Q2 2022 Entergy Corp Earnings Call
Yeah.
Thank you for standing by and welcome to the Entergy Corporation second quarter 2022 earnings release.
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 will need to press star one one.
As a reminder, today's program may be recorded and now I'd like to introduce your host for today's program Bill Abler, 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.
Our earnings release, our slide presentation, and our SEC filings.
<unk> 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 legal.
Thank you Bill.
Morning, everyone.
Today, we are reporting strong second quarter adjusted earnings of $1 78 per share.
Robust economic activity and supportive fundamentals drove favorable sales trends in our commercial and industrial sectors.
And hot weather drove increased residential and commercial sales.
We are also seeing growing residential customer counts supported by strengthening wage unemployment data.
Given our results to date as well as our view of the balance of the year, we are tracking towards the upper half of our 2022 guidance range.
It remains squarely on pace to achieve our longer term, 6% to 8% growth outlooks.
While we're pleased with the strength of our business I want to acknowledge that due to global factors impacting natural gas prices.
With high electric usage caused by extreme heat or customers like many across the country are receiving electric bills that are much higher than is typical for this time of year.
This is top of mind as we continue to achieve outcomes that build upon our proven track record of results.
Yeah.
We executed on the important customer regulatory operational and financial deliverables that continue to improve quality across our business.
As we discussed at analyst day, the attribute you mentioned cheese business align well with premium utilities.
Given the bill pressures customers are facing we continue to take strong and meaningful measures to help ease the burden of electric costs.
Many of our past actions and investments are mitigating the impacts of higher natural gas prices for our customers today.
The investments we made over the last eight years and more efficient generation and renewable resources have lowered fuel cost by nearly $500 million annually compared to what they would otherwise have been.
Going forward.
Investments in renewables and highly efficient generating resources like the Orange County advanced power station will further reduce customer exposure to natural gas prices.
Our ongoing participation in MISO has provided more than $250 million per year of savings for customers.
And these savings increased during periods of higher fuel prices.
Our top quartile O&M performance and customer centric investments have delivered meaningful value for customers.
We place extra importance in helping customers who need it the most with programs like the power to care and initiatives to get lie heap assistance to customers that qualify.
Otherwise, we help customers manage affordability include products like level building deferred payment plans as well as analytics and AI driven usage alerts.
To further address bill challenges today, we are working with our regulators on additional solutions.
We've agreed to deferred fuel recovery to mitigate fuel price impacts on customers monthly bills.
We are also waiving late fees for eligible customers and credit card fees for all residential customers with.
We've committed $10 million in shareholder donations for residential bill payment assistance programs.
Given our strong industrial and commercial sales and hot weather, we are utilizing our flex program to increase spending on initiatives designed to lower customers' costs and improve reliability.
Yes.
As I mentioned with the largest drivers of higher customer bills has been the increase in natural gas prices.
Looking ahead forward Nymex curve indicates significant gas price declines over the next 12 to 24 months and we are seeing fundamentals that support that trajectory.
Weather across the nation has driven up natural gas demand this year, causing inventories to be tight.
U S gas production is tracking roughly three Bcf per day ahead of last year.
The U S has ample natural gas resources that can be produced in shale plays at prices consistent with our long term Nymex curve.
Over the last year, we've seen independent producer activity ramp up in Haynesville and Permian Basin shale plays Haynesville.
Haynesville gas rig counts have increased nearly 50%.
Increased gas production is also reflected a higher oil rig counts and west, Texas, where high levels of associated gas from Permian basin shale represent significant natural gas supply additions.
The adage that nothing solves high prices like high prices is certainly true.
And while we can't control commodity prices, we see relief for customers in sight.
Our racing recent series settlement represents another way, we have worked with our regulators to mitigate risk while also helping reduce customers' bills.
In late June we announced a settlement with the MTS see that resolves entergy Mississippi's, 40% economic interest in complaints against CRE.
The settlement is a big step forward in resolving risk surrounding system energy and improving our overall regulatory environment.
And that also comes at an opportune time to provide much needed bill relates to Mississippi customers.
Entergy, Mississippi will use the cash payment from this settlement.
Immediate bill relief and help offset fuel impacts on customer bills.
JP Public service Commission recognized the opportunity to deliver meaningful value to customers today, rather than wait for an uncertain outcome potentially years down the road.
Looking beyond Mississippi. This settlement sets a marker and represents a catalyst opportunity to drive progress with the other commissions on broader series litigation resolution.
Beyond CRE regulatory progress was made in all of our utilities, we have submitted our annual FRP filings in Arkansas, and New Orleans, and Louisiana and as planned Entergy, Texas filed a rate case, reflecting the significant investments we've made across transmission distribution and generation resources to bear.
Serve our Texas customers.
We also demonstrated strong operational quality in the quarter.
We have a flexible diverse and reliable portfolio of generation and grid infrastructure.
Allowed us to reliably deliver power to customers during the extreme weather.
In fact, all of the states, we serve recorded triple digit temperatures during the month of June and Entergy system set a new peak load in MISO.
