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spk01: Good day and thank you for standing by. Welcome to the Interdict Corporation second quarter 2021 earnings release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 in your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Bill Abler, Vice President and Vexster Relations. Please go ahead.
spk09: 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.
spk02: Thank you, Bill, and good morning, everyone. I'm happy to report another solid quarter. Our adjusted earnings were $1.34 per share, including a negative impact from milder than normal weather. The underlying utility performance was strong, and our team successfully executed on multiple deliverables across the business. Our execution not only this year, but over the last several years has resulted in strong growth and lower risk. This in turn has provided us more financial flexibility, which was most recently recognized by Moody's. The result is enhanced ability to manage risk and lower equity needs to fund our growth. The bottom line is we are on track to deliver on our commitments, including our financial results. We have a clear line of sight to achieving our 2021 guidance, as well as our longer-term financial outlooks, and with the added financial flexibility from our lower business risk profile, we expect to be in the top half of those ranges. Our three-year, $12 billion capital plan is the foundation. It is designed to deliver important benefits to our customers and will result in 5% to 7% adjusted EPS and dividend growth. Our capital investments will improve customer outcomes along several dimensions, including reliability, resiliency, affordability, and sustainability. Our plan also supports our expectation of at least 5,000 megawatts of renewables by 2030, delivering on our environmental stewardship commitments. There is a great deal of certainty around the execution of our plan as more than 90% of our investments today are tied to enhancing technology across our system to improve reliability and resiliency. 90% of our investments will be recovered through efficient and timely regulatory mechanisms, such as FRPs and riders, and 90% of these investments are ready for execution from a regulatory standpoint. Additionally, we are able to manage our costs to provide certainty to our stakeholders, through both our flex spending program and continuous improvement. These initiatives allow us to manage our customers' bills and keep them affordable while also providing steady, predictable growth in earnings and dividends for our owners. We have consistently maintained rates among the lowest in the country, and we have achieved 7 percent compound annual growth in adjusted EPS for 2016 to 2020. Our accomplishments so far this year keep us firmly on the path to meet our objectives. One important objective is increasing our renewable and clean energy resources. To that end, Entergy Texas began the process to seek approval to construct the Orange County Advanced Power Station, a large-scale hydrogen-capable facility that represents a significant milestone in our strategy to provide clean energy that also supports reliability. We received approval from the Arkansas Commission for the Walnut Bend Solar Project. We will own this 100 megawatt facility, which is expected to be placed in service in 2022. It will provide clean energy for our customers in Arkansas and possibly provide capacity under a green tariff. We recently filed our proposed green promise tariff in Arkansas. to allow for the sale of designated renewable energy to interested customers. Many customers have expressed interest in such an offer, and in fact, customers had input into the development of the proposal. We have received signed non-binding letters of interest from 20 customers, including Walmart, a global technology company, a major retail pharmacy company, nearly a dozen hospitals or hospital networks, an Arkansas university, and a number of large manufacturing customers. Our customers are telling us what they want and we're listening. We're working to bring them offerings such as Green Promise to help them achieve their sustainability goals. We also continue to make progress on our annual FRPs, which provide for timely recovery of investments that benefit customers. Entergy Mississippi's FRP was approved and the full rates are in effect. And we submitted our annual filings in three jurisdictions, Arkansas, Louisiana, and New Orleans. Many of you are interested in our storm recovery filings and they remain on track. Legislation to support off balance sheet securitization passed in Louisiana and Texas, and we expect to receive proceeds by mid 2022. In fact, Entergy Louisiana filed its request for securitization this past Friday. As I've mentioned before, building greater resiliency into our system is an ongoing focus. Some of our resiliency improvements have been occurring as normal course of business as we replace aging transmission and distribution infrastructure with assets designed the latest standards and able to handle higher wind loading or flood levels. At times, these resiliency improvements are accelerated, like when we build back better after a major storm. However, We won't wait for another storm to continue to strengthen our system. We're conducting a review of our critical infrastructure. We are developing long-term plans to continue this progress