安特吉 (ETR) 2006 Q1 法說會逐字稿

Good day, everyone, and welcome to the Entergy Corporation first quarter 2006 earnings conference call. This call is being recorded. At this time for opening remarks and introductions, I will turn the conference over to Michele Lopiccolo of Investor Relations. Please go ahead.

Good morning and thank you for joining us. We will begin this morning with comments from our CEO, Wayne Leonard, and then Leo Denault, our CFO, will review results. After the Q&A session, I will close with the applicable legal statements. Wayne?

Thanks, Michele. Good morning, everybody. Somebody once said that sin is the failure to reach your full potential. Guilt is the unlived life. Under those criteria, given the events of the past year, we could all die happy men and women here at Entergy. The damage inflicted to our system, over 120,000 square miles by the two worst natural catastrophes in our history, was exceeded only by the extraordinary response of our employees. Many of whom were displaced from their homes, lost all their personal and real possessions, and were staring directly in the face at months to years of personal stress and trauma. And they never blinked. They've exceeded everyone's expectation of what is possible while living every hour of the very long, long days on the edge, in battle, living a life that matters.

Today we're conducting our earnings call from our New Orleans office. After eight months, scattered from Texas to Michigan, this week we finally returned home. The recent decision to return to New Orleans was as disciplined as any decision we've ever had to make. We studied some 172 different functional processes from every conceivable perspective, including numerous contingencies and linkages among the processes. Outside the tabletop analysis, we learned a lot over the last few months and the real, although it seems surreal at times, world that we were living. In particular, we learned how we can more effectively conduct business through digital technology and dispersed employees using real-time information. While we have re-opened our Headquarters Office in New Orleans, we have also established primary business offices in other locations to better align functional processes with business needs and to minimize the risk of business interruption in the future.

Now, let me turn to the discussion to the significant progress we have achieved on our 2006 agenda. At the top of the utilities agenda, after completing system redundancy work once the lights came back on, is the recovery of storm costs, and we've checked off all of our activities through the first quarter as planned. Our approach remains unchanged. First of all, we want to collect all the insurance proceeds we're entitled to. Secondly, we want to secure our fair share from federal funding initiatives, like the Gulf Opportunity Zone Legislation and Community Development Block Grant funding that is critical to buying down the rate impact on our customers. Third, we will seek to achieve securitization for reimbursements of storm costs from 2005 and to add a safety net storm reserve in each jurisdiction for future storm damages. Lastly, having pursued storm cost recovery through insurance, federal funds, and securitization bonds we will continue to work with our regulators to implement rate plans to mitigate the uncertainty and the volatility that customers, owners, and lenders all experienced in 2005. Our regulators have been appreciative of the storm restoration success and supportive of not only providing some interim relief through address liquidity issues, but signaling to rate agencies and creditors that they acknowledge The Regulatory Compact to provide in recovery for prudently incurred storm costs. In addition, they have indicated strong support as advocates for more preferred recovery approaches like Community Development Block Grant funding and legislation to allow securitization of the storm costs.

Let's start with priority one, Insurance. We have received an initial payment from our primary insurer. While the amount was small, it indicates the process is moving forward and insurance is forthcoming. We anticipate it will take into 2007 to receive all insurance proceeds, currently estimated at $382 million. Our second initiative, Federal Funding, we have already received a $344 million income tax refund during the quarter as a direct result of the Gulf Opportunity Zone Legislation passed at the end of last year. This legislation accelerated the timing of tax deductions and the related tax refunds that we were already entitled to. And I've been spending a lot of my time, meeting with government officials at all levels and utility commissioners trying to make clear the size of the damage doesn't change the basic principles of law and the simple fact that these are recoverable costs under The Regulatory Compact. Or, in landmark supreme court cases, like Bluefield Water Works vs West Virginia Public Service or FPC vs Hope Natural Gas, both of which I'm sure you've heard many times before. I've also been trying to build a consensus that Community Development Block Grant funding is particularly critical to establish a rate plan for Entergy New Orleans and achieve agreement that the next few months are absolutely critical to achieve closure on this issue.

On the securitization front, efforts are providing results. Securitization legislation was signed by Mississippi Governor, Haley Barbour in March. Not only does the legislation allow for securitization of system restoration costs for Katrina and reserve for future storms, it does so through General Obligation Bonds of the state. In Louisiana, securitization legislation is also moving forward, having received all but one vote in favor of this legislation in the House. In Texas, on April 17th, Governor Perry called the legislature into a 30-day special session to address school finance issues. We've been working for several weeks with various parties to draft the securitization legislation and to obtain support for passage. We expect that this legislation could be taken up during this session if school finance issues are resolved and the governor opens the call for other issues.

Turning to our rate and regulatory initiatives in Louisiana, the Commission approved interim storm recovery for Entergy Louisiana and for Entergy Gulf States through two mechanisms until final recovery is achieved through our Phase II filing. Initially, $20 million can be recovered through the fuel adjustment costs from March through September and then just under $3 million monthly can be recovered through the Formula Rate Plan to the extent that our 2005 test year formula rate plan filing to be made in May indicates we are not earning over the top of the band. On the surface this is less than we requested. The difference was primarily due to the fact that the LPSC factored in an assumption for insurance recovery. No disallowances were ordered. We expect to make our Phase II filing in Louisiana around the end of the second quarter or in the third quarter. In Mississippi, we are encouraged by Governor Barbour's stated intent to use Community Development Block Grant funding to mitigate rate increases for the benefit of Mississippi rate payers. The Commissioner is scheduled to issue a Final Order on June 23rd on the reasonableness and prudence of our storm costs. At which time, Entergy Mississippi will forward the final commission order to the Governor to obtain Community Development Block Grant funds as he has promised. In Texas, we continue to provide updates in the Public Utility Commission Storm Project and we expect to make a Final Accounting Filing on June 1st. The outcome of the securitization legislation in a special session will guide our next action to seek recovery of our storm costs in Texas. In New Orleans, load has been -- has remained fairly stable in the city at around 60% and in April the bankruptcy judge extended our exclusivity period for filing a plan of reorganization by four months to August 21st.

Turning to other utility initiatives, in Texas, a unanimous settlement was filed allowing for rider recovery of 14.5 million annually for 15 years for transition and competition costs. We expect the PUCT to consider the formal settlement in May. Combined with the capacity rider approved by the PUCT in December, these two legislative riders are equivalent to roughly two-thirds of the rate request that was filed in 2004, but was denied pending legislative action on the rate freeze issue. Implementation of these two riders will obviously contribute to improved returns and clearly help close the gap between our 8.2% ROE earned in Texas in 2005 and our allowed return, which is just under 11%. And through another project initiated by the PUCT, we're evaluating qualified power regional alternatives. In order to authorize customer choice, the PUCT must first certify a qualified power region. Our goal is to reach consensus with enough market participants to make substantially uncontested retail open-access filings by the end of this year as called for by the Texas legislation. In Louisiana, initial testimony was filed last week, outlining plans for jurisdictional separation at Entergy Gulf States. Assuming all parties can reach agreement, potential implementation of the jurisdictional separation could occur in mid 2007.

On a less positive note -- actually considerably less positive -- in Arkansas, the Commission suspended the Annual Fuel Rate Increase scheduled to take effect in the first billing cycle in April, pending further investigation. And a week later, issued a Show Cause Order on perspective elimination of our fuel costs -- fuel recovery mechanism and requiring a Current Cost of Service Study by June 8, 2006. Entergy Arkansas filed for a rehearing of the Commission's order requesting that the fuel rate increase be implemented in May, subject to refund, and that the Commission rescind its Show Cause Order. We are confident that our fuel and purchase energy expenditures will be found appropriate. This is a case where there's good law and there's good facts. For example, the Arkansas Commission staff reviewed in detail Entergy Arkansas's 2005 Actions and Decisions, and found no imprudent action and the staff has filed testimony supporting Entergy Arkansas's request to implement the fuel rate increase subject to refund.

Moving on to another key initiative at the utility, we issued our draft -- our final RFP for 2000 MW of long-term supply resources on April 17th. Through this process we will evaluate a self-build, solid fuel option, a Little Gypsy Unit relocated near LaPlace, Louisiana, compared to other third-party proposals obtained through the RFP process. We're considering adding two coal and ore coke fueled circulating through fluidized bed boilers to provided about 500 MW on the Little Gypsy self-build option. This project represents the opportunity to diversify our fuel mix and leverage an inexpensive fuel source, pet coke, particularly since Little Gypsy is located in the area that some would refer to as the Saudi Arabia for pet coke supply. The Little Gypsy site is located in the Amite South region, a load pocket in our system, and therefore, a very attractive location for additional generation. We're targeting an end-of-the-year selection and as in the past, we will seek formal regulatory orders to assure risk and returns are appropriately defined prior to transacting.

Turning to the federal front, our key initiatives are moving into new phases. In April, we made our Compliance Filing outlined in our plans to implement FERC's ruling in the Systems Agreement case. Under the Compliance Filing, any payments will be recorded as purchase power expense and will be payable over a 12-month period, commencing no sooner than June 1, 2007. Payments will be based on actual production costs for the previous year ended December 31st. In another positive development, FERC conditionally approved our Independent Coordinator of Transmission proposal and extended the initial term of the ICT from two to four years, finding that substantial benefits can be brought to market participants and to Entergy's native-load customers. FERC indicated that Entergy's ICT proposal is intended to improve transparency of transition information, enhance transmission access, and relieve transmission congestion. Further, with limited modifications FERC concluded that the ICT proposal is consistent with and/or superior to the open-access transmission tariff. Obviously, we're pleased with that outcome. We will review the order of modifications with our retail regulators to ensure their continued support and over the next two months we will submit a Compliance Filing and an executed ICT contract to FERC. We expect that the ICT operations could commence within 30 days of the final approvals.

Turning to Nuclear, the northeast fleet delivered another quarter of solid operational performance. The northeast fleet achieved the capacity factor of 97% and production costs and nonfuel O&M expense per megawatt hour were consistent with expectations in the 19 to $20 per MWh range. We also saw improvement in the average realized price for sales with an increase of 7% as a result of recontracting efforts and the decision to take measured market risks by leaving a larger portion of our portfolio open to capture the historical risk premium in the spot versus the forward market. And after more than 29 months and the most extensive engineering due of any uprate, including a unanimous approval recommendation from the Advisory Committee on Reactor Safeguards, the NRC issued the license amendment for up to 120% of Vermont Yankee's pre-uprate power. The power extension began in early March and currently stands at 17.5% as we evaluate performance data and begin taking the final steps to achieve the full uprate. We're also moving to the next stage for our northeast fleet, the license extension application process. In March, the NRC informed us that our license renewal applications for Vermont Yankee and Pilgrim were acceptable, complete, and would be docketed with an opportunity for hearing. The schedule calls for a 22-month review and approval process if no hearing is requested and a 30-month review if a hearing is requested. And finally, we closed on the sale of our competitive retail business in ERCOT to a more natural owner, Direct Energy.

I started by saying that due to the extraordinary efforts and successful response to the massive storm damage, we could die happy knowing we fought the good fight in a just cause and emerged victorious. That's true. Except for one big thing. Last year was miserable in terms of our financial success. Granted it's a hard life when your customers take off to other states and they don't come back for months and you have to front the payment of $1.5 billion in total storm damage costs while you wait for the recovery process to play out. But despite the storm restoration success there is no joy here in what could happily have been called "mudville" just a few months ago. Last year was the strikeout financially and time will not change that. It's history now. We failed to meet our standards for delivering value to our owners and it feels just like the numbers Leo will show you in a moment; miserable. We are on a mission to return to where we would have been if the storms had never hit and to deliver top-quartile shareholder returns as we have been accustomed to doing. The line of sight is still not as clear as we would like, but we know your expectations and I assure you ours are higher. And now I will turn the call over to Leo.

Thank you, Wayne. And good morning. In my remarks this morning I will cover quarterly results and review our current liquidity position. I will then close with an assessment of our first quarter performance in the context of our full year earnings guidance and thoughts on what we see ahead.

Turning to our financial results, for the quarter Slide 2 shows the first quarter '06 As-Reported and Operational results, were higher compared to one year ago. Operational results increased 13% with the higher results coming from both Utility, Parent and Other and Entergy Nuclear. In addition, accretion associated with our Stock Repurchase Program contributed to results again this quarter. Slide 3 shows Utility, Parent and Other earnings rose compared to the first quarter of last year. Several factors compared to produce the higher results in this business, including higher revenues from constructive rate actions, including the addition of Perryville and Attala plants, increased margins on wholesale sales, and accretion from the share repurchase program. During first quarter this year, Utility, Parent and Other did incur higher O&M expenses. Some of these higher costs were expected and are being recovered in rates, including increased storm reserves and costs associated with the Perryville and Attala plants. Higher nuclear expenses also increased O&M at the utility. These increases, along with higher interest expense in connection with storm cost financings and the impact of milder-than-normal weather, partially offset the factors that led to higher results at the utility. In looking more closely at utility sales, we saw solid increases in the residential and commercial sectors on a weather-adjusted basis. The increased sales this quarter resulted from the return to a pattern of more typical growth in those service areas without serious storm damage.

In the industrial sector, we experienced a decrease of 4% this quarter, compared to last year. We still have two large refineries, customers of Entergy Louisiana, who have not yet returned to full service. We expect one of the refineries currently offline to return to full service shortly with the other likely coming back by the end of the second quarter. On our last quarter's earnings call, we noted that a chemical plant in the Entergy Gulf States/Louisiana territory suffered severe damage and would not re-open. An update to that situation is good news, in that this customer now plans to re-open at about 50% capacity. Entergy Nuclear's operational earnings per share reflected higher results, compared to the same period last year. The increase is due primarily to higher generation, due to fewer outage days this quarter and power uprates. Also, higher contract pricing led to improved results in this business. Partially offsetting these factors was higher O&M due primarily to the effects of refueling outage timing. In first quarter last year, we had 20 days of refueling outage at Indian Point 3. During outages, planned expenses are deferred and amortized over the ensuing run cycle of 18 to 24 months. This had the effect of lowering O&M in the first quarter of 2005, relative to the current period when there were no refuelings. Closing out the discussion of quarterly results, we look at the Non-Nuclear Wholesale Assets businesses. Results in the first quarter of '06 were lower than a year ago when this business realized the benefits from the sale of SO2 allowances. There were no sales of SO2 allowances in the current period, which led to lower results compared to a year ago.

As reflected on Slide 4, net cash flow from operating activities was up significantly compared to the first quarter of 2005. One factor for the higher cash flow was the receipt of a $344 million tax refund. It is important to understand that while positive, this is essentially a tax-timing difference. A refund of this magnitude was made possible because we incurred tax losses in excess of $1 billion associated with hurricane Katrina damage. I should also mention that we will realize additional tax deductions going forward in connection with casualty and property losses, as well as bonus depreciation associated with hurricane Rita, but we'll not be seeing a large tax refund similar to this year, these deductions will reduce our overall tax expense in the future. Other factors contributing to higher cash flow this quarter were collections at deferred fuel balances at the utility and higher revenues at Entergy Nuclear. The current quarter's improvement in net cash flow from operating activities follows two of the weakest OCF quarters for the utility in recent history. With restoration activities essentially complete, we ended first quarter 2006 with more than $750 million of cash on hand and our gross liquidity stood at $3.5 billion. This untapped borrowing capacity ensures we are able to fund future unforeseen events. That said, it is important to note that since last August, we spent $1.3 billion in storm costs, yet we've recovered less than $30 million. This is evident in our net debt ratio, which has increased to 50%.

Slide 5 demonstrates the important distinction to be made between funding and recovery of storm costs. Funding relates specifically to obtaining the cash needed to pay our storm costs when they are incurred. Recovery is our actual collection of revenue in future periods to offset storm costs. For example, our $2.5 billion financing program and the tax timing benefits we received this quarter are temporary funding sources, but we still require recovery from some combination of insurance, federal assistance, securitization, and customers. Wayne offered updates on each of these efforts, so I won't reiterate the details. I will, however, emphasize that securitization is a highly efficient financing mechanism for both customers and the Company. As such, we will continue to focus on getting securitization in place, while we also pursue the other recovery initiatives shown on this slide.

Moving now to earnings guidance, Slide 6 is the same slide I shared with you last quarter. It has not changed because the components of our as-reported and operational expectations for the current year have not changed. We continue to see '06 as-reported earnings in the range of $4.78 to $5.08 per share with operational earnings in the range of $4.50 to $4.80 per share. Both ranges exclude results from Entergy New Orleans. It should be no surprise to you that we continually assess our performance across a range of factors, including our earnings projections. I will take a few minutes now to share with you our view on performance to date compared to our guidance assumptions. In establishing '06 guidance, we anticipated that nonstorm-related rate actions at the utility would contribute to earnings this year. We also projected that the continuation of storm-related outages at Entergy Louisiana would serve to offset a portion of that contribution. We can now see evidence of these assumptions beginning to materialize in the first quarter. At the utility, we expected to see higher operating and maintenance expenses for reasons ranging from inflation to additional plants being added to the utility. While somewhat moderated in first quarter, higher O&M for the year continues to be likely, and finally, we knew higher interest expense would impact results. The financing cost associated with storm restoration was clearly defined in this projection held true in the first quarter. Looking ahead, we expect to see some ongoing effect of higher financing costs, at least in the near-term.

As we reflect on the utilities performance in the first quarter, we know that not everything went in our favor. For example, one obvious factor that differed from our expectation was weather, from a guidance perspective we assumed normal weather, but for the first quarter reported a hurt to earnings of $0.06 per share due to milder-than-normal weather. In nuclear, we expected higher contract and market energy pricing and higher generation from uprates, as well as fewer outages would boost results. Each of those factors indeed added to the results in the first quarter. However, spot electricity prices and prices for the remainder of '06 in the Northeast are lower than the $83 of MWh we assumed in guidance. In spite of this, we know that prices are volatile and are any number of factors that can move prices up or down over the next three quarters. Also at nuclear, we expected to see higher operating and maintenance expenses and that was the case in the first three months of this year. As we assess our overall performance to date, we continue to believe our current earnings guidance range for both as-reported and operational earnings are appropriate. We had some factors work for us this quarter, like utility sales growth in the residential and commercial sectors. We also had some who will go against us, like weather and market prices. With three quarters to go, we know there is potential for a number of variables to materialize. As we look beyond first quarter, we remain committed to achieve positive outcomes for those variables which we control.

It is important to acknowledge that our recent financial performance in terms of shareholder returns does not meet the standards we have established for our Company. Slide 7, the chart many of you will recognize as one we've used often in presentations, reflects our shareholder return performance over the past 15 months. The decline in our performance is evident and we could offhandedly defend it as being attributable to events beyond our control. However, we know it is our responsibility to manage through even the most difficult of times. Beyond improving the views shown on Slide 7, we will not lose sight of our long-term aspirations as shown on the bottom of Slide 8. Our first quarter results have gotten us off to a solid start on our earnings growth aspirations. However, the remainder of our aspirations are tied closely to our success in the storm recovery process. Specifically, our return metrics are shaping up well, but storm financing has pushed up our debt ratio and related to this, our credit quality has come under additional scrutiny. Dividend growth, stymied by the financial impact of the hurricane cannot be seriously reconsidered until we have a line of sight on the cost recovery process. This year finds us off to a good start with much more work to be done.

In summary, we've been faced with some of the most challenging financial periods in our Company's history. In a period of eight months, we have funded approximately $1.3 billion of storm costs, financed $300 million of fuel costs, executed a $2.5 billion financing plan, managed to cash resourcing effort for one of our subsidiaries spurred by a liquidity crisis in a Chapter 11 proceeding, and navigated the challenges to our credit quality coming from intense scrutiny over storm costs recovery process. This difficult period has not come -- has not gone by without financial consequences to our Company. The charts shown on Slide 7 tells the story and it can be quantified. The decline in Entergy's market value since August 2005 is nearly $2 billion, but we have a clear view of the path to recapture this value and we think this path -- we think of this path in three interrelated phases. We have stabilized our financial situation, which was our first phase and are now well into Phase II, the recovery phase. This phase is included and will continue to include a collaborative effort with key governmental and regulatory parties. While we have achieved some level of success in the recovery phase, more work remains. Finally, we have never lost sight of the importance of growing our business and growth is our third phase. Additional progress in recovery will allow us to devote our energies to executing our supply plan initiatives, including the potential for a self-build option. At nuclear, we will take measured market risk to capture upside while aggressively managing costs and pursuing new acquisitions and contracting opportunities. And we will be positioned to execute other capital deployment opportunities, including valuating the dividend and additional share repurchases. We now turn to our Q&A session and our senior team is available to respond to your questions.

[OPERATOR INSTRUCTIONS]. The first question will come from Dan Eggers with Credit Suisse.

Hi, good morning.

Good morning.

First question, you guys have done a very good job as far as managing the balance sheet to avoid the contingency event. With some nuclear assets apparently in the market for sale, how do you guys think about approaching those acquisitions? Are you going to look and be involved? Or do you wait until more of the storm cost recovery is squared away before you start reallocating bigger chunks of capital?

Dan, this is Wayne. Like we've said before on nuclear assets, we're always interested. I think, like you said, we've done a good job of providing for various events and contingencies in the past and in the financing we put in place last year. Anytime we look at share buyback, dividend increases, we always leave ourselves some headroom for the potential that nuclear asset, in particular, would become available in the marketplace. So, to the extent that those come up, we feel like maybe we're not as well-positioned as we might have been a year ago or might be six months from now or whatever. But by the time a plant would close we expect to be better positioned maybe than we've ever been financially. So we will be interested.

Great. Next question, I know you guys talked about it a little bit, but just on the CDBG federal block allocations, particularly in Louisiana, can you give an update? I know that there was a 60-day window there, all applications were supposed to be in mid April. It sounds like that's been delayed. But if you can give a little color on what's going on in Louisiana and how dependent money coming your way will be on additional capital coming out of the budget reconciliation?

Okay, we will let Curt Hebert address that issue, Dan.

Dan, Curt. Good to talk to you. Let me just tell you, this is still a little bit up in the air exactly when the dates will fall. But what we're looking for and what we're hearing is that you're going to see something in the third quarter as to the application being handed up to HUD. Obviously, that would set something up for the fourth quarter that could be very positive for the rate payers and shareholders of the Company. Having said that, there is also a supplemental package, which we're looking at coming from Congress in the neighborhood of 5.2 billion, of which they're saying 4.2 billion would go to Louisiana. There has been allocation already talked about with the initial Louisiana plan. If you remember right they set aside 1.24 billion for infrastructure. The utility dollars are not clear as to whether or not they're included in that at this point, but we are looking for that 4.2 to really add to what can be done through Louisiana.

Got it, thank you. Just last question, now that you guys are finally making your way home from a corporate perspective, I believe at one point in time you had said the headquarter needs to be in a place where you do business. What should we read into the move back to New Orleans at this point?

I don't think there's a lot to read into that, other than our confidence that the city of New Orleans is going to recover. Despite everything you see on television and all of the challenges that New Orleans faced, it is making progress every single day and there clearly is sediment, not just in New Orleans, but all around the country, that this city needs to recover. There are issues from the past that need to be addressed. We are in an election period with both candidates for mayor committed to addressing those issues, re-establishing the private schools -- or the public schools as learning centers, providing more green space, mass transportation, all the issues that have held the city back. And I think the one thing you should read into our location here is the simple fact that we believe in the recovery of the city and that it is taking place.

Great. Thank you.

Thank you. Moving on to Steve Fleishman with Merrill Lynch.

Can you hear me?

Yes.

Hi, Wayne. Could you elaborate a little more of what's going on in Arkansas with respect to kind of the -- I think there's a decision to actually also have you file a base rate case and give any data on what the recent returns on equity have been in Arkansas?

Yes, Steve, I will let Rick Smith go through that. He has a pile of paper about a foot high in front of him, so --.

I will take the abbreviated version.

He's been on the hot seat ever since they filed that, so he looks prepared.

Good morning, Steve.

Hi.

Well, I mean, we were surprised and disappointed with the Commission's action as it related to the Annual ECR. But we do recognize it was a substantial increase in our fuel rates and they have a desire, a need, to really review our costs. But our feeling was that we disagree with the action they took by suspending the ECR increase and that they should have put that into effect and review the costs going forward. In fact, Arkansas law provides that utilities can recover prudently incurred fuel and purchased power costs. And, in fact, the APSC's staff found no evidence of imprudent action on the part of EAI and agrees with us that those rates should be in effect.

So we have made a series of filings asking for a rehearing on their two orders. And the second is a "Show Cause" order that we're working on today to comply with and we will make all the necessary studies and testimony by June 8th, called for in that Show Cause order. And we're very confident we're going to be able to demonstrate that our actions were not only prudent, but are also in the best interest of the customers of Arkansas. Because these increases clearly were a function of some unprecedented gas price increases due to the hurricanes in the Gulf last summer and, of course, Majeure Declaration coming out of -- to coal suppliers to the EAI coal plants in Arkansas.

So, like I said, we're highly confident that we will be able to show in it, June 8th proceeding that it was not only prudent, but in the customer interest. That would be separate and distinct from what we're looking at because we would have expected the ECR to have been put in effect. That's separate and distinct from what we're looking at as it relates to a rate request in Arkansas. And we're working on those numbers and that filing right now and expect to make that filing in the third quarter of 2006.

Okay, but what -- the ROE, either -- that you earned in either '05 or trailing or forecasted --.

Well, we --.

You're not going to tell us what?

Well, we don't give out those numbers. I mean I think you can look in the 10-K and do your own calculation, but there is definitely a need for a rate increase in Arkansas.

Okay. And I guess a general question, on the whole -- moving from storm recovery back to kind of shareholder-friendly actions phase of the Company, and this I guess is addressed to Wayne. I mean what are really the trigger points for that transition? Because you're making some progress, not full progress, but it seems like you're financially healthy status quo and even more so as storm recovery flows through. So, I guess, what is really the trigger to kind of go back to where you were before?

Well, the two big things that are going to drive that, certainly is the Northeast power prices that we're getting out of nuclear is certainly a boost that we hadn't counted on originally. And then I think securitization of the storm costs is really critical to making that big leap. If you don't get securitization then you're facing a much longer period of time of recovery. What we have is some press, I think in Louisiana, where at one time they established the storm reserves. They took the debit balance over five years and then they established the average of the last 10 years, as far as your storm reserve and added them together. And that would be a long haul to recover the money were down right now.

So, the securitization piece, I think getting that in place is absolutely critical to getting us back to where we need to be as a company and where we should be as a company given the extraordinary effort that was put forth and the fact that you can have it -- we're nearing hurricane season again. I don't think -- I think the states all recognize they don't need -- they need to put these issues behind them before the next season comes up. And so we're really looking towards securitization as far as I think an event that puts this really behind us and then with the Northeast power prices being kind of a boost to get us back to any ground that we might have lost in this interim while we wait for securitization. I don't know if Leo has anything particularly to add to that, but I think the Board -- that's going to be a big issue for the Board.

So just kind of legislative approvals of doing securitization?

Yes, I think once you get that done -- I mean my sense in talking to anybody who will listen is everybody understands securitization makes a whole lot of sense. LPSC directed us to go out and do that. Mississippi has moved kind of a step beyond Florida, in terms of General Obligation Bonds. There's a very -- and I think even the consumer advocates, the strong industrial customers that we've had differences of opinion with in Louisiana over the years, my sense is that they understand that securitization will -- like Leo said, it's a sufficient way to provide for this and it's far and away the best alternative. The Florida yield has certainly proven that.

Okay, thank you.

Thanks, Steve.

Moving on to Ashar Khan with SAC Capital.

Good morning. Congrats.

Good morning.

Leo, could you just go back to a comment you made that the prices have come down versus what was anticipated, the $83 MWh in the forecast? Could you just tell us what the curve you're seeing right now is for I guess the weighted average for your region similar to the 83 that you had in the January 2006 number?

It's down into probably balance of the year around the 70 to $73 range and it's -- as we've said before, the more open position we have the more volatile that's going to be going forward. We have the ability to leave as much as 15% open and we did hedge out 91% of the portfolio going into 2006. But prices have come off on the front end down to that balance of the year is probably around 70, $73. They haven't come down as much in the back end.

Okay.

And more stable out in the years beyond 2006.

Okay. And then could you just mention, what timeframe can the plant at -- you've mentioned, I guess, out of the operate -- I forget the percentage, you were at 17 or something, you mentioned. At what timeframe can you be at 100% of your operate? What's the program on that? How soon can it go to the 100% upgrade level?

Ashar, I will let Mike Kansler, who is sitting in for Gary Taylor today, Mike runs our Northeastern fleet operations and he does it, as you all know, he does an extraordinary job up there. And so he's sitting here today. So I will give him a chance to address that.

Good -- thank you, Wayne. Good morning, Ashar. We actually are doing some analysis on some instrumentation readings that we got when we got up to 117, 118%. And we expect that analysis to take us about a week to get through and redo some curve limits that we have to stick to. And then we expect to bump up the last couple of percent towards the end of next week. So right now the data that we're seeing is not going to hold us back.

Okay. Thank you very much.

Thanks, Ashar.

Thank you. Moving on to Michael Lapides with Goldman Sachs.

Hey, guys. A quick question on the non-regulated nuclear and then one question on the regulated businesses. At Entergy Nuclear, for the new contracts that were signed this quarter for the 2008/2009 timeframe, at roughly what price on a dollar per MWh were those signed?

Leo?

Michael, those are in the high 70s range.

For 2008/2009?

Yes. Those are some of the strongest prices we've seen yet. But that's -- or the market, I guess I should say, is pretty strong out there. So that's -- those are in the high 70s.

Okay. And on the regulated side, thinking about rate-based growth long-term, you've got the RFP at ELI, I think it's the -- what is it, the 5 or 600 MW of base loaded Little Gypsy. Is there any other plans for new base load generation for the regulated subs?

Rick?

That would be the first base load plant that we would be looking at. But we're doing an RFP that looks up -- looks into up to 2000 MW of capacity. A portion of that, again, would be related to load following assets similar to Perryville and Attala. So I would expect something to come out of the RFP that is similar to what we saw with Perryville and Attala that might be attractive to add to the portfolio, which --. So that will take place over the next month or two, where we get those bids in, in towards the end of the year where we will be ready to look at maybe contracting on one of them. So there is some additional opportunities around some planned assets coming out of the RFP.

That's great. Thank you, guys. Welcome back to New Orleans.

Thanks, Michael.

Thank you. Moving on to Greg Gordon with Citigroup.

Thanks. Wayne, Leo, I know the timing for you guys to start repatriating cash back to shareholders is not too a large degree under your control. So, if we just look out to year-end 2007 and assume that at some point between now and then we will get a clear enough view on storm cost recovery to go to the Board with a strategy, what is your target, debt-to-cap ratio, EBITDA to interest coverage and/or dividend payout ratio?

Okay, I will let Leo hit that one?

All right, thanks, Wayne. Thanks, Greg. Right now I guess you can say that we're still operating under the metrics that we've done -- that we've had over time to keep our debt ratio around 50%, having the payout ratio capped at 60% and top-quartile dividend growth. And also going back and forth between making that analysis that we always do between investments, share repurchases, and dividend increases.

Over time, we know that those are continually -- those metrics, are continually re-evaluated. We just haven't changed them. As you know, prior to the storms we were in a position to have done a significant amount of repurchases over the last several years and, as well as having two step-wise increases in the dividend. We hadn't actually gotten very close to those caps or those metrics. And over time we know that prior to the storms and prior to storm -- the outflow, because of the storms, we were getting into a position to continue down that path.

We will likely have to look at all of those again when we start to develop that strategy going forward when we get a clear line of sight of what's going on with storm recovery. We will go back to the Board and we will talk to them about the dividend payout ratio cap, what kind of growth rate we should see, what kind of catch up may or may not need to be done both there and on the repurchase program. So, we're still operating under those same metrics that we've talked to you about in the past, but as we go forward we will probably revisit those and maybe they will stay the same and maybe they won't.

Wayne, just to clarify that, when you made your presentation at the EI Conference last year, you indicated that you wouldn't be satisfied with just getting back on track in terms of getting on a trajectory towards reaching those goals, that you would want to true investors up for -- so that on a backward-looking basis you would still be at -- be able to show that you had had over time top-quartile dividend growth and that you had efficiently redeployed cash back to them. Is that a fair regurgitation of your position?

Yes. That's absolutely the goal. Like Leo said, we've already started the process. Certainly we just finished the Board retreat where Leo went through numerous scenarios of how to get back to that level. What it's going to take to get back to that level. How we could do it and still maintain the risk profile that the Board is comfortable with. And so all those initiatives have been assigned to people and they're working on them.

Thank you, gentlemen.

Thanks, Greg.

Thank you. Moving on to Shalini Mahajan with UBS.

Good morning.

Good morning.

Could you talk about the ongoing legislative session at Vermont, and some Senate and House bills that are proposing legislative approval for license extension at the Vermont Yankee Nuclear plant?

Sure can.

Yes, Mike?

Yes, I can speak to that; Mike Kansler. We just had the House up there, just basically took a Senate bill that was passed last year, which actually requires the legislature to approve both relicensing and dry fuel storage for Vermont Yankee beyond 2012 when the current license expires, and they modified that bill to say that the legislature only needs to approve license renewal. You don't have to come to the legislature twice for license renewal and dry fuel, you just need to come once and both will get done. That needs to be done before the plant can go to the Public Service Board and seek a certificate of Public Good for both of those items beyond 2012.

So, there was already legislation up there that said the legislature had their hands in relicensing and dry fuel beyond 2012. They've now simplified the process in a current bill that sits in the House and we're awaiting to see what happens in the Senate. So, we're basically working through the legislature, but as far as our continued operation through 2012 we have our CPG for dry fuel storage now at Vermont Yankee, and we will seek license renewal and continued dry fuel storage beyond 2012 as we approach the 2012 timeframe.

Okay. And then as I look at your contract coverage for 2007, you're 81% contracted. Is that the level that you're comfortable with or could you look at bringing in some more hedges there?

Leo?

The -- that's what we're comfortable there now. That actually is in a position that is more hedged than the flexibility than the limits would allow us. As we approach the end of the year we would work ourselves to be at a maximum of probably 15% open. So as we get closer to the end of the year our tray -- our hedge limits would force us to get a little bit more hedged than that and we may choose to go farther than that if the point of view around the market pricing and the opportunities that we have present themselves.

Okay and then one last question. Leo, you indicated that you've laid on some hedges '08 or '09, which are at high 70s for MWh. I was just doing some back on the envelope calculations for '09 and my calculations are suggesting, some of them could be maybe low to mid 80s as well. This was for '09, so I just know if I'm in the right ballpark there or not?

They're in that high 70s -- in the ballpark, they do get into that range, yes.

Okay. All right, thanks, Leo.

We'll move on to Paul Ridzon with KeyBanc.

As you look at your RFP, is the Acadia plant, is that well situated that you could do something with that?

Let me have Mark Savoff, Mark is Head of Operations and the fossil plants fall under Mark. And we will let Mark address that. Mark?

Thank you.

Good morning. Thanks, Wayne. Yes, the Acadia plant is one that we will be looking at, as well as a number of other opportunities that are out there that we hope that the various constituencies submit into the RFP. So, now that's as good a plan as any of the other ones that could be brought in --.

Thank you.

-- to be submitted.

Thank you, Operator 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 call was recorded and can be accessed for the next seven days by dialing 719-457-0820, replay code 6287406. This concludes our call. Thank you.

That does conclude today's conference call. We thank you for your participation. You may now disconnect at this time.