Q1 2021 Entergy Corp Earnings Call
Good day and thank you for standing by welcome to the Entergy Corporation first quarter 2021 earnings release and teleconference. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised the today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your Speaker today, Bill Abler, Vice President Investor Relations. Please go ahead.
Good morning, and thank you for joining US we will begin today with comments from interviews chairman and CEO Leo Denault, and then drew Marsh, our CFO will review the results.
The and effort to accommodate everyone who has questions. We request that each person ask no more than one question and one follow up.
And today's call and it will make forward certain forward looking statements actual results could differ materially from these forward looking statements due to a number of factors, which are set forth and our earnings release for slide presentation, and our SEC filings Entergy does not assume any obligation to update these forward looking statements.
Management will also discuss non-GAAP financial information and reconciliations for the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the Investor Relations section of our website.
And now I will turn the call over to Leo.
Thanks, Bill good morning, everyone.
We had a strong first quarter and her team successfully executed on several fronts.
And with the highlights.
We reported first quarter adjusted earnings of $1 47 per share that's an excellent start the year and it keeps us on track to deliver on our commitments to you and all our stakeholders.
In addition to solid earnings we reached settlements on several important issues, reducing risk, providing long term clarity and solidifying a clear path for future growth.
And Arkansas, we resolved the F. R P through settlement and legislation, which included a five year extension and an equitable outcome for the netting of adjustment.
We reached agreement on a three year extension of the Formula rate plan, and Louisiana, our largest jurisdiction.
We received the initial decision and the system energy, our OEM capital structure case.
While we believe we have strong arguments for a better outcome and the final FERC decision the.
L J recommendations would be manageable within our current long term forecasts.
We filed the joint settlement agreement among all parties paving the way for the sale of the Indian point Energy Center at the whole check the four mid year.
We are pleased for the outcomes of these proceedings as they provide certainty for you our owners and regulatory clarity with more than 90 per cent of our capital plan to be recovered with timely mechanisms.
This enables us to continue to make investments and a cleaner generation fleet and a more reliable delivery system that benefit our customers and our communities and support the long term growth of our business.
Last quarter, we provided a comprehensive update on our clean energy efforts.
We are intently focused on expanding renewables, while pursuing other clean energy solutions like hydrogen and carbon capture and investing and the utilities carbon free nuclear fleet.
So far this year, we have initiated three requests for proposals totaling 1000 megawatts of renewables.
We are also exploring structural options for renewable projects that will lower the cost of these investments for our customers and help ensure that we have the capital required for other needed investments the penny.
Our customers.
Our renewable portfolio has grown significantly.
We have nearly doubled our renewables capacity over the past three years.
With an outside of VIX and Rfps, we have clear line of sight to more than 2500 megawatts by the end of 2020, five which will more than quadruple our renewable capacity from 2020.
And we expect the double that with more than 5000 megawatts of renewables by 2030.
In addition to renewables. We're also looking at other technologies that will help us achieve net zero carbon emissions.
Those technologies include that the combined with the renewables to provide short term storage flexibility.
We are actively developing options to utilize hydrogen to support and leverage of large renewable fleet and provide clean energy with long term flexibility.
We see hydrogen as a form of long duration storage for renewables, which when combined with our nuclear fleet allows us to add additional intermittent renewable power to the grid and yet maintain reliable dispatch of coal power and is 100% clean.
Entergy service area is well positioned to play a key role and the transition to green hydrogen as.
As we are in the heart of hydrogen producers pipeline storage and the industrial users.
We have a relationship with Mitsubishi power to advance our future and hydrogen.
Together, we are working on the Orange County power and storage project, which will be hydrogen capable day, one and eventually able to run on 100% hydrogen.
We are also developing the Montgomery County innovation center to advance electrolysis to produce hydrogen.
Long term our goal is for all of our capacity to be low or zero emitting.
In addition to operating one of the cleanest large trading fleets and the country. We are committed to helping our customers meet their sustainability reliability and cost goals through electrification.
This is an excellent long term opportunity for us to create sustainable value for our customers across the Gulf South.
We've already described power of shore power initiative has the potential to lower our customers' emissions.
And the operating costs, while we grow our business.
In March we announced the electric highway coalition of multi state of electric vehicle charging initiative.
This collaboration will increase the number of charging options across multiple states, thereby improving convenience of long range driving with electric vehicles.
Our fleet play on the will also improve our carbon footprint.
With the help of our vendor partners, we have set a goal that all newly acquired passenger vehicles for cliffs pallet jacks and similar equipment the fully electric starting in 2023.
As Congress puts together the legislation to implement the overarching vision of president of buying items infrastructure initiative.
We see potential opportunities to improve services to our customers.
For the resiliency of the power delivery system.
Enhance our transition to low and zero carbon power generation and produce growth for our region.
The proposal is far from final.
But the environmental and social goals are aligned with our values and the work we are doing.
Because of the improving economics of renewable resources, and our customers' desire for green power to support their own sustainability goals. We believe believe there will be support for projects that will benefit all of our stakeholders.
With policy support those projects can be done faster and at a lower cost.