Consistent with the accelerated resilience plan, we laid out at the analyst day.
<unk>, New Orleans made its initial resilience and hardening filings.
Filing included $1 $5 billion of hardening projects over the next 10 years, including options for several micro grid spaced in neighborhoods throughout the city.
All projects proposed create customer benefits.
We will work with the city Council and other stakeholders to identify the optimal set of projects for Entergy New Orleans.
We will make a formal filing later this year to seek approval for these projects.
We are working towards similar resilience filings that extra <unk> in the fourth quarter and at Entergy, Texas next year.
These filings and stakeholder engagement are important steps toward our 10 year accelerated resilience plan.
Our plan will reduce risk for customers and for entergy, both in terms of reduced outages and lower storm costs and further improve our operational and balance sheet quality.
Another important accomplishment is the sale of palisades to whole check.
This represents the last major milestone in our multiyear plan to exit the merchant nuclear power business.
Turning to growth overall economic activity in our region was vibrant during the second quarter.
Our commercial customers continue to show a strong recovery from the pandemic.
We've seen positive economic indicators for our residential customers for example.
Louisiana wages increased more than 6% in 2021, which exceeded the national average.
Further, Louisiana as unemployment rate hit a 50 year low of three 8% this past year.
Economic development and expansion across our region is robust.
And as we've discussed entergy as a major facilitator of this growth.
Across our system residential customer counts continue to grow and show energy efficiency gains both of these trends drive improved affordability.
We had significant industrial growth this past quarter, which drives the economic gains for the regions, we serve and the load growth helps keep bills low for all customers as we discussed at analyst day, Entergy has a robust and unique growth story stemming from our industrial customers with an expected 6% compound annual growth rate over the next five years.
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Commodity spreads and geopolitical conditions combined with the inherent Gulf coast stability and competitive advantages are driving new customers to locate in our region.
Our existing customers to expand their businesses.
Over the next five years, we have line of sight to the growth, we outlined with a robust pipeline of projects.
As we sit today.
There are 100 identified projects in the pipeline.
Roughly half of these projects have already made final investment decisions comprising almost 10, five terawatt hours of annual potential by 2026.
Further highlighting our growth opportunity.
Sempra infrastructure entered into an Mou with Entergy, Texas ports Port Arthur LNG plant.
Phase one of this facility includes two LNG trains with gas turbine compression, representing 270 megawatts of new load.
Phase II will add two additional trains with plans for electric compression that would represent approximately 600 megawatts of new load.
The Port Arthur project demonstrates the strong basis for the industrial load growth, we expect over the next decade.
As outlined in the Mou.
Entergy, Texas developing options to accelerate the deployment of new renewable generation and to increase power supply resiliency.
<unk> Port Arthur Energy.
Where would you be supplied with 100% solar it.
It would represent more than 2500 megawatts of new solar generating resources.
Projects like Central Port Arthur highlight industrial expansion with customers striving to grow in a carbon neutral manner.
For our broader industrial customer base to achieve their de carbonization goals. It goes well beyond mitigating emissions from business growth.
I must decarbonize their existing operations.
As we've previously discussed entergy as industrial customers have significant carbon emissions, representing 15% of the nations industrial emissions.
And the majority of our customers have aggressive de carbonization goals.
Our utility investors interested in driving de carbonization.
Entergy represents a unique rate of change investment opportunity.
Over the last quarter, we continued to make de carbonization progress for entergy and our customers.
Construction of Entergy, Mississippi, some flowers solar station was completed.
This 100 megawatt facility represents the first step toward Entergy, Mississippi's 1000 megawatt edge program, which will support economic development in the state.
In May the Arkansas Public Service Commission approved our Green promise tariff that offers 100 megawatts of capacity from Entergy, Arkansas, certainly in Chico's solar resources for allocation to customers, who signed letters of intent.
We've seen robust customer demand for green products and this program is already fully subscribed.
We intend to grow this tariff to accommodate the demand.
Entergy, Texas continued to move the Orange County advanced power station through the regulatory review and approval process.
When it comes online.
Caps will have the lowest heat rate of any combined cycle plant in our fleet and will immediately provide fuel savings reliability and environmental benefits for our customers.
This hydrogen capable facility.
Further benefits over time through fuel diversity, and long duration clean energy storage.
At our analyst day, we laid out a clear plan and path to support our customers significant growth potential over the next decade.
This plan calls for greater investment in clean resources and accelerated resilience to meet our customers' demands while we maintain our focus on affordability and drive continued quality gains across all aspects of our business consistent with our premier utility objective.
Entergy has an excellent near term growth opportunity.
When considering the broader electrification of de carbonization potential.
Our long term growth opportunity is even better.
We are excited about our future and proud of the progress we are making towards achieving that.
I will now turn the call over to drew to review, our first quarter results as well as our financial strength and outlooks.
Okay.
Thank you Leo good morning, everyone.
As Leo said, we've had a strong start to 2022 supported by our second quarter results.
As you can see on slide three our adjusted earnings were $1 78 per share a.