on the path to greater resiliency. Customer affordability continues to be a cornerstone of our plan. We're starting at a great place, and looking ahead, even after accounting for storm recovery, we will still expect our rates to be well below the national average. And the annual growth rate for average bills from 2021 to 2024 is slightly above 2%. Bottom line, so we have a solid plan with significant certainty and a strong growth outlook. We consistently execute on our key deliverables that underlie our commitments. We have a proven track record of delivering on those commitments. We're confident that we will be successful, but we're not stopping there. we aspire to do even better. Over the last several years, we've been highlighting the opportunity we see in customer solutions. We've begun to commercialize some of those solutions, such as power through, our backup generator solution, and shore power, the electrification of ships while in ports. We're also developing other products to further electrification of industrial processes to accelerate the development of EV infrastructure. We're expanding our product and service offerings to help our CNI customers meet their sustainability objectives. We're actively working to reduce our carbon emissions, and that will help all of our customers reduce their Scope 2 emissions. To further support our customers' aggressive decarbonization goals, we will leverage green tariffs to provide carbon-free resources to further reduce their Scope 2 emissions. As you all know, Entergy has a large industrial base with about 40% of our demand coming from industrial customers. Some have viewed this as a risk, but we disagree. We see continued opportunity in this sector, and here's why. Our industrial customers are efficient, diverse producers with infrastructure and labor competitive advantages. Our Gulf Coast refineries produce a wide variety of feedstocks and finished products highly integrated into the value chain. This is not going away. Even as products like cars evolve toward more sustainable options, the components of these products will still be needed. For example, cars and trucks will still have tires, frames, and dashboards, all things created from feedstocks produced by Entergy's industrial customers. Additionally, in a carbon-constrained world, we see opportunity for additional growth and demand from our industrial customers. We talked about green tariffs as one way to help them meet sustainability goals, but that only addresses Scope 2 emissions that come from their power purchases. The lion's share of our industrial carbon emissions come from Scope 1 emissions from fossil fuels that they use on site. Again, we're developing ways to help customers reduce their Scope 1 emissions through electrification, including electrification with green options. Substantial opportunity exists for us to help them electrify processes such as compression for LNG or product pipelines, cogeneration, replacing a fossil fuel process with an electric alternative, and process heat to convert on-site boilers to electric heating. And as our customers adopt carbon capture utilization and storage, we can provide green energy to maximize the benefit of that technology. As we discussed, Entergy's geographic positioning in the heart of hydrogen producers, pipelines, storage, and consumers represents another unique opportunity. We have the ability to help our hydrogen customers, both producers and consumers, convert to carbon-friendly hydrogen alternatives. The bottom line is that we believe our large industrial base gives Entergy a unique advantage and growth opportunity in a rapidly decarbonizing world. Turning to our efforts around hydrogen, which we see as a critical part of a clean energy future, we are working with Mitsubishi Power to advance technologies and expertise in hydrogen for the benefit of our customers. Part of our collaboration involves the hydrogen-capable Orange County Advanced Power Station, which I mentioned earlier. We're also continuing our work on Montgomery County Innovation Center, a 25-megawatt electrolysis facility to demonstrate green and clean hydrogen production capabilities. Finally, we recently participated in the DOE's Hydrogen Energy Earth Shots Initiative. Our goal is to secure federal funding to help jumpstart hydrogen demonstration projects in our region in a matter that mitigates impacts on our customers' bills. We expect to see a request for proposal notice from the DOE later this year or early next year. At Entregy, we have a solid strategy to achieve our objectives. We are an industry leader in sustainability. We have one of the cleanest large-scale generation fleets in the countries, and we're working to make it even cleaner. We have a robust capital plan to meet our customers' evolving needs. Our low rates position us well. We're committed to continuous improvement for the benefit of our stakeholders. We have a clear line of sight to 5% to 7% earnings and dividend growth, and we have a unique advantage with our customer base to provide sustainability solutions that could result and incremental sales growth. Even with our excellent positioning today, our goal is to do more. These are exciting times, and we're working to create a very bright future for our company. I will now turn the call over to Drew, who will review our financial results for the quarter, as well as our outlooks.
