on slide seven.

As reported earnings were one dollar eight.

Approximately $3 higher than a year ago.

This is largely the result, largely the result of high returns on decommissioning trust investments during the quarter.

Favorable tax items, and lower asset write offs and impairment charges.

On slide eight you can see that operating cash flow in the quarter with $699 million 173 million higher than a year ago.

The biggest driver was the lower amount of unprotected exits 80, I T returned to customers.

Another offsetting key driver with an incremental 200 million dollar contribution to our pension trust made possible by the strong cash flows in 2019.

Now turning to the full year on slide nine Entergy adjusted EPS between 19 with $5.40.

11 cents higher than for 2018.

These results exceeded the midpoint of both our original and our revised guidance ranges.

Utility adjusted EPS on Slide 10 was $6.95 in 2019, seven cents higher than 2018.

Well the magnitude or different the drivers for the annual increase with the same as for the quarter I just reviewed.

Slide 11 summarizes E.W. see as reported earnings which were 74 cents for full year 2019.

Gains on the decommissioning Trust fund investments lower asset write offs and impairment charges and lower operating expenses were the main drivers.

Partially offsetting this increase was lower revenue primarily due to the shutdown in sale pilgrim.

Full year operating cash flow shown on slide 12 was approximately $2.8 billion $432 million higher than last year.

Most significant driver within approximately 300 million dollar reduction in the Unpredicted excess 80, I T returned to customers.

Well. The 19 results also benefited from increased collections for fuel and purchase power cost recovery at the utility.

And lower revenue that you see partially offset the increase.

Moving to slide 13.

Our 2020, adjusted EPS guidance range is $5.45 to $5.75.

For the midpoint of $5.60.

This and our 2021 and 2022 outlook ranges remain the same as our outlook that yeah.

We continue to target of 5% to 7% annual growth rate for adjusted earnings per share.

A few of the key drivers for 2020 earnings growth are summarized on slide 14.

Starting on the topline a full year of 2019 rate activity.

Entergy, Louisiana, and Entergy, Mississippi will contribute to 20 twentys growth.

As well as Entergy, Arkansas, new rates that were effective in January of this year.

We will also make up RP filings in Mississippi in New Orleans and Louisiana.

We expect the Lake Charles Power station to go into service during the second quarter with rate recovery in the month following its in service date.

Additionally, our project sales volume in 2020 is expected to increase year over year, our projected sales volume 2020 is expected to increase year over year.

Driven by strong industrial sales growth of approximately 5.5%.

This is partly offset by slightly negative residential commercial sales volume.

We continue to expect volatility and industrial sales from quarter to quarter, as new and expansion customers ramp up operations.

Overall, we see about 2% positive sales growth for 2020.

We project utility owned them to be approximately $2.6 billion inline with our previous disclosures and about $30 million higher than 2019.

This is driven by pension expense and items offset in revenue.

Just energy efficiency and storm reserves.

Smaller amount is due to a full year of Saint Charles and talk talk as well as the the Lake Charles Power station coming online.

Depreciation and interest expense are also expected to increase as we expect as we continue to grow our business through productive investments to benefit our customers and our communities.

On a per share basis, we expect our average share count to be 201 million shares.

As a result of settling the remainder of our equity forward mid year 2019.

Finally, our cash and credit metrics as of the ended the year are shown on slide 15.

Our parent debt to total debt, the 21.6% and our FFO to debt is 14.6%.

This includes the effects of returning $300 million unprotected accessibility to customers over the last 12 months.

Excluding this give back in certain items related to our exit of each WPC floated that would have been 16.8%.

While we still have some unprotected excess say the remaining we have returned over a billion dollars to our customers.

The bulk of the credit impact is now behind us.

We remain committed to our credit targets, including editor above 15% FFO to debt by 2020.

And below 25% for parent debt to total debt as well as maintaining our investment grade profile.

I'd also like to note that are finalized capital plans in the appendix of our materials.

Our capital plan through 2022 continues to grow.

And now totals nearly $12 billion led by incremental transmission investment in Louisiana and Texas.

The financing framework for our capital plan has not changed since 2018, and we don't see a need for equity until 2021.

Now that we are in 2020.

We're actively considering the timing and method to fill that need in a manner that best supports our financial goals.

As Leo mentioned 2019 was a very successful year for our company.

