Entergy Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 29, 2025

Key Takeaways

  • Strong financial results: Adjusted EPS of $0.82 in Q1, aligning with 2025 guidance and on track for >8% CAGR in adjusted earnings per share through the outlook period.
  • Major industrial customer investments: Announced commitments from Hyundai Steel ($5.8B), CF Industries ($4B), and Woodside LNG ($17.5B) projects in Louisiana, expected online starting 2028.
  • Robust data center pipeline: Ongoing discussions with hyperscale developers keep the potential data center load at 5–10 GW, reinforcing growth visibility.
  • Capital project execution: Orange County Advanced Power Station is ~70% complete and on budget for a summer 2025 in-service date, with Delta Blue and nuclear refueling/capacity upgrades also on schedule.
  • Regulatory and legislative progress: Multiple approvals across Louisiana, Texas, Arkansas, and Mississippi (storm cost recovery, transmission projects, gas business sales, solar RFPs, and new economic-development laws) accelerate infrastructure investment and cost recovery.
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Earnings Conference Call
Entergy Q1 2025
00:00 / 00:00

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Operator

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. 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.

Liz Hunter
Liz Hunter
VP of Investor Relations at Entergy

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, who 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. Now I will turn the call over to Drew.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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 $0.82. We are 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 have heard us say, we aim to create value for all our stakeholders: customers, employees, communities, and owners. Customers are listed first because everything starts there. The opportunities driving our industrial sales growth continue to be robust.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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. In early April, CF Industries announced that it had reached its final investment decision on its $4 billion investment in a low-carbon blue ammonia facility, which will be located near Hyundai Steel. This project was first announced in 2022. 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.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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, a 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. Our data center pipeline remains in the 5-10 GW range. We are executing on our capital plan to support that strong customer growth as well as improved reliability and resilience.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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 Blues 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 MW. 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 work for three refueling outages is now underway.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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 MW in the fall of 2026. We continue to assess potential capacity upgrades at our other nuclear plants that could total approximately 275 MW. As we mentioned before, we have an NRC early site permit for a 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.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

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 Entergy Louisiana's credit, both of which keep costs low for customers. The LPSC also approved the $500,000,000 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.

Operator

Separately, we received the final approval needed for Entergy Louisiana's gas LDC sale from the East Baton Rouge Parish Council. We are starting 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 GW solar RFP, the first round of procurement is complete, and we're moving forward with two proposals for owned assets that total 400 MW. 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.

Operator

We have also requested a certificate of convenience and necessity for a large transmission project in Texas known as SETEX, S-E-T-E-X. The hearing is scheduled for May, and we are targeting a commission decision by the end of August. Entergy 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 plant 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.

Operator

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 in process during construction, thus lowering costs for customers. Texas is also in a legislative session.

Operator

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.

Operator

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, 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.

Operator

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 would 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. 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 with 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.

Operator

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 with the Gulf Coast advantages that we have 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 outlook initiated on last quarter's call. Before I wrap up, tomorrow, our COO, Pete Norgeot, is retiring.

Operator

Over his 10-plus years at 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.

Operator

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 are excited about the new opportunities that will come from the leadership of Kimberly and John. Finally, we are 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.

Operator

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. To 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.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Thank you, Drew. Good morning, everyone. Today, I will review our financial results as well as our guidance and outlook. I'll also talk about tax credits and their potential financial impacts. Starting with earnings, our adjusted earnings per share for the quarter was $0.82. This result keeps us firmly on track for our adjusted EPS guidance for the year.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