On Monday, we announced leadership changes and our utility organization that will sharpen our customer focus day.
David Ellis has been named our first chief customer officer.
He will lead the utilities strategic efforts aimed at delivering extraordinary customer experiences, while also bringing to market innovative solutions to keep pace with evolving customer needs and expectations day.
<unk> has nearly 30 years of experience and customer solutions technology energy management and reliability.
Gina Rodriguez will succeed David is president and CEO of Entergy, New Orleans Deanna.
Deanna has been with Entergy for 27 years her industry experience combined with her background and regulatory affairs make her ideally suited for the role.
The addition of David as our first Chief customer officer, as well as Deanne has moved to New Orleans show, our commitment to improving our customers' experiences and building the premier utility.
We all know that our employees rose to the challenges of 2020 and the resiliency has continued this year.
The ice and freezing temperatures of winter storm jewelry. This past February presented challenges across many aspects of our operations are.
Our employees worked tirelessly tirelessly to balance of the system and minimize customer outages.
We committed and $650000 to help community nonprofits and qualifying customers who are affected by the winter event.
Grants went directly to local nonprofits, assisting low income customers with emergency needs, including food banks and the S. P. P and the organization that helps communities rebuild after weather events and.
Additionally, funded funding was also provided to the power of the care, which provides payment assistance of entergy customers, who are low income seniors and people with disabilities.
We also implemented new bill payment options for customers experiencing financial hardship.
Indian point unit, three will shut down and just a few days and we expect to complete the sale of that plant and just over a month the.
The Indian point team is finishing strong as operations wind down and in fact the.
We are finishing so strong that they set a new world record for the longest continuous run for a light water reactor.
I would like to thank the employees of Indian point for their dedicated service to the plants.
New York and to Entergy.
Through this entire shutdown and sale process. We have remained committed to our employees and all of those qualified and willing to relocate and have been offered positions we.
We look forward to them and starting the next phase of their careers with us.
As I said, it's been a very productive start for 2020, one and we will continue to successfully achieve the milestones that keep us on track to deliver steady predictable earnings and dividend growth for you our owners, while investing to benefit our customers and creating value for all our stakeholders.
Before I turn it over to drew I encourage you to read our recently released Twenty-twenty integrated report forward together.
The report outlines the significant accomplishments of 2020.
When faced with the circumstances the threatens the divide US we chose to tackle challenges head on and move forward together.
We supported our customers employees and communities, we champion diversity inclusion and belonging and we delivered on our financial commitments.
The report outlines in detail the solid foundation that underlies our strategy to deliver steady predictable growth, including sustainability leadership, among the lowest retail rates and the country. One of the cleanest large scale generation fleets and getting cleaner a robust customer centric capital plan construct.
And the regulatory mechanisms and a commitment to continuous improvement for the benefit of all of our stakeholders.
With the solid foundation that we've built over the last several years and the significant opportunities that lie ahead.
We are more excited than ever for what our future holds.
I will now turn the call over to drew who will review, our first quarter results as well as our outlooks.
Yeah.
Thank you Leo good morning, everyone. Today, we reported strong results for the quarter as Leo mentioned, we successfully executed on several fronts and resolve the key regulatory proceedings.
As a result, we continue to improve the clarity on a strong path forward, we remain confident and our future growth and we are affirming our guidance and longer term outlooks.
And you can see on slide five we had a strong start for the year with adjusted earnings of $1 47 per share.
Turning to slide six you'll see that the primary drivers for the positive quarter were straightforward and largely the result of investing for our customers and executing on our strategy.
The continued to see the effects of rate actions across our jurisdictions to recover the investments we have made to the customers.
Operating expenses, including O&M and depreciation were also higher.
Resident and sales were stronger with and without the effects of weather and the weather was largely due to winter storm Yuri.
This was tempered by a lower sales quarter over quarter and other customer classes due to the effects of COVID-19.
Although overall sales were in line with our expectations.
This quarter's results also included the reversal of of regulatory reserve.
That we recorded in the fourth quarter of 2020.
The reserve reflects the Arkansas commissions of original order on the 2021 formula rate plan.
With further legislative and regulatory clarity on the netting of adjustment methodology the.
The reserve is no longer needed.
And income taxes were higher due to items that benefited 2020.
Our first quarter financial performance combined with an improved result, and Arkansas has put us in a good position.
Following up with the plan, we discussed last quarter, we're now able to pull flex levers and put back some of the spending and investments for the benefits of our customers.
Moving to EWC on slide seven.
For the earnings per share were <unk> 19 cents.
74 cents higher than the prior year.
The key driver with better market performance of Ewc's nuclear decommissioning trusts.
As Leo mentioned, we filed the joint settlement with the New York Public Service Commission earlier this month.
Which is the key milestone for the sale of Indian point, and we're on track the shutdown the plant and two days as well as close the sale near the end of day.
Over the past several years, we have worked systematically to eliminate risks associated with exiting the business. This includes regulatory risk commodity price risk operational risk as evidenced by Indian Point's record run and risk for employees and in fact, we have said many poise will continue the careers and other areas other areas of Entergy has operations.
Or withhold tech.