The fundamentals that support the steady predictable growth of our business are strong.

And as we continue to optimize our efficiency through continuous improvement technology and innovation.

An opportunity to take our business to the next level.

We are excited about the growth ahead.

And now the Entergy team is available to answer questions.

Thank you as a reminder to ask a question you want me to press Star one on your telephone we ask that you. Please limit yourself to one question and one follow.

You May then when trying to make him to withdraw your question press the pound.

Please standby while compiled the culinary roster.

My first question comes from sharp wrestle with Guggenheim partners.

Hi, Good morning, guys, it's actually commenting starfish are.

Okay. Good morning, good morning.

Good morning, congratulations on great quarter.

Talking about some of these innovative capital deployment programs that kind of you're putting in place and just want to talk kind of get a little bit of.

An idea for how big do you see the opportunities for all of the electrification and kind of customer solutions and how does that fit within the plan that was presented at the <unk>.

As far as the of the.

Plan, there's very little in there we have.

Added some dollars when we went through the process at the.

End of the second quarter, where we.

Had some continues improvement opportunities and then we put money it back into the business for all of our stakeholders. There was some level of that from the key screening labs sort of initiatives, but theres very little in the plan really at this point.

For those opportunities.

It's a little early for us to start to size it up as the year goes on and we start to develop more we will.

But our view is that at the end of the day the distribution side of the business and these customer solutions will be the fastest growing part of our business.

Customer solutions could include all kinds of electrification. If you look at for example, Louisiana.

Industry.

Is the second.

Largest a matter of greenhouse gases behind transportation with utilities third which is a little bit different that it isn't the rest of the country given the nature of the size of the industrial complex in Louisiana.

So across across all of our footprint, we see a significant amount of opportunity electrification space.

Once we work be onshore power and into manufacturing processes, and even a transportation sector. So that could get get significant overtime as we go forward and there's a lot of other things that they're going to be able to do in addition to what we've already done in solar in addition to what we're already doing in backup generators as I mentioned.

While we put a footprint of am I am customer digital.

And in all those other technological improvements that we do on the system, we get significant amounts of data that will allow GE string labs, and and the rest of the company to actually create products and services based on that so.

It's too early to size what to size it up and give you any numbers, but if you go 510 years down the road, we think that it's going to be pretty significant.

Wonderful. Thanks, just one quick follow up is.

On the numbers for kind of sales volume in 2019 seemed a little bit weaker and a little bit weak on the industrial sales in just the customer account.

Can you comment on what you're seeing in terms of just economic activity and kind of how does that play into 20 going into 2020.

Sure this is true.

No the fundamental strengths that we have that are sort of built into our surface area are still in place in terms of the low.

Costs down here from an energy perspective, our low rates the welcoming communities for industrial growth the access to the river and the infrastructure and the.

Labour and everything else. So all those things are still in place and so we continue to see opportunity going forward that.

That would allow us to continue to two to grow on the industrial base.

Talking about 2019 versus 2020.

We've talked about over the course of 2019, how some of our key customers that we were expecting to ramp up.

Not able to ramp up as fast as we anticipated.

But we still expect them to be there and so that's contributing to.

Kind of the year over year expectations for 2020.

As well as on the smaller industrial customer size base.

There was a quite a bit of rain in Arkansas. So a number of our customers in that normally do pumping for agriculture use on an industrial scale.

Weren't there, but we expect them to be back in 2020.

Barring that.

Assuming a normal weather condition up in Arkansas. So that's really what's driving kind of the change year over year and kind of the softness in 2019, I'll, let Ron talk a little bit about sort of the where we actually see customers going forward.

Good good morning, I think we commented during the last quarter that our confidence in the outlook comes from the fact that our growth expectations stem from our ability to actually identifies specific projects and we know exactly who those customers are.

Over the last several years, we've improved our capacity.

To engage those customers, giving us greater visibility and insight.

Through various aspects of their project development cycle from concept to financial investment decision and so when we give you our outlook gets a probability weighted assessment of the timing of those projects coming online and the associated.

Load and financial implication so our outlooks is still strong and we can tie our expectations in the near term to.

Two specific two specific affirms within different industrial segment, so we still have clarity.

Liebig, sometimes come in lumpy.

Over the course quarter over quarter, but our confidence to steal high in the industrial outlooks driving our growth.

