Paula Waters - Vice President, Investor Relations Leo Denault - Chairman and Chief Executive Officer Drew Marsh - Chief Financial Officer Theo Bunting - Group President, Utility Operations Bill Abler - Vice President, Commercial Operations.

Greg Gordon - Evercore Paul Patterson - Glenrock Associates Julien Smith - UBS Dan Eggers - Credit Suisse Jonathan Arnold - Deutsche Bank Anthony Crowdell - Jefferies Michael Lapides - Goldman Sachs David Paz - Wolfe Research.

Good day, ladies and gentlemen and welcome to the Entergy Corporation Second Quarter 2015 Earnings Teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Paula Waters, Vice President of Investor Relations. Ma’am, you may begin..

Good morning and thank you for joining us. We will begin today with comments from Entergy’s Chairman and CEO, Leo Denault and then Drew Marsh, our CFO will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions.

In today’s call, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Additional information concerning these risks and uncertainties is included in the company’s SEC filings. Now, I will turn the call over to Leo..

One, the compliance timing. Two, the requirements the rule will impose on each state. Three, a state’s ability to elect a mass-based approach and establish a training ready plan. Four, the impact on the nation’s existing nuclear fleet, which in 2014 comprised nearly 63% of the U.S.’s emissions-free generation.

And five, the overall impact that we could have on our customers. You should expect to hear more from us on the months to come. In conclusion, I would note that as we have said in the past, our business is a long-term play. Short-term and even mid-term volatility is embedded in it, but is that does not detract from this company’s strong fundamentals.

We are confident that the growth opportunity in our utility service area is intact and we have a solid strategy to realize that opportunity. And we remain focused on managing risk and preserving optionality of EWC and that we will vigorously pursue our business plans and continue to make productive investments to help achieve long-term growth.

As a result, Entergy’s performance for the quarter as well as the year is in line with our expectations. Earnings expectations for 2016 remain insight and we are on track with our 2017 outlook.

As we noted last quarter, we expect that the stability and financial flexibility created by our actions this quarter, this year and indeed over the last several years will put us in a position to begin to act on one of our major objectives of sustained dividend growth starting with a discussion with our Board as early as this fall.

With that, let me turn the call over to Drew..

Thank you, Leo. I will start by covering our second quarter results and then I will turn to our longer term financial targets. Slide 3 summarizes consolidated earnings per share. In the second quarter of 2015, Entergy earned $0.83 per share in line with our expectations.

Additional details on the results are provided in the press release and slides published this morning. I will cover some highlights on results starting on Slide 4 where utility, parent and other had combined earnings per share of $0.87 on an adjusted basis. This compares to $0.98 per share last year.

Details of quarter-over-quarter variances can be found in Appendix B1 of the release and here are some of the key points. Despite a 1.5% decline in sales volume quarter-over-quarter on a weather-adjusted basis, our overall net revenue variance was positive.

This was partly driven by capital investments that benefit customers, such as the new Ninemile 6 plan. Residential sales growth also contributed as well as new industrial customers and expansion projects. The increase in net revenue was offset by a corresponding rise in related depreciation, operations and maintenance expenses and other items.

O&M increases not offset in that revenue included increased nuclear-related expenses of about $0.09. Over half was from increased nuclear regulatory commission oversight of the Arkansas nuclear 1 plant. Earlier this year, ANO was placed in column 4 of the NRC’s reactor oversight process.

The increased levels of cost for ANO were expected to continue into 2016. I will take a moment now to talk a little more about industrial sales volume this quarter on Slide 5. In total, the segment was down 1.5%, driven by our existing customers. Refineries were down the most quarter-over-quarter due to their turnaround season.

We anticipated a more significant turnaround season than last year, however, was a bit more expensive than we expected due to macroeconomic factors, such as high product inventories and a strong dollar. Core alkali was also down quarter-over-quarter and more so versus our expectations.

