安特吉 (ETR) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Entergy Corporation second-quarter 2016 earnings release and teleconference. At this time all participants are in a listen-only mode. Later there will be a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to David Borde, Vice President Investor Relations. Sir, you may begin.

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 one question and one follow-up.

In 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.

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 in the investor relations section of our website.

Now I will turn the call over to Leo.

Thank you, David, and good morning, everyone. By any measure this was a solid quarter. Strong growth in our core business absent any impact of taxes or weather was coupled with significant accomplishment. We spent the first half of 2016 working to execute on our strategy and the results we are reporting today are a reflection of that work.

We have made progress toward meeting our objective of steady, predictable growth at the utility while reducing our EWC footprint. We delivered solid results through the first half of the year. Our utility parent and other adjusted earnings increased 35% this quarter versus last year and are in line with our growth expectations for our core business.

Most importantly, we continue to set up the business to achieve our longer-term targets. Our extensive 2016 to do list on slide three is a roadmap of the execution of our strategy and it is a good way to illustrate some of what we have accomplished. At the Utility, we have received a favorable ALJ recommendation for the St. Charles Power Station. The result of the Entergy Louisiana request for proposal was announced with the self-build alternative and one long-term power purchase agreement selected.

The self-build alternative was also selected in the Entergy Texas request for proposal. Entergy New Orleans filed for approval for a new gas fired combustion turbine. Entergy Mississippi received a revenue increase under its first formula rate plan filing with of forward-looking features. Entergy Louisiana made its 2015 test year formula rate plan filing. Entergy Arkansas made its first forward test year formula rate plan filing. Entergy Texas received approval on its transmission cost recovery factor rider.

We received a confirmatory action letter from the NRC for ANO and the letter is consistent with our expectation and we saw over 7% industrial growth versus last year.

At EWC, we entered into negotiations for the sale of our FitzPatrick nuclear plant. Finally, we met with many of you at our Analyst Day in June where we highlighted our progress towards effectively shifting our investment profile to a pure play utility.

We are achieving this shift by continuing to invest in the utility for the benefit of our customers while maintaining reasonable rates. One of these investments is the St. Charles Power Station project which received a favorable recommendation from the administrative law judge in July. We expect the certification decision from the LPSC in August. We are encouraged with the ALJ's recommendation that the project serves the public convenience and necessity and is in the public interest.

The ALJ further recommends that Entergy Louisiana's decision to commence construction is prudent and the selection of the project is consistent with the terms of the LPSC's market-based mechanisms order.

We also continue to make progress for our plans for a CCGT in Texas. In April, the RFP process resulted in the selection of the self-build alternative and in the third quarter we will begin the necessary filings for regulatory approval. We are on a similar path in Louisiana where the RFP process also resulted in the selection of the self-build alternative and we expect to make the necessary regulatory filings in the third quarter.

That same RFP resulted in the a selection of a long-term power purchase agreement for an existing CCGT resource and we also plan to seek approval of the PPA from the LPSC.

Entergy New Orleans has filed an application with the New Orleans City Council seeking approval to build a New Orleans Power Station. The natural gas fired combustion turbine plant at the existing Michoud site. This request follows the early June deactivations of our 1960s era Michoud Units 2 and 3. These units are a prime example of the aging infrastructure in our service territory. The decision to deactivate these units was based on economics, maintenance and operational considerations.

The new plant will provide a long-term local resource that can meet the city's particular resource needs at the lowest reasonable cost to customers.

We have requested the City Council approval by January 31, 2017. If approved as requested, the new plant is expected to be placed in service in the second half of 2019. These investments will provide more cost-effective reliable and efficient generating resources for our customers. By building these plants, we will reduce the average age of our fleet and improve the heat rate in key areas of our system.

For example, by 2025 in the WOTAB region, we will have reduced the age of our fleet by approximately 19 years. Also in the Amite South region, we will have reduced the age of our fleet by 18 years. With new units operating at heat rates of less than 7000, the efficiency of our fossil generation portfolio will be improved by roughly 800 BTU per KWH fleetwide by 2025. Additionally the new CCGT units will on average produce 41% fewer carbon dioxide emissions than our legacy gas units.

In addition to addressing our aging infrastructure, we also need to control fuel volatility in our customers' builds. Our nuclear assets are critical to this objective as they provide valuable fuel diversity to our utility fleet. The low volatility of nuclear fuel price effectively acts as a hedge against the high volatility of natural gas prices.

