Q4 2024 Entergy Corp Earnings Call
Aaron: Good morning. My name is Aaron and I will be your conference operator for today. At this time, I would like to welcome everyone to Intergy's fourth quarter 2024 earnings conference call.
Aaron: All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Aaron: If you would like to withdraw your question, simply press star followed by the number one again. Please also note that we ask that you limit yourself to an initial question followed with a follow-up question when you are given the opportunity to speak. Thank you.
Speaker Change: And with that, I'd like to now turn the call over to Liz Hunter, Vice President of Investor Relations for Intergy Corporation.
Liz Hunter: Good morning, and thank you for joining us. We will begin today with comments from interviews chair and CEO, Drew Marsh, and then Kimberly Fontan, our CFO, will review results.
Liz Hunter: 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.
Liz Hunter: Due to a number of factors which are set forth in our earnings release, our slide presentation and our SEC filings Entergy does not assume any obligation to update these forward-looking statements
Liz Hunter: 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 Drew.
Drew Marsh: Thank you, Liz. And good morning, everyone. 2024 was a transformational year for Intergy. We had strong financial performance while also making meaningful progress to grow and de-risk our business.
Drew Marsh: Because growth in most years is now greater than our previous range of 8-9% and we see additional growth opportunities.
Drew Marsh: We are simplifying our disclosure by removing the top end of the range. To that end, we're now simply noting our long-term growth rate through 2028 as greater than 8%.
Kimberly will review the details.
Drew Marsh: Our achievements in 2024 position us well to capture the growth opportunities we have on the horizon.
Drew Marsh: Starting with the customer, we continue to see strong growth in our industrial segment.
Drew Marsh: Industrial sales were up 8% for the year and 15% for the fourth quarter.
Drew Marsh: We have seen strong growth from the natural advantages of the Gulf South for many years, and we added two large hyperscale data centers to our outlooks in 2024. This growth brings important value to our stakeholders, particularly the communities we serve and our existing customer base.
Drew Marsh: Today we are announcing a new electric service agreement with a large customer in Mississippi.
Drew Marsh: The customer has not announced their project, so we can't provide additional details at this time.
Drew Marsh: In addition, we anticipate signing an ESA with META to expand their capacity needs as detailed in supplemental testimony submitted by Intergy Louisiana last week.
Drew Marsh: When working with very large potential customers, we aim to find ways to deliver what those companies need, when they need it.
Drew Marsh: At the same time, we include protections for existing customers through tools, such as minimum bills, contributions, and aid of construction, and credit terms.
Drew Marsh: These new customers also provide community enhancements through significant ad vorm taxes and direct investments such as workforce development and infrastructure improvements.
Drew Marsh: Through this work, we continue to have a robust and diverse pipeline for potential growth above our current plan.
Drew Marsh: Data centers remain the largest growth category, and we continue to have 5 to 10 gigawatts of data center opportunity within our larger pipeline.
Drew Marsh: We also remain well positioned to capture additional projects as a one-stop shop.
Drew Marsh: We have extensive experience bringing large customers online. Our vertically integrated model allows us to provide complete technical solutions.
Drew Marsh: Our local relationships help our new customers connect with critical stakeholders, and our strong partnerships with vendors support additional growth potential.
Drew Marsh: Regarding our relationships with stakeholders, our focus on stakeholder engagement has helped us move forward with our ongoing journey to be the premier utility.
Drew Marsh: This starts with putting the customer first and making sure our stakeholders fully understand their potential value.
Drew Marsh: In the last year, we successfully concluded several regulatory processes through this approach.
Drew Marsh: Those include final approvals of the CERI settlements, first phase approvals of more than $2 billion of resilience investment in Louisiana, Texas, and New Orleans.
Drew Marsh: LPSC and New Orleans City Council approval of the gas LDC sale.
Drew Marsh: several rate actions across multiple jurisdictions including the Louisiana formula rate plan renewal and the recent regulatory approvals to divest Intergy, Louisiana's 16% of Grand Gulf capacity and energy to Intergy, Mississippi.
Drew Marsh: We anticipate decisions on new customer-driven generation and transmission investments, including utilization of Louisiana's accelerated review process for renewables.
Drew Marsh: And I'm going to be talking about the The The The The The The The The The The The The The
Drew Marsh: We also expect to clarify cost recovery for the 2024 storms.