The quarter's adjusted EPS drivers are shown on slide four. Key highlights include higher retail sales volume, including the effects of weather, effects from regulatory actions, including recovery of investments to benefit customers, and lower other O&M than first quarter last year. These favorable effects were partially offset by higher interest expense and depreciation as a result of investments. First quarter weather-adjusted retail sales growth was strong at 5.2%. The industrial sales increase was the biggest driver at 9.3%, reflecting increases in usage from customer additions over the course of 2024, as well as continued ramp of new and expansion customers. Slide five provides our credit ratings and affirms that our credit metric outlooks remain better than agency thresholds. Our ongoing focus on credit has created flexibility to manage volatility and headwinds. Availability and transferability of renewable tax credits continue to be a topic of interest.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Nuclear production tax credits, or PTCs, became effective in 2024. The Treasury Department has not issued guidance on how to determine gross receipts for purposes of calculating the amount of nuclear PTCs generated. We are evaluating our position with respect to these credits and will finalize our position prior to our 2024 corporate tax filings. As a reminder, cash benefits from nuclear PTCs are not included in our outlooks, so any nuclear PTCs that are realized would be positive to our plan. Our 2027 and 2028 outlooks include tax credits of approximately $170 million and $350 million, respectively, on more than $5 billion of renewable investments through 2028. If the transferability rules change, we would expect to monetize the credits using tax equity. We continue to safeguard as many projects as possible in the event that the credits phase out sooner than the current rules provide.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

However, even if we were to lose all the renewable tax credits assumed in our guidance, our credit metrics would still exceed rating agencies' thresholds. Turning to slide six, our equity needs are unchanged since our last update. During the quarter, we executed an approximately $1.5 billion block equity forward, including the green shoe. Prior to the equity block, we contracted roughly $230 million using ATM forwards. With these transactions, we have successfully secured our equity needs into 2027, and we've contracted approximately 2/3 of our needs through 2028, ensuring access to capital needed to execute on our capital plan. No forwards were settled during the quarter. As shown on slide seven, we are affirming our adjusted EPS guidance and outlooks. For 2025, we're firmly on track. Weather and other updates in the first quarter create flexibility to manage the business in response to potential volatility and other headwinds.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Looking ahead to the second quarter, we expect other O&M to be roughly a nickel higher than last year, primarily due to planned power generation spending, including the timing of outages and timing of vegetation management expenses. We have confidence in our plan and our ability to deliver on our guidance and outlooks. We've had a strong start to the year and have a solid plan to support our growing customer base. We are excited about the opportunities before us and remain well-positioned to execute and deliver successful outcomes. The Entergy team is available for questions.

Operator

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Once again, star one. As Liz mentioned earlier, in the interest of time, we ask that you please limit yourself to two questions.

Operator

Thanks. We will pause just a moment to compile the Q&A roster. It looks like our first question today comes from the line of Shar Pourreza with Guggenheim Partners. Shar, your line is open.

Operator

Hi. Good morning, team. Congrats on great quarters. Actually, Constantine here for Shar. Hey, good morning. Just as we're thinking about the Arkansas generation bill, do you feel the state is now fully competitive on the data center front in terms of providing turnkey interconnection? Have there been any inbounds thus far, or do you need any further rate design improvement?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Shar is Drew. Sorry, Constantine, this is Drew. We feel that they are fully competitive at this point. We are talking to potential customers in the state of Arkansas. We have a lot of interest there. We are working down that path right now.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Excellent. Maybe in terms of the financing updates, just last quarter, the guidance was for 75% of the equity to be after 2026, and it looks like that might be accelerating slightly. Does that imply an acceleration of credit metric improvement or any other moving pieces you want to highlight?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, there has not been a substantial change in the timing of the equity needed. We contracted forward into 2027, and our credit metrics through 2028 continue to build towards an up to 15%. We see strong flexibility in credit, but I would not assume a whole lot of shift in the equity needs and the timing of the equity in that period.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Anything that drove such a big forward volume in one quarter relative to last quarter, or is that just kind of optimization?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, really was taking risk off the table.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

We had an opportunity to execute on that forward, and given volatility and the equity that we needed, that we believed we could continue to satisfy with the ATM. We had an opportunity to close some of that out, and we took advantage of that and set ourselves up to be able to manage volatility over the next couple of years.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Excellent. Appreciate that. Thanks for taking the questions. I'll jump back in queue.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, Constantine. Our next question comes from the line of Jeremy Tonet with JPMorgan. Jeremy, your line is open.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