spk08: Thank you, Leo. Good morning, everyone. Today, we are reporting results for another solid quarter. As you can see on slide five, we've experienced robust sales as we recover from the impact of COVID-19, and we continue to execute on our key deliverables. We're well on our way to achieving our goals for the year, and we are affirming our strong guidance and longer-term outlooks, while pointing to the upper end of the range for each. Turning to slide six, you'll see the primary drivers for earnings in the quarter were straightforward. we continue to see the effects of our investments to improve customer outcomes, including rate changes to recover those investments. We also saw effects of the COVID-19 recovery. Sales were higher than last year, despite negative weather in the quarter. Our industrial sales improved 7.1% year over year. Driven by economic recovery and growth, our industrial customers are now running at levels exceeding 2019. Commercial sales increased also are continuing to recover as businesses reopen and residential sales are beginning to taper as workers go back to their offices. On slide 7, you'll see a little more detail on key sector indicators for our industrial customers. These four sectors collectively represent nearly half of our industrial sales. As you can see, the economic indicators are healthy and at or near multi-year high points. Inventories are back in alignment, commodity spreads have improved, and volumes and margins are doing better across the board. Overall, our industrial base has rebounded nicely from the challenges of 2020. We are fortunate to have a resilient and competitively advantaged industrial base. Turning back to the earnings drivers, our spending increased as we returned to more normal business conditions. This increase was expected. as we significantly reduced costs last year to offset the effects of COVID-19. The spending includes increased scope of work at our generating plants, including outages deferred from the past year. We also have incremental spending for new plants in service and in our focus areas of reliability and improving the customer experience. Our O&M expectation for the full year remains $2.7 billion. and we will continue to utilize our flexible spending tools to achieve steady, predictable results. Moving to EWC on slide eight, you'll see the results were lower than the prior year. The key driver was the sale of Indian Point to Holtec. The sale resulted in a pre-tax charge of $340 million driven primarily by the Nuclear Decommissioning Trust exceeding the decommissioning liability. The sale of Indian Point is a significant accomplishment and an important milestone in our exit of EWC, and one which further improves our business risk profile, the impact of which I will address shortly. Operating cash flow for the quarter is shown on slide nine. The quarter's result is slightly higher than last year's operating cash flow returns to more normal levels. This change is due primarily to improved collections from customers, which are offset by a few items. Fuel prices increased compared to last year and we saw a negative cash flow impact from the timing of fuel and purchase power cost recovery. Severance and retention payments were higher at EWC relating to the closure and sale of Indian Point. And we also had some remaining payments for non-capital 2020 storm costs. Our current credit metrics are shown on slide 10. Our parent debt to total debt is 22.4% and our FFO to debt is 8.3%. Our FFO to debt remains suppressed in large part due to the financial impacts from storms. As we mentioned the past few quarters, we expect the metric to return to targeted levels in 2022 after we receive securitization proceeds and pay down the incremental debt. We've made our storm recovery filings in Louisiana, Texas, and New Orleans. As Leo noted, both Louisiana and Texas passed legislation to support off-balance sheet treatment for securitization. And last week, InterChief Louisiana made its securitization filing. Recovering storm costs through securitized debt is the best alternative for customers and helps strengthen our balance sheet. As we've communicated, we have several options to meet our equity needs. In this past quarter, we utilized the At-the-Market Equity Program. As of the end of June, we had sold approximately $73 million of common stock, of which approximately two-thirds were forward sales. which could settle as late as next fall. Finally, I'd like to discuss the Moody's advisory that was issued this past week. Though affirming CERI's investment grade ratings, Moody's did place CERI on negative outlook, citing the currently pending cases filed against CERI at FERC by retail utility commissions. Moody's indicated that these cases have the potential to erode CERI's earnings power and cost recovery. While we are, of course, disappointed by this change, we recognize that the level of claims brought against CERI approached the value of Grand Gulf, and the regulatory environment in which CERI is operating is far from constructive. In the same advisory, Moody's affirmed the parent's investment grade rating and outlook, recognizing that Entergy's larger size and diversity could withstand adverse outcomes at CERI. In addition, Moody's recognized our improved business risk profile, which is a result of our successful multi-year strategy to wind down the EWC merchant business and