Thank you for standing by. And welcome to the Third Quarter 2022 Entergy Corporation Earnings Release. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s program is being recorded.

And now I’d like to introduce your host for today’s program, Mr. Bill Abler, Vice President, Investor Relations. Please go ahead, sir..

Good morning and thank you for joining us. We will begin today with comments from Entergy’s CEO, Drew Marsh; and then Kimberly Fontan, our CFO, will review results. In an effort to accommodate everyone who has questions, we request that each person has no more than two questions. In today’s call, management will make certain forward-looking statements.

Actual results could differ materially from these forward-looking statements 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 Drew..

Thank you, Bill, and good morning, everyone. Yesterday, the planned leadership succession that we announced in August took effect. While I am honored to have the opportunity to lead this great company, I am not alone. Leo remains as the Executive Chair for the next few months and we will continue to execute at a high level on our strategic path.

Leo built a strong bench of talented leaders. Kimberly Fontan takes over as Chief Financial Officer, and Kimberly Cook-Nelson assumes the role of Chief Nuclear Officer.

Meanwhile, Chris Bakken will serve as the Executive Vice President of Entergy Infrastructure to provide leadership and mentorship to both Pete Norgeot, who was recently promoted to Chief Operating Officer; and Kimberly Cook-Nelson as they settle into our top operational roles.

While the new senior leadership -- with the new senior leadership team in place, Entergy has a bright future and we expect to deliver on the commitments that we have made to our key stakeholders. Today, we are reporting strong quarterly adjusted earnings of $2.84 per share. This is another solid quarter that keeps us on track for the year.

In fact, with our biggest quarter behind us, we are narrowing our 2022 guidance by raising the bottom of the range by $0.10 per share and we are affirming our longer term outlooks for 6% to 8% annual growth through 2025. Last week, our Board of Directors raised our quarterly dividend by 6%.

The annualized amount is now $4.28 per share, consistent with our target payout ratio of 60% to 65%. During the quarter, we continued to execute on many important fronts. Steady predictable growth depends on steady predictable regulatory mechanisms.

Four of our operating companies have annual formula rate plans to provide timely recovery of our investments to benefit customers. Mississippi’s FRP filing was approved in July. Entergy New Orleans and Entergy Louisiana’s FRP rate changes were effective on September 1st. And we expect Entergy Arkansas’ annual review to wrap up in December.

Entergy Texas filed a base rate case this year and it is proceeding on schedule with hearings planned in December. Absent the settlement, we expect a decision in the second quarter of next year. New Orleans City Council approved a $206 million securitization financing for storm cost recovery and replenishment of Entergy New Orleans storm escrow.

While the prudent review of Ida cost is ongoing, moving forward with the financing will benefit customers by reducing interest rate risk. Louisiana’s review of Ida cost is also ongoing. Staff recently filed supportive testimony and recommended full cost recovery.

Hearings are scheduled for December and we expect to receive securitization funds early next year. These developments are an important step in moving our credit metrics back to targeted levels. In September, we received an ALJ recommendation on our proposed Orange County Advanced Power Station or OCAPS.

It was very encouraging that the presiding judges recommended approval of the project and they recognize the significant economic and reliability benefits that this facility would bring to our customer in Texas.

The ALJ did not support the hydrogen capability for the plant though we continue to believe that day one hydrogen co-firing capability for OCAPS is in the best interest of our customers. I will note that the Governor of Texas has indicated his support for the plant, including its hydrogen capability.

OCAPS hydrogen capability is less than 5% of the total investment, and it provides a critically important option for fuel diversity and ensures the plant’s continued value in a low carbon future. Also, an economically viable hydrogen economy is no longer decades away.

The passage of the Inflation Reduction Act promises to improve hydrogen economics and further accelerate clean hydrogen production. As we have said, Entergy’s region is uniquely positioned to take advantage of this opportunity and we expect the Gulf Coast to lead the way, bringing jobs and economic benefits to our communities.

The decision on Orange County ultimately lies with the commission and it is on the agenda for tomorrow’s meeting. If approved, OCAPS will be our first unit capable of burning up to 30% hydrogen on day one1 with plans to eventually be 100% hydrogen capable. The Gulf region remains a prime target for onshoring growth opportunities.

As we laid out at Analyst Day, our industrial customers have many inherent advantages that make them low cost producers on the global stage. This is enhanced by recent supply chain and geopolitical conditions. Commodity spreads important to our customers remain positive and continue to support the outlooks we laid out at Analyst Day.

