Good day and thank you for standing by. Welcome to the Entergy Corporation First Quarter 2021 Earnings Release and Teleconference. At this time all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session.[Operator Instructions] Please be advised that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to your speaker today, Bill Abler, Vice President of Investor Relations. Please go ahead..

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 who has questions. We request that each person ask no more than one question and one follow up.

In today's call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors, which are set forth in our earnings release, our slide presentation and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements.

Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the Investor Relations section of our website. And now, I will turn the call over to Leo..

Thank you, Bill. Good morning, everyone. We had a strong first quarter, and our team successfully executed on several fronts. I’ll begin with the highlights. We are reporting first quarter adjusted earnings of $1.47 per share. That's an excellent start to the year and it keeps us on track to deliver on our commitments to you and all our stakeholders.

In addition to solid earnings, we reached settlements of several important issues; reducing risk, providing long term clarity and solidifying a clear path for our future growth. In Arkansas, we resolved the FRP through settlement and legislation, which included a five year extension and an equitable outcome for the netting adjustment.

We reached agreement on a three-year extension of the formula rate plan in Louisiana, our largest jurisdiction. We received an initial decision in the System Energy ROE and capital structure case.

While we believe we have strong arguments for a better outcome in the final FERC decision, the ALJ recommendations would be manageable within our current long term forecasts. We filed the joint settlement agreement among all parties paving the way for the sale of the Indian Point Energy Center to Holtec before midyear.

We are pleased with the outcomes of these proceedings as they provide certainty for you, our owners, and regulatory clarity with more than 90% of our capital plan to be recovered with timely mechanisms.

This enables us to continue to make investments in a cleaner generation fleet and a more reliable delivery system that benefit our customers and our communities and support the long term growth of our business. Last quarter, we provided a comprehensive update on our clean energy efforts.

We are intently focused on expanding renewables while pursuing other clean energy solutions like hydrogen and carbon capture and investing in the utilities carbon free nuclear fleet. So far this year, we have initiated three requests for proposals totaling 1000 megawatts of renewables.

We are also exploring structural options for renewable projects that will lower the cost of these investments for our customers, and help ensure that we have the capital required for other needed investments that benefit our customers. Our renewable portfolio has grown significantly.

We have nearly doubled our renewables capacity over the past three years with announced projects and RFPs we have clear line of sight to more than 2500 megawatts by the end of 2025, which will more than quadruple our renewable capacity from 2020. And we expect to double that with more than 5000 megawatts of renewables by 2030.

In addition to renewables, we're also looking at other technologies that will help us achieve net zero carbon emissions. Those technologies include -- that to combine with renewables to provide short term storage flexibility.

We are actively developing options to utilize hydrogen to support and leverage a large renewable fleet and provide clean energy with long term flexibility.

We see hydrogen as a form of long duration storage for renewables, which when combined with our nuclear fleet, allows us to add additional intermittent renewable power to the grid and yet maintain reliable, dispatchable power that is 100% clean. Entergy’s service area is well positioned to play a key role in the transition to green hydrogen.

As we are in the heart of hydrogen producers, pipeline, storage, and industrial users. We have relationship with Mitsubishi Power to advance our future in hydrogen. Together, we are working on the Orange County power and storage project, which will be hydrogen capable day one, and eventually able to run on 100% hydrogen.

We're also developing the Montgomery County Innovation Center to advance electrolysis to produce hydrogen. Long term, our goal is for all of our capacity to be low or zero emitting.

In addition to operating one of the cleanest large scale generating fleets in the country, we are committed to helping our customers meet their sustainability, reliability and cost goals through electrification. This is an excellent long term opportunity for us to create sustainable value for our customers across the Gulf south.

We've already described how our shore power initiative has the potential to lower our customers emissions, and upgrading costs while we grow our business. In March, we announced the electric highway coalition, a multistate electric vehicle charging initiative.

This collaboration will increase the number of charging options across multiple states, thereby improving convenience of long range driving with electric vehicles. Our fleet plan will also improve our carbon footprint.

With the help of our vendor partners, we have set a goal that all newly acquired passenger vehicles, forklifts, pallet jacks and similar equipment be fully electric starting in 2023.

As Congress puts together the legislation to implement the overarching vision of President Biden's infrastructure initiative, we see potential opportunities to improve services to our customers, improve the resiliency of the power delivery system, enhance our transition to low and zero carbon power generation and produce growth for our region.

The proposal is far from [fine] [ph], but the environmental and social goals are aligned with our values and the work we are doing.

Because of the improving economics of renewable resources and our customers desire for green power to support their own sustainability goals, we believe there will be support for projects that will benefit all of our stakeholders. With policy support, those projects can be done faster and at a lower cost.