Hi, good morning.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning, Jeremy.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

Just wanted to look at the sales a little bit here. I think that your residential customer count might have been up just under 1% quarter-over-quarter. Your weather-normalized sales, if I'm seeing this right, for residential went up about 4.5%.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

I was wondering if you could talk a bit more about drivers there.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, good morning, Jeremy. It's Kimberly. I wouldn't look too much at the specifics on the quarter. Every quarter, you're going to see some volatility in the counts. What we expect our residential sales to be about 1% for the full year and our sales overall to be about 5.5%. Still strong sales over the year, but you're going to see some volatility in a given quarter on a quarter-over-quarter basis.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

Got it. That's helpful. Thanks. Just moving to industrial sales, and as you said, it'll be volatile in any given quarter, but it seems like there's a degree of macro uncertainty out there that might be weighing on industrial activity a bit. Just wondering if you could provide any thoughts from your viewpoint on your service territory.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, when we think about our industrial customers, we have had more than 5% growth for over 15 years, and that has included a number of periods where there were various economic factors happening in those periods. I think the three industrial customers that Drew referenced in his comments coming in just this quarter or over the last couple of months underscores the opportunity that we have for our traditional customers, and we continue to have significant opportunity in the data center space. Our customers are making 30-year decisions. There is short-term volatility that they may have to manage through, but we see those decisions coming through, and we continue to see a lot of opportunity through our pipeline as we go forward.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

I'll just point to the rule of thumb that we have in our materials for industrial sales: 1% change in a given year is only about a penny of impact. It is pretty well de-risked because of the high level of demand charges that we have in the industrial customer space.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

Got it. That's helpful. Just one last one, if I could, as far as winning these new packages here and increasing the pipeline of big activity. I wonder if you could provide more color of what it looks like, I guess, on conversations with data center or other large industrial users. How you see that, I guess, coming together in this environment? Has anything changed?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, Jeremy, Drew referenced that we had 5-10 GW in our data center discussions. Those are still strong and ongoing discussions.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Our pipeline in our other customers has not really changed from the last time that we gave that level of detail. We continue to have strong conversations. Our pipeline in our forecast is on a weighted probability basis, and Drew referenced that these customers were in our forecast, but certainly they are hitting at a faster and higher success rate that enables us to continue to serve them. If that rate continues, we will have to look at incremental capital to support continued growth.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah, that is a good point. I mean, outside of data centers, we probability weight everything. The three announcements that we gave you were in our forecast, but they were probability weighted. Now the sales expectation for them are much higher than what we were originally anticipating, and taking up the space that the other probability weighted customers might have been taking up.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

There could be additional capital needed should those customers come in, and we do expect some of them to come.

Jeremy Tonet
Jeremy Tonet
Research Analyst and Managing Director at JPMorgan

Got it. That's helpful. I'll leave it there. Thanks.

Operator

Thanks, Jeremy. Our next question comes from the line of David Arcaro with Morgan Stanley. David, please go ahead.

David Arcaro
David Arcaro
Power, Utilities, and Clean Tech Analyst at Morgan Stanley

Oh, hey, thanks so much. Good morning.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning.

David Arcaro
David Arcaro
Power, Utilities, and Clean Tech Analyst at Morgan Stanley

I was wondering if you could maybe just give maybe an update or a profile of your system as you're looking at some of these large load customers in the pipeline. How quickly can you offer them service to connect in? Time to power has been a focus among that cohort. Curious just what the latest is in terms of how quickly you can accommodate new large load customers.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah, this is Drew. I'll see if Kimberly wants to add anything.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

We do have positions in queues in order to provide generation to potential customers. As you all know, those queues are full, but our positions, we believe, would allow us to continue to offer up opportunities for customers. At this point, it is near the back end of our period because there is just a lot to do to make room for all this. As you know, the three customers that we were talking about today are all in the 2028, ramping into 2029 kind of time frame. That is kind of where we are in terms of potential opportunity. It does not really matter which kind of customers we are talking about. That is where that opportunity will be sitting.