Utilization from this sector was lower than anticipated due to unplanned outages compounded by margin pressure from lower demand and the market’s recently added supply, including our customers. The decline in our existing large industrial group’s mass growth from expansions and four new customers who began to ramp up this quarter.

Continuing the trend from last quarter, these new customers and customer expansions are coming online and ramping up more slowly than expected. I will talk more about that later as part of our forward-looking view. Switching over for a minute to EWC, Slide 6 indicates operational earnings per share this quarter were about breakeven as expected.

You may recall that we said on the first quarter earnings call that the bulk of 2015 earnings were completed at that time. The quarter-to-quarter decline was driven by a $5 per megawatt hour decrease in revenue on the operating nuclear plants and lower volume from the 34-day refueling outage of Pilgrim compared to none last year.

This decline in EWC nuclear revenue was the primary factor in the operating cash flow change as shown on Slide 7. Also reflected was improved net revenue with the utility largely triggered by productive investments put in service to benefit customers.

For the full year view on Slide 8, today, we affirmed our 2015 earnings per share guidance with the midpoint of $5.50 and a range of plus or minus $0.40. Recognizing we still have the summer to go, we remain on track at each of our segments to meet full year expectations.

You may recall that we expect some tax items to come into play this year, but we currently do not expect any tax items in the third quarter. Slide 9 recaps the 2015 guidance midpoint for utility, parent and other, adjusted for weather, tax and special items in 2016 and 2017 midpoint outlooks.

These outlooks are consistent with our previous disclosures last year at Analyst Day and at EEI. The slide also provides 2013 and 2014 results on a comparable basis. This presentation illustrates how the base business has grown, with the expectations for continuing growth through 2017.

The two main drivers for this growth are making productive investments in improving our utility return on equity as shown on Slide 10. Importantly, our plans for capital investment to modernize our infrastructure, maintain and enhance reliability, and meet new compliance standards have not changed.

Our 2016 rate base growth includes the Union Power plant acquisition, which approved by the required regulators. We contribute roughly $0.02 per share per month in 2016. While we have made some adjustments to the structure, our regulatory procedural schedules in required jurisdictions still allow for us to close by the end of the year.

In addition, we have moved up the projected in-service date of the St. Charles power station project. Assuming LPSC approval next summer, the new construction drawdown schedule will accelerate about $0.03 per share of AFUDC into 2016 and $0.08 per share into 2017.

Approximately, 90% of our $8 billion of planned investment from 2015 through 2017 will fall under a formula rate plan, rider or other constructive regulatory mechanism. This percentage includes the forward test year, FRP proposed in the Entergy Arkansas rate case. New rates will be effective by early 2016 for the rate case.

And in early 2017, the changes are warranted in the first FRP review. Regarding sales growth for the balance of the year, we are already seeing evidence that the refining sector is once again performing as expected. However, with the core alkali markets challenged, the balance recently added supply.

Overall uses from these customers for the remainder of the year may not reach the levels we had anticipated. Still, new customers and expansions are coming online. Previously, we had indicated that the vast majority of our large industrial customers were already under construction or had reached their final investment decisions. This is still the case.

However, we have seen them trail their own expectation for the last couple quarters. Of 17 large industrial projects expected during the year, 14 are complete or under construction. Of the 14, most have experienced delays getting online and a few have lower ramp rates than expected or lower peak usage than expected.

Of the three that are not under construction, they currently are delayed and represent only about 0.1% of our expected industrial sales next year.

O&M expenses and other elements of managing our return on equity, you are anticipating some benefit over time from the roll off of temporary nuclear compliance cost and an estimate – an approximate 50 to 75 basis point increase in discount pension rate to 4.75% in 2016 and 5% in 2017.

Looking further ahead, we expect our capital investments and plant infrastructure, transmission and other distribution system improvements will ultimately lower O&M costs for our customers, while enhancing reliability in our service territory. We will persist in looking for every opportunity to control O&M costs as part of this.

