安特吉 (ETR) 2006 Q3 法說會逐字稿

Good day everyone, and welcome to the Entergy Corporation third quarter 2006 earnings conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like the turn the call over to Ms. Michele Lopiccolo of Investor Relations. Please go ahead.

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

Good morning. We know many of you are preparing for the EI financial conference. We're also aware that many of the segs are releasing earnings and holding teleconferences this is week. With these activities in mind I will try to keep to the high points, particularly on storm recovery.

As a result of Governor Barber's decisive, timely actions, Entergy Mississippi has received community development block grant funds in the amount of $81 million. The money is now officially in the bank. That's equivalent to $0.90 on the dollar for Katrina's restoration costs just as Governor Barber promised from day one. Further, the Mississippi Public Service Commission approved our storm cost securitization request.

Pursuant to the terms of the securitization order, the state of Mississippi will issue general obligation bonds for approximately $48 million, $8 million for remaining Katrina restoration costs after applying the $81 million of Community Development Block Grant funds which we already received, and an additional $40 million to increase the storm reserve. We anticipate receiving securitization proceeds around the end of the year. Together these actions substantially benefit Mississippi customers by holding the line on necessary rate relief.

To not only recover from the aftermath of Katrina, but to also prefund restoration costs associated with future storms that may come Mississippi's way. We applaud the unwaivering commitment of Governor Barber, the Mississippi Public Service Commission and other Mississippi officials to constructive regulation, protection for customers and promotion of the public good. I will also convey our appreciation to the Governor for personally following the Community Development Block Grant request through HUD to make sure it wasn't derailed by others outside of HUD.

Turning to Texas, hearings on storm recovery begin tomorrow. We're encouraged by developments in the storm recovery process, particularly the PUCC staff's expected willingness to advocate for strict implementation of the will and the intent of the Texas legislature as outlined in the storm costs recovery legislation they passed last spring. And as evidenced by the staff's own prefiled testimony in the case.

In New Orleans, two major milestones were reached last week when Entergy New Orleans filed its proposed plan for reorganization with the U.S. bankruptcy court and reached agreement with the New Orleans City Council on a rate plan. Starting with the plan of reorganization, I am particularly pleased to report that it anticipates full compensation to all Entergy New Orleans stakeholders. The proposed plan represents the culmination of extensive efforts with federal, state and local regulators and lawmakers to gain support for Community Development Block Grants, rate relief, and insurance proceeds, each of which is critical to Entergy New Orleans emergence.

The plan would enable Entergy New Orleans emerge in the manner that assures Entergy New Orleans customers are served by an ongoing financially viable entity, pays its creditors, and protects the rights of investors. Assuming the plan is approved by the bankruptcy court and the creditors, Entergy New Orleans could emerge from bankruptcy before the end of 2007 following the completion of the conditions precedent that are set forth in the plan. Perhaps the most important of these conditions is the receipt of the $200 million of Community Development Block Grants that was approved in mid-October by the Louisiana Recovery Authority.

We're pleased that Governor Blanco and members of the LRA recognized that Community Development Block Grants will help make Entergy New Orleans customer rates more affordable than they otherwise would be, something that is clearly important to the economic recovery of the city and of the state. Other conditions called for reaching acceptable agreement with the New Orleans City Council on post-storm filings that were made in June including creating the storm reserve to provide liquidity to meet future potential needs and receiving assurances by the expected insurance claim proceeds of approximately $250 million for New Orleans.

On the regulatory recovery front, Entergy New Orleans reached a settlement agreement that was unanimously approved by the New Orleans City Council last Friday on a phased in electric and gas base rate plan to be fully implemented by January 1, 2008. Consistent with the conditions of the plan of reorganization that have been filed with the bankruptcy court. The Council also approved the creation of a $75 million storm reserve to be collected over a period of ten years and established emergency rate relief provisions to ensure that Entergy New Orleans will obtain expedient rate relief to have the means to maintain liquidity and receive timely payment should a Hurricane Katrina type event occur in the future. Let's hope not.

