Entergy Corporation

Good morning, my name is Jael and I'll be your conference operator today. At this time, I would like to welcome everyone to the EnterG's fourth quarter 2025 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I'll now turn the conference over to Liz Hunter, Vice President of Investor Relations, for Entergy Corporation.

Good morning. Thank you, JL, 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. Entertee 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 investor relations section of our website. And now I will turn the call over to Drew.

Thank you, Liz, and good morning, everyone. The last couple of years have been transformational for Entergy. While 2024 reshaped our long-term expectations through historical new demand for power, 2025 was affirmational as our successes continued. Today, I'll highlight our 2025 achievements, and discuss our ongoing efforts to successfully execute on our customer-first strategy that creates value for all stakeholders. Starting with the financial results, we are reporting 2025 adjusted earnings per share of $3.91, which is in the top half of our guidance range. Continue to expect greater than 8% adjusted EPS annual growth through 2029, and our transparent outlooks provide specific expectations by year. Turning to the customer, our initiatives to improve customer experience have yielded positive results. Based on J.D. Power data, Entergy's utility remains in first quartile for net promoter score for both residential and business customers. Three jurisdictions were in the top quartile for residential NPS, and Entergy Texas was ranked number one in customer satisfaction for business electric service in the south among midsize utilities. Our work to meet our customers' needs while maintaining low rates is being recognized, and this will remain a key focus for us going forward. We had 4% sales growth in 2025, driven by a 7% increase in industrial sales, continuing a long history of strong growth rooted in the advantages of our service area. We anticipate the sales growth trend to accelerate an expected 8% compound annual growth rate through 2029, from 2025 and driven by 15% industrial growth. Last year, we signed electric service agreements totaling approximately three and a half gigawatts. There were several noteworthy customer announcements, which give us confidence in our outlooks for growth from data centers and traditional industrial segments. Customers achieved important development milestones, including those in the steel, petrochem, and LNG sectors. In fact, with Hyundai Steel's $5.8 billion planned investment in Ascension Parish, Louisiana earned Business Facilities' Platinum Deal of the Year, the first state to accomplish the feat two years in a row after the Meta AI Data Center project in 2024. We also had new data center announcements in Arkansas, Louisiana, and Mississippi, including both co-location developers and hyperscalers. Energy service area remains attractive, starting with our low electricity rates and vertical integration, business-friendly environment, welcoming communities, and proven workforce. Our geographic location provides access to diverse energy sources and robust infrastructure that are attractive to industrial customers. Our integrated stakeholder engagement is also an advantage, as we bring parties together to discuss potential development solutions and a common understanding of benefits. We continue to have meaningful conversations with potential new customers to secure additional growth to benefit all of our stakeholders. Our pipeline is unchanged at 7 to 12 gigawatts for data centers and 3 to 5 gigawatts for other industries. We have clear line of sight on equipment to serve 8 gigawatts of incremental load above our current plan. We've also confirmed EPC engagement for projects in our outlooks and beyond. Entergy has distinguished itself with a long history of greater than 5% compound annual large industrial growth over the past 16 years. We know how to attract new business and serve new large load customers while delivering positive outcomes to all our stakeholders from operational execution to affordability. The economic development activity has paid off as all of our states achieved record employment milestones in 2025. From the beginning, our hyperscale electric service agreements were developed with guiding principles that account for both the new customer's goals and impacts for our existing customers and communities. For our residential customers, we estimate the data center contracts in place today will generate approximately $5 billion in rate offsets from their fair share of contributions to fixed costs during the life of the contracts. That equates to more than $5 per residential customer per month on average. And that has the potential to grow with additional data center contracts. Customers will also see improved reliability and resilience from new generation and transmission infrastructure built to the latest standards. In addition, new, more efficient power plants will lower fuel costs for all customers. Our operating companies have implemented programs such as Superpower Mississippi and Next Generation Arkansas, made possible by data center revenues that will improve reliability and reduce outages for all customers in those jurisdictions. Our long-term data center contracts include early termination penalties and minimum bills to ensure that other customers aren't left to pay for investments needed as a result of adding large loads to the system. Plus, on their own, These