Entergy Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Entergy third quarter 2020 earnings release and teleconference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. And I'd like to hand the conference over to your speaker today, Mr. David Board, Vice President of Investor Relations. Thank you. 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 requested 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. N2G 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. Today, we are once again reporting strong quarterly results, which keep us firmly on track to meet our financial commitments. Third quarter adjusted earnings were $2.44 per share, and we're on pace to exceed our $100 million O&M cost savings target for the year. With three quarters behind us and the confidence and clarity we have for the remainder of the year, we are narrowing our 2020 guidance range, which is now $5.60 to $5.70, and we are affirming our longer-term outlooks. 2020 has presented challenges for all of us around the world. We've endured a global pandemic, including its economic impacts. We've witnessed social unrest. And we've had a record-breaking storm season with back-to-back hurricanes hitting our service area. Yet, no matter what 2020 threw at us, we remain steadfast in delivering on our commitments to our customers, our communities, our employees, and our owners. That's what our stakeholders expect from us. For the past several years, we've built the culture, processes, and resources to successfully deliver on our commitments. even in the face of extraordinary times. Our comprehensive incident and storm response plans ensure we are always ready and prepared to respond to extraordinary events. Our best-in-class capital projects management team delivers projects on budget and on schedule, even in challenging environments. Our proven cost management program helps us confront financial headwinds so we can meet our financial commitments And our disciplined continuous improvement program identifies permanent cost savings to deliver incremental sustainable value for all of our stakeholders. Our strong results today amid these extraordinary times demonstrate the progress we've made over the past seven years to build a simpler, stronger, and more resilient company. We are on track to achieve not only our commitments for 2020, but also the long-term strategic, operational, and financial objectives we laid out at Analyst Day. We have a strong five-year customer-centric capital plan that will elevate our customer experience. We will create incremental value for our four stakeholders through continuous improvement. We will continue our legacy of sustainability and environmental leadership for a cleaner world, and we will maintain our long-term vision for steady, predictable growth in earnings and dividends, and we see a path to continue that growth beyond 2024. The professionalism and dedication of our employees and our organization were once again on full display when Hurricane Delta made landfall in southwest Louisiana on the heels of Hurricane Laura. Delta caused 493,000 outages at its peak. With the help of our mutual assistance partners, we were able to deploy 12,000 workers and nearly all of our customers were restored within five days. We showed why we are best in collapsing storm response as we successfully managed to back to back major hurricanes all amid a global pandemic. That's what we prepare for and that's what we do. In fact, Zeta is expected to make landfall this evening in Southeast Louisiana. We've activated our storm response plan and we are fully prepared and ready to respond. For our restoration efforts, we have received broad support from local, state, and federal officials. And as one local official put it best during Hurricane Laura, as soon as the storm passed, energy was everywhere. Of course, our thoughts and prayers are with everyone who was impacted by these storms, especially those in southwest Louisiana and southeast Texas who endured the most damage. Beyond our thoughts and prayers, we provided financial support to affected communities. Entergy shareholders granted more than $730,000 during the third quarter to help families and communities recover. We are deeply grateful for our employees and partners who dedicated themselves to restore the electric service that is so critical to the communities we serve. The storms also proved the strength and resiliency of our modern infrastructure. For example, in the past two years, we completed the Lake Charles and the Nelson to Menina transmission projects in the Lake Charles area. Those projects were designed to withstand 140 mile per hour winds. Every structure from those projects remains standing after enduring the brunt of Hurricane Laura, the strongest storm to hit Louisiana in over 150 years. This is a direct result of our plan to improve the resiliency of our infrastructure and provide a high level of service to our customers. By contrast, many older structures in the same path, which were built to less resilient standards, were destroyed. We rebuilt those structures using modern design and technology, and they remained intact throughout Hurricane Delta. These improvements to our transmission system will provide benefits to our customers for many years to come. In the midst of all of this, we continue to make progress on our key long-term deliverables. Our renewables efforts have escalated over the past few years, and this quarter, we've achieved several important milestones. Louisiana customers began to receive power from the Capital Region Solar, the largest solar facility in the state. We have a 20-year power purchase agreement for the output from the 50-megawatt facility. Entergy New Orleans completed Louisiana's largest commercial rooftop solar project. Approximately 7,000 solar panels provide 2.4 megawatts of clean energy to New Orleans residents. We announced three new solar projects from our request for proposals. Entergy Arkansas is planning to purchase Walnut Bend, a 100-megawatt solar farm. Entergy Texas announced two projects from its renewable RFP. The first, Liberty County Solar, will be a 100 megawatt owned resource. The second, Umbriel Solar, will be a 150 megawatt facility from which we will purchase the output. We are requesting approval from our regulators to move forward with these selections where required. We also continue to make progress on partnering with our customers to offer renewable resource options to help meet their sustainability goals. Sixty-one tax-exempt companies subscribe to Entergy Arkansas' solar energy purchase option, purchasing