Given current considerations such as capital investment, rate actions, cost changes and interest rates assumptions, our financial outlook continues to support our previously stated expectations for utility, parent and other earnings per share. As illustrated on the slide, for 2016, we are currently near the lower end of the range.

For EWC, EBITDA projections have declined as shown on Slide 11. Our expected energy and capacity prices have dropped by $1 to $2 per megawatt hour since March 31. As you know, wholesale prices are volatile.

We continue to follow our hedging philosophy that allows us to benefit from upward price movements, while protecting against the operational and credit risks. All-in-all, our actions this quarter and plans for the future represent sizable utility, parent and other earnings growth potential in the coming years.

The fundamentals of the utility business to achieve this growth are in place, including our solid credit profile reflected on Slide 12. Backed by these credentials, we are maintaining a sound financial foundation to make investments and better serve our customers. We will continue to execute on the plan we have laid out for you.

Every plan faces challenges, we are confident in our ability to meet them and succeed. Our mission as a company is to create sustainable value for our four stakeholders. Our owners, our customers, our employees and the communities we operate in. That mission is foremost than what we do everyday. And now, the Entergy team is available for questions..

Thank you. [Operator Instructions] And our first question comes from Greg Gordon from Evercore. Your line is now open..

Thanks. I have two questions.

At what point – and when we are looking at 2017 midpoint outlook, do you reassess the ramp rate on the industrial projects that are already up and running and the excess expected in-service those that are still in queue and give us a full update, it would seem that you really wouldn’t have the visibility for – with any degree of certainty until some point in early to mid-16, is that fair?.

Theo?.

Greg, this is Theo Bunting. As part of our planning process, we would try to as get much information around as we possibly can. And I think in terms of when we would – you would expect us to see some updates relative to that, we would probably be pointing toward EEI in that timeframe.

And as you said and as drew has mentioned in his opening comments that information does change from time to time. And our expectation is we will try to stay abreast of that as best we can and continue to update it as new information becomes available so that we can roll that into our overall expectations..

Great. Greg, this is Leo. I will just add while and we have said this since the beginning as it relates to the addition of these customers that there are big projects, billion-dollar investments, in some cases, $10 billion investments. Schedule is always an issue in that kind of thing.

Our sector has the same issue when we build big projects that are first of the kind or unique or whatever. The issue here is while its common and some may come early, some may come late, they may ramp differently the investment profile that we have got between now and then is remains intact.

And as you recall, the way the business model works, the rate base growth is kind of what we are targeting here. And so if you look out there whether they come in a little bit late, a little bit early, it doesn’t really change when these power plants come.

The only changes we have made, I think Drew outlined and a little more details would lie in the script is a couple of the capital projects that we had are actually coming up earlier than we had originally planned, just given the timing and the need and it’s a combination of this growth from this sector, but also the need to replace the aging infrastructure that we have and the opportunity to get these things done and constructed.

So it’s not just the sales piece of it that we need to look at it from a timing standpoint. It’s coming – some of it’s coming later because of the size of the projects and other factors, but the investment profile that we have got over the next several years through the first part of decade is pretty much on track..

Okay, understood.

So to get to your guidance aspiration for ‘17 and it reflects expectations for top line revenues from industrial, you would have to either readdress your expectations for revenue requirement from other customer classes reflects your costs then?.

Yes. I think that’s true and on a short-term basis, if we have said these productive investments we would expect to ultimately get into rates. And if the sales aren’t where we have expected them to be in any given period, you are right and you would have to adjust in another area..

Okay.

Second question is on EWC, obviously the power curves come off quite a bit in New York and New England, can we attribute that to winter premiums coming off or is it summer discounts getting steeper, some combination of both and do you think there was any market activity that you can see in the foreseeable future that might reverse that trend?.

Greg, this is Bill. A couple of things, I mean obviously we have seen gas prices come off tremendously at $1 since last summer. We have also seen some folks take some steps to try to mitigate the gas supplies issues, that type of thing, in terms of using LNG facilities for base loading of plants, that type of thing.