Beyond fuel diversely, our nuclear assets also provide other significant benefits as large scale virtually emissions free resources, these assets minimize our environmental footprint run at high capacity factors and provide stable baseload generation. Nuclear generation also offers a host of economic benefits and contributes to the financial health of the communities in which these assets sit including thousands of good paying jobs, tax benefits to local, state and federal governments and billions of dollars in economic output.

Investing in the long-term sustainability of our existing nuclear assets to preserve these benefits for our core stakeholders is an important part of our utility strategy. We have drafted the framework for our nuclear sustainability plan that will preserve these benefits and that framework is now under external peer review. We are working on firming up the cost estimates and steps for implementation. We are currently on track with our commitments to provide you more specifics at EEI this November.

We also have a path forward at Arkansas Nuclear 1. The NRC issued its confirmatory action letter shortly after our Analyst Day and adopted our proposed comprehensive recovery plan. The letter confirmed that the plan we developed will lead us to sustained performance improvement. We will work diligently to complete the agreed-upon actions listed in the letter to the satisfaction of the NRC. We believe we will be able to demonstrate to the NRC our ability to exit column 4 as early as late 2017.

However, our goal is not to simply exit column 4 but to return to sustained operational excellence and to be considered one of the industry's strongest performers.

We are rounding out our generation portfolio with renewable energy initiatives I talked about last quarter. Entergy New Orleans Solar Generation project with battery storage technology was placed in service in June. Entergy Arkansas Power purchase agreement will support construction of an 81 megawatt solar energy generating facility which is expected to be completed in 2018.

Entergy Mississippi's three new solar installations are online and capable of generating 500 kilowatts each. And we have three renewable requests for proposals outstanding at Entergy Arkansas, Entergy Louisiana and Entergy New Orleans.

In the Arkansas and New Orleans RFPs, bidders will have an opportunity to provide acquisition proposals and the New Orleans proposal also includes a self build option. Proposals are due in August for the Arkansas and Louisiana RFPs and in October for the New Orleans RFP. Final selections will be made in December of 2016, February of 2017 and April of 2017 for Louisiana, Arkansas and New Orleans, respectively.

In addition to our generation supply plan, we are also executing on our transmission investment plan. In Arkansas we placed in service a new 23 mile 230 KV line and completed a new 500 KV substation to serve Big Rivers Field. These two projects represent over $100 million of investment.

In Mississippi, we completed a new distribution substation and kicked off two new projects for another new substation and 115 KV line additions and upgrades. These new projects are expected to be in service in 2017 and total nearly $75 million of investment.

In Texas, we placed three major projects in service between May and July which total roughly $140 million in investment. These are just a few examples of major transmission projects that facilitate improved system reliability, compliance with NRC standards, enhanced economic development or reduced transmission congestion. All of these factors can ultimately contribute to a lower cost of service for our customers.

At Analyst Day we focused on investing in new technology to migrate towards a flexible, reliable, innovative, integrated Entergy network. We are beginning the first phases of this process with advanced meters that change the way we manage our distribution system, reducing operating costs and providing savings for customers.

Since Analyst Day, we finalized our vendor and technology partners and have initiated the design phase of our project. Regulatory filings are expected to begin in September with the first filing to be made before the Louisiana Public Service Commission. Filings in other jurisdictions will follow.

Advanced metering is a foundational technology that supports other technologies to reduce costs and provide customers greater control and options over their energy usage. We have initiated a great engineering study to assess the best path forward incorporating these technologies in an integrated energy network for each of the operating companies. We will provide more information in due course.

These investments in technology infrastructure deliver the same benefits as our more traditional investments in generation and transmission. Namely a more efficient electric system with enhanced electric reliability, a reduced environmental footprint and a reduced cost to serve our customers.

Over the past couple of years we have improved our regulatory constructs to give us the ability to make investments that support economic development, create jobs, improve reliability in our systems and reduce our environmental impact. With many of those constricts now in place, we have moved into a rhythm of filing annual formula rate plans.

Entergy Mississippi received an order approving a revenue increase for its first FRP filing with forward-looking features. The rate adjustments were implemented at the end of June. Entergy Louisiana made its 2015 test year FRP filing at the end of May and last month, Entergy Arkansas made its first FRP filings with a forward test year.

And at Entergy Texas, we have been working on the implementation of the transmission cost recovery factor. We received approval on this rider in late June and recovery of transmissions spend through this rider will relate back to April 14.