Perfect. That's a that's really helpful. Congrats on the quarter. Thanks, guys. Thank you.

Thank you. Your next question comes from Julien Dumoulin Smith with Bank of America.

Hey, good morning team thanks for the time.

Good morning Julien.

Hey, so perhaps a pick up on some of the commentary Leo.

Can you elaborate a little bit more on some of the customer centric angles and specifically what I'm getting at is I think some of your commissioners in Louisiana, specifically have talked about.

More direct access.

And I don't mean direct access and the competitive sense, but more in terms of procurement choices.

Just curious you should we expect something along the lines of green tariffs or something like that to sort of enable another angle here and I'll leave the witnessed too much but im curious on that angle and then separately. Leo you also talked about the resource portfolio at large, but I understand I think theres, a retirement study ongoing and I just wanted to understand.

Little bit as to how that might.

Play out more specifically in terms of dockets and how we see.

Sort of need the planning process played more specifically out in the near to medium term product.

Well, let me, let me try and keep up with that with that question or that series of questions.

The as far as the customer solutions area goes it took its wide ranging across all of our customer segments. So.

We've done.

Lower income rooftop solar in out of key string labs, we've done backup generation for small industrial and commercial.

Net utility level, we're engaging with our larger industrial customers across a variety of different ways to interact with them to help them do business better we have been investigating.

Green tariffs, we have been investigating community solar we are looking at a whole host of other types of products and services that provides us the opportunity to give our customers the outcomes they desire.

You think about a customer utility function.

Goes beyond just and I don't mean electric utility, but from an economic standpoint. It goes beyond just.

The the low cost provision of highly reliable power. It goes beyond that in terms of with their objectives are in terms of what they want to do with that consumption. So they have a sustainability objective.

In addition to just selling them electricity, we want to help our customers would that sustainability objective so hence.

That's where you get into a position where you electrify a sector.

In short power Arena as I mentioned.

Just there we help those customers meet their sustainability objectives, and quite honestly away that meets their needs at a lower cost and so that's a very very important way for us to serve the customer while we serve the communities, while we enhance our sustainability footprint and theirs and make them more competitive.

Their business so.

Okay.

In terms of specifics Julian across that.

Products and services will be developed.

Out of the innovation.

By working with our customers in a different way than we have before it because technology data information analytics allow us that.

Capability in ways that weren't available and the more technologies, we put on the system to more availability will have that data that information and our ability to actually make that happen. So the reason. We're so excited about it is it's pretty wide ranging.

In terms of.

What we're going to do for different segments of the residential class versus different segments commercial class versus different different in specific customers industrial space.

So that's about as specific as I really want to get at the moment on that.

As far as the resource plan goes you know, we're obviously constantly in the in the mode of.

Evaluating what the resource plan looks like going forward and all of our jurisdictions and.

As we see technologies change our view of what those resources could be broadens.

And so from the standpoint of of.

Say what type of technology, we choices, we make whether they be on the energy efficiency side on the side of renewables gas or what have you.

We have the opportunity to expand that footprint as technology improves.

And renewables and battery and other storage technologies become more economic and more operable, we'll see more those show up in the system.

And it's our anticipation that we will continue to provide three things for our customers through the resource plan one is.

Comparability when they turn on the lights they come off that's obviously a ticket to play we continue to want to be one of the lowest cost providers in the United States that helps our competitive position that helps the economic development of the of the.

Though service territory, which obviously creates a good business cycle for us and that we want to help ourselves our communities and our customers meet their sustainability objectives, we're going to do all three of those and we're going to optimize those to the extent.

Practical.

So that means taking advantage of all of the technologies out there in the most efficient way weekend.

I don't know fraud wants to add into that Oh, yeah, I would only add that in Louisiana, we'll be making filings with the with the commissions.

With the condition relative to a green tariff options that we want the commission to to consider in response to some of the.

The sustainability objectives of our of our industrial customers for that that's an ongoing conversation that it falls right in line with.

Since you just made clear.

And we have retirement study do.

After the same Charles project goes in service that will address them thing.

Yeah.

Got it.

Excellent. Thank you.

Thank you Julien.

Thank you next question comes from painful Mehta with Citigroup.

Thanks, So much high guys.

Hey problem.

Good morning.