We continue to see announcements for new projects in our service area. For example, Entergy Texas and New Fortress Energy signed an MOU for collaboration on developing renewable energy and hydrogen infrastructure. The partnership will help accelerate the green hydrogen economy in Southeast Texas.

New Fortress Energy’s project will leverage industry-leading electrolysis technology from Plug Power for the production of more than 50 tons per day of green hydrogen. Entergy Texas will supply 120 megawatts of green power to serve this facility, which is expected to be one of the largest of its kind in North America.

In Louisiana, Olin and Plug Power announced plans to produce green hydrogen from a 15-ton per day plant. Both of these projects are good examples of how the hydrogen economy is coming to life in our service territory. CF Industries announced a $2 billion carbon capture ammonia complex in Ascension Parish, which will create more than 400 jobs.

This is another great example of customer growth tied to decarbonization. As I said, we have seen a lot of progress in the last few months. We continue to monitor the significant pipeline of opportunities for signs of impacts from broader economic uncertainty. We have not seen a noticeable pause or pull back.

As we said at Analyst Day, fundamentals of our region uniquely position the Gulf Coast for substantial growth even in a challenging economy. We also continue to make progress on expanding our renewables footprint. We received approval for the 250-megawatt driver solar acquisition in Arkansas. This facility is being constructed near U.S.

Steel’s expansion in Osceola and it is expected to be completed in 2024, and U.S. Steel received the facility’s clean energy attributes. This illustrates how we work collaboratively with our customers and our regulators to support growth, jobs and sustainability in our region.

In September, the Louisiana Commission approved four solar projects totaling 475 megawatts. They also approved our new Geaux Green tariff, which -- that’s G-E-A-U-X, Geaux, which began taking reservations from large commercial and industrial customers yesterday. Based on inquiries to-date, we are expecting strong demand and it arrived.

The 365 megawatts allocated to the tariff were fully reserved in just a few minutes, indicating strong faster demand for sustainability products. We also announced plans for two new renewable RFPs. Entergy Texas is seeking 2,000 megawatts of clean energy and Entergy Mississippi is seeking 500 megawatts.

We now have eight active RFPs totaling 7,000 megawatts. We have made selections in four of those RFPs and are negotiating with counterparties. We will announce specific projects once agreements are reached. In addition to clean energy, resilience is important for our customers who depend more than ever on reliable electricity supply.

Since Hurricane Ida, we have invested in new infrastructure built to higher standards that will improve the system’s resilience, including more than 22,000 distribution poles, more than 2,200 transmission structures and eight fuel stations.

Execution on our resilience investment is ongoing and our base plan includes investments that will continue to upgrade our system. At Analyst Day, we laid out our $15 billion 10-year accelerated resilience plan.

We expect our proposed investments to significantly reduce physical and financial storm risk, and we are engaging with stakeholders to make our case. We made our first filing in New Orleans. We plan to file in Louisiana before year end and in Texas by mid-next year.

We did our homework and the accelerated resilience plan is heavily informed by our neighbors in Florida, knowing that their hardened assets performed well and Hurricane Ian along with the strong performance of our own hardened infrastructure over the past couple of years gives us confidence that we can substantially reduce our exposure to storms and provide meaningful benefits to customers.

Affordability remains a top priority and we announced several initiatives last quarter to help our customers when they saw higher bills from both warmer temperatures and higher natural gas prices. As part of our recent customer affordability initiatives, we have helped more than 35,000 customers with more than $5 million in bill credits.

We have held energy fairs in 48 communities to provide helpful information to our customers about how to manage their bills and benefit from energy efficiency. We have also weatherized many low income customer’s homes and installed energy efficient appliances including new heat pumps and tankless water heaters.

These efforts are only a part of what we are doing to help with affordability. Many of our past actions are mitigating the impacts of high natural gas prices for our customers today. The investments we made over the last eight years in more efficient generation and renewable resources are reducing fuel costs.

Based on 2022 gas prices, these modern assets are reducing fuel cost by an estimated $400 million compared to what it would have otherwise been. Our nearly decade-long participation in MISO has also produced customer savings, which totaled more than $2 billion through 2021.

Support for economic development and growth in our service areas also helps with customer affordability. Not only does it spread fixed costs over a growing customer base and also provides economic growth and jobs that are critical for our communities. Another lever for affordability is continuous improvement, which is more important than ever.

We are using CI to find efficiencies that will offset inflationary pressures and create headroom for new investments to help customers. We have a robust growth story at Entergy. We are seeing significant industrial growth as economic indicators for businesses in the Gulf South continue to be positive.