I will take a moment now to talk briefly about EWC starting with an update on Pilgrim which is currently preparing for its NRC inspection. Many of the same team members who put two together these comprehensive recovery plan for ANO are working on a plan for Pilgrim. We expect to be ready for the NRC to conduct its inspection this fall with a confirmatory action letter potentially to be issued in the spring.

Finally, in mid-July, we announced that we are in discussions with Exelon on the sale of our FitzPatrick Nuclear plant. The opportunity to change the future of FitzPatrick has significant positive impact on our employees and the surrounding communities. We are willing to consider any viable option to keeping the plant open.

In that spirit, we applaud the New York PFC's decision to adopt the Clean Energy Standard Program. It is a critical component of a potential transaction. We are reviewing the order to confirm it addresses the issues we had hoped but at this point, we are very encouraged.

As negotiations for a sale continue, we continue to proceed along two parallel paths; preparing for the plant's permanent shut down and decommissioning under the current plant while also preparing for a possible refueling and continued operation in the event of a sale. We are hopeful that negotiations can be completed this month.

Regardless of the outcome, our focus continues to be on the safe and reliable operations of the plant for as long as it continues to operate.

We will also do our best to support our employees and the community throughout this transition whether that leads to a sale to a new owner or the safe shut down and decommissioning of a plant.

I would like to thank our hundreds of employees at FitzPatrick who continue to do their best work every day to run the plant safely and reliably amid the uncertainty of the plant's future and the additional for now preparing for two possible paths forward. They continue to show a first-rate level of professionalism, dedication and hard work throughout this time of transition.

What I have said so far you can see that we have accomplished a lot to achieve our objectives and our employees continue to do so by meeting our obligations to the communities we serve. These communities are home to both our customers and our employees, who along with our owners represent our four key stakeholders. Only by serving all four of our stakeholders are we truly successful.

In just the last few weeks, we have received recognition from three different organizations for our civic minded approach to doing business. First, I am proud to say that Entergy Corporation was recently named to the Civic 50, an initiative of Points of Light honoring the 50 most community minded companies in the nation. Being named to the Civic 50 acknowledges the number of ways our employees power life for all of our stakeholders.

Our team members not only provide reliable affordable electric power and gas to customers but also actively support strategic initiatives that support improved educational and employment opportunities to boost economic development and protect the environment.

We have also been awarded the [Propatry] Award from the Employer Support of the Guard and Reserve Louisiana Committee for promoting supportive work environments for members of the National Guard and Reserve.

Finally, our legal department was recently named the recipient of the 2016 Pro Bono Partner Award from the Pro Bono Institute. This national award recognizes innovative team approaches to pro bono work involving in-house legal departments.

In a partnership with the Louisiana Civil Justice Center and the Orleans Parish Civil District Court, our lawyers helped to establish and staff the self-help resource center. We are pleased that with the assistance of our law department, the self-help resource center has to date been able to serve more than 10,000 vulnerable citizens who otherwise would not have access to legal assistance.

Each of these awards shows that we view our Company as part of a broader community and in a recent study conducted by Market Strategies International, Entergy was designated a most trusted brand in 2016 ranking first among electric utilities. Our employees work hard every day to earn the trust of our customers and our broader communities.

I would also like to acknowledge the nearly 3200 workers who helped with our the recent storm restoration efforts. Severe storms, lightning and high winds left 170,000 customers in Arkansas, Louisiana and Mississippi without power. Roughly 800 of our own Entergy employees partnered with 2500 lineman, vegetation workers and support personnel from 15 states. Power was restored to more than 90% of affected customers in less than three days. Times like these are when our people truly shine. These and other actions we take every day are the way that we power life.

In summary, this was a very solid quarter. Our financial results with our adjusted utility parent and other earnings increasing 35% versus last year and our accomplishments towards implementing our investment plan to benefit customers and our continued strategic actions EWC provide a clear path toward our objectives. Our results for the first half of 2016 have demonstrated our ability to continue to execute on our strategy.

So with our objectives and strategy firmly in place, we will continue down this path to pursue steady predictable growth in utility, while reducing the EWC footprint. For the second half of 2016, we look forward to continuing to deliver solid results for each of our core stakeholders.

With that I will turn it over to Drew.