On Monday, we announced leadership changes in our utility organization that will sharpen our customer focus. David Ellis has been named our first Chief Customer Officer.

He will lead utilities strategic efforts aimed at delivering extraordinary customer experiences, while also bringing to market innovative solutions to keep pace with evolving customer needs and expectations. David has nearly 30 years of experience in customer solutions technology, energy management and reliability.

Deanna Rodriguez will succeed David as President and CEO of Entergy New Orleans. Deanna has been with Entergy for 27 years. Her industry experience combined with her background in regulatory affairs, make her ideally suited for the role.

The addition of David as our first Chief Customer Officer as well as Deanna’s move to New Orleans show our commitment to improving our customers experiences and building the premier utility. We all know that our employees rose to the challenges of 2020. And their resiliency has continued this year.

The ice and freezing temperatures of Winter Storm Uri this past February presented challenges across many aspects of our operations. Our employees worked tirelessly to balance the system and minimize customer outages. We committed $650,000 to help community non-profits and qualifying customers who were affected by the winter event.

Grants went directly to local non-profits assisting low income customers with emergency needs including food banks, and SBP, an organization that helps communities rebuild after weather events.

Additionally funding was also provided to the power to care, which provides Payment Assistance to Entergy customers who are low income seniors and people with disabilities. We also implement a new bill payment options for customers experiencing financial hardship.

Indian Point Unit 3 will shut down in just a few days and we expect to complete the sale of that plant in just over a month. The Indian Point team is finishing strong as operations wind down in fact, they are finishing so strong that they set a new world record for the longest continuous run for a light water reactor.

I would like to thank the employees of Indian Point for their dedicated service to the plant, New York and to Entergy. Through this entire shutdown and sale process, we have remained committed to our employees and all those qualified and willing to relocate have been offered positions.

We look forward to them starting the next phase of their careers with us. As I said, it's been a very productive start for 2021.

And we will continue to successfully achieve the milestones that keep us on track to deliver steady predictable earnings and dividend growth for you, our owners, while investing to benefit our customers and creating value for all our stakeholders.

Before I hand it over Drew, I encourage you to read our recently released 2020 integrated report, “Forward Together”. The report outlines the significant accomplishments of 2020. When faced with circumstances that threatened to divide us, we chose to tackle challenges head on and move forward together.

We supported our customers, employees and communities. We champion diversity, inclusion and belonging and we delivered on our financial commitments.

The report outlines in detail the solid foundation that underlies our strategy to deliver steady predictable growth, including sustainability leadership, among the lowest retail rates in the country, one of the cleanest large scale generation fleets and getting cleaner, a robust customer centric capital plan, constructive regulatory mechanisms, and a commitment to continuous improvement for the benefit of all of our stakeholders.

With the solid foundation that we have built over the last several years and the significant opportunities that lie ahead, we are more excited than ever, for what our future holds. I will now turn the call over to Drew who will review our first quarter results as well as our outlooks..

Thank you, Leo. Good morning, everyone. Today we are reporting strong results for the quarter. As Leo mentioned, we successfully executed on several fronts and resolved key regulatory proceedings.

As a result, we continue to improve the clarity on our strong path forward, we remain confident in our future growth and we are affirming our guidance and longer term outlooks. As you can see on slide five, we have a strong start for the year with adjusted earnings of $1.47 per share.

Turning to slide six, you'll see that the primary drivers for the positive quarter were straightforward and largely a result of investing for our customers and executing on our strategy. We continue to see the effect of rate actions across our jurisdictions to recover the investments we have made to benefit customers.

Operating expenses including O&M and depreciation were also higher. Revenue sales were stronger with and without the effects of weather, and the weather was largely due to winter storm, Yuri. This is tempered by lower sales quarter-over-quarter and other customer classes due to the effects of COVID-19.

Although overall sales were in line with our expectations. This quarter's results also included the reversal of a regulatory reserve that we recorded in fourth quarter 2020. The Reserve reflect the Arkansas Commission's original order on the 2021 formula rate plan.

With further legislative and regulatory clarity on the netting adjustment methodology reserve is no longer needed. And income taxes were higher due to items have benefited 2020. Our first quarter financial performance combined with an improved result in Arkansas has put us in a good position.

Following up with the plan, we discussed last quarter, we're now able to pull flex levers and put back some of the spending in investments for the benefits of our customers. Moving to EWC on slide seven, as-reported earnings per share were $0.19, $0.74 higher than the prior year.

The key driver with better market performance of EWCs nuclear decommissioning trust. As Leo mentioned, we filed a joint settlement with the New York Public Service Commission earlier this month, which is a key milestone for the sale of Indian Point. And we're on track to shut down the plant in two days as well as close the sale near the end of May.