Besides driving investments and growth for our owners, that industrial growth is important for our communities, especially in today’s economic environment. This opportunity is unique to Entergy and it will benefit each of our key stakeholders.

We see our growth continuing for years to come as our customers need to help our -- help to -- need our help to achieve their decarbonization goals. It starts with growing our clean energy capacity, which will reduce our customer’s indirect emissions and continues through electrification of industrial processes to reduce their direct emissions.

We are very excited about our near-term and long-term prospects, and we look forward to continuing this conversation with you at the EEI financial conference in a few weeks. Before I wrap up, I’d like to say a few words about Leo Denault. He yesterday retired from his role as our Chief Executive Officer after a long and successful career.

While we won’t see him day-to-day, the impacts of his tireless dedication to our four key stakeholders remain. Under Leo’s leadership, we simplified our business to our core utilities. We turned around our nuclear operations. We redefined our customer focus. We have progressed and broadened our ESG commitments.

We raised diversity, inclusion and belonging as a strategic pillar. We emerged as a national leader in corporate citizenship. Without missing a beat, we navigated through the pandemic and storms of the last couple of years. And we established a clear vision of our future opportunities.

As part of his distinguished career, Leo completed 74 earnings calls over the past 19 years and he has been a steady presence for our key stakeholders. We will work with him as Executive Chairman for the next several months, as we continue to make progress on the vision and strategy that he established.

As I turn the call over a word about our new Chief Financial Officer, Kimberly Fontan. Most recently, Kimberly served as our Chief Accounting Officer and she also has senior leadership experience in operations and regulatory roles. Kimberly brings a broad experience and perspective, and she’s a great addition to Entergy’s senior leadership team.

Now I will turn the call over to our Chief Financial Officer, Kimberly Fontan..

Thank you, Drew, for that introduction. I am honored to join the leadership team and I am pleased to join you all on the call today. I am looking forward to working with all of you in the financial community. As Drew said, we have had another strong quarter, with results to keep us on track to meet our financial commitments.

Summarized on slide three, our adjusted earnings were $2.84 per share. Consistent with comments on guidance last quarter, we are narrowing our guidance range by raising the bottom end $0.10. This result is consistent with our objective of steady, predictable earnings growth. We are also affirming our outlooks through 2025.

On slide four, you will see the adjusted EPS drivers for the quarter, higher retail sales was the primary driver as last year was impacted by Hurricane Ida. Weather this year was also warmer than normal. Excluding weather, sales growth in the quarter was 5.7%. Industrial sales were up 7%.

We continue to see growth from new and expansion projects in line with our expectations. The primary contributors to the industrial growth were chlor alkali and transportation customers. Sales to small industrial and cogen customers were also higher than last year. O&M increased for the quarter due to several factors.

Power delivery expenses increased, including higher vegetation costs in part driven by inflation. We also had increased costs for transmission maintenance and nuclear operations. Bad debt expense rose on the heels of higher bills this past summer.

Other drivers for the quarter results include higher depreciation and interest expense from investments we continue to make to serve customers. You can see on slides five and six that the fundamentals underlying our industrial sales and growth remained strong and we have not seen signs of a pullback.

Industrial commodity spreads continued to support positive margins and robust Gulf Coast operational levels, refining remains highly profitable with low product inventory supporting high operational rates, record commodity spreads continue to drive Gulf LNG exports to Europe today and expansion of this capacity in the future. The U.S.

Gulf ammonia producers are running at high rates to help fill the global supply gap. Beyond supportive commodity spreads, the Gulf Coast region continues to offer industrial customer’s inherent labor, infrastructure and global shipping advantages.

And as we discussed at Analyst Day, this next wave of our industrial growth is being accelerated due to onshoring trends. These trends are caused by broken supply chain globally, manufacturers needing reduced geopolitical investment risk, as well as global customers who need energy security. The results for EWC are summarized on slide seven.

The shutdown and sale of our merchant nuclear plants continue to be the main drivers for that business. Operating cash flow is shown on slide eight. The quarter’s result is $993 million, a decline compared to last year.

Key variances, including the timing of fuel and purchase power payments, the wind down of EWC and increased O&M, offset partially by higher utility customer receipts. Turning to credit and liquidity on slide nine, we continue to work towards achieving in range or better credit metrics by the end of 2023.

We continue to monitor our deferred fuel position, and in the third quarter, our balance increased approximately $150 million. We continue to work with our retail regulators to manage the impact of high fuel cost on customer bills. The forward curve for natural gas continues to decline, which helps with customer bills as well.