So I think there is a number of issues in the market that have driven those prices down.

As we look forward, we are – we are slightly bullish gas prices as we look into ‘16 that increases a little bit over time, but we are seeing some movement in New England in terms of some market structure improvements that would come on in the ‘17, ‘18 timeframe on some energy price formation issues that could be constructive.

I don’t anticipate at this point seeing the numbers we saw in 2014. I mean, that was largely driven by the polar vortex and kind of the after math of that, but we do see some constructive positive steps from an energy price perspective..

The reason I asked is because you moved your hedging, the construct of your hedges around a bit for next year and hedged up just a fair amount more, but you – there were no demonstrable changes in your hedge profile beyond ’16, is that a fact – is that a function of your point of view?.

Yes, that is a function of our point of view. And to be frank, what we are seeing out in the market as well, there is a little bit less liquidity out in the market. And obviously, we are not – we don’t want to ourselves in a situation where we are locking in at these low prices at this point in time.

So we are evaluating that as we go and we think there is some upside..

Thank you..

Thanks Greg..

Thank you. Our next question comes from Paul Patterson from Glenrock Associates. Your line is now open..

Good morning..

Good morning Paul..

Just I guess I wanted to sort of follow-up on that letter that you mentioned from Murkowski and some other Republican leaders regarding market reforms.

And I noticed this as well and I guess what I am wondering is I mean, how quickly do you think anything from that will actually come about and I mean I don’t know, I mean, they also sort of threaten legislation that they are going to get it done, I don’t know I mean I just wanted you just elaborate a little bit more what you think the practical benefit of that would actually maybe be?.

Sure. As it relates to that letter, I think it’s on track with our general thoughts in terms of what needs to happen in the market. We have had similar discussions with the ISOs and a number of other stakeholders.

We think that in general, depending on what gets implemented, there is upside potential of say $3 to $6 a megawatt hour as a result of these changes to energy price formation. Now the question on timing, this will come probably in increments.

And as you look at the timing of being implemented, you are probably looking at the timeframe of ‘17, ‘18 before they could actually make those changes to their systems and get those in place where we would see that uplift. Now the exception there is what we have got going in ISO New England as it relates to the winter reliability program.

That’s currently being reviewed by FERC as we speak. We could see some uplift there in the upcoming winter if we get a decision in our favor as it relates to that. So it will kind of evolve over time, but we see that happening across the next 5 years or so, 3 years to 5 years..

And it will be a series of debt is what we are talking about I guess as opposed to one sort....

That’s what I would think, Paul is it’s I think just having discussions with the ISO, there are some practical issues you have to deal with in terms of how you can change the systems associated with that and so they are more than likely would be steps taken along the way as opposed to one just big massive change..

Okay, great. And then just on the – on Friday there was an order out of FERC that denied the authorization that some of subsidiaries were seeking for – to issue and sell securities and what have you.

And I can’t recall seeing that before with FERC, think it was kind of run of the mill, maybe I am wrong, so I was a little surprised to see that they rejected it, I know that you guys can put pressures, you can re-file, I was just wondering is there any significance to this or is this just sort of a hiccup that happened because of the format which they seem to be unhappy with or how you guys report it, could you just elaborate a little more on that?.

I think you hit on most of it in terms of the format. They have a way of using backward-looking results to assess what the coverage ratio ought to be. And we had suggested some changes to that and they didn’t want to put them in.

So I think it is a bit of a technical challenge, but we should be able to put the new filing in and get that complete fairly quickly..

Okay. Thanks a lot..

Thank you..

Thanks Paul..

Thank you. Our next question comes from Michael Weinstein from UBS. Your line is now open..

Hi, good morning. It’s Julien..

Good morning, Julien..

So perhaps, first question just as it relates to Texas and East Station and the decision to pull that out.