Thank you, Leo. Good morning, everyone. I will start with key takeaways on slide four. Quickly pointing to the top right corner for our core business, Utility, Parent, Other's adjusted earnings for the quarter came in strong, 35% above last year and in line with what we expected. As you may recall, our adjusted view removes special items, weather and tax effects.

Our full-year view of Utility, Parent and Other adjusted earnings remains on target with our original guidance. Looking at the bottom left corner, EWC operational results were essentially flat after normalizing income taxes.

Turning to the details beginning on slide five, the blue bars show our consolidated operational earnings which were $3.11 per share in the current period. This compares to $0.83 a year ago. This quarter's results were higher than last year due to a few factors, the most significant of which was income taxes which increased earnings about $2.00 per share net of customers sharing. Though these tax items are beneficial and we previously discussed their potential, they were not included in our original guidance due to their uncertainty.

In the current period as reported results included special items related to EWC nuclear plant that we have identified to close, these special items include a portion of the proceeds we received during the quarter for DOE litigation as we talked about at Analyst Day in June as well as severance and retention costs and capital spending which were expensed because the plants are impaired.

Operational earnings per share for Utility, Parent and Other increased $0.92 quarter over quarter shown on slide six.

Looking at the orange bars on an adjusted view including the effects of weather and income tax items, Utility, Parent and Other results increased $0.31. This growth reflects rate actions to recover productive investments that benefits the customers and improves returns. Specific drivers include the Union Power Station acquisition and Entergy Arkansas rate case. Also contributing to the earnings increase was nonfuel O&M expense which declined on lower fossil spending and decreased compensation and benefits expense.

Utility, Parent and Other's increase in as reported income included $0.68 for income taxes net of approximately $0.06 for additional customer sharing reflected in that revenue. During the quarter, we resolved tax matters within the 2010, 2011 audit. As a result, we recognize tax items totaling approximately $135 million. Though these tax items come about for other business purposes, they are important to us because they provide real benefits. For example, tax sharing has reduced customer bills more than $300 million over the past 14 years.

Turning to EWC's second-quarter results summarized on slide seven, operational earnings were $1.34 in the current quarter compared to a slight loss a year ago. A $238 million reduction in income tax expense from a tax election accounted for virtually all of EWC's earnings this quarter. Excluding this item, EWC's earnings would have been $0.01, slightly higher than last year. Effects from 2015 impairments and lower nonfuel O&M expense were largely offset by lower prices in volume for EWC's nuclear fleet.

Slide eight shows operating cash flow this quarter of $719 million, slightly lower than the same quarter in 2015.

Our 2016 earnings guidance is summarized on slide nine. As you can see, we are affirming our original guidance for Utility, Parent and Other adjusted EPS of $4.20 to $4.50 with expectations still around the middle of the guidance range.

As we mentioned at Analyst Day, we have improved incremental nuclear spending for this year and expect to mitigate those costs with a number of items across the business. This is reflected in our affirmation of 26 guidance today.

We are also updating our consolidated Entergy operational guidance range of $6.60 to $7.40 with a $7.00 per share midpoint. This update is due largely to the income tax items recorded in the second quarter. Absent those tax items and consistent with our previous discussions, we would expect to be around the bottom of the original guidance range due primarily to unfavorable weather, the extended outage of Indian Point 2 and lower market prices.

To be clear, we do not expect additional significant income taxes for the remainder of this year. I will also note that while industrial sales growth has been strong at 6.7% for the first half of the year, we expect this to taper off in the second half of 2016 particularly from our biggest segment, refiners, as they ran very well in the third and fourth quarters of last year and they are expected to have a number of maintenance outages this fall.

In addition, you may recall that high product inventory levels and a strong dollar contributed to a temporary negative industrial growth in the second quarter of last year. Similar macro factors in supply/demand rebalancing in oil markets may present challenges for US refiners in the fall. As a reminder, fixed demand charges represent about 50% of our industrial revenue and to the extent we see volatility in sales from existing large industrial customers, the revenue impact should be small.

Beyond the fall, we continue to see new and expanding customer growth for the next few years.

Moving to the longer-term view, slide 10 shows our adjusted Utility, Parent and Other outlook for 2017 through 2019 which is unchanged. I will reiterate that our current outlook reflects pension discount rate assumptions from earlier in the year which were 4.75% in 2017, 5% in 2018 and 5.25% in 2019.