Our results included retail sales growth fueled by industrial growth and much hotter than normal weather.
This strong start to the year is enabling us to flex our spending to benefit customers.
And we are affirming our guidance and longer term outlooks.
For 2022, we expect results within the top half of the range.
In addition to EWC results, which included the sale of Palisades.
Quarter's results had adjustments that road out of two issues <unk> been following closely.
Storm cost recovery and the partial settlement on system energy cases at FERC.
These developments included specific benefits for customers and reduce regulatory risk.
The receipt of securitization funds also strengthened our balance sheet.
Okay.
We provide more details on these items in our earnings release.
On slide four you'll see the adjusted EPS drivers for the quarter.
Retail sales were strong partly driven by hot weather within our service area cooling degree days were 15% higher than normal.
All states in our service area saw above normal temperatures with Texas experiencing record heat.
We also saw strong growth.
Even after excluding the effects of weather.
Industrial sales grew approximately six 5% for the second straight quarter.
Including higher sales to existing as well as new and expansion customers.
For this quarter many of our major industrial customer segments increased with Chlor alkali and LNG seeing the largest increases.
Sales to cogeneration customers were also higher comprising one third of the total growth.
You can see on slide five that the fundamentals underlying our industrial growth outlook remains strong.
In addition to industrial sales being higher than last year. They were also higher than our guidance expectation.
The largest driver was cogeneration sales.
As a reminder, we don't rely on above average cogeneration sales in our outlooks.
For the quarter. We also saw higher operating expenses from the effects of our ongoing customer centric investments as well as higher other O&M driven in part by increased spending on power delivery and customer service.
This represents the beginning of the flex spending that we have reference to achieve customer outcomes for improved affordability reliability and customer experience.
The results for EWC are summarized on slide six.
The drivers for that business continued to be the shutdown and sale of our merchant nuclear plants.
Moving to slide seven operating cash flow for the quarter was $278 million decline.
And compared to last year.
The most significant driver with natural gas prices, which were more than 150% higher than the same quarter a year ago.
Our deferred fuel regulatory asset increased by more than $600 million in the quarter.
We've taken steps to help customers manage steel costs and their bills, including the landing more than $300 million of pure collections and the series settlement and Mississippi among other things that we have discussed.
As we also said the good news is the forward curve calls for natural gas prices to decline.
And we are seeing fundamental indicators that support this outlook.
Turning to credit and liquidity on slide eight I'll start with our net liquidity, which is strong at $3 $7 billion.
That includes $323 million in store mass growth, which is important as we move through the summer.
During the quarter, we received securitization proceeds in both Louisiana, and Texas <unk>.
As we've done with previous Louisiana, Securitizations, we have guaranteed savings for our customers sharing value created from the efficient securitization structure.
The guaranteed amount is about $100 million.
And that could eventually be higher.
As you know we reached the settlement with the Mississippi Public Service Commission for their 40% share of the serious cases.
If you were able to settle if we are able to settle with all parties on the same terms that would totaled $588 million <unk>.
Including Mississippi sure.
Those refunds with temporarily impact <unk> when cash moves to customers.
The financing costs and other elements of the settlement such as ROE and capital structure would remain on an ongoing basis.
We have not.
Reach settlement with all parties, so without knowing the details we have yet to design, how a full settlement would be funded.
Regardless of how it's funded our long term objectives remain the same.
<unk> or exceeding 15% cash flow to debt.
And 6% to 8% growth in our adjusted EPS and.
And any amount that we were to fund through equity.
Could be easily achieved quietly and cost effectively through the ATM program.
I would also like to highlight that we have published a sustainable financing framework, which allows us to issue green social and sustainability directed financings to fund eligible projects that drive our business objectives.
Including our energy transition and resilient strategy.
We engaged S&P global to provide a second party opinion.
And they have affirmed the framework alignment with accepted principles for these types of financing instruments.
Both the framework and opinion can be found in the Investor Relations section of our website.
A summary of our progress against our equity plan as shown on slide nine.
In the second quarter, we reduced our equity needs by $250 million through our ATM program.
That leaves a little more than $300 million remaining in the equity plan to be executed between now and the end of 2024.
Slide 10 shows our guidance and outlook, which we are affirming today, we provided a thorough update at our analyst day in June which offered a clear picture of the significant opportunities in front of us.
In 2020, we reduced spending significantly in response to lower revenues from the pandemic.
For 2022 as noted.
We have had a strong first half of the year.
Now we are flexing to increase our O&M and other costs to benefit our customers.
Includes spending to improve reliability affordability and the customer experience.
Even with these initiatives, we expect results for the year to be in the top half of our guidance range consistent with where we've been asked several years.
Regarding longer term outlooks. One recent note not yet reflected is the inflation reduction act.
Like everyone else, we're a week into the review.
Overall, we are optimistic about the <unk> ability to create long term economic benefits for our customers.
The production tax credits will support renewable development, and nuclear which will help our customers decarbonize and reduced their exposure to natural gas prices.