As deferred fuel balances are recovered, our credit metrics should improve. We continue to make progress on the securitization front. A credit positive development in the quarter was the City Council’s approval for Entergy New Orleans to issue securitization bonds to establish a new storm reserve and recover Ida storm cost.

This, of course, is subject to the City Council’s prudence review. Last quarter, we gave our early take on the impact of the inflation reduction add for our customers and for Entergy’s cash and credit position. After additional analysis, we continue to be optimistic about the benefits from this legislation.

Slide 10 provides highlights on the cash and credit impacts of the IRA. One important note is that we do not expect to be subject to the minimum tax provisions until 2026. The chart illustrates the relationship between gas and power prices and the resulting nuclear production tax credits at various commodity prices.

We expect to see meaningful value for our customers, though, as you can see, the value is dependent on volatile commodity prices. We will work with our retail regulators to flow the value of the production tax credits to customers in a manner that mitigates volatility on their bills. We see meaningful value from the solar PTCs as well.

The PTCs increased competitiveness of utility owned solar. The value for customers will increase over time as we grow our renewables portfolio. We remain encouraged about the prospects for the IRA to create value for our key stakeholders. Slide 11 summarizes the progress against our equity plan.

To-date, of the $1.2 billion expected need through 2024, we have issued nearly $1.1 billion, most of which are equity forwards. We plan to exercise the equity forward and receive the cash proceeds by the end of the year.

Moving to slide 12, given the added clarity from 3 quarters of actuals, we are narrowing our adjusted EPS guidance range and affirming our long-term 6% to 8% growth outlook through 2025. For the full year, we once again raised our expectation on sales growth. This is largely due to higher than planned sales to cogeneration customers.

While a positive for 2022 going forward, we will continue to plan conservatively for this customer group as electric demand from these customers varies. Commercial sales also have been higher than we expected a positive sign for economic health.

The higher than planned revenue from weather and sales gives us the ability to spend in areas that benefit our customers and de-risk future periods. Our O&M estimate for the year reflects flex spending, including initiatives to improve customer call response time and the enhanced customer assistance programs that we have discussed.

We are also able to absorb some higher than expected expenses like vegetation management and ammonia used to reduce NOX emissions at our power generation plants without having to reduce other costs. Actions like these help us ensure that we deliver steady, predictable adjusted EPS growth year in and year out.

The Entergy management team will be in Florida in less than two weeks and we will provide our preliminary three-year capital plan and high level drivers for 2023’s earnings expectations.

Additionally, we will discuss Entergy’s long-term growth story, including our unique industrial growth opportunity, our accelerated resilience program, renewables expansion, IRA opportunities and our role in the hydrogen economy. Entergy has great opportunities ahead for our key stakeholders.

We have a strong base plan to meet our strategic objectives and we look forward to talking to you about our plans at EEI. And now the Entergy team is available to answer questions..

Thanks. [Operator Instructions] And our first question comes from the line of Jeremy Tonet from JPMorgan. Your question please..

Hi. Good morning..

Good morning, Jeremy..

Thanks. Just want to start off with the 2,500 megawatts add in RFPs.

Just what is your expectation for utility owned opportunities there versus PPAs?.

Hey. Thanks for the question, Jeremy. Good question. Our current expectation is at least 50% or better from an owned perspective and that’s what’s assumed in our outlook..

And does....

It’s consistent with where we were. Sorry, Jeremy, this is Drew. It’s consistent with where we were at Analyst Day..

Got it.

Does IRA present the opportunity that this could be a bit higher?.

Sure. That’s certainly something that we are looking at. Recall that a lot of our investments on renewables are in the back half of the decade. So we certainly expect to see benefits from IRA in that period and we will talk more about that at Analyst Day.

But we do think that the IRA provides upside, as well as reducing the need for tax equity partnerships on that front..

Got it. That’s helpful. And just if I could ask about U.S.

Gulf Coast industrial activity expansion, just wondering what cadence do you see for that growth as far as LNG export capacity and other factors? What time frame do you see that ramping up and how do you think about the secondary impact where you bring kind of more and better jobs into the area and what that does for your residential customers?.

Yeah. I think that’s a great question, Jeremy. This is Drew. I will start off and then Kimberly or Rod can add to that. But it’s -- what we laid out at Analyst Day was 6% compound annual growth through the five-year period. There’s a big chunk of that that’s coming in around 24% and that’s -- I think that’s probably the biggest step-up in our forecast.