So a little on the generation side, you had mentioned that you have opportunities for more generation projects going forward. Just wanted to understand is that from low grill, driven or there are five 6% goal that you have currently that you plan to retire what's kind of driving the new generation opportunities and what kind of fuel mix that you're looking for as you.

Go forward and the new generation.

The generation opportunities are similar to what we've discussed in the past, we still see a need to transform our fleet from the older less efficient.

Generation to new cleaner.

More efficient.

Way to provide power and our perspective on the mix hasn't changed from where we worthy hi that if we look 22 to 30 million that 78000 megawatt range that we think that that based on where technology is going and what we could foresee that roughly half of that could be renewables.

The way, we're going to fill that out is going to be specific to those three points that I made a minute ago.

He has to be right operational characteristics at the right cost with the right sustainability footprint.

Our objective is to optimize that as much as possible and so that's as we've discussed before.

As we get closer to each one of those resource choices to the extent renewables storage technologies and other factors have made those more operable and cost effective.

They become a bigger part of the resource mix.

That doesn't change how much capacity we need.

Because we need to provide service we need to provide in the and the age of the fleet is what it is and as I mentioned, we have plans for retirement of the majority of the coal resources that are out there and we're looking at what to do with the others. So so that plus old gas fleet that still needs to be to be refreshed.

All go into the mix.

Got it.

Thanks for that second question all the follow up on the equity needs point drew I think you mentioned or it can you said you had a range of 5% to 10% now you're saying you're at the upper end of that so closer to the 10, just wanted to understand what's driving that equity need going up a little bit and is that a little bit.

Managing the credit as well just wanted to understand that tripe.

Sure profitable.

I think that's that's probably.

And part part what it is nothing has changed relative to where we said in 2018 from our plan and and I think there is.

There is some credit considerations our earnings considerations. All those are part of what we're working through and ER and also the capital plan itself has grown over.

Over the that's grown that the guys group last summer so it's been growing as well.

And as we always been talk has been talking about there is the potential for considerably more equity needs our capital needs out in the future. So I think all those things are factoring into how we're thinking about where the.

Equity might land when we go to fill that need and 2021.

Got it and finally any any up a four month outperformance that you had in your decommissioning trust, especially on Indian point I'm, assuming that doesn't accrue to entergy because that was part of like the deal that was struck in terms of the seat of Indian point correct.

That's correct. So the the Trust fund Indian point is a whole tax responsibility in terms of the level that that and and that's that all be part of the NRC proceeding that is underway right now.

Got it really appreciate it guys congrats on a great quarter. Thanks.

Thanks problem.

Thank you next question comes from Sophie Karp with Keybanc capital markets.

Hi, Good morning, guys. Congrats on the corner good morning. Thanks.

Just wanted to talk little bit more about cash flows and balance sheets, obviously the.

Jeff metric and leverage metrics same proven and that's very encouraging where might we see maybe.

A positive surprise, there or whereas the room for a change versus your what do you anticipate and right now maybe it's a pension as it relates to performance over the pension assets.

Our and they may be surprised to load growth can you just walk us a little bit more some of the puts and takes and what might affect that.

The trajectory of the improvement here either way.

Yes, so theres a couple drivers out there that have been helpful. In 2019, one was that he'd have you see.

Cash flows came in a little bit better than we anticipated. The team there has done a great job managing costs and identifying.

Ways to reduce capital needs as we transition towards shutting down this plant.

So that's been very positive we had some very positive working capital on developments in utility and we may see some more of that this year because of lower fuel prices.

So thats been been helpful.

Course, the the performance of the pension trust has been good.

But at the same time interest rates have been coming down and raising the liability and so we actually our liability went up about $1 billion from 7.4 to 8.4.

Last year solely because of interest rates dropping over 100 basis points.

Our our.

Delta between our assets and our assets went up as well our delta stayed about the same around 2 billion a year over year, So we weren't able to make up as much.

Around as we were hoping given the positive performance.

But we did we were able because of some of the positive cash flows as I mentioned in my remarks able to put some incremental cash into the pension trust about 200 million more than we planned at the beginning the year, we did that at the end of the year.

So that will help continue to de risk that that pension liability. So those are kind of some of the drivers and some of those what I would expect to continue to.

The opportunities going forward in terms of potential for lower fuel prices, helping our working capital.

And ER and potentially some incremental room at each of you see as well and none of that takes into consideration. So things that we I was talking about around continuous improvement.

