Entergy Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Entergy Corporation second quarter 2020 earnings release and teleconference. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, David Ford, Vice President, Investor Relations. Thank you. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us. We will begin today with comments from Entity'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, David, and good morning, everyone. Thank you for joining us. Today, we are reporting strong second quarter results of $1.37 adjusted earnings per share. Sales in the quarter were better than we expected. We are on track to achieve our $100 million O&M cost savings target for the year, and our capital plan is unchanged. With these results, we are affirming our full-year guidance, our longer-term outlooks, and our dividend growth aspirations. As you all know, the COVID-19 pandemic has placed a burden on our customers, employees, and communities. We believe it is part of our mission, empowering life. to do all that we can to support our stakeholders as we all work to recover from its effects. Despite these extraordinary times, 2020 is on pace to be another year of significant accomplishments for Entergy. This quarter, we've made progress on multiple fronts, all of which will benefit our stakeholders. We completed phase two of the Western Region Economic Transmission Project. The New Orleans Power Station came online The Public Utility Commission of Texas finalized its rulemaking for a generation rider. The Mississippi Public Service Commission approved Entergy Mississippi's formula rate plan filing. Entergy Arkansas and Entergy Louisiana each filed their annual formula rate plans and requested extensions of these mechanisms. And Entergy Louisiana issued a request for proposal for up to 300 megawatts of new renewable resources. And more importantly, we continue to successfully manage the effects of our investment on customer rates. According to an S&P Global Market Intelligence study published earlier this month, in 2019, Entergy provided power to retail customers at the second lowest average price of the major investor-owned utilities in the United States, something we are very proud of. The COVID-19 pandemic continues to affect all of us across the country. As we discussed last quarter, we were well prepared from the outset, and we continue to effectively manage our response. We are taking precautions for our employees and our customers. Those who can are working from home, and we have procedures in place to keep our employees in the plants and in the field safe. We are also creating innovative solutions to help our customers and our communities. For example, our social responsibility and automation employees work together to develop a bot, It proactively informs customers in need about the Low-Income Home Energy Assistance Program, or LIHEAP. This project also won second place in a global contest for innovative ways to reduce COVID-19's impact on the economy and communities. Students and faculty at Southern University are using 3D printers in their Entergy-sponsored lab to make parts for reusable N95 masks for healthcare professionals. With our community partners, Entergy has helped to prepare more than 2 million meals, provide crisis grants for more than 5,000 households, and deliver personal protection equipment to first responders, individuals, and families in need. Through the first half of the year, Entergy has donated almost $9 million in charitable contributions to support our communities, including almost $3 million in COVID relief efforts and Entergy's The Power to Care program, which helps customers who need financial assistance to pay their bills. In parallel to our COVID-19 relief efforts, we continue to execute on our major projects across our service area to modernize our utility infrastructure and enhance its efficiency and reliability for the benefit of our customers. We placed New Orleans Power Station in service in May, in time for the summer peak period and hurricane season. Since entering service, this highly flexible and efficient peaking unit is being dispatched frequently. We completed Phase 2 of the Western Region Economic Transmission Project. This $115 million investment supports economic growth in southeast Texas and enhances reliability for existing and future customers. The Public Utility Commission of Texas also approved our Certificate for Convenience and Necessity For the Timberland transmission line, a $57 million project expected to be completed in 2022. We reached an important energy milestone with the 100th customer signing up for the Renewable Orleans Residential Rooftop Solar Program. The program offers a cost-effective way for low-income customers to participate in the benefits of renewable energy without having to make an upfront capital investment. Entering New Orleans installs, owns, and maintains the rooftop solar systems, and customers get a bill credit for their participation. Renewable Orleans is a good example of the innovative programs we are implementing to deliver renewable energy solutions to our customers. We will continue to engage with our regulators and stakeholders to expand the use of renewables under a framework that ensures we build the most economic system balancing reliability, cost, and sustainability. In addition to providing meaningful customer benefits, our three-year capital plan has significant certainty. We've talked to you before about the 90-90 framework by which you should view the certainty of our capital plan, that our capital plan is 90% ready for execution from a regulatory approval standpoint, and that more than 90% will be recovered through timely mechanisms. Today, we're adding a third 90 to further emphasize the strength of the plan. that 90% of the capital plan is based on the need for system modernization and not dependent on customer growth. These three statistics mean that our customer-centric capital plan is necessary, the majority will not require special regulatory review, and we expect timely recovery. We benefit from constructive and progressive regulatory mechanisms that provide clarity to our plan and give us confidence in meeting our financial commitments. Recently, the Public Utility Commission of Texas finalized the Generation Rider, which will provide for full and timely recovery of capital costs associated with a new generation facility. We are grateful for the Commission's leadership in developing this new rule. More timely recovery will help us create value for our stakeholders in Texas and ensure that the communities we serve remain economically competitive. We plan to make a filing later this year using this mechanism to request recovery of Montgomery County Power Station when it comes online in 2021. Entergy