Drew Marsh: and lay the groundwork in Louisiana and New Orleans for more timely storm cost recovery, which will benefit customers.
Drew Marsh: In addition to the regulatory calendar, we are engaging in the legislative processes in both Texas and Arkansas.
Drew Marsh: It's very early in those sessions and we are looking at options to support investment needed for new growth opportunities, to help us create significant value for our communities, and to create space for more risk management investments and resilience to benefit customers.
Drew Marsh: Our regulatory calendar supports a strong capital plan to serve customer growth in our region and improve the resilience and reliability of our system for the benefit of customers.
Drew Marsh: We plan to invest $37 billion over the next four years, 2025 through 2028.
Drew Marsh: Driven by our customer requests, we'll continue to expand our renewables portfolio. We have active requests for proposals for new renewables in Arkansas and Louisiana in addition to the planned 1,500 megawatts associated with the META project.
Drew Marsh: Our plans include investment in several new modern and efficient gas plants.
Drew Marsh: This includes the Orange County Advanced Power Station in Texas and the Delta Blues facility in Mississippi that are already under construction.
Drew Marsh: We also have pending regulatory approval requests for a combustion turbine in Arkansas, three combined cycle facilities in Louisiana, and one of each in Texas.
Drew Marsh: This gives us confidence in our ability to successfully complete the projects we are undertaking today to serve our customers' demands.
Drew Marsh: We have secured critical long lead time equipment with Mitsubishi Power America's and Siemens Energy.
Drew Marsh: Through these partnerships, we have clear line of sight to acquire additional equipment for subsequent projects beyond our current plan. We also have long-standing relationships with our EPC partners that can support additional projects.
Drew Marsh: Each of our combined cycle plants will be configured to enable future carbon capture and sequestration.
Drew Marsh: Our current capital plan does not include dollars for CCS, but we are actively working on developing projects, including customer-supported investment and third-party ownership options.
Drew Marsh: We have a feed study underway at the Lake Charles Power Station with an expectation to move towards a decision this year.
Drew Marsh: We're also exploring expansion of our nuclear footprint, including upgrades at each of our nuclear stations and incremental 20-year license extensions.
Drew Marsh: In addition, we continue to evaluate potential new nuclear options with customers and partners.
Drew Marsh: As we have stated previously, these opportunities are not in our base plan and we will carefully manage financial risk with any new nuclear investment.
Drew Marsh: While we have been working hard to meet customers' capacity and energy needs, we have also been actively reducing other risks facing stakeholders.
Drew Marsh: Our transmission plans have grown, supporting growth and improving reliability and resilience.
Drew Marsh: Our current plan includes investment from the most recent MTAP 10-year plan approved in December, which included 49 projects and $1.8 billion of investment to support reliability.
Drew Marsh: Additionally, we propose project totaling $3.7 billion in MTEP-25 to meet NERC's reliability standards as we grow.
Drew Marsh: In addition, work authorized by the Accelerated Resilience Approvals is underway.
Drew Marsh: In 2024, we completed seven projects in Louisiana, one of which was in New Orleans.
Drew Marsh: We expect the number of completed projects will grow exponentially in 2025, and we plan to seek approvals for subsequent phases on a timeline that would seamlessly ensure ongoing progress.
Drew Marsh: As you know, we experienced two hurricanes in 2024, and our teams performed admirably, providing safe and efficient restoration.
Drew Marsh: For Francine, we leveraged learning from previous storm responses, including Beryl, enabling our crews to restore 90% of our customers within three days.
Drew Marsh: Entergy's workers also assisted other utilities in the restoration efforts following devastating storms in the southeast, lending over 900 people to support Helene and more than 1,100 to support Milton.
Drew Marsh: And as many of you have heard, we experienced a winter weather event.
Enzo in January, which brought extremely low temperatures.
Drew Marsh: Our operations performed well throughout the event as our system and four of our five operating companies set new winter peak records.
Drew Marsh: Another risk that we actively manage is financial health, and specifically credit.
Drew Marsh: We continue to make positive progress on our credit metrics in 2024, which provides financial flexibility, as well as long-term customer benefits through lower cost of capital.
Drew Marsh: Our work in 2024 benefited our stakeholders, including our customers, communities, and all of you as owners.
Drew Marsh: None of this could happen without also benefiting the other critical stakeholder, our innovative, hardworking, and dedicated employees.
