安特吉 (ETR) 2008 Q3 法說會逐字稿

Good day everyone. Welcome to the Entergy Corporation third quarter 2008 earnings conference call. Today's call is being recorded.

At this time for introductions and opening comments, I'd like to turn the call over to Ms. Michele Lopiccolo. Please go ahead, ma'am.

Good morning and thank you for joining us. We'll begin this morning with comments and a review of our results from our Executive Vice President and CFO, Leo Denault. In an effort to accommodate everyone with questions this morning, we request that each person asks no more than two questions. After the Q & A session I will close with the applicable legal statements. Leo?

Thank you, Michelle and good morning, everyone. Let me begin by offering Wayne's sincerest apologies for not being able to participate in the call this morning. In his absence he asked me to give what could probably be best described as the injured reserve list for our senior team. In recent weeks, both Wayne and Rick have undergone successful surgeries. While they were both major procedures, out of respect for their privacy, I don't believe sharing details on those procedures is appropriate for this call. I can tell you that Wayne's issue was discovered very recently during an annual physical at the Mayo Clinic, which our Board of Directors requires for all senior officers. In an abundance of caution, surgery was performed in the middle of last week and he was released on Saturday.

Rick is home as well, and all indications are that they are both on the road to recovery and they anticipate no lingering effects assuming they follow doctors orders. Actually, we believe they are likely to be in better shape and stronger going forward compared to before these procedures. That said, their travel will be limited for several weeks while they are both engaged in working from home they will not be participating with us on the call today. Also they will not be at EDI due to these travel restrictions and they send their regrets. This will result in the need to combine our planned separate meeting schedules for Entergy and Enexus and to cancel the Enexus schedule. We apologize for any inconvenience this may create for you. As for the rest of the team our only travel restriction is that Wayne won't let us take vacation. As any of you who have attended EDI know, it's clearly not vacation, so we'll be there and look forward to seeing you. Joining me in Phoenix will be Gary Taylor, Curt Hebert, Mike Kansler, and Dean Keller, who is also on the call with us today.

Moving now to the quarterly update. I will first review some activities and progress on a range of business initiatives and then move to a more focused financial review. In looking back over the last three months, I suspect there are a few things we could all agree on. Events that have evolved have been among the most turbulent and trying since the historic Great Depression with profound effects on all Americans, US business and industry, as well as the global economy. As you well know, Entergy has not walked away unscathed, with the stock price dipping into the 60s and having been struck by back to back hurricanes over the course of just two weeks. In the midst of this however, we can look back on the quarter with a sense of accomplishment on a number of fronts.

First the storms. Hurricane Gustav made landfall September 1, followed 12 days later by Hurricane Ike, both as maximum category 2 storms. Our utilities were prepared, having drilled for very similar scenario in early May. For Gustav, the largest team of restoration workers in Entergy's history was quickly assembled. Team members came from our own ranks and those of other utilities and contractors nationwide, including 165 companies from 26 states and Canada. The logistics for housing, feeding, transporting and organizing this massive effort were on the same scale required for an Army going into battle. At the peak, 14,900 tool workers and 4,500 support personnel were engaged. This army consumed 600 thousand meals and used 1.9 million gallons of fuel.

In the aftermath, Gustav and Ike were added to the utilities record books. These two storms were among the most destructive storms we've ever experienced, and presented unique challenges. Hurricane Gustav caused severe damage to the transmission system in New Orleans was initially islanded from the transmission grid. Gustav also inflicted extensive damage to the distribution system particularly in the Baton Rouge area, with its hardest hit since hurricane Andrew in 1992. Indeed, a case study prepared by GCR Associates concluded Gustav had a much greater wind damage impact on the Louisiana population than Katrina. This impact was due to the high wind fields traversing higher population areas of the State.

Then, close on the heals of Gustav was Ike. We were on the Eastern side of this hurricane which is the wrong side, and Ike was not only a storm surge but a wind event as well. Hurricane Ike caused the most outages in Entergy Texas's history, knocking out power to 99% of its customers. The power plant sustained damage from flooding that spread throughout portions of Texas and Louisiana. Despite the challenges presented, the utilities set a record for the fastest and more importantly, the safest storm restoration efforts in the company's history. Crews restored power to 85% of customers within seven days of Ike and eight days of Gustav. When the costs were tallied, the combined estimate ranged from roughly 1 to $1.2 billion. Each affected utility company is responsible for its storm restoration cost obligations and for recovering storm related costs.

The utilities are considering all reasonable avenues to recover storm related costs, including but not limited to accessing funded storm reserves, federal and local recovery, securitization, and insurance. Given that most Gustav damage was to T& D facilities generally not covered by insurance, deductibles might not be met. On the other hand, flooding during Ike makes it more likely that the deductible will be met and some insurance received. On the regulatory recovery front, early action in October included drawing down funded storm reserves. Funds in the collective amount of $229 million were eligible to be drawn where thresholds were met for Entergy Gulf States Louisiana, Entergy Louisiana and Entergy New Orleans. In addition, the LPSC approved Entergy Gulf States Louisiana and Entergy Louisiana's request to defer and accrue carrying costs on unrecovered storm expenditures during the period the companies seek regulatory recovery. The approval was without prejudice to the ultimate resolution of the total amount of incurred storm costs or the final allowed carrying cost.

