Q1 2022 Entergy Corp Earnings Call
Thank you for standing by and welcome to the Entergy Corporation's first quarter 2022 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 this session you'll need to press star one on your telephone as a reminder, today's program is being re.
Accordingly, I would now like to introduce your host for today's program really Blur Vice President Investor Relations. Please go ahead Sir.
Good morning, and thank you for joining US we will begin today with comments from <unk>, Chairman and CEO Leo Denault, and then drew Marsh, our CFO will review results.
In an effort to accommodate everyone who has questions we request that each person ask no more than two questions.
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.
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 and now I will turn the call over to Leo.
Thank you Bill and good morning, everyone.
Today, we are reporting first quarter adjusted earnings of $1 32 per share a very good start for the year.
With favorable weather and higher than planned retail sales. We are ahead of schedule and solidly on track to achieve our 2022 objectives.
And we remain on track for a longer term outlooks.
During the quarter, we continued to execute on both our near and long term deliverables just as we have over the last several years.
We made demonstrable progress on our operational strategic and financial objectives.
Operationally I'll start with some notable regulatory updates.
We've continued to make meaningful progress on storm cost recovery.
Texas is done.
Louisiana securitization proceeds from the 2020 storms plus $1 billion towards Ida will be completed in the coming weeks.
Entergy, Louisiana filing for the balance of item will be completed within the coming days.
The Entergy New Orleans filing will follow later this year.
Financially strong utility is important for customers drew.
Drew will discuss how securitization progress supports our balance sheet strength.
As expected.
Entergy, Mississippi filed its annual Formula rate plan, which enables continued customer centric investment and supports our financial outlooks.
We're continuing to drive progress on enhancing the resilience of our system, which benefits customers and supports local economic activity as well as our growth plan.
Entergy, Louisiana completed an important transmission upgrade in the southern part of the state.
This $86 million project replaced approximately 80 structures to increase resilience.
Several miles of critical path transmission <unk> pairs.
An area that was severely affected.
Hurricane Idaho last year.
To create a solid foundation and the new infrastructure is placed in steel cases.
The line was built to withstand wind speeds of 150 miles per hour and will improve the resilience of the electric system.
Entergy, Louisiana also completed a $100 million project in North Louisiana.
Physicians that region for economic growth the.
The West Monroe project will provide additional transmission capacity improved reliability.
Built to withstand extreme weather events.
That means for customers is enhanced reliability and resilience better integration of clean generating resources and economic benefits to improve access.
Hello.
Bottomline Entergy team continues to focus on delivering operational excellence across all facets of our business.
Strategically I will start with our merchant business wind down.
The last step in our merchant nuclear exit is nearly complete palisades is on track to shut down at the end of May.
The sale of the whole tech following around mid year.
<unk> team is finishing strong and I would like to thank them for their dedicated service.
We have worked to help employees with their career goals beyond the plant shutdown.
We will continue to work to entergy at other locations. Some will continue to work for whole tech commissioning and others are retiring.
As you know.
Recently announced program to save nuclear plants that are about to shut down.
Michigan Governor issued a letter encouraging utilization of this program to keep Palisades.
We are supportive of struggle initiatives to keep nuclear plants operating however.
However, we are five years into the palisade shutdown process.
Far down the path.
There are significant technical and commercial hurdles change.
Changing course at this point that said alongside health Tech.
We will work with any qualified party that wants to explore acquiring plan obtaining federal funding.
But I do want to be very clear does not change our strategy.
Entergy is exiting the merchant nuclear business that pulsates.
<unk> continues to operate.
Interesting.
Across all of our operating companies continue to be a critical partner support strong economic development.
New businesses and new jobs and your tax basis the communities we serve.
For example, Entergy, Arkansas and economic Development Corporation.
Its completion.
<unk> site certification.
700 acre industrial site.
Certification streamlines site selection process.
Initiatives like this help track new businesses and new projects like the U S steel expansion that was announced earlier this year.
Over the past five years, our economic development team has helped to bring to fruition.
300 announced projects.
$42 billion of capital investments.
25000 jobs.
These outcomes have been critical to economic health of our communities.
A significant factor.
In the 9% cumulative industrial sales growth achieved in the past.
Five years.
And we continue to expect significant industrial expansion next several years as.
As we have discussed growth from our industrial customers.
That's been driven in large part by cost labor logistics and regulatory advantages Gulf coast.
Well as commodity spreads, which continue to support expansion.
Further.
Current Gillette political state World.
Gulf Coast in particular.
Top choice for stability.
LNG exporters and developed are being called on to expand production to help reduce Europe's clients on Russian energy.
This opportunity represents a win for our customers communities and owners to.
As I mentioned.
To help support our customers growth and.
<unk> decarbonization objectives.
Driving progress to expand our footprint.
As of today.
We have approximately 650 megawatts of renewable capacity in service.
625 megawatts of solar projects by.
Our regulators.
Yes.
725 megawatts of announced projects and up to 4000 megawatts of Rfps.
More than half of the 11000 megawatts of renewable resources and our supply plan through 2030.
We've made progress identifying new resources and active rfps.