The result is the we have dramatically improved our business risk profile and are at the threshold successfully exiting EWC next spring.
Slide eight shows operating cash flow for the quarter.
<unk> is lower than you may be expecting but it caused by two timing related factors of which you are aware.
For the FERC fuel costs, mostly due to winter storm Uri and discussed on our last call for approximately $350 million on the quarter and we expect to recover them over the next few months.
And second the payments for non capital cost related to last year's Hurricane restoration efforts for approximately $200 million.
These hurricane restoration costs will be recovered through our storm recovery filings.
Despite this quarter's result of three year operating cash flow expectation of more than $10 billion has not changed.
As you might anticipate this affects our current credit metrics, which are shown on slide nine.
Our parent debt to total debt is 23% and our episodes of the debt is eight 2%.
As we have mentioned for the past few quarters, our episode of debt.
Really suppressed and part due to financial impacts from storms coding winter storm here.
F of BOE is lower as a result of the higher deferred fuel costs and the non capital portion of the storm restoration costs, while debt currently higher as it was used to pay for the restoration efforts.
As we said the debt will return to normal once we receive securitization proceeds proceeds next year.
We made our first storm recovery filing in Texas This month and.
And we will file on Louisiana, and New Orleans, and the near future.
Also of legislation is moving ahead, and Louisiana, and Texas, the support off balance sheet treatment and both states. This legislation legislation has already unanimously passed one legislative chamber and now moves forward to the other.
We remain committed to maintaining our investment grade profile and the sporting credit targets and we still expect to be at or above 15% per episode of debt next year and it.
Main below 25 per cent for parent debt the total debt.
Moving to slide 10, we are affirming our 2021 adjusted EPS guidance range of $5 eight since the $6.10.
As well as our longer term outlooks.
As Leo mentioned, we settled the ink the entergy, Louisiana Formula rate plan and resolve the entergy, Arkansas formula rate plan, including the appropriate netting adjustment methodology and a five year extension.
Our O&M and capital spending plans are aligned with these outcomes and.
In addition, as we progressed through the year and will continue to utilize our flexible spending leverage the support steady predictable earnings growth.
Looking ahead, we continue to have a clear line of sight on a 5% to 7% annual growth rate for adjusted earnings per share and.
And we expect to grow our dividend commensurate with our EPS growth rate and the fourth quarter of this year subject to board approval.
We have a solid foundation to achieve our stakeholder objectives built on operational excellence and risk reduction as we move forward together with our stakeholders.
And we see a clear path for future growth through our core utility business and the emerging opportunities associated with sustainability and improving our customer experience.
This includes hydrogen and renewables on which we are keenly focused as Leo discussed and which we expect the benefit all stakeholders and support our growth trajectory throughout the decade and beyond.
We see 2021 being another successful year for Entergy and we look forward to great opportunities ahead, as we work toward our goal to become the premier utility and.
And now the Entergy team is available to answer questions.
And as reminder to ask the question you will need of press Star one on your telephone to withdraw your question press. The pound key we ask that you limit yourself to one question and one follow up are for.
First question comes from the line of Schwab Teresa of with Guggenheim Partners. Your line is open. Please go ahead.
Hi, Good morning, it's actually Constantine here for Shar, Congrats on a great quarter.
Thanks.
A couple of quick questions here Oh.
And you reiterated the guidance and kind of of the strong result of the first quarter or are you starting the trends of the top half of your current range given the strong results and maybe some of the moving pieces here and.
And the there some sort of reserve and the current plan for the theory of complaint on the lease back and tax issues and any kind of color you can give.
Yeah.
So this is true on the on the first question and obviously, it's just the the first quarter. It's early and the year I would say we're off to a really good start of.
And and some of the things that are in our numbers. This.
This quarter and.
We have said that we would flex up to to put the spending back in that we had taken out to adjust for the order of like for example, and Arkansas. So.
I would say we are we are very comfortable and our range right now, but since it's only the first quarter, we're not making any adjustments.
Just yet and.
And then as it and regard to the reserve for CRE on the uncertain tax position, we have not as we said before we haven't made any reserves for that position. We still believe that we have a good position and regardless of that case.
And nothing has changed in that regard that would cause us to think otherwise because nothing's changed we haven't taken any reserves and not from an accounting position.
That's excellent color and just one follow up and kind of given the recent regulatory outcomes on kind of how you move your plan around.
And does that cause any of that changed the two and a half billion dollar equity need outlooks of kind of maybe a few moving pieces there and the given.
Given the disconnect between the stock are you potentially looking at any kind of alternatives the satisfied that equity content, whether it's different instruments or.
Of any kind of asset monetization persons of issuance.
Yeah, so and regardless of the amount and nothing has changed and that regard and then.
The.
We are we're still where we were when we talked to you last summer the.
The the other thing associated with the the methods and which we might go access that equity capital and we've talked a little bit about that and the past certainly we have out of the ability to go do block equity, but more recently, we've put a plan in place to do at the market and NEC.
Weak we have our proxy our results, which you know we've requested from you all are owners of.
To to allow us to do preferred equity and we think that gives more flexibility and terms of axis and the capital and we think we can do it and a more shareholder shareholder friendly way.