Drew Marsh: Our employees have embraced the opportunities ahead of us, and we are building a culture that supports rapid growth and change. I thank each and every employee for all they do to make Intergy successful.
Drew Marsh: This is an exciting time as we continue our journey to be the premier utility. We have a very strong outlook that includes double-digit industrial sales growth and adjusted EPS CAGR well above 8%.
Speaker Change: A strong balance sheet and an approving risk profile for all stakeholders.
Speaker Change: And we continue to talk to potential customers that could bring incremental growth and additional benefits for our stakeholders.
Speaker Change: Our employees and our partners are excited about our plan, and they are ready to meet the opportunities ahead. I'll now turn the call over to Kimberly.
Kimberly Fontan: Thank you, Drew. Good morning, everyone. As Drew said, 2024 was a very exciting year. I'll provide some additional detail on the financial picture. We'll start by reviewing 2024 results, and then I'll provide an overview for 2025 and our longer-term outlooks.
Kimberly Fontan: Starting on slide 5, Energy Adjusted EPS for 2024 was $3.65.
Kimberly Fontan: Our results reflected the investments we made to benefit our current customers and to support new customers and projects.
Kimberly Fontan: This included regulatory actions across all our operating companies, as well as higher depreciation and interest expense.
Kimberly Fontan: Other income increased mainly from higher AFUDC due to construction work in progress.
Kimberly Fontan: Weather-adjusted retail sales grew approximately 4%, driven by strong industrial growth of more than 8%, consistent with our original expectations.
Kimberly Fontan: Moving to slide 6, we closed 2024 with solid credit metrics. Our bulk FFO to adjusted debt was 14.7%.
Kimberly Fontan: We estimate that Moody's and S&P's comparable metrics will be well above their thresholds. Both rating agencies will ultimately perform and publish their own calculations.
Kimberly Fontan: In December, in response to FERC's approval of the LPSG settlement, S&P upgraded Series Issuer Credit Rating One Notch from BBB-.
Kimberly Fontan: to Triple B Minus from Double B Plus. Higher ratings should result in relatively lower borrowing cost, which benefits our customers.
Kimberly Fontan: Given the investment needed to support customer growth, maintaining healthy credit metrics continues to be a key focus. Our current forecast outperforms the rating agency's thresholds, growing towards a sustainable 15% FSO to debt.
Kimberly Fontan: As Drew mentioned, we have a 4-year, $37 billion capital plan, which is $2.7 billion higher than what we provided at EEI.
Kimberly Fontan: The increase is primarily in Mississippi and Louisiana. It includes dispatchable and renewable generation capacity to support growth and reliability and customer demand for green attributes.
Kimberly Fontan: The incremental capital also includes distribution investments to support reliability and resilience.
Kimberly Fontan: With the Higher Capital Plan, we increased our equity needs by $300 million in 2026, as you can see on slide 7.
Kimberly Fontan: Using our ATM program, we've already secured $1.4 billion of equity, which we plan to exercise in 2025 and 2026.
Kimberly Fontan: Slide 8 summarizes our adjusted earnings per share guidance and outlooks.
Kimberly Fontan: 2025 remains unchanged from EEI. As Drew mentioned, with our higher capital plan, we are raising our longer-term outlooks, driving our growth rate through 2028 now well above 8%.
Kimberly Fontan: As you can see on slide 9, our adjusted EPS guidance range for 2025 is $3.75 to $3.95.
Kimberly Fontan: We expect our weather-adjusted retail sales growth in 2025 to be 6%. The largest driver is industrial, which is expected to be very strong at 11-12%, driven by several large customers, including primary metals and data centers.
Our guidance also reflects the effects of customer-centric investments.
Kimberly Fontan: This includes AFUDC during construction and earnings on our investments in rate base after assets are placed in service, as well as the associated depreciation expense, interest expense, and taxes other than income taxes.
Kimberly Fontan: Utility O&M is forecasted to be lower for the year as we flexed costs up in 2024. For the first quarter, we expect our O&M to be roughly flat to first quarter last year.
Kimberly Fontan: Additional information on specific drivers for the year, as well as detailed quarterly considerations and earnings sensitivities are included in the appendix of the webcast presentation.