Entergy Arkansas also filed to implement a temporary surcharge during 2009 in the amount of $26 million. This filing is designated to recover extraordinary storm restoration expenses in excess of the $14.4 million reflected in base rates. Preliminary regulatory recovery strategies for the other utilities affected are shaping up with filings generally expected no later than the Spring of 2009. Once restoration is complete, it takes time to accumulate vendor billings to develop the final cost estimates to be submitted in a regulatory filing. Giving the ability to draw unfunded storm reserves the utilities do not anticipate interim funding requests. Finally, the utilities are also working on a community development bought grant funding request, the necessary language allowing CDBG funding to be used for infrastructure was included in the Continuing Resolution Appropriations Bill recently passed in Congress. This is a critical first step in the process.

In other utility matters, at the end of July, Entergy New Orleans filed its required rate case. This filing indicated a $23 million electric reduction partially offset by a $9 million increase in gas base rates. The Electric reduction includes $10.6 million to convert the voluntary recovery credit implement the earlier this year to a permanent reduction. Entergy New Orleans proposes to include the balance of the reduction in the fuel adjustment clause to realign Grand Gulf non-fuel Operations and maintenance expense to base rates.

Regarding the portfolio transformation strategy, Entergy Arkansas closed on the Washetaw acquisition of a cost of $325 per KW. As you may recall, Washetaw is a 789 megawatt gas fired plant placed in service in 2002. This asset is the latest of our low cost additions to our utility generation fleet. Entergy Louisiana supplemented and resumed Little Gypsy Phase II proceeding following a temporary suspension related to the need for additional environmental analysis. In the proceeding, Entergy Louisiana further recommended an allocation of 1/3 of the product to Entergy Gulf States Louisiana. The procedural schedule was also established for the Waterford 3 steam generator replacement project. Just before hearings were set to begin, the LPSC staff and Entergy Louisiana jointly requested a continuance, pending settlement discussions that are in progress. We believe this is a positive development in this proceeding.

In Texas, last week, the PUCT deferred action on our rate filing until their next meeting scheduled on November fifth. While Entergy Texas respects the Commission's interest in fully considering all parties views, it believes there are a number of reasons why a favorable decision should be rendered. The near unanimous settlement is supported by virtually all of Entergy Texas's retail customers. Issues in the proceeding were fully vetted and the ALJ's render for a proposal recommending the settlement and this business has gone 17 years without a base rate increase. In addition, balanced recovery outcomes are more important today than ever. Current challenges presented by the credit markets come at a time when Entergy Texas faces a near term cash demand to fund up to $510 million in storm restoration costs. The Company will pursue recovery of these costs over the course of the next year through a separate proceeding but the need for financial relief is real.

In other utility filings, River Bend made its COL filing for a potential new nuclear unit at that site using the General Electric ESBWR technology. Also loan guarantee applications were filed with the DOE for potential new plants at both Grand Gulf and River Bend. As a final note on portfolio transformation, in October the utilities suspended long term resource procurement efforts and will reengage the market in the future. This action was taken in response to the current financial crisis, the potential effects on the overall economy and significant uncertainty across all commodity markets. The utilities believe it is prudent to take a step back at this time and reevaluate a number of key considerations. They believe this is the appropriate course versus simply moving forward on what was a business as usual basis two months ago. For example, in recent months we've seen a notable retreat in commodity prices for steel, copper, aluminum and concrete among others. This suggests to us that new build construction cost estimates need to be reevaluated. While the utilities continue to have long term Resource needs, the majority can be managed through shorter term procurements for a period of time. This approach will provide an opportunity to reassess the market and solicit long term resources at a future date.

Turning to Entergy Nuclear. The nuclear fleet posted a strong operational quarter delivered a 95% capacity factor. On the license renewal front, significant milestone was achieved when the NRC renewed the license for the James A. Fitzpatrick plant in September for another 20 years. Also, continued progress was achieved on the Indian Point license renewal initiative. While the projected license renewal date was pushed back a few months to January 2011, the contention set for hearing were narrowed from around 160 to just 13. NRC on site inspections and audits for license renewal is complete and the next major milestones of completion of drafts safety evaluation and environmental impact statements.

In other Indian Point news, the independent Safety Evaluation panel released their report at the end of July. The two over arching conclusions are that Indian Point is safe. It meets NRC requirements and safety systems are well maintained and it's reliable with performance comparing favorable to high performing plants in most safety aspects; however, relationships with the general public and officials, particularly on matters of emergency preparedness, are not healthy and must be rebuilt. Entergy Nuclear applauds the panel's efforts and commitment, and responded to the report with action plans to implement panel recommendations. These plans indicate that the comprehensive and unique evaluation will serve as a road map as Entergy Nuclear continues to guide the Indian Point site to excellence.

