Entergy Corporation

Good morning, my name is Greg and I will be your conference operator today. At this time, I would like to welcome everyone to the Entergy Corporation first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. Thank you. I will now turn the call over to Liz Hunter. Vice President of Investor Relations for Entergy Corporation. Liz, you have the floor.

Thank you, Greg, and thanks to everyone for joining this morning. We will begin today with comments from Entergy's Chair and 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 ask 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, Liz. Good morning, everyone. We had a very productive start to the year with progress on activities that support our near and long-term objectives. Important updates to facilitate customer growth include new customer announcements, regulatory outcomes, and new legislation. Starting with our financial results for the first quarter, today we are reporting adjusted earnings per share of 82 cents. We're on track for 2025 guidance, and we remain well positioned to attain our greater than 8% adjusted earnings per share compound annual growth rate for the outlook period. Kimberly will discuss our financial results in more detail. As you've heard us say, we aim to create value for all our stakeholders, customers, employees, communities, and owners. And customers are listed first because everything starts there. The opportunities driving our industrial sales growth continue to be robust. There is increasing visibility into our growth, including three announcements from large customers since our last call. In March, Hyundai Motor Group announced a $5.8 billion investment in Hyundai Steel, a manufacturing facility and an engine for economic growth in Ascension Parish, Louisiana. Then in early April, CF Industries announced that it reached its final investment decision on its $4 billion investment in a low carbon blue ammonia facility, which we located near Hyundai Steel. This project was first announced in 2022. And just today, Woodside announced that they have reached FID on their $17.5 billion LNG facility, bringing jobs and investment to coastal Louisiana. These projects are expected to come online in 2028 and into 2029 and were assumed in our outlooks last quarter. These customers diversify our industrial mix. They also provide important benefits to the nearby communities through substantial local investment, significant growth, and workforce development. We've demonstrated a long history of powering industrial growth as businesses establish and expand operations in the Gulf South region. Hyundai Steel, CF Industries, and Woodside LNG are examples of this trend continuing. As more companies consider investment in the U.S., the Gulf South remains a very attractive option with low power costs, robust energy and transportation infrastructure, access to diverse energy sources, a business-friendly environment, proven workforce and welcoming communities. Data centers are a more recent addition to our large customer portfolio, and we remain in productive discussions for many potential projects. We continue to receive strong interest and optimism from hyperscale developers about the incredible opportunity before them. And our data center pipeline remains in the 5 to 10 gigawatt range. We are executing on our capital plan to support that strong customer growth as well as improve reliability and resilience. We continue to make progress in the Orange County Advanced Power Station. The project is approximately 70% complete with more than 1 million man hours worked with no safety incidents. The project remains on schedule and on budget with a projected in-service date by summer of next year. Delta Blue's advanced power station in Mississippi is in earlier phases of construction and is also on schedule and on budget. At the same time, we're exploring the potential to increase the capacity of our existing combined cycle natural gas facilities by nearly 500 megawatts. For nuclear, we completed the spring refueling outage at River Bend on schedule. During the outage, we conducted extensive work on the main generator to support long-term reliable operations. The Waterford III refueling outage is now underway. Planned work includes replacement of low-pressure turbine rotors that will improve efficiency and pave the way to increase the capacity of the plant by an estimated 40 megawatts in the fall of 2026. We continue to assess potential capacity upgrades at our other nuclear plants that could total approximately 275 megawatts. As we mentioned before, We have an NRC early site permit for potential new nuclear facility at Grand Gulf, which expires in April, 2027. We intend to renew the permit for another 20 years to maintain a viable option for new nuclear. We are in discussions with customers, potential partners, and other stakeholders regarding that opportunity. As you can see, our operations and project management development teams are doing a great job keeping us on track to support our customers' needs. In addition to our efforts and operations, we are working with our regulators and other stakeholders on important dockets that address infrastructure needs to support growth, reliability, and resilience. Efficient review processes are critical to stay on track to meet our customers' expectations. Entergy Louisiana received approval from its Public Service Commission to place the capital investment from Hurricane Francine into rates subject to a future prudence review. This means our recovery started less than two months from filing and six months after the storm. A faster recovery reduces carrying costs and supports Intergy Louisiana's credit, both of which keep costs low for customers. The LPSC also approved the half billion dollar West Bank 230 kV transmission project that will support customer growth and economic development. In addition, We have a major 500 kV transmission project in Louisiana that is pending commission review. Separately, we received the final approval needed for Entergy Louisiana's gas LDC sale from the East Baton Rouge Parish Council. We are targeting to close the sale of both Entergy Louisiana and Entergy New Orleans gas businesses in July. Entergy Louisiana's filing to support its hyperscale data center customer continues to move forward. parties have filed testimony and the hearing is scheduled for mid-July. We remain on track for an LPSC decision in October. For Entergy Louisiana's 3 gigawatt solar RFP, the first round of procurement is complete and we're moving forward two proposals for owned assets that total 400 megawatts. Proposals in the second quarter were received in mid-April and we are targeting selections later this quarter. In Texas, the PUCT approved placing $137 million of transmission investment into rates. We have also requested a certificate of convenience and necessity for a large transmission project in Texas known as CTEX, S-E-T-E-X. The hearing is scheduled for May, and we are targeting a commission decision by the end of August. Energy Texas requests for generation CCNs are continuing as expected. Hearings