Just to be curious, could you jive that with the RFP and what the ultimate thought process is around pursuing self-build options or acquisitions under rate base? I suppose what drove the decision to provide a little context and ultimately next steps?.

Theo?.

Hey, Julien, this is Theo. As Leo indicated, I mean, really in Texas, it came down to – it was clear that a clear path in Texas that the parties really preferred a long-term capacity solution located in the State of Texas. And as he said earlier, our Western RFP is seeking just that.

Our objective in Texas is to obtain support of the staff and the customer groups or approaches that meet the generation’s resource needs in Texas. And I mean, clearly, as the record indicated as it relates to Union transaction that was not the case.

And as Leo mentioned in the script also in the opening comments, there has been interest expressed in New Orleans and we are pursuing regulatory approvals. We will pursue regulatory approvals in New Orleans with the City Council relative to that. The second part of your question, I am not sure I understood when you said kind of what’s next..

Right.

I suppose fundamentally there is not necessarily any opposition to doing rate-based or cell phone options per se, right? This was more about a locational angle on the plant rather than your ownership of the unit per se, correct?.

We don’t believe there is any opposition to self build. Matter of fact, if you look – if you go explore the record I will mention by the other parties around another option being a self-build option in Texas. So, we don’t clearly believe there is any opposition to it. It was just a preference in Texas, the interveners and other parties in Texas.

And clearly, I think their views and comments relative to other options made it clear that was self-build. It is something that could be pursued in the future..

Got it.

And then separately on transmission, I know you have provided some background here, but I would be curious, I suppose MISO did an out-of-cycle study on MISO’s doubt during the quarter, could you elaborate on that as it relates to the studies that you discussed yourself at the various capabilities? And ultimately, how that jives with your capital budgeting process and if that’s already reflected in your CapEx expectation?.

Sure. I am not – when you talk about, I mean, we had one out-of-cycle project, I believe, which was the Lake Charles project. But in terms of just transmission and MISO in general, I mean, as you know, we have a fairly robust transmission investment in ‘15 through ‘15 – ‘15 through ‘17, I am sorry, capital cycle. We nearly doubled in ‘15 versus ‘14.

And as Leo went through his opening comments, he mentioned a number of transmission projects that are currently being approved and the process of being approved and will be underway shortly, approximately almost $800 million of transmission projects. So, we feel good about the fact that we have got transmission opportunities.

In terms of the MISO study, the VLR study in that MISO accelerated six projects into ‘15. And largely, most of those projects were already in our plan, but what we do see potentially is an opportunity for acceleration of some of those projects.

And the fact that MISO is moving forward in that process gives us our confidence as these projects will be approved by MISO..

And perhaps just to clarify is that already reflected in your CapEx outlook as it stands today?.

For the most part, yes..

Alright, great. Thank you..

Thank you, Julien..

Thank you. Our next question comes from Dan Eggers from Credit Suisse. Your line is now open..

Hey, good afternoon guys. Leo, just on the industrial outlook and kind of maybe the longer term prospects, can you share a little bit about how much time you are spending on economic development and kind of your quoting industrial customers and you were pretty busy last year.

How is that changing, if at all, right now?.

I will let Theo jump in, but we continue to work that process across all of our jurisdictions.

You have seen a lot of success, obviously, with things that are under construction in the near-term, in the Louisiana, Texas, Arkansas and others, but we have – as we mentioned earlier, as we went through our reorganization last year, one of the things that we had done was beef up the business and economic development functions and we continue to have those folks out working the process, things like the region designation here in Louisiana and other things we are working to make sure that we help continue to promote the region.

So, I guess how much time we spend in quite a bit, some people – we have a department that’s their full-time job working with the states. And obviously, the states are backing off this either as all of them are working, working very diligently to try and help bring economic development.

So, that includes we continue to utilize our site selection database. We continue to try and pre-certify sites. We continue to build transmission into areas that could house more manufacturing before the fact that they are not necessarily ready yet.

