安特吉 (ETR) 2016 Q1 法說會逐字稿

Welcome to the Entergy Corporation first quarter 2016 teleconference.

(Operator Instructions)

As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, David Borde, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and thank you for joining us. We will begin today with comments from Entergy's Chairman and CEO, Leo Denault; and then Drew Marsh, our CFO, will review results. In an effort to accommodate everyone who has questions, we request that each person ask no more than two questions.

On today's call, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information concerning these risks and uncertainties is included in the Company's SEC filings.

Thank you, David, and good morning, everyone. This quarter was a good start to another important year for Entergy. We accomplished what we set out to do by successfully executing on our to-do list. We closed the acquisition of the Union Power Station, finalized our Arkansas rate case, received a final order in our distribution cost recovery factor filing in Texas, filed our first FRP with forward-looking features in Mississippi, completed the ANO NRC inspection.

Received confirmation from the New York ISO that the shutdown of FitzPatrick will not affect reliability in the region; saw over 6% industrial sales growth versus last year; and today, we are reporting first quarter operational earnings per share of $1.35, above what we expected. While that's a good start, we are also aware that it's early in the year, and we face challenges ahead. But we are confident that we can manage these and deliver on our earnings commitments for the year as well as our Adjusted Utility, Parent, & Other long-term outlook.

Our results for this quarter are the outcome of the strategy we have been pursuing for some time to create sustainable value for all of our stakeholders in 2016 and beyond. At the Utility, investing to benefit customers while maintaining competitive rates with ready access to capital, and timely and predictable investment recovery, which provides the financial flexibilities we need to make these investments.

And at EWC, continuing to reduce our footprint to limit exposure from assets not supported by the market. We've already materially reduced our size, risk and volatility through the sale of the Rhode Island State Energy Center and the shutdown of Vermont Yankee.

This trend will only accelerate as Pilgrim and FitzPatrick come off-line. We will continue to emphasize safe operations, regulatory compliance and commercial diligence at all sites.

If you turn your attention to our to-do list on Slide 3. On March 3, we closed the acquisition of Union Power Station. This acquisition is both an important driver in achieving our 2016 earnings expectation and also one more important step in our broader plan to modernize our fleet and provide lower-cost, reliable generation for our customers.

Recovery of the cost of this investment in Arkansas, Louisiana, and New Orleans, effectively began simultaneously with the transactions close, thanks to a collaborative agreement between our team, our regulators and other participants who recognize the benefits of this investment for our customers.

Another important component of our supply plan is building the St. Charles Power Station. The hearing at the LPSC began April 18, and is expected to conclude today. Thus, we expect that the LPSC will be able to take up the certification decision in August. This is an important investment to serve our customers in Louisiana and is an example of the infrastructure development that we are undertaking to position the Utility for the future.

Beyond generation, we also continue to make significant progress of providing benefits to our customers through our transmission investments. We officially kicked off Entergy Louisiana's Lake Charles transmission project, with a wire-cutting ceremony in March. Once completed, this $159 million project will support continued reliability and service to a rapidly growing area in our service territory.

On the regulatory front, we've also made progress towards better aligning the timing of our investments to the needs of our customers going forward. This will improve access to the capital needed to make the investments required to enhance the reliability and capability of our system and provide lower-cost, more environmentally-friendly sources of generation for the benefit of our customers.

This ultimately supports economic development in our service territory, which strengthens communities, creates jobs, and brings more financial stability to the regions we support. This quarter, we filed or concluded several major proceedings. First, we received a final order on our Arkansas rate case and rate adjustments became effective on February 24.

We make our first formula rate plan filing in July under the new framework using a future test year which will bring more predictability and strength to Entergy Arkansas' financial profile. This new regulatory structure is the result of collaboration among a broad group of stakeholders and will help us be a stronger partner to attract jobs and economic expansion to Arkansas.

Last month, Moody's acknowledged this view with an upgrade to Entergy Arkansas's long-term rating. Entergy Mississippi has also begun to utilize its new formula rate plan with forward-looking features and made its first filing on March 15. The filing reflects an anticipated earned ROE for the 2016 test year that is below the FRP bandwidth, indicating a $32.6 million rate increase to a point within the FRP bandwidth that reflects a 9.96% earned ROE.

A final order on that filing is expected before the end of the second quarter, with a resulting rate adjustments to become effective around midyear. And in February, the administrative law judge issued a proposal for decision with the Public Utility Commission of Texas on our transmission cost recovery filing.

Based on the Proposal for Decision, we estimate $10 million to $11 million annual recovery on transmission spending, incremental to base rates. Use of this rider, along with the distribution cost rider we have been utilizing since January of 2016, will bring us greater financial flexibility to support the needs of our customers in Texas.

The Louisiana Commission also recently opened two generic dockets on income tax and corporate structured questions. The dockets were initiated in response to specific Commissioner concerns regarding the Cleco transaction and the implications of that transaction structure on taxes and rate making.

While the dockets are generic and affect all LPSC jurisdiction utilities, we believe that the scope of the documents will be narrowly focused on those type of structures that gave rise to the dockets and not on broader policy issues like tax normalization or tax-related matters previously approved by the Louisiana Public Service Commission.