Since our last call Entergy, Texas concluded evaluations of its 2021 solar RFP.
Several resources were selected totaling at least 400 megawatts from owned and contracted proposals.
We also made selections from the Louisiana, and Arkansas 2021, Rfps earlier in the year.
We will provide additional details about the resources selected from these proposals once parties reached definitive agreements.
We're also soliciting extra round.
Entergy, Arkansas recently issue its RFP seeking up to 500 megawatts of renewables cost effective clean energy, which further fuel diversity.
Entergy, Louisiana also issued notice to proceed with renewable RFP seeking up to 500 megawatts in Louisiana.
Our customers demand for de Carbonization solutions, including Green products is not slowing down.
Long term solar market continues to look favorable based on an improving technology curve and higher natural gas price scenarios.
However.
We fully recognize the near term cost and schedule pressures that solar projects are facing supply chain constraints, then exacerbated by the department of Commerce investigation, which we expect will drive additional delays and the potential for further cost increases.
These dynamics are affecting the entire U S solar industry.
We are continuing to work through these constraints and are executing on our solar expansion plans.
It is important to note that not all of our projects are perfect.
Example.
Sunflower solar in Mississippi, our wholly owned projects.
This year as.
As its panels onsite installation is nearly complete.
Entergy as one solar represents a relatively small portion of our three year $12 million capital plan.
Roughly half of.
Owned projects in the three year horizon are not experiencing.
Impacts of recent market strengths.
Greater portion of our own projects expected either half decade should.
It would be past the current streams.
As we've said before a large backlog of customer centric investments the ability to rotate capital into our plan.
Okay.
Bottom line is that we recognized.
Strength still see strong market fundamentals and long term.
Ports are supply plan.
<unk> objectives.
On our last call. We told you about U S steel expansion.
In support of this project and the customers' carbonization goals Entergy.
Entergy, Arkansas filed.
To acquire the 250 megawatt solar facility.
Drivers solar as an example, how we can partner with customers and sustainability needs while accelerating the growth.
And our regulated.
It also highlights our unique growth strategy to help customers achieve the outcome they desire.
Turn drives outcomes for all stakeholders.
Two more jobs and economic activity in our service area increased capital deployment to support electrification.
It costs.
Higher rate of change.
Title Carbonization.
Nuclear also plays a critical role in our customers' carbonization strategy.
Entergy as one of the cleanest large scale fleets in Asia due to our nuclear fleet.
Customers are high.
Highlighting access to care.
It says.
Key economic.
They are looking to reduce their carbon footprint and many are different.
Technology.
We continue to see examples illustrates.
From liability.
Portability.
Higher metal sustainability.
<unk> resource planning has always balancing these objectives are base load nuclear.
Lisa.
We have discussed the sizable long term opportunity for entergy to help our industrial customers.
Achieved are sustainable.
We estimate that addressable market.
30, terawatt hours back to when you start.
Put that into context, that's about 25% 2022.
Not to say to capture this entire market.
But we're working.
To serve our customers' needs.
This opportunity.
With many carbon reduction goals coming past 2030.
Even greater opportunities.
<unk>.
Realizing this growth our significant investment in <unk>.
All stakeholders.
This will include infill transmission and distribution investments to rely on that Sir.
Expansion of our renewal.
I'll be honest youll have to keep watching are correct.
Okay.
Financially.
To strengthen our balance sheet.
Beyond the securitization progress that I mentioned, but also significantly start with Dave.
Through 2020.
Currently only 25% original I'll discuss that R 22.
Analyst day remains there.
We are on track to achieve steady growth adjusted EPS and dividends the opportunity.
Adam.
We're very excited about our upcoming analyst day on June 16th.
Is that opportunity I had a closer look at a multiyear strategy.
The actual claims.
That includes plans to quickly advance resilience investments coastal region lower start risk system, our communities and our customers.
To further expand our portfolio to support customers' decompensation.
As I said.
Had a productive start to 2022.
And we will continue to successfully achieved milestones that keep us on track to deliver steady predictable earnings and dividend growth.
Maximizing operating efficiencies and investments to make our system resilient.
Clean.
Jim.
These are the outcomes our customers want.
Delivering now.
Create sustainable.
All of our stakeholders.
Before I conclude I encourage you to read our <unk>.
Recently released 2021.
The future is off.
Report lays out how we can deliver results in 2021 discussed.
Discusses why we're optimistic and excited about <unk> future.
You can see how we integrate environmental social and governance objectives, all we do.
I'll now turn the call over to drew to review our first quarter results.
As our financial strength.
Thank you Leo good morning, everyone. Today, we are reporting strong results for the first quarter.
You can see on slide three at.
Adjusted earnings of $1 32 per share.
The drivers are straightforward and keep us solidly on track to achieve our financial objectives for the year.
We remain confident in our continued success.
We're affirming our guidance longer term outlook.
Turning to slide four you'll see the drivers for the quarter.
As a result of our continued customer centric investments, we saw higher levels of revenue.
Higher depreciation and interest expense.
Other O&M increases included higher customer service support.
Nuclear generation expenses.
The result for EWC.
Are summarized on slide five.