So, all of those things, both in our activities from an economic development, operationally and also from the regulatory process, we are continuing to pursue forward on all of them. Theo, I don’t know if you want to add anything..

I guess, Dan, one thing I will add in addition is we continue to work very closely with states in which we serve.

And as Leo mentioned, we – in the regulatory environment itself, I mean, if you look at some of the transmission projects, he mentioned that we have done some of those transmission projects or specific around working to foster economic development in the regions.

So, we have a lot of people dedicated full-time to helping the regions that we serve growth. That’s part of our growth story..

Okay. So, I guess if I think about the economic growth from here, maybe I will say it differently.

If you look at industrial demand, industrial recruitment today are the whiteboards more full or less full than they were 6 or 9 months ago? I mean, is the population of opportunity changing as you talk to customers?.

I would say we are continuing to pursue more opportunities and tried to keep that pipeline growing. I mean, that’s our objective quite frankly is to do as much as we can to continue to see a growth in the pipeline.

In terms of kind of where we are now versus 6 months ago, I would have to go back and look at the data specifically, but it is something we focus on. And we understand that having a strong pipeline is really a key to having success in the economic development area..

And I will just add the investments that we are making in the system again make the area more conducive. So, we are modernizing the generation fleet. We are improving the fuel cost because of that.

We are improving reliability, because we are building things like the Lake Charles Transmission Project that’s going to not only help serve the customers that are under construction down there, but it’s going to beef up the system down there to be able to handle more. So, we are – we kind of get out.

While we are placing the aging infrastructure, beefing up the reliability to meet new requirements and to meet existing construction of those facilities, it puts us in a better position to bring those in. So, the investment profile helps fulfill not only what we are doing right now but bring other stuff in as well..

And I guess just separate from market reforms, when you guys think about your more than and your point of view, do you see gaps against the fours, where you think New England New York prices should be today and maybe help quantify what you think the delta is with the sell off in power prices?.

Yes, I don’t. I think what we are seeing obviously from a supply perspective is continued growth in the supply in Marcellus. Obviously, that is creating a discount to Henry Hub. And as we look forward in terms of our pricing, we don’t see those numbers going above 4% anytime in the near future.

I mean, we see that staying fairly consistent with now, but again, I said we are bullish. So, we see it rising, but not getting above that level. So, that’s kind of where we sit. And obviously, the power prices are commensurate with that. I mean, as you look at that from an energy price perspective..

And that’s true. I will just add that once you get out little further on the curve and don’t mention this earlier, there is a bit of liquidity discount that’s out there.

And we have seen this in the past as you roll the props, some of that comes out of the market and improves things a little bit, but some of that had gone away last year, but it seems to have reasserted itself again.

So, I guess but for some backwardation because of liquidity you think the curves are pretty realistic to where the fundamental value is?.

No, I have said we are still slightly bullish. For ‘16 we are a little bullish and that kind of increases as we got – go out over time, but it’s relative to where we were a year ago. It's, obviously, a lower price level..

Okay, got it. Thank you, guys..

Thanks..

Thank you. Our next question comes from Jonathan Arnold from Deutsche Bank. Your line is now open..

Well, good morning..

Good morning Jonathan..

Leo, could you just help us kind of parse your statement about the dividend still being potentially up for discussion in the fall, when we would look at your utility, Parent & Other, the low end of guidance for 2016 would put the pay out ratio above 65% to 75% target a little bit.

So you are going to be thinking about other things beyond payout?.

What we are looking at is a long-term perspective, Jonathan in the growth and the business. So I think the way I have characterized it in the past is that we are looking out several years. We are looking at sustained dividend path. We are not going to jump around with it to follow when earnings go up a bunch in 1 year raise it a lot.

When they don’t go up raise it a little, we are trying to get ourselves more of a glide path view about the long-term prospects of the company.

And as we have said, we look at the investment profile that we have for the aging infrastructure, for the reliability requirements, for environmental needs as well as the growth we are seeing in the business and that helps facilitate all of that.