In August, the new state-of-the-art siren system for Indian Point was successfully placed into service. Performance evaluation is under way and the system has successfully completed two of the three tests, demonstrating reliability of at least 97%. Regarding the nuclear spinoff, progress continued on the regulatory front. The Internal Revenue Service issued its private letter ruling in September, and the briefing and comment process is complete in Vermont and New York. In Vermont, a decision is spending from the Vermont Public Service Board. In New York the ALJs have determined that no additional proceedings are necessary and a recommendation from the New York Public Service Commission is now from them to the New York Public Service Commission is now pending. Entergy continues to target receiving regulatory decisions in the fourth quarter; however as a result of the unprecedented turmoil in the financial markets it is uncertain whether or not financing fundamental to the spinoff transaction can be affected in the near term on a cost effective basis.

As we assess the conditions of the market against our options for Enexus, we remind ourselves that we are in the enviable position of being able to simply wait. We believe the market will ultimately improve. We are not tied to a specific timeline to effect the transaction and we believe the value proposition remains intact. We will not take financing into market where conditions are clearly unfavorable, but we will be fully prepared when market conditions improve. Now that we have the private letter ruling in hand we have the approvals to launch financing, and we stand ready to act when we believe action will create value. It is noteworthy to point out that even in this extremely challenging market, Enexus has successfully secured bank committment letters in excess of $1 billion. These commitments are in support of efforts by Enexus to fill out its liquidity needs through a corporate revolver. We believe this successful effort is an indication of the interest and support in the financial community for a business that is truly one of a kind.

In closing our business review, I'll mention a couple of items that are among the accomplishments we are most proud of because they reflect who we are as a Company. Earlier this month, we learned that Entergy had garnered the distinctive recognition from two separate organizations for its corporate governance practices. First, governance metrics international assigned Entergy an overall global rating of 10 for best-in-class corporate governance. Among the 4200 companies reviewed, 1% received a perfect score. GMI is an independent organization whose philosophy is based on the view that governance and transparency will over time generate superior returns and economic performance. Also, ISS Corporate Services awarded Entergy a 100% rating for corporate governance in the utility ranking reflecting Entergy's superior performance in this sector. In addition, Entergy received an index ranking of 98.5% placing it near the very top performers in the S & P 500.

I'll now cover some key financial topics related to our performance this quarter including quarterly results, the latest on our share repurchase activity, and brief comments on our '08 guidance. I'll close with an update on cash flow, including a discussion of our overall liquidity position which is quite strong. You might find the webcast presentation useful following our financial review.

Looking at our financial results for this quarter, slide 2 shows an increase in third quarter '08 as reported earnings compared to a year ago. This increase was achieved as we continued to expend resources associated with the nuclear spinoff and while we endured two major hurricanes. As was the case last quarter, the spinoff expenses are reflected as a special item in the current period. Turning to operational earnings, we achieved a 9% improvement in results this quarter compared to the third quarter of 2007. The increase in operational earnings came primarily from higher results at nuclear with utility, parent and other achieving a modest improvement in earnings. Partially offsetting the higher results in these businesses was an increased loss incurred at our non-nuclear wholesale business.

Slide 3 presents the factors that drove the quarter on quarter results. The increase at utility parent and other came primarily from lower income tax expense and lower operation and maintenance expense. The lower tax expense was associated with the liquidation of a subsidiary that resulted in a tax loss on Entergy's investment. The lower O & M resulted primarily from lower payroll related expenses and the absence of minimum bill credit write-offs taken in the third quarter last year. A significant portion of these expense decreases were offset by lower net revenues due to the effects of milder than normal weather, and lower usage during the storm related customer outages. The weather effect this quarter was minimal on billed sales, however unbilled sales recorded at quarter end reflect significantly milder weather versus the warm weather of a year ago.

At Entergy Nuclear we achieved an increase of 31% in operational earnings with the primary contributor being higher pricing for energy sold. The nuclear fleet posted a strong operational quarter with a 95% capacity factor over the three-month period. The non-nuclear wholesale business recorded a loss this quarter which exceeded the loss recorded in the third quarter of 2007. Results in the current period reflect higher income tax expense, driven primarily by the redemption of a previous investment in that business.

As noted in our review of quarterly results, income tax expense this quarter had a material effect on our earnings. We anticipated a material tax benefit in guidance and this comes as no surprise given taxes are one of the most significant expenses on our income statement. Given their significance, we believe it is important to use well thought out tax planning that results in us paying only the amount of taxes appropriate for our business. We believe as owners, you expect this of us. I believe a few words on the effects of the storms on our results this quarter might be helpful as well.