But it’s still consistent with what we laid out at that point and we see it continuing to be robust. In terms of jobs, it certainly will be helpful for jobs in our area and continue to allow our customer -- our residential and commercial customer bases to grow.

It’s not as big as it was 30 years ago, honestly, because of the amount of automation and other things that are inherent in modern industrial facilities. But that also gives us the opportunity to be much more competitive on the global stage. So I think those there are trade-offs in those pieces.

But that’s one of the things that makes our region very attractive.

I don’t know, Rod, if you have anything to add to that?.

No. I think that makes the point. The message we sent an Analyst Day around the back half of the decade, representing the lion’s share of the growth, and even at Analyst Day, we showed what sectors we thought would populate that growth as well, tying in our industrial expansion with the electrification and ESG concerns of our customers.

So we ought to leave it at that..

Okay..

Got it. That’s helpful. I will leave it there. Thanks..

Thanks, Jeremy..

Thank you. One moment for our next question. Our next question comes from the line of Shar Pourreza from Guggenheim. Your question please..

Hey, guys. Good morning..

Good morning, Shar..

Drew, maybe just starting off around your earnings guidance, just, I guess, looking at your O&M run rate increase and interest rate headwinds for 2023, how are you sort of thinking about the contingency and plan levers on offset, et cetera? I guess how does sort of this inflationary environment kind of change your planning parameters versus the Analyst Day expectations, especially as we are looking to bridge into next year with a sort of a $0.30 band at the top and bottom end?.

Thanks, Shar, for that question. I will start with your O&M question. The drivers for 2022 were really around our flex levers, which includes both pull-forwards and onetime items like the enhanced customer assistance program that we talked about earlier this year.

The pull-forwards give us ramp to pull-forward things from future years and de-risk future periods. The other impact from 2022 was inflation, as you noted, and we were able to cover that in 2022 through the increased weather and volume that we had in the first three quarters of the year.

That said, we have included a level of inflation in our forecast for 2023 and we expect to meet our outlook as said, and we cover that with continuous improvement opportunities that we have been working on. As it relates to your interest rate question, I think, at Analyst Day, the outlook was about 5%, we -- or 5.25%.

We have increase the interest rate expense to about a little less than 6% on the long-term debt and about 5.25% on the shorter term debt and that’s included in our outlook.

That said, our treasury team has done a lot of work over the last few years who would help mitigate exposure to potential rising interest rates by refinancing long-term debt in the periods of lower interest rates to help us offset in future periods..

Got it..

And Shar, I will just add one thing on that last piece. We have a lot of cash expected to come in. Kimberly mentioned that we are intending to exercise the equity forwards and then we have the securitizations, which we should be finishing up over the next several months.

Those two things should alleviate some borrowing needs in the next near-term, I should say..

Okay. Perfect. And then just to ask, maybe just shifting to financing, I mean, obviously, your capital growth opportunities are increasing with resiliency, hardening, green tariffs, et cetera. I guess, how are you sort of thinking about more accretive ways to finance this growth in this current really challenging capital markets environment.

I mean there’s been some press sort of highlighting that you could be looking to raise about $2 billion through a minority sale of your utilities combined into a holding company, excluding Texas.

I guess any sort of general comments here, any sense on timing, is there a process that started? I mean you certainly won’t be the first utility that’s looking to optimize an asset in lieu of traditional financing?.

Yeah. So I will hand this over to Kimberly to address it first..

Yeah. Thanks, Shar. There’s no new news on this front. I know we had talked to you about the value difference between private capital and public capital markets, and to the extent that we can capitalize on that, and there’s a difference there, we would be compelled to do that. But there’s no new news on that front at this point..

Okay. Got it. Figured this is Drew’s first CEO call, I was going to try to put him on the spot. Thanks, guys..

And I hand it to Kimberly very softly..

But give you the flex. You did perfectly. Thanks..

Thank you..

Thank you. One moment for our next question. And our next question comes from the line of David Arcaro from Morgan Stanley. Your question please..

Hey. Good morning. Thanks very much for taking my question..

Good morning..

On the AMT, I just wanted to check, how much of an impact are you expecting once we reach 2026. I think you had in one of the slides in terms of when the corporate AMT would start impacting the business.

And I was wondering in the interim over the next couple of years, just given that same slide, slide 10, we are currently seeing Henry Hub forward prices kind of in the 450 range or above over the next few years.

Is there an AMT impact at all in like 2024, 2025 that’s offset by the nuclear PTC level? I am wondering if you could just compare those two impacts. Thanks..