The drivers for that business are largely due to the shutdown and sale of Indian point last year.
As Leo mentioned, we expect to complete our exit of our merchant nuclear plants in the coming months.
It will be a major strategic milestone.
Moving to slide six operating cash flow for the quarter was higher than last year at $538 million higher utility revenue.
Fuel and purchased power payment.
And lower pension contributions were the largest drivers.
As a reminder, fuel and purchase power payments were significantly impacted by winter storm Yuri in 2021.
Non capital storm spending higher than last year, which provided a partial offset.
Turning to credit and liquidity on slide seven we continue to make progress on securitization strengthen our balance sheet reduce significant cost savings for our customers.
Our regulators recognize that financially healthy utilities benefit our customers.
To that end Entergy, Texas recently completed securitization 2020 stores.
And on the day of our last call PSC approve storm recovery in financing for the 2020 plus million dollars downpayment on hurricane either.
The approval included replenishment of Louisiana storm escrow to $290 million.
Louisiana securitization is expected to be off balance sheet, and we anticipate a $3 2 billion issuance in the coming weeks.
Entergy, Louisiana plans to file for either cost recovery in the coming days as Leo mentioned youre targeting to receive proceeds by year end.
Timing of recovery ultimately depend a procedural schedule.
Entergy, New Orleans seeking approval on the New Orleans City Council to issue $150 million of securitized bonds to replenish the company's storm reserve.
If approved this reserve.
Credit and ability to respond to potential future storms.
In addition plans to file for either cost recovery later this year.
Our net liquidity at the end of the quarter was $3 5 million.
It will be further supported by the securitization proceeds received on a first.
And the $3 2 billion.
Louisiana securitization proceeds.
Steve.
Beyond securitization and liquidity continue to focus on resilience.
We will discuss in detail at our analyst day.
Part of that discussion will include how we are actively applying for federal.
Ending held.
Pay for resilience investments and mitigate customer impact.
Looking at slide eight and approximately two months since our last earnings call at that time, we have reduced our equity needs by nearly $170 million through our ATM program.
With roughly $570 million remaining to be executed between now and 2020.
Given the small amount our plan is to close out the remaining <unk> <unk>.
<unk>.
The fourth factor is shown on slide nine.
Nearly half of our industrial sales.
And the fundamentals for our industrial customers remains robust and supports growth and expansion.
In addition to expansion of LNG export facilities is coming in again.
Majority of these potential LNG expansion project reside.
Entergy surface.
Looking forward to slide 10, we have a solid base plan and visibility to achieve our guidance outlook.
We are also monitoring situations surrounding inflation and interest rates.
We've not seen a meaningful impact on our operational results and we remain on track to achieve our annual cost.
As a result, we are affirming our 2022 adjusted EPS guidance range.
Well as our longer term outlook.
As we move towards the analyst day in New York in June .
Executing on our operational strategic and financial objectives and building on our solid foundation.
In New York, we will share our longer term views on customer centric investments and financial outlook.
Look forward to seeing you there and now the entergy team is available to answer questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to move yourself from the queue. Please press the pound key.
Please limit yourselves to two questions you may get back in the queue. As time allows our first question comes from the line of Shar Theresa from Guggenheim Partners. Your question. Please.
Hey, guys.
Good morning furniture.
From your prepared remarks, just quickly on Palisades should we assume you don't want to even remain a short term owner until the asset is essentially sold so viability of the asset is really a whole tack question or could there be changes to the whole Tech agreement, maybe just elaborate a little bit on some of the <unk>.
Nickel challenges like refueling and the capital that's needed the whole decommissioning in the kidney and can.
They even be overcome.
Yes, I am not really not going to get into any kind of.
Details about what we would or wouldn't.
Work.
So the technical details, though around the operations.
The plant will have to stop operating in May.
Because we will be at Shaw, we havent ordered fuel.
There's a lot of work that we need to be done at the plant to prepare it to continue to operate beyond.
That cycle.
And we really haven't done the investigation into what that work would be.
Because as you might guess, we have a plant in for five years to shut the plant down.
We do have an agreement with <unk>.
Obviously.
That has certain features in it that by and large have all been all conditions have been met and except for the plants to operating so.
It's just real.
A real heavy lift at the last hour.
As I said.
We couldnt be more.
Supportive.
<unk> that continue.
Continued operation of the country's nuclear fleet is important.
The reliability of the bulk electric system and two the ability for us to Decarbonize the economy.
Those clients now is just moving backwards.
But.
So I am encouraged by those.
Scott going on for future plants, just at this stage with palisade just a really heavy lift is all we're saying at this point.
Got it got it and then just on credit metrics and equity would you guys potentially trending above your thresholds.
Do you see any opportunities to maybe further downsize your $570 million of remaining needs as you're kind of getting closer to hitting your credit metrics and prepare to roll forward. Your capital plan do you anticipate any improvements in credit metric thresholds, especially as the business mix has improved and storm funding is moving closer to.
Resolutions, so would like for instance in improvement and thresholds lets say, the 12% to 13% effectively leave youll recognize versus the current projections.
Yes.
Yes, Shar this is drew so.