Kimberly Fontan: Gulf Coast advantages have driven growth for many years and we expect that to continue. Now we also have large data centers in our forecast which has further diversified our customer mix.
Kimberly Fontan: As Drew said, InterG Louisiana expects to update its agreement with META to increase the capacity requirement of the existing contract.
Kimberly Fontan: As noted in the filing, we can serve this load without constructing any additional generation at this time. The increased load will require additional transmission facilities, which are anticipated to be paid for by the customer.
Kimberly Fontan: The incremental volume would not have a significant effect on sales in our forecast period.
Kimberly Fontan: As a reminder, with these very large customers, we take a conservative approach for financial planning. We do not add large customers to our forecast until we have a signed agreement. And our financial planning assumptions are at the minimum bill level for these customers.
Kimberly Fontan: We're very proud of what we have accomplished in 2024, and we look forward to another successful year in 2025. We continue to prioritize the needs of our customers to create value for all of our key stakeholders. We have a unique growth opportunity, and we're excited about what the future holds.
And now, the Entergy team is available to answer questions.
Speaker Change: Thank you, Kimberly. And ladies and gentlemen, at this time, if you would like to ask a question, remember, it is star followed by the number one on your telephone keypad. To withdraw your question, it's star followed by the number one again. Please also remember that we are asking you to limit yourself to a total of two questions.
when you're given the opportunity to speak.
Speaker Change: Our first question for today comes from the line of Char Poreza with Guggenheim Partners. Your line is live.
Hey guys, good morning.
Good morning, Sean.
Speaker Change: Good morning, Drew. Drew, just to elaborate on the core drivers of the $3 billion CapEx update, it skews to generation and renewables, so does that kind of imply you're starting to trend towards the high end of that load growth, especially as we think about the ramp up for something like Hub 8, which I think is up to a $12 billion site?
Thanks.
Speaker Change: Thanks, Sharon. Good morning. As you said in the in the capital plan it is
Speaker Change: largely generation for both dispatchable and renewables but it also does have some distribution investment and there's some incremental nuclear investments to support the reliability of those as well. All of that is baked into the outlooks that we have here and and as you noted we increase the outlooks as we go out into the back end of that period reflecting those investments and the earnings on those investments.
Speaker Change: Got it. Perfect. And then, and then too, you're not, you're not the only CEO that's talking about new nuclear. I'm just kind of curious if you just hone in on just specifically what you mean by new nuclear, because one of your commissioners in Louisiana,
Speaker Change: kind of highlighted large-scale And so I'm not sure if there's an appetite for SMRs
Speaker Change: in the state and he seemed to focus a little bit on the larger scale side. So is there room for large-scale reactors if there's ample risk sharing either as a federal backstop, etc.? Or when you mean new nuclear, are you really specific to SMRs? Thanks.
Speaker Change: Thanks, Char. That's a good question. We actually are looking at all forms of new nuclear.
Speaker Change: a large-scale, like an AP1000, which, as you all know, there are some that exist now in our country and several under construction around the world, and several more that are planned.
Speaker Change: Yeah, in some sense of a viable supply chain for new nuclear today
Speaker Change: And so certainly we would be looking at that because in a lot of ways that could be risk.
Speaker Change: entry into the new nuclear space, but we are also looking at SMRs, you know, we have
Speaker Change: MOU with Holpec to investigate their new technology. And of course, we're looking at others like GE's technology and some of the other ones that are around.
Speaker Change: We're not exclusive to any particular new nuclear technology at this point. We are primarily looking at what's going to give our stakeholders the best risk profile and the best value. Those are going to be the driving components for us.
Speaker Change: And is there, just to follow up on that one, is there conversations at the federal level or is there any sort of data points we should be kind of monitoring around that? Thanks.
Speaker Change: I mean, I think it's a most of our conversations are at the state level internally. Certainly we're working with
NEI on the federal level to facilitate continued
Speaker Change: conversations and as you know at the federal level things are evolving pretty quickly right now.
Speaker Change: but there is a lot of bipartisan interest in new nuclear so I imagine that those conversations will continue and and there'll be opportunities going forward in the new nuclear space.
Speaker Change: Okay, perfect. Thanks guys. Big congrats on the execution. That's obviously very evident. Congrats. Thanks, Jar.
Speaker Change: Thanks for your questions. Our next question is from the line of Nicholas Campanella with Barclays. Your line is live.