By leveling the playing field for renewable development with production tax credit transferability and avoidance of normalization. The act will allow for greater customer economic benefits through utility ownership that provides long term operational flexibility and investment optionality.
And the App encourages emerging technologies like hydrogen and carbon capture that will help our industrial customers decarbonize.
And green hydrogen.
Entergy sizable clean electrification potential and our region is uniquely positioned to support these technologies.
Finally, we expect that after the first year most of our customers should see a benefit in their bill from production tax credits in excess of the alternative minimum tax.
For entergy, it looks largely cash flow neutral after the first year.
But we'll need to see the final law and work with the Federal authority and of course, our retail regulators on implementation.
In summary, we see the act as a positive.
At Analyst day, we discussed how we are demonstrating strong financial quality, we have a unique and significant sales growth opportunity due to organic industrial growth and de carbonization, we have a robust plan to advanced and clean and renewable resources.
And improve the resilience of our grid.
We also have a plan to achieve 6% to 8% EPS growth and at the same time, we are focused on balance sheet quality and reducing risk.
While our employees will always remain focused on our customers and all that we do they remained world class getting stuff done.
With a track record of delivering on our commitments to prove it we plan to continue that success.
And now the Entergy team is available to answer questions.
Certainly ladies and gentlemen.
At this time, please press star one one on your telephone one moment for our first question and our first question comes from the line of Sherri.
<unk> <unk> from Guggenheim Your question. Please.
Hi, Good morning, Leon team, it's actually Constantine here for sharp congrats on a great quarter.
Good morning, good morning, Glenn.
I wanted to start off on the strong results of the quarter and some of the changes on assumptions for 'twenty. Two guidance you are now in the top half, obviously and you have a big EPS offset for the remainder of the year and the O&M flex category.
Whether it keeps looking strong.
How does that potentially set a base for growth in 'twenty, three and maybe just curious on the recurring elements and Thats flags and how that carries into 2003 assumptions and contingency.
Sure. This is drew and ill start and Leah Rodkin can add in.
So I think we're planning to.
As you say, we would expect to be in the top half of the range.
As we're thinking about the impact of that in the things that we are doing certainly it's encouraging to see a lot of the growth from our customer base.
Not all of that I would say is growth that we would expect on a continuing basis as I referenced in my remarks. Some of that is cogeneration and we would expect a more normalized cogeneration rate.
On ongoing basis.
In terms of the line items, you specifically referenced the O&M.
Obviously, we do have a bunch more sales we do have.
Have some higher costs that come along with that that's a chunk of what youre seeing there.
We also talked about.
Customer initiatives last week, we had the press release I'm talking to and we referenced some of the things that we're doing to help our customers out there.
That is in the works and in part of what you see reflected in the 22.
Outlook in guidance there.
And also on the O&M, we have a couple of operational items vegetation management is a big piece of it.
As well as.
Some investments to help for reliability the O&M components of those incremental investments followed some investments to improve our customer experience working in the contact centers and things like that to help our customers out, particularly at this point in time.
A number of investments that.
While I would say arent.
Specifically pulling out 2023, although there is a little bit of that.
They are working to continue to de risk 2023, and beyond by creating more continuous improvement opportunities today that should be lasting on an ongoing basis.
And so I do.
Leo Rod if you don't have anything you want to add to that I think thats I think thats fair, we're encouraged by it.
Beginning of the year, we're using that.
Those results.
Make sure that we're doing the right things for customers here.
Here and now and certainly.
See a lot of reasons why that industrial load growth.
Should continue not only this year, but for years to come to support our outlooks.
That's helpful and on the litigated process for Syria Park.
The Mississippi settlement, obviously to carry a large portion of that I think one of the major parties, but other party even less willing to accept the terms in their comments, how should we think about the process and kind of options going forward here.
What are the settlement currently.
As currently structured fit within that longer term, 6% to 8% guidance or.
The impact kind of above or below the midpoint as they're currently set.
All right Rod why don't you give them the process and the drew you can help out.
From a process standpoint.
The conversations and negotiations with the.
The other jurisdictions are ongoing.
They took their they've made their public stance in response to the Mississippi filing, but we're not in a position to opine or disclose anything further.
Further as it relates to.
Where those negotiations stand, but you should know that we are now.
We're in active conversations with.
With each of those jurisdictions not notwithstanding there.
Theyre public position on the Mississippi.
Settlement I will note that the FERC trial staff and we thought this was constructive stated that the settlement was fair and reasonable and in the public interest.
And it is our.
Position that that's a constructive framework for our ongoing conversations with each of those individual jurisdictions.
And then regarding the financials, we have in our outlooks, we've reflected the collective.
Of the Mississippi settlement.
Ongoing basis.
Once we do have some since we're in ongoing discussions with everyone. We wouldn't comment on ROE or capital structures or anything else beyond that at this time.
Okay perfect.
Thanks for taking the questions.
Thank you.
And our next question comes from the line of Paul Zimbardo from Bank of America. Your question. Please.
Hi, good morning, and thank you.
Good morning, Paul.