In terms of opportunities out there that they could continue to change or improve around our credit metrics obviously.
The one that we cited I think last at the end of <unk>.
Last year I guess on the last call.
Was around pension and certainly interest rates are changing that pension liability.
The returns associated with the trust.
The pension arent.
Good as we were anticipating either all that kind of balancing out but that is something that we're watching closely if rates continue to stay high and returns.
Come back around to closer to our expectations that it could create some more headroom.
And our credit metrics, that's probably the one that we are looking at most closely right now.
So we're monitoring that in terms of.
Obviously, we need to get the Securitizations done we need to be off sheet as we've discussed.
Those things are going to be big milestones in terms of taking some debt off of our balance sheet.
And so we're watching that closely as well.
Outside of that are.
Sure.
Pectase ins around capital, which obviously also drive our equity needs.
Those are things that we're watching closely we do have some capital associated with <unk>.
Solar in the near term.
And we can we can I'm sure there's going to be a question on the call about that we can talk about that here in a minute, but we have other capital projects that are waiting in the wings, particularly around resilience.
So if there is extra headroom for us.
Cause of delays in solar theres quite a bit of resilience investments that our customers are waiting on.
To achieve if theres an opportunity so I.
I don't anticipate any extra room from the capital side.
Going forward.
Got it and then just one quick follow up if I may I. Appreciate that is just on your analyst day I know, obviously, you guys talked about resiliency and sort of the green tariffs just given the timing of sort of the regulatory initiatives in the technical conferences I know you, obviously highlighted how they would fit in with the analyst day, but should we specifically.
We think about the analyst day is a roll forward of your base plan and qualitatively maybe discuss these opportunities with some scenario or back testing analysis, we actually see some of the spending actually rolled into the capital plan.
Thanks.
Well I think short we're going to we're going to.
The punch lines of <unk>.
Analyst Day show up on Analyst day.
I'm sorry.
Alright.
Yes.
Alright, Thanks, Peter I tried to get that passed.
Got it thanks.
Yeah.
Thank you. Our next question comes on line.
Nicholas Campanella from credit Suisse. Your question. Please.
Hey, good morning team thanks for taking the question.
Hey, good morning.
So I just wanted to hit on solar.
Ply chain risks quick and just the impact could you just help us to size the amount of megawatts going into rate base that would potentially be at risk I think you said.
Roughly half you're.
Your secured on over the three year horizon. So is that is that like three to 400 megawatts and just to confirm I heard your last comments right to the extent that capital shifts you were just going to backfill that with potential distribution resiliency span.
Yes.
This is rod good morning from Leo's comments, the near term risk that we were referring to in terms of existing our existing owned.
Projects was roughly.
280 megawatts, because we were discreet about both.
Were explicit about both.
With Memphis and.
And Walmart event, and so from a from a megawatt standpoint, they really they're really don't represent.
We made a material.
Mature amount of capacity, so we want to make sure that we put that in some in some context recall you also mentioned the.
The lion's share of our our renewable capacity actually shows up on the back end of the decade. So we're we're <unk>.
Selling it out because we recognize that there are some near term constraints, but they really don't influence.
Are we thinking about our build out.
And I think to the last point Nick.
I think drew mentioned and I mentioned in the script we've got.
We've got a.
Our capital plan and timing Thats laid out we've got other things waiting in the wings that we could or couldn't accelerate so the ability to.
To roll something else into the plan that provides benefits to our customers.
One way is always it's always there.
Absolutely absolutely and then just drew.
<unk> comments on inflation.
Anywhere where would you kind of call out that youre kind of seeing the most pressure.
To the plan.
Can you just kind of talk about the current state of power markets, how youre kind of managing customer bill impacts and the ability to just continue to extend your rate base growth here or perhaps any levers that makes your jurisdiction more unique than others that'd be helpful. Thanks.
Thanks next is true so the way you phrased it was an interesting way to think about it in terms of putting pressure on the plan.
I would actually turn that around and say that it actually enhances the.
Economics of the plan because.
Let me think about where the inflation what the inflation does too are two central investment themes beyond sort of our base capital in renewables.
In resilience.
Think that is actually inflation will actually strengthen the economic case from a customer's perspective to get those things done.
Certainly when you're talking about renewables and higher gas prices.
More economic headroom there.
Right now.
And thats accelerating the pressure to get renewables than we've already done a lot of work around improving.
Our gas efficiency with the <unk> that we built historically and of course.
Orange County Advanced power station is out there as well at a high efficiency unit. So those things are helpful already but.
We think it will accelerate our plan around renewables.
And then of course around resilience.
A key piece of the plan as the costs associated with them.
Putting up a hardened lines distribution lines and transmission lines prior to the storm compared to the cost associated with doing it after the storm and to the extent that there is inflation.
That's going to exacerbate that difference, which is already substantial.
And accelerate the need for customers to do it ahead of time and our plan full way.
So obviously those things have an impact on the customer bill, but the alternative of not doing it as an even greater impact on the customer Bill. So I think it will.
Drive customers to want to accelerate our plan, which will include renewables and resilience investments.
That was very detailed thanks for the thanks for the response and see in New York.