Because it gives us the opportunity to do and potentially converts and not dilute our existing owners today.
So that's something that we're looking to to get next week and so we'll know the results of that and regards to I think the other thing that you're hinting at is something that we addressed last quarter as well around the potential sale of of a portion of equity from an operating company and go.
Going forward and and as we said you know there is a difference between obviously the the.
The cost of equity and at the operating company and where we're trading today. So that that's something that we were we would look closely at but yeah that is still very much of a strategic decision that the long term decision.
And it's sort of masquerading around as a financing decision and it's really not because you can't do.
And do the transaction and the clothes and a couple of days you know you're gonna be waiting 18 months to 24 months, because you Gotta go get regulatory approval and our jurisdictions.
So it doesn't make it ideal from that perspective are there are other considerations that you have the toll so take into account and in addition to the regulatory and the timing risk.
As we've seen others execute on that and it didn't actually solve their credit problem. They ended up getting downgraded anyway.
And so that's something that we would be have to be keenly aware of but that's the strategic issue, it's something that we pay attention to.
And it's something that we are evaluating and continue to evaluate a because of the the price differences out there because the strategic question. It is starting to get into the more M&A stuff around okay. So and you do this when you go ask for approval can you execute on it.
And we think there's some value there.
And will it distract you from other things that are going on and the utility business. So the you know our ability to execute so so that's the kind of a long answer around what sort of the financing question, but really turned into an M&A question on the on the key point that I think youre looking for.
Yes, that's the that's very helpful and thank you so much and.
Thank you guys for taking the questions today.
Thank you.
Thank you and our next question comes from the line of Jeremy Tonet with J P. Morgan. Your line is open. Please go ahead.
Hi, good morning.
Good morning.
And just wanted to kind of dive into trends and your territory of a bit more what are you seeing behind <unk> sales and do you of any sense on more recent trends and how sales may come in over the balance of the year and reopen poster of COVID-19 here.
Hi, it's rod west from a sector perspective.
Most of the year, we're expecting and the residential for instance, the residential and commercial sector, we're seeing recovery from from COVID-19 and the industrial sector, where we've had and the talks.
<unk> talked about our outlooks and and the growth there we're seeing that sector also recovering from COVID-19, but and the short term.
And two accounts some of the challenges from the the recent winter storm.
That said, our stakeholder engagement with specific customers within each segment support on.
Our confidence in the ongoing outlooks for sales growth so everyone is and their own way of recovering from COVID-19.
COVID-19 and and on.
The winter storms, but we have line of sight.
And each sector that supports what we've shared with you from an outlook perspective on on continued growth and that's just that's not only 21, but but beyond.
And Jeremy I'll add that in the and Roger referenced the winter storm, but it had an outside of an outsized impact.
On our industrial customers as of the last quarter, So, it's minus 3% quarter over quarter, but they've been less and the 1% down.
Without the winter storm. So that's the that's a big impact and and you can see that kind of play out and our overall view for the year.
Because that's not of weather adjustment that we would make we don't weather adjusted the industrial customers and then I'll also add just from a macro perspective that.
And we are seeing sort of.
Some good signals and the industrial space Yeah, we are.
Yeah, we see that the inventories for some of our key pet and and and refined products.
Our customers are are trending back to normal so some of that inventory overhang and has gone away as a result, we've seen.
The margins improve crack spreads and type of our geographic spreads you know Henry hub to Asia and Europe. For example are trending and the right direction and yeah. It was it looked like the housing market is starting to tick up so that could help out our core alkali customers and yeah.
All of the just the the basic macro factors like oil prices are better now and you know the dollar still hasn't rebounded all of that much and those are all sort of positive signals for our industrial customers. So we yeah. We we look at those signals and we're optimistic all that we want to see it show up and the sales as well.
Okay.
Got it got it so it sounds like the the weather depressed things a bit there.
And that makes sense and.
Just wanted to.
Turn to carbon capture for many here you mentioned that and just wondering what do you what prospects do you see in the near term there do.
Do you think that the 45 accuses the written now maybe combined with the old CFS. You know makes these projects the economic and I guess, what's unique about your territories. Just the you know given the backdrop of oil and gas there. It seems like it could be more economic to do it in your area of versus maybe other areas and the countries. So just wondering if you could talk about how you know.
Near term that potential is or how you guys might.
It might stand up versus others.
Yeah, well. Thanks, that's you know that's the.
Carbon capture is just one piece of the puzzle here and I think our service territory really bodes well.
Across a variety of new technological advancements and again will be helpful. Not only for the power sector.
But for the people who produce some of those commodities as well as the people consume those commodity so.
And you've probably seen a lot of press lately about what a lot of our customers are doing and both hydrogen and carbon capture as well as renewables.
So there's there's a significant amount of opportunity for us.
Other it's you know 45 Q as it stands today or whatever happens with the.
The infrastructure legislation or tax policy around that.
It's really early and the game, but that's certainly.
The administration has been has been very clear that.
New technologies that provide the opportunity to lower the carbon footprint of the power sector and our industrial customers are all fair game for <unk>.