grow our utility business. To do this, they reduced the cash flow from operations minus working capital to debt threshold. That's a bit of a mouthful. For Intergy Corporation, from 15% to 14%. We are pleased with the recognition of the de-risking that we've accomplished in our business, and combined with S&P's similar recognition last fall, we are excited about the enhanced financial flexibility that our work has unlocked. Moving to slide 11, the recent recognition of our de-risking efforts and incremental balance sheet capacity, we are early in the process of determining its full impact on our plans and outlooks. That said, There are some early takeaways. First, the incremental capacity significantly increases our confidence in our ability to execute the current business plan. Second, we will not need as much equity to fund our utility growth. While we are affirming our 2021 adjusted EPS guidance range of $5.80 to $6.10, as well as our longer-term outlooks for 5% to 7% adjusted earnings per share growth, The combination of the improved confidence and lower equity needs places us in the top half of our guidance and outlook ranges. We have a clear line of sight on our capital plans to benefit customers and a robust balance sheet to support that investment, both underpinned by a strong continuous improvement program and disciplined, flexible spending plans. We plan to invest for the benefit of our customers in projects designed to improve reliability, sustainability, resiliency, and customer experience. These investments and programs further support community economic development and employee development, all while keeping our focus on low rates. Finally, the incremental balance sheet capacity resulting from our de-risking efforts will enhance our ability to unlock the significant investment opportunities that will flow from working alongside our commercial and industrial customers, as Leo described, to help them lower their Scope 1 and Scope 2 emissions. Today, we are executing on our key deliverables, and we are firmly on track to meet or exceed our financial objectives. We are investing in customer solutions to enhance our customer experience, and our investments in renewables and hydrogen technology continue to support our sustainability efforts and those of our customers to provide new opportunities in the future. We are very excited about the growth opportunities ahead. And now, the Entergy team is available to answer questions.
spk01: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. Also, please limit yourself to one question and one follow-up. To withdraw your question, please press the pound key. Our first question comes from the line of Jeremy Tonette with JP Morgan. Your line is open. Please go ahead.
spk11: Hi. Good morning. It's actually Rich on for Jeremy. Thanks for taking your questions today.
spk02: Good morning, Rich.
spk11: Maybe just starting with the equity message first, I realize you laid out some of the drivers behind this, but just wanted to drill down more specifically on equity the share count aspects for 21 as well as just the overall evaluations. Can you speak a little bit more just to the timing of updating for the new Moody's Outlook and what other considerations around business mix and where the plan stands now could factor into the lower equity needs?
spk08: Sure. So I'll talk about the timing. This is Drew. I'll talk about the timing first. We have been working on this a long time, but we just got the recognition from Moody's in the past week or so, as I mentioned. And so we are still early in the assessment of what the overall impact means. I pointed to a couple of the early elements associated with it. We expect to complete that this fall. It could be sooner. I would say probably no later than EEI, but it could be sooner than that. And as it relates to something like the share count or specifics around size, I don't have those kinds of details available to give you today. Other than to say, you know, we believe it would be meaningful. It will be a meaningful change. In terms of the evaluation, which is, I think, part of the question that you had in there, you know, we still want to make sure that we are hitting our earnings and credit expectations. We will still need to issue a little bit of equity to do that, but the opportunity is much more robust in front of us now. We think it's been significantly de-risked. We have a lot more confidence, as I said, in our ability to execute, but we don't have specifics that we can give you today. A couple other sizing or, I should say, evaluation perspectives. One is that, as Leo talked about extensively, we have a significant growth opportunity ahead of us, and we want to make sure that we have the capacity to invest into that opportunity as it materializes. And then Moody specifically also talked about Siri and our ability to manage that risk as it's presented right now, specifically around the uncertain tax position case. And their perspective was that we should be able to manage that risk and still meet the expectations around earnings and credit. And so we want to make sure that we have that capacity built in as well. And, of course, we still believe that we're going to be successful in Siri. I know that wasn't really your question. But, you know, if that doesn't materialize, that would be an incremental opportunity for us to invest in the business.