Over the past several years, we have worked systematically to eliminate risks associated with exiting the business. This includes regulatory risk, commodity price risk, operational risk as evidenced by in Indian Point’s record run and risk for employees.

In fact, we have said many boys will continue their careers in other areas, other areas of Energy's operations or with Holtec. The result is that we have dramatically improved our business risk profile and are at the threshold successfully exiting EWC next spring. Slide eight shows operating cash flow for the quarter.

The result is lower than you may be expecting but it's caused by two timing related factors of which you are aware. First, Deferred fuel cost, mostly due to winter storm Yuri and discussed in our last call are approximately $350 million in the quarter, and we expect to recover them over the next few months.

And second, the payments for noncapital costs related to last year's hurricane restoration efforts were approximately 200 million. These hurricane restoration costs will recover through our storm recovery filings. Despite this quarter's results, our three year operating cash flow expectation of more than $10 billion has not changed.

As you might anticipate this affects our current credit metrics which are shown on slide nine. Our Parent debt to total debt is 20.3% and our FFO to debt is 8.2%. As we have mentioned for the past few quarters, our FFO to debt is temporarily suppressed in part due to financial impacts from storms, including winter storm Yuri.

FFO is lower as a result of the higher deferred fuel costs in the non-capital portion of the storm restoration costs, while debt is currently higher as it was used to pay for the restoration efforts. As we said, the debt will return to normal once we received securitization proceeds next year.

We made our first storm recovery filing in Texas this month, and we will file in Louisiana in New Orleans in the near future. Also legislation is moving ahead and Louisiana and Texas to support off balance sheet treatment. And both dates this legislation has already unanimously passed one legislative chamber and now moves forward to the other.

We remain committed to maintaining our investment grade profile and exporting credit targets and we still expect to be at or above 15% for FFO to debt next year, and to remain below 25% for Parent debt to total debt. Moving to slide 10. We are affirming our 2021 adjusted EPS guidance range of $5.80 to $6.10, as well as our longer term outlooks.

As Leo mentioned, we settled the Entergy Louisiana formula rate plan and resolve the Entergy, Arkansas formulary plan, including the appropriate netting adjustment methodology, and a five year extension. Our O&M and capital spending plans are aligned with these outcomes.

In addition, as we progress through the year, we'll continue to utilize our flexible spending levers to support steady, predictable earnings growth. Looking ahead, we continue to have a clear line of sight on our 5% to 7% annual growth rate for adjusted earnings per share.

And we expect to grow our dividend commensurate with our EPS growth rate in the fourth quarter of this year, subject to board approval. We have a solid foundation to achieve our stakeholder objectives built on operational excellence and risk reduction.

As we move forward together with our stakeholders, we see a clear path for future growth through our core utility, business and emerging opportunities associated with sustainability and improving our customer experience.

This includes hydrogen and renewables on which we are keenly focused as we have discussed, and which we expect to benefit all stakeholders and support our growth trajectory throughout the decade and beyond.

We see 2021 being another successful year for Entergy and we look forward to great opportunities ahead as we work toward our goal to become the premier utility. And now the Entergy team is available to answer questions..

[Operator Instructions] Our first question comes from the line of Shar Pourreza with Guggenheim Partners. Your line is open. Please go ahead..

Hi, good morning. It's actually Constantine here for Shar. Congrats on a great quarter. A couple of quick questions here. So you reiterate guidance and kind of the strong result of the first quarter.

Are you starting to trend to the top half of your current range given the strong results and maybe some of the moving pieces here? And is there some sort of reserve in the current plan for the SERI complaint on the leaseback and tax issues? Any kind of color you can give?.

So this is Drew. On the first question, obviously, it's just the first quarter it's early in the year, I would say we're off to a really good start. And in some of the things that are in our numbers, this quarter, we have said that we would flex up to put the spending back in that we had taken out to adjust for the order like for example in Arkansas.

So I would say we are we are very comfortable in our range right now. But since it's only the first quarter, we're not making any adjustments just yet. And then as in regard to the reserve for SERI on the [insert and tax position.

We have not] [ph], as we said before, we haven't made any reserves for that position, we still believe that we have a good position in regards to that case. And nothing has changed in that regard that would cause us to think otherwise because nothing's changed. We haven't taken any reserves from an accounting position..

That's excellent color. And just one follow up on kind of given the recent regulatory outcomes and kind of how you move your plan around.

Has that changed that two and a half million dollar equity need outworks kind of maybe a few moving pieces there and given the disconnect between the stock, are you potentially looking at any kind of alternatives to satisfy that equity content, whether it's different instruments or any kind of asset modernizations versus issuance?.

Yes. So in regards the amount nothing has changed, in that regard. And that we are, we're still where we were, when we talked to you last summer. The other thing associated with the methods in which we might go access that equity capital, we've talked a little bit about that in the past, certainly, we have the ability to go do walk equity.