David Arcaro
David Arcaro
Power, Utilities, and Clean Tech Analyst at Morgan Stanley

Got it. Yeah, that makes sense. Appreciate that color. Maybe just a quick clarification on the tariff exposure.

David Arcaro
David Arcaro
Power, Utilities, and Clean Tech Analyst at Morgan Stanley

Would you consider, I guess, do you think of the tariff exposure as being earnings exposure? Is this kind of already approved projects that now need to, that are going to be more expensive, or this is out in the future, will get worked through regulatory processes over time? I know you're trying to offset it, but how do you consider kind of earnings exposure, if any, from that?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, David, most of that exposure, as you noted, is in 2027 and 2028, and most of it is also tied to new generation, specific components to help build those facilities. We think that gives us time to find additional suppliers and mitigate that. We do not see that being a real earnings effect. Drew mentioned some of the things we're doing to mitigate that, but we think that that is manageable within the forecast period.

David Arcaro
David Arcaro
Power, Utilities, and Clean Tech Analyst at Morgan Stanley

Okay, got it. Understood. I appreciate it. Thanks so much.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, David. Our next question comes from the line of Nick Campanella with Barclays. Nick, your line is open.

Nick Campanella
Nick Campanella
Director at Barclays

Hey, good morning. Thanks for all the updates.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Hey, good morning, Nick.

Nick Campanella
Nick Campanella
Director at Barclays

Good morning. Hey, I just wanted to ask on 2025, it just seems like you're off to a good start. Are you trending higher in the fiscal 2025 plan, just given the weather tailwinds or other headwinds to kind of consider for later this year?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah, we did have a good start to the year, but as with any year, we use that to manage through the course of the business. Uncertainty, we obviously have the summer coming. We could have a super hot summer, or we could have a mild summer. We need to see how that plays out.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

We will use that flexibility to help us manage, but we are comfortable that we will deliver our outlooks at the end of the year.

Nick Campanella
Nick Campanella
Director at Barclays

Okay, great. Thanks. Then just on this new customer generation transmission filing, I know that we are kind of approaching hearings here as kind of a midterm data point. Just is there any potential or effort by the parties to want to settle issues in the proceeding, or do you kind of see that going straight through into the October order? Thanks.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah, this is Drew. There is always the potential to settle, and so we will look at that. If those opportunities arise, certainly we would always prefer to settle rather than go to hearing if we could. We have a good schedule, and there is a lot of support for this investment in the state and among the stakeholders.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

We're confident that we will manage through the process and get the outcome that will benefit customers and communities.

Nick Campanella
Nick Campanella
Director at Barclays

Thanks a lot.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, Nick. Our next question comes from the line of Paul Fremont with Ladenburg. Paul, your line is open.

Paul Fremont
Paul Fremont
Managing Director of Equity Research at Ladenburg

Hey, thank you very much, and congratulations on a strong quarter. I guess my first question is, can you give us a sense of the load that's associated with the three customers?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning, Paul. Unfortunately, I can't. We don't have authorization to talk about specific customer load, so I wouldn't mention that to you. I would say these are large industrial facilities, and they would be on par with things that you might see elsewhere. I can't give you specifics, unfortunately.

Paul Fremont
Paul Fremont
Managing Director of Equity Research at Ladenburg

Your transmission filing in Texas, is that a 365, 500, or 345 kV line that you're proposing?

Paul Fremont
Paul Fremont
Managing Director of Equity Research at Ladenburg

I guess how many miles should we think of additional transmission?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah, it's 500 kV, and it is 130-160 mi. There's a slide in the materials on that that you can look at. It actually will sort of terminate ideally with the line that we are requesting for approval in Louisiana. You will get, in addition to customer support, I think you will get a good resilience benefit out of that as well to help us with storms.