As a point of reference, our recent forward test year FRP filing for Entergy Arkansas assumed a 4.25% pension discount rate in 2017. If you looked at the market today, that rate would be closer to 4% or perhaps even lower. Also 2017, 2018 and 2019 do not currently include the effects of the nuclear sustainability plan or expected mitigations in rate treatment. As Leo said, investing in the long-term sustainability of our existing nuclear assets to preserve the benefits of nuclear for our stakeholders is an important part of the Utility strategy.

We are working to identify the cost mitigation but to the extent we are not completely successful by the time we get to 2019, we will have gone through a rate proceeding in each of the affected jurisdictions and we believe that these prudently incurred costs and expected mitigations should be reflected in rates. As such, our long-term earnings plan for 2019 and beyond should not be significantly affected by the nuclear sustainability plan.

As we committed at Analyst Day, we will provide a full update including all of these items at the EEI later this year.

Slide 11 provides EWC's EBITDA outlook assuming market prices as of the end of the quarter. Our current estimates reflect market prices as of June 30 and as you know, prices have come down a bit since then.

Before I close, I would like to highlight two items. Last week Moody's Investor Services changed Entergy Mississippi's rating outlook to positive from stable. Moody's specifically noted EMI's successful implementation of its formula rate plan with forward-looking features. Moody's view the FRP as a significant credit positive since it provides a dependable and clear framework for timely operating cost recovery.

Also during the quarter, we completed several refinancings, issuing $840 million of operating company debt at an average coupon of 3.1%. The majority of the issuances were economic refinancings which replaced about $660 million of debt with an average rate of 6.1% creating annual interest savings of about $20 million pretax. These interest savings will help offset the effect of a potentially lower than planned pension discount rate.

As Leo mentioned, results through the first half of the year have been solid and in line with our growth expectations for our core Utility, Parent and Other business. That said, we know we still have work to do to achieve our longer-term aspirations and we will continue to work toward that end.

Now the Entergy team is available to answer questions.

(Operator Instructions). Shar Pourreza, Guggenheim Partners.

So this may be a little bit semantics but I thought at the Analyst Day you highlighted that expectations for 2016 should sort of be at the midpoint to top end of expectations when you are accounting for the tax benefits especially when you think about today's results and relatively warm July, you still expect to come in at the midpoint. And so is there something that is coming in weaker than you expected since the Analyst Day?

This is Drew. I think at Analyst Day we tried to guide toward the bottom end of our original guidance range absent the taxes and I think if you add the tax back you will find -- or I guess if you take it out of the new guidance range, you will find we are kind of back down at the bottom of our original guidance ranges where we have been talking about for a little bit of time now.

With the taxes I think at Analyst Day, we tried to say that there were a number of things in the hopper that could take us to the top of the range or potentially even over the range which is I think the way we described it but I think outside of those things I think we are still about in the same area that we were describing at Analyst Day.

Okay, got it. Super helpful. And then just lastly on the sustainability plan, it is great that you have it scheduled, you sort of have a framework there and you are on schedule to provide numbers at EEI. But since there is a framework there, is there anything you can provide directionally or are the expectation still within the hundreds of millions of costs that you discussed at the Analyst Day briefly?

This is Leo. We are not really going to give any more detail about that. As I mentioned, we've got a framework, we have really got the outline of the plan really well in hand. Chris and his team have been working past their peer-reviewed check as he had mentioned in his outline at our Analyst Day and we are on track to be able to provide you the numbers as well as what we think the impact is going to be based on our mitigation strategies and regulatory recovery, etc.?

Got it. Thanks. Congrats on the solid results.

Michael Lapides, Goldman Sachs.

Want to dive a little further into the nuclear sustainability program and the only reason why I ask is when we talk to other companies, a lot of other companies and in fact, the Nuclear Energy Institute at its annual briefing spent a lot of time on this as well talking about being able to take cost out of the nuclear business meaning to keep the reliability levels elevated in the 90%, 91% range but to be able to reduce costs. And that seemed to be an industrywide effort.

It seems your disclosure over the last six to nine months is actually in the opposite direction in terms of the cost structure. And can you just talk a little bit about what makes Entergy different than the rest of the -- effectively the US nuclear industry in that regard? Do you view this as a temporary issue, do you view this as a multiyear 3 to 5, 5 to 7 year issue and what got you to this point relative to where it seems like the industry trade group is talking about?