power generated by the Stuttgart Solar Energy Center. By participating in this utility-level arrangement, these customers will save anywhere from 18 to 28 percent on their electricity usage. These renewable projects will bring clean energy to our customers and will help us achieve our environmental commitments. At Analyst Day, we laid out our climate strategy, and we told you how renewable investments will continue to grow significantly as we move towards achieving our 2030 carbon reduction goal and ultimately our commitment to achieve net zero emissions by 2050. We already are the largest provider of renewable energy in both Louisiana and Arkansas, and Energy Mississippi is building the largest utility-owned solar facility in that state. We have a meaningful commitment to grow our renewable portfolio, for which we plan significant investment by the end of the decade, as always subject to the approval and direction of our regulators. We will continue to engage and work with our regulators and stakeholders to expand the use of renewables under a framework that ensures we balance reliability, affordability, and sustainability. In 2002, We established our portfolio transformation strategy to replace aging, less efficient assets with modern, cleaner, highly efficient assets. We've deactivated approximately 6,500 megawatts of older generation with an average heat rate of approximately 13,000. And we've added more than 9,000 megawatts of modern generation with an average heat rate of approximately 7,300. These newer resources have, on average, a 50% lower emissions profile than the assets we deactivated. And not only are they cleaner, they also provide significant savings to our customers from lower fuel costs. Looking ahead, we will propose building resources that will have fuel optionality to be powered with hydrogen. We will also look at retrofitting existing assets to enable the use of hydrogen fuel and carbon capture and sequestration technologies. We are already working to make this a reality. We recently submitted a proposal in Entergy Texas' RFP for a resource that, if selected and approved, will be developed with the option to be powered partially or fully with hydrogen, and that asset could also utilize carbon capture and sequestration when that technology becomes economical. Our portfolio transformation strategy has led to measurable, undeniable results. For the past two decades, our emissions rate has been well below the sector average. Our utility CO2 emissions rate has decreased approximately 30%, and today we operate one of the cleanest large-scale fleets in the country. And we will only continue to get cleaner as we maximize the use of new modern technologies to serve our customers at the lowest reasonable cost while meeting our environmental commitments. We've talked to you about our unique framework, which illustrates the certainty of our capital plan. Ninety percent of our capital plan is based on the need for system modernization and is not dependent on customer growth. More than 90 percent will be recovered through timely rate mechanisms, and approximately 85 percent of our capital plan is ready for execution from a regulatory approval standpoint. Our constructive and progressive regulatory mechanisms provide clarity to our plan and give us confidence in meeting our financial commitments. On October 15th, New Orleans City Council approved the unanimous settlement agreement that resolves Entergy New Orleans rate case and FRP filing. Under the agreement, Entergy New Orleans will submit the first of three annual formula rate plan filings in mid-2021. The agreement also sets Entergy New Orleans' equity ratio at 51% for the duration of the FRP. the settlement does not address the 9.35% allowed ROE. We continue to believe that this ROE does not adequately reflect Entergy New Orleans' business risk profile as evidenced by the recent downgrade by S&P. We will continue to explore adjustments to the allowed ROE in our discussions with the City Council and its advisors. Entergy Texas also submitted its first filing utilizing the new generation rider recently established by the Texas Commission. The filing requests a $91 million annual revenue requirement from Montgomery County Power Station, effective when the plant is placed into service. At Entergy, we play a vital role in every region where we operate. This responsibility is never clearer than during our incident response to events like major storms and the current pandemic. but our commitment to sustainability extends far deeper than just incident response. We demonstrate our leadership through our daily actions, such as our climate strategy, attracting talent and developing our workforce, our commitment to diversity, inclusion, and belonging, and initiatives that strengthen the well-being of our communities. At our Analyst Day, we published a comprehensive ESG presentation that outlines our leadership in sustainability, which I encourage you to review. As I said at the outset, 2020 has validated that we are now a simpler, stronger, and more resilient company. We are prepared to successfully respond to challenges, and that's been important this year more than ever. With much of 2020 behind us, we've delivered strong results despite the challenges of a global pandemic and its economic impact, social unrest across the country in an active storm season with back-to-back-to-back hurricanes hitting our service area. We are excited about the prospects ahead of us. The fundamentals of our company are strong and the value drivers that uniquely position us to be the premier utility remain in place. We are strategically, operationally, and financially on track to meet the commitments we've made to our stakeholders. We have some of the lowest rates in the United States and are committed to maintaining that advantage. We have a significant investment plan that improves the level of service for our customers through innovative solutions that meet the outcomes they expect. We have one of the cleanest large-scale generation fleets in the country, and we are a leader in sustainability with a commitment to achieve net zero carbon emissions by 2050. We have a clear line of sight to 5% to 7% growth in earnings, and by the end of next year, we'll start to grow the dividend commensurate with those earnings. And as we mature in our continuous improvement efforts, we aspire to lower our costs and do even better for the benefit of our stakeholders. We look forward to continuing the conversation with you at the EEI Financial Conference, and Drew will now review the quarter's results.