Furthermore, we have worked constructively and transparently with the LPSC on tax-related matters. The LPSC is familiar with our tax positions, which have resulted in significant benefits to our customers. The Commission has two items regarding the Cleco transaction on its Business and Executive Agenda on April 28, and we are hopeful they will take that opportunity to clarify the scope of these dockets.

We do not expect significant effects for ELL as a result of these dockets. Finally, we carefully monitor the effects of investments and rate actions on our customers' bills, which today, remain on average, 20% to 25% below the national average. In fact, our average residential rates remain below $0.10 per kilowatt hour.

Looking forward, and we continue to explore solutions that will meet our customers' changing expectations in the evolving landscape of the utility industry. By introducing new technologies and renewable energy resources, we can build a grid that is cleaner, more resilient and affordable and provides innovative opportunities in the way we interact and generate power for the benefit of all of our customers.

We're active on the renewables front with solar pilot programs underway in Mississippi, New Orleans and Arkansas. Entergy Mississippi has completed three solar installations in three different locations, each capable of generating 500 kilowatts. Entergy New Orleans has begin construction of a 1 megawatt solar generation project with state-of-the-art battery storage technology.

Entergy Arkansas has entered into a power purchase agreement to facilitate construction of an 81-megawatt solar-generating facility which could be online as early as 2018. These are the first steps towards assessing feasibility of utility scale solar generation, a resource that provides one way to help meet our voluntary commitment to stabilize our carbon dioxide emissions and reduce our environmental footprint.

At the same time, in 2015, our existing generating fleet continued to produce electricity at one of the lowest carbon dioxide emission rates in the United States. We are building on these pilot programs and we have initiated three new request for proposals for renewable side generation resources to help meet long-term resource planning objectives in our service territory.

These RFPs are seeking up to 200 megawatts of capacity for Louisiana, 100 megawatts for Arkansas, and 20 megawatts for New Orleans. Beyond pilot programs, we've also created a commercial development and innovation team dedicated to evaluating and integrating other new technologies in our operating model.

That team focuses on addressing customer needs and expectations through product and service innovation, technology deployment, an alternative service models, and we will also research and develop the enabling technologies that enhance the distribution grid and provide higher service and reliability for all of our customers.

For example, as I mentioned last quarter, we are moving forward with the process to install advanced meters in our distribution system. At our Analyst Day in June, we will give you more details around the next steps for deployment of advanced meters, and similar to our approach for our supply plan back in 2014, we will provide the initial strokes around broader plans for other potential grid modernization efforts to be followed with more details over time.

I'll take a moment now to talk about initiatives to improve our nuclear operations. First of all, our plants are safe. If they weren't, they would not be running. But this past year, the performance nuclear fleet as a whole was not in line with our standards. Operational excellence is integral to our business model and a core competency we must maintain to maximize value for all of our stakeholders.

We've made it a top priority in 2016 to strengthen the culture of operational excellence throughout our organization. I'd like to extend my thanks to Tim Mitchell, who started us down this path as our Interim Chief Nuclear Officer and welcome Chris Bakken, who has officially joined us as Executive Vice President and Chief Nuclear Officer. Reporting directly to me, Chris will now lead these efforts in the nuclear organization.

In January, as part of a comprehensive fleetwide performance improvement plan, we formed a corporate event response team with the industry assistance around best practices and increased engagement with all stakeholders. We are evaluating nuclear operations across our fleet from top to bottom, and we continue to evaluate the need for process changes at each individual plant.

And it's not just about Column 4, our main long-term objective is sustained operational excellence across our fleet. This could result in incremental nuclear spending and we're working hard to mitigate any financial implications.

At ANO, the NRC completed its supplemental inspection and announced those results a public meeting earlier this month. The NRC is confident that the problems have been identified, and a comprehensive plan is being implemented to correct them. The NRC is expected to issue a confirmatory action letter in the next several weeks and we plan to give you an update at Analyst Day.

Finally, it's Important to emphasize that the NRC did recognize that the plan is safe to continue power operations, and that the actions taken to date have further improved the margin of safety, not only at ANO, but at all of our other nuclear facilities.

Pilgrim is also working toward process improvements and the NRC will complete a supplementary inspection of that plant that will focus on the corrective action program weaknesses that resulted in entry into Column 4 and a safety culture assessment. We will inform the NRC when we are ready for that inspection, which we expect to be in the second half of this year.

Also, after careful consideration of the circumstances surrounding the plant's operations, we intend to refuel the plant in the spring of 2017 and run the plant safely through its current capacity market commitments with the ISO New England until the planned shutdown date of May 31, 2019. At Indian Point, we are committed to resolving performance deficiencies and ensuring recovery in plant performance.

We performed and completed comprehensive inspections during our planned refueling outage at Unit 2. We detected additional work involving baffle bolts, which we will fully address before re-starting the plant. Subject to the completion of engineering analysis, we expect to be done with the additional work and have the plant back online around late June.