I will just briefly, again, I'm not going to get into the sustainability plan until we are ready to give you the details of it and that will be later in the year at EEI. And we are participating with the industry in all of those analyses of nuclear promise, etc. So all of that will the part of our thinking when we look at the plan but with situations we have had with a couple of units in column 4, our operations haven't been up to our expectations and so we are working to make sure that we put in place a plan that sustains the ability for us as I mentioned in my prepared remarks to once again be considered one of the top performers in the industry.

That is really what we are trying to get to is move from where we are to a top performer but we are also obviously participating with all the industrywide efforts nuclear promise as you mentioned and other things as well.

Got it. Do you view this as more capital intensive or is this more kind of operating cost intensive?

As we said at Analyst Day, it will be some of both. But again, I am going to defer giving any details until we get to November.

Okay, got it. Last thing, can you just -- I want to make sure, Drew, I understand your comments when going through some of the puts and takes on multiyear guidance, pension a headwind, I think that is a headwind for everybody in the industry that doesn't have a pension tracker. The nuclear sustainability program a headwind; the tailwinds offsetting these are obviously your above average expanded demand growth levels and in the move to more formula rate plans and kind of more formulaic revenue increased programs. Anything I am leaving out in those three or four items, kind of puts and takes?

Yes, I think we are aggressively looking for ways to offset some of these costs with other things in the business. I mentioned interest rate is helping offset some of the pension costs. That is a bit of a double-edged sword but we are looking high and low within the business to find other offsets and there is little bits and pieces here and there that are going to help us out.

Insurance is helping us out a little bit this year and we think it will help us some going forward. There are other O&M areas that we are looking at, depreciation has been a bit helpful this year. I think there is just a number of things that are out there that we are trying to turn over every rock right now to make sure we mitigate as much of the expected headwinds as you are describing them as possible.

That is our objective to make sure that we get to a point in the fall where we can update you and try to maintain those same guidance ranges. Then as I mentioned and you were alluding to, we do have rate actions over the next few years planned that we think will get us back to a point where we can be on track for 2019 and beyond.

Got it, thank you, Drew. Much appreciated.

Jonathan Arnold, Deutsche Bank.

Good morning, guys. Just a quick one. Can you remind us what the critical timelines are on the FitzPatrick decision, the shot versus sale? I don't know if there is maybe -- is there a third path now you have the CEC which is stay open and not sell?

Let me just get to the last one. I don't know that there is a stay open and not sell option necessarily but the other two are certainly what we are working for. The last thing we need to do is create a third path and for people who have to start working down. Bill, why don't you go ahead and talk about where we sit?

Sure. So, Jonathan, obviously yesterday's order was a step in the right direction as it related to the CES and putting a value on the ZECs in New York. So between now and the end of the month, we need to be able to successfully negotiate a deal with Exelon. So a commercial arrangement and then there obviously are a number of regulatory approvals that will have to take place in order to have assurances that the transaction will move forward. Largely those are state driven.

In the event that all of those regulatory approvals are met, then we would proceed down the path with Exelon and then the plant would be refueled in January.

If we are unable to reach commercial agreements with Exelon or we are not able to achieve those regulatory approvals, we will begin the regular decommissioning process and stay on the same path that we had previously been on.

But as Leo pointed out, there are no plans to continue to run the plant under Entergy ownership as we have made a commitment to reduce the size of the EWC footprint and that would not be consistent with that strategy.

So January refuel hoping to reach an agreement by the end of August, you need some approvals in the interim. Is there a date somewhere in the middle there by which you really need those approvals? Is it sooner than January?

Yes, Jonathan. That is still something that is in flux right now so we are working through that and I really can't comment on the details.

Thank you for the extra color. Secondly, can I ask on the EWC, you said this was a tax election. Can you give a little more color as to what you have elected, what the cash impact is versus what it has meant for earnings?

Jonathan, it is a restructuring for tax purposes and it builds off of work that we have done over the past 15 years in the tax area and it is going to be part of the 2016 audit cycle. But based on private letter rulings that we received in the past, legal opinions that we have received, audit settlements that we have made, we believe that this is the appropriate way to go about accounting for the restructuring that we have and we will work through that with the IRS over the next few years.

Can you comment on the cash timing?

The cash timing, as you know, we have low cash taxes right now and we would expect to keep those. We have talked about a 10% kind of targeted cash tax rate from here on out -- I say from here on out -- but from here on through our current forecasting period we would expect that to be about the same.

Okay. Thank you.

Stephen Byrd, Morgan Stanley.