Just to make sure I understand correctly it sounded like under the draft IRA you believe the regulated nuclear assets would be eligible for the production tax credits and just if you could talk about how that could work in the regulated construct that'd be helpful.
Sure Paul This is drew.
We do think that they are eligible based on our reading of the act.
As you know our nuclear units do compete in the MISO markets they bid their power in everyday.
And so we haven't bought stock price a wholesale market price. That's the revenue that comes to the company.
David.
Ultimately gets netted off in rates and stuff like that.
Through the normal regulatory process, but we do participate in the wholesale power markets every day.
Last time, we believe we'd be eligible.
Okay, I understand that makes sense.
And then shifting.
Shifting over to call and if you could talk about the Texas rate case filing and the new target dates for Nelson and Big Cage and it seemed like you are accelerating there and just broadly how could some of the more stringent EPA nox requirements lead to changes in coal timing renewables in there.
Related thank you.
It's rod I can frame up the Texas rate case filing.
Between October and.
Through the end of the year Youll see.
The procedural schedule laid out now direct you to page 34.
<unk> of our materials just for some context, but it's about $131 million a base rate change in our in our case.
Our proposed our ROE.
Is 10, eight reflecting a 10 five mid point with the 30%.
30 bps performance adder.
With.
With equity ratio of around 51%.
The procedural schedule is laid out as is and certainly reflects that.
The continuing benefit of our transmission.
Distribution and generation riders as we as we move to.
To incorporate.
Caps and other assets in our capital plan.
Yes, and this is drew on the on the coal piece I'll say, it's not really much of a factor in the Texas case right now.
And of course, as you know Paul with high gas prices, there's not a lot of economic appetite to accelerate retirements right now, but I would say that and you referenced at the new rules that are that could come out soon that could cause us to.
<unk> made some significant investments in our coal facilities in order to become compliant with that if those do materialize and they come in within the timeframe that were already contemplating and that could be an accelerator.
Retirement, we certainly would make significant large capital investments in our coal plants.
To satisfy.
Those things on a very short timeframe.
So that would be a consideration on the on the timeline of our coal plants if in windows.
Those rules come out.
Okay, great. Thank you.
Thanks, Paul.
I'll add one more thing.
We do not have a lot of control technologies on our coal plants today and so they would be a lot of incremental investment for us. So I just make sure that that's clear as well.
Yes, Thanks, Dan Thank you.
Okay.
Thank you and our next come from.
When you Tonet from Jpmorgan your question. Please.
Hi, good morning.
Good morning.
Just wanted to start off with Entergy, New Orleans, and the Brazilians filing there had there been any initial reactions that you could share with us or other takeaways and especially as we think about Louisiana and Texas on this front.
It's rod initial reactions to the actual filing.
Has been constructive obviously the details of all in.
The pace of the investment and certainly given.
The current economic environment whats the build impact we expect the council.
Going to set additional.
Technical conferences, if you will we have one scheduled later I believe on the 18th of.
This month.
But the council will ultimately direct us.
To make a filing more in line with where the thinking is that might that might show up.
Later on.
And the end of the third quarter into the fourth.
The reaction has been constructive, but but let's be clear our efforts right now are focused on addressing some of the near term challenges that our customers are facing with with inflation and the impact of gas prices in New Orleans, and that's that's taking up at least.
Near term.
Mindshare for the council, but we're we think it's a constructive reaction, thus far and Youll see in the fall.
The council is a procedural schedule kind of laying out where we go from here.
Got it yes that was kind of the next part of the question here just a conversation.
Conversations in Louisiana talking about higher customer bills as you talked about in your prepared remarks there so.
Do you see what type of royalty you see this playing in conversations for Capex at large and particularly on the resiliency front.
Given the inflationary pressures.
That you'd talked about there.
We are aligned on the objectives and why why we are why.
While we've been focused on the resiliency conversation.
We moved back the resiliency filing in Louisiana.
To October .
Can you give us an opportunity to better refine.
The benefits case that we expect to make too.
With the commission.
But Louisiana, the same with New Orleans, and our other jurisdictions they are very much.
Focused on providing relief.
To our customers in the near term, but we are very much aligned with.
With the commission on.
This resiliency conversation.
Also I'll make this make this point.
There is nothing about the timing of our October resiliency plans for Louisiana that changes our current plan. So both the timing and the way in which we laid out our capital planning for near term resiliency spend in Louisiana.
Unchanged buyback.
So more to come as we work through.
The summer.
And get further into.
Through the formula rate plans and.
And hurricane season, but.
Early indications are we're still remain very much aligned with the regulators on the objective.
Brazilians.
Got it that's very helpful and just a last one if I could here as it relates to equity needs in 'twenty, five and 26, while the ATM can satisfy these needs here just wondering how you think about asset recycling at this point. If this is on the table or could you speak to broader considerations here.
Yes, well, we talked to thank Jeremy through that we've talked about that at analyst day. So I think there is there is not really think different than what we discussed at analyst day.
There is a valuation difference between the private capital markets and the public capital markets, which causes us to.
Explore this idea.