But more recently, we put a plan in place to do at the market. And next week, we have our proxy results, which we've requested from you, all our owners, to, to allow us to do preferred equity, we think that gives more flexibility, in terms of accessing that capital.

And we think we can do it in a more shareholder friendly way because it gives us the opportunity to potentially convert and not dilute our existing owners today. So that's something that we're looking to, to get next week. And so we'll know the result of that.

In regards to I think the other thing that you're hinting at is something that we addressed last quarter as well around the potential sale of a portion of equity from an operating company. Going forward, and as we said, there is a difference between obviously the cost of equity at the operating company and where we are trading today.

So that that is something that we were we would look closely at but that is still very much a strategic decision that’s a long term decision. And it's sort of masquerading around as a financing decision.

And it's really not because you can't do the transaction and then close in a couple of days, you're going to be waiting 18 months to 24 months, because you got to go get regulatory approval in our jurisdictions. So it does make it ideal from that perspective.

There are other considerations that you have to also take into account, in addition to the regulatory and the timing risk, as we've seen, others execute on that it didn't actually solve their credit problem. They ended up getting downgraded anyway. So that's something that we would be have to be keenly aware of.

But as a strategic issue, it's something that we pay attention to. And it's something that we are evaluating and continue to evaluate because of the price differences out there, because strategic question that it starts to get into the more M&A stuff around.

Okay, so if you do this, when you go ask for approval, can you execute on it? We think there's some value there. And will it distract you from other things that are going on in the utility business, our ability to execute.

So that's kind of a long answer around what sort of financing question but really turns into an M&A question on the on the key point that I think you're looking for..

Yes, that's, that's very helpful. And thank you so much. And thank you guys for taking the questions today..

Great, thank you..

Thank you. And our next question comes from the line of Jeremy Tonet with JPMorgan. Your line is open. Please go ahead..

Hi, good morning..

Good morning..

I just wanted to kind of dive into trends in your territory a bit more.

What do you see behind 1Q sales? And do you have any sense on more recent trends and how sales may come in over the balance the year as we reopen post COVID here?.

Hi, it’s Rod West. From a sector perspective, most of the year we were expecting in the residential for instance, residential and commercial sector. We're seeing recovery from COVID in the industrial sector, where we've had and talked about our outlook and the growth there. We're seeing that sector also recovering from COVID.

But in the short term, take into account some of the challenges from the recent winter storm. That said, our stakeholder engagement with specific customers within each segment support our confidence and our on-going outlooks for sales growth. So everyone is in their own way, recovering from both COVID and, and the winter storms.

But we have line of sight in each sector that supports what we've shared with you from an outlook perspective on continued growth. And that's just that's not only 21, but beyond..

And Jeremy, I'll add that in and Rod referenced the winter storm, but it had an outside and outside impact on our industrial customers as of last quarter, so it's minus 3%, quarter-over-quarter, but [within] [ph] less than 1% down without the winter storm. So that's, that's a big impact.

And you can see that kind of play out in our overall view for the year. Because that's not weather adjustments that we would make, we don't weather adjust the industrial customers. And then I'll also add, just from a macro perspective that we are seeing some good signals in the industrial space.

We are, we see that inventories for some of our key pet chem and refined products customers are trending back to normal. So some of that inventory overhang has gone away. As a result, we've seen margins improve, crack spreads, or geographic spreads, Henry hub to Asia and Europe, for example, are trending in the right direction.

And, it looks like the housing market is starting to tick up. So that could help out our core alkali customers. And, some of the just the basic macro factors, like oil prices are better now. And the dollar still hasn't rebounded all that much. And those are all sort of positive signals for our industrial customers.

So we, we, we've looked at those signals, and we're optimistic, although we want to see it show up in the sales as well..

Got it, got it. So it sounds like the weather depressed things a bit there. That makes sense. And just want to turn to carbon capture for a minute here.

You mentioned that and just wondering, what do you, what prospects do you see in the near term there? Do you think that the 45Q as they're written now may be combined with OCFS, makes these projects economic? And I guess, what's unique about your territory is just, given the backdrop of oil and gas there, it seems like it could be more economic to do it in your area versus maybe other areas in the country.

So just wondering if you could talk about how, near term that potential is or how you guys, might stand up versus others?.

Yes, well, thanks. That's, that's a carbon capture is just one piece of the puzzle here.

And I think our service territory really bodes well across a variety of new technological advancements, and again, will be helpful not only for the power sector, but for the people who produce some of those commodities as well as the people who consume those commodities.

