Entergy Corporation

Hello, everyone. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to today's Entergy Corporation third quarter earnings call and teleconference. 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?

Good morning. 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 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, and good morning, everyone. Today we are reporting strong financial results as well as continued progress on business and regulatory matters. Starting with our quarterly financial results, our adjusted earnings per share was $1.53. With our results to date and our biggest quarter behind us, We are narrowing our guidance, raising the bottom by 10 cents. We also remain well positioned to achieve our long-term growth outlooks. Kimberly will review the financial details in a moment. Turning to the business, last quarter, we achieved the first quartile net promoter score for utility residential service for the first time since we began tracking this metric. We're pleased to report that we've maintained our first quartile position. We are keenly focused on meeting the needs of our 3 million customers, and we believe our strategy will carry this momentum forward. Our focus on the customer starts with keeping our rates as low as possible. To begin, we aim to maintain our average rates well below the national average through the remarkable commitment and creativity of our employees and a culture of continuous improvement. Today's share of Wallet is roughly the lowest our customers have seen over the last 20 years. We expect it to stay in that range over the outlook period. Of course, there's more to it than that. We proactively manage the effect of fuel volatility on customers' bills through fuel hedging programs and mechanisms to defer fuel costs during peak prices. And for individual customers, we have developed tools to help them manage their bills, such as approved bill discounts for low-income seniors, payment options like average billing and payment timing, energy efficiency services, and customer assistance programs like Power to Care and LIHEAP Advocacy. I'm proud to highlight that our digital LIHEAP platform recently received a Silver Best Practices Award from Chartwell for excellence in serving vulnerable customers. This tool streamlines access to energy assistance and provides real-time app updates for customers in need. And as we've worked to attract new hyperscale data center customers, we ensure that they pay their fair share of energy infrastructure investments while bringing other significant benefits to our communities, such as jobs, property tax payments, direct municipal infrastructure investment, and workforce development. This is consistent with their stated intent to be good neighbors. For example, At the recent groundbreaking announcement, Google said that they will protect energy affordability for existing customers by covering the full cost of powering the data center in West Memphis. They're also committed to making a significant community impact, including a $25 million fund to accelerate local energy efficiency efforts and workforce development. In September, Entergy Mississippi announced a new customer-focused initiative known as Superpower Mississippi. The initiative includes a $300 million investment to harden the grid and improve reliability with the goal of reducing outages for customers by half within five years. We're able to add this investment for grid improvements at no additional cost to Entergy Mississippi customers because of new revenues from Amazon and other large industrial customers' investments in the state. Aletha Sackerley, our CEO at Entergy Mississippi, recently noted that customer rates would be 16% lower than they otherwise would have been due to these large customers, and that includes the incremental Superpower Mississippi investment. In customer growth news, in late September, SEMPA reached its final investment decision for Phase 2 of its Port Arthur LNG project. In addition, a co-location data center of I-O announced an investment in an Intrigue, Mississippi service area. While these were included in our probability-weighted sales forecast, these developments continue to build confidence in our long-term outlook. As a reminder, we probability weight potential industrial customers in our plans, except for very large businesses like hyperscale data centers, which we don't add to our plans until there is a signed electric service agreement. Because of our vertical integration, natural Gulf Coast advantages, thoughtful regulation, a long history of successfully working with large industrial projects, and now MISO's expedited connection mechanisms, We continue to see strong demand from businesses looking to locate in our service areas. This includes data centers, but also customers from traditional industrial segments. Our data center pipeline has continued to grow and now is sending from 7 to 12 gigawatts. This is based on active conversations with customers for whom we reasonably could expect to sign agreements within the next year or two. With line of sight on incremental opportunities, we've added four and a half gigawatts to our agreement for the purchase of power island equipment, including steam turbines, combustion turbines, and heat recovery steam generators. This addition represents six units that will be delivered in time to support commercial operations in 2031 to 2032. In total, we now have secured more than 19 gigawatts of capacity. 11 gigawatts of which is accounted for due to growth or other supply needs. That leaves 8 gigawatts for additional growth. We secured other critical equipment, including transformers and breakers, and we secured 90% of materials required for our planned transmission projects through 2030. We also have agreements with EPCs for the generation projects through mid-2029. We have a line of sight for additional projects. We're also well positioned for solar projects. For our owned projects, we secured approximately 75% of our critical equipment, including generator step-up transformers, high voltage breakers, and solar modules. We also have clear line of sight for the remaining 25% through our existing supplier relationships. In July, FERC approved MISO's expedited resource addition study, or ERAS process. We have since submitted nine interconnection requests for 12 plants into the new process. Eight of these plants in our ARIS submission are in our plan, and four are available for incremental growth. ARIS has worked well to support speed to market for customers trying to come online as quickly as possible, as well as help us respond to the national