Finally, we remain focused on safely operating the FitzPatrick plant through January 27, 2017, followed by a safe shutdown and eventual decommissioning of the facility. The decision to shut down assets are very difficult. And we are proud of our employees who remain focused on safe operations and finishing strong.

I reiterate our commitment to support them and the communities affected by the difficult decisions we've made for these plants. Speaking of the communities we serve, we recognize that we play an important role as a corporate citizen in every region where we operate and our core values resonate in the ways we support our communities.

Improving education and economic opportunities for customers and our communities is one way we demonstrate our commitment. As part of a five-year, $5 million initiative to support workforce development training, we made a $250,000 grant to Jobs for America's Graduates.

This program equips at-risk youth with the skills needed to transition successfully to careers or college, addressing critical workforce needs, closing skill gaps and creating a competitive advantage for local communities. The benefits of program like this one are long-lasting, providing opportunities for those who might not otherwise have some and helping to raise the standard of living for a family for generations to come.

We've also made a two-year, $450,000 grant to the Red Cross to support disaster response in our communities. Recent floods damaged nearly 13,000 homes in Louisiana and damage is still being assessed from this month's floods in Texas, highlighting the importance of a fast response in times of disaster.

Through our partnership with the Red Cross, Entergy is able to direct funds to communities following storms or other disasters as they are needed, allowing help to be provided more quickly to those in need. I'm also proud of our initiatives, which help us maintain a diverse and engaged workforce.

Veterans and active reservists make valuable contributions to our Company and in recognition of our efforts to support National Guard and Reserve members, we've been selected as a finalist for the 2016 Secretary of Defense Employer Support Freedom Award. We are pleased to be considered for this honor and we appreciate the sacrifices these employees and their families make in their service to our country as well as the unique skills and experiences that they bring to Entergy.

These are just some of the efforts that got us ranked top quartile in Corporate Responsibility Magazine's Annual List of the 100 Best Corporate Citizens. This is the seventh time we've been included on this list, which recognizes companies taking sustainable, responsible actions in areas such as employee relations, philanthropy and community support, environment and climate change.

Nowhere are these qualities more important -- apparent than when our employees go above and beyond to serve our customers during their most difficult times. Many of you may have seen or read about the significant flooding in our service territory this quarter. Though our system withstood the conditions quite well, our employees were also very diligent in safely restoring powers to those that needed it, repairing damaged infrastructure, and even saving lives.

I'm excited by all that we've done so far in 2016 to execute on our strategy. This quarter was a good start to the year. The major undertakings we have completed will help drive our 2016 results. We are also aware of the challenges ahead and more work needs to be done to deliver on our commitments for the year.

Everything we do is designed to support our objective to create value for each of our four stakeholders. We strive to deliver top quartile returns for our owners, provide top quartile satisfaction for our customers, achieve top quartile organizational health scores and top decile safety performance for our employees, and maintain an active role in supporting our communities by achieving top decile performance for corporate social responsibility.

With these objectives in mind, we remain focused on the strategy we've developed to achieve those objectives. To steadily grow the utility by investing to benefit customers while maintaining competitive rates, with ready access to capital and timely and predictable investment recovery, providing the financial strength and flexibility we need to make those investments.

And continue to reduce EWC footprint while ensuring safe operations, regulatory compliance, and commercial due diligence for our assets. We're off to a good start and we'll continue to execute through the remainder of the year on the plans that we've laid out. With that, I'll turn the call over to Drew.

Thank you Leo. Good morning everyone. As Leo mentioned, this is a good start to the year. Let's get straight to the results for the quarter. Turning to Slide 4, our operational earnings, excluding special items, were $1.35 per share, higher than we expected. This compares to $1.68 a year ago.

This quarter's results varied from last year due to the effects of weather and a 2015 income tax item at Utility, Parent, & Other, and lower wholesale power prices that EWC. These declines were partially offset by growth in the Utility business.

In both periods, as reported results included special items related to EWC nuclear plants that we have identified to close. These special items offer severance and retention costs as well as capital spending which is being expensed.

Turning to Utility, Parent, & Other results on slide five, operational earnings per share decreased $0.13 quarter over quarter. However, the adjusted view on slide 6, which excludes the effects of weather and income tax items, increased $0.19. The growth in our base business, as a result of our efforts, will allow us actually execute on our strategy to make productive investment to benefit customers and improve returns in our operating companies.

Consistent with that strategy, Entergy Arkansas' rate cases is an important driver for the quarterly results. Rate adjustments were effective starting February 24, and included recovery for the Union Power Station acquisition. In addition, the final order allowed for deferral of $0.06 of previously expensed Fukushima and flood barrier compliance cost, which we collected over 10 years. Combined, these items contributed about $0.15 to this quarter's earnings.

A second driver of note was improved efforts to manage non-fuel O&M expense which decreased $0.07 after excluding the deferral I just noted. The scope for FERC lavish spending and benefit costs, including pension, were lower, while nuclear spending increased. This quarter, we also recorded a charge of approximately $0.05 associated with FERC quarters in the Entergy Arkansas opportunity sales proceeding which came out last Thursday.

