Entergy Corporation — 2024 Q1

It's actually Constantine for Shar. Can we start on the updated thoughts around the CapEx plan given the data points around resiliency and additional industrial customers. You had about $900 million in plan with a bigger number now approved. Is that pushing CapEx higher in the near term? And how should we think about the moving pieces there?

Yes. From a capital plan, we did get $1.9 million approved. We had $900 million through this outlook period. Of the $1.9 billion approved, about $1.5 million of that is in that same 3-year period. So that's an increment of about $700 million for Louisiana. The Louisiana portion of that $900 million was $800 million. So that's an incremental $700 million. How that rolls out through the capital plan, we'll update all that at the Analyst Day along with the effects of the rider and any other changes to our capital and our financing plan.

Okay. Perfect. And maybe can you help us reconcile some of the charges taken in the quarter and how the refunds may impact cash and financing needs in the near term? Just do you anticipate any pull forward of equity issuance? Or are there offsetting factors that we should think about?

We don't see any needed change in equity. We had already reserved a substantial portion of the income tax or the deferred tax effect for New Orleans. We did increase that, but the return period is a pretty long period, and so there's no material effect on the outlook period.

Perfect. And maybe just one last follow-up on some of your commentary around regulatory outcomes. Do you have any updated thoughts around the FRP process and rate case process in Louisiana? And is the period after the direct testimony of the make it right for the kind of more intense settlement discussions? Any kind of lessons learned that you can implement?

It's Rod. I think I can say, look, 5 weeks ago, we suspended the procedural schedule to facilitate settlement. If you think about the date of May 21, when staff and intervenor testimonies do, in the next 3 weeks, I think it's reasonable to assume that 1 of 3 things will happen. We'll either announce the settlement, we'll mutually agree to extend the dates procedurally to facilitate settlement, or pivot back to a procedural schedule. With the resiliency docket addressed last week, I think the next 3 weeks will be telling about the progress we'll make. But we're comfortable that the stakeholders in Louisiana are now focused on settlement discussions.

This is Rod. I can touch on that and certainly Kimberly can follow. But beyond the AWS transaction in Mississippi, we're continuing to see significant interest in the data center sectors, both hyperscale as well as colocation in Arkansas, Louisiana and Mississippi. But we continue to see strong interest from the metal sector as well, specifically aluminum and steel. With projects in various stages of development, you can add in there with the RRA, developments showing up in blue ammonia in addition to the conversations around carbon capture. And that's not to exclude what we would consider to be our traditional sectors of growth in the service territory around refining and petrochemicals. We plan to give more color, of course, at Analyst Day, but I didn't want to suggest that there was one specific sector. There's a fair amount of diversity in our backlog and growth outlook.

And Jeremy, just to add to that for the $0.15 for this year, you can think about that specifically as our historic industry along the Gulf Coast, and those industrial customers are online and taking power currently.

Well, I mentioned a few of them in my remarks earlier around some of the things that Rod just discussed and the opportunities that we see for growth from a sales perspective and where that's coming from. So more color and depth to that conversation. Certainly, more clarity around the kinds of investments that we plan to make. And that includes the generation side as well as the golden wire side, we're talking about reliability and resilience. Some of the work that we are doing to drive productivity internally.

Yes. You're right, being in a position where we can say comfortably that roughly 85% of the SERI risk has been addressed through settlement, it does lend itself to what I would think would be a compelling case to resolve the risk with the state of Louisiana. We can't speak and don't speak around the nuances of negotiations in any period. But we do believe that the fact that New Orleans is now off the table, it gives us a shot to pursue that with Louisiana near term.

Yes. It's Rod again. We're going to make that filing in the second quarter. And some of the considerations around the amount will be influenced by how we think about the contribution to the resilient spend from the state grant program, not to mention, to your earlier point, how the capital would flow through the recovery mechanisms affecting both affordability and credit. But we'll make that filing before the end of second quarter.

And I'll add that as you probably recall, the Texas part of the resilience investment was pushed back a little bit, because we had a lot of growth upfront. And so you probably won't see as much and that's where the grant piece comes in. And also the mechanism, as we've talked about before, since we have all of this growth in our service territory, mechanism doesn't work as well from a credit perspective for us. So we're working on that. We have another legislative session coming up, but you'll see all of that reflected in our ultimate resilience filing.

Yes. As far as the $411 million that is included in our capital plan from a protection, it's a technology that's been used elsewhere and certainly just not necessarily in this area along the East Coast. And certainly, it's expected to be resilient in heavy winds and storms.

And just to be clear, it's not out in the middle of the ocean, it is on land, but it's in a canal, so that it can float with the storm surge. And so that's really what we're talking about here, not an oil rigging out in the middle of Gulf.

Yes. Thanks for the question, Nick. When you think about the Mississippi Data Center, it ramps up over time. So you're not going to see a lot of that in the 3-year outlook period. We can talk more about what that means over the 5 years that Drew referenced at the Analyst Day. But you're right, when you think about AGM on that sort of customer, you are also putting in infrastructure to support it. So you saw a shift in spending in the fourth quarter update, where we added incremental renewables, for example, in Mississippi, because those investments and the associated costs associated with those investments will offset some of that from a bottom line perspective and then financing costs for those type of things as well. But again, you'll see most of that effect outside the 3-year outlook period.