for Legend and Lone Star dispatchable generation projects, as well as renewable resources, are complete. Briefings have begun, and no parties have disputed the need for new generation to meet growing demand. We are targeting decisions in the third quarter. In Arkansas, the APSC issued a Certificate of Environmental Compatibility and Public Need for Lake Catherine Unit 5. This plan is important to support Arkansas customer demand. Entergy Mississippi received approval to build a combined cycle gas plant in Ridgeland County. This facility will serve the growing demand in our Mississippi service area. And Entergy Mississippi also filed its annual formula rate plan with no rate change requested. We expect the commission to take this up over the next few months. Turning to legislative matters. Arkansas recently completed its session, setting the stage for future growth in the state. Act 373, signed into law by the governor, supports economic development and growth and will benefit our customers and communities. Specifically, the legislation allows recovery for new generation capacity and certain transmission investments outside of the formula rate plan's 4% cap. It also streamlines and simplifies the process for certification of public need to allow for faster response to economic development while maintaining regulatory oversight. Additionally, the new law allows utilities to recover carrying costs on construction work and process during construction, thus lowering costs for customers. Texas is also in a legislative session. One of the bills of interest for us will accelerate the regulatory review and approval for storm securitization to 150 days, significantly faster than previous reviews. More timely reviews benefit customers through lower carrying costs and improved credit. The Texas legislative session continues through June 2nd. Turning to tariffs, we know tariffs are certainly a topic that we know you're interested in. It's top of mind for us as well, and we are actively engaged in monitoring as the landscape evolves. There are several considerations and the bottom line is that we believe tariffs impacts are manageable. The current tariffs would primarily impact capital expenditures, and we estimate that the impact to be approximately 1% of our $37 billion four-year capital plan. The vast majority of the dollar impact is in the back end of our forecast period, which provides time to continue to reduce those effects through additional supply sources. To mitigate potential impacts, we are working with our suppliers to develop alternative supply sourcing strategies. In addition, our ongoing cost management efforts as well as contingencies in our spending plans, will help us manage our costs. For example, at Analyst Day last summer, we talked about our disciplined capital prioritization and review processes to drive customer value. To date, we've identified greater than $1 billion of capital that was redeployed into other projects to benefit customers. We're making every effort to reduce the effects of tariffs for our customers for working hard to make ends meet and competing in a global marketplace. To that point, we're also actively monitoring what this means for our customers' businesses. Our large industrial customers are highly competitive in domestic and global markets. Commodity spreads continue to be supportive, in part due to the structural advantage of low-cost natural gas. I'd like to highlight a few specific examples. LNG exports are likely to increase due to the natural gas advantage, which would help bridge the trade deficit. And I just mentioned the Woodside announcement as a case in point. Ammonia has a strong competitive position due to low natural gas prices in the U.S., and companies are moving forward investment in clean energy technologies, as the CF Industries example illustrates. The petrochemical sector also enjoys structural advantages from low cost natural gas liquid feedstock and potential decreases in global production would likely come from the European Union. Beyond the price advantages of natural gas, companies seeking domestically produced materials to manage tariffs could cause sectors such as steel that are not currently running at full capacity to ramp up production. Overall, commodity fundamentals still favor U.S. manufacturing. As a result, our service area remains well positioned to capture new onshoring and industrial development, but the Gulf Coast advantages that we talked about for some time and that I mentioned earlier. These foundational elements can facilitate even further expansion of the broad industrial manufacturing base and supporting services in our region. As I said, we believe tariff impacts are manageable, and with everything we know today, we remain confident in the guidance and outlooks initiated on last quarter's call. Before I wrap up, tomorrow our COO, Pete Norgio, is retiring. Over his 10 plus years in Entergy, Pete transformed our power generation team, closed out our exit from the merchant power business. In the last couple of years as COO, he re-centered us on public safety while preparing us to manage the large capital investments responding to customer demands. Pete is also a good friend. We will miss him and we wish him well in the next chapter. Moving into the COO role is Kimberly Cook Nelson. who has been driving our steadily improving nuclear operations over the last few years. A leader in the nuclear industry, she brings a wealth of leadership experience, operational discipline, and project management skills to the COO role, which has served us well for the growth investment road ahead. Finally, John Dinelli is taking over as Chief Nuclear Officer. He is a longtime Entergy employee having started here when we purchased Indian Point. He has held many leadership roles within the nuclear organization, and recently, he has served as our nuclear COO, helping lead the cultural changes needed to continue our relentless pursuit of improvement in nuclear operations. While we are sad to see Pete go, we're excited about the new opportunities that will come from the leadership of Kimberly and John. And finally, we're saddened to learn of the passing of Alexis Herman over the weekend. From her beginnings in Alabama along the Gulf Coast, she attended Xavier University right here in New Orleans, and then went on to become Secretary of Labor, among many other accomplishments. Of course, we know her from her 20 years of service on our Board of Directors. Beyond her outstanding wisdom and insight, she was a friend, a mentor, and an inspiration to all of us, and we will miss her dearly. Although we are sad, Alexis would be proud of our great start to the year. We are on the path to meet our stakeholders' expectations in 2025 with solid progress across key customer, operational, legislative, and regulatory fronts. We are executing on our plan to realize the opportunity in front of us, and we're confident we can be successful. As we continue to put our customers first, we will deliver premium value to each of our key stakeholders. I'll now turn the call over to Kimberly.