Sure. Good question. As the slide indicates, we don’t expect the corporate minimum tax until 2026. That’s not being offset in 2024, 2025. If you think about how that’s being calculated, it’s a 3-year historical average and then we can replace book with tax depreciation. So that enables us to not expect to have a minimum tax until 2026.

That said, to your point on the graph on the right, we do think that we have significant opportunity on the nuclear PTCs. But it is dependent on the gas and the power prices and where those are at the time. But those do start coming in, in 2023 and 2024 and so we would expect those to come in earlier than that corporate minimum tax.

And we will work with our regulators to provide benefits to our customers, but also offset the effects of that corporate minimum tax when we do have exposure to that..

Okay. Great. Thanks. That’s helpful.

And then on the upcoming Louisiana Resilience filing, I was just wondering if there’s any feedback or initial conversations from relevant stakeholders in the state around the importance, the priority of kicking off this work and what the appetite might be?.

Hi. It’s Rod. The short answer is, the stakeholders in the State of Louisiana all have expressed an interest in resiliency. They certainly understand the demand after several stakeholder engagements between reliability and resiliency. The commission in and of itself, obviously, is always going to be interested in how we pace it.

And certainly, given the sensitivities around the current economic environment, how does this ultimately impact customer bills.

But I think the -- as we stated in Drew’s opening comments, it’s very clear that the lessons that we learned from NextEra is also highlighting the work that we have been doing to get the alignment around the need for accelerated resiliency spending.

Obviously, the decision is going to ultimately play out through the resi -- after the resiliency filing when the LPSC sets a procedural schedule. But the homework that we have done to-date all the way up to and including the most recent lessons learned from our friends in Florida, all informing our bullish point of view around the need to do this.

We are not in a position to tell you in advance or to get ahead of our regulators, but we do believe we are making good progress on getting a line amongst our stakeholder group..

Okay. Great. Thanks so much..

Thanks, Dave..

Thank you. One moment for our next question. And our next question comes from the line of Durgesh Chopra from Evercore ISI. Your question please..

Hey, team. Good morning and congrats Drew your first call and Kimberly to you as well..

Thank you..

Thank you..

Yes. Of course. All my other questions have been answered. I was just wondering if you could update if there’s an update to share on the SERI settlement.

I know you had this settlement with Mississippi, but anything there that we should focus on as we get into the year-end or next step there?.

It’s Rod again. No new news that I can communicate publicly. I can share affirmatively that we are actively engaged with relevant stakeholders and trying to contact a settlement and find common ground and I can only report that, that work is ongoing, but nothing public..

Okay. That’s helpful, guys. Thank you..

Thank you..

Thank you. One moment for our next question. And our next question comes from the line of Paul Zimbardo from Bank of America. Your question please..

Hi. Good morning. Thank you..

Good morning, Paul..

If I could just follow up on Shar’s question a little bit and thanks for the details on the O&M.

If you could just break down that, I believe it’s $0.60 higher than the original guidance, basically how much is that acceleration versus more the inflation and kind of organic pieces of that?.

Yeah. Good question. There’s a number of both pull-forwards, as well as inflationary items. It’s hard to get to the specific number. But from an inflation perspective, we are seeing that more in -- you see it in fuel, you see it in chemical type costs and then we see it on the capital side and less so in the labor market side.

But we have included an ongoing level of inflation.

And then if you think about the flex side, we have long talked about flexing up when there are opportunities from whether in volume or other things that happen in the business and that’s really what you are seeing on the other side, opportunities to spend where we can support our customers and our stakeholders..

Yeah. And Paul, this is Drew. I will add that the inflation effects, they are touching us. We are not immune to that, like, the rest of the industry. The places where we are seeing it start to creep in on the labor side or Kimberly mentioned the commodity type effects. And so we are also seeing, what I would say, in commodity services area.

So vegetation is a big area where we have seen inflation and so we have been ramping up, as you mentioned, our continuous improvement efforts to offset that, because the inflation piece doesn’t go away easily and so there are continuous improvement efforts are ramping up to offset that over the next however long we need it.

And we are finding actually good success in the offset. So we are very comfortable that we are going to be able to manage through the inflation effects that we have seen so far..

Okay. Great. Understand there.

And staying on the hot topic of inflation, just as you think about the next Arkansas FRP filing, do you think that this is probably another one that’s going to be at the rate change cap or do you think you can manage a little bit below that level?.

Yeah. The -- we have been working in the Arkansas area. The continuous improvement will help us in that space to reduce cost. We certainly look at and watch to see -- try to stay under those caps so that we are both managing the affordability for customers, as well as obviously, creating value for all of our stakeholders.