And we see an upward sloping long-term trajectory that would indicate to us that the time is right to look at when to start to follow that earnings path, and that could be as early at this fall..

Okay, thank you..

Thank you. Our next question comes from Anthony Crowdell from Jefferies. Your line is now open..

Good morning. Just two quick questions, I wanted to follow-up on Dan’s question, your view on gas, I mean is it closer to the $3 number or the $4 number.

And second, in your comment, Leo, you had stressed or stated that EWC makes up roughly 15% of the consolidated company’s earnings, where is the sweet spot there with EWC?.

You want to talk about gas?.

Yes. I think on the gas price, I mean, you guys know where it is right now, we are closer to the $3 level and the $4 level at the front end of the curve..

As far as the sweet spot, I mean I wouldn’t say there is a sweet spot or not, it’s just the fact of the matter is right now, the investment profile that we have and the utility is very, very robust. The opportunity for returns are very good there.

The need for the investment, because of, as we have mentioned before 75% of our non-nuclear facilities in the utility are over 30 years old, I mentioned the Michoud plant, for example in my prepared remarks.

That’s a plant that’s been online since 1960s and there are more efficient ways currently if we – once we beef up the transmission system and meet the MISO requirements to be able to serve that load and deactivate that unit, we deactivated 25 units since 2010 and we continue to go on the path to have more and bigger units in that realm as we add to the system.

The risk reward trade off is just better at the utility than it is at EWC for our deployment of capital. So it’s less than 15% and I am being generous with that because I take out the tax benefits that we are showing up in the 2015 numbers before you get close to 15% in 2015.

And if you just protect out forward what’s happening with the utility business and the growth profile we have there, 15% becomes smaller. The 15% become smaller and smaller as we go through time given that trade off. So there is no sweet spot, it’s just a fact. And as it relates to the business itself, it’s a different business.

It should have a different investor mix. It should have a different dividend profile. It should have a different commercial reality. And so our objectives right now are to grow the utility business and we – we have no plans to grow the EWC business to merchant business, given that risk-reward trade-off and the different investor base.

But the fact is over time, between now and 2020 in particular, we are going to become more and more and more a utility. That’s just the fact..

Great. Thanks for taking my question..

Thank you. And our next question comes from Michael Lapides from Goldman Sachs. Your line is open..

Hi, guys. Just I wanted to make sure I understood something on the utility capital spending levels and the utility demand trends, it strikes to me that your tone today was that the demand trends a little bit softer or maybe a little bit more delayed than expected.

But then when you talked about the capital spending trends and the generation, it seems as if several new projects have moved forward a year or so, I am just curious, it seems like if demand more pushed out a little bit, maybe projects would get pushed out, not accelerated, but can you just kind of walk me through the difference there?.

Well, I will start and let others jump in, Michael. But the – remember for almost a decade, we have had I think we called it the portfolio transformation strategy where we have been working to replace the generation fleet over the course of the last several years, maybe not quite a decade, but maybe close.

We have seen an ever-changing landscape of the reliability requirements out of the NERC and certainly the continuation of environmental policies, etcetera, whether it’s MATS, or now CPP or what have you.

All of those things have created a real need for us to continue to modernize our generation fleet to add new transmission facilities and to make investments in environmental compliance and we are going to continue to do that.

We are at a point now where we – as we change out that generation fleet, it’s turning more and more, absent the union projects, turning more and more to construction to replace that aging fleet. So that part of the process is reasonably agnostic to what the demand growth is.

You are changing out the megawatt for megawatt because you get the more efficient new power plant in place versus one that with the O&Ms creeping up, etcetera, because of its age that just happens over time. So that’s really not changed one way or the other. The growth whether it’s a little bit delayed or not, is still pretty crisp.

And we are making plans to build generation and replace the aging infrastructure as well as meet that new demand. If a plant slips a year, that doesn’t really change the capital program.

And in fact even as long ago as Analyst Day when we were asked, so what could be your capital program, we said, well not very much, because it’s a long – you got to plan this stuff in advance.