Nicholas Campanella: Hey, good morning and thanks for taking my questions. What an update.
Dick
Nicholas Campanella: Hey, yeah, so I guess just you know, you signed a few more customers the growth rates now, you know uncapped per se and You know when I think about kind of this five to ten gigawatts in the pipeline You know, how would you kind of simplistically frame, you know, every one gigawatt affecting growth? Is it you know?
Speaker Change: If you get another gig into the plan with similar frameworks that you just got in Mississippi and Louisiana, could that add another 100 basis points to the CAGR, or what's kind of the simple way to frame it here, since you're kind of letting people dream about where it can go? Thanks.
Speaker Change: Good morning, Nick. I don't know that you can do a one-for-one math. I would think about it as...
Speaker Change: What investment is needed to support customers or to support the system overall? And the investment is really driving the growth. In this case, you know, we had 2.7 billion that covered a variety of investment types. So I think each.
Speaker Change: Each new customer would be unique and we'd have to look at what that means relative to the investments and then relative to the overall CAGR. And it also depends on the...
The business model of these data centers, you know, certainly
Speaker Change: the customers that we've been dealing with like Amazon and Meta that we've announced previously.
Speaker Change: Those are very large trillion plus dollar companies that have a clear expectation for their utilization of those facilities. There are others in subscription model format that would be very different and have a very different profile.
Speaker Change: We are starting to see a little bit of interest in that particular space where we hadn't seen that previously. And so that would be a little bit different rule of thumb perhaps. So there are different models within the data center space that could give you different outcomes as well.
Speaker Change: Okay, that's great. I appreciate it. And then I just wanted to address...
Speaker Change: You know, you have a lot of organic opportunities in the growth plan today. I just wanted to acknowledge that there's an adjacent service territory that's also kind of running a sale process and can you just address what your appetite is for anything inorganic at this point, given everything that's in front of you?
Speaker Change: We certainly don't comment on specific, you know, potential opportunities, but, you know, we have the sales gas business going through and that is an example of how a transaction that our gating criteria of.
Speaker Change: It doesn't distract, it creates value, and it's executable. So certainly if something meets that criteria, we would look at it. But again, we wouldn't address specific opportunities until something met those criteria.
Thank you.
Thank you for your questions.
Speaker Change: Our next question is from the line of David Arcaro with Morgan Stanley. Your line is live.
Oh, hey, thanks. Good morning. Good morning.
Speaker Change: I was wondering, would you be able to frame kind of the time to market that you're able to offer for new data center customers as you look at that pipeline? You know, do you have, is there a certain amount of available capacity, whether it's transmission or generation on your system?
Speaker Change: or is most of this going to take incremental new infrastructure to enable in terms of future customers?
Speaker Change: Thanks, David. Similar to Nick's question, I think it's going to depend on where the customer locates and what's needed.
Speaker Change: We have been working with our customers and with a number of stakeholders to work through that timeline, whatever is needed. And we do have strong partnerships on availability of equipment as well as availability of vendors and contractors to help support the build process.
Speaker Change: I think we talked about at Analyst Day the ability in Mississippi last year to shrink that time relative to working with the legislature and decreasing the time to bill, but it's going to be unique depending on the specific customer needs.
Speaker Change: landscape and some of the partnerships you have. I was just wondering if there's any other color you would be able to provide on the availability of production slots for gas turbines and how the pricing has trended just as you're looking out even further in your generation planning here.
Speaker Change: That's a good question, David. So we know something that we've been engaged in for quite a while at this point, thinking about those turbine slots and and managing them carefully, you know, as I said earlier,
Speaker Change: We have turbines and transformers and other critical equipment as well as labor to do the work.
Speaker Change: lined up for everything that we've announced and then we have some capacity beyond what we've announced today already lined up.
Speaker Change: And we're continuing to work on additional capacity beyond that, because we believe there are more opportunities, and so we're trying to be prepared for those opportunities should they materialize. It is a much different space than it was 18 months ago, for sure. And so we are...
Speaker Change: We are clearly aware of that. Pricing is getting tougher in some cases. Costs are getting more expensive just for the slots. So we're mindful of that. But at this point we haven't seen anything that materially changes our expectations about where we are and what we might be able to accomplish.
Okay, great. Appreciate the color. Thank you.
