安特吉 (ETR) 2010 Q4 法說會逐字稿

Good day, everyone and welcome to the Entergy Corporation fourth-quarter 2010 earnings release conference call. Today's call is being recorded. At this time, for introductions and an opening comment, I would like to turn the call over to Vice President of Investor Relations, Ms. Paula Waters.

Good morning and thank you for joining us. We'll begin this morning with comments from Entergy Chairman and CEO, Wayne Leonard, and then Leo Denault, Entergy's CFO will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions. After the Q&A session, I will close with the applicable legal statements.

Wayne?

I'll begin today with our most frequently asked question, what's the latest in New York and Vermont? Starting in Vermont, at the end of October the Atomic Safety and Licensing Board denied delayed file contention on hard to access electric cables, finding that reopening the case was not likely to lead to a different outcome. The petitioner, the New England Coalition, appealed that decision to the Nuclear Regulatory Commission. In parallel, we continue to supply the NRC staff information on related issues to assure the safety evaluation report remains complete as time continues to pass, and as you know, we are over 5 years since our original filing. Regardless, once the expected supplement to that safety evaluation report is issued, we're expecting a positive decision from the NRC on VY's license renewal application. Importantly NRC regulations allow for regulations to issue the license during a pending appeal.

We are committed to maintaining open and timely communications in Vermont however great the challenge is for gaining public support and disproving the negative put in the public's mind that the age of the plant is determinant of its condition. That is simply the position Governor Shumlin took last month when he said, "It was designed to be shut down in 2012 and that 40 years is up in 2012." He went on to say, "It's old, it's tired and it should be retired." In fact, he has encouraged New York to take the same position. States or governors are certainly free to voice their opinions, but the NRC which has jurisdiction in these matters must deal with the facts.

The truth is what those in the industry already know to be true, that the 40-year license was based on the expected economic life, not the physical life, the nuclear plants were designed for. Recognizing this fact, the NRC set two principals in reviewing licence renewal applications. First, that all operating plants provide and maintain an accessible level of safety, and secondly, even plant's licensing basis is required to be maintained during the renewal term in the same manner and to the same extent as during the original licensing term. To that point, with the constant replacement of equipment and design upgrades most of the 1970s vintage plants are in excellent operating condition and Vermont Yankee's operating record certainly supports that fact. For example, during the first 30 years of its life, Vermont Yankee's average capacity factor was below 78% and it never had a breaker to breaker run. Over the last 5 years, the capacity factor has been above 94% and has had two breaker to breaker runs. In fact, Vermont Yankee has been evaluated in the excellent category as compared to its peers.

Efforts also continue to secure a new power purchase agreement with the Vermont utilities. Negotiations have been ongoing for some time now, and we have made progress toward reaching agreements on key terms and conditions that would provide citizens of Vermont continued access to clean and affordable power. However, while we would certainly prefer to sell power in-state, that is not a necessary condition, of course. We expect to have clarity by around the middle of 2011 on all of the open issues we are pursuing, including but not limited to, securing a PPA with the local utilities.

The importance of Vermont Yankee's continued operations to Vermont was highlighted in a presentation given last month by ISO New England to a Vermont senate committee. The system operator's assessment of reliability of the Vermont electric system found what you would expect, that without Vermont Yankee existing state reliability risks increase. ISO's own legal studies on the performance and cost of transmission solution alternatives to VY are expected in the first half of 2011. But not only would reliability likely deteriorate, studies have shown power rates would also rise as supply is reduced. With that point, on January 26th, 2011, IBM, the major employer in Vermont, said, quote, it pays about $35 million a year in power to power its Vermont facility, and the company estimates those costs will go up by 25% if Vermont Yankee goes off line. And in an open letter to Governor Shumlin on February 3, 2011, community leaders representing industry, labor, and energy stakeholders expressed concern that the window of opportunity was closing to allow the public service (inaudible) to complete its docket of Vermont Yankee's continued operations beyond 2012, and emphasized the serious economic consequences for Vermont if the plant is not allowed to operate under a renewed license.

One final note on Vermont Yankee. In early November we announced the process for potential sale of the plant. The confidential nature of the process does not allow me to provide any updates today, but all our actions remain consistent with the objectives of keeping the plant open and meeting stakeholder needs. For the pessimists, and I know there may be a lot of you out there on this issue, one thing you should know is, and it may not have been communicated well, but over the last years VY's earnings contribution to Entergy at best has simply covered it's fully allocated overhead, some of that is fixed and some of that is variable.