spk11: Got it. Thanks for the color there. And then maybe just switching gears to the CCGT in Texas, what is the timeline for regulatory approval, and do you expect the hydrogen aspect to impact approvals process at all?
spk07: It's Rod. Good morning. From a procedural standpoint, the process will begin at the commission right around the Labor Day, right around the Labor Day timeframe. We're zeroing in on that. And then the procedural schedule will be set by the PUCT. And that process could run six to 12 months if we're efficient in the way that we're pursuing it. But again, that's up to the PUCT in Texas. And you asked a question around the hydrogen component. I want to make sure I heard the question correctly.
spk11: Sure. Just curious if, given the novel nature of the hydrogen component, if you expect that to impact the approvals process at all.
spk07: No, the hydrogen component, as it's currently configured, represents approximately 5% of the overall cost, and we believe we have a compelling case for why having that flexibility benefits our customers and certainly would support the CCN. So it's novel, of course, and we're prepared to explain why it's beneficial, but more importantly – bringing our customer benefits along when we think about the industrial opportunity that both Leo and Drew referenced. We think that also adds to the viability of hydrogen being part of the CCN process at this stage.
spk02: Jeremy, I'll just add to what Rod said. There's two advantageous components to the hydrogen piece of this. One is certainly in the environmental space that hydrogen is a cleaner fuel. The other is that what we are going to end up with at the end of the day is a dual fuel unit. It'll be able to run on natural gas or hydrogen or any combination in between. And so if you think about resiliency, that optionality provides not only environmental benefits but an added level of resiliency, which we've all seen is something that we need as we start to deal with the weather events.
spk11: Understood. Thank you for the color there.
spk02: Thank you.
spk01: Thank you. And our next question comes from the line of Julian Dolmelin-Smith with Bank of America. Your line is open. Please go ahead.
spk10: Hey, good morning, team. Congratulations on some of these updates. Really well done. Good morning, Julian. If I can, if I can try to rehash a little bit. I know it's early in the process, but maybe the other way to ask this is what are the big puts and takes as you think about the outlook now relative to new targets, et cetera. I just want to make sure that as you think about it, what are the building blocks that you're, shall we say, assessing here early in the process? And then related to that, if you can just sneak this in there, where are you just in the financing plan year to date? I know this is all fluid and dynamic, but, you know, what have you done thus far this year relative to the full year plan and expectations here, if you can, around that?
spk08: So, Julie, this is Drew. In terms of the big puts and takes, I mean, I think the first thing is just sort of the back of the envelope math in terms of how much put and take is out there. And when you go from 15% to 14%, you know, given the size of our cash flow, you know, it's somewhere in the $1.7 to $2 billion range, you know, and it's sort of growing over time. So it's a lot of extra capacity. And what we are considering, you know, in terms of the building blocks, I think, as I mentioned, I think there's probably three big ones, right? One is, you know, okay, so how much incremental equity do we really need right now? That'll take up some of that capacity.
spk03: One is...
spk08: how much opportunity is really out there for growth in the commercial industrial space as we ramp up our ability to work alongside our customers to manage their scope one and scope two positions. Those are probably the two big ones. And Moody specifically talked about our ability to manage identifiable risks that are out there. And they pointed to CERI specifically And if you take the ALJ's recommendation around uncertain tax position, that's in the ballpark of a little over $500 million. That could be a piece of capacity as well. Certainly, we're very comfortable in the way that we are positioned in that case, and we can go through that. And we have in the past, as you know, Julian. So, I mean, I think it's reasonable. That is, you know, additional something that we're thinking about as well, make sure that we have the capacity to manage a risk like that, and that Moody's was pointing at that. So, I mean, those are the three things. And, you know, we certainly had a forecast, you know, before this ruling last week that said, you know, we were going to, hit our earnings expectations. We were going to hit our targets on credit. Those are still the case. Now we have extra capacity to do that and manage through these new opportunities and these risks. So it's incrementally better for us because it really de-risks our ability to execute.