Yes. The investment is the thing that will ultimately go to the bottom line. The AGM is there to support that incremental investment. So we think it's really important and it demonstrates the growth opportunity at the time in front of us and the demand from our customers to help them meet what they want to do.

We certainly have regular conversations with the rating agencies, and they are constructive conversations about what's happening in the business. If you look at our underlying calculation, the FFO trailing 12 months for the quarter was similarly strong to what it was at the end of the year. And then we issued more debt in this quarter, as I mentioned in my comments, that would balance out over the course of the year, putting us strongly in the rating agency's expectation at the 14% or better.

Short answer is no. We're pursuing our efforts with stakeholders on selling both and the interest being avoiding any litigation associated with either. So short answer is no, there's nothing preventing us from pursuing a settlement on both issues regardless of federal versus state jurisdiction.

So the gas LDC, as I mentioned, is on schedule. There's more details in the appendix. And so I think that at the LPSC, it's moving on quite quickly. The time line is a little longer in New Orleans. But at this point, we don't see anything that's impeding the progress and the ultimate completion of the transaction. So we're firmly confident there is a possibility that it could move up a little bit. But at this point, we're sticking with our third quarter 2025 time line.

Probably not. That's a new transformer. And as I know you're aware, there's a backlog for large transformers like that. And we don't have one of that size as a spare. So we do have the interim transformer ready to go, and it should be ready by summertime. That gets us back to about 90%. And so the plant should be online this summer, but we won't have full deliverability out of the plant that we get a new transformer in place. But you can run 90% just with the spare. So it's kind of most of the way. So...

I believe that they are expecting to put something out late this year, but the time lines have moved around a little bit for them, but I think that was the previous expectation. Just to be clear, you're talking about the long-term planning piece of it, right?

Yes. As you know, they've been in MISO North for a while working on stuff. And I do believe that they plan to put out some expectations later this year.

That's absolutely correct, Steve. And the Cogent sales were for the quarter, but that's really a volume difference, slight EPS difference. But as we discussed, the incremental industrial sales certainly support that, helping us achieve our objectives at the end of the year.

Yes, when you think about data centers, they certainly are requiring infrastructure to support them. And so we are ensuring that the pricing of those customers price in a way that support those customer coming, but also support the rest of our customers in the infrastructure build that's needed. When you referenced Mississippi specifically, we worked closely with the legislature to ensure that we had the ability to add the infrastructure that we needed, but also that we protected all of our other customers through the contract. So it was a benefit both to add the customer to the system, but also to the state of Mississippi and all of our other customers. And I would think about it the same way for future data centers that add to our service territory.

Yes, that's a good question, Angie. We are thinking about various potential solutions there. Right now, the output of those facilities are contracted for the life of the unit to each of the operating companies that participate. So I don't think that there's any room for data center pieces, but we are looking at all other alternatives in order to try to mitigate that future potential litigation risk, but that is definitely on our radar screen, although we don't have anything to discuss about that right now.

Yes, this is Rod, again. And I think Kimberly alluded to it. The example in Mississippi, I think, serves as a blueprint for other states when you think about how we shape both the legislation from the actual state, the contractual guarantees, if you will, from AWS, and the regulatory outcomes that facilitated our ability to meet AWS' needs, I think, plays well.

Yes. And I'll just add that given what Rod just outlined, our regulators and our communities are excited about these potential investments. There are large investments that are going to throw off a bunch of tax holders and provide some really good jobs. There are areas in Central and Northern Mississippi, Northern Louisiana and in Arkansas, there's a lot of rural space out there that data centers can go to. And those jobs are meaningful in those areas. So they're really excited about the opportunity for those investments and the economic activity that comes along with them. That's why, as Ross said, they're competing to figure out how they can serve these potential customers.

Yes, that's a great question. And where we are along the coast in Texas, a lot of the resilience investments and the wildfire investments is going to be very similar and overlapping. So yes, that is going to be part of it. I'm sure that wildfire is going to be a part of the conversation or legislature coming up early next year.

There's both there, Travis. The transmission certainly generally is less than the generation, but some of it is timing. When you think about it, we have long-term supply plans where we may have had generation in a plan and perhaps there's some earlier execution of it in order to meet that demand. And as you know, we're in MISO. So transmission is playing through MISO as well.

In Mississippi, the legislation enabled us to -- it effectively gave us CCN authority to build what was needed for that data center to meet their time line. So that doesn't require an RFP process. Some of our jurisdictions have RFPs and others don't. I think it comes down to a customer time line and how you work with all your stakeholders to bring the customer on the time line they're looking for, and then what that requires to ensure that we are building strong appropriate assets in order to support the customers overall.

Yes, the data center is unique in that it's a larger customer coming in at one time on a faster time line, but I would think about the planning principle is the same for all of our customers.

Thank you, and thanks, everyone, for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on May 10, 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.