Alright, Thanks, Nick.
Thank you. Our next question comes from the line of Jeremy Tonet from Jpmorgan. Your question. Please.
Hi, good morning.
Good morning, Jeremy.
Just wanted to come back to dose a little bit more if I could and for 2023 projects. If you could just break down.
Price risk versus timing risks.
Do you see C&I demand kind of insulating.
The projects to a degree on both these factors.
Price really ask the question again, so we want to make sure drew and are trying to figure out who is going to answer with part of the question because I know there was a price risk question in there as well.
Just price and timing for 2023 projects.
So on the on the projects that we just.
We just referenced.
Sunflower for instance, sunflower is is not at risk that's one of our own projects, we're expecting that as Lee alluded to to.
To be in service sometime in August so we're looking good we're looking good there.
The other ongoing projects that we are expecting a bit of a delay.
The delay of the ones I referenced earlier, west Memphis and Walnut Ben.
We are working with our.
Partners, both of whom are reputable firms to lockdown, both pricing and schedule certainty.
So there is some risk.
On both because of the delays.
For both the supply chain as well as the DLC issues, but beyond that I'll see if drew as anything I think the only thing I'll add to what Rob said is that.
Actually Rob mentioned earlier, the bulk of our expectations are beyond kind of the next two year window and and we've issued rfps.
The DOZ piece accepted and they are fully aware of all the supply chain concerns and risks and they are prior to the DLC action. They were already aware of tariff activity.
And in that space so.
And we expect that.
The folks that we have there we're working with coming out of the RFP will be well situated to manage through.
The current environment and meet the expectations that they put through in the Rfps, we expected the DOZ piece will be resolved.
At some point relatively near term I mean, I think most of the folks that we've been engaging with we talk about by the end of year, but yes.
Even if it goes a little bit longer we don't think that that puts our overall expectations in jeopardy, and certainly in the near term as I mentioned earlier, there are plenty of other things.
Projects are delayed there are plenty of other things for us to accelerate forward and meet other customer expectations.
Got it. Thank you for your thoughts if that's helpful.
Just kind of pivoting a bit here to nuclear in really small modular reactors.
Just wanted to know your thoughts on I guess, how this could unfold going forward and we saw one of your peers potentially partnering with the university to build <unk>.
Is this something that entergy would consider doing to demonstrate the viability of the technology or any thoughts I guess on SME.
When in decade.
<unk> be something that entergy is really moving more towards or exploring.
Yes, Jeremy we are certainly monitoring what's going on in the SMB space and as you might guess our nuclear folks.
Our.
Involved in.
And advisory capacities and others with various <unk>.
<unk> to make sure that we're we've got our finger on the pulse of where that goes.
I think that.
The success of the technology is going to be critical to the de carbonization objectives.
The economy.
When you think about the ability to build.
Cost competitive carbon free smaller.
Projects.
Art.
The issue for example, we have with the size of the capital budgets of the existing technologies that they're as big as the companies that fund them.
Thats problematic.
Got it issues.
Construction so.
We're very excited about that opportunity when and how it fits itself into the into our needs.
We're continuing to monitor and that's a little bit difficult to say, but certainly I think we should all be rooting for that technology can take root.
<unk> spend and I know probably more of our of our efforts in the hydrogen space because of the unique position that we have in the hydrogen market with producers consumers stores transporters all in and.
The heart of our service territory. So there is a unique advantage there.
But that doesn't mean, we're not we're not staying involved and what the SLR technology could do for us and for the economy in general.
Yes.
Got it that's very helpful I'll leave it there thanks.
Thank you.
Thank you. Our next question comes from the line of <unk> Chopra from Evercore ISI. Your question. Please.
Hey, good morning, guys and drew longtime mostly.
Good morning.
All other questions have been.
So just one quick follow up from my side.
Just can you confirm that these.
The storm Ida.
<unk> of course, which.
You Havent received sort of regulatory.
Regulatory approval for does that still sit at $1 7 billion I believe that was the number at the end of the fourth quarter call. So if you could just confirm that or or update us on where that sits now.
Yes. So the answer is the total cost estimate for that store is still at $2 7 million in total one.
$1 billion of that is in the first securitization, we see expect to price in the next few weeks and the balance would be towards the end of the year.
The full $2 seven will be part of our filing that we are making.
And the next couple of days.
We still need to get to declare we have to get it.
Approval for the full amount.
To get cost recovery for the full amount that hasn't the $1 billion down payment is not pre approval of those costs. It's just a it's a prefinancing.
I see so essentially you'll be seeking approval for the full $2 7 billion and the.
$1 billion that you've gotten already will be applied towards it is that the right way to think about it.
That is correct.
Okay. Thank you very much I appreciate the color thanks, guys.
Thank you. Thank you.
Thank you. Our next question comes from line of Julien Dumoulin Smith from Bank of America. Your question. Please.
Hey, good morning team thanks for the opportunity here congratulations.
<unk>.
If I can just focus on the first quarter and some of the dynamics here.
Can you comment a little bit on the industrial demand in the six 5% in the first quarter here.
How are you seeing this trend through the balance of the year as you think about it especially given.
It depends.