Hurricane Gustav and Ike had an overall impact of reducing our results this quarter by $0.14. There were basically three components that make up this decrease. Lower revenues due to outages were approximately $0.14. Lower O & M for resources diverted to the storm restoration was about $0.06 positive and increased O & M for Entergy Arkansas Storm Restoration was approximately $.06 effectively offsetting the other wise lower O & M in other jurisdictions. Recall that Entergy Arkansas has already exceeded its $14 million storm accrual in rates this year and there is no regulatory provision for deferring additional storm costs. As I mentioned earlier, Entergy Arkansas recently made a filing with the APSC to address the issue with the regulatory process in Arkansas.

The last item contributing to higher consolidated results this quarter was the accretive effect of our share repurchase program. We continue to utilize our share repurchase program during the quarter, the details of which are reflected on slide 4. We repurchased 1 million shares in the third quarter at an average price of $98 per share with roughly 70% of the repurchases coming through our $2 billion of authorization. At the end of the third quarter, we had approximately $640 million of repurchase authority remaining. With three quarters to go of the year behind us, we continue to see '08 as reported in operational earnings guidance of the range of $6.50 to $6.90 per share. Slide 5 include the components of guidance. For the remainder of the year we expect continued strong performance at nuclear, the effects of hurricanes and mild weather will serve to moderate the utilities contribution but overall, the year is still on track.

Slide 6 includes a recap of our cash flow performance this quarter, which shows a significant increase compared to the same period last year. The major items that contributed to our more than $1.1 billion increase in net cash flow provided by operating activities include the receipt of $954 million in securitized debt proceeds associated with Entergy Louisiana and Entergy Gulf States Louisiana storm financings. Increased collections of deferred fuel costs totaling $287 million, higher net revenues at Entergy Nuclear, producing $ 78 million of cash, and lower income tax payments of $120 million. These items were partially offset in our cash flow results by higher working capital requirements of $144 million at utility, parent, and other and higher pension funding payments of $103 million.

No doubt you've seen how very expensive it can be to secure liquidity in a credit market in complete disarray. As you see in our release this quarter, we've included a thorough update on our liquidity. This approach is in keeping with our policy of giving you detailed information so that you can fully assess our business. We believe these details support the view that our liquidity is very solid today. This position is not a coincidence. It did not just happen. In the spring of this year we saw signs of unprecedented volatility in the commodity markets. We are also heading into another hurricane season and the credit crisis was beginning to take shape. Affecting our liquidity position is an ongoing exercise, but these events sharpened our focus and our focus was on insuring cash availability consistent with our liquidity strategy as highlighted on slide 7.

As the financial market collapse upfolded, liquidity demands on some companies heightened and credit availability dried up. While these events and the crisis have been and remain unprecedented, similar shocks have happened before, for example, in the post-Enron environment earlier this decade. We have always taken our financial strength and flexibility seriously and this is why we spend so much time on risk management. The reality is that we were very concerned about what we saw in the Markets and took additional action to protect your investment.

These actions included accelerating planned refinancings of $600 million, focusing our efforts to get regulatory approval and successfully completing the Louisiana storm financings, taking a very measured approach to share re purchases when under valued shares could have triggered a less thoughtful approach, delaying discretionary tax payments and delaying dividends from operating companies to the parent. As Slide 8 indicated specifically, it's by design that our corporate revolver is heavily drawn today and that our ready liquidity totals approximately $3.9 billion. It's also by design that we expect to have approximately $2.4 billion of cash available at year-end even after paying around $1 billion of storm expenditures.

There is one other element of our liquidity planning that deserves additional comment. We have a debt covenant in some of our financing arrangements, limiting debt to no more than 65% of capital. Otherwise, certain accelerations may be triggered. The specific debt covenants define the components of the calculations. Some components require knowledge of confidential information on the interim basis, which we do not feel appropriate to share; however I can tell you we are continuing to meet this covenant. I don't point this out as cause for alarm, but to be clear that it exists and provides some limit in addition to our financing authorities. That said, we have cushion between our current position and this limit, and should we approach a point where we are unreasonably close to this test, we can quickly respond by taking a variety of actions, most notably, we could use some of our extensive cash resources to pay down our revolver. We want you to know that we are diligent, not complacent, as we manage our cash sources and needs going forward.

In summary, we share the same concerns that you, understandably, have in the current environment. We know you are concerned about overall liquidity. Our liquidity position is solid, as fully detailed in our release this quarter. You believe that access to capital is very limited and very expensive if available at all. We have no need to access the capital markets any time in the near future. You are thinking that liquidity triggers are looming and calls on cash could be significant. We have all of our cash needs covered, and even in extreme circumstances have a projected $2 billion cash cushion. You're seeing more and more evidence of economic slowdown and expect weak results in '08 for much of the sector. Storms and weather did affect our utility this quarter but the business otherwise held up quite well. Nuclear had another outstanding quarter and it will be the engine that we expect to drive us to our earnings guidance for the year.