So even back then, we had mentioned that the capital program around the edges wouldn’t change a lot as long as the demand growth stayed in a reasonably close proximity to what we are seeing.

And so delays, one way or the other where – what we mentioned back then might have some impact, that projects might move around, but that they were still going to show up.

So all it is, is sharpening the pencil on the need for the facilities and when we can get it done based on the age of the fleet, interaction with the transmission system and when this stuff is showing up. And right now there hasn’t been big enough shifts in anything to change the construction program versus where we were. We have a couple of projects.

We are going to market test for an earlier project. We are bringing the new generation here at St. Charles project online a little earlier. We brought Ninemile 6 online early. And I think we have learned from that in terms of the timing it takes.

So we were embedding in some of these projects how long it would take to go from planning to development to construction and we have proven we can do it faster and at a lower cost and that’s what happened in Ninemile and that’s what we had anticipated what happened at St. Charles project and likely happens on some of the other stuff as well.

So we are – the construction program meets many needs, sales growth is one of them and an important one we have to be ready, willing and able to serve these customers when they show up. And if they show up six months later than they had planned, we still want to be there with a reliable system when they show up and that's really all we are doing..

Got it.

And then one question on EWC, what do you see is the impact and do you think it’s already embedded in market expectations for some of the new pipeline projects, maybe constitution, which is coming online in New York, there is also some smaller pipelines that actually came on in New York pretty recently as well as some of the more longer dated projects, the Eversource and Spectra projects or the Kinder Morgan 1, to get you new gas up into New England?.

I think the Eversource-Spectra project is one that is kind of included in the current market expectations. Obviously, in New York, I think those are progressing well and are also kind of already included in the market.

I think the issue is going to be how do some of those get paid for specifically in New England and how – what is the cost recovery mechanism going to be and how is that going to work, is it going to go through the legislative process. And then – but I think a lot of that is built into expectations kind of going forward..

Got it. Thank you, guys. Much appreciate it..

Thanks Michael..

Thank you. And our final question will come from David Paz from Wolfe Research. Your line is now open..

Hi, good morning..

Good morning, David..

I believe your 2017 utility outlook expected 3.25% or 3.75% retail sales growth on average, just want to make sure, is that still – does your outlook still expect to reflect that figure?.

Well, I mean we have continued to look at that and as Theo mentioned, we will have a fuller update later this fall, probably the EEI, but our expectations given the number of changing variables are that we are still in the middle of that range..

Great.

And do you just have – I don’t know if you have given this before, but have you – what would every 100 basis point change in that figure do to your 2017 target, all else equal?.

I don’t know that we have published a rule of thumb on the growth rate of industrial change. Certainly 1% change in our existing base is about $0.11....

Total….

Yes. So it’s like $0.02 for industrial, $0.04 for commercial, $0.05 or so $0.06 for the residential piece. So I think – and that's a 1% change across all segments, so on the existing piece. But I don’t know that we have published a rule of thumb around sensitivities for the industrial change in the growth piece, 1%.

It would be a little different than the existing piece because the existing piece has the demand charges built into it already and so you would only be seeing the variability around the energy piece that we actually sell to customers. So – and that’s about 50% of the margin for the industrial piece.

So I don’t know, it seems like there might be about $0.04, but I don’t have those numbers in front of me..

Okay, that’s helpful. Thank you..

Thank you. And I would now like to turn the call over to Paula Waters for any closing remarks..

Thank you and thanks to all for participating this morning. Before we close, we remind you to refer to our release in website for Safe Harbor and Regulation G compliance statement. As a reminder, we plan to file our quarterly report on Form 10-Q with the SEC this week. The Form 10-Q provides more details and disclosures about our financial statements.

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Our call was recorded and can be accessed on our website or by dialing 855-859-2056, conference ID 44024303. The telephone replay will be available until August 11, 2015. This concludes our call. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day..