If we can find incremental headroom through continuous improvement on our cash flows then.

We can put that to work either with incremental investments to benefit our customers are or other investments to create value for all our stakeholders.

Got it thank you.

And that from off I had is.

Good point, so within the objection filings by the New York Attorney General.

Can you just walk us through how these proceedings typically.

Go and how much Wayne would be and afforded to a party like that I guess in this person and I should be worried about this.

Yes, so the the questions that the New York Attorney General are asking are the same ones that we have addressed in the proceedings at the NRC for both from on Yankee and for Pilgrim and namely there around the the financial and technical capabilities of whole Tech too in this case too.

Due to do the work.

Of the of decommissioning and that's really that is what the NRC is addressing that is there what their accountable for figuring out in the proceeding and and so I think that'll be a good for him to to address those questions.

And we are confident I'll add we're confident whole tech will be able to into those they've already answered them successfully into other proceedings, one with us around Pilgrim and then of course Oyster Creek.

Got it.

I think it's very helpful.

Thank you.

Thank you. Our next question comes from Greg Gordon with Evercore.

Thanks, I feel like you may have indirectly answered most of this but when I look at the.

The slide deck for me I am just compare to the slide deck now as you refine your guidance the.

You know in particular own M. costs, I think we're only expected to be up 10 cents more or less.

Another up 25 cents.

I think that's moving in part due to.

Lower pension discount rate used 4% as a place holder and.

The last deck using just under 3.4%.

Now and I also you've pointed out that a lot of those increased costs are probably offset by increased revenues. So.

Can you.

My capturing all that or am I missing something.

I think you're on the right track Greg is true the.

The pension discount rate did come down lower than what we were anticipating when we were talking to the guy.

And so that was.

The incremental I want them that was probably 40% of of the Delta.

Also there's another 40% is associated with things that are offset in the topline energy efficiency.

Storm reserve changes that that at the bottom line will be a net zero.

And then of course, you know there are a little there are few odds and ends but those dollars that up to something really small so.

I think all in all and actually I would say, we're overall were in line with what we were expecting.

2.6 billion in utility and we've talked about trying to keep it flat at around 2.65 going forward is what we discussed last summer.

So we've managed to work against all of those things that move they all went up a little bit, but it's still within the expectations that we had overall.

Yeah, that's a good good answer and then.

As I compare the expected rate actions from the fall till now.

Looks like on the margin your you maybe I missed it but the team did DCR F and TCR, a filing and the A.M.I. writers filing.

So those weren't explicitly included in the retail price actions in the fall back.

When they're included now so those are modest.

Modest increase in regulatory activity versus the fall plan or were those always.

Anticipated, but just maybe not called out explicitly yeah. I think we were anticipating that we were going to do those things, but we hadn't explicitly called them out.

Okay, great and.

And then in terms of the Capex plan, obviously, it's up modestly for 22, but you know two two gigawatts of potential incremental opportunities.

Hey, look I'm, just going to spitball in a thousand dollars kilowatt I mean.

Is it right to think about that as as long as you can.

Most importantly, as long as you can.

See you know sort of pencil out that those incremental capital expenditures drive customer benefits is that am I right that that could be up to a 2 billion dollar increase in capex and over what timeframe might that be.

Absolutely.

The big opportunity for us.

We've talked about the.

The capital plan is inching towards a $4 billion average at this point, if we look beyond our capital Horizon 2022.

I would expect that it would be up above $4 billion and and all the things that you're talking about are going to be a piece of that opportunity. That's on the generation side I mean, we always saying that the biggest opportunities on the other end of the value chain at the distribution and and the customer services, that's where the biggest growth.

Opportunity, we think will ultimately be.

So there is significant capital opportunity out there for us, but the thing that you said is really what we're working through which is how do we make sure that.

We can create value for customers in really all of our stakeholders, while we put this capital to work.

And do it wouldn't way that.

Yeah allows our customers to manage this through through their bills and that's the that's kind of the key to this whole thing and all the continuous improvement in the innovation, the new products and services, the leveraging of technology, creating headroom and those bills. That's what we are that's what we're after and we see opportunities for that.

Significant way down the road.

Hey wheel I've got a question for you that you're probably not going to want to answer, but I'll ask it anyway.

You know there's.

With the opportunities you have in hand, just organically it would seem to be that you guys control your own destiny, but.