Paul Fremont
Paul Fremont
Managing Director of Equity Research at Ladenburg

Last question there, what would be the completion if you were to be awarded the project? What would be the completion date?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

We think it would be just outside of our outlook period in 2029.

Paul Fremont
Paul Fremont
Managing Director of Equity Research at Ladenburg

Great. Thank you so much.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, Paul. Our next question comes from the line of Steve Fleishman with Wolfe Research. Steve, your line is open.

Steve Fleishman
Steve Fleishman
Senior Analyst at Wolfe Research

Yeah, hi, good morning.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning, Steve.

Steve Fleishman
Steve Fleishman
Senior Analyst at Wolfe Research

I guess just on the sales guide for 2025, you took it down a little bit. I know it's still really good, but just any explanation for that?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Good morning, Steve. It really is just as we get line of sight over the course of the year, we know the industrials will come in. Their ramps may vary. They come in, large load comes in, a little bit of variety over the course of the year. Still at 5.5%, we still see strong sales, but just a little bit of clarity on how that's going to come in.

Steve Fleishman
Steve Fleishman
Senior Analyst at Wolfe Research

Okay. The last quarter, I think you had the second Mississippi customer that you kind of announced but hadn't been named. Is there any more clarity on that customer?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah. We are still all on moving forward with that customer. They have not announced themselves, and we are working to their schedule, but there is nothing new from our end. We are moving forward on everything we need to do to serve that customer.

Steve Fleishman
Steve Fleishman
Senior Analyst at Wolfe Research

Okay. On the regulatory, on the Texas plants that you are the next round of plants that you are looking to build, I think staff came out against it more because they thought you should have had an RFP. Could you talk to your views on being able to kind of resolve that constructively?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Sure. As I mentioned in my remarks, there is no disagreement with the need for incremental generation in Texas. Everybody recognizes that. I think everybody also appreciates that we really need to move quickly in order to support the load growth in Texas as well.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

That's fully in the record and well-supported, the rationale for why we needed to move quickly. We've already got the Orange County plant. We actually did a full RFP for that one, and there were no other competing bids. For this project, in lieu of the longer time required for a full RFP, we did bid out some of the major components for the plant. So there is RFP in there, just not for the whole thing. That's all reflected in the record, and we understand what the staff was saying, but we do believe there's support for us to continue to move forward and get to the finish line. Of course, we have to finish out the process with the commission, and the commission needs to agree with that. We believe that there's evidence in the record that'll support moving forward quickly.

Steve Fleishman
Steve Fleishman
Senior Analyst at Wolfe Research

Okay, great. That makes sense. Thanks.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

All right. Thanks, Steve.

Operator

All right. Thank you, Steve. Our next question comes from the line of Sophie Karp with KeyBanc Capital Markets. Sophie, please go ahead.

Sophie Karp
Sophie Karp
Managing Director and Senior Equity Analyst of Electric Utilities and Alternative Energy at KeyBanc Capital Markets

Hi. Good morning. Thank you for taking my questions.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning, Sophie.

Sophie Karp
Sophie Karp
Managing Director and Senior Equity Analyst of Electric Utilities and Alternative Energy at KeyBanc Capital Markets

Hi. A couple of questions on the, I guess, the generation portfolio, how you think about that. I was curious to hear your thoughts on what kind of market signal would make you take a closer look at nuclear and maybe bring those opportunities forward. Also, some of your peers are discussing how building gas plants takes a really long time, right? What are you seeing, and how fast can you basically build a gas plant right now?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah. With regards to nuclear, we are working on opportunities right now, as I mentioned.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