But it's not an easy track to go down as we've discussed in the past it's not like.
Depending on how you go about it it's not necessarily like financing equity in the public capital markets.
It could take a lot longer and there could be more risk to it. So those are things that we're thinking about when we think about what we're calling strategic financing. So they have to lineup more strategically at the same time.
Got it that's helpful I'll leave it there thanks.
Thank you.
Thank you.
Our next question comes from the line of Jonathan Arnold from vertical Research partners. Your question. Please.
Hi, good morning, guys.
Good morning.
Ask about.
You mentioned you've deferred.
$300 million of fuel I think is that the extent of what you're.
Proposing to do.
On that particular tool or is that just what you would recognize through second quarter.
The student balance sheet.
That's that's what we have proposed to the retail regulators in terms of delaying collection of deferred fuel so on the balance sheet.
At the end of the second quarter, all the incremental $600 million of deferred fuel assets.
Some of that is what's being delayed.
And so some of it's being delayed till the fall through of it might be delayed until next year.
A bulk of it is in Louisiana, I think were about 100.
30 million ish in Louisiana.
And smaller amounts in other jurisdictions.
Yes.
The current.
Proposal.
Across the portfolio.
The rest of the deferred fuel from.
And first half of the year, we should see that sort of catch up a little quicker.
Well I would say that that is pretty recent.
June and July .
Deferrals, I think maybe theres, a little bit of August even in there so.
So we are.
We are pretty current on how.
We're thinking about that I'm not I guess, it's Jonathan if you're asking are we going to see a whole bunch more of delaying I think where most of the way through the summer at this point and I would not expect that to continue on into the fall.
Okay.
Could you just sort of.
Maybe help frame for us a little bit some of the other things you're doing to try and mitigate.
Yes your own customers.
Yes, maybe you sort of put some.
Quantification around that in the context of the <unk>.
Fuel deferral number.
Yes.
Biggest thing presume I'm guessing it probably is but just curious like what are the other.
Pieces of the strategy.
Yes.
As Rod Leo made reference fuel deferral would be I believe the biggest.
By way of single financial impact across the across customer classes.
But what we are what we're offering to do it.
You mentioned $10 million.
Towards.
Bill assistance programs across our jurisdictions.
There is a moratorium on disconnects coming out of New Orleans were voluntarily offering that up for R.
For our other jurisdictions there is a credit card.
Fee waivers late fee waivers that we're working our way through.
Different jurisdictions on top of.
The bill payment programs that.
<unk> walked through in his opening comments.
The objective being to to give customers some relief during what we see as this convergence.
Particularly on Louisiana, and New Orleans, where the high usage is intersecting with.
With the high gas prices, and we're Louisiana and New Orleans.
It's perhaps different than some of the other jurisdictions is the fuel recovery mechanisms.
Or are capturing that.
<unk> high gas impact on a monthly on a monthly basis and so these are these are short term.
Relief efforts R&R part two to answer the call for our customers with the support of our regulators and we expect that to sort of play itself out.
Through the <unk>.
And of the cooling season so.
And that October November timeframe, we'll revisit with our regulators.
Where we are on on the relief relief package and I don't want to understate the significance of what drew referenced in terms of our ongoing investment strategy.
Strategy on behalf of customers that have far greater long term impact that lower lower customer bills. In addition to the robust growth story.
In the industrial sector, but also benefits.
Bill path for customers over the long haul so.
The only thing I would add to that Jonathan is certainly for Mississippi customers The series settlement.
Yes.
Probably the biggest.
Bang for Buck that we've had in terms of near.
Near term bill release.
Could you just remind us.
Okay.
<unk>.
I was going to add John .
The securitization that we did we got $100 million benefits.
Benefits to Louisiana customers I mean, there is a new.
Number of things that we've done that had some big dollars associated with them, we haven't really talked about our gas hedging program, that's been beneficial to the customers in these high gas price environment.
A number of things that we've done to help mitigate.
Bills.
Great. Thank you could I just.
The <unk> settlement.
It goes into effect.
Yes, regardless of not having reached agreement with the parties correct and what's the timing on.
When that benefit flows.
Yes that is correct.
Seeking.
We're asking Kirk.
Essentially a proven ratify that settlement by November but.
Mississippis already.
Taking steps to.
To put that the benefits to customers and.
In place so.
But November is the time frame from a FERC perspective.
Okay and then just.
Finally.
Sure.
No.
You've reflected the Mississippi aspect of.
And kind of in guidance is that is that a gross up.
Impact assuming others sort of went down a similar trajectory or is it sort of just the discrete.
Mississippi piece.
Right now, it's assuming sort of a grossed up.
Element on inclusive everybody got the same as Mississippi.
But we're not commenting beyond that about where it might end up given we have ongoing discussions.
Okay, you got to at least not in flat.
Yes.
Thank you very much guys.
Thank you Jonathan.
Thank you and our next question comes from the line of David <unk> from Morgan Stanley . Your question. Please.
Hey, good morning, Thanks, so much for taking my question.
Just curious on yes.