Speaker Change: Thank you. Thanks for your question. Our next question is from the line of Jeremy Taunt with JP Morgan. Your line is live.
Hi, good morning.
Good morning.
Speaker Change: Thanks for all the details this morning. I wanted to pivot towards Arkansas, if I could, and just wanted any thoughts on the Economic Development Working Group and efforts to expand existing, I guess,
Speaker Change: Data Center incentives there and specifically DC Ward C&I customers taking notice of the potential in the state
Speaker Change: There is a lot of interest in the state for some of these large customers, and so certainly we're working with them there. And we're working with all the stakeholders as well to facilitate the ability for customers like hyperscale data centers and others.
Speaker Change: to come together to facilitate economic development. We've done this before in Arkansas, you know, we have.
Speaker Change: A thriving steel industry on the east northeast corner of the state at this point. There are other opportunities and lithium mining and other areas that we're paying close attention to. But, you know, clearly the data centers is is something that has.
Speaker Change: People's attention in Arkansas and so we're working with all the stakeholders there to to help make that a potential reality so that their communities can also benefit from this investment in growth.
Speaker Change: got it makes sense. And then just want to pivot towards the financing side if I could.
Speaker Change: I'm just wondering if you could walk us through a little bit more how you're able to finance $3 billion of incremental CapEx with only $300 million of incremental equity here, and just wondering if more of your growth projects hit, how should we think about, I guess, any rules of thumb for equity funding going forward?
Speaker Change: Yeah, thanks Jeremy. We've talked about a run rate of 10 to 15 percent. I think that's valid over our
Full Forecast, period.
Speaker Change: You know, when we look at how to finance these, we start with operating cash flow and making sure we're optimizing that, whether that is looking at...
Speaker Change: managing against our caps or using mechanisms that we have like cash on c-web
Speaker Change: or in or matching timing of closings, but making sure we're optimizing in that space. We've also had some help from our pension, which is largely fully funded, which reduces or gives us additional opportunity there in the credit space. And then with the large customers.
Speaker Change: We talk about, as part of our framework, them paying their fair share.
Speaker Change: and that really means that even during the ramp periods, they are supporting us, whether that is kayak or minimum bills or those types of things. And all of that together then helps us manage that equity need at the level that we have, that we've added here.
Got it. Very helpful. I'll leave it there.
Speaker Change: Thanks for your question. Our next question is from the line of Michael Longan with Everclear IS, Evercore ISI, excuse me, your line is live.
Michael Longan: Hi, good morning. Thanks for taking my question. Good morning. On the resiliency programs, Phase 2, you know, total is greater than $2 billion approved and underway. You know, you talked about the timing of Phase 1. Phase 2 request plan, when and where can we expect them? And, you know, what is included in your capital plan versus what could be incremental?
Speaker Change: I'll answer the first part and I'll turn the second part over to Kimberly, but in terms of the timing,
You know, we are
Kimberly Fontan: working through the the first phase right now and we have a number of projects that are ramping up. Our overall program is ramping up right now quite rapidly. We expect to be in a position by the end of the year to begin to seek the next phase so it could be
Kimberly Fontan: Just before the end of the year, or just after the end of the year at this point, but the teams are already starting to gear up to think about what that looks like and prepare for that with a goal of making sure that we can continue our programs and we don't have to.
Kimberly Fontan: you know ramp down our work teams and and then ramp them back up at some point uh be much more efficient to just keep that
Kimberly Fontan: that effort moving along much more productive. So that's where that's kind of what we're thinking about right now. Be sometime near the end of the year, a little before, perhaps a little after.
Kimberly Fontan: and I'll turn it over to Kimberly for the second part. And then from a financing perspective, similar to what we did on phase one, we added that incremental capital once we had clarity through the regulatory process. And so I would think about that the same way. Louisiana set up a
Kimberly Fontan: of Mechanism to recover that that's been quite productive and so we look at that and then look at adding that incremental capital at the appropriate time once it goes through the process.
Speaker Change: Great, thanks. And then on the dividend, you've had a target of 6% per year. Is that a firm commitment you have? You have this 5 to 10 gigawatt pipeline, you know, a lot of additional capital could be coming into your plan.
Speaker Change: Yeah, we've talked about 6%, and that is an expectation. Obviously, we have a lot of growth there. And so what we've talked about before is from a payout ratio that has historically been 60 to 65%. You can see that decline somewhat over the outlook period, but not a change in the dividend percent necessarily.