Finally, you're uneasy about the things you don't know. The surprises that all too often are unpleasant once you learn of them. We have been and continue to aspire to the most transparent disclosure in our business and while we too have felt the effects of the financial meltdown we've all been witness to, these situations do create opportunities. Our focus on risk management has kept us on solid footing through this crisis and has prepared us well to play solid defense in a trying financial market. This is a time when our focus on operational excellence, on that leg of our business model, must be at the forefront. Additionally, the same focus has enabled us to be ready, should strategic moves identified through our portfolio management leg of the business model provide new opportunities to create value.

Now, our senior team is available for your questions.

(OPERATOR INSTRUCTIONS). We'll take our first question today from Greg Gordon with Citigroup. Please go ahead, sir.

Thanks good morning and I hope the rest of the Management team comes back soon and back at full health.

Thanks, Greg. We do too.

On the quarterly earnings while they are not related, would it be fair to say that you were able to mitigate more than mitigate the impact of the storm and weather in the utility business through the sale, through the income tax impact of selling that asset? Because it seems to me while they aren't related, they were offsetting.

By and large from an amount perspective, they are offsetting, and you're right. They aren't related. It's just the timing of when that would have occurred anyway.

So if I look at 2009 versus 2008 and I'm thinking about your service territory, the disclosure you made on page 14 there's a little call out box at the bottom that shows about $0.21 of impact from the storm and weather, $0.14 was sales and pricing. Would it be fair to assume that in normal operating conditions you'd see $0.21 improvement quarter-over-quarter? In storm and normal weather?

Yeah, the weather is both in the billed and then there was significant weather in the unbilled period that's just deviations from both normal and then also we had positive weather last year, and then the storms were just, the function of the lost revenue offset by the lower O & M, but which lower O & M diverted to the storms in most jurisdictions was offset by the higher O & M for storm costs in Arkansas almost exactly.

Okay.

So that's right. You'd have to put the weather and the storm effects back.

What at this point, while you haven't given guidance for 2009, what can you tell us with regard to the economic outlook in your regions and your expectation for sales growth? We've had several other utilities already comment early in the earnings season that it would be best to assume no, at most very modest growth in sales if any at all next year.

Yeah, and I'll let Gary go into detail on that. Certainly, we've been benefited over the course of the last year by some of the drivers of our economics in this region, but with declining commodity prices and the refining sector here, also with changes in the value of the dollar with the strength of the dollar, that's going to offset some of the positives we had but I'll let Gary go into detail on that.

How you doing this morning? We have actually as you would expect, monitored the economics in our area and in our area, if you look at it has really been somewhat buffered from what you're seeing in the rest of the country. We've gone back and we see that the expansions that are planned, all indications are that those will continue forward and they aren't being pulled back from. There's additional federal relief assistance which comes into this area for Gustav and Ike of about $6.5 billion. There's about $1.5 billion that has now been appropriated to continue work on the levies, and as you might expect and as we've talked about, the housing market in our territory, really have not been to the overbuilt area or some of the concerns that you've seen in some of the others. We continue to see employment to be somewhat steady. We have not seen a decline and I think that's reflected by one of the things that you would see in our area as we closely monitor write-offs. The write-offs for us have not increased.

They have stayed steady throughout the year. We monitor those as well as we actually went through the higher gas price earlier in the Summer and with the lower commodity prices for us especially in our area and the high percentage that this represents of our customers, but disposable income, those will come down as the commodity prices comes down which is a positive again for our area. As Leo says, that we have basically have some of the same effects that would impact the exports here from where our part was $1 increases and some of the projects that might go on as commodity prices fall might be impacted. We've seen the typical things that you would see in wood products where it has, we think, bottomed out but that again impacts a lot of our small industrials and I think finally in closing, our sales expectations and growth in our area have actually been relatively modest over the time, typically the 1.5 to 2% and if you look at where we are, we're slightly lower than that 1.5% year-to-date if you adjust for the hurricane but we still continue to see growth in sales that seem to be pretty close to what our projections are going forward.

Okay, my last question is on the competitive business and the $0.11 delta that was also a tax issue. Can you go into a little bit more detail on that and give us a sense of what the real sort of underlying run rate of earnings is and the non-nuclear wholesale?

Well I think what we had in guidance at the time, at the beginning of the year was mid point of about $.05 loss around that business which has been pretty consistent with the last several years. That was actually related to tax on a capital gain of a sale we had of an asset earlier and that's the tax, the gain showed up earlier on the books, the tax gain is just showing up now just because of the timing, and so it's associated with a capital gain that we didn't at the time think we would have capital loss to offset.

Okay, so you took the gain in the prior quarter this year and now you're taking the tax hit? Or was that the gain taken in the prior period?

The gain was in a prior period, yeah.

Okay. So while it is an ongoing item it is sort of a non-recurring item?

Correct.

Thank you.

Thank you. We'll take our next question from Scott Engstrom with Blenheim Capital Management.

Good morning.

Good morning.

I had a question, Leo, on the tax benefit as well on that same schedule Greg was referring to, kind of B1 it shows the $0.34 and the footnote I think says it's mostly from the tax benefit. You'd also mentioned an associated loss on the sale of asset. Is that captured in that line, that $0.34 or was that in a different period and just wondering also as I know there were some year-over-year changes within the segments on taxes for the guidance this year. Is this $0.34 part of what was in the original guidance for this year?