Turning to New York on December 3, a significant milestone was achieved when NRC issued the final supplemental environmental impact statement. In short, the NRC staff concluded that there were no environmental impacts that would preclude another 20 years of operation for the Indian Point units. The ASLB will now hold hearings on these new contentions which begin at the end of this year or early next. Also in December, the administrative law judges with the New York Department of Environmental Conservation issued a ruling in schedule in the Water Quality Certification and the State Pollutant Discharge Elimination system or SPDES water permit proceedings. Schedule is set for hearings to begin June 14 before the ALJs on a number of issues, including the threshold issue, regarding whether Entergy could even contain air permits necessary to build and operate cooling towers at Indian Point given the air quality non-attainment status in the area. Related issues, of course, include the effectiveness of our proposed best technology available alternative Wedgewire screens.A decision by the ALJs on the issues to be tried starting this summer could be referred to the commissioner of the New York Department of Environmental Conservation by the end of this year or early next.

As you know, on January 18, President Obama issued an executive order based upon the principles that the regulatory system, "must protect public, health, welfare, safety and our environment while promoting economic growth, innovation, competitiveness, and job creation and must promote predictability and reduce uncertainty and must identify and use the best, most innovative and least burdensome tools for achieving regulatory ends." He went on to say, "A government-wide review of the rules already on the books to remove outdated regulations will stifle job creation and make our economy less competitive." The executive order was issued to make clear "that this is the operating principle of our government."Certainly the cooling tower versus Wedgewire screens matter at Indian Point and similar cooling water intake issues around the nation would seem to be a good opportunity to meet the President's stating operating principal for government as the EPA moves toward issuing new intake structural rules.

Then on January 27, Chairman Fred Upton of the House Energy and Commerce Committee called on the NRC for greater transparency and certainty in the licensing process. He stated that "gone are the days of reasonable expectation for a stable and predictable regulatory process and that this uncertainty and lack of transparency in the process is needlessly putting plants and thousands of jobs at risk." In particular, Chairman Upton cited the application for Pilgrim and Vermont Yankee, saying "today marks an unfortunate milestone for the new regulatory commission as the time line for the reactor renewal process has now doubled without explanation, eclipsing 60 months with no end in sight." Then just yesterday on the senate side in their own letter to the NRC, Senators Inhofe and Vitter referenced Chairman Upton's letter as well as President Obama's executive order questioning the extended time frame to review license renewal applications for plants in some areas of the country and the need to protect the rights of the applicants as well as the public or local citizens in the process. They requested responses to their specific questions by February 24 as well as such things as emails and phone logs supporting the activity to date. The mounting frustration on these issues seems to be driven by the fact that the federal government has clear jurisdiction on these issues and Congress is questioning whether that is being exercised as intended. In any event we're hopeful this increased attention will bring expedited resolution.

Moving on to the Utility, when we announced the proposed spinoff in 2007 a lot of people questioned who would want the Utility stock when EWC or in Inexus at the time was so attractive. We answered those questions with our belief that the Utility was still a work in progress, unfinished business. Part of our strategy back in 1998 when we changed management was to make it the premier utility in America, but between dealing with operational issues and the cost to rebuild the system after 5 of the 6 largest hurricanes in the history of the Company and the fallout from numerous system agreement disputes, we've never achieved the full potential that we had envisioned for the Utility, but today it is a lot closer than it was then and it is a lot closer than some may have noticed. In October of last year, we raised our long-term net income outlook for the Utility segment to a 6 % to 8% compound average growth through 2014 from a previous 5% to 6%, one of the fastest growing utilities, if not the fastest in the country.

As you know, we have secured recovery of $2.4 billion of storm costs and established cash reserves of nearly $330 million today, something that few would have imagined even possible 5 years ago. One of the two key drivers of the industry-leading outlook is earning our allowed ROEs in all jurisdictions, particularly in Arkansas and Texas. The rate actions approved in both states in 2010 were constructive, but there is still more work to be done. Looking ahead, timely recovering of increasing capacity costs are expected to be a significant risk affecting Entergy Texas future financial performance. To that end, we are working with our state legislators on legislation to be introduced in the near future that would give the PUCT explicit authority to implement stream lining measures such as distribution cost recovery riders, purchase power capacity riders, and a formula rate plan.

Another substantial aspect of the utility growth plans are additional investments that are consistent with our obligations to maintain effective and efficient operations. In January, the Louisiana Public Service Commission approved the acquisition of the 580 megawatt Acadia plant with cost recovery beginning immediately after purchase. With this final regulatory approval now in hand, closing is targeted by March 31. After the Acadia acquisition closing, four of the utility operating companies will have acquired five plants since 2005 through well-developed, highly regulated and disciplined procurement process, the same we expect to use and continue to use going forward. On that point, Utility operating companies continue to negotiate on potential acquisitions of two gas-fired generation resources and an approximately 500 megawatt PPA proposal of a third party supplier identified in the summer 2009, long term RFP, that concluded last summer. While no definitive agreements have been reached today, we remain in active discussions targeting conclusion around the end of the first quarter.