What we said that you've been open to better ideas about the strategic direction of the company is that just brain damage at this point because you've got so much opportunity organically or the right what would the set of what would the set of circumstances have to be for you to want to be distracted enough by a strategic offered to consider it.

I think the the.

Criteria are the same.

Certainly we you know as management team in the board are open.

Too and I think you characterize it correctly better ideas.

So if there is a way to advance the ball beyond what we think we can do.

The way we are configured today, we will investigate it.

In addition to it happened to be something that does advanced ball.

It has to be transactable, both with the counterparty in through the regulatory process because there's no point in going forward if you can't.

Can't get along well enough to go through the process and if you can't get the process completed there's obviously that's it doesn't matter how good the ideas that we can't get done it doesn't matter and then you did also bring up the third thing that we always discussed and that's distraction.

As you know in our industry because of the way the process works. It takes 18 24 months to get something done are you distracted during that timeframe from doing the things that got you to the point, where we are today in such a way that.

Yeah, if you don't get across the goal line or even if you do youve lost so much ground that it doesn't make it worth it.

If you can solve that puzzle.

Then then our our stance we continue to be that is worthwhile.

We do have in my opinion.

The most attractive.

Standalone plan that we've ever had.

For all four of our stakeholders, we have significant amount of opportunity to improve the level of service and the way we serve our customers we have significant opportunity to continue to sustainability objectives in our community building across the environmental though.

Education workforce training eradication of poverty space or anything of provide value for our communities. We continue to have an opportunity to expand our culture and away that engages our employees the way they've never been before.

And certainly all of that results and investment profile that grows the business for for certainly our shareholders. So.

It's a pretty high bar.

In that first part about.

Can you actually have a better idea that advances the ball.

Enough to make it worth doing.

That doesn't mean, we don't look at it doesn't mean, we wouldn't be open to it. It just means that I think now the bar par as high as it is it's been in that front.

Thanks, Leo Thank you all take care. Thank you Greg.

Thank you. Our next question comes from Michael Lippi with Goldman Sachs.

Hey, guys. Thanks for taking my question real quickly can you remind us what the stated retirement dates are for some of your coal units some taken larger ones like white blocks and then some of the smaller ones.

You know independence, Nelson et cetera.

Yes, the Arkansas units, Michael are part of that settlement that gets us to the by the end of 2030.

Yeah.

Okay is there.

Is there a scenario, where especially given the economic <unk>.

Coal versus gas versus solar.

Where you would fast forward or move up the retirement dates which might create a little bit of a capacity me, but also may potentially create customer savings.

There you know I mentioned in my in my script that in addition to what we're doing we're looking at what to do with the rest of the fleet. There is there is that kind of analysis going on on a regular basis. We look at all of the resources, we have and what's the right balance between.

Spending the money required to keep them operating.

Versus versus replacement and so so.

That's that's on the table at this point in time, we haven't made that that call.

Got it.

My other question is on the nuclear side and can you talk a little bit about.

The dispatch economics, all in economics for your move clear fleet in the southeast and just how you're thinking about those plants in kind of weird. They said economically on that dispatch or as we've seen in other parts of the country on both regulated and non regulated.

We've seen some nuclear retirements and trying to just think about.

You know is that even the nuclear units that we should be thinking about as fleet transformation over time.

Hey, Michael This is true and so just in regards to where it sits in the dispatch stack. It's it's low right. It brought these run all the time they have low variable costs and so they are going to run all the time.

Yes, we do know about the economics, and we've talked about that in the northeast obviously with the shutdown of our of our either of you see fleet.

But there are many reasons why you might want to continue to operate your nuclear fleet that are very very important from a policy perspective, and you can you can evaluate those more effectively in the utility setting then you can and they merchant power market where.

All that matters is that marginal.

Vectrens price.

So when you talk about and you see folk supporting nuclear plants in those unregulated power markets.

For the same reasons right you're talking about.

Clean generation that supports the grid, it's always available it diversifies the portfolio.

It provides good tax base. It so there's a lot of jobs in communities and a lot of act active volunteering coming out of these plants that have a lot of employees.

So there's a lot of policy reasons, why you want to keep a nuclear plant around.

But it's hard to evaluate those in a merchant setting.

See people doing that already in those in Illinois parts of New York and other places.

You can do that more easily integrate regulated framework evaluate those characteristics understood and then last question, where do you think scanlin benchmark yourself on.

You'd be call I see there on a per loaded mile or per customer or whatever you. All think them. Most appropriate metric has kind of where do you think you stand versus the peer to peer group.

And how do you think about the path to kind of getting the top decile.

Well you know the.

It's a tricky metric to be making broad generalizations about the peer group because the peer group would have to be somebody who's.

Service territory characteristics mirror ours, so theres, a big difference between people who are in.

Urban dense versus rural versus mountainous versus swampy versus all the things that that makes that up.

Does it doesn't mean, we don't do it doesn't mean, we don't compare favorably in a lot of respects, but.

We need to go beyond just those benchmarks, Michael and get into what can we do to continuously improve ourselves.

Once we get outside of the plant level, because it's too many variables to.

Just make broad generalizations I wouldn't think even if we are top decided that we wouldn't be able to find ways to improve.

Got it thanks, guys much appreciated thanks like you.

Thank you and your final question will come from Jonathan Arnold with vertical research.

Good morning, guys.

Morning, Jonathan.

Right.

Thanks for taking my call just the can you give us a little preview the what kinds of things we might expect you to do at the analyst day, I mean, obviously you talked about another.

Evolving.

Opportunities that margin.

Yes, more specifically do you think you'll roll food your outlook.

To 23, and you're going to continue giving these multiyear outlooks in fact, the plan to just as just a sense of what we should be practical in June.

Yeah, I think Jonathan as I mentioned in my remarks will go out typically the way. The process has worked for US we've historically done at analyst day every other year.

And when we do it we roll out kind of a five year look.

Versus the every.

Good year rollout three or less.

Yes.

And so I would anticipate that we would we would do that obviously give a little bit more ability to dive into what we're doing.

Terms of all the things that we've been talking about here maybe.

Turn or cards on what those opportunities look like and what they might be and.

Gives us a little more time to get into a little bit more detail that way.

But I think.

Kind of just.

More discussion around the opportunity set in front of us.

Rich again.

We.

You know a mentioned it in my in my prepared remarks.

We have a pretty good.

Base here with some close rates in the country one of the cleanest fleets in the countries some of the only industrial growth in the country. Some of the best regulatory mechanisms in the country.

And a.

No shortage of opportunities to invest on behalf of our customers to increase the level of service that they that they get.

While we manage the bill path to be at or below the level of inflation.

And so just looking at the at the.

The outlooks that we provided you here.

That's a that's a and again in my estimation is one of the best positions we've been in as a company.

But that doesn't mean, we're not looking for ways to do better because our team keeps coming up with more investment opportunities for us to make on behalf of our customers that could improve that level of service.

Or whether it's in the traditional things about.

So sustainability and reliability or whether it's in some of these newer areas, where we start to talk about customer solutions, where.

We're getting closer and closer closer to providing them outcomes rather than just the just inputs. So the idea of continuous improvement to provide the headroom that allows us to get there.

Improve things I think I think as is a great challenge.

Great Challenge for Us and continuous improvement takes many forms whether it's continuous improvement through RPK and utilization of our supply chain shared services and I T functions to actually drive costs out of the business, while we up scale actually the level of performance or whether it's in economic development and new load.

Growth that that isn't in the plan today that helps drive costs down for the rest of the customers or just the fact that gas prices continue to be.

Lower than what we what we typically project them to be.

You look at the forward curve you're out for five years, you're still at sub 250 gas.

And Thats, a great opportunity for us to benefit our customers.

Great.

Great execution on the pool, the hearing more about it in June thank you.

Thank you Jonathan.

Ladies and gentlemen that concludes our question and answer session I would now like to turn the call back over to management for any further <unk>.

Thank you Shirley and thanks, everyone for participating this morning, our annual report on form 10-K is due to the FCC on March 2nd and provides more details and disclosures about our financial statements events that occur prior to the date of our 10-K filing that provide additional evidence of conditions that existed at the date of the balance sheet wouldn't be reflected in our financial state.

Shipments in accordance with generally accounted accepted accounting principles.

Also as a reminder, we maintain a web page as part of our of Entergys Investor Relations website called regulatory and other information, which provides key updates of regulatory proceedings, an important milestones on our strategic execution, while some of this and information may be considered material information you should not rely exclusively on this page for all relevant company and.

Formation and this concludes our call. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[noise].