customers will create real value for our communities, including benefits from jobs and increased tax base and economic development. These are just a few examples of how data center growth is enhancing Entergy's efforts to support customers and communities every day. Beyond data centers, our operating companies have implemented many other ways to help manage customer rates and benefit our communities. That starts with cost discipline. including an ongoing focus on O&M efficiency and scrubbing our capital projects to ensure the best outcomes for customers. Our teams work closely with regulators to manage bill levels and volatility, which includes use of tools like deferred fuel collections, state and federal grants, tax incentives, philanthropic support, and securitization. Our operating companies also proactively engage customers to ensure they are aware of programs to help manage bills, including energy efficiency programs, LIHEAP funds for qualifying customers, and a Power to Care program for low-income seniors. Currently, we are exploring new rate offerings, such as demand response and time-of-use rates, to complement our average bill and deferred payment options. This year, our employees delivered more than $100 million in economic benefits to the communities we serve through philanthropy, volunteerism, and advocacy. That includes our employees volunteering for approximately 170,000 hours in our communities last year, the equivalent of roughly 81 full-time employees. Our employees are also focused on delivering benefits to customers from our four-year capital plan. Because of our track record, we know what it takes to successfully execute large projects. With a $43 billion capital plan through 2029 to support customer needs, we have a sizable build cycle ahead. In 2025, we invested $8 billion to benefit customers with about half of that in generation. That includes significant work on Orange County Advanced Power Station, which is entering the final stages ahead of a summer in-service date, and Delta Blues in Mississippi. Looking ahead... New generation is a big part of our customer-centric plan. We have several projects in early stages that will come online in the next few years, including Franklin Farms Units 1 and 2 and Waterford 5 in Louisiana, Legend and Lone Star in Texas, Iron Wind in Arkansas, and the Vicksburg Advanced Power Station and Trace View in Mississippi. We also have five owned and contracted solar resources approved or in progress, totaling 740 megawatts. Including gas, solar, and battery storage, we have nearly 9 gigawatts approved and under construction towards our planned 13 gigawatts of new capacity to serve and support customers over the next four years. In 2025, our nuclear fleet operated safely and reliably, achieving a 90% unit capability factor. All refueling outages, including major turbine and generator projects, were completed on schedule. The team also delivered more than 35 megawatts of additional clean capacity from plant upgrades and replacement of older equipment. Looking ahead at Waterford III, previous investments in low-pressure turbines have paved the way for a 45 megawatt upgrade later this year. Turning to energy delivery, we invested about $3.5 billion in 2025. which includes accelerated resilience projects to support customer growth and to improve reliability. Thus far, we have invested $800 million in approved accelerated resilience work, including 17 substation upgrades and 59 line hardening projects, upgrading more than 15,800 structures. In total, our four-year, $17 billion customer-led energy delivery capital plan includes new construction on more than 570 miles of 500 KV lines and 175 miles of other transmission lines, as well as investment in new substations. This also includes $1.4 billion of approved projects to harden more than 45,000 assets. System resilience is a key area of focus. and we are planning to continue progress on delivering that value to customers. To that end, InterGene New Orleans filed an application for the second phase of its resilience program, requesting approval for up to $400 million in projects. While we have and will put forward recommendations for projects that have both resilience and cost-benefit value for customers, we recognize it's important that we balance near-term affordability with the need to continue to strengthen our system. The topic of reliability is never more in focus for us and our customers than when faced with a storm. A couple of weeks ago, winter storm Fern affected our service area, particularly in North Louisiana and Mississippi. Throughout the event, we worked closely with state and local leaders to stay aligned on our restoration efforts. Our generation fleet operated well, providing critical energy to serve customers who could take power. At the same time, our distribution and transmission lines were impacted by significant ice accumulation, well over an inch in some places. Burn disrupted 170,000 of our customers, but ultimately we restored power for more than 360,000 cumulative outages because many customers were impacted multiple times due to ongoing tree damage from the heavy ice. Damage resembled a strong hurricane, but with more dangerous, icy restoration conditions afterward. In fact, we replaced more poles, more miles of wire, and repaired more substations than we did for Hurricanes Beryl or Francine in 2024. Our employees, contractors, and mutual assistance workers performed very well in these dangerous and difficult conditions. I sincerely appreciate their hard