The charge represents a portion of EAI's estimated liability that would be attributable to its wholesale business and is not recoverable. This is a complex and technical case that continues on at the FERC and its ultimate outcome is uncertain. We will provide additional details in our Form 10-Q.

Turning to sales, we also saw earnings contribution from over 6% industrial sales growth. Slide 7 provides a breakdown of the increase. About 70% of this quarter's increase came from new and expansion customers across several sectors as they continue to ramp and come online. Higher sales to existing customers were driven by petroleum refiners as fewer and shorter outages drove industrial sales growth in the quarter. This is expected to continue into 2Q.

Growth in new and expansion customers are also expected to continue through the rest of the year. However, given how strong refiners ran in the second half of last year, and expected outages and changes in operational levels later this year, we expect industrial growth to be weighted towards the first half of 2016.

Turning to EWC's first quarter results, summarized on Slide 8. Operational earnings were $0.51 in the current quarter, $0.20 lower than the prior year. The single most significant factor was lower wholesale prices. The nuclear fleet average price was down more than $8 per megawatt hour, or nearly 13%.

In addition, realized earnings on decommissioning trust declined due to last year's pre-balancing activity for VY's trust, which resulted in higher interest income in 2015. On the other hand, the effect of last year's impairments reduced fuel -- nuclear refueling outage and depreciation expenses, which benefited earnings approximately $0.16 this quarter.

Slide 9 shows operating cash flow for this quarter of $533 million, about $80 million lower than the same quarter in 2015. The largest driver was reduced net revenue at EWC.

Our 2016 earnings guidance is summarized on Slide 10. As of today, we see Adjusted Utility, Parent, & Other earnings at our guidance midpoint. Recall this excludes the effect of any weather or tax items. For our consolidated guidance, we must also consider negative weather to date, EWC price declines since year end, and the extended outage at Indian Point Unit 2.

For IP2, we have not completed our engineering analysis but based on information to date, our preliminary estimate is that the extended outage will reduce earnings by approximately $0.20. This is primarily from lost revenue but also includes higher refueling outage costs, which we currently estimate to be around $20 million. The higher outage cost will be amortized over the life of the outage, with the bulk of the earnings effect in 2017.

Looking at the balance of the year, there are additional risks and opportunities that could apply to both Utility, Parent, & Other as well as Entergy overall. As Leo mentioned, we have the potential for higher nuclear spending as we execute on our nuclear performance improvement plans.

As always, there are potential risks to our sales forecast. We also see opportunities to mitigate these challenges and provide upside, starting with management of our spending, some of which began in the first quarter. In addition, as we mentioned in our last quarterly call, there's potential for income tax items, possibly as early as the second quarter of this year. Considering all these factors, we are affirming our guidance for the year.

Moving to the longer term view, Slide 11 shows our Adjusted Utility, Parent, & Other outlook, which is unchanged. Some of the challenges and opportunities that we've noted for 2016 exist on an ongoing basis and an added uncertainty for -- with an added uncertainty for pension expenses but also with the added benefit of efficient regulatory mechanisms.

Our strategy to realize these results remains the same as we focus on making productive investments to benefit customers while maintaining competitive rates with timely and predictable investment recovery.

Slide 12 provides EWC's EBITDA outlook, assuming market prices as of March 31. One thing to note is the root cause analysis for the Indian Point 2 bolt issues could prompt an accelerated inspection schedule for Unit 3 at Indian Point. This is not reflected in our current estimates and we plan to provide more information once our analysis is complete.

Before closing, I'd like to give you a little more detail on our Analyst Day on June 9 in New York City in Midtown. We'll talk about what's next for Entergy and the utility growth opportunities before us. We'll also provide some longer-term five-year views and more details on our nuclear performance improvement plan.

Our extended management team, including our new Chief Nuclear Officer, Chris Bakken, will be there to give you an opportunity to talk with them about their areas of responsibility. We look forward to seeing you there and now the Entergy team is available to answer your questions.

(Operator Instructions)

Rose-Lynn Armstrong from Barclays.

Yes, could you go back to Indian Point 2 discussion and just clarify, is the additional $0.20 of outage-related expenses, are -- is that included in the $4.20 to $4.50 of Utility, Parent, & Other adjusted earnings or is that outside of it?

And then separately, could you talk a little bit about where you are in that process? Have you identified the number of bolts that need to be replaced? Is equipment on site? When will the replacement begin, et cetera? Whatever color you can add.

Okay. Good morning, Rose-Lynn, this is Drew. I will take the first part of the question and I'll turn it over to Bill. First part of the question was, is the $0.20 of IP2 included in the affirmation of the outlook? In the overall consolidated number, it is included in our -- and we do believe there are things that will get us back into the range. For Utility, Parent, & Other, of course, that is separate from EWC so we wouldn't include IP2 within that.

Right. Fair enough. Okay.

It is included in the overall guidance range.

Okay, thank you.

As it relates to the number of bolts and the timing of the return of the unit, we are still in the process of completing the engineering analysis as to the specific number of bolts; however, we do have the equipment on site, and are, in fact, replacing bolts as we speak.

There was a little long-lead time item. But we are in the process of doing that right now. And obviously, are working very closely with the NRC so we get concurrence on our analysis and final repairs.

Okay, thank you.

Thank you.

Michael Lapides, Goldman Sachs.

Yes, hi guys. One follow-up on Indian Point and then over to the regulated side. On Indian Point, on the IP2 issues, is the bulk of that an issue that impacts second quarter 2016 in terms of that $0.20 or does this drag throughout 2016 and even into 2017?

This is Drew again. So it's going to be the bulk of it in the second quarter because most of it, as I said, in my remarks was -- is net revenue. And we're not expecting that plan to come on to -- until near the end of June. So that's, basically the entire quarter is going to be lost from a net revenue perspective.

The outage, the refueling outage expenses are going to move across the new fuel cycle. And it's a little shorter than it typically is. It's usually, I guess, 23 months or so and it's now going to be probably like 20 months. So it's, I don't know, $0.07 or so associated with that. Most of that, maybe $0.05 will show up in 2015 -- excuse me, in 2017 is amortization. So maybe $0.01 this year and maybe $0.01 in 2018.

Got it. Thank you. And over on the regulated side, you've talked a little bit about smart meters, you've talked a little bit and it's been a while since you have done so about natural gas reserves and rate base. Outside of adding new generation to the fleet, can you talk a little bit about what other items could have the biggest impact over the next three to five years to potential rate base growth? Just walk us through high level where you see the greatest opportunities that may not actually be in your current CapEx forecast.

You know, Michael, that's -- I guess I was giving you a little bit of a teaser of what we wanted to talk a little bit about at Analyst Day so if I let Theo go off on that now, I will take away that surprise. But the fact of the matter is, we are in the process of evaluating a lot of that right now.

Certainly getting the meter technology onto the system is the first step, along with all the back office systems and meter data management systems and I'll likely go with that. So that's in the near term, that's what we are talking about. Some of this, too (multiple speakers) extend out beyond the 2018 timeframe that we are talking about.

Got it. Thanks Leo. Much appreciated.

Thank you Michael.

Jonathan Arnold from Deutsche Bank.

Yes good morning guys.

Good morning, Jonathan.

Just curious, if you could talk a little to what it was that drove the quarter so much higher than the $1.10 you were speaking to on the, I guess, the Q4 call. It felt like weather continued to be mild. Were you not counting on the Arkansas decision perhaps or just trying to understand what the -- what surprised you in that sort of back half for the quarter?

Okay, thanks, Jonathan. This is Drew. So there were a couple of things that broke our way in the quarter. And some of the things were determined, and some of the things were timing.

So at EWC, there were some mark-to-markets and elements that came in, about $0.04 of that and about $0.03 of volume as we actually ran better in the quarter before the outages, the planned outages took over. So we actually were about $0.07, $0.08 ahead at EWC versus our previous expectation.

The balance of it was at the utility. Some of it was -- or the bulk of the O&M savings that we saw above expectation were in the fossil area. As we came through the outage season, we actually did much better than we have historically. Then at the balance of it, as you referenced, there was some conservatism built into the Arkansas rate case.

So we -- that was justified at the -- right at the very end, we did lose $5 million of comp, but that spread out differently than we had built the conservatism into our case. Some of those Fukushima and flood barrier costs were not part of our expectations for the quarter. But they were able to stay in, in that final order and then some timing elements were for the period between February 24 and April 1.

It went in our favor but they were in our overall expectation so that's more of a timing shift between periods. So that's really the bulk of those items. So hopefully, that helps close the gap for you a little bit.

That is really helpful. Thank you. Can I just -- on just a similar vein, the -- you made a comment about, well, I think -- or you were hinting that there could be some tax items as early as the second quarter and you've made that comment in the context of having maintained guidance. Is -- are you maintaining guidance because of that item or do you see that more as an upside?

I think it's a big piece of why -- how we are able to maintain guidance on Entergy overall. As you know, on the utility side, our adjusted Utility, Parent, & Other, it doesn't include taxes, or weather. And so for that part of the business, we are solidly saying we're right at the midpoint.

But when we go back to the overall consolidated business, we have the big one-time outage at IP2. We have the negative weather and then of course, the prices at EWC.

Those put us down near or below the bottom of our range. But with the expectation that we would get some benefit out of taxes, possibly like I said, as early as next quarter, we think we are going to get back into the range so it's too early to make that call now.

Okay but those are the moving pieces -- that's directionally. Thank you.

Stephen Byrd from Morgan Stanley.

Hi, good morning.

Good morning, Stephen.

I wanted to get your view on the commercial and residential low growth numbers that we saw for the quarter. They were weather-adjusted, fairly weak. Is this something that's just a quarterly fluctuation or are there drivers that you see there? Any color you can provide on that?

Sure, Stephen. This is Theo. I would think when we think about those two particular classes, we continue to see impacts from energy efficiency, as we've talked about on previous calls, both at federal type programs as well as some of our local energy efficiency programs that we see within our jurisdictions.

In terms of what we expected, I mean, given some of the economic data that we were utilizing to try and forecast sales, we did see some economic weakening in the first quarter and somewhat expected that. So while I do agree it was fairly low for the first quarter, it was a little bit below our expectations, but it wasn't necessarily a big surprise to us.