security priority for rapid energy deployment to win the AI race. expect to start receiving our first project approvals by the end of this year. With standardized designs for our generation projects and our transmission lines, and our history of successful execution on large projects, we remain confident in our ability to manage our operations and execute on our capital plan. We are also well positioned to serve potential new customers above our current plan. For the customer base that continues to grow, perhaps it is no surprise that our system, as well as Entergy Arkansas and Entergy Texas, hit new peak loads in July. Our system performed well during these high load periods. Responding to that customer growth, Entergy Texas remains on track for the completion of the Orange County Advanced Power Station next spring. The plant's decommissioning, not decommissioning, the plant's commissioning, we're just getting started with that one, The plant's commissioning is underway, and first fire is expected in December. Our other large generation and transmission projects are also on track. Last week, Entergy Mississippi broke ground on the Vicksburg Advanced Power Station. We'll also support customer growth, including the large customer that Entergy Mississippi signed this past February. Entergy Louisiana recently announced selections from its baseload generation RFP to support customer growth. That includes two combined cycle resources that will be self-built. For accelerated resilience, we expect to file phase two plans in Louisiana and New Orleans within the next several months. This timing allows us to maintain operational momentum with our resilience investments. To date, our operating companies have invested about $580 million in approved resilience work. We've completed 32 line hardening projects, upgrading more than 13,000 structures. And we have hardened 10 existing substations to mitigate the impacts of both hurricane force winds and storm surge. In addition, Entergy Texas was recently awarded $200 million in grant funding by the PUCT from the Texas Energy Fund for Resilience Projects with no cost to customers. The grant will allow for the hardening of more than 8,000 distribution poles covering 338 miles, as well as hardening 16 transmission lines. We appreciate the proactive support from our state regulators and legislative bodies to improve the storm readiness of our system for the benefit of all customers. With the customer growth opportunity before us and excitement throughout our service areas, we continue to work with our stakeholders, including regulators, elected leaders, community leaders, and local vendors, to meet customers' needs and to improve their outcomes. In August, the Louisiana Public Service Commission approved the settlement for generation and transmission resources needed to serve META. META's generational investment will bring significant benefits including jobs, workforce development, and state and local tax income. In addition, as the LPSC staff highlighted at the business and executive meeting, contracted minimum bills ensure that META is paying the incremental cost to serve them during the contract term without imposing costs on other customers. These features provide benefits to support keeping rates as low as possible for Louisiana customers. Last week, the Louisiana Public Service Commission also approved the 200-megawatt Bogalusa West solar project, which was the first project approved through Louisiana's accelerated solar approval process. In Arkansas, the Public Service Commission approved the Generating Arkansas Jobs Act rider. This rider, enabled by the legislation this past spring, allows recovery for new economic development-related and other customer critical generation and transmission investments outside of the formula rate plan's 4% cap. Additionally, it includes recovery of carrying costs on CWIP during construction, thus lowering costs for customers. Under the new rider, Entergy Arkansas filed in early August for the Jefferson Power Station approval. Also under the new rider, Entergy Arkansas filed for approval in September for Cypress Solar, a solar and battery storage facility to support economic development via Google's recently announced data center. Moving to Texas, in September, the Public Utility Commission approved the Legend combined cycle power station and Lone Star, a simple cycle peaking unit. They will provide efficient, reliable power to support the rapid growth in our Southeast Texas service area. While the Commission approved the generation, it also implemented a cost cap at our filed cost estimates, totaling $2.4 billion, including transmission, carrying costs, and contingency. As I noted earlier, we have already contracted with the EPC and secured the long lead time equipment, which comprise a significant portion of the construction costs. The Texas Commission also recently approved Two large transmission projects that serve growth and improve reliability and resilience of the system. CTEX, the Southeast Texas Area Reliability Project at $1.4 billion 500 KV line and the Legend of Sandling 230 KV line, which will serve industrial customers in Port Arthur, including phase two of the SEMPRA LNG project. Separately, Entergy Texas filed for an increase in its DCRF rider. We expect a decision from the PUCT by the end of the year. These are exciting times in Entergy and exciting times for our industry. We are delivering unprecedented growth for our region and economic development that benefits the customers and communities we serve. At the same time, we are answering the call to support our national security through our rapid response to the energy needs of companies working to win the global AI race. All that while keeping rates as low as possible for our customers. The EEI financial conference is in a couple of weeks, and we'll share additional cover regarding the strong foundations underpinning our differentiated growth story. Notably, our long-term customer sales growth outlook is robust. including continued support from both traditional industrial and data center customers. We are well positioned to support speed to market through our supply chain positioning, design choices, stakeholder engagement, and strong balance sheet. And we are successfully executing on critical issues that our existing customers care about, including keeping rates as low as possible and deploying resilience and reliability investments. We look forward to continuing this conversation with you at the EEI Financial Conference in a couple weeks. I'll now turn the call over to Kimberly, who will review our financial results for the quarter.