The operator, Joel, welcomes everyone to the Entergy Third Quarter 2023 Earnings Conference Call. The call will begin with comments from Entergy's Chairman and CEO, Drew Marsh, followed by a review of the results from CFO, Kimberly Fontan. Attendees are asked to limit their questions to two. Management will make forward-looking statements and discuss non-GAAP financial information. The company has reported strong financial results for the quarter and has made progress with recent announcements, including a settlement in principle with the Arkansas Public Service Commission and an agreement to sell their gas distribution business. The adjusted earnings per share for the quarter was $3.27.

The company experienced record temperatures, leading to increased investments in key areas and a raised guidance range. They also announced a dividend increase and discussed their performance during the extreme weather, including record demand and successful power delivery. The company is also investing in their nuclear assets and power delivery to improve reliability and attract economic development.

The company has made significant investments in infrastructure and energy production, which helped them meet high demand during the summer. They are also expecting strong customer growth and have made progress on regulatory matters. This includes reaching a settlement with the Arkansas Public Service Commission and receiving approval from FERC on a previous case. These actions have reduced the company's litigation risk and improved customer outcomes.

The company has submitted a compliance report and recouped $40 million from Entergy New Orleans and Entergy Louisiana. The LPSC filed for rehearing and clarification, which was denied by FERC. The company believes the August order and settlement with Arkansas will help resolve remaining SERI litigation matters. Entergy New Orleans and Entergy Louisiana have new formula rates effective in September, and the company has filed a rate case and proposed to extend its FRP with revisions. The company prefers the proposed FRP renewal over the rate case as it better supports growth in Louisiana.

At the LPSC conference, a settlement was reached to resolve outstanding rate plan filings and implement a streamlined process for solar certification. In Texas, a rate case settlement was approved and Entergy Arkansas filed a settlement for its annual FRP. The company also agreed to forego cost recovery for incidents in 2013 and is moving forward with resilience proposals in New Orleans and Louisiana.

The company is focused on bringing value to customers while maintaining the credit of the business. They have significant capital needs to meet demand for reliable, resilient, and clean energy. They have agreed to sell their gas distribution business for $484 million to reduce debt and support capital needs. The sale is expected to be neutral to earnings and the buyer has agreed to prioritize the employees and continue high levels of service for customers. The company is also pursuing federal programs for grants and loans to source capital, with one project from Entergy New Orleans being selected for a $55 million share. Four other projects received encouragement letters and can reapply for future funding rounds.

Entergy is preparing to apply for federal loans to fund renewable energy projects. They are also working with community partners to attract federal support for clean energy investments in their region. They have already been successful in securing funding for projects in Louisiana and Texas. Additionally, Entergy is actively involved in economic development and has programs in place to assist customers in need, such as bill assistance and education on energy efficiency. They also hosted a summit to create job opportunities for individuals from underrepresented communities.

The company's utility companies and employees work hard to support their community stakeholders and their long-term growth and value creation remains strong. They have a robust sales growth outlook and are investing in clean energy and customer affordability. Despite inflationary environment, they are maintaining a flat O&M trajectory with the help of technology. They are on track to deliver steady earnings and dividend growth and will be discussing more at the upcoming EEI Financial Conference. The financial results for the quarter were strong and they are on track to meet their commitments.

In the retail sector, sales volume declined by 1% excluding weather. However, sales to new and expansion customers in the industrial sector increased, particularly in the primary metal, industrial gases, and petrochemical industries. Sales to Cogent customers were lower due to elevated sales last year. Sales to existing large industrial customers also declined, mainly in the petrochemicals, pulp and paper, and agricultural chemical sectors. The company expects strong industrial sales in the fourth quarter from new and expansion customers, bringing the full-year growth to close to 2%. Regulatory actions, such as new base rates and formula rates, had a positive impact on results. O&M expenses were lower compared to last year, driven by lower nuclear costs and MISO ancillary generator service costs. However, this was partially offset by expense increases from customer-centric investments. Operating cash flow for the quarter was $1.4 billion, $412 million higher than last year, due to timing of fuel and purchase power payments, lower O&M spending, and no severance and retention payments. Net liquidity remained strong at $4.9 billion, and the company is on track to achieve credit metrics at or above target ranges by the end of the year.

The paragraph discusses key drivers for the company, including debt repayments and the roll-off of FFO items. It also provides an update on the company's equity needs and adjusted EPS outlook, affirming a 6-8% growth through 2026. The company has higher revenue from weather, allowing for increased spending in areas that benefit customers and reduce risk. The FLEX program helps ensure steady adjusted EPS growth. The company's management team will be discussing their progress and plans at an upcoming conference. They are excited about opportunities and are available to answer questions.