And as we go forward throughout the year, we expect to see that to come back, as we look at growth state products in the regions we serve, particularly Louisiana and Texas, we see that starting to fill out and begin to trend upward and we think that will help move those growth rates back to a more typical level. But again, energy efficiency will continue to have an impact on our residential and commercial sectors.

Understood. And can you remind me just as you thought about guidance for 2016 and where you are headed, what your expectations are for full-year low growth for commercial and residential?

Excuse me. I think as we go forward, we have -- we continue to monitor the various variables and inputs relative to that. We will talk more about that at the -- at our Analyst Day. But clearly, with what we saw in the first quarter, we're going to continue to monitor what we expect for the remainder of the year and make adjustments as necessary.

But what I will also say is given where we are as it relates to sales growth, we brought -- we did consider that in our -- reaffirming of our guidance. So we feel like we will continue to evaluate it but feel like we will still, from a -- as it affects us going forward, it will not take us out of our guidance range at this point.

Understood. Thank you very much.

Praful Mehta from Citigroup.

Thank you. Hi guys. On the strategic side, given your transition now to become more of a utility pure play than you clearly are right now, M&A opportunities in this space on the utility side, there are utilities coming out of bankruptcy potentially. How are you seeing strategically where Entergy should be going in areas that you think from a M&A perspective strategic direction perspective, you would like to go more broadly?

Thanks, Praful. The main thing to keep in mind is the same three criteria exist today that have always existed. Anything we do would need to be consistent with the internal plan we have right now, and as you know, we have a lot of organic growth that is happening because of the modernization of our infrastructure in both transmission and generation.

And then some of the things that we've talked about as it relates to new technologies that we can deploy, whether it is the solar RFPs, et cetera, that I talked about or the advanced metering or what's to come next. So we've got a significant organic growth opportunity in working through the investment plan, the financing plan and the regulatory structure around that to make it beneficial to our customers first and foremost on our mind.

So anything we do would have to be consistent with that objective, so -- or with that strategy. So that's the first screen we go through is, what would help us in that whether it is cash flow balance sheet, other growth opportunities, technological synergies, et cetera.

Secondly, we would want it to be transactable, something that we know we can have a really good chance of getting done, both through counterparty engagement, price that makes sense to us on whatever side of the table we would sit on, and regulatory execution.

And three, it cannot distract us from doing number one. We don't want to have a couple years of not doing the growth, organic growth that we have today while we try to do something that is supposed to help us get that done.

So those three criteria continue and to be the way we look at it. As you know, we evaluate this kind of thing on a regular ongoing basis. If anything comes up, we will obviously let you know. But we still look at it that way. Nothing has changed in regard to that.

Fair enough, thank you. And secondly just on EWC, I saw that you brought on your guidance for the EBITDA for EWC in 2018. Is that more commodity curves or is there something else that's driving it? And secondly, as more clients retire, do you expect the O&M per megawatt hour to go up given there is now less synergy given your smaller fleet and is there any impact of that flowing into the reducing EBITDA guidance for 2018?

Well, I'll take -- I guess I will try answer it and then BIll can cover with any color. So it is primarily energy driven, Praful. There is some capacity elements, actually that's pushing back against that a little bit. Our capacity price expectations are a little higher in 2017 and 2018 in New York. But it's primarily energy-price driven. I don't think there is any big changes in O&M or fueling outage expenses. A little bit, obviously, because of magnitude, but not a whole lot when you're talking about 2018. And then the second question was --

Yes, on the overhead, we have been looking at that very closely so we are implementing a plan to decrease the associated overhead, consistent with the downsizing of EWC. I couldn't tell you at this point in time exactly where that stands in terms of what may -- how that may be split, because we run as a fleet.

But I can assure you that we have been looking at that very closely and setting up a plan where we will reduce those costs over time commensurate with the downsizing of the fleet in the Northeast.

Got you. Thank you and just to clarify, Drew, the underlying gas price that's driving 2018 EBITDA, have you put that out or do you know what that is?

I think it's consistent with whatever the market is, so I don't know, a little bit below $3.

It's a little bit below $3 is correct.

Got you. Thank you, guys.

We use mark-to-market on those EBITDA curves, Praful, as of March 31.

Brian Chin from Merrill Lynch.

Hi, good morning.

Good morning, Brian.

Just to follow-up to your answer to Jon Arnold's question. I think you said that part of the beat for the quarter was based on some conservatism that was built into the numbers from the Entergy Arkansas recent decision. Could you just remind me or say one more time what was that amount? And when did that benefit begin in the first quarter?

Okay, so the effective date of the order was February 24, and bills went in -- I guess bills went into effect on April 1. So we had modeled it so that we would start collecting revenues on April 1, but the accounting, ultimately, allowed us to accrue it during the first quarter. So I think there was a little bit of timing switch there. That was maybe $0.05. And then -- I'm sorry?

That was $0.05 from the order date til the end of the quarter; is that right?

Yes, yes. And then the other big piece was the $0.06 of the regulatory asset that we got from Fukushima and flood barrier pieces. And that is kind of a one-time deal; that's the bulk of it.