So you've probably seen a lot of press lately about what a lot of our customers are doing in both hydrogen and carbon capture, as well as renewables. So there's, there's a significant amount of opportunity for us, whether it's 45Q as it stands today, or whatever happens with infrastructure, legislation or tax policy around that.

It's really early in the game, but certainly, the administration has been has been very clear that new technologies that provide the opportunity to lower the carbon footprint of the power sector and our industrial customers are all fair game for tax credits.

All fair game for, other support and initiatives that could help accelerate the development of things like not only renewables, battery storage, but carbon capture, hydrogen utilization and hydrogen production, hydrogen transportation, hydrogen storage, all of that is, when you say how do we how do we line up, those people who are talking in other sectors about carbon capture and talking about production of green hydrogen or all our customers.

And so, how near term is it that's why we are investigating those technologies on our own with our customers and through our JDA with Mitsubishi to try to tease out the technologies, tease out the costs, and accelerate the ability to utilize those.

If you think about it, if carbon capture and hydrogen, for example, become more economic and get to market faster, and our deployment of renewables can increase, and go faster, so that all works really hand in hand.

So, early in the game, I think there's a lot of support, both through extension of existing policy plus the potential for new policy, we're working closely not only with the industry, but with, with folks in Washington and the administration ourselves.

Plus, with our partners and our customers to try to try to really advance the ball on this, because we think we're uniquely positioned as it relates to all of those. Because it's vital to us, it's vital to the, to the customers that we have as well. So really think there's a lot of momentum behind it at the moment as well..

Got it. That's very helpful. Thanks for that..

Thank you..

Thank you. And our next question comes from the mind of Durgesh Chopra with Evercore ISI. Your line is open, please go ahead..

Hey, good morning team. Thanks for taking my question.

Drew, can I just go back to your commentary around the salary reserve? Did I did I capture that correctly that you did not change your sort of your reserve amounts or your accruals after the LGA decision? So do I take that to mean that sort of the decision was in line with your recommendations? I'm just trying to see what the implications might be your guidance and long term growth rate once you do receive a final outcome?.

Yes, no good question. And I was actually I thought referring more to the uncertain tax question. But in regard to the ROE, and capital structure, the answer is actually the same. We didn't we didn't change our reserve position. I would say that we were exactly in line. In fact, it was a little bit below our expectations.

We talked about a three cent sort of on-going drag versus what we had in our own models internally. It doesn't change any of our outlooks. But that was a little different than our expectation. That would, if it stands, translate to a slightly higher need for us to reserve at some point, if the FERC comes out.

At the same place that the ALJ does, I think it would be 20 million to 25 million kind of one time on that change. But yes, we, as you saw, we filed last week, to see if we could convince the FERC that it ought to be a little bit higher. So we'll wait to see how that comes out.

But if we will need to take a charge on the ROE cash structure piece of about 20 million, 25 million down the road, if the ALJ Position stands..

Got it? Okay, so modestly worse. Okay. Understood. And then maybe just can I get your thoughts on sort of your capital allocation priorities? I mean, there's a, obviously a large balance of deferred costs as it relates to storms. And I'm sort of thinking about the timing of getting to your 15% of -- debt in 2022.

And how sort of patient are the credit rating agencies are going to be? And then, does that, call for a higher layer of equity in the plan? How are you thinking about all of that stuff?.

And that's a good question. So when we take the -- I think this question really hinges around the rating agency piece of this. And if you look at our metrics from S&Ps perspective, I think we're in good shape. Even through all of this, we're above the downgrade thresholds that they've written about.

And we continue to our forecast continues to pull away from those thresholds. So we're, we're comfortable with where we are on the S&P metrics. The Moody's metrics are a little more challenging, as you know, because their cash flow from operations to debt, not including working capital. That is that sort of that 15% threshold.

And that's what we've been really aiming for. And we still believe we're going to get there next year. We're, in order to do that, we have to get past these cash flow, these cash flows that we've experienced for the storms, some of the ones that I talked about this quarter, and we need to get to the securitization.

And ideally, we'll be able to do that off sheet as well. And as I mentioned, that legislation is moving forward in both Texas and Louisiana to do that. So I think we're actually in good shape to achieve all those objectives. In terms of the conversation with Moody's I mean, obviously, you'll have to talk to them to get their perspective.

But I think they understand what's going on. They understand that we have very good solid mechanisms between fuel recovery. And with securitization, we have a history there. And they can see the results in the in the legislature going forward. So they're very comfortable that we are going to be able to make that progress.

And they've actually written that they expect us to hit their target until 2023. So we're actually right aiming to hit their target a year earlier than they would expect us to. So they, the conversations are going very well with them, I would say because it we just had our annual review, which is in typically in the spring.

And we have, as we've talked about, and we're talking about today forecast which should achieve our targeted objectives..

That's super helpful. Sounds like you have some, you have some runway of time to get to that level. And assuming that regulatory filings go your way, you'll be able, you'll be able to get that fraction faster than then, they were targeting you to get to that level. Okay. That's all I have. Thank you. Appreciate it. Drew..

Thank you..

Thank you. And our next question comes from the line of Julian Dumoulin with Bank of America. Your line is open. Please go ahead..

Good morning team, thanks for the opportunity. Good morning. If I can pick it up off the last question here. Just as you think about the latest series of developments in the regulatory front.

How does that square against capital spending? Largely it seems intact? But I'm also thinking here about rate pressures, the slight downtick in sales, and obviously, some of the storm impacts.

How do you think about some of the mitigating impacts, or offsets to ensure your capital spendings intact, and obviously reaffirmed your earnings guidance trajectory today. So on balance, things are clearly in place. But I want to address maybe the bill pressure impacts implicit..

Sure, sure Julian, this is Drew. So actually, in terms of our capital spending, we probably we didn't pump capital this quarter. But we've actually accelerated some of the capital primarily in Arkansas. We had, as you probably recall, at the beginning of the year, we had pushed capital back to make room for the December order.

And with the more recent order, we've moved the capital back forward. So it's about 200 million that we moved out of 03, most of it into 01 sum of into 02. Excuse me, 22. Sorry, I'm 20 years behind. But in terms of in terms of the rate pressure of yes, as you know, that's something that we talk about, very, we talked about a lot.

And we watched very closely, that actually beginning to improve, work through our continuous improvement. And the and some of the other things that have been going on, have the biggest step change that we've seen in terms of our rep, pressure is as good as it turns out, going to be between 2020 and 2021.

And now that we've gotten through all of our regulatory proceedings for the year, we think we're going to be able to manage that pretty well. Going forward using 2021 as a baseline, we're much closer to kind of a 2% growth rate in sort of an average bill. And I think that that on going forward should be very achievable in a regulatory framework..

Yes. Excellent. I appreciate that. If you can just embrace than elaborate.

How do you think about perhaps the renewable angle you alluded to earlier? I mean, we've talked about this in the past, you brought it up in the comments prepared again, obviously, you're you have, I suppose, three RFPs out there at present, but can you can you address that, or your latest thinking on that front?.

Well, as I mentioned in the my prepared remarks, Julian and as we've been talking about, more I think since last analysts day. We start with a really clean fleet. As you said, we've got RFPs for 1000 megawatts outstanding right now, our current thinking is that the renewable path be about 2500 megawatts by 2025 up to 5000 by 2030.

And I think the right way to think about it is we're trying to make, a low cost reliable and sustainable footprint.

And, and as we look going forward, as technology improves, as prices come down as battery storage gets more economical that just makes the possibility for renewables to play a bigger part in the resource plan going forward a reality and that's what you've seen and we evaluate resource plan on a regular basis but we don't stop with the resource plan.

We evaluate each individual project on a regular basis and so as you know we've got the Orange county power and storage station that we'll that we're developing that on day one will have hydrogen capability and with being provided in the development space to be 100% hydrogen capable at the point in time when that makes sense to the extent that gets accelerated that allows us to put more renewables into our footprint because we got that long-term storage flexibility.

So when you think about our resource plan we're just trying to meet the need that when you flip the switch the lights come on. That's the need we got to meet. We want to do it as efficiently and cleanly as possible and that just as technology has come to the point where that's a bigger and bigger renewable footprint.

And again if some of these other technologies are viable and cost-effective that really helps accelerate their renewable deployment as well. And so we continue to evaluate every project and every resource plan with those things in mind.

So I'm excited about the possibility that 5000 gets bigger at some point and we've got a lot of time between now and 2030 to make that happen and with again the infrastructure support coming out of the policy environment that only will tend to make that technology advance further, faster and be more economical for our customers if there's again that policy support..

But to clarify here, if you don't mind the structural options that you're alluding to for renewable projects that sounds like how you finance or somehow structure incremental opportunities beyond what you're already talking about?.

Well, it would be utilized to structure for the opportunities we're already talking about because if you think about it Julian, the -- if we can make them more cost effective for our customers through those structural options that frees up capital to spend on other things that improve the level of service that our customers receive whether it's on the PND front customer solutions front or in other renewable projects as well..

All right. excellent. Well, congrats on all fronts here. Speak to you guys..

Thank you..

Thank you and our next question comes from the line of Stephen Byrd with Morgan Stanley. Your line is open. Please go ahead..

Hey, good morning. Thanks so much for your time..

Good morning..

Maybe just following up on Julian's question a little bit on clean energy.

It sounds like there's a pretty significant chance that we might get a congressional action that would essentially extend the solar and wind tax credits for a very long time, create a new energy storage tax credit, potentially provide more support for carbon capture and storage and a few other things hydrogen as well.