We will -- but we believe that we will continue to work inflation and manage that with continuous improvement. The specific number that we would file in Arkansas next year would still -- is still being developed, but it will certainly take into consideration of inflation..

And we are a little over the cap for what’s coming for the formula plan this year. So we are above the cap already there..

Yeah. Yeah. Okay. Understood. Thank you both and see you soon..

All right. Thanks, Paul..

Thank you. One moment for our next question. And our next question comes from the line of Michael Lapides from Goldman Sachs. Your question please..

Hey, guys. Thank you for taking my question, and again, congrats, not just to Drew and Kimberly, but obviously, Leo. It has been a long time since coming over from Indiana. I have a couple of easy questions.

One is your demand growth, especially on the C&I side has been really, really healthy, not just this year but last couple of years, and this quarter, we saw a turn in residential demand growth.

You have proposed Orange County in Texas, but just curious, even though you are adding a lot of renewable in lots of the jurisdictions, what your thoughts are around in some of the other jurisdictions to any need for any more conventional generation?.

Yeah..

Yeah. That’s a good question. We do plan out over a long-term and we are looking for growth -- we watch the growth that’s occurring. Our plans include a significant amount of renewable investments as you suggested. I think we have 14 gigawatt hours to 17 gigawatt hours in our -- over the longer period in investments.

We will add baseload generation, smaller units to the extent that they are needed to support reliability and ensure that we continue to meet the needs of our customers. But near-term, Orange County is the project that’s on the plan..

And certainly, I think, Orange County is an example of how we would approach it with hydrogen capability defined, because of the long-term need to make a potential transition or a targeted transition, I should say, to clean energy where our customers are taking us. So that would be part of it.

I think, Michael, in the near-term, we don’t have a need for incremental capacity that can offset that. But certainly, if the demand -- the energy demand accelerates, then we would certainly need to look at that.

And right now, I think, we are looking at sort of the back end of this decade is, where we start to see the need for additional capacity, either from storage in some form or perhaps natural gas converting to hydrogen over the long-term..

Got it. And then one on related follow-up, can you -- lots of really positive things happening in Louisiana. The securitization looks like it’s going pretty smoothly. Don’t have a last step or two there. It will be interesting to watch the grid resiliency docket.

Just curious, though, can you remind us what your was -- revenue request was for the formula rate plan versus what’s been authorized in the formula rate plan there? And just in general, how you are thinking about getting Louisiana closer to earning authorized rates of return?.

Yeah. So you are referring to the fact that we have sort of been at the bottom of our band in the formula rate plan. Is that what you are….

Either the bottom….

… referring to, Michael?.

Either the bottom or in some periods not at the bottom, depends how long you look?.

Right. Right. Well, I think, we continue to work with the retail regulators around options to be -- to get more efficient recovery, particularly as we begin to ramp up things like resilience. In our resilience filing, you will see that we have a request for more contemporaneous cost recovery.

We have put in place more efficient riders for transmission and distribution investment in Louisiana. We will need to get those extended. But those are the kinds of tools that we have been using to help manage the lag that we have seen in Louisiana in particular..

So if I look at your EPS guidance over the next couple of years, does this assume that Louisiana at some point in that timeframe that it kind of how far out gets closer to the midpoint of the range?.

Yeah. So it certainly seems -- I think the last year of the FRP is next year’s filing and so we would have to go through a new either rate case or renewable of that FRP. And we work with the commission to get outcomes that support the needs of the business and so that’s what we would be planning for in our outlook..

Meaning your outlook assumes you are not at the low end of the band, you are back towards the middle or does it assume kind of what you have delivered over the last couple of years?.

I think I’d have to look specifically what it assumes, but it certainly assumes that we work constructively with our regulator in order to move us further up in that band..

And I don’t think it’s assuming….

Makes sense..

… any new mechanisms that suddenly pop up in the forecast. We have -- we are assuming that we have the existing mechanisms in place. But we will need to get better mechanisms in order to hit all of the financial targets that we need to hit, particularly the credit metrics that we are targeting going forward..

Understood and thank you. A lot of things improving in Louisiana over the last five years to seven years in terms of regulation and look forward to seeing this on a go-forward basis as well. Thanks, Drew..

Thank you, Michael..

Thank you. One moment for our next question. And our next question comes from the line of Ross Fowler from UBS. Your question please..

Good morning, Drew. Good morning, Kimberly.

How are you?.

Good morning..