spk10: Right. And the press, is that still in the currency? I just want to understand on the specific financing aspect.
spk08: I'm sorry, I didn't hear that. That's certainly something that's on the table for us still. But, you know, we are looking at, you know, we're sort of stepping back and thinking about, okay, so what's the best way for us to proceed given that we have this extra capacity? And so we want to think through it a little bit before we proceed with any specific financings. Okay. And once we get finished with that, then we will, you know, start moving forward and communicate with you all about what our plan is.
spk10: And sorry to rehash slightly your comments on the upper half. I just want to be extra clear about this. That is strictly tied to dilution and equity needs, and that is not reflective of any changes in your cost-cutting efforts, and or perhaps more critically, load trends, and especially industrial load trends therein, et cetera?
spk08: Yes. So we were very comfortable in our guidance and our outlooks before, just to be clear. And this, you know, the fact that we don't need to issue as much equity starts to move the earnings per share up. So that is a driver for helping us move to the upper half of the range. And that and the additional confidence that we have because we now have additional flexibility to achieve these earnings outcomes and the financial flexibility that we have available to us now. So the combination, I would say, of those two things that allows us to say we think we're going to be in the top half of the range with some work to do to refine that for you all going forward.
spk10: Right. But these other factors presumably are still independent, right?
spk08: That's correct.
spk10: Right. Excellent. Well done. We'll speak to you shortly. All the best in this process. Thanks, Julian. Appreciate it.
spk01: Thank you. And our next question comes from the line of Jonathan Arnold with Vertical Research. Your line is open. Please go ahead.
spk00: Hi. Good morning, guys.
spk02: Morning, Jonathan.
spk00: Just a quick one, again, on financing. Given the lower need... does that make you sort of more likely to look at something which might put this whole need to bed quicker as opposed to sort of doing it through the plan? Any thoughts on that at this early stage?
spk08: Yeah, Jonathan, that's a good question. Certainly that is a possibility now. Yeah, we haven't completed our assessment, but that is something that we would consider if we could do it. You know, we're mindful of the so-called equity overhang. We understand that. And so we are thinking about that. That is definitely a consideration as we're doing our assessment.
spk00: Okay. And could I just, just to double set, I want to make sure I'm clear on what the prior plan was. I think it was up to $2.5 billion, but that was out through 2024. Is that correct? That's correct. Okay. And then just finally, obviously from the analyst's day, you also had a 24 range out there, which you've not been including in the last couple of slide decks. Is there any reason why we wouldn't continue to use that and why your comments about the upper end wouldn't also fold into that longer-term outlook that you gave whenever it was?
spk08: Yeah, so, I mean, I can't go out right now because, you know, we haven't got that information available. But, you know, our expectation is to drive steady, predictable earnings and dividend growth. And to the extent that we want to be steady and predictable, that might imply what you're looking for.
spk00: Okay. Thanks very much, and thanks for the update.
spk08: Thanks, Jonathan.
spk01: Thank you. And our next question comes from the line of Steve Fleshman with Wolf Research. Your line is open. Please go ahead.
spk06: Hey, everyone. A couple things. Just on those three considerations you mentioned, Drew, one of them was the growth opportunity. I assume this is on, as you talked about, on the industrials as they, you know, look to clean up and electrify more. When you talk about that as a growth opportunity, are you referring it to more as a kind of rate-based CapEx or as a sales and cash flow?