We have the early site permit in Mississippi that is an opportunity for us. We're talking with stakeholders, including customers and vendors on that. I don't know that there are any other market signals that we could see. The key issue for us is our ability to manage the construction risk. Of course, we need a customer to want to pay for that. There is a lot of political support in Mississippi, Louisiana, Arkansas, and in Texas. Some of the states have laws in their legislative sessions right now that they are considering to try and facilitate nuclear investment. We view that as all very, very positive. We need to be able to solve that commercial question upfront in order to move forward with nuclear on a more rapid pace.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Regarding combined cycles and the path there, the key for that is where are you in the queue? We have queue positions that would allow us to build plants in 2028 and 2029. You saw the examples today, and the customers that are coming in are coming in in that timeframe that matches up with our ability to continue to build. That is the timeframe that we are looking at right now, is that timeframe and sort of bringing on combined cycles. I think if you have queue positions, I think that is consistent with most. I think there may be a few people that have sort of uncommitted queue positions maybe in 2027, but that is about as early as I think you can get today that we have seen that could come into our service area.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

If you're not in the queue and you're trying to get into the queue today, it's probably more like 2030, 2031. It's a little further out.

Sophie Karp
Sophie Karp
Managing Director and Senior Equity Analyst of Electric Utilities and Alternative Energy at KeyBanc Capital Markets

Thank you. This is very helpful color. My other question is on the legislature that you mentioned in Arkansas and in Texas, I believe that improves recovery mechanisms for plants under construction and storm recovery. How should we think about potential financial impacts of those? Obviously, this is a positive, but how much would that be, I guess, a credit on a normal year to you guys?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Good morning, Sophie. It's Kimberly. From the Arkansas legislation, it does allow us to build earlier because you get recovery earlier through you get AFUDC through or you get cash CWIP rather than AFUDC. We haven't quantified that effect.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

We'll look at what specific investments we'll use that mechanism for and how that will benefit customers. That will be coming in future quarters, but certainly sets us up to move faster and actually provides lower cost to customers because of the CWIP recovery early in the construction period. In Texas, I think the mechanisms are more around ensuring risk. There's wildfire legislation. There's other legislation there, but I don't know that you'll see a lot of changes in the financials depending on what goes through the legislation session there. From a securitization perspective, it is timing of the ability to recover the cost, which does lower cost to customers because of the carrying cost on that time to get those dollars back.

Sophie Karp
Sophie Karp
Managing Director and Senior Equity Analyst of Electric Utilities and Alternative Energy at KeyBanc Capital Markets

Thank you so much.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, Sophie. Our next question comes from the line of Ryan Levine with the Ryan, please go ahead.

Ryan Levine
Ryan Levine
Equity Analyst at Citi

Good morning. Two related questions, particularly to Louisiana. How does the Woodside FID decision impact the availability of power or time to market for new potential data center customers in your service territory? Related, given the macro uncertainty, any color you can share around GDP sensitivity to your load or customer activity in your plan and how that could impact the large load customer conversations?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Right. I'll address the first part of your question regarding the data center and how the large customers affect that. We've talked before that our large traditional customers are in a probability-weighted pipeline in our forecast. The large data centers, we consider them binary. We look at what does it take to make sure that we can supply those, and also we add that as needed when we add that large customer. That's what you saw the last couple of quarters.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

They're not mutually exclusive, but they're also not as dependent on each other. We look at that supply for the probability-weighted, and then you look at the supply for the specific large customers. We think that we can continue to serve data centers over time. Obviously, Drew talked about the timing on construction, but we think we still have a lot of opportunity there.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Just to make sure I understand your second part of your question, Ryan, you're asking about macro drivers and whether those would affect how would those affect Woodside in particular?

Ryan Levine
Ryan Levine
Equity Analyst at Citi

How those would impact some data center conversations to the extent that the economy were to slow and that may reduce your load and you expand your reserve margins.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Yeah. I mean, I would think that's—I don't think data centers are really any different than our traditional industrial customers in that regard. They are looking at long-term investments, and so they're looking past any near-term macro effects that you might see from tariffs or recession or anything like that that could come about. At least that's what's happening in the conversations that we're having. They're looking well out into the future, and they're not looking at just these investments, but lots of investments. That's, I think, that would be the driver for them, not near-term macro, but long-term expectations.