Shar asks about the 2023 earnings and 2024 assumptions, specifically the offsets and carry-forward benefits. Kimberly explains that the positive weather impact and increased O&M spending have helped derisk 2024. The recent asset sale on the gas side will also contribute to the incremental capital needed for 2025 and 2026.

The company has strong sales and does not have incremental equity in the period. They will discuss their financing plan at an upcoming conference. The settlement in principle for the SERI complaints in Arkansas was prompted by a FERC ruling in August. The company believes it is a constructive step and is actively pursuing similar settlements in Louisiana and New Orleans. The company is hopeful for fair and reasonable settlements with these parties.

David Arcaro asks a question about the industrial sales backdrop, wondering about the activity around projects and major industrial customer expansions. Kimberly Fontan responds by saying that they continue to see a strong pipeline of new and expansion customers, and Roderick West adds that they are confident in their growth prospects due to the increasing number of projects and customers in their service territory. There has been no change to their projections for industrial sales growth. David Arcaro also asks about their competitiveness in renewable RFPs and any progress they have made. Kimberly Fontan mentions that their pipeline for solar self-development is developing well.

The company is confident in its ability to compete in the renewable energy space and is seeing growth in customer demand for clean energy. The U.S. Gulf Coast is experiencing a favorable economic environment due to the widening spread between natural gas and oil products, which is attracting investments in the region. Global geopolitical uncertainty and disrupted supply chains are also contributing to this trend.

The company is strongly supporting industrial growth in the Gulf Coast, particularly in their service territory. They are currently discussing resiliency options in New Orleans and have received feedback from staff engineers and the commission staff. The main areas of debate are scope, pace, and cost, with a focus on maintaining affordability for customers. The company has reaffirmed their 6% to 8% EPS CAGR through 2026.

The company expects rate base growth to continue at a 7-8% CAGR through 2028, driven by capital investments to support customers and their objectives. There may be additional capital spending for resilience and renewables, but the company is focused on supporting customer growth and providing reliable power. There are concerns about affordability and staying within regulatory caps, but the company is continuously working on improving efficiency.

The speaker discusses how they are managing against inflation and investing in capital to drive costs. They do not believe this will impact their rates significantly. The questioner asks about the potential for renewable opportunities and resilience programs, and the speaker mentions $900 million in resilience capital. The speaker also mentions a rate case in Louisiana and states that a settlement is preferred.

The company is in favor of continuing with the FRP regime as it provides clarity for both the company and customers. This also promotes certainty around recovery and allows for a smoother transition to fund growth and resiliency. The company believes that avoiding litigation is important for stakeholders and the FRP is the optimal outcome. It is too early to determine a timeline for potential settlements, but technical conferences in the coming months may provide some insight.

During a recent earnings call, the company discussed its outlook for utility operations and maintenance (O&M) for the year. They mentioned that they had to spend more on O&M due to record temperatures and peak demand, but did not provide a specific breakdown of how much was spent on derisking and maintaining reliability. They also mentioned that the approval process for the sale of their gas system is expected to take 18-21 months due to multiple stakeholders involved.

Management is working to get approvals for a potential transaction sooner, but the buyer is new to the business and may take longer to set up some back-office pieces. They are also considering all potential outcomes for the SERI venture, but believe they have made good progress with settlements in Mississippi and Arkansas to derisk the exposure. While they do not currently plan to end the venture, they are always considering options for the future.

The operator introduces a question from Nick Campanella of Barclays about the company's credit and the potential for reaching a 14% trailing 12-month rate by the end of the year. The operator confirms that this is due to debt roll-off and no additional regulatory approval is needed. The next question comes from Ryan Levine of Citi about opportunities for resilience spending and the company's equity issuance plan. The company has opened filings in Louisiana and New Orleans and plans to file in Texas in 2024. They have assumed a base level of investments for resilience and have enough capital in their plan to cover it.

Paul Patterson of Glenrock Associates asks about the SERI leaseback litigation and when there would be closure if there is no settlement. Drew Marsh responds that the FERC process could take two-plus years and that a settlement would provide benefits and value to customers sooner. Roderick West adds that there is no guarantee of full resolution in any scenario. Travis Miller of Morningstar also asks a question, but their line is unmuted and there are no further questions. The call is then turned back over to Mr. Abler.

Bill Abler thanks everyone for participating in the call and reminds them that the quarterly report on Form 10-Q is due to the SEC on November 9th. He also mentions that events that occur prior to the filing date may be reflected in the financial statements. He also reminds listeners to check the Regulatory and Other Information webpage for updates on regulatory proceedings and important milestones. However, this webpage should not be relied on exclusively for all relevant company information. The call concludes.

This summary was generated with AI and may contain some inaccuracies.