Great, thank you.
Thank you.
Speaker Change: Our next question is from the line of Steve Fleischman with Wolf Research. Your line is live.
Steve Fleischman: Yeah, hey, good morning. Thanks. And congrats on the continued strong outlook. I guess first
Steve Fleischman: On the credit metrics, we've been waiting, I think, for the nuclear PTC piece of it for you all. Is that still not included in your metrics?
If they don't define it, when would you include it?
Steve Fleischman: Yeah, that's right. See, we have not included that in our metrics. We are still waiting on Treasury guidance. You know, I don't know when that will come out. And we do view that as credit positive. We'll have to look at if they don't define it, we'll have to make a decision later this year on what to what to, you know, how to proceed there. But it is not in our forecast as you as you noted.
Okay.
Speaker Change: Drew, I think you mentioned legislative activity in Texas and Arkansas to support growth. Could you talk to a little bit more what you're either seeing or what you're supporting in those states?
Cool.
Speaker Change: Well, I think the main thing that we're focusing on right now is growth elements, things that can support growth in both states.
Speaker Change: We had a question earlier about Arkansas in particular, so there is the potential for bills to show up in Arkansas that could help facilitate economic development within the state, and we would hope to be a part of that.
Speaker Change: In Texas there's similar activity to support it, but also we're looking at risk opportunities, you know, particularly around the resilience space that could help us, you know, things like
Speaker Change: managing the recovery of assets that are taken out of service when resilience investments are made, perhaps a little differently than where they are today, to help manage our credit in that scenario.
Speaker Change: Those are examples of things, but it's still very early in the in the process. There isn't really anything filed at this point Yeah, I think that we expel expect several thousand bills to be filed ultimately in Texas I think there's maybe a hundred that are that are out there at this point. So it's still very early in the process
the the
Speaker Change: and then the expansion at Meta, although some of that might be going beyond 28 in terms of some of the benefits, because the sales growth didn't change that much.
Steve Fleischman: That's right, Steve. The forecast includes the both updated customers with the note that, as you noted in the sales volume, the meta is largely outside this period from a volume perspective.
Steve Fleischman: So you're seeing like AFUDC and some other things in the EPS.
Steve Fleischman: as you're building the investment for it. Okay. Thank you. Appreciate it.
Thank you.
Speaker Change: Our next question is from the line of Julianne Smith with Jeffries. Your line is live.
Speaker Change: Hey, good morning team. Very nicely done. Really kudos to all of you.
Speaker Change: Absolutely, absolutely, really. Maybe just to follow up a little bit on the conversation on the cash flows, you all provide a little bit of a slide showing, at least as present, your Moody's and S&P projections, and there's a little bit of a downtick in 26. Can you speak a little bit to how you think about earned ROEs? As you lean into this ramp in spend, are you thinking that there could be some pressure on earned returns, or do you think when you look at the outlook that you'll be able to manage through the uptick in spending without having an impact on earned returns,
whether it's legislative or otherwise.
Speaker Change: Yeah, thanks, Julian. I'll start with credit and then switch to ROEs. On your note, on credit, you can see that it builds towards 15%. There's a couple of one-time items in 26, including the change in the Louisiana State.
Speaker Change: Tax rate that drives some adjustments happening in 26 That that you noted in that downturn in the from an ROE perspective. I would think about
Speaker Change: What we talked about at Analyst Day, that ROEs are improving over the forecast period from 9 to 9.5%. That is still our expectation.
Speaker Change: and we're working that with all of our stakeholders. So I think we continue to expect to see that over this period.
Speaker Change: Wow, truly incredible on both fronts. And then maybe a little bit of a nuanced follow-up here. You talked about new nuclear earlier. It seems like Texas is really contemplating a new nuclear fund of sorts. Any thoughts about tapping into that? Is that driving some of the accelerated thought process in your mind as you talk about it today?
Speaker Change: Certainly, it's something that if they actually created a fund for new nuclear, it's something that we would look at as another tool in the toolkit to help manage risk.
Speaker Change: So that is interesting to us. We'll see how that materializes, if that comes out of legislation or however it goes. But our focus is going to be on risk management.
Speaker Change: and anything that's available out there to help us with that at the state, the federal level, with customers, with vendors, or with a consortium, a consortium of owners, maybe other utilities. There's there's lots of different opportunities out there to help.