Ryan Levine
Ryan Levine
Equity Analyst at Citi

In terms of your core business outside of those customers, how GDP-sensitive is your load?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

I mean, it is not recession-proof, if that's what you're asking.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

We have some of the most competitive industrials in the world, given all the investment that's happened over the last 15 years in our service territory. In any sort of macro change, they would be the last to turn off and the first to turn on. That is looking at the commodity spreads from the U.S. to global markets right now. Those continue to be favorable, particularly for the Gulf Coast. We might see some temporary downturn, but anybody that's operating today would probably continue to operate very soon if they had to turn down at all. As I mentioned earlier, our sensitivity from an earnings perspective is really low, $0.01 for any 1% change in our industrial sales. That shows you how low the sensitivity is and the significance of the demand charges that we have.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

I would think that our industrial customers will be very robust through any sort of downturn. From an investment perspective, as I said, the data centers and the large industrials, traditional large industrials, they are looking at many decades of investment, not the current macro environment.

Ryan Levine
Ryan Levine
Equity Analyst at Citi

Thank you.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thank you.

Operator

Thanks, Ryan. Just a reminder, folks, if you would like to ask a question, again, it is star one on your touch-tone phone. Once again, star one. Our next question comes from the line of Anthony Crowdell with Mizuho. Anthony, your line is open.

Anthony Crowdell
Anthony Crowdell
Senior Analyst of U.S. Energy and Electric Utilities at Mizuho

Hey, thank you. Good morning. Just a couple of quick questions on transferability. I appreciate you gave us some numbers, but what is the impact to your FFO to debt metric if transferability were to sunset?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yeah. It is Kimberly. The numbers that I gave you, as I noted, we did not give a percent on FFO, but we would be well above our or we would be above our threshold, I should say. We also would look to maintain some of that through other mechanisms like I talked about, safe harboring potentially, or also tax equity partnerships. That is sort of a bookend case, but we would expect to be able to manage that as well. Regardless, we still expect to be above our thresholds.

Anthony Crowdell
Anthony Crowdell
Senior Analyst of U.S. Energy and Electric Utilities at Mizuho

Great. Maybe it is more of a rating agency question, but if one of the options were tax equity, do you know if the treatment of that is similar to transferability or that is not included in the FFO calculation?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yes. We have done a few of those already over the last few years, and they are treated in the normal course.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

I would not expect that to be any different.

Anthony Crowdell
Anthony Crowdell
Senior Analyst of U.S. Energy and Electric Utilities at Mizuho

Great. Thanks for taking my questions. Congrats on a good quarter.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Thanks.

Operator

Thanks, Anthony. Our next question comes from the line of Andrew Weisel with Scotiabank. Andrew, please go ahead.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Hi. Thanks. Good morning, everyone. If I could first just elaborate on the slight reduction to the load growth forecast. First, just to clarify, you are saying it is about the pace of new customers ramping, not about usage from existing customers. Is that right?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Yes. I think that is a fair assumption.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Okay. Great. I recognize the EPS impact is modest, but can you detail you originally guided to 11%-12% industrial growth in 2025? What is your new forecast for the industrial class?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

I do not think it is substantially changed. I think you would still be close to that range.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Really, this is about, like I said, timing, ramping, but not a significant change in where we are.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Okay. Very good. One more, if I may. I appreciate the easy-to-read list of the significant investment proposals on slide 15, and it does add up to a lot of potential spending, mostly in Louisiana and Texas and across generation and transmission. My question is, how much of that is already included in the CapEx plan? Is there sort of a risk adjustment for some or all of these projects? Would there be upside or downside to the plan pending regulatory approval?

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

$37 billion through 2028. What you are seeing on 15, that list of investments, those are all, I would assume, those are in the financial plan.

Kimberly Fontan
Kimberly Fontan
CFO at Entergy

Anything that's not in the financial plan, we'd have to look at whatever that is in the future, depending on additional customers and that sort of thing.

Andrew Weisel
Andrew Weisel
Analyst at Scotiabank

Okay. Appreciate you clarifying. Thank you.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Absolutely.