Good morning.
Hi, Good morning, I was curious on the inflation reduction Act.
Do you have a view at this stage just how much that could.
Improve your competitiveness on the renewables front and whether it could unlock.
Additional opportunity to rate base renewables within the play going forward versus the proportion that you've.
Been assuming thus far.
Yes, I don't have I don't have numbers that I can tell you right now David but I will say that we do believe.
That does level up the playing field for US we don't have to go through the normalization.
<unk>.
We can.
Assuming this all goes through we might not have to do the tax equity partnerships that we do and eliminate some of the friction.
Associated with that.
And allow us to go ahead and deploy more capital.
So I think those are all positive.
From a utility perspective from an ownership perspective, the customers as I said in my remarks will also benefit from that.
Because.
They will get the benefit of ongoing operational improvements that would come up with those wouldn't necessarily crew to a third party that crew to our customers.
Create optionality.
Around the assets and increases the operational flexibility if there's a problem with the assets. We can respond more quickly don't have to work through a third party.
Storm situation the likes so theres a lot of it.
Theres a lot of benefits associated with utility ownership that are harder whenever we were structurally disadvantaged before.
But now the customers will get the full benefit of those things. So we think that that will be.
Accruing to customers over the over the long term, but I don't have an exact number for you right now.
Great. Thanks, that's helpful.
You had also mentioned on the cash flow side of things it sounds like you've been neutral.
It's the way to think about that that youre already kind of plain to see a cash tax bill that at least at the level of the A&P. That's been floated out there such that there wouldn't be incremental cash flow drag.
As you see it.
David This Leo I don't think Thats. The case I think it's just the case that we'll be able to.
Utilize the credits against the AAM team plus the transferability of the credits allows for us to be able to get back to neutral.
Yes, and I'll add that got it and Thats, an ongoing basis I referenced the first year. There is a timing element that's out there that we have to pay close attention to.
Between the A&P, starting in 2023, and the bulk of our tax credits would be from the nuclear tax credit and those would start until 'twenty four.
So that's there that 'twenty three gap that we'll have to figure out how to work through.
The good news is it should be an offset to deferred taxes. So that means our rate base should go up.
But we got to work through that we get the final bill worked through that with retail regulators talk to the rating agencies and alike.
Yes, okay. Thanks, so that does assume a thankfully that you get the nuclear tax credits that youre able to collect them and thats what helps you offset the.
The that AMD cash drag.
Correct.
Correct Okay.
Okay, Great got it thanks, so much.
Thank you.
Thank you.
Our next question comes from the line of.
David patents from Wolfe Research your question. Please.
Hey, good morning.
Good morning, David.
Just on Grand Gulf.
According to the NRC data, it's been down since July 12. So just wanted to know why has it been down when do you expect that to come back online and then maybe just remind us in terms of the mechanisms you have in place for replacement cost.
Thank you.
Yes, as far as operationally David.
I won't get into the technical details, but we had a couple of pieces of equipment.
That.
Have issues, so we had to take.
Take the plan offline to fix those issues and Thats ongoing.
Plant should be online pretty quickly.
And ready to roll after the.
Recent refueling outage, where we replaced a lot of equipment and on the backs of last year's record run.
What we're talking about nuclear I will just point out.
Because it happened today.
Riverbend stations now had its longest continuous run.
Online too so congratulations to them.
As far as the mechanisms Rod I don't know if you want to add to it.
Monthly formula rate plan, where the flow through of our cost of operating the plant are part of.
The FRP.
And the contract back to the operating companies or unit contingent so yeah. They would just replace.
The purchase power in the market as they do every day.
That would flow through the fuel causes.
Hi, Richard.
Each of the individual operating company in essence, you are correct.
Got it Okay makes sense. Thank you.
Thank you. Thank you.
Thank you one moment for our next question.
And our next question comes from the line of Michael <unk> from Goldman Sachs. Your question. Please.
Hey, guys congrats on a great quarter and thank you for taking my question I don't know if this is a we or a rod one but I'm just curious process wise, the grid hardening or the system hardening proposals in Louisiana and Texas.
How does that how do you think that will look from a docket perspective and.
And how old.
You are thinking about recommending there how would that match or how will that how will that interface with the existing ratemaking structures that are already in place in those states, meaning the formula rate plans.
In Louisiana, and the DPR out there in the transmission recovery in the general rate case process and taxes.
Yeah.
Hey, Michael its Rob.
We had a we.
We covered it.
And analyst day, but.
The point being it.
It does.
Pan on.
On the on the timing of.
Of our agreement in let's say in Louisiana.
How the stable, Louisiana thinks about the capital plan around resiliency.
He is going to determine whether we think we can flow through there.
The capital cost through the existing FRP and recovery riders or if theres going to be a need.
For anything.
Thing else and again Thats a function of sizing because what we talked about on analyst day.
For our capital program was that we would go from two to four.
<unk> million dollars around accelerated resiliency.
A chunk of the larger chunk of that would be in Louisiana, and we would do it through existing mechanisms and whether we needed anything different.