Good morning. Wanted to talk about the power demand outlook for residential and commercial. We have been seeing some fairly low numbers there, some negative numbers. In your view, what are some of the drivers, both negative and positive that you are looking at that could cause either a surprise to the upside or the downside? What are the prospects for this changing to be more supportive, more positive? Any big drivers that you see or is it really hard to extrapolate just from a couple of quarters?

Stephen, this is Theo. I think your last comment probably fits. I think it is tough to extrapolate from just the last couple of quarters. I mean clearly as we have talked about on other calls, as other utilities also, we see the effects of energy efficiency both at a state level and through different federal guidelines having impacts. And we see our usage per customer has been in a decline again I think consistent with what we have seen in the industry. We started to see some flattening out relative to that.

And I think also you have the macroeconomic impacts from a demand perspective. I think as we go forward, the macroeconomic impacts clearly would be the first that you would point to in terms of positives as you could change that. If you look through our region and you look at our real estate product forecast, we see that, we saw kind of a downward trend over the past year or so. We see that starting to pick back up and clearly if that does materialize, you could see some positive impact as it relates to that.

But we will continue to see impacts around energy efficiency as we go forward and as we get further through the year especially the third quarter because that is one of our largest quarters from a sales perspective, I think we will have a better perspective and point of view around where we think the longer-term trend will take us.

Okay, understood. Then wanted to shift to Indian Point and just check on the status of the New York PSC investigation into the automatic shut down there. Would it be possible to get an update in terms of where that stands and what the next steps are in that investigation?

Yes, Stephen, this is Bill. That investigation continues, really have nothing new to report. We have fully cooperated with the state but I am not aware of any specific milestones associated with that investigation.

Understood. Thank you very much.

Steve Fleishman, Wolfe Research.

Good morning. Just at a high level, any thought process on how the New York ruling might affect your views on Indian Point? And maybe way out of the box, any thought on chances that something like this could happen in Massachusetts with Pilgrim?

Certainly there is no push for something like this in Massachusetts at the moment. As far as it relates to what is going on with Indian Point, as we understand it, the way the proposal has shifted, it went from excluding Indian Point to potentially including it. It meets certain criteria within the next couple of years so we view that as positive, we don't think that clean air should be discriminatory about where it shows up in the state so certainly that could down the road cut off the bad tails as it might be in terms of pricing related to Indian Point given the criteria that the plant be financially challenged, etc. to qualify for the program. But other than that, it is really too early to say what it might mean for Indian Point and again there is really no push for something similar in Massachusetts that I am aware of.

One other question with this rule. My recollection is that you guys actually challenged a contract with the Dunkirk plant in New York that might already have some similarities to this rule. So I'm curious how you differentiate the legal support for this rule versus that Dunkirk plant?

In general we think it is different because this order 0actually places the value on the attribute associated with Zero Emissions Generation as opposed to more of a contract for differences that was associated with the Dunkirk litigation.

Okay. And then another question just on the kind of -- Leo, you laid out a lot of different programs you are doing. Could you just remind kind of any the things you are talking about that may not already be in your current capital plan supporting the growth through 2019?

Yes, Stephen, there is certainly not everything that we will likely identify associated with the Integrated Entergy Network. There is probably more out there associated with that. I think we referenced toward the backend or beyond the time horizon we have been talking at Analyst Day. We mentioned the $6 billion to $8 billion number at that point in time but that obviously goes out beyond the period we are talking here now.

Also in the world of gas price volatility, etc., where there is nothing in there for anything we might due to hedge that volatility if it were to include investments and the like and the potential for where we come out on some of the renewable RFPs, etc.

So when you get to the backend and certainly beyond it, there is a significant amount of other things that we are investigating that could be part of the capital program in addition to what we need. And again as we have mentioned before, we've got a pretty solid generation and transmission capital program and we are doing that from a position as we have mentioned before of being short generation across the system? And we would continue to anticipate that, that we would be short across the system as we go forward and these capital investments create a significant amount of benefits to our customers as it relates to reduced congestion, lower production costs, lower emissions, you name it, particularly given the age of our fleet these things are really, really beneficial to our customers.

Great. One last quick one. On the pension discount rate, my like recollection from the Analyst Day is that was a 50 basis point move is like a $0.14 a share sensitivity,. Is that still correct or do have that right?

Our rule of thumb is $0.06 for every 25 basis points for Entergy overall. And so it is I guess $0.12 for 50 basis points. Then about three-quarters of that is utility, the other quarter is EWC.