Operator

Thanks, Andrew. Our last question today comes from the line of Travis Miller with Morningstar. Travis, your line is open.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

Thank you. Good morning.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Good morning.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

High-level question here with all the large load conversation and the potential need for new generation, transmission, etc. Have you changed any of your strategic conversations when you're thinking about contracting with these customers, i.e., going from maybe shorter-term types of contracts to longer-term offtake types of contracts or fixed-price types of contracts? Just wondering if there's been any change there in your strategy.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Not really. One of the advantages that we have is we've been serving large industrial customers for a while, and we were able to take advantage of those structures and frameworks that we had been contracting with previously. That included credit provisions, fixed demand charges, what we call minimum bill, I guess, sometimes, minimum bill charges, and other features, termination features, and things like that, and adapt them for the current environment, particularly with the data centers. I don't think our strategy changed all that much, but we have had to be disciplined with the way that we approach this so that we can make sure that we keep all of our existing customers in a good spot while we get these new customers up and running.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

Sure. Okay. That makes sense. And then a specific one on the Louisiana new customer filing.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

Is there a precedent either in Louisiana or other states you serve or other states you've researched for a decision like this? Is there any kind of precedent ruling you've seen?

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

I'm sorry. I missed the first part. A precedent ruling on transmission investment in Louisiana?

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

No. The new customer investment.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Oh, the new customer. Yes. Okay. I mean, I think the components themselves, nothing is new that's in there. And so it's standard generation and transmission investments that have been requested before. There is a specific customer that we are aiming to serve in this docket. Outside of that, I think that actually helps because it helps illustrate how we will manage the overall impact to existing customer bills. I think that probably helps the conversation. The investments themselves are nothing new for the commission to consider.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

Okay. I was thinking more of the kind of fixed-price type long-term contract approval.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Oh, yeah. Again, we've had those kinds of contracts before. They exist in our existing tariffs that we have. In fact, in Louisiana, we have an existing high-factor load-serving tariff, and that allows us to serve a lot of these large industrial customers. We're able to use that same exact tariff for the new customer.

Travis Miller
Travis Miller
Energy and Utilities Senior Equity Analyst at Morningstar

Okay. Perfect. That's great. I appreciate it.

Drew Marsh
Drew Marsh
Chair and CEO at Entergy

Absolutely.

Operator

All right. Thank you, Travis. That does conclude our Q&A session today. Thank you so much, everyone. I will now turn the call back to Liz Hunter for closing comments. Liz?

Liz Hunter
Liz Hunter
VP of Investor Relations at Entergy

Thank you, Greg. Thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on May 12 and provides more details and disclosures about our financial statement.

Liz Hunter
Liz Hunter
VP of Investor Relations at Entergy

Events that occur prior to the date of our 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. This concludes our call. Thank you very much.

Executives
    • Drew Marsh
      Drew Marsh
      Chair and CEO
    • Kimberly Fontan
      Kimberly Fontan
      CFO
    • Liz Hunter
      Liz Hunter
      VP of Investor Relations
Analysts
    • Paul Fremont
      Managing Director of Equity Research at Ladenburg
    • Jeremy Tonet
      Research Analyst and Managing Director at JPMorgan
    • Andrew Weisel
      Analyst at Scotiabank
    • Steve Fleishman
      Senior Analyst at Wolfe Research
    • Analyst at Guggenheim Partners
    • Nick Campanella
      Director at Barclays
    • Travis Miller
      Energy and Utilities Senior Equity Analyst at Morningstar
    • David Arcaro
      Power, Utilities, and Clean Tech Analyst at Morgan Stanley
    • Sophie Karp
      Managing Director and Senior Equity Analyst of Electric Utilities and Alternative Energy at KeyBanc Capital Markets
    • Anthony Crowdell
      Senior Analyst of U.S. Energy and Electric Utilities at Mizuho
    • Ryan Levine
      Equity Analyst at Citi
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