work and dedication to safely and quickly bring power back to our affected customers. Legislative and regulatory processes support our ability to successfully execute initiatives to provide long-term benefits to our customers. In 2025, Arkansas passed the Generating Arkansas Jobs Act, which materially improves utilities' ability to make critical generation and transmission investments needed for economic development in the state. The act paved the way for assets like Jefferson Power Station and the Cypress Solar and Battery Project. Meanwhile, Texas passed legislation enabling rider recovery of miso capacity costs, which historically were recovered in base rates. A year ago, I said that our 2025 regulatory calendar would be busy, and it was. Our regulators made tremendous headway to benefit our communities and to advance customer growth. They approved routine updates to base rates and riders, as well as major transmission projects and new generation, both modern gas and renewables. All of these projects will modernize our infrastructure, provide customer reliability benefits, and support growth that's critical for our communities. Our regulators are also considered policy issues aimed to promote economic development. For example, the Louisiana Public Service Commission in December voted to adopt a policy proposal referred to as the Louisiana Lightning Initiative, which provides a path for utilities to efficiently meet the needs of large new loads. The rule allows for RFP exemptions and an expedited review in specified situations, with all actions subject to prudence review. This policy will align with Louisiana's broader Lightning Speed Initiative to better coordinate among critical state permitting offices allow us to bring new customers online faster, which will attract new business to Louisiana. You may recall that Arkansas and Mississippi also adopted rules and processes to foster economic development and attract projects that have speed to market as a top priority. There are a few other regulatory updates since our last earnings call that I'd like to highlight. The Arkansas Public Service Commission approved the special rate contract for Google. They also approved construction of the Jefferson Power Station and established a benchmark against which to measure the cost. In December, Entergy Louisiana filed a request to acquire the Cottonwood facility with an upfront purchase price of $1.5 billion, as well as $300 million of investment for maintenance and improvements. This is an attractive opportunity to acquire additional energy and capacity sooner and at a lower cost than a new build alternative, as Louisiana continues to experience significant customer growth. We requested a decision from the LPSC by the end of this year to allow for an acquisition early next year. In November, Intergy Louisiana also filed a request for approval to construct the Segno and Votol solar units. These projects were safe harbored earlier this year, earlier last year, and will be attractive resources to support customer clean energy demand. For our 2026 regulatory calendar, we're planning for another productive year. In addition to the projects I just mentioned, we have four major generation and transmission projects that are awaiting commission decisions in the year. Arkansas Cypress Solar with battery storage, the Babel to Weber 500 KV project, and the Waterford Six and Westlake combined cycles in Louisiana, which were filed yesterday. Later this month, Entergy Arkansas will file its first base rate case since 2015, following 10 years of formula rate plans. Our current expectation is to request a rate change of well below 3%, and it could be lower for residential customers which will support our continued efforts to invest for the benefit of our customers while being mindful of affordability. Our goal is to receive a commission determination by the end of this year for rates effective at the beginning of 2027 and a renewed formula rate plan starting with the 2028 forward test year. The formula rate plan benefits our customers and other stakeholders through predictability and ease of implementation while supporting continuous regulatory oversight. In addition, we expect to implement the Generating Arkansas Jobs Act rider for the next few weeks, supporting economic development. And a combined total rate change for residential customers between the rider and the rate case is expected to be at or below recent FRP rate changes and also maintain Entergy Arkansas's competitive position with rates well below the national average. Mississippi, New Orleans, and Louisiana will file their formula rate plans between now and May, and Intergy Texas expects to request updates to its transmission and distribution riders as needed. Intergy Texas also plans to utilize the generation rider after Orange County Power Station is placed in service, which will trigger a base rate case in 2027. 2025 was an affirmational year, building on our continuing transformation. I appreciate everything our employees have done to create value for our customers, and as a result, all of our stakeholders. As we move into 2026, we will continue to put the customer first in everything that we do. Before I turn it over to Kimberly, I'm excited to announce that we will host an Investor Day on June 9th in New York City. We will continue the conversation on the significant opportunities that we see ahead, including five-year outlooks as we've done in the past. And now, Kimberly will review our 2025 financial results as well as our outlooks.