I guess first just on the utility side if you saw that kind of long-term federal support that really does change the economics meaningfully would that trigger essentially a sort of a formal sort of reassessment of your resource planning across or is it more just opportunistic you sort of keep that in mind in the future or is it I'm trying to kind of think about whether that caused you to sort of immediately want to rethink some of the resource plans you already have..

So Stephen. It's a great question we're already rethinking the resource plan based on the potential for those kinds of initiatives to occur. As I mentioned the resource plan, it's not like we said it and then we just put it on autopilot and we're going to follow through on it regardless of what happens.

So we're already looking at the plan that we have and determining based on different policy scenarios what that might do to change the economics such that the plan itself is changed.

And again as I mentioned the more support, policy support for these technologies that occur the lower cost they are for our customers and the faster they're going to accelerate in terms of their development as viable. We see that as having a positive impact on the cost to the customers as well as the sustainability of the resource plan itself.

So I mean the short answer is absolutely.

We're already looking at what those impacts might be and certainly like everybody else in the industry we're playing our part in helping the congressional leaders and the administrative leaders understand what those impacts might be on the industry on Entergy and on our region and as I mentioned earlier there's not only a growth opportunity for us in some of these policies but the people who are making hydrogen today Stephen are in our service territory and are our customers.

The people who are utilizing that hydrogen are in our service territory and are our customers.

So it's our intention to work with them in helping them meet their sustainability goals and their sustainability requirements depending on what again comes out of legislation and an administrative situation in Washington to help them with their sustainability objectives.

So if you think about major hydrogen producers today through gas reformation if they're going to have to get carbon capture or renewables we want to be there to help them with that..

That's extremely helpful actually the last part of what you mentioned Leo kind of brings me to my second question which was just on, I guess especially hydrogen and carbon capture.

I wonder if you could just talk a little bit more about sort of the role of Entergy in helping your customers? I guess, I'm thinking about frankly degree of technology risk you're willing to take, commodity risk, what sort of the range of possible roles that Entergy could have helping customers pursue those technologies.

Would you mind just elaborate a little bit on that?.

Sure. Certainly we're in that early phases of evaluating exactly what their needs are, what they want to do and what their exposure is as well as how we want to participate. So we're really in the range of investigation right now.

One is for example with our fleet itself what we're going to utilize on the Montgomery County Innovation Center that I talked about that is a 22 megawatt electrolysis facility that we're looking to develop where we would be obviously creating green hydrogen that we would then test in our own facilities as we use that as a precursor up to then how Orange County Is going to utilize green hydrogen in its own for the production of electricity.

At the same point in time to the extent carbon capture is something that a hydrogen producer might want to utilize our ability to provide them with economic renewables would be a way to obviously create new load and new renewables for us to be able to help them with that and to the extent that they want to pursue electrolysis in their own production of green hydrogen and we can provide the clean energy whether it's through nuclear or through renewables we can do that as well.

So we're investigating on all aspects of that. At the same point in time there is transportation infrastructure down here in terms of pipelines and everything for that.

We need to look at how that transportation tees up to our own facilities as well as amongst the service territory and then we've got storage facilities that are capable of being converted to store hydrogen and so we're looking at that and what role that can play not only for us but for our customers.

So there's a wide range of things that we're looking at.

Obviously our lane is to be the utility in all of this but as this progresses and we collaborate with Mitsubishi and we collaborate with our customers the opportunity to be the utility and provide the electricity for all this to happen should be pretty significant if it all plays out and I would say that the creation of the customer organization where we announced David Ellis's position within Rod's organization that's going to be a pretty significant organization that we're developing is designed to help and collaborate with those customers on these new needs that they have.

So I know that wasn't a specific list of projects Stephen but it's more of a pretty wide-ranging opportunity where we're going to stay in our lane but yet we're going to really pursue being able to make it reality..

No that's really helpful color. That's all I have. Thank you so much..

Thank you Stephen..

Thank you. And our next question comes from the line of Steve Liesman with Wolfe Research. Your line is open. Please go ahead. All right it looks like his line disconnected. So we'll move on to our next question which comes from the line of Jonathan Arnold with Vertical Research. Your line is open. Please go ahead..

Hello?.

Hey Jonathan..

Yes. I'm just curious you talked about CapEx and potentially pulling things forward or having them less deferred but when I look at the guidance you gave for this year was just under $3.5 billion and it looks like you already invested a billion six in the first quarter.

So just maybe trying to get a little more of a sense of is that just timing or could this year's number be a good bit higher than what you were looking at before and maybe what's driven that is really a much bigger quarter than you've had in a while?.