Tax credits all fair game for for and.
Other support and initiatives that could help accelerate the development of things like not only of renewables battery storage like carbon capture hydrogen and utilization and hydrogen production and hydrogen transportation hydrogen storage.
All of that is when you say how do we how do we.
Line up.
You know those people, who are talking and other sectors about carbon capture and talking about production of green hydrogen or all of our customers.
And so so how near term is it that's why we are investigating those technologies on their own with our customers and through our J D. A with Mitsubishi to try to.
To tease out the technologies tease out the cost.
And accelerate the ability to to utilize those.
If you think about it if carbon capture.
And hydrogen for example become more economic and and.
And get to market faster and our deployment of renewables can increase and go faster. So that all works really hand in hand so.
No.
Early in the game I think there's a lot of support both through the extension of existing policy plus the potential for new policy, we're working closely not only with the industry, but with with you of.
And the folks in Washington, and the administration of ourselves.
Plus with our partners and our customers to try to try to really advance the ball on this because we.
We think were.
Uniquely positioned as it relates to all of those.
Cause it's vital to us it's vital to the to the customers that we have as well so.
Really think there's a lot of momentum behind it and at the moment as well.
Got it that's very helpful. Thanks for that.
Thank you.
Thank you and our next question comes from the line of the cash chunk for with Evercore ISI. Your line is open. Please go ahead.
Hey, good morning team. Thanks for taking my question and there.
Can I just go back to your commentary around the the share.
The reserve.
Did I did I capture that correctly that you did not change.
Your sort of your reserve of Mount or your accruals and you know after the ALJ decision. So do I take that to mean that sort of the decision was in line with your recommendations and I'm just trying to see what the implications might be true guidance and long term growth rate. Once you do receive of final outcome.
Yeah, No. Good question and I was actually I thought referring more to the uncertain tax question, but in regards to the ROE.
And capital structure of the answer is actually the same we didn't we didn't change our reserve position I wouldn't say that we were exactly in line in fact, it was a little bit below our expectations.
We talked about of three cent.
And sort of ongoing drag versus what we had and our own models internally does it change any of our outlooks, but that was a little different and our expectation.
That would if it stands translate to a slightly higher a need for us to reserve at some point if the FERC comes out at the same place at the ALJ does I think it would be.
20 to 25 million and kind of one time on that change but.
Yeah, we as you saw we filed last week to see if we could convinced of the FERC that the.
The ought to be a little bit higher so we'll wait and see how that comes out, but we will need to take a charge on the aro cash structure piece of about 20, and 25 million down the road if the ALJ position stands.
Got it okay. So so modestly worst okay understood and then maybe just can I get your thoughts on sort of your capital allocation priorities I mean, there's a obviously a large balance of deferred costs as of as it relates to the storms and I'm sort of thinking about the timing of getting to your 15 per cent episode of debt and 2020 two and how.
It was sort of patient out of the credit rating agencies are going to be and then you know does that call for a higher and there of equity and the plan of how you're thinking about all of that stuff.
And all of its a good question. So let me take the <unk>.
And I think that's quite really hinges around the rating agency piece of this and for me. If you look at our metrics from S&P's perspective, I think we're in good shape, even through all of this we are above the the downgrade thresholds that they've written about and we continue to forecast continues to pull away from those threat.
And so we're we're comfortable with where we are on the S&P metrics are the Moody's metrics are a little more challenging as you know because of their cash flow from operations the debt not including working capital of that is the sort of that 15% threshold and that's what we've been really aiming for and we still believe.
We're going to get there next year Leo.
In order to do that you know we have to get past. These cash flow. These cash flow items that we've experienced for the storms.
Yeah, and some of the ones that I talked about this quarter.
And we need to get the the securitization and ideally we'll be able to do that all sheet AR as well.
And as I mentioned that the.
The legislation is moving forward in both Texas, and Louisiana to do that so I think we're actually in good shape to achieve all of those objectives in terms of the compensation with Moody's I mean, obviously, you'll have to talk to them to get their perspective.
But I think they understand what's going on and they understand that we have very good solid mechanisms between the fuel recovery and with the securitization and we have a history there.
And they can see the results and the and the legislature are going forward. So they're very comfortable that we are going to be able to make that progress and they've actually written that they don't expect us to hit their target until 2020. Three so we're actually we're aiming to hit their target of your earlier than they would expect us to so they of the conversations are going very well with them I would.
Say, because we just had our our annual review of watches and typically in the spring and and we have as we've talked about and we're talking about the day forecasts, which should achieve our targeted objectives.
And that's super helpful. It sounds like you have some you know you have some runway of of time to get to that level.
And then assuming the regulatory filings going on where you'll be able and you'll be able to get back to you and faster than <unk>.
And then you know they were targeting you do get to that level, Okay, and that's all I had thank you appreciate it drew.
Thank you.
Thank you and our next question comes from the line of Julien Dumoulin Smith with Bank of America. Your line is open. Please go ahead.
Hey, good morning team thanks for the opportunity maybe in the earnings.
Good morning.