Importantly, after considering the total effect of phased in rates, typical Entergy New Orleans electric rates will be comparable to neighboring utilities and almost 35% lower than cities like Houston and Dallas where many evacuees still reside. In other utility developments we concluded hearings in Arkansas earlier this month related to the energy cost recovery Ridder investigation and post hearing briefs have since been filed. The APSC does not have a deadline to file an order in the case. We remain confident that our fuel and purchased energy expenditures will be found appropriate and that the ECR Ridder will not be replaced with an alternative recovery mechanism.

Finally, we saw progress at the Federal level. First, the FERC ruled on our power purchase agreement case essentially approving all of the PPA's with some modifications and supporting our RFP process. In our independent coordinator transmission proceeding in September FERC denied various requests for rehearing and in October accepted the operating companies compliance filing with some modifications and directed the operating companies to install SPP as the ICT within 30 days of the order. We are pleased to finally be implementing the ICT proposal and are working closely with SBP to ensure that we have a seamless transition to the ICT. We expect to implement the ICT oversight functions within thirty days of the order and anticipate the implementation of the enhanced weekly procurement process by next May.

Closing out the update on Federal regulation late last week Entergy Arkansas received a FERC order that completely reversed an earlier ALJ decision. That was an extremely surprising and disappointing development because FERC included that a co-op, one of the co-owners of two Entergy Arkansas coal units was entitle to do a refund under its interpretation of certain provisions governing replacement power when the units output is constrained or reduced.

Previously the administrative law judge who actually heard the case found that the plain terms of the agreement require Entergy Arkansas to reflect system operating constraints when determining the amount of energy the co-op is entitled to just as we would do for Entergy's ownership percentage. There is no evidence that Entergy Arkansas violated the terms of that provision whatsoever. As a result of this very recent event, we recorded a regulatory charge that is reflected in the third quarter financial statements issued today causing them to differ from the earnings prerelease we issued to the market in October 17.

While we strongly believe the FERC errored in its decision, the fact that the FERC reversed the Administrative Law Judge's decision on the issue of a contract interpretation which is pretty straightforward indicates to Entergy Arkansas that it may be difficult to overturn on a rehearing. Nevertheless, we believe our interpretation is correct and is clearly consistent with the intent of the provision in question. FERC's decision acknowledges the benefits of ownership, but fails to acknowledge the risk of ownership that the co-op should bear. We intend to seek rehearing on this decision. In the event we are not successful, we will consider whether to seek relief in the courts.

Once again, our nuclear business demonstrated outstanding operational results. The Northeast fleet ran at a 99% capacity factor and Arkansas Nuclear Unit 1 completed the equivalent of a perfectly pitched game in baseball. ANO2 shut down on September 19, to begin its 18th refueling outage after a continuous 527 days of operation since its last refueling outage. Entergy's Nuclear's first uninterrupted breaker to breaker run. We also achieved positive results for our Northeast fleet in the form of additional forward contracting for the output and we received notification from the Nuclear Regulatory Commission that a licensed extension application for Fitzpatrick has been reviewed and accepted enabling the NOC staff to proceed with its review.

Finally, we continue to work towards welcoming our newest plant, Palisades to our fleet. All filings for key approvals have been made and are moving forward. We anticipate a second quarter closing given the current regulatory schedule in Michigan.

In closing, momentum is strong and we continue to make strides on all fronts coming out of a very difficult year in 2005, happily for everyone, the 2006 storm season is uneventfully drawing to a close. That means another year for infrastructure bolstering at pumping stations, levies, and flood walls and for more progress on some of our own goals like resolving storm recovery processes and securitizing storm costs and establishing reserves. It also means returning capital to our owners, we have seen many of our stated goals and plans put on hold for over a year now.

While we were able to demonstrate some modest progress on this front by initiating action on existing share repurchase programs that were suspended after Katrina, I am obviously disappointed that we weren't able to do the same on the quarterly dividend. By now you undoubtedly saw that last Friday the Entergy Board voted to continue to maintain the quarterly dividend at its current level of $0.54 per share.

This action was an obvious yet frustrating decision. Since the Board takes seriously its aspiration to grow the dividend and is well aware that the current level is well below the average relative to our peers. But this was the recommendation that management brought to the Board.