In original guidance, we did have some portion of tax benefits associated with our tax planning. This is going to be a little bit more favorable than what we had in guidance because of the size of the tax benefit of the liquidation. The tax benefit itself shows up because of the taxable entities being outside the consolidated group. There is not an associated book impact because of the consolidation of it all up into Entergy Corp. I think that's what you were getting at.

Okay, so I guess what I'm getting at is the opposite of what Greg was asking about the $0.11 in terms of being operating but non-recurring, how much of the $0.34 would you say was operating but non-recurring?

Well, that specific item just occurred this year. There are typically items like that that come about every year. It's lowered our effective tax rate from about 36 to 34% this year. Last year, it was about 31%, so it's difficult to say. That item specifically won't show up again but typically based on our tax planning, they have items like that and they reflect themselves in lower tax rates.

So you wouldn't expect a large delta in the tax rate for 09 guidance?

We wouldn't plan it as such, no. We keep it where we are at the beginning of the year and see what we think is coming in and plan accordingly. Just like we did this year.

Okay, great. Thanks very much.

(OPERATOR INSTRUCTIONS). We'll take our next question from Dan Eggers with Credit Suisse. Please go ahead.

Hi, good morning.

Good morning, Dan.

To echo Greg's comments I hope these guys recover in good form quickly. Just real quickly, if you could explain something on schedule 7 or table 7, I guess you talked about ample liquidity from Entergy full cycle structure but the corporate or Entergy Corporation has availability at $224 million. Can you explain to me kind of how that works as far as the ability to speed up additional liquidity at the parent or corporate level and how we should think about money flows to support outside of the utilities?

Well, the majority of the capital that we have in the cash balance that we have are really at Corp, So we have not exactly sure what you're trying to get to.

I guess the issue is the 244 is really the liquidity there is substantially higher than just 244 because the bulk of the cash balance would be sitting --

Oh, the --

220.

Okay, well okay. Obviously, I see what you're getting at. In terms of how we get that moved around we have ways to move the cash around the system between operating companies through the money pool, we also have ways to make loans and securities back and forth between the companies. We have ways in place to make sure that we can fund the system outside of each individual operating Company.

Would you guys look to try and expand the authority at the corporate level or is it Entergy Corporation level or is it just as easy to move money within the pool?

At this point, we don't see any reason to have to expand that. We've got the ability to draw as much cash as we need. Right now, Dan, we're drawing quite heavily on the revolver and we've got a lot of these liquidity needs because as I said we just determined that was the right thing to do in this environment. We made that determination earlier this year given where we were or where the markets were going and where we saw not only people in our space going but also the financial institutions themselves. The securitization proceeds if you look at that table actually sit in that other category also, and those can be linked around to be utilized as well.

And then I guess with the kind of the notion that Enexus will get spun or addressed when the credit markets are supportive, how do we think about maybe some extra corporate overhead costs and when does that go from special items recurring to the income statement if this goes on for a period of time?

That's actually something that when we get to you and we give guidance we'll be giving you some more color along what those, the term we use for those are dissynergies that are we see by having three companies instead of just one, and we'll try to minimize those as much as we can and be as prepared as we can to move when the markets allow it, but there will be some element of dissynergies during that interim period. As I look across the table, Dean is kind of one of those dissynergies.

Thanks a lot.

Although we love having him around, but we'll give some color on that when we talk to you about guidance.

Should we expect that or wait a little longer to get an update on guidance?

Right now we're looking through all of the elements of it and a big part of it has to do with the financial markets and the spin and how we actually how we present it, but it's likely that it will probably be around that time around EDI.

Thank you very much. I appreciate it.

We will take our next question from Steve Fleishman from Catapult Capital Management. Please go ahead.

Hi, Leo. Please send my regards to Wayne and Rick as well.

Thank you.

On the question in New York on the spin approval, has there been any movement toward maybe trying to settle it?

Well, that's not the kind of thing that we would comment on, certainly the ALJs said they've got all of the information that they really need, that there's no need for further proceedings so there won't be a hearing and so we just wait now to process and obviously we've provided a significant amount of information around not only what we propose but what everybody else has proposed and believe that the record is pretty clear that this should be allowed to go forward, that Enexus will be on solid financial footing and really be a great asset to New York, Vermont and the rest of the states where those plants operate.

Okay, and I guess in the event that you end up happening that you do not do the spin, is there any real significant difference in the Company value at this point, either way? I mean, how are you thinking about the options?