If I can pick it up on the last question here, just and you think about the latest series of the developments and the regulatory front and how does that square against capital spending largely it seems intact, but I'm also thinking here about rate pressures.
The slight downtick in sales and obviously some of the storm impact.
Do you think about some of the mitigating impacts are on.
To ensure your capital spending is intact.
And obviously, you've reaffirmed your earnings guidance trajectory today, and so on balance things are clearly in place and I want to address maybe the the bill of pressure impacts implicit.
Sure sure Julien that's true so you know actually and in terms of our capital spending we'd probably and we.
And public capital this quarter, but we've actually accelerated some of the capital primarily in Arkansas, We had as you probably recall at the beginning of the year, we had pushed capital back to make room for the December order.
And with the more recent order and we've moved the capital back for it. So it's about 200 million and we moved out of the three most of it into a one and some of and enter into O. Two.
Excuse me 22, sorry on.
20 years behind but the.
In terms of in terms of the rate pressure of yeah. As you know that's something that we talk about very Oh, we talked about a lot and and we watch very closely.
That's actually beginning to improve and work through our continuous improvement and the and some of the other things that have been going on.
And have the biggest step change that we've seen in terms of our rep pressure is is it kind of as it turns out to be between.
'twenty 2020 'twenty, one and now that we've gotten through all of our regulatory proceedings for the year. We think we're going to be able to manage that pretty well going forward using 2021 as the baseline.
And we're much closer to kind of of 2% growth rate and are sort of in the average bill.
And I think that that on going forward should be very achievable and and regulatory framework.
Yeah and excellent I appreciate that.
You can't just didn't breathe and elaborate.
How do you think about.
Perhaps the renewable.
Ingo you alluded to earlier I mean, we've talked about this and the past you brought it up on the comments prepared again, obviously your.
You have the I suppose the three rfps out there and pricing, but can you can you address that on your latest thinking on that front.
Well you know as as I mentioned and the my prepared remarks, Julien and and as we've been talking about.
More and more I think last analyst day.
We start with a really clean fleet.
As you said, we've got Rfps for 1000 megawatts outstanding right now are our current.
Thinking.
Is it the renewable path would be about 2500 megawatts by 2025 up to 5000 and by 2030.
And.
And and I think the right way to think about it is we're trying to make.
And you know a low cost reliable and sustainable footprint.
And and as we look going forward.
As technology improves as prices come down as battery storage and kits are more economical and that just makes the possibility for renewables to play a bigger part and the resource play and going forward.
Our reality and that's what you've seen.
You know and we evaluate the resource plan on a regular basis, but we don't stop with the resource play and we evaluate each individual product on a regular basis.
And so as you know we've got the Orange County power and storage station that will that we're developing that debt.
On day one.
We'll have hydrogen and capability and with a and.
Being provided and the in the development space to be of 100 per cent hydrogen capable.
At the point in time, when that makes sense to the extent that gets accelerated.
That allows.
Allows us to put more renewables into our footprint because we got that long term storage for the flexibility. So.
And so when you think about our resource plan, we're just trying to meet the need that when you flip the switch the lights come on.
That's the need and we got to meet.
We want to do it is as efficiently and cleanly as possible and that just for me as a technology has come to the point, where that's a bigger and bigger.
The.
Renewable footprint and.
And again, if some of these other technologies are viable and cost effective and really helps accelerate the renewable deployment as well.
And so we continue to evaluate every project and every and every resource plan and with those with those things in mind. So.
You know I'm excited about the possibility that the 5000 gets bigger at some point.
And we've got a lot of time between now and 'twenty 30.
And to make that happen.
And with with again, the the the infrastructure support coming out of the policy environment.
That only only.
Will tend to make that.
Technology advance further faster and be more economical for our customers. If there's again that policy support.
But to clarify here, if you don't mind, the structural options that youre alluding to for renewable projects. It sounds like how you finance or somehow structure incremental opportunities beyond what you're already talking about.
Well, it's it would be utilized the structure for the opportunities were already talking about because if you think about of Julian the the.
If we can make them more cost effective for our customers through those structural options.
That frees up capital to spend on other things that improve the level of service that our customers receive whether it's on the T&D front, the customer solutions front or and in other and we're in the renewable projects as well.
Excellent well congrats on all fronts here speak to you guys. Thank you.
Thank you and our next question comes from the line of Stephen Byrd with Morgan Stanley. Your line is open. Please go ahead.
Hey, good morning, Thanks, so much for your time.
One of them.
Maybe just following up on Julians question, a little bit on on on clean energy.
And it sounds like there's a pretty significant chance that we might get a congressional action that would essentially extend the solar and wind tax credit for a very long time, creating a new energy storage tax credit on potential.
It tends to provide more support for our carbon capture and storage and a few other things hydrogen as well I guess first just on the utility side. If you saw that kind of long term federal support that really does change the economics meaningfully would that would that trigger are essentially of sort of a formal sort of reassessment of your resource planning of cross.
Or is it more just opportunistic you'd sort of keep that of mine and the future or is it you know and I'm trying to kind of think about whether that caused you to sort of you know immediately want to rethink some of the resource play and as you already asked so.