Yet as you know, just like we committed to restore the system in order to put customers back in service as if the storms had never hit, we remain committed to those that provided the money to do so to catch up to where we expected to be on key measures like earnings, dividends, debt ratios as if the storm had never hit also. And to deliver top quartile shareholder returns as we've been accustomed to doing. We look forward to seeing all of you at EEI to discuss moving beyond the storms at Entergy. It has been too long since we've been able to do that.

With that, let me turn the call over to Leo Denault. Leo will outline earnings and cash projections for 2007 and beyond, that I hope you will agree are reflective of our commitment to catch up to where we expected to be. Leo.

Thank you, Wayne. Good morning, everyone. In my remarks today I will cover quarterly results, recent progress in nuclear contracting, third quarter cash flow performance, 2007 earnings guidance, and I will close with a review of the new long-term cash available projections.

Turning to our financial results for the quarter, slide 2 shows that third quarter '06 as reported earnings increased by 11% compared to one year ago. Operational earnings in the current period were 7% higher compared to the third quarter of 2005. The increase in operational results came from a strong quarter performance at Entergy Nuclear, lower results at utility parent and others served to partially offset the increase at Nuclear and while the non-Nuclear wholesale business was nearly flat quarter to quarter.

Slide 3 shows the decline in utility parent and other earnings compared to the third quarter of last year. The factors producing this decline included higher operation and maintenance expense, higher interest expense, lower interest income, and the regulatory charge Wayne mentioned that was recorded due to a FERC decision rendered late last week. Partially offsetting these factors were additional revenue from sales growth in rate actions implemented since third quarter last year and lower income tax expense.

In reviewing the components of results this quarter, some additional detail may be helpful. Starting with the utility, several factors materially impacted operation and maintenance expenses this is quarter. One factor was the absence of a benefit realized last year in connection with the low level radioactive waste compact settlement. The settlement reduced O&M by $0.04 in the third quarter of '05. Another item relates to the effect of storm recovery efforts.

Recall that our workforce was concentrated on storm restoration in the wake of hurricanes Katrina and Rita in the third quarter of 2005. The shift in focus moved resources away from many O&M activities thereby reducing these expenses in the quarter. The return to a more normal expense pattern this year increased labor and benefits costs producing an increase in O&M on a quarter to quarter comparison. A third factor relates to increased costs associated with the additions of Perryville and Attala plants and higher storm reserves, all of which are being recovered in rates. Finally, we did experience higher legal and regulatory costs as well as higher insurance expense.

Higher interest expense during the quarter is another item associated with the continuing storm effects at the utility. Additional borrowings were ramping up in the third quarter of '05 to fund storm recovery and they remain outstanding today. Lastly, lower interest income also reduced utility results due to the absence of last year's compact settlement, a portion of which was recorded here.

On a positive note, the utility experienced an improvement in sales across all customer classes this quarter. The improvement which excludes Entergy New Orleans primarily reflects the return to service of the Mississippi customers who were hit by storm outages in the third quarter of 2005 and a portion of the Entergy Louisiana customers.

The improvement in the industrial sector also reflects the storm related rebound. However, the overall recovery in this sector is trailing our original expectations and chemical manufacturers in particular have been hampered by high energy prices. One final item that benefited utility parent and other was lower income tax expense. The lower expense relates to a pension item reflecting the benefit of a tax deduction accounted for using the flow-through accounting. This accounting treatment matches the regulatory treatment of the item for rate purposes.

Moving to Entergy Nuclear, we recorded higher earnings as this business had an excellent operating quarter. The increase is due primarily to higher contract pricing which contributed $0.07 in the current period compared to the third quarter of '05. Other positive drivers at Nuclear were increased generation from the up rate completed at Vermont Yankee earlier this year, increased generation due to fewer unplanned outages as reflected in the 99% capacity factor achieved for the quarter, and a reduction to the decommissioning liability to reflect timing of decommissioning at one of our northeastern plants. Recall that routine adjustments like this one are made from time to time similar to the ones made in the third quarter of '04 and the first quarter of '05. Partially offsetting these positive factors were increases in O&M due to higher benefits and insurance expenses.

Closing out the discussion of quarterly results, we look at the non-Nuclear wholesale business. Results in the third quarter of '06 were slightly improved over a year ago, the return to service of the Harrison County unit damaged by an explosion of a third party pipeline and reduced overhead expenses were the primary contributors to the earnings increase.

Turning to slide 4, we continue to pursue opportunities to contract at attractive prices on terms that are consistent with our risk criteria. We are pleased to report that significant progress was made on this front in the third quarter. Before considering the addition of Palisades we increased our hedge positions by an average of approximately 10% over the 2008 to 2010 time frame. The pricing on new contracts was somewhat below transactions completed earlier in the year. However, pricing on new contracts this quarter were on average 33% above our prices for the portfolio at the end of the second quarter. Slide 4 also shows that factoring in Palisades significantly enhances our hedge position for each of the years 2007 through 2010.

Slide 5 includes a snapshot of our cash flow performance this quarter which was quite solid. In the current period collections of previously deferred fuel costs, lower non-capital storm spending and higher revenues at Entergy Nuclear increased net cash flow by nearly $450 million.

Today we are issuing '07 as reported and operational earnings guidance in the range of 5.40 to 5.70 per share with all components of our guidance detailed on slide 6. At utility parent and other sales growth and improved pricing coming from rate actions are expected to make a positive contribution to earnings along with accretion. With respect to growth, we are projecting some continued storm related impact at Entergy Louisiana as a portion of their customer base has not yet returned.

Higher O&M, depreciation, and higher interest expense along with an adjustment for normal weather will largely offset the positive drivers at the utility. The contribution to '07 earnings from Nuclear pricing is expected to be significant at $0.70 per share and increased capacity revenue will add an additional $0.10 per share to earnings. Also, we currently expect to close the Palisades transaction in the second quarter of the year and revenue from that plant will also add to Nuclear's results.

Finally, accretion will round out the positive factors including in '07 guidance for the nuclear business. These positives are expected to be partially offset by higher O&M and the impact of two additional refueling outages increasing one at Palisades. The final component of our '07 guidance is an estimate of a moderate increase in losses at the wholesale business which moves our consolidated midpoint to $5.55 per share.

Looking ahead, the combination of continued strong cash generation and financial discipline give us ample flexibility to create long-term value for our owners. As slide 7 shows our new estimate of cash available for capital deployment is $3.2 billion for the period of '07 through '09. Our build up of net cash available over this three-year period includes solid growth in net cash flow provided by operating activities, particularly at Entergy Nuclear, increased planned capital expenditures reflecting the purchase of Palisades and potential supply plan additions at the utility, the conservative estimate for dividends and stock repurchases covering options and equity units and additional debt capacity at a level consistent with BBB credit quality.

The strength of our cash available going forward gives us the flexibility to seize opportunities in the market and/or to return capital to our owners. We recognize your patience in standing by us as we've worked to recover from the challenges of 2005. I echo Wayne's sentiments when I say that we are focused on returning value to you in response to your continued commitment to Entergy.

In conclusion, the optimism we've shared with you in previous quarters is now taking shape in the form of strong cash flow projections and earnings growth. We will continue to assess the opportunities available and are excited about our prospects for 2007 and beyond. As we execute going forward, we will do so with discipline, and with a mind toward creating value to our shareholders. We now turn to our Q&A session and our senior team is available to respond to your questions.

[OPERATOR INSTRUCTIONS] Our first question comes from Dan Eggers with Credit Suisse.

Good morning.

Good morning, Dan.

First question on I guess share repurchase activity looking at the implied share count reduction for next year and the fact that you guys are in the market. Are you assuming that you will announce a expanded share repurchase for 2007 beyond the residual pre-Katrina amount?

We're not in those estimates, Dan. What we've got in there is a completion of the $1.5 billion program and the offset of employee ownership plan issuances.

And that number is included -- that is included in the numbers before you get to the $3.2 billion of incremental available cash; is that correct?

Correct.

Okay. And you guys -- you said that you were in the market already or you have been in the market in 2006; is that correct?

That's correct.

Do you want to give any thoughts on how much of that you're going to get done in 2006?

We typically don't disclose what we have done, but our estimate would be that we would finish up the $400 million by the end of the year.

On the guidance you guys gave today, what is the implied power prices on the unhedged component at Nuclear?

That's in the release, Dan. I believe it is $69 a megawatt hour.

I apologize about that. You said -- the last question, then I will let somebody else go, but on the CapEx side you said there was some inclusion of capital being spent at the utilities as part of that CapEx program. Can you give some color on how much you guys expect to spend on the generation front?

We'll give more detail on that as we go forward into the disclosures of the 10-K. We'll have that same three-year projection in those, Dan, but there is some dollars in there for assumptions around the supply plan as well as some transmission investment and some environmental costs. We'll give more detail to that as we go forward in the beginning of next year.

Thank you, guys.

Our next question comes from [Vick Kite] with Deutsche Asset Management.

Thank you. Wayne and Leo, could you comment about when you're contracting for nuclear power, where did your fuel contracting, how are you matching the two?

I am sorry, Vick what was the last part of that?

The matching of your nuclear contracting for power against your fuel purchase for nuclear fuel.

Leo can do that.

We're already hedged by and large out through 2008 into 2009 with our fuel, and we've been actively looking at and hedging portions out farther than that. As you recall, we've stated for awhile that we've been out through 2008 into 2009 with our contracting previously as we saw the run up in nuclear fuel prices, but we have been working quite actively on -- out through 2010 and beyond even.

Is there a concern that this nuclear fuel cost might rise beyond your current expectations?

There is always a concern that it could rise beyond our current expectations. We've been watching that very closely, and certainly it is something that over the course of the last couple years has gone up tremendously. As you know, the costs of nuclear fuel itself, it was only about 25% of the cost of fuel, the actual uranium price, as you get fabrication and other aspects of it that go into that. It is not a tremendously significant change in the overall production costs when this that goes up, but it is something that we've been paying a lot of attention to and that's why we've been actively trying to manage it going forward.

Thank you.

Vick, this is Wayne, we do -- we try to manage that going forward to keep the costs as low and stable as possible, but as you know, these plants don't trade off of uranium, they trade more closely to gas. Our point of view relative to gas and the relationship there between power prices is much more important.

The margin -- we're not like a gas plant where it is critical that we could end up with a contract below water because we have matched up the two. The fuel we manage as kind of a separate item to increase the margin as much as we can. As far as having an out of the money contract, that's really not an issue because the margin is so big.

Okay. Thank you very much.

Thank you. Our next question comes from Ashar Khan with SAC Capital.

Good morning. Leo, if I read the assumptions, Palo Verde is going to add $0.13 operational, and then you said there was an accounting for the PPA which adds another $0.07 for '07. If I am right, the output is nearly half in '07, and then I guess you have the full year in '08. Can we then assume there is an additional $0.13 to $0.15 in '08 for the -- sorry, the Palisades. For the Palisades in '08 versus '07?

Well, you certainly got Gary going with the reference to us on in Palo Verde. The -- we're looking at a close in the second quarter. You're right. We have got about $0.13 for the plant and another $0.07 or so for the PPA. It is going to depend on where that sits when we close. It is difficult to say. There is also an outage in 2007 and not in 2008. You would anticipate that we would get a full year, plus not an outage in 2008 around Palisades. As far as what the PPA accounting is, that's going to be set primarily with what prices look like at the day we close the plant.

Basically there will be no PPA effect in '08 but there will be more generation in '08 because you have the full year and you have less of an outage in '08; is that correct.

No. There will be a PPA adjustment every year of the plant. It is just that we'll know-- we'll set it in terms of where it starts at the time we close the plant based on what prices are at that point in time, and then it will work its way out over the life of the plant. There will be an adjustment to earnings every year that will net to zero effectively over the life of the plant, but we won't know exactly where that starts until you get to the day you close the plant. It will show up in both years.

Okay. Okay. Thank you.

Our next question comes from Michael Lapides with Goldman Sachs.

Congratulations on the quarter. Two regulatory items. One, when we think about New Orleans, what rate base should we be incorporating in our models after 2007? Prior to the storm it was around $380 million or so. I don't know kind of how the storm accounting treatment will impact rate base. That's the first question, and, second, can you provide an update in terms of level of under earning at the Texas subsidiary in the rate case time line there?

Rick Smith is President of our Utility Operations will -- I think he has got both of those ready for you.

Michael, on the first question, the rate base would be about the same because of the -- with the CDBG funds it is pretty much taken care of all the storm costs that we incurred, and I am sorry, I didn't pick up the second question? Well, we would expect that we would get up into around 11% on allowed basis. We haven't really put that case together, but we would file a case that would pick up the difference between what we're earning currently and what we would ask for in that case.

And do you mind if we ask where you think you're currently earning or at least based on your 2005 filing at the PUCC? Meaning the end of year filing, the annual report you file every year at PUCC?

I think it is around 8%.

Okay. Thank you.

Our next question comes from Paul Patterson with Glenrock Associates.

I am sorry, I thought I signaled that my question had been answered. It has. Thanks a lot, guys.

We'll move to Andrea Levy with Bear Wagner.

How are you guys doing.

Fine. Thanks, Andy.

Just to clarify something, so 400 million is what you're going to complete between now and the end of the year, but we don't know the missing piece which is how much have you done of that 400 million.

Effectively that's correct. We typically disclose during the quarter at the end of the quarter what we've acquired during that quarter.

Right. Did you disclose that this quarter?

The Q hasn't come out yet for the quarter.

Basically until the Q comes out it is kind of a mystery and there is no other type of hint or guidance or anything like that you can give us an idea of as far as what's been done thus far?

No.

Thank you very much.

Our next question comes from Steven Rountos with Talon Capital.

Good morning. Actually, I wanted to touch on the free cash flow for one second. At the Merrill conference there was a slide in your presentation with the projected free cash flow from '06 to '08, and that was $2.8 billion. What is the comparable number from '07 to '09?

What we had disclosed in cash available was 1.9 billion, and that included at that point in time our previous disclosure but then it also included that we were going to acquire Palisades. What we've done now is roll forward that table from the '06-'08 time to '07-'09, and that's -- the comparable number to the 1.9 is 3.2 billion.

How about the comparable number to the 2.8?

I would have to look at the 2.8. It is 2.2.

The free cash flow from '07 to '09 is 2.2?

Yes. That comparable number.

If I were to take your net cash flow provided by operating activities of 8.3 less 6.1 of planned CapEx, less 1.6 of dividends, that's only giving me like 0.6 billion of free cash flow. What's the delta there?

If you look at table 10 in the release, we lay that out. It is the 8.3 less 5.2 of CapEx, and then 100 million of preferred dividends and other investing cash flows, about 800 million. That strikes that total which is comparable to the 2.8 of 2.2. Then if you look at common dividends of 1.6 and then the capital structure changes which is our keeping the cap structure flat net of share repurchases and the like, that gets you to the $3.2 billion.

The free cash flow of 2.8 or 2.2 is before the dividend?

It is before the common dividend, yes. You will notice we changed the title of it in the current release to subtotal as opposed to free cash flow to try and eliminate some confusion around that.

That makes sense. Thank you.

Our next question comes from Neil Stein with Levin Capital.

Good morning. A couple of questions. First, any new plans for your fossil non-regulated assets?

We don't have any new plans for those, Neil, it is pretty much the same plans that we've had all along is try to find the most -- get the most value out of those as we can. As you know, over the course of the last several years we've put in place long-term and short-term contracts off of those plants we've sold entire plants, and we've sold pieces of plants, and we would continue to look at all of those opportunities as we go forward. It is really just trying to find the -- like we do with everything else, the highest value that we can out of those facilities.

You don't currently have a sales process in place?

I guess I would rephrase that a little bit to we're always looking to sell the plants or sell the power out of them.

Okay. And then shifting gears to the Nuclear business, the production costs are up to around 20.50 for '07. Where do you expect that to trend over the next few years.

I think you will see a trend with inflation as it goes along. We continue to factor in how do we address these. What tends to drive is is the NRC has increased its fees, we have Palisades factored into that, as well as the earlier question, we're, over the years anticipating seeing and granting some increasing fuel costs. Like we said, we continue to work towards that, but I'd expect to stay within the rate of inflation.

And then are there any -- I guess you have Palisades now, are there -- between having Palisades and other economies at the northeastern plants, are there any additional savings you can take out of plants? Is there additional -- a further initiative you could do?

Well, I think what we're doing now is we're looking for those. I think as we go forward farther we will discuss what we think those are. I think clearly we're seeing there should be more opportunities as we're able to leverage our costs over a larger fleet of plants.

Okay. And, Leo, just one follow-up question on the fossil non-regulated. Do you have the tax basis on those assets?

Not off the top of my head. If you want to follow up with Michelle, she can get you that.

Okay. Thanks very much. See you at EI.

Our next question comes from Jonathan Arnold with Merrill Lynch.

Hi, guys, good morning.

Good morning.

Just a quick question on the -- you made the statement that there is no buybacks assumed in 2007. I guess beyond options offset. But then in the earnings factors that you give for the two years, you talk about the end of year fully diluted shares in '06 being 213 and ten 206 for 2007. Can you reconcile those two things?

Well, the -- what we have in -- what our estimate would be today, it is probably more like 211. The 213 was what we gave at the beginning of the guidance table hasn't changed from when we started the year.

Okay.

We would anticipate it being lower at the end of this year.

How did you get to 206 in '07 without major buybacks.

It is the averaging concept if you look at what you're looking at as average shares over the course of the year, and so you finish the 400 million plus options offsets we didn't have in the 2006 guidance, and then you look at going forward in 2007, and you would just have the options offset.

The average -- the way you do the averaging in terms of calculating the average shares outstanding is what creates that, Jonathan.

The way you're saying end of year fully diluted, you're meaning average for the year?

Yes.

Okay. Thank you.

Jonathan, this is Wayne. I don't want to leave the impression with anybody that we've decided that there won't be a buyback program that will be extended into next year, just like the dividend we haven't made a decision that to not raise the dividend next year. Those are things that are all on the table, our Board started through the process of reviewing the cash flows and the capital expenditures and the internal needs at the Board meeting last week. They will continue that process in much more detail at the December Board meeting, and that will give us I think a much better feel at that point in time where it will stand for '07.

We'll also at that time have, actually I think we will have a decision in Texas relative to where we're going to come out there, and then we will be -- we will have -- we'll be close to having the intervenors testimony in Louisiana, so we'll -- by the time we start the first of the year, we will have a much stronger recommendation to the Board in terms of how to deploy cash for next year. Like I said, that question we have not asked the question at the Board level yet with regard to what their preferences are, but that will be coming up.

That's helpful. Thank you, Wayne.

We'll take our final question from Shalini Mahajan with UBS.

Good morning.

Good morning.

The 5.2 billion CapEx or '07, '09, I know, Leo, you mentioned there will be more details in the 10-K. But could you break this into maintenance versus growth CapEx.

About 2.7 billion of that is maintenance CapEx, and the rest of it would be in the supply plan, Palisades, some transmission projects that allow us to work through the supply plan, et cetera.

Okay. And then on the '07 outlook for the utility, it is showing no growth year-over-year. How should we be thinking about earning's growth from this part of the business going forward?

Let's let Rick talk about that since I am getting an evil look on that.

Well, I think it is what we talked about before. 2007 gets everything kind of righted, and then '08 we'll have got through all the storm recovery and then you will see growth off of 2007, and I think we've typically been at about 2 to 3% per year.

And you're assuming a decision on your Entergy Arkansas case by middle of the year for '07?

Yes, yes.

Okay. All right. Thank you.

Thank you.

Thanks.

There are no further questions. I would like the turn the conference back over to our presenters for any additional or closing remarks.

Thank you, operator. 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 a dialing 719-457-0820, replay code 4496801. This concludes our call. Thank you.

This concludes today's presentation. Thank you for your participation. Have a wonderful day.