Understood and then going back to that $0.05 for Arkansas. Should we assume a similar run rate of conservatism if we pro rata that out, that is embedded in the remaining quarters of 2016?

No, no, I think we were expecting to collect that over the remaining quarters. So I don't think there is going to be any extra sticky -- extra opportunity there from the rate case on an annual basis.

Got you. (multiple speakers) And then -- I'm sorry, go ahead?

I was trying to see if that answered your question. It sounded like it did.

Yes. No, it did. And then I guess in your prepared remarks, you made reference to the Louisiana Commission's next meeting, I guess, on April 28 here. And the thought is they are going to narrow the scope of the docket. Could you just give a little bit more color on what your expectations of how they're going to narrow that scope down?

Brian, it is Theo. I think Leo pretty much summed it up in his opening comments. I think it was clear, based on what came forward as it relates to the docket, that there were questions as to exactly what the Commission's intent was. And as he stated, we have a perspective as to what we believe that entails and that's, where hopefully, that's where we will see it go, when they do hopefully bring it up again, on the 28th.

Okay, thank you very much.

Thank you, Brian.

Julien Dumoulin-Smith from UBS.

Hi, good morning.

Good morning, Julien.

So just wanted to follow a little bit up on some of the last questions here. As you transition your portfolio back towards a more regulated outlook, can you comment a bit on the opportunity eventually buy yourself out of the existing contracts, for instance, Palisades, if that's been an opportunity you've explored or you have conversations around?

You know, you do have the objective we have as was stated in our -- in my remarks around strategy is to reduce the footprint of EWC and we've done that, at RISE, Vermont Yankee, and Pilgrim and FitzPatrick to follow and the plants that aren't supported by the market or that are and no longer fit the portfolio.

As far as the operating plants, I'd just lump Indian Point and Palisades in together. Certainly, concurrently today, they are not in the same situation necessarily as the other plants as far as being cash flow positive, if they are not operating cash flow positive, if they are. Remember when we made those decisions around those facilities, we looked at three different things. One, what's the NPV of the facility, is it negative or positive? Two, what's the near-term cash flow burn rate, positive or negative And three, how does it change the risk profile of the Company?

I think we achieved our objectives s with all of those including the RISE sale around that. We continue to evaluate the other plants in a similar matter, the difference being, obviously, the PPA supports the cost structure at Palisades and the market sports the cost structure at Indian Point. As far as any kind of opportunities that we would have around those facilities outside of the decisions we've already made, I can't really comment and wouldn't comment on that just because once we start down that path, our strategy -- or our policy is to just not to comment on those sorts of things.

But like I said, we're looking at those in the same way, from a NPV, cash flow and risk standpoint, what are our options with those facilities. We will pick the one that we believe creates the best value for our stakeholders and again, is the NPV positive to run versus whatever alternative become, that will be a major driver.

Just cash flow positive or negative, and particularly in the near term, or one of those alternatives to run, or to run the plant. Third, if the -- it doesn't change the risk profile and obviously, our view is that -- make enough footprints, smaller, does improve the risk profile of the Company, and then the last thing we always need to look at is the execution opportunity; is it something similar to what I discussed on the question around M&A. There's a lot of things we could do but we've got to make sure anything we do is executable, both with the counterparty, our own point of view, and through the regulatory process.

Great, thank you. As a follow-up to the -- a prior question here, just wanted to be a little explicit. Are you guys expecting to participate and submit a self-build option into the renewable RFP outstanding in Louisiana?

We can't comment on that, one way or the other, Julien, at this point.

Okay, but maybe perhaps, generically, would you be open to participating in generation opportunities outside of gas?

We are already, as I mentioned, we are building the 1 megawatt plant with battery storage here in New Orleans. We built the three facilities in Mississippi. We're not building the plant in Arkansas but we are having it supported by our contract for the power out of that. So we already participating in that arena.

And we would continue to look at those sorts of things going forward because we think that's a -- again as I said in my prepared remarks, that's a way for us to continue to add resiliency, a way for us to continue to add good service to our customers, higher reliability, a more beneficial environmental footprint as long as we get the cost right because we do value the fact that our pricing is lower than the majority of the rest of the companies in the United States and we want to stay there.

Great. Thank you.

Thank you.

David Paz from Wolfe Research.

Hi, good morning.

Morning, David.

Just a couple of quick ones. Why did your 2017 EWC EBITDA outlook remain unchanged from $510 million? What were the drivers of that?

The big driver is we've seen an uplift in LHV pricing so approximately, a couple dollars of KW a month, so that's probably about a $48 million impact on the positive side, so that offset some of the commodity energy price decrease we've seen.

Okay.

I think that's really the main driver.

That's a big one. Okay. And then just on AMI and grid month. Are those plans already in your -- were those already in your rate base outlook that you gave us, the EAI?

Some of the cost associated with the metering is in there, yes.

But the bulk of it is outside that? Outside of your 2016/2018 plan?

Correct.