Export oriented.
Industry has to do particularly well here and can you talk also in tandem at the same time about some of those trends that you observed.
Specifically around accelerating customer desire for renewables you had specifically identified at the start of this year a number of very large customers.
Imagine based on your comments already that there are actually several other larger customers that you're talking to.
Drew I'll take the first part and I'll turn the second part over to Rod. So certainly in terms of the sales expectations. We did have higher than anticipated industrial sales in the quarter a lot of most of it was actually more or less in line in fact, I would say.
<unk> two our expectation, obviously refiners seeing very high crack spreads performed well.
We did have some unplanned outages and some of the chemical and petrochemical space, which pulled us down a bit.
And then there are unplanned outages for our cogent customers and that actually lifted it back up.
So that that cogent piece was actually fairly strong in the quarter. There were a number of outages that helped put this back up.
I'd say that the other part the unplanned outages for our regular customers that were fairly significant tick so all.
All in all it's probably about what we were expecting.
But a little bit higher.
And as we sort of go through the balance of the year and I showed you. The statistics on one of the slides for some of our key industries.
We do expect it to continue to run at high utilization rates.
Yes.
Aside from planned or unplanned outages, they're going to try and trim those off as much as they can to run as hard as they can given the current commodity environment and I will also say LNG wasn't on that page.
LNG utilization rates are extremely high as well so I'll turn it over to Rod to talk about other color I would probably I was only going to elaborate on the LNG piece.
I'm not going to <unk> point.
If any.
The punch lines around analyst day, because we will give our point of view.
Five year outlook, but.
We are seeing greater interest.
Signing off take contracts, which.
Port.
Our view on expansion in the LNG space, we will leave it to our customers.
Leave that conversation, but we will know empirically that at 85% of the projects under consideration in the LNG space.
Entergy service territory.
That just further supports.
Our point of view.
That we have a unique growth story that is our customers have a unit growth story and our ability to serve their expansions in addition to.
They are helping them meet their ESG objectives.
<unk> remains a growth opportunity for us and we still remain bullish.
Felicia.
Excellent and then just one other nuance here just seeing a lot of headlines here on insurance costs you guys had.
Given the headlines in Florida, but also in Louisiana itself.
It does feel as it relates to catastrophic storms can you comment about any potential pressures.
From an inflationary perspective on your business specific.
You're talking about insurance specifically Julian.
Yes, I mean, I was thinking about insurance, specifically, obviously a broader bag.
Drop here, but insurance seems to be getting headlines here outside of the utility space a very late.
Okay. So all insurances.
We aren't allowed to ensure our poles and wires.
That hasnt been a driver on that particular space.
Just like everybody else, we have seen broad insurance premium pressure.
And so we are working through that regardless of whether it's property.
Or general liability or what have you you know et cetera. So we're cyber we're working through that and making sure that we continue to meet our overall O&M expectations on a go forward basis.
But that as you said, it's sort of symptomatic of a broader perspective around inflation.
We certainly have seen inflation in fuel space.
<unk> talked about that a little bit.
We are working with our stakeholders on how about how to manage that.
In the near term I think long term that is a commodity.
Which cycles and we expect the Wildcat or spirit, that's out there in the oil patch take over at some point in.
And help bring prices back down again.
As far as sort of inflation in the capital space, we talked about that a little bit with solar we're seeing it in other materials and.
And some of our other capital projects.
And I think the thing to keep in mind on that is we're seeing it for our current marginal capital projects.
<unk> being added to a much larger rate base, which is already invested in and fixed.
So it's a much smaller piece of the overall rate base when you add it in and so the pressure from a customer bill perspective is not that great.
Certainly the as I mentioned the fuel piece is something we're paying close attention to it.
As far as just other operating costs, we haven't seen much pressure as of late but we're certainly mindful of that and we are driving our continuous improvement efforts to make sure that we stay ahead of that on an ongoing basis.
Got it it doesn't sound like it's an outsized impact to you all here.
It sounds like you guys have it under control.
And also it sounds like a pretty good update here at this analyst day. So we're gonna stay tuned. Thank you guys.
Thank you Julien.
Thank you. Our next question comes from the line of Steve Fleishman from Wolfe Research. Your question. Please.
Yes, hi, good morning, just I know.
Brazilian.
Just on the resilience plans that you.
I have talked about I think going back to last year, you talked about kind of.
Having discussions with key stakeholders and the like and just can you get give any sense of how those have gone in.
Is there any.
Do you get a sense of urgency from people on this.
Just any color there.
Hey, Steve it's rod good morning.
We have just completed the analytics.
Around.
The risk scenario probability and consequence of storms.
We're in that evaluation phase of the Capex.
Investment scenarios and so.
What you're alluding to is the beginnings of the formal sometimes informal tech.
Technical and stakeholder conferences and conversation that actually begins in earnest.
Tomorrow.
As we began the conversation and.
In New Orleans, and so the feedback loop is.
Beginning and we'll have more color around it.
At Analyst day, I can tell you that we certainly had informal.
Conversely issues as we were beginning the.
Analytics.
There is a keen interest in understanding one what's our point of view.
Round the risk.
The benefits of acceleration, obviously in the current economic environment.
Most of the stakeholders customers and regulators and others alike are always going to be interested in.
And how we think through the cost.
And bill impact and so we're beginning but I'm expecting.
Active engagement from the stakeholders as we as we move through New Orleans.
We certainly Louisiana.
And Ralph to what we believe to be our first formal filings.
Okay.
July timeframe for the city of New Orleans.
And then the state of Louisiana certainly.
Around that time frame, but not just later.
<unk> been in Texas, Steve.
Steve we have.
We've begun.
Dropping.
Ideas around how you ought to think about resiliency.
Certainly their point of view might be a little different in terms of the sense of urgency that you alluded to then say, Louisiana and New Orleans, but we certainly have there there are two June especially given.
The role of our Texas Service territory.
In the industrial growth.
Space and their interest and resiliency as well, but short answer is we are we're just beginning.
But more and more to say about it.
At Analyst day.
Okay. So it sounds like at the very least youll have.
Better data scenarios for the analyst day or what.
Options are in.
Obviously the results will be.
Over time, depending on what customers want.
Okay. Thank you Jack.
Thank you. Our next question comes from the line of Jonathan Arnold from vertical research. Your question. Please.
Good morning, guys.
Good morning.
One question just can you give us a little bit of a sense you've alluded to.
Being conscious of commodity and gas prices.
Take your points about.
The longer term benefits of some of your investment plans.
What is the current bill.
Bill trajectory that you see.
Over the coming months.
Maybe we could just sort of focus in on.
That.
Sure. This is drew so in the near term of course it depends on the jurisdiction one that you're probably most interested and of course as Louisiana and securitization.
Costs associated with that.
Depending on what the final pricing is of the securitization bonds, but somewhere in the neighborhood of about 10%.
Once all of those securitization.
Costs are into bills.
And I think that includes a little bit of uptick in the interest rates that we see.
So obviously our customers are expecting that.
It's out there so we're managing through that with our stakeholders.
The bulk of that has already been approved by the commission.
So it's headed for it is as we've discussed.
The gas price piece.
That reflects it depends on the jurisdiction, but it generally gets into build fairly quickly in Louisiana, Texas.
Texas New Orleans.
There is a little bit of hedging that goes on in Mississippi.
In Louisiana that can help that but it's pretty small.
But they are yes.
They're used to the gas price volatility.
Nevertheless, we are continuing to work through it and it continues improvement program that we have as part of that we also have level is billing program for customers that allow them to manage through their bill.
And avoid some of that volatility.
So these are examples of things that we're doing to try to help customers go.
Go through that.
And then.
Over time.
I think gas prices are a little bit above.
Where where our previous expectations were.
But there is still manageable.
Manageable range and as we said and as you were alluding to Jonathan.
Investments that we intend to make should help with gas price risk and inflation risk on a longer term basis.
When you say over time, you are talking about sort of further out on the curve.
Alright can you can you frame for us what the.
So the 2022 impact on sort of top of the securitization it might end up being on Louisiana customers for example.
On 2022.
Yes, it's all going to be a portion of what I was explaining earlier because it's not all of the overall securitization costs. So about two thirds of that so about five or 6% increase.
But once those get into the Bill this year later this year.
And then I think it was commodity tantalum material incremental to that or is that included in that number I guess my.
No no the commodity piece, you're talking about gas prices correct.
Yeah, I think our general rule of thumb around there is about a dollar per and then b to use about a 3% to 4% increase in gas prices.
That sustained over a year of course, we haven't seen that yet but that.
It'd be kind of the thought there okay well. Thank you for that color and if I could just one other thing when.
When I look at your slide with the progress against guidance.
In the few buckets like utility O&M.
Interest line and then also this is parent lines, let's now there.
It seems like you're tracking <unk> have more than a quarter's worth of the pressure you're expecting from the year in first quarter.
I know the other taxes piece, you said would be kind of more front end loaded but is that is that timing across the board or are these some things that are building, but then you hope that kind of the sales uptick is going to hold you to hold your harmless effects of either just curious if you can.
I'm not a bit for us.
Yes, sure. So in terms of O&M I think in the first quarter you are talking as timing elements we are.
On track for our expectations for the balance of the year.
And in terms of the interest expense element, we are seeing some interest expense, that's a little bit higher than we would expect to stick as we go.
Go through the course of the year.
But there's also some timing elements in that sort of category.
That that we're seeing in the first quarter that will turn back around so youre not seeing all of the interest expense in the first quarter. Then it goes away. It actually is going to be building over the balance of the year, but there are some timing elements in the first quarter that will turnaround.
That is.
I think those are the two things that are going on in there.
Thank you for that I think cooler go pull into June .
Alright, thank you.
Thank you. Our next question comes from the line of James <unk> from BMO capital markets. Your question. Please.
Good morning, everyone.
Good morning, James.
Just a real quick clarification, just posed to Julians question with a slightly better sales outlook you guys have.
Have been drivers related to mix changed materially ergo.
I was just really being driven more by a more robust C&I sales are you seeing higher demand across all classes. Despite.
An increasing trend for return to work at this point.
This is rod I think the short answer is it's actually going the way that we expected.
With residential demand.
Demand.
Trailing off.
As our residential customers are going back to work school.
And kind of a kind of a pre COVID-19 life.
The growth story being driven.
Bye.
The C&I space as you alluded to so from our vantage point, we're actually tracking.
We're tracking according to plan there with the little bit of.
Robustness.
In the C&I space, but.
That's about it.
Okay, Okay, great and just a.
Following up on Jonathan's question too just to clarify the 10% increase you're talking about that's in.
That's 10% increase across total retail sales correct in Louisiana.
Yes.
Is there.
Is there a somewhat of a SKU across from a rate design basis like zero a rough.
Idea of like what that could mean for residential versus commercial versus industrial might.
It might be able to bring or at this point I can follow up offline.
Yes, I think I think bill can cover that for you offline because I don't I can't actually answer that off the top my head there is a difference of course.
There is a big chunk of distribution costs and that is going to go mostly to residential and commercial customers not as much on industrial customers.
Okay, Great I'll follow up with bill Thanks, so much.
Sure.
Thank you our final question for today comes from the line of Ross <unk> from UBS. Your question. Please.
Good morning, how are you excuse me.
Good morning.
Okay think about your capital plan at $12 billion, and I think if I remember correctly from Ian.
Talking about $5 billion to $15 billion of potential incremental capex I just wanted to understand.
I understand your comment around federal funding.
Is that five of $15 billion of incremental Capex.
Net of that number or would any federal funding net debt number down whatever that number happens to be the.
Two long term opportunities.
Yes.
Federal funding would be outside of anything that we've got in our our projections. So the 5% to 15 now that isn't over the next three years that goes out through 2030.
To be clear on that.
<unk>.
And it's really an acceleration of work that we could do over time based on the fact that.
We might.
Pick things that are.
And today, but our old standard and pull them down and put up some kind of a new standard.
That kind of work that debt that we'd be looking at so any kind of federal funding.
Would be used to offset the cost.
And then that provides headroom that you could potentially accelerate more.
So one way to think about it Ross.
If you were going to spend.
$10 billion.
Now all of a sudden you've got $1 billion worth of federal funding, we may spend $11 billion would be one option.
To be able to get it effectively $11 billion worth of resilience for $10 billion.
So that's the way, we would think about it and likely proposal.
Okay. That's the way I understood. It I just wanted to make sure I was understanding that correctly.
And then.
Maybe maybe longer term I can get to as you get to the correct metrics you need on the balance sheet. The one on the balance sheet, I think about 5% to 7% EPS growth.
As you execute some of these opportunities and maybe grow rate base.
Faster than that in the long term, but there might be an equity need attached to the capital city does that bring your EPS growth rate back down what.
How do you think about rates and bill.
And your long term growth rate in other words is the $5.
<unk> 15 billion.
Extending that five to seven or maybe even the upper end of that five to seven for a longer period of time.
Or is there actually opportunity to accelerate that five to seven longer term.
Given even bill pressure and other things that might be happening with equation.
I guess ill.
Kind of sum it up this way we have.
<unk>.
A significant amount of.
Growth opportunities because of the growth needs of our customers.
The resilient spend is certainly one of those areas.
Acceleration of renewables.
The schedule that we're on to me.
C carbonization goals of our.
Current customers.
As they want to get outsized access to clean resources could accelerate renewables at the same load growth the expansion of our industrial base is a growth opportunity just the growth that we're seeing as we've talked about the utilization rates are high inventories are low all the commodity spreads are in the right place.
Matt.
Lease itself pretty ripe for expansion and Thats what were seeing as we as we have dialogue with our customers going forward and then then.
Location side of things, where theyre going to take existing load.
Or existing processes that are not electrified and electrify them and that creates load growth. So there's all kinds of avenues for growth in customer demand for a higher level of different level of service that could provide capital opportunities for us.
I would say at a minimum that just makes the runway pretty long for us in terms of where we are with the current outlooks.
Our objective would certainly be.
To have a better outlook going forward and balance all the things that you were talking about the growth in sales of the growth and investment.
And the growth and financing needs and balance all that out in a way that creates a different trajectory.
For us going forward and I think our customers are going to demand the types of investments we need to make that happen, but that's that's in the future. So I think I think all of those combined certainly.
Bode well for a continuation of the growth that we've seen and demonstrated over the course of the last several years.
Pretty pretty much like clockwork.
And then I think I think.
Our objective in the work we need to do is find a way to make it better.
Alright, Thats perfect. Thank you for that.
Look forward to seeing you in June .
Alright. Thank you Ross look forward to seeing all of you as well.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Bill a blue for any further remarks.
Thank you Jonathan and thanks to everyone for participating this morning.
Quarterly report on Form 10-Q is due to the SEC on May five.
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.
But accounting principles also as a reminder, we maintain a web page as part of <unk> Investor Relations website called regulatory and other information, which provides key updates of regulatory proceedings and important milestones on our strategic execution.
Some of this information may be considered material information you should not rely exclusively on this page for all relevant company information.
And this concludes our call. Thank you very much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
[music].