spk02: So, Steve, that's a good question. There's a couple of growth opportunities that we're assessing right now. One, as I mentioned in my script, which doesn't have to do with environmental benefits necessarily, but is part of it, is the assessment we're doing on resiliency across the system, which is could lead to more T&D investment going forward. So that's an area that I did want to point out, the assessment of that. In conjunction with what's going on with infrastructure in Washington, could be a combination of rate-based assets plus some costs that are actually picked up by the states and the federal government through potentially the infrastructure bill, depending on how that all works out. The big opportunity, though, and we've been talking about this for a while, obviously, is the size of the emissions footprint of our industrial base. If you just go on the Internet, look at who our industrial customers are and look at their websites, they all have sustainability objectives, many of which are public. There's a couple of ways for us to help them out. What we already do when they provide electricity from us, it's some of the cleanest electricity in the country, so their scope two emissions are lower. To drive those even lower, we've been discussing things like green tariffs with those customers, and that really makes the deployment of our renewables more efficient. And so, for example, we've got the solar facility that we got approval for in Arkansas, filing a green tariff in Arkansas. We already have customers like Walmart who want to talk to us about taking a slice of those facilities and make the deployment of those more efficient. In a way, that could accelerate our investment in renewables if there's a large uptake of that, particularly if that spreads over into our industrial customers, which we're already having discussions with them on that. then the big opportunity is exactly what you said, is to attack their scope one emissions. And that really is getting outside of just merely adding generation to the system for technological improvement. Now we would be adding more load growth. And so you can think about it as it's new load with new sales for new processes that today are not electrified. It would provide us the opportunity to deploy assets to help them meet those objectives, and primarily that could not only accelerate but increase the size of our renewable footprint going forward. We're in the early stage of assessing the size and timing of that, so we'll be laying out more as we go, but it would be rate-based additions to meet regulated utility sales for things like if they're using natural gas compression on a pipeline today, electrifying that. If they're using fossil fuels for compression and LNG process, that could be electrified. If they're co-generating with highly inefficient and high emitting generation on site today, that could be electrified by us or utilized in green tariffs or to the extent that we develop hydrogen over time, that can be part of the mix as well. So it's a pretty significant opportunity that we're in the early stages of investigating. We're having a lot of discussions with our customers about what their needs are.
spk06: Okay. Great. And just one other question on just the change in the equity plan. So obviously it's great that you're targeting seeing things now in the upper half, but actually the amount of equity, just that difference to get you in the upper half by 20, you know, in these years is actually, it's only, I don't know, maybe $300 million less equity. And you talked to potentially billion seven, two billion of more capacity. So could you just try to kind of tie that together in terms of how to think about that? Is it, you know, how should I just think about that?
spk08: Well, it's true. You know, I think that we are early in our assessment is probably the best way to think about that. So, you know, we got the news that we got the recognition last week, and so we haven't completed our assessments about, you know, what this might mean for us going forward. And, you know, I think what we – We wanted to get you early out there that we at least see ourselves in the top half of the range. We have more work to do around that. We have a couple of things that need to factor into the analysis, like you just discussed, Leo, around the growth potential that's out there. There are a couple of risk items out there. that we want to make sure that we have the capacity to manage. And if we can manage through them without using that capacity, that's incremental capacity that's available for us. But, you know, I think you're looking at the right thing. There is a good opportunity for us out there going forward.
spk06: Okay. So it sounds like you're both obviously going to update balance sheet, but also almost really a full refresh of the capital plan, too, for some of these things in it. that Leo just mentioned.
spk08: That's right. There's that opportunity out there that we're still framing it up.
spk06: Okay. Okay. Thank you.
spk08: Thanks, Steve.
spk01: Thank you. And our next question comes from the line of Paul Freeman with Mizzouho. Your line is open. Please go ahead.
spk04: Thanks, and congratulations. I guess my first question is, should we assume that the longer-term FFO to debt target now is going to be 14%? Well, I'll answer that.
spk08: No, not right off the bat, because we still have some expectation of having some capacity to manage risks that are out there. but I do fully expect us to utilize some of the capacity for sort of the capital formation changes that we were just talking about and for some of the growth opportunity that we're talking about. So I wouldn't say it goes all the way down to 14 unless some of those risks were to materialize, but that's not what we're looking at. trying to do right now. The idea would be to get past some of those risks, and then maybe we'd reassess whether we go down to 14. But I don't think it would go all the way to 14 right now.
spk04: So at some point, you'll provide sort of an amended FFO to debt target?