Speaker Change: manage the risk, diversify the risks that are out there, such that, you know, it's something that we could manage within our frameworks. So that's, yeah, that would be an interesting tool, but it's just one of many ways for us to manage the overall effort.
Speaker Change: I appreciate the risk emphasis. Thank you guys very much. All the best. Thanks Julian. Thank you.
Speaker Change: Ladies and gentlemen, once again, if you would like to ask a question today, remember it's star followed by the number one on your touchtone keypad.
Speaker Change: Our next question is from the line of Paul Patterson with Glenrock. Your line is live.
Hey, congratulations guys.
Thank you.
rates kind of going
You know, through this forecast period.
Speaker Change: Yeah, Paul, we do focus heavily on affordability. We do have the forward curve on gas in our forecast, which is going to drive some increase. I think at Analyst Day we had talked about
Speaker Change: occur without fuel of about three and a half percent and we are in that range slightly above that range here what you're seeing is increase in investments and then as Steve noted the sales come in after that and so you'll see some moderation of that when the sales come in.
Speaker Change: Okay, and then just on the new nuke, when do you think we might see a potential announcement? What's the earliest that we could maybe hear something on that?
I don't think there's, there's.
Speaker Change: There's no, let me just say, there's nothing imminent around new nuclear. We are, we are working on it. We're thinking about it, but it will take us a while to put that framework together.
Speaker Change: But it is something that we are working on and we are interested in and our customers are Interested in so we are having ongoing conversations, but I wouldn't anticipate Anything this year in terms of an announcement
Awesome. Thanks so much.
Thank you.
Thank you for your question.
Speaker Change: We have a final question from today from the line of Travis Miller with Morningstar. Your line is live.
Thank you. Good morning.
Travis Miller: Good morning. A quick one here. The Amazon facility, I wonder if you've had any update on progress there, filings, etc.
Travis Miller: Mississippi. Yeah so you know their their work is under construction and it's ongoing right now. We have constructed our first substation and it is live and and serving them and so it's
Travis Miller: It's underway. And, you know, we hope that that's the first phase of a lot of growth for Amazon in the state of Mississippi.
Speaker Change: Great. Okay. And then higher level, when you're going out there and talking with not just data centers, but any of the large load customers, who's the competition? You know, what other services are they looking at?
Speaker Change: Is it on site? Is it some other provider? Just wondering, kind of very high level, the large load customers, who you're competing against, essentially, for these large contracts.
Speaker Change: Well, I think I would say we're competing against everybody. I mean, these data centers can
Speaker Change: And so, you know, we, I think that means that everybody.
could compete with us.
Speaker Change: We offer what we believe is a great value proposition around our ability to serve large low customers. We have a lot of experience with that. We have, since we're a vertically integrated utility, we can provide a complete technical solution that means that we can
Speaker Change: You know, provide a transmission element, we can provide generation elements that includes green attributes, you know, we can interface with the RTO, we can provide the retail access. We can do everything that they need from a.
Speaker Change: from a technical perspective. And then, of course, since we are a regulated utility, you know, and vertically integrated, we have tremendous relationships within the communities that we operate in.
Speaker Change: which means that we can make introductions to all the key stakeholders and critical stakeholders to be part of
Speaker Change: A large economic development project and we've done that for a long time. That's not actually a new thing It goes with kind of the first bullet, but it is, you know An emphasis of ours around stakeholder engagement to be able to do that And so, you know those things we believe
Speaker Change: create a very competitive offering for us relative to other folks literally around the world.
Yeah, okay. Well, very good. That's helpful. Thank you.
Liz Hunter: Thank you. Thanks for your questions. And ladies and gentlemen, that will conclude our Q&A session for today. Liz, I'd like to turn the call back over to you.
Liz Hunter: Thank you Aaron and thanks to everyone for participating this morning. Our annual report on Form 10-K is due to the SEC on March 3rd and provides more details and disclosures about our financial statements.
Liz Hunter: Events that occur prior to the date of our 10-K filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles.
Liz Hunter: Also, as a reminder, we maintain a webpage as part of Entergy's Investor Relations website called Regulatory and Other Information, which provides key updates of regulatory proceedings and important milestones on our strategic execution.
Liz Hunter: 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.
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