Mississippi received approval of its formula rate plan filing. Rates were implemented in April. Entergy Arkansas and Entergy Louisiana each submitted their annual FRP filings. Summaries of the requests are included in the appendix of our webcast presentation. Both of these operating companies are in the last year of their FRP cycles, and both are requesting extensions. EntryG Louisiana's request includes a midpoint reset and a new distribution rider similar to the transmission rider that is currently in effect. In New Orleans, we continue to work with the City Council on the appropriate timing to begin the filing cycle for the recently approved three-year formula rate plan. At CERI, we filed our brief on exceptions to the ALJ's initial decision issued in April. As you know, we disagree with most of the initial decision because it incorrectly seeks to resolve important policy issues of first impression that FERC ultimately must decide. The actions we've taken seek to create significant benefits for our customers who consistently experience some of the lowest rates in the country year after year. Our customers have not been harmed by our actions and, in fact, stood to benefit greatly from them. Our tax planning practices have created more than $900 million in direct customer benefits, $550 million of which has already been credited to customer bills. The April initial decision, if it is affirmed by the FERC, would discourage utilities like ourselves from pursuing such prudent, innovative strategies to lower customer bills. The sale leaseback arrangement also produced significant savings for our customers, and the ALJ's recommendations would similarly discourage utilities from entering into such transactions. We feel strongly that our positions on the law and the facts are correct. To be very clear, we believe that our actions have been prudent and for the benefit of customers and that there should be no refunds or disallowances except for the small depreciation correction that we agreed to. While we will vigorously defend our position at the FERC, the time frame for pursuing series uncertain tax position any further is lengthy, and the outcome is uncertain. This leaves us no choice but to mitigate risk for our owners. In the next few weeks, we will give up series uncertain tax position with the IRS. This will effectively cap the principle of any potential historical refunds, eliminate the basis for any reduction in series rate base going forward, and eliminate the basis for the $147 million excess ADIT customer credit raised in the July ALJ initial decision. Drew will provide additional thoughts on this matter, and I encourage you to review our brief on exceptions. At Entergy, we play a vital role in every region where we operate, and our core values are reflected in our efforts on behalf of our stakeholders. Entergy is consistently recognized for its corporate citizenship, climate leadership, and commitment as an employer of choice, which is a tremendous honor. For a fifth consecutive year, Entergy was named a 2020 honoree of the Civic 50 by Points of Light, the world's largest organization dedicated to volunteer service. This award recognizes Entergy as one of the 50 most community-minded companies in the United States. Additionally, 3DL Media, has named Entergy to its annual 100 Best Corporate Citizens ranking, which recognizes outstanding environmental, social, and governance transparency and performance among the 1,000 largest U.S. public companies. This is the eighth year Entergy has been included in this prestigious ranking. We were also named the winner of the Bronze Stevie Award for our 2019 Climate Report, where we outlined steps that we are taking to deliver cleaner energy solutions, and promote a lower carbon future for all of our stakeholders. Finally, like many of you, I've been saddened and upset by recent events that have laid bare yet again the deep social inequalities and injustices so many in our country continue to face. As our human rights statement outlines, Antigone respects the human rights of all individuals. With a workforce of close to 14,000, we leave no room in Entergy for racism, discrimination, or intolerance, but rather seek to achieve our vision and mission through diversity and inclusion of all people and their unique ideas, backgrounds, and perspectives. We will continue to move forward in our mission and you, as owners, including our employees who are a top 10 owner of the company, have my and the entire Entergy leadership team's commitment that we won't retreat from our obligations personally or professionally. We know that our actions towards creating real and meaningful change speak much louder than words. As I said at the outset, we delivered yet another strong quarter. Even though COVID-19 has had an impact, 2020 has already been a year of significant accomplishments that keep us on track to meet our strategic, operational, and financial objectives. We are committed to those objectives and are resolved to be the premier utility. The foundation of our business remains strong and sustainable. We have among the lowest retail rates in the country. Our capital plan remains on track and will modernize our system and benefit our customers and our local economies. We have constructive and progressive regulatory mechanisms. We are an industry leader in critical measures of sustainability. We have one of the cleanest large-scale power generation fleets. And while we have seen some slowdown in industrial activity, our industrial base is among the most economically advantaged in the world, and we expect that they will lead the region's recovery in their respective industries. We create innovative solutions to help our customers, and we are prepared to overcome headwinds through a disciplined cost management program, as evidenced in our response to both last year's unfavorable weather and this year's COVID-19 impacts. It should not surprise you that we are affirming our longer-term outlooks given our commitment to create permanent cost savings through continuous improvement efforts. These efforts strengthen and, when possible, will improve our delivery of steady, predictable earnings growth, as we demonstrated on this call just last year. This is what makes Entergy a compelling long-term investment. This is the foundation on which we will grow, innovate, and expand our investment profile to continue to deliver on our commitments tomorrow. Before I turn the call over to Drew, I want to confirm that our Virtual Analyst Day will be held on September 24th. These are exciting times for Entergy, and we look forward to continuing the conversation with you then about what we're doing to build the premier utility. Drew will now review our second quarter results and our outlooks.