So Steven and it's great question, and we're already rethinking the resource play and based on the potential for those types of of of initiatives to occur.
You know as I mentioned, the the resource plan.
It's not like we said it and then we just put it on auto pilot and we're going to follow through on it regardless of what happens. So we're already looking at the plan that we have.
And determining you know based on different policy scenarios and what that might do.
The change to change the economics.
Such that the.
The plant itself has changed.
And again as I mentioned, the more support policy support for these technologies and occur of the lower cost they are for our customers and the faster they're going to accelerate in terms of there.
Development as viable.
That's we see that is having a positive impact on the cost of the customers as well as the sustainability of the resource plan itself.
So I mean, the short answer is absolutely.
And we're already we're already looking at what those impacts might be and and and certainly like everybody else and the industry were playing our part and helping.
The the congressional leaders and the and the administrative leaders understand what those impacts might be on the industry.
Entergy and on.
Our region and is.
I mentioned earlier, the there's not only of growth opportunity for us and some of these policies but.
The people, who are making hydrogen today, Steven already and our service territory and our customers.
And the people who are utilizing that hydrogen are in our service territory and our customers.
So, it's our intention to work with them and helping them meet.
Meet their sustainability goals and their sustainability requirements, depending on what again comes out of the legislation and and administrative.
Asian, and and Washington.
To help them with their sustainability objectives. So if you think about.
Major of hydrogen producers today through gas for information, if theres going to have to get the carbon capture or renewables, we want to be there and to help them with that.
That's extremely helpful and actually the last part of what you mentioned Leo kind of brings me to.
My second question, which was just on the.
I guess, especially hydrogen and carbon capture I wonder if you could just talk a little bit more about sort of the role of entergy and helping your customers and I'm I guess I'm thinking about frankly degree of technology risk you're willing to take commodity risk what what's sort of the the the range of possible roles and entergy could have on helping customers pursue those.
And those technologies, which I'm on just elaborate a little bit on that.
Sure certainly we're in the and the and that in the early phases of the evaluating exactly.
What their needs are what they are what they were.
I want to do and what they can on what they what their exposure is as well as how we want to participate so we're really and the range of investigation right. Now one is for example.
With our fleet itself, what we're gonna Utilise, the Montgomery County Innovation Center that I talked about that is of 22 megawatt.
Electrolysis a facility that we're looking to develop where we would be obviously, creating green hydrogen debt.
We wouldn't that test and our own facilities as we use that as a precursor of up to and then how the Orange County is going to utilize green hydrogen and its own you know for for the production of electricity.
The same point and time.
To the extent carbon capture is something that.
And producer might want to utilize.
Our ability to provide them with with economic renewables would be away.
Obviously create new load and new renewables for us to be able to help them with that and to the extent that they want to pursue electrolysis and their own production of of green hydrogen and we can provide the.
The the clean energy, whether it's through nuclear or through renewables, we can do that as well. So we're investigating on you know all aspects of that at the same point and time you know there there is transportation infrastructure down here in terms of pipelines and everything for for that and we need to look at and how that transportation Tees up to our own facility.
And as well as amongst our you know the service territory.
And then we've got storage facilities that are capable of being converted to store of hydrogen and so we're looking at that and what role that can play not only for us but for our customers. So there's a wide range of things that we're looking at.
Obviously, our layne has to be the utility and all of this.
And but but but as this progresses and we collaborate.
With Mitsubishi and we collaborate with our customers the opportunity to be the utility and provide the electricity for all of this happened and should be pretty significant.
And if at all if it all plays out and I would say that.
The creation of the customer organization, where we announced the David Dallas's position.
Within rods organization.
You know, that's that's going to be a pretty significant organization that we're developing is designed to help and collaborate with those customers on these new needs that they have.
So I know that wasn't the specific list of projects and Steven but it's more of a.
Of a pretty wide ranging opportunity, where we're going to we're gonna stay and our lane, but yet we're going to we're kind of really pursue being able to to make it a reality.
No. That's really helpful color. That's all I have thank you so much thank you Steven.
Thank you and our next question comes from the line of Steve Fleishman with Wolfe Research. Your line is open. Please go ahead.
Okay.
Yeah.
All right it looks like his line disconnected. So we'll move on to our next question, which comes from the line of Jonathan Arnold with vertical research. Your line is open and please go ahead.
Yeah.
Hello.
Hey, Jonathan.
On the I'm, just curious you talked about Capex and the.
And potentially pulling things forward, all of whom having the left the fed but when I when I look at the you know the.
Guidance you gave for this year was just under $3 5 billion and it looks like you already invested 1 billion and six in the first quarter. So just maybe trying to get a little more of a sense of is that the timing or could this year's number be a good bit higher than what you were looking at before.
And maybe what's driven that is really not much bigger quarters, and you've had and awhile.
Yes, so I think for the year I think it is probably just timing elements.
I don't think that there's you know any sort of massive acceleration versus what we had previously planned other than to say that we pulled some of that capital and and Arkansas up from 2023, and so I think that I'm going to say it was and the 150 to 175 million for this year.
And so that's at this point I think that would be the only difference from what we previously published for 2020 one.
Okay. So just the big first quarter in terms of.
The project spend and anything in particular for true.
Driving the.
And nothing comes to mind that would be something that would stand out. Okay. And then could you also could we just get an update on where you are on a radius and the cut.
Customer bad debt and used.
Starting to see any any improvement there and how does the low classes and where you were at last quarter.
Sure. So you know from where we were at.
At the end of the year I think we've improved a little bit not a lot you know, we kind of got stalled out because of the the winter storm a little bit.
And we expect Arkansas, and New Orleans to lift their moratoriums and May so that should give us a clearer path to to starting to move those arrears are little bit lower.
But at this point there, they're still I would say, there's still around 300 million they are down from where they the highs where.
And by I don't know, if 10 per cent or so but the.
Are they still have a ways to go.
Great and then.
One one of the one of the maybe related issue and he is looking at the residential sales a little more of.
To what extent.
I know the weather adjustment can be.
And on rather than a thorough and stuff.
To what extent do you think you'll still seeing when the work from home and benefit is that starting to fade and just the so wont come into the.
And we're actually seeing increasing customer accounts and the usage per customer, which is more of an indicator for us for a long term view usage per customer has sort of flattened flattened out.
And the and the residential sector, but.
We are we are expecting the actual growth rate.
Quarter over quarter to begin to moderate as those folks begin to return back to a more a more normal for us and load shape. The way that it plays out because people go back to work and school and things of that nature, but but we're tracking it rather rather discreetly and no real surprises for us thus far.
And thank you Rob.
Yeah.
Thank you and our last question comes from the line of Andrew Weisel with Scotiabank. Your line is open. Please go ahead.
Hey, Thanks, good morning, everyone.
My first question is on the renewables and you can just elaborate a little bit you gave a lot of details on the size of the opportunity. The overall, but what's your latest thinking on utility ownership versus P. P as potential role for tax equity partners and how that might affect any of the rate base or capex.
And and therefore balance sheet impacts relative to third party of Ppas.
So hey, and or this true so we do expect to own a good portion of of the solar opportunity. That's in front of us and we think that we can be extremely competitive for a couple of reasons and one of them and you alluded to in terms of the tax equity partnerships.
And that allows us to to manage the.
That debt.
The investment tax credit.
At the end and work around some of the some of the challenges for them being utility.
And so that that's probably the the main thing that's out there. Obviously, we are working on and hard on bringing our costs down and just like everybody else in the sector.
But the.
And we think the you know based on the last couple of Rfps, where we've ended up we think we're getting much more competitive.
And that space and so we expect the owner of a big chunk of those things going forward.
And we'll say yeah I don't.
At the end of the day doing all Ppas is probably not going to be that great for our balance sheet and and might actually start harm and the customers. So that's something else that we're paying attention to it but I think and where to avoid that we really just have to get competitive on the on the rfps and and make sure that we win our share.
Okay, and I assume there's no change to your assumptions when you talk about the capex and cash flow and equity need the outlook all of that the have you changed your assumption on the win rate if you will.
No we haven't we haven't changed our assumption and and we are still are working to figure out. Okay. So the second half of this decade, where a big chunk of that the renewable comes in and what does that look like but.
Yeah, we would expect over time and if we're successful and our strategy that we the the win rates should improve for us.
Okay, Great and then last question. Thank you for all of the cash flow and and details on the Texas Wind storms. My question is do you see any need or opportunity for incremental capex to improve reliability, whether in terms of under grounding of winter rising your regulated power plants there.
Certainly as it relates to the the winter storm, specifically, which is not different than.
Any weather event that we have.
Or a major portion of our of our after action analysis will clued.
Strategically what can we do to make the system more resilient.
And <unk> and the winter storms and no different and so we will we're doing a comprehensive look at all of our facilities.
And all of our functions not just in the generation side, but transmission and distribution as well to get what's the right balance.
Of the.
Of cost and reliability that we want to put in it so that that that is ongoing.
I wouldn't say that that's a significant.
Amount of capital that would go into those facilities.
Compared to the size of the capital budget as it sits today, but certainly we're looking at and crude and resiliency.
And all of the investments that we're making and the normal capital plan are meant to improve power quality and reliability and so.
As we do for example, with our transmission system.
All of the new stuff, we build is to the us to a higher standard than what we built 20 years ago.
And as we saw on Hurricane Laura all of the stuff that we built with the new technology, which stood the hurricane. It was the stuff that we built 2030 40 50 years ago that was destroyed and all of the new stuff is the new stuff. So.
That's a continuing and.
Continuous.
Analysis for us to how how do you improve the resiliency of just on a day and day out basis, and the Houston and the weather events like the winter storm give us the opportunity to learn even more.
Okay. Thank you very much and the congratulations to David and Deanna on the promotions.
Oh. Thank you. Thank you.
Thank you and this does conclude today's question and answer session and I would like to turn the conference back over to Mr. The April or for any further remarks.
Thank you Michelle and thanks to everyone for participating this morning.
Our quarterly report on form 10-Q is due to the SEC on May 10, 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.
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Information and this concludes our call. Thank you very much.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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