The spin rationale still exists. The ability to change the bottom line, the revenues by changing the hedging strategy, the ability to provide option value to owners by giving them two pieces of paper instead of one, the ability to optimize the cost of capital. Today, that cost of capital would be probably too high and literally today, given the financial markets and where they are for Enexus, but on the margin, if you think about financing that Company the way it should be financed, it would still be better standalone than together. All of those elements still exist. We're just in an odd time frame right now in terms of whether or not that financing could actually be donor if it could be done at a cost effective basis. So all of the reasons for doing the spin still exist. That said, we've always pointed out there's a significant amount of value inherent within that business already and we would attempt if for some reason we couldn't go forward to try and capture as much of those other spin related items as possible realizing that we wouldn't be able to capture them all.

Okay. Thank you.

Thank you, Steve.

(OPERATOR INSTRUCTIONS). We'll take our next question from Jonathan Arnold with Merrill Lynch.

Good morning, guys.

Good morning Jonathan.

To reiterate to the prior comments about the other members of Management, I wish them all the best.

Thank you.

My question actually relates again to table 7 and on the cash position financing authority. I just wanted to clarify, the way you list authority, are these actual committed lines of financing? Or just what you would be able to have, because I think the actual credit lines doesn't seem to jive with the numbers on the 10-Q.

No, that's the authorities that they have the amount that they have authority to issue. It does not, you're right. It does not match up with the credit lines in existence. But they could go out and secure new financing at that level within their authorities.

But they would still have to secure new lines to do that?

Correct, correct.

So what's the number of actual available liquidity under lines that are in existence today?

Well, that's the, when you say available do you mean available yet to go?

You know, financing that is in place as opposed to just authorized.

That's the $374 million. and that compares to what number? It's actually if you look at the paragraph on the previous page and you add up those --

Okay. So that would be kind of versus the 1954 on the table? Is that the right comparison?

In terms of what of that amount is actually already got a committed line to it, yeah.

Okay. Thank you. And then I want to just ask, I heard your comments on the Texas rate case. It seemed that the Commission has said that they were uncomfortable that staff wasn't part of the settlement and I've also heard there's some statutory deadline they have to decide this by late November. Just wondering what are the next steps and did anything that happened last week oblige you to come to an agreement with staff or how should we think about how this resolved?

Gary.

Well, I think you need to think first the other thing that the Commissioner has also said that when they reviewed the settlement that there was two Commissioners I believe from a high level view that they felt that the settlement number seemed to be correct, and we took that as obviously very positive that through the process that represented most of our customers that we wound up with something which is equitable to all parties. I think where the commissioners are and I can't really speak for them, but clearly, it is a complicated case. It is the first case that we've had in a number of years and I think they want to be diligent going through it. If I had to add to it, I think the question they are really asking us is to make sure the process was correct and are they comfortable with that, and I think based on their comments they want to make sure they review the paperwork to ensure that. Having said that I think the next real decision and we extended the decision you were talking about, to allow this to move to November 5 we should have what that outcome is and then based on what the Commission then decides, then we would then avail ourselves to what the avenues are we need based on that decision.

Okay, thank you. And then just one other follow-up, in terms of guidance, is there a time period in which the spin could be delayed that might lead you to give some kind of Entergy consolidated outlook for 2009, and would that be as soon as, is that an option at EDI or is that something you would sort of wait to do if it's delayed well into the New Year?

Well when we give guidance, whether we give it combined or apart, we'll have to give all of the components, so it's likely that it will be some sort of hybrid, if at that point in time we're looking at giving guidance at EDI and still some uncertainty in the financial Markets and not knowing the timing of the spin that guidance whether we give it for each individual Company or as one will have to give it as somewhat of a hybrid anyway for you.

It will be somewhat maybe not fully comparable to how you're forecast today?

Well it will have all of the components. We'll be able to get there.

Okay, thanks a lot Leo.

Our next question will come from Paul Patterson with Glenrock Associates.

Good morning guys.

Good morning.

I want to echo the comments previously about add my sympathy. Secondly, I want to touch base with you guys on is on the buyback, I saw slide 4 and I see how much you guys accomplished. Are you guys still going to go forward with that or is the credit situation out there changing things at all on that? I'm sorry if I missed it.

No, that's all right, Paul. We've continued to take advantage of the share repurchase program throughout this period; however, we've been pretty measured in how we've done it, even given the weakness in the stock price, we've not taken it upon ourselves to be responsible, given what's going on in the credit markets with liquidity. That's why we have significant liquidity. That's why we have the financial strength that we have today. That's one of the things we've been measured about but we've continued to utilize the program just on probably a more measured pace than you might think if you just went into this saying well gee, if your stock price was in the 70s what would you do? We probably continue to look at it the same way to make sure we balance what our liquidity requirements are, what our cash flow requirements are and what the market availability of liquidity is going forward. So the authorization still exist. In the table that we gave you, going out through the end of the year, in that table, we just put the assumption that we finished the $1.5 billion portion of the $2 billion of authorities that we have. That's just an assumption. It's not an indication of what we necessarily will or won't do but it's a very regular, in fact day in day out analysis that we do about what we should and shouldn't do on that program.