Okay, great. And then just on the nuclear spending, how should we -- how can we think about what is ongoing nuke spend will be going forward at the utility segment, at EWC, or just both? How should we think about that?

This is Drew and I will just say, that's going to be a big topic at the Analyst Day here in a few weeks. We will try to give you some framework around that. But we are still getting our hands around our performance improvement plan.

And of course, as you know, Chris, has just been here for a couple of weeks so he is getting his hands around it as well. But I think the important thing for us is that at the same time, we're doing that, we are also looking for opportunities to mitigate that in the business and some of them you've already seen show up.

Things like insurance rebates or lower interest cost because the interest-rate environment. We have some O&M opportunities that we've found, that we've -- in the first quarter, like the fossil, outage management and stuff like that. So there are opportunities that we have identified to begin to offset that. Obviously, we're not done looking for those but at this point, we think we can manage those costs within a framework of the expectations that we have for guidance and outlooks right now.

Okay. All right. And are your full-year 2016 impacts for ANO and Pilgrim still the same? So in other words, I think $50 million for ANO and $30 million for Pilgrim?

They are currently the same. We just got the report, the initial report out, I guess, on ANO and we're looking, as Leo mentioned, for the letter from the NRC. Once we get that, we will have a better idea if there's any incremental risks associated with ANO. And Pilgrim's inspection, we expect to be sometime second half of this year. We will have better information then. So as of now, those costs are staying pat.

Great, thank you.

Thank you.

Shar Pourreza, Guggenheim Partners.

Hi guys, question was answered. Thanks so much.

Paul Patterson from Glenrock Associates.

Hi, how are you doing?

Morning, Paul.

Just everything has pretty much been asked and answered, but just, I'm sorry if I missed this, but you mentioned the generic stuff in Louisiana, and sort of what you think maybe unfolding there. Do you have any picture at this point on what might be happening in Texas with a similar issue? Or is it just too early?

(multiple speakers) About the Encore and the REIT assessments?

Right. I guess of doing a little bit more generically as well, right?

Paul, at this point, we might have to get back with you and follow-up, but I don't -- I'm not sure it's been -- it's moved forward enough for us to get a, I think a perspective as to how it may impact us. I mean, at this -- I don't -- we don't see that having any major impact on us at this point.

But again, we will follow-up with you if, in fact, that is different. But again, it is fairly generic. Until we get more specificity relative to that, it's -- we don't necessarily see it having an impact on us.

Okay, great. And then just in terms of FitzPatrick. There's constant discussions about New York coming up with some sort of plan to rescue the nukes and what have you. And I know that you guys have basically been indicating, at least from what I've read, it's really too far along.

But again, you keep on hearing that they -- you keep on hearing that the governor is hopeful that he is going to be able to keep it open. Is there a point of no return at all in terms of -- have you crossed it already with respect to FitzPatrick or how should we think about that when we can -- we keep on hearing that he wants to do something for the nuclear plants?

For the first thing, I would say, Paul, is that obviously, we -- from an economic standpoint, the closure of FitzPatrick is the right thing to do and we would have loved for there have been a way around that, if economics could have been different. We've, for example, we have been promoting a clean energy standard in New York that would include nuclear plants for several years.

And the reason, obviously, that we would do that is one, it's the right thing to do from a public policy standpoint. It's certainly the right thing to do from an environmental standpoint, from an energy price standpoint, in support of the market's reliability, the whole nine yards. we have been promoting it for a number of years because obviously these things must take their course in the regulatory arena, and then in the legislative -- if it's legislative, it's regulatory or the courts.

And obviously, you can always expect there to be intervention into anything that comes up and these things just take a long time to develop. And so right now, there is no -- nothing in place. We don't know if there was something in place, what it would be. We don't know, if we knew how it was structured, what it would provide.

We don't know if -- what it provided would be enough to support the economics of a plant, and we don't know that the timing of it could ever be done before we had to make the decision to go ahead and re-fuel, which then we're committing to several hundred million dollars of losses. So we're out of time. It's not that we're against any of those proposals in terms of on their face, other than I would say that obviously, we believe if there's a clean energy standard in New York that includes nuclear, it should include all of the nuclear plants.

But -- and we commend them for their efforts because that's the right thing to do and we wouldn't have been proposing it for the last couple of years, but, I mean, you hit the nail on the head on this point of no return aspect. It's not in place. We don't know what it is.

We don't know what it will provide. We don't know what the economics would be and for it to run its course, again, we get to -- we're, unfortunately, we -- likely out of time. So anything that says we are opposed to a clean energy standard and the like, we're not.

We have been full of those all along. Again, we do think they should incorporate all plants in the state. We would -- before it all plants in the country, actually, to be consistent. But right now, there is nothing in place that we could look at that would provide us the opportunity to change our decisions.

Okay, thank you very much.

Thank you.

Thank you. This does conclude the question-and-answer session of today's program I would like to hand the program back to David Borde for any further remarks.

Great. Thank you, and thanks to all for participating this morning. Before we close, we remind you to refer to our release and website for Safe Harbor and Regulation G compliance statements. Our quarterly report on Form 10-Q is due to the SEC by May 10, and provides more details and disclosures about our financial statements.

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