spk08: Well, I think I'll add one more thing. From an intergy perspective, I don't know that we're going to change intergy's perspective. I mean, I think we're talking about going from 15 to 14 you know, our intergy view is going to be well above the 15. I think we may still actually stay above 15, even if Moody's dressed down closer, you know, between 15 and 14. But we may not actually amend the intergy target. We're still working through that. Okay.
spk04: And then do you need clarity on CERI and what in order to sort of determine what your ultimate equity needs are going to look like, and when would you anticipate a final CERI order?
spk08: Well, I mean, let's talk about the CERI order first. Yeah, I could – the first part of that, the uncertain tax position and the sale lease back, we expect, you know, possibly by the end of the year, but more likely into next year. Yeah, it could be in the first quarter. It could leak into the spring. Okay. So we're getting closer on that. But I don't think we need that to start thinking about what we might do differently. We might be mindful of that as an ability to continue to hit our marks, but I don't know that we necessarily need that to get started on our changes in our capitalization plan.
spk04: So it's more likely that you'll have a better feel for the equity around the end of the year, around EEI, right?
spk08: Yeah, no, what I said earlier was that I would think EEI at the latest, you know, hopefully sooner.
spk04: Great. I think that's it for questions for me. Thank you. Thank you.
spk01: Thank you. And again, if you have a question at this time, please press star then 1. And it looks like our last question will come from the line of Paul Patterson with Glamrock Associates. Your line is open. Please go ahead.
spk05: Hey, how's it going? Good morning. Good morning. How are you, Paul? I'm managing. I think I got everything. So around EEI, we're going to be getting an update, it sounds like, on all these opportunities. Is that how we should think about it? You guys are in early assessments right now, but we'll get more of a picture as to sort of what these opportunities and how it folds into the capital plan and everything. Is that the timeframe we're looking at?
spk02: So certainly we'll have, we'll have update on what the opportunities set looks like, what we're thinking and how it's evolved by then. You know, the good news about the opportunity that we were just talking about is that it's a pretty long runway opportunity. It's significant. significant opportunity that's got a long path. As you imagine, our customer base is going to be reducing their emissions over time. Some of them have, for example, their own net zero objectives. Some of those might be as early as 2035. Some of those go out to 2050, that sort of thing. So it's a significant opportunity that's got a long runway. So will get you the early parts of it as it develops. But it's the kind of thing we'll continue to update. And as I said in the answer to Steve's question, it's really a load growth question. And then the resource mix that we require to meet that load, which again, the objective is clean energy. So it'll probably have implications for what you see in the generation mix.
spk05: Okay, and just to sort of clarify this, this is basically because of the, just to make sure that I understand, the customer footprint that you guys have, their ambitions and their decarbonization ambitions and the potential to help. Is there any cost advantage that you think these customers might get? Is it just purely decarbonization, or is there anything else that would be driving this? Is it just basically, look, we're the utility, they want to do this,
spk02: that would mean electrification and we're in a pretty good position to do that or is this the deployment of new technology or anything that we should think about that that would be turbo turbo charging it if you follow me well the the it's obviously cost is going to be a factor our low rates factor into it and we certainly need to continue to help our customers be competitive as they go forward it's going to depend on the process for example Shore power is the exact same opportunity where you've got a ship pulls into dock, it's burning diesel fuel to keep the lights on while they do maintenance on the ship before they go back out into the Gulf of Mexico, for example, to help with the oil services out there. When we electrify that ship, we not only reduce their emissions, which was the original discussion around it, but it does lower their cost because the trade from our electricity to diesel fuel is positive. So it does two things for them. It lowers their cost and it improves their emissions, both of which make them more competitive as they bid for offshore work. So it's going to be a combination of all of those things.
spk05: Awesome. Well, it sounds like a great opportunity. I look forward to hearing more about it. Great. Thanks, Paul.
spk01: Thank you, and I'm showing no further questions, and I would like to turn the conference back over to Mr. Bill Abler for any further remarks.
spk09: Thank you, Michelle, and thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on August 9th and provides more details and disclosures about our financial statements. Events that occur prior to the date of the 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 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.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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