Regarding the 9-mile self-build project, a fourth resource, collectors of the RFP evaluation process that was certified by the independent monitor, project development activities are ongoing with a definitive announcement estimated in the first half of 2011. This 550 megawatt combined cycle natural gas plant is targeted for completion no later than the summer of 2015. On a less positive note, Westinghouse has informed us that they will be unable to deliver Waterford 3's replacement steam generators for installation this spring as originally planned. After hydrostatic testing, which is the last step in the fabrication process, Westinghouse found separation of stainless steel cladding from the carbon steel base metal in the channel head of both replacement steam generators in areas beneath and adjacent to the divider plate. For those who do not have a PhD in engineering, let's just say that would be a bad thing. Westinghouse continued its analysis to determine the root cause and develop repair options. Meanwhile back at Entergy, Spring 2011, refueling activities will include extensive inspections to validate preliminary engineering analysis that supports Waterford 3 operating safely for another full cycle before replacement of the steam generator.

In transmission, the FERC approved an interim extension of the independent coordinator transition arrangement in November 2010 and then certain enhancements to that arrangement in December 2010, providing for analysis of longer term structures. Charles River Associates has completed the cost benefit analysis studies on the Entergy system joining the Southwest Power Pool as well as Entergy Arkansas joining the Southwest Power Pool on a stand-alone basis. They are expected to give comparable cost benefit analysis on the Entergy system or Entergy Arkansas stand alone joining the Midwest ISO by the end of February. The results of these studies will be critical factors for retail regulators, including the Entergy regional state committee or what we call the ERSC on evaluating alternatives for the current transmission structure.

Under the procedural schedule established by the Arkansas Public Service Commission, Entergy Arkansas's assessment of its post system agreement strategic options is due in May. Last October Charles River Associates final report on the costs and benefits of Entergy Arkansas joining SPP on a stand-alone basis found that the modest tower exchange of variable economic benefits were not sufficient to off-set the fixed costs of Entergy Arkansas joining the ESPRTO. The Arkansas Public Service Commission has set an target date of October 7th, 2011 for the post agreement structure. We need look no further than the most recent system agreement issue to illustrate where the current agreement has been the source of so much dispute. An initial decision by the FERC ALJ issued last December found entries accounting for wholesale opportunity Entergy sales violated the system agreement and ordered refunds to operating utility companies. This case concerned a limited amount of short-term wholesale energy sales less than 0.5% of the total system to third parties from 2000 to 2009. In previous orders, the FERC rejected arguments that these sales were inconsistent with the system agreement and that the other operating companies had a right of first refusal on these assets. Subsequent to the ALJ's initial decision, the FERC staff filed briefs on exceptions in January supporting the Company's actual practices and consistent with Utility Operating Company's rational filing its own briefs. We continue to believe we and the FERC staff are on the right side of this issue, and given past practice and supporting FERC decisions, and FERC staff positions, we were very surprised by the ALJ's initial decision.

Turning to 2011, we have numerous goals at the utility. Particularly with regard to the regulatory calendar. In addition to the annual formula rate plan filings in Louisiana, Mississippi and New Orleans, utility will address potential timing and future rate case filings and continue to pursue other regulatory mechanisms like riders and formula rate plans in Texas and Arkansas and future regulatory processes and structures according to the Gulf States Louisiana and Entergy Louisiana given that the FRP framework expires with the 2010 test year. Achieving resolution of long standing issues regarding transmission structure and system agreement is another aspiration. For this to happen in 2011, it will require parties to put the scars of numerous years of litigation behind them and focus on what is important now. There are numerous things that we believe we can agree on, but achieving total agreement among the retail regulators on every issue is highly unlikely, but we clearly believe it is in everybody's best interest to come to a self-determined mutual agreement on as many of the issues that we can agree on as possible.

Operationally, during 2011, the Utility will focus on managing major products in the capital plans consistent with costs and scheduled objectives, including planned fossil fuel generation acquisitions in the self-build CCGT plant, nuclear brand gulf upgrade and revised plan to install the Waterford 3 replacement steam generators and ongoing transmission and generation investment projects. Completion of the majority of these projects is planned for 2012 and beyond. Regarding EWC's goals in 2011, EWC will continue to focus first and foremost on maintaining safe and secure operations for its generating fleet, but I can't emphasize enough the importance and the effort being put to resolve any lingering uncertainties on license renewal. The NRC operating licenses expire next year not only at Vermont Yankee but also at Pilgrim. One of the points license renewal process will extend beyond 2011, EWC will focus on encouraging the federal and state regulatory processes to move toward an expeditious conclusion. In addition, EWC will continue to execute on opportunistic but disciplined portfolio and risk management activities and transactions like the sale of the Harrison County power plant which closed on December 31, 2010.

Before turning it over to Leo, I want to recap a strong year of operational financial accomplishments. Not only did we set another record for the sixth year in a row and 10 out of the last 11 years, since 1999, for the highest consolidated operational earnings per share in Company history, we also had the highest ever operating cash flow in Company history. 2010 operational achievements are just as impressive. At the Utility, we achieved a number of constructive Utility regulatory outcomes and improved customer service metