Q2 2021 Entergy Corp Earnings Call

Good day and thank you for standing by welcome to the Entergy Corporation second quarter 2021 earnings release Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask the question during the session you will need of press star 1 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 <unk> Vice President Investor Relations. Please go ahead.

Good morning, and thank you for joining US we will begin today with comments from Entergy, Chairman and CEO Leo Denault, and then drew Marsh, our CFO will review of results.

In an effort to accommodate everyone who has questions. We request that each person ask no more than 1 question and 1 follow up in today's call management will make certain forward looking statements actual results could differ materially from these forward looking statements due to a number of factors, which are set forth in our earnings release, our 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 reconciliations to 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.

Now I will turn the call over to Leo.

Thank you Bill and good morning, everyone.

I'm happy to reported another solid quarter, where adjusted earnings were $1.34 per share, including a negative impact from milder than normal weather.

The underlying utility performance was strong and our team successfully executed on multiple deliverables across the business.

Our execution not only this year, but over the last several years has resulted in strong growth and lower risk.

This in turn has provided us more financial flexibility, which was most recently recognized by Moody's the res.

Salt is enhanced ability to manage risk and lower equity needs to fund our growth.

The bottom line is we are on track to deliver on our commitments, including our financial results.

We have a clear line of sight to achieving our 2021 guidance as well as our longer term financial outlooks.

With the added financial flexibility from our lower business risk profile, we expect to be in the top half of those ranges.

A 3 year of $12 billion of capital plan is the foundation.

It is designed to deliver important benefits to our customers and will result from 5% to 7% adjusted EPS and dividend growth.

Our capital investments will improve customer outcomes along several dimensions.

The reliability resiliency of affordability and sustainability.

Our plan also supports our expectation of at least 5000 megawatts of renewables by 2030 the.

The living on our environmental stewardship commitments.

There is a great deal of certainty around the execution of our plan is more than 90 per cent of our investments today are tied to enhancing technology across our system to improve reliability and resiliency.

90% of our investments will be recovered through efficient and timely regulatory mechanisms such as Frp's and writers.

The 90% of these investments are ready for execution from a regulatory standpoint.

Additionally, we were able to manage our cost to provide certainty to our stakeholders through both our flex spending program and continuous improvement.

These initiatives allow us to manage our customers' bills and keep them affordable while also providing steady predictable growth in earnings and dividends for our owners.

We have consistently maintained rates among the lowest in the country and we have achieved 7% compound annual growth in adjusted EPS for 2016 to 2020.

Our accomplishments so far this year of keep us firmly on the path to meet our objectives.

1 important objective is increasing our renewable and clean energy resources.

To that end Entergy, Texas began the process to seek approval to construct the Orange County advanced power station at large scale hydrogen capable facility.

<unk> represents a significant milestone in our strategy to provide clean energy that also supports reliability.

We received approval from the Arkansas Commission for the Walnut Bend Solar project.

This 100 megawatt facility, which is expected to be placed in service in 2022.

It will provide clean energy for our customers in Arkansas.

Possibly provide capacity under a green tariffs.

We recently filed our proposed green promise tariff and Arkansas to allow for the sale of designated renewable energy to interested customers.

Many customers have expressed interest in such an offer and in fact customers had input into the development of the proposal.

We have received signed non binding letters of interest from 20 customers, including Walmart the.

Global Technology company of major retail pharmacy company, nearly a dozen hospitals or hospital networks, and Arkansas University and the number of large manufacturing customers.

Our customers are telling us what they want and we're listening.

We're working to bring them offerings, such as green promise to help them achieve their sustainability goals.

We also continue to make progress on our annual Frp's, which provide for timely recovery of investments that benefit customers.

Entergy Mississippi's F. R. P was approved and the full rates are in effect.

And we submitted our annual filings in 3 jurisdictions, Arkansas, Louisiana and New Orleans.

Many of you are interested in our storm recovery filings and they remain on track legislation.

Legislation to support off balance sheet securitization passed in Louisiana, and Texas and.

And we expect to receive proceeds by mid 2022.

The interesting, Louisiana filed its request for securitization this past Friday.

As I've mentioned before building greater resiliency into our system is an ongoing focus.

Some of our resiliency improvements have been occurring as normal course of business as we replace aging transmission and distribution infrastructure with assets designed the latest standards enable the handle higher wind loading or flood levels of.

Times, these resiliency improvements or accelerated like when we build back better after a major storm.

However, we won't wait for another storm to continue to strengthen of our system. We're conducting a review of our critical infrastructure. We are developing long term plans to continue this progress on the path to greater resiliency.

Customer affordability continues to be a cornerstone of our plan.

<unk> integrates both of great place and looking ahead, even after accounting for storm recovery, we will still expect of rates to be well below the national average.

And the annual growth rate per average bills from 2021 to 'twenty 'twenty 4 is slightly above 2%.

Bottom line.

So we have a solid plan.

With significant uncertainty in a strong growth outlook.

Consistently execute on our key deliverables that underlie our commitments.

We have a proven track record of delivering on those commitments.

We're confident that we will be successful, but we're not stopping there.

We aspire to do even better.

Over the last several years, we've been highlighting the opportunity we see in customer solutions.

We've begun to commercialize some of those solutions such as power through our backup generator solution and.

Sure power electrification of ships while imports.

We're also developing other products the further electrification of industrial processes to accelerate the development.

Of EV infrastructure.

We're expanding our product and service offerings to help our C&I customers meet their sustainability objectives.

We are actively working to reduce our carbon emissions and that will help all of our customers reduce their scope 2 emissions.

To further support our customers' aggressive decarbonization goals.

The leverage green tariffs to provide carbon free resources to further reduce their scope 2 emissions.

As you all know entergy.

Entergy has a large industrial base with about 40 per cent of our demand coming from industrial customers.

Some have viewed this as a risk, but we disagree.

We see continued opportunity in this sector and here's why.

Our industrial customers are efficient diverse producers with infrastructure and labor competitive advantages.

Our Gulf Coast refineries produce a wide variety of feedstocks and finished products highly integrated into the value chain. This.

This is not going away.

Even as products like cars, the ball toward more sustainable options. The components of these products will still be needed.

For example cars and trucks will still have tires frames and dashboards all things created from feedstocks produced by energies industrial customers.

Additionally, the carbon constrained world.

We see opportunity for additional growth and demand from our industrial customers.

You talked about Green tariffs is 1 way to help them meet the sustainability goals, but that only address the scope 2 emissions that come from their power purchases.

The lion's share of our industrial carbon emissions come from scope, 1 emissions from fossil fuels that they use on site.

Again, we're developing ways to help customers reduce their scope 1 emissions through electrification.

Including electrification with green options substantial.

Substantial opportunity exists for us to help them electrified processes such as compression.

For LNG of product pipelines cogeneration, replacing of fossil fuel process with the electric alternative and processes to convert onsite bowlers boilers to electric heating.

And as our customers adopt carbon capture utilization and storage, we can provide green energy to maximize the benefit of that technology.

As we've discussed Entergy geographic positioning in the heart of hydrogen producers pipeline storage and consumers represents another unique opportunity we have the ability to help her of hydrogen customers both producers and consumers.

Convert to current carbon friendly hydrogen alternatives.

The bottom line.

We believe our large industrial base gives entergy of unique advantage and growth opportunity and of rapidly Decarbonising world.

Turning to our efforts to our efforts around hydrogen, which we see as part of the clean energy future.

Working with Mitsubishi power to advanced technologies and expertise in hydrogen for the benefit of our customers.

Part of our collaboration involves the hydrogen capable of Orange County, advanced power station, which I mentioned earlier.

We're also continuing our work on Montgomery County Innovation Center at 25 megawatt of electrolysis facility to demonstrate green and clean hydrogen production capabilities.

Finally, we recently participated in the D O hydrogen Earth energy Earth's shots initiatives.

Our goal is to secure federal funding to help jumpstart hydrogen demonstration projects in our region in a matter of that mitigates the impacts on our customers' bills.

We expect to see a request for proposal notice from the Hawaii later this year or early next year.

At Entergy, we of a solid strategy to achieve our objectives.

We are an industry leader in sustainability.

1 of the cleanest large scale generation fleets from the countries and we're working to make it even cleaner.

We have a robust capital plan to meet our customers' evolving needs.

Low rates position as well.

The continuous improvement for the benefit of our stakeholders.

We have a clear line of sight to 5% to 7% earnings and dividend growth.

We have a unique advantage with our customer base to provide sustainability solutions that could result in incremental sales growth.

Even with all of excellent positioning today, our goal is to do more.

These are exciting times and we're working to create a very bright future for our company.

I will now turn the call over to drew who will review our financial results for the quarter as well as our outlooks.

Thank you Leo good morning, everyone.

Today, we are reporting results for another solid quarter as.

As you can see on slide 5 we've experienced robust sales as we recover from the impact of COVID-19.

We continue to execute on our key deliverables.

Well on our way to achieving our goals for the year and we are affirming our strong guidance and longer term outlooks, while pointing to the upper end of the range for each.

Turning to slide 6.

You'll see the primary drivers for earnings in the quarter were straightforward.

To see the effects of our investments to improve customer outcomes, where the rate changes to recover those investments.

We also saw effects of the COVID-19 recovery sale.

Sales were higher than last year, despite negative weather in the quarter, our industrial sales improved 7.1% year over year.

Driven by economic recovery and growth our industrial customers are now running at levels of exceeding 2019.

Commercial sales also are continuing to recover as businesses reopen.

Residential sales are beginning to taper as workers go back to their offices.

On slide 7 you'll see a little more detail on key sector indicators from our industrial customers.

These 4 sectors collectively represent nearly half of our industrial sales.

As you can see the economic indicators are healthy and at or near multiyear high points inventories are back in alignment commodity spreads of improved and volumes and margins are doing better across the board.

Overall, our industrial base has rebounded nicely from the challenges of 2020.

We are fortunate to have a resilient and competitively advantaged industrial base.

Turning back to the earnings drivers our.

<unk> spending increased as we return to more normal business conditions.

This increase was expected as we significantly reduced costs last year to offset the effects of COVID-19 the.

Spending includes increased scope of work at our generating plants, including outages differed from the past year.

You also have incremental spending for new plants in service and in our focus areas of reliability and improving the customer experience.

Our O&M expectation for the full year remains $2.7 billion.

And we will continue to utilize our flexible spending tools to achieve steady predictable results.

Moving to EWC on slide 8 you'll see the results were lower than the prior year the.

The key driver was the sale of Indian point, the whole tech.

The sale resulted in a pretax charge of $340 million driven primarily by the nuclear decommissioning trust exceeding the decommissioning liabilities.

The sale of the Indian point is a significant accomplishment and an important milestone in our exit of EWC.

And 1 which further improves our business risk profile, the impact of which I will address shortly.

Operating cash flow for the quarter as shown on slide 9.

The quarter's result is slightly higher than last year of operating cash flow returns to more normal levels.

This change is due primarily to improved collections from customers, which are offset by a few items.

Fuel prices increased compared to last year, and we saw a negative cash flow impact from the timing of fuel and purchase power cost recovery.

Severance and retention payments were higher at EWC relating to the closure and sale of Indian point.

And we also had some remaining payments for non capital of 2020 storm costs.

Our current credit metrics are shown on slide 10.

Our parent debt to total debt is 22.4 per cent and our episodes of the debt is 8.3%.

Our episodes of the debt remains suppressed in large part due to the financial impacts from storms.

As we mentioned in the past few quarters, we expect the metric to return to targeted levels in 2022. After we receive securitization proceeds and pay down the incremental debt.

We've made our storm recovery filings in Louisiana, Texas, and New Orleans as well.

You have noted both Louisiana, and Texas passed legislation to support off balance sheet treatment for securitization.

Last week Entergy, Louisiana made its securitization finally.

Recovering storm costs through securitized debt is the best alternative for customers the help strengthen our balance sheet.

As we've communicated we have several options to meet our equity needs.

And this past quarter, we utilize the at the market equity program.

As of the end of June we had sold of approximately $73 million of common stock of which approximately 2 thirds reported sales, which could settle as late as next fall.

Finally, I'd like to discuss the Moody's advisory that was issued this past week.

The farming series of investment grade ratings Moodys did place theory on negative outlook signing of the currently pending cases filed against CRE at FERC by retail utility commissions.

Moodys indicated that these kit that these cases has the potential to erode series earnings power and cost recovery.

While we are of course disappointed by this change we recognized that the level of claims brought against theory approach the value of Grand golf and the regulatory.

1 of the environment in which theory is operating it's far from constructive.

And the same advisory.

Moody's affirmed the parent investment grade rating and outlook, recognizing the entergy as larger size and diversity could withstand adverse outcomes of theory.

In addition, Moody's recognized our improved business risk profile.

The result of our successful multi year strategy to wind down the EWC merchant business and grow our utility business.

To do this they reduced the cash flow from operations minus working capital to debt threshold, that's a bit of a mouthful.

For Entergy Corp from 15%.

The <unk> 14 per cent.

We are pleased with the recognition of the Derisking. The we've accomplished in our business and combined with S&P's simpler recognition last fall.

We are excited about the enhanced financial flexibility that our work is unlocked.

Moving to slide 11, the recent recognition of our Derisking efforts and incremental balance sheet capacity.

We are early in the process of determining its full impact on our plans and outlook.

That said there are some early takeaways first the.

The incremental capacity significantly increases our confidence in our ability to execute the current business plan.

Second.

We will not need as much equity to fund our utility growth.

While we are affirming our 2021 adjusted EPS guidance range of $5 needs at the $6 and Tencent as well as our longer term outlooks for 5% to 7% adjusted earnings per share growth.

The combination of the improved confidence of lower equity needs places us in the top half of our guidance and outlook ranges.

We have a clear line of sight on our capital plans to benefit customers and a robust balance sheet to support that investment.

The <unk> underpinned by a strong continuous improvement program and disciplined flexible spending plans.

We plan to invest for the benefit of our customers and project designed to improve reliability sustainability of resiliency and customer experience.

These investments of programs further support community economic development and employee development, all while keeping our focus on low rates.

Finally, the incremental balance sheet capacity, resulting from our derisking efforts will enhance our ability to unlock the significant investment opportunities that will flow from working alongside our commercial and industrial customers. The Leo described the help.

Them lower their scope, 1 and scope 2 emissions.

Today, we are executing on our key deliverables and we are firmly on track to meet or exceed our financial objectives.

We are investing in customer solutions to enhance our customer experience.

And our investments in renewables and hydrogen technology will continue to support our sustainability efforts and those of our customers to provide new opportunities in the future.

We are very excited about the growth opportunities ahead.

And now the Entergy team is available to answer questions.

Thank you as a reminder to ask a question you will need of press star 1 on your telephone also please limit yourself to 1 question and 1 follow up to withdraw your question. Please press the pound key.

Our first question comes from the line of Jeremy Tonet with J P. Morgan. Your line is open. Please go ahead.

Hi, good morning, its actually rich on for Jeremy Thanks for taking our questions to that.

Good morning Rich.

Maybe just starting with the equity message first you realize you laid out some of the drivers behind this but just wanted to know.

More specifically on the share count aspect for 'twenty, 1 as well as just the overall the valuation could you speak a little bit more just the the timing of updating.

For the new Moody's outlook, and what other considerations around business mix and where the plane stands now could factor into the lower equity needs.

Sure. So I'll talk about the timing. This is true I'll talk about the timing first.

We.

<unk> been working on this a long time, but we've just got the recognition from Moody's in the past week or so as I mentioned.

So we are still early in the assessment of what the overall impact of these I pointed to a couple of the early.

Elements associated with it we expect to complete that this fall it could be sooner you know I would say probably no later than the EI, but it could be sooner than that.

And as it relates to something like the share count or specifics around size I don't have those kinds of details available to give you today.

Other than to say you know, we believe it will be meaningful it'll be a meaningful change.

In terms of the evaluation, which is I think part of the question that you had in there.

We still want to make sure that we are hitting our <unk>.

Earnings and credit expectations.

We will still need to issue a little bit of equity to do that.

But the other.

<unk>.

Is much more robust in front of US now we think it's been significantly derisked, we have a lot more confidence as I said in our ability to execute.

And.

But we don't have we don't have specifics that we can give you today.

A couple of other sizing or I should say evaluation perspectives..1 is that now as we have talked about extensively.

We have of significant growth opportunity ahead of us and we want to make sure that we have the capacity to invest into that opportunity as it materializes.

And then Moody's specifically also talked about.

CRE and our ability to manage that risk as it's presented right now specifically around the uncertain tax position case.

And the Eric perspective was that we should be able to manage that risk and still meet.

The expectations around earnings and credit.

And so we want to make sure that we have that capacity built in as well.

And of course, we still believe that we're going to be successful in theory, I know that wasn't really your question but.

But yeah.

If that doesn't materialize that would be incremental opportunity for us to invest in the business.

Got it thanks for the color of day or and then maybe just switching gears to the GCG T. In Texas, what is the timeline for regulatory approval and do you expect the hygiene and the aspect to the impact of approvals process at all.

It's rod good morning from the press.

Sequel standpoint, the process will begin at the commission.

Right around the labor day right around the labor day timeframe with zeroing in on that and then the procedural schedule will be set.

By the by the PUC tea and that process could could run.

6.2 to 12 months, if we're if we're efficient in the way that we are pursuing it but again thats up to the PUC too and the.

In Texas and you asked a question around the.

The the hydrogen component I want to make sure I heard the question correctly.

Sure just curious if you know given the novel nature of the hydrogen component. If you expect that the impact of approvals process at all.

No the the hydrogen hydrogen component as it's currently configured represents approximately 5% of the overall cost and we believe we have a compelling case for why.

Having that flexibility.

Benefits the benefits of our customers and certainly would support the CCN. So we its novel of course, and we're prepared to to explain of why it's been of Fisher, but more importantly, bringing our customer benefits alone. When we think about the industrial opportunity that where the both Leo and drew.

Referenced we think that also adds to the viability of of hydrogen being part of the CCN process at this stage Jeremy I'll, just add to what Rod said the others too.

Advantageous components to the hydrogen piece of this.

1 is certainly in the environmental space that hydrogen as a cleaner fuel.

The other is that what we are going to end up with at the end of the day is a dual fuel unit it'll be able to run on natural gas or hydrogen or any combination in between.

And so if you think about resiliency.

That optionality provides not only environmental benefits, but it out at the level of resiliency, which we've all seen is something that we need.

You know as we go.

As we start to deal with the weather events.

Yeah.

Thank you for the color there.

Thank you.

Thank you all of 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 congratulations on some of these update.

Really well done been morning, Joe if I can if I can try to rehash a little bit I know, it's early in the process, but maybe the other way to ask this is 1 of the big puts and takes of do you think about the outlook now.

Relative to new targets et cetera, I, just want to make sure that.

You think about it 1 of the building blocks that you're.

Shall we say assessing here early in the process and then related to that if you can just sneak this in there.

Or are you just in the financing plan year to date I know this is all fluid and dynamic, but you know what have you done thus far this year relative to the full year plan and expectations here, if you can around that.

So Julien this is true in.

Terms of the the big puts and takes I mean I think.

The first thing.

As the as just sort of the back of the envelope math in terms of what the how much put and take is out there and when you go from 15% of 14%.

Given the size of our.

Of our cash flow.

It's <unk>.

Somewhere in the 1.7% to $2 billion range, you know in it and it's sort of growing over time. So it's a it's a lot of extra capacity.

The AR and what we are considering in terms of the building blocks I think as I mentioned I think there's probably 3 big ones right..1 is.

Well, okay, so how much.

Incremental equity do we really need right now that will take up some of that capacity.

1 is how much opportunity is really out there for growth.

In the commercial industrial space.

As we ramp up our ability to work alongside of our customers to manage their scope, 1 and scope 2 positions those are probably the 2 big ones.

Then.

Moody's specifically talked about.

Our ability to manage a identifiable risks that are out there and they pointed to the series specifically.

And if you take the <unk>.

If you take the <unk>.

L J as recommendation around the uncertain tax position that's in the ballpark of a little over $500 million.

That could be a piece of the capacity as well.

Certainly we are very comfortable in the way that we are.

Positioned in that in that case, and we can go through that and we have in the past as you know the shoe.

So I mean I think it's it's that is you know additional so something that we're thinking about as well to make sure that we have the capacity to manage the risk like that and that Moody's was pointing at that so those are the 3 things and you know.

We certainly had a forecast.

Before this ruling last week that said we were going to.

Hit our earnings expectations, we were going to hit our targets on credit, though there is still the case now we have extra capacity to do that and manage through these new opportunities and these risks so it's.

It's the incremental the better for us because it really de risks our ability to execute.

Right and the press is that still in the current year I just want to understand the on the specific financing.

I'm, sorry, I didn't I didn't hear that Julian refreshing it.

The sort of usage.

That's on the table for us still but we are we are looking at where sort of stepping back and thinking about okay. So what's the best way for us the perceived given that we have this extra capacity.

And so we want to think through it a little bit before we proceed with the with any specific financings and and once we get finished with that then we will stop.

The start moving forward and communicate with you all of that what our plan is.

And sorry to rehash the slightly your comments on the upper half I just want to be extra clear about this.

That is strictly tied to dilution and equity needs.

That is not reflective of any changes in your cost cutting efforts and or perhaps more critically low trends.

And especially the industrial trends, there and the et cetera.

Yes, so we were very comfortable in our guidance and our outlook before just to be clear.

And this.

The fact that we don't need the issue as much equity starts to move the earnings per share up.

So.

So that is that as a driver for helping us move to the upper half of the range.

And of.

That and the additional confidence that we have because we now have additional flexibility to to.

To achieve this are the.

These earnings outcomes and and the financial flexibility that we have available to US now so the combination I would say of those 2 things that allows us to say, we think we're going to be in the top half of the range.

With some work to do to refine that for you all going forward.

Right, but these other factors presumably are still independent.

That's correct.

All right excellent well done.

Speak to you shortly all the best in this process.

Thanks appreciate it.

Thank you and our next question comes from the line of Jonathan Arnold with vertical Research. Your line is open. Please go ahead.

Hi, good morning, guys.

Morning, Jonathan.

Just a just a quick 1 again on the financing given the the low of need.

Does that make use of the more likely to look at something which might put this whole.

No need to bed.

Quicker as opposed to sort of doing it through through the plan of any thoughts on that.

Early stage.

Yeah, Jonathan that's a good question certainly that as of now.

All of a possibility now yeah, we haven't completed our assessment, but the but that is something that we would consider if we could do it.

Mindful of the.

The so called the equity overhang, we understand that and so we're thinking about that that is definitely a consideration as well.

We're doing our assessment.

Okay, and then could I just just the several said I want to make sure I'm.

Clear on what the of the prior plan was I think it was.

Up to 2.5 billion, but that was out through 'twenty 'twenty 4 is that correct.

That's correct.

Okay.

And then just finally, you obviously from the Analyst Day, you also had a 24 range out there, which you've not been including in the last couple of slide deck. So just sort of the reason why we wouldn't kind of continue to use that in the while your comments about the upper end wouldn't wouldn't also sort of fold into.

And so until the longer term outlook that you gave them whenever it was.

Yeah, So I mean, I can't I can't go out right now because we haven't got that information available, but the you know our expectation is to drive steady predictable earnings and dividend growth.

And to the extent that we want to be.

Steady and predictable that might imply what youre looking for.

Okay. Thanks, very much in the thanks for the update.

Thanks, Jonathan.

Thank you and our next question comes from the line of Steve Fleishman with Wolfe Research. Your line is open. Please go ahead.

Yes.

Hey, everyone.

Excellent.

A couple of things just on those 3 considerations you mentioned drew the 1 of our most of the growth opportunity.

I assume this is on as you talked about on the <unk>.

Industrial says day, you know look too.

Lean up and electrify more.

Just when you talk about that as the growth opportunity are you, referring it to more of as a kind of rate base capex or as a sales and net cash flow.

So Steve.

Good question.

There's a couple of growth opportunities that we're assessing right now 1 as I mentioned in my script.

She doesn't have to do with environmental benefits necessarily but is part of it is the assessment, we're doing the resiliency across the system, which.

Could lead to more T&D investment.

Going forward to that.

That's an area that I did want to point out of the.

The assessment of that.

In conjunction with what's going on with infrastructure in Washington could be a combination of your rate base of assets plus some.

Costs that are that are actually picked up by the states and the federal government through some through potentially the infrastructure build depending on how that of all works out.

The big the big opportunity there and we've been talking about this for a while obviously as the the size of the emissions footprint of our industrial base.

If you just go on the Internet look at who our industrial customers are and look at their websites. They all have.

Sustainability objectives.

Many of which are public.

And so there's a couple of ways for us to help them out 1 well.

Well, we already do when they buy electricity from us and some of the cleanest electricity in the country. So there's scope 2 emissions are lower.

Drive those even lower we've been discussing things like green tariffs with those customers.

And that really makes the deployment of our renewables more efficient and.

So for example, we just got the solar facility that we got approval for in Arkansas.

All of the Green tariff in Arkansas, where we already have customers like Walmart line too.

Talk to us about taking a slice of the those facilities to make the deployment of those more efficient.

The way that could accelerate our investment in renewables, yes, theres, a large uptake of that particularly if that spreads over into our industrial customers, which we're already having discussions with them on that day.

The big opportunity is exactly what you said.

He used to attack the scope 1 emissions and that really is.

Getting outside of just merely haddon generation to the system from technological improvement now we would be adding toward load growth.

And so you can think about it as its new load with new sales for new processes that day or not electrified it would provide us the opportunity zone dips.

Deploy assets.

To help them.

Meet those objectives, and primarily that could not only accelerated but increase in the size of our renewable footprint going forward. We're in the early stages of assessing the.

The size and timing of that so we'll be laying out more as we go but it would be rate base additions to meet regulated utility sales.

For things like.

So he's using natural gas compression on the pipeline today electrifying that if they're using fossil fuels took from repricing and LNG.

Process that can be electrified sales.

Co generating with highly inefficient and high emitting generation of onsite today that could be electrified by us or utilizing green tariffs or to the extent that we can develop hydrogen over time, but that can be part of the mix as well. So it's a pretty significant opportunity that we are in the early stages of investigating we're having a lot of discussions.

With our customers about what their needs are.

Okay.

Great and just 1 other question on just the the.

The the change in the equity plan. So obviously, it's great.

You're targeting seeing things now in the upper half.

But actually the amount of equity.

Just that difference to get you in the upper half by 20, you know in these years is actually it's only I don't know maybe $300 million.

The less equity and you talk to the.

Essentially 1 billion 72 billion of.

More of capacity so.

Could you just try to kind of tie that.

Together in terms of.

How to think about that is is it.

Is there you know how should I just think about that.

Well the true.

No.

I think that the we are we are early in our assessment of it.

This is probably the best way to think about that so you know we got the wing of the news that we got the recognition of <unk>.

Last week.

And so we haven't completed our assessments about what this might mean for us.

Going forward.

And I think what we wanted to get you the early out there that.

We at least the ourselves from the top half of the range, we have more work to do.

Round that we have a couple of things that.

Need to factor into the analysis.

You just discussed with Leo.

Around the growth potential that's out there.

There are a couple of risk items out there.

We want to make sure that we havent passed the manage and if we can manage through them without using that capacity that's incremental capacity that's available for.

For us.

Uh huh.

No I think youre looking at the right thing. There is there is a good opportunity for us out there going forward. Okay. So it sounds like you're both obviously got update balance sheet, but also almost really of full refresh of the capital plan.

2 for some of these things.

I have just mentioned.

That's right. So there's that opportunity out there that we're still we're still framing it out.

Okay.

Okay. Thank you.

Thanks, Steve.

Thanks, a lot of our next question comes from the line of Paul Friedman with Mizuho. Your line is open. Please go ahead.

Thanks and congratulations.

I guess my first question is should we assume that the longer term F. F out of debt target now is going to be 14%.

All elements of that no not right off the bat, because we still have some expectation of having some capacity.

To manage risks that are out there.

But oh I.

I do fully expect us to utilize some of the capacity for sort of the the capital.

Formation changes that we were just talking about it.

And for some of the growth opportunity that we're talking about so I wouldn't say it goes all the way down to 14.

Unless some of those risks where the materialize, but that's not the.

That's not what we're trying to do right now kind of the idea would be to get past some of those risks and then maybe we'd reassess whether we go down to <unk>.

But.

I don't think it will go all the way the 14 right now.

So at some point you, you'll provide sort of an amended some of the debt target.

Well I think I'll add 1 more thing you know from an interview perspective, I don't know that we're gonna change Entergy perspective, I mean I think.

We're talking about going from 15 to 14.

You know.

The entergy, our entergy view is going to be well above the 15, I think we may still actually stay about 15, even the foodies dress down closer between 15 and 2014.

But and we may not actually a man of the Entergy target, we're still we're still working through that.

Okay.

And then.

All right.

Do you need a clarity on salary and.

In order to sort of determine.

What your ultimate equity needs are going to look like and when would you anticipate of final salary of water.

Yes.

Well, let's talk about the Siri order first yeah.

Yeah, I could the first part of that the uncertain tax position of the sale leaseback, we expect possibly by the end of the year, but more likely into next year.

Yeah, it could be in the first quarter could leak into the spring.

So yeah, we're getting closer on that.

But I don't think we need that.

Of that to start.

Thinking about what.

What we might do differently.

We might be mindful of that as a as the.

The ability to.

The new to hit our marks.

I don't know that we necessarily need that to get started on our changes in our end of our capitalization plan.

Okay.

So it's more likely that you'll have a better feel for the equity need around the end of the around the end of the year around the EI right.

Yeah.

I said earlier was that I would think of <unk> at the latest hopefully sooner.

Great I think that's it for questions from me. Thank you.

Paul.

Thank you and again if you have a question at this time. Please press Star then 1.

And it looks like our last question will come from the line of Paul Patterson with glam rocker Associates. Your line is open. Please go ahead.

Hey, How's it going and good morning.

So.

Of managing through it just I think I got everything so yeah, we're going to be getting an update it sounds like on all of these opportunities is that.

We should think about.

You know the earliest.

Early assessments right now, but but we'll get more of a of other pictures to.

Sort of what these opportunities and how it folds into the capital plan and everything is.

Is that the the time frame. We're looking at certainly will have will have the update on what the opportunities set looks like what we're thinking and how it's evolved by band.

The good news about the opportunity that we were just talking about.

Is that it's a pretty long runway opportunity it's significant.

Significant opportunity the scuttle that's got a long path as you imagine.

Our customer base.

Is going to be reducing their emissions over time some of them have for example, their own net zero objectives. Some of those might be as early as 2035. Some of those go out to 2050 of that sort of thing.

So so it's a it's a significant opportunity that's got a long runway. So we will get you the the early parts of it.

As it develops but we kind of think we will continue to update that as I said in the answer to Steves question.

It's really.

Yes.

Our load growth question and then the resource mix that we require to meet that load, which again.

The objective is.

Lean energy, so it'll probably have implications for what you see.

In the generation mix.

Okay, and just to sort of clarify this is basically because of the just to make sure. They understand the the the customer footprint that you guys have their ambitions and the decarbonization ambitions and the potential to help is there any cost advantage that you think these customers Mike.

Is it just purely decarbonization.

Or is there is there anything else that debt would be driving this is it just basically look where the utility they want to do this day.

That would mean electrification and we're in a pretty good position to do that or is this the deployment of new technology or anything that we should think about that that would be turbos turbo charging. It if you follow me.

The the <unk>.

Obviously cost is going to be a factor of our low rates.

Factor into it and the.

We certainly need to continue to help our customers be competitive as they go forward.

It's going to depend on the process of for example, sure power is the exact same.

The exact same opportunity where you've got the ship pulls into the dock, it's burning diesel fuel to keep the lights on while they do maintenance on the ship before they go back out.

I mean to the Gulf of Mexico for example to be to help with the oil services out there.

When we electrify of that ship, we not only reduce their emissions, which was the original discussion around it but it does the lower their cost because of the trade from our electricity of the diesel fuel is positive 1.

So it does 2 things for them it lowers their costs and it improves their emissions both of which make them more competitive bid for offshore work.

So it's going to be a combination of all of those things.

Awesome well it sounds like a great opportunity look forward to hear more about it.

Great. Thanks, Paul.

Thank you and I'm showing no further questions and I would like to turn the conference back over to Mr. Bill <unk> 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 August 9 and provides more details and disclosures of our financial statements.

The benefit of current prior to the date of the 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles.

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

The information and this concludes our call. Thank you very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

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