Thank you.

Praful Mehta, Citi.

Thanks. A quick question again on FitzPatrick. In terms of how we should think about the sale price given the price of what the nuclear credit is pretty clear and for eight years, how are you kind of looking at what is the adequate consideration you should be getting from Exelon for the sale? Is it the value of the NPV of those cash flows? Is there something else? Is there another threshold you are looking at in terms of recovery of additional costs? Any kind of benchmarks we should be thinking about there?

As you might guess right now, that is between us and Exelon. I appreciate the question. There is just no way I can comment.

All right. Fair enough. So I guess on the tax impact that you had at EWC, just wanted to understand is there any reason why it is not excluded -- like from a one-time versus an operating earnings basis? Is there something we should be thinking about, is that item, the $1.33 why it is not excluded from one-time operating income perspective?

We pointed out and try to make it very clear where the number is and what the impact is. But taxes are something that we work on every day just like every other line item in the income statement so we consider taxes to be an operational item. Now having said that,0 particularly in the Utility where we are targeting steady predictable growth, we want to make sure it is very clear where the tax are falling out so we provide an adjusted number for you but we do think taxes are a part of operational earnings and we would never call them out as a special item.

And then finally just quickly on Indian Point, in terms of asset life today as we think about valuing Indian Point, is there any different view today you have given what is happening in New York in terms of how you would view the asset life of Indian Point?

Well, we have always viewed that we are on a path towards relicensing of the plant. I think with what we have seen in New York, we had mentioned what the CES does if that goes through as planned is it certainly provides a backstop against lower prices during the course of that program. So it is not really necessarily what the life of it issue is as much as maybe probability of distribution of prices that it would receive.

Fair enough. Thank you, guys.

Julien Dumoulin-Smith, UBS.

Good morning. So perhaps to follow-up on the last series of questions if you will, for Indian Point, is there a potential here to eventually transact? Does this call it backstop against lower prices make it more of a transactable asset or what do you see as the strategic fit of Indian Point given the added visibility or certainty provided potentially here?

From a strategic standpoint, we are still as I mentioned in my remarks and we mentioned at Analyst Day and we have been mentioning for several years now, our view is that the businesses should be separate. And we have been proceeding down that path for the last several years. The only thing that changes from time to time is the methodology we would use.

So for example we look at New England and something like Vermont Yankee for example. Separation came about because prices didn't support the economics of the plant and we were forced into shutting it down. To the extent that something becomes transactable as part of that separation, certainly that is a preferable route as it was with the Rhode Island State Energy Center when we sold that and if we are successful to be able to sell Fitzpatrick.

So what I will tell you is again, it does impact I guess the probability distribution of prices it might receive. We still believe that we are going to get the plant relicensed so that would indicate a long life of the plant.

And then the other aspect that has always been part of transacting which was part of the spin was regulatory approvals that we would require to get something done. All of those are the same, we are incrementally changing the dynamic as we proceed down the licensing path to be successful or if something like this occurs where again it changes the downside price risk.

Got it. Just to be clear about this, the sustenance CapEx that is contemplated or that you are preparing for EEI, does the development in New York change that at all either with respect to FitzPatrick and refueling and/or Indian Point to be clear?

Those will be part of the mix when we look at what we are going to do but again we are going to save more detail until we get there.

Got it. Thank you. Congrats.

Paul Patterson, Glennrock Associates.

Good morning. I just want to sort of follow up a little bit on Jonathan Arnold's question. I wasn't completely clear on what was the driver of the tax benefit at EWC? Was there a revaluation of some sort or a recognition of a liability? Just what is it that triggered this tax benefit?

It ultimately ends up being a step up in basis for some of our nuclear assets and liabilities that are sitting at PWC.

A step up in tax basis?

Yes.

And that is driven by what?

It is driven by the restructuring and the transaction. They get recognized through the transaction. It was recognized through the election. I think from a tax perspective it is deemed to be transferred when you make the election that we are talking about.

Okay, so it is associated with FitzPatrick?

I don't think we have said where it is associated.

Okay. Thanks so much on the rest of my questions have been asked and answered. Thank you.

I would now like to turn the call back over to David Borde for closing remarks.

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 on August 9 and provides more details and disclosures about our financial statements. Please note that the 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.

The call was recorded and can be accessed on our website by dialing 855-859-2056; confirmation ID 85416349 and the telephone replay will be available until August 9 and this concludes our call. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.