Okay, great. And then with the Enexus spin and just sort of talking about getting back to normal, I'm wondering if there's any sort of metric we should be following as to what you guys would consider to be sort of normal? I mean, one could make the argument that the period before the credit crisis was kind of abnormal. What is normal, not to get philosophical here but sort of a, what, is there a specific spread we should be thinking about in terms of what you guys are looking at or needing to get to for this spin to sort of take place and then also just when we, the staff has made comments about additional sort of credit enhancement which I have seen your response to and what you feel about that, but is there any thought or is there any change in that thought with respect to the credit crisis, or any other thoughts about how perhaps the Enexus situation could change in light of what's happened or is it sort of like we're just going to wait until things get back to where they were before we do a spin?

Well, I might actually let Dean comment on some of that, but I think we would agree that some of what we saw prior to the financial situation that we're in was not normal. On the opposite side of where we're not normal today, so I don't think we'll be waiting to get back to that point but we will be waiting to get back to a little bit less volatility, a little bit more certainty, a little bit more clarity around what spreads are day in, day out, and what availability of capital is, day in and day out. Dean?

No, I think on the first question, you can imagine we spend a lot of time thinking about all sorts of different scenarios for this business both from an operational, from a markets and from a financing perspective. We have the benefit of a business that in almost any scenario shows a lot of free cash flow, has low operating costs, and is really well positioned in the markets in which it's located. What we are focused on is delivering the best value package to shareholders that encapsulates the totality of the value delivery mechanisms that Leo talked about earlier, so when we think about ranges of financing rates, we really focused on the totality, the package, and this is not a deal that lives or dies on 25 basis point differentials and interest rates that we're thinking about. We are actually incredibly encouraged as Leo mentioned earlier about the fact that we have actually been able to raise more than $1 billion of bank commitments in this particular market. We think that says a lot about the quality of the business and we think that says a lot about the receptivity of investors in this business and we expect this to receive strong interest from bondholders when those markets open up.

Okay, great. Thanks guys.

Thanks, Paul.

And we will take our next question from Michael Lapides with Goldman Sachs.

Hi, guys. Real quick question. Can you give us an update regarding Indian Point and the need for environmental CapEx or the discussion about potential environmental CapEx related to cooling towers?

Sure, Mike?

Thanks. Good morning. Right now, the process up there that we're before the administrative law judge for the State of New York and Department of Environmental Conservation is changing a little bit and when we actually hear the case on our permit it's probably going to be delayed somewhat maybe upwards to a year or 18 months so a decision on whether the requirement is going to be cooling towers or whatever is getting further delayed as it has been over the past several years. We still believe cooling towers aren't required and aren't necessary and that will be the case that we present so it continues to be delayed by process and we continue to build our case saying we do not need to build these cooling towers.

Okay, and is there a kind of a formal docket or a formal procedure that lays out a timeline or is that still kind of uncertain and that's partly what's driving the delay?

Yeah, that's kind of what the delay is because they have a change in the requirements, to get a lot of the study work that would have been done once the permit was issued done up front and so that may have to be done before we actually get in any kind of proceedings and that's still being laid out in the State.

Got it. What about the federal litigation and how that could potentially impact Indian Point? And actually impact any --

It ends upturning out whether they require retrofitting existing facilities with best available technology et cetera. I know that's in question and I'm not sure what the schedule on that is these days.

Okay, thank you guys.

Thanks Michael.

And we will take our final question today from Ms. Annie Tsao with AllianceBernstein. Please go ahead.

Good morning Leo.

Good morning Annie.

The best for them getting well.

Thank you.

Anyway, a question on in this quarter you have, you increased the pension funding payment of $103 million. Now, for '08 in your guidance. what kind of numbers that you forecast for your pension liability and can you give us a sense of how we should think about your pension liability in '09?

That was the cash payment this year and that was actually just the normal cash payment that we would have made into it. It's just different from last year. So that really is not a change from the funding that we had planned in 2008 as it stands anyway. Certainly as we look to 2009, we're in the process of assisting with that pension funding estimate will be, in terms of the estimate for funding and the funding and the expense are two completely different animals, driven by differences in GAAP and IRS regulations which I'm not going to attempt to reconcile for you but as far as the funding levels go, we're going to have to look at what our unfunded balance is and what's happened to the planned assets by the time we get to the year-end, what the segment rate looks like in terms of how we split that out and then as you know in the funding category, there are some smoothing rules that go into effect in terms of how long you have to make up funding deficits. That said, we'll closely look at what happens in the market and what happens at the federal level, given that there's no doubt that the funded balances of the trusts associated with pensions are going to have fallen for just about everybody in all industries, and so there might have to be some sort of change in regulations going forward and that as well. We don't anticipate that it's going to have an impact of great proportions but it will be an impact given the fact that what's happened in the market at least to date this year has driven down the value of the fund assets.

Thank you.

Thank you and I will now turn the call back over to Michele Lopiccolo for any closing remarks. Please go ahead.

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 3834525. This concludes our call. Thank you.

And once again that will conclude the Entergy Corporation conference call for today. Thank you all for your participation and have a wonderful rest of the day.