Congratulations on the official new roles, I guess, as of yesterday. Most of my questions have been asked, but just a couple for me. So going back to Rod’s comments on the Louisiana resiliency filing and lessons learned from Hurricane Ian. I guess one of the lessons learned was the system did very well.

But there were parts of it, obviously, that didn’t perform as well and there’s been some discussions, I guess, in Florida around undergrounding those portions of the system that are higher risk.

Has that entered sort of the conversation in Louisiana yet or can you provide some color or context around that?.

Sure. It’s Rob again. The short answer is, yes. All of the above is part of the analysis. And you wouldn’t be surprised to hear us say, the conversation -- we expect the conversation to go towards cost benefit and risk reward.

As you think about the location of where the risk of high winds versus high water shows up, it’s different depending upon what portion of the region you are talking about.

But in Louisiana, they are definitely taking into account the benefits of undergrounding, which historically has -- the benefit has been that the frequency of outages with underground facilities is lower.

But when there is some type of disruption, the duration is longer, that is after you tend to overcome the initial upfront cost of undergrounding, which in our service territory has historically been cost prohibitive.

What’s different now, given some of the, I will call it, the positive recency bias with storm experience, we -- and certainly, some of the cost -- potential cost improvements and benefits of undergrounding, it is part of the conversation..

All right. That’s fantastic. Thank you. And then maybe one just on LNG expansion. We have seen some softening in LNG prices. I think that probably has more to do with weather in Europe than anything else.

But I know it’s days, are you still seeing a lot of interest there, obviously, you touched on this a little bit, but what interest specifically are you seeing around maybe use of electric drives for future projects and putting renewable energy into those electric drives to the extent possible to sort of make the profile….

Yeah. Yeah..

… of future projects green..

Yeah. It’s at the core of most of the conversations we are actually having with our LNG customers. We noted the recent earnings call for Energy Transfer on the Lake Charles LNG project where they are spending the gamut in consideration of the electric drives, gas compression, as well as a carbon capture.

But across the landscape, we are seeing the expected acceleration of development of the LNG projects in the service territory. And we remain bullish as are our customers, notwithstanding the current economic environment.

I think Drew alluded to some of the structural benefits or advantages that those customers have, and that’s continuing to show up, not just in the expansion, but also in the ESG components of the LNG expansion as well..

And Ross, I will just add that, that theme around the LNG with electric drives and having a cleaner product, is not unique to LNG. We are seeing that in other industrial processes where folks that, particularly if you are putting in -- they are putting in new facilities, they are trying to electrify as much as possible.

Some of the existing facilities will electrify over top of it. If anybody is putting anything new, whether it’s in metals or LNG or petrochem or whatever, they are looking to see if they can electrify those industrial processes that normally, probably, would have been handled through fossil fuels.

So that’s an ongoing thing that we are seeing across a broad spectrum of industrial processes..

Yeah. That’s fantastic, Drew. Thank you and see you all in couple weeks..

Great. Thanks, Ross..

Thank you..

Thank you. One moment for our next question. And our final question for today comes from the line of Sophie Karp from KeyBanc. Your question please..

Hi. Good morning and thank you for taking my questions. Just wanted to go back to SERI a little bit here, maybe from a different angle, it’s now up to just three or four slides in your presentation.

Have you given any thought to maybe some sort of strategic -- more strategic solution to this situation around these assets rather than mitigating or trying to settle these dockets one by one? Maybe it’s a strategic solution or some overarching regulatory solution, is it global settlement of all of it, like, is there any ideas you could share that you may be had?.

Sure. Sophie, this is Drew. I will tackle that. Certainly, the settlement, Rod, referenced the settlements that we have in Mississippi and we are in conversations with others to see if we can find a global event.

Prior to the work that we are doing right now up at FERC and all the different proceedings that we have, w went -- I don’t know, couple of decades without significant litigation around SERI. And I would expect that once we are through this, it will kind of go back to that natural state. We will have to see.

But certainly a strategic alternative around with that is something that we consider, but we would not have an option around that until we get through the litigated settlement.

And so if we are able to get through the litigation, then we could consider something like that, but that’s -- if we go back to a normal run rate, I don’t think that would be the best option for us.

So we will have to wait and see how this develops, but certainly, until we get through the current conversations up at the FERC, we wouldn’t be able to go forward in any way on the strategic front..

All right. Thanks for the color. That’s all for me..

Thank you..

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Bill Abler for any further remarks..

Thank you, Jonathan, and thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on November 9th 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 webpage as part of Entergy’s Investor Relations website called Regulatory and Other Information, which provides key updates on -- 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..

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day..