It would be dependent upon how the commission work through with us.
Around the pace and timing of capital.
Capital spend.
Texas is a little.
That process will begin when we make the filing that we currently plan in October .
In Texas, the way that we sequenced.
<unk>.
The.
Accelerated resilience filing in Texas.
We pushed that back into 2023.
That the timing around the rate case, and Oh caps.
Shifted a bit and we want to sequence the resiliency filing.
Two to fall in place behind both <unk> and the rate case.
And the dynamic is not radically different than the way, we're thinking about it in Louisiana again, depending upon how the commission things through and certainly our customers think through that.
Pacing of resiliency spin in Texas, then the question becomes can we accommodate.
That capex through the existing T D.
Recovery riders or if there's a need.
As we described it a tweak.
The regulatory recovery mechanisms and those remain that remains to be to.
To be seen Michael but the thinking theyre thinking is the same.
And Michael This is Lee I'll just add.
In addition to as Rod said kind.
How do they fit.
<unk> wise underneath existing regulatory mechanisms there is a nuance.
Around.
Assets that we want to replace that are not yet fully depreciated.
Sure.
And Thats, a tweak to use rods word that we might need to look at and as you recall, that's the same tweak we needed in the regulatory process for AMRI.
Jurisdictions, where were taken out meters that.
That worked but we're replacing them with meters that were going to lower costs and improve service levels to customers in the future.
The dynamic here is the same we've got the $2 billion $2 2 billion that we've got in the plan already that fits under.
The current regulatory mechanisms along that sizing as rod mentioned as well as fully depreciated property.
The mechanism.
But but as you know.
<unk>.
Our regulators have been have been publicly.
Supporting.
Replacing equipment that it was built.
15 years ago, when the standards, we are different across the industry with the new standard equipment.
Need to get we need to get that pushed out as to how you're going to recover the dollars for that existing equipment, it's not fully depreciated.
Preston across every jurisdiction with the meters same concept.
That's an added.
Then to use Roswell tweak that we'd probably have to.
To make sure we're getting throughout those jurisdictions.
You need to thank you for that Leo in Rod.
Just a quick follow up on the Louisiana side, you have a lag right now in Louisiana.
Louisiana I would argue is maybe one of the harder places to earn authorized for you guys.
Do you worry that if you don't get a change in ratemaking, meaning somehow a more forward looking structure to the formula rate plan, that's simply using the existing contract would simply add to the lab.
That's always a concern and our primary objective is to match the capex for customer benefits with the recovery mechanisms.
For all the stakeholders, including you guys. So yes that is that is a constant.
Attention as we work through.
The.
Forward looking view of our of our capital plan and recovery mechanisms. Michael So it is very much a part of the conversation.
Louisiana has some good precedents around that I mean, we don't talk about <unk> and the Ami Dockets in Louisiana, we were able to get more contemporaneous recovery.
Of course on the capacity side.
I have a long history of getting generation assets into rates when they get to cfd.
So I think there is there is.
Examples of how this could work differently in Louisiana, but we certainly echo Ron's concern.
Got it thank you guys much appreciated.
Thank you.
Thank you and our final question for today comes from the line up Paul Patterson from Lynn Rock Your question. Please.
Hey, guys.
Good to hear your voice.
Yeah.
Just procedurally back to the series settlement.
It seemed like no party will at least know the state commissions objected to the settlement at all.
Is there any reason why the November approval.
It can't happen in the earlier or how should we think about that the potential for the perks approval assuming that they approve it.
Okay.
The FERC.
<unk>, we don't get hurt.
I'd say this respectfully, we don't get to Telfer.
What.
They're a procedural schedule needs to be but we're certainly they're usually sensitive.
Two two certainly Austin other stakeholders when there is an objective.
Two.
Particularly in instances, where we're trying to reduce the overall.
Noise around Syria, and the risks associated with it.
And a potential benefit for customers that tends to resonate.
So that it's as soon as possible as far as we're concerned, but we're always weaving in our interests with those of <unk>.
Of our other stakeholders and first docket.
Which as you might imagine has has more than been entergy to contemplate. So we're grateful for whatever FERC is able to do to accelerate the consideration of this this customer beneficial settlement Mississippi.
And then in terms of the <unk>.
The parties are suggesting sort of bifurcated or splitting up so the proceedings or what have you and I realize that what they are public documents in the discussions you are having but just in general.
I mean, just correct me if I'm wrong with the most favorite nation I am not completely clear on those with the most favored nation provision in the settlement.
If theres a litigated portion that portion.
Is not subject to.
The most favorite nation adjustment is that correct.
I think you got that right.
Okay.
That's it for me thanks, so much.
Thank you. Thank you. 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, our quarterly report on Form 10-Q is due to the SEC on August nine and provides more details and disclosures about our financial statements.
Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles.
Also as a reminder, we maintain a web page as part of <unk> Investor Relations website called regulatory and other information, which provides key updates of our regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information you should not rely exclusively on this page for all relevant company.
Information and this concludes our call. Thank you very much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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