Yes. So I think for the year I think it is probably just timing elements. I don't think that there's any sort of massive acceleration versus what we had previously planned other than to say that we pulled some of that capital in Arkansas up from 2023.

So I think that I want to say it was in the $150 million to $175 million for this year and so that's at this point I think that would be the only difference from what we previously published for 2021..

Okay.

So just a big first quarter in terms of projects span and anything in particular Drew that was driving that?.

Nothing comes to mind that would be something that would stand out..

Okay and then could you also could we just get an update on where you are on arrears and customer bad debt and you starting to see any improvement there? How does it look versus where you were at last quarter?.

Sure. So from where we were at the end of the year, I think we've improved a little bit not a lot. We kind of got stalled out because of the winter storm a little bit and we expect Arkansas and New Orleans to lift their moratoriums in May.

So that should give us a clearer path to start to move those rears a little bit lower but at this point they're still, I would say they're still around $300 million. They're down from where their highs were by I don't know 10% or so but they still have a ways to go..

Great and then I think that one other maybe related issue looking at the residential sales a little more to what extent I know whether adjustment could be an art rather than a science but to what extent are those do you think you're still seeing that work from home benefit is that starting to fade and just still more comment there?.

We're actually seeing increasing customer counts and the usage per customer which is more of an indicator for us for a long-term view usage for customer has sort of flattened out in the residential sector but we are expecting the actual growth rate quarter-over-quarter to begin to moderate as folks begin to return back to a more normal for us load shape the way that it plays out as people go back to work in school and things of that nature but we're tracking it rather discreetly and no real surprises for us thus far..

Thank you Rod..

Thank you. And our last question comes from the line of Andrew Russell with Scotia Bank. Your line is open. Please go ahead..

Hey thanks. Good morning everyone. My first question is on renewables.

If you can just elaborate a little bit you gave a lot of details on the size of the opportunity overall but what's your latest thinking on utility ownership versus PPAs potential role for tax equity partners and how that might affect any of the rate-based or CapEx and therefore balance sheet impacts relative to third-party PPAs?.

So hey Andrew, this is Drew. So we do expect to own a good portion of the solar opportunity that's in front of us.

We think that we can be extremely competitive for a couple of reasons and one of them you alluded to in terms of the tax equity partnerships that allows us to manage that invested tax credit and work around some of the challenges from being utility. And so that's probably the main thing that's out there.

Obviously we're working hard on bringing our costs down just like everybody else in the sector but we think based on the last couple of RFPs where we've ended up we think we're getting much more competitive in that space and so we expect to own a big chunk of those things going forward.

I will say I don't at the end of the day doing all PPAs is probably not going to be that great for our balance sheet and it might actually start harming the customer. So that's something else that we are paying attention to but I think in order to avoid that we really just have to get competitive on the RFPs and make sure that we win our share..

Okay and I assume there's no change to your assumptions when you talk about the CapEx and cash flow and equity needs outlook and all of that.

Have you changed your assumption on a win rate if you will?.

No, we haven't changed our assumption and we still are working to figure out okay so the second half of this decade where a big chunk of that renewable comes in, what does that look like but we would expect over time if we're successful in our strategy that the win rate should improve for us..

Okay. Great. Then last question, thank you for all the cash flow and details on the Texas windstorms.

My question is do you see any need or opportunity for incremental CapEx to improve reliability whether in terms of undergrounding or winterizing your regulated power plants there?.

Certainly as it relates to the winter storm specifically which is not different than any weather event that we have, a major portion of our after action analysis will include strategically what can we do to make the system more resilient and the winter storm is no different and so we're doing a comprehensive look at all of our facilities in all of our functions not just in the generation side but transmission, distribution as well to get what's the right balance of cost and reliability that we want to put in it.

So that is ongoing. I wouldn't say that that's a significant amount of capital that would go into those facilities compared to size capital budget as it sits today.

But certainly we're looking at and proven resiliency and all the investments that we're making in the normal capital plan are meant to improve power quality and reliability and so as we do, for example, with our transmission system all of the new stuff we build is to a higher standard than what we built 20 years ago.

And as we saw in hurricane Laura all the stuff that we built with the new technology which stood the hurricane it was the stuff that we built 20, 30, 40, 50 years ago that was destroyed and all the new stuff is the new stuff.

So that's a continuing and continuous analysis for us to how do you improve the resiliency just on a day-in day-out basis and the weather events like the winter storm gives the opportunity to learn even more..

Okay. Thank you very much and congratulations to David Diana on their promotions..

Thank you..

Thank you..

Thank you. And this does conclude today's question and answer session and I would like to turn the conference back over to Mr. Bill Abler for any further remarks..

Thank you, Michelle and thanks to 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.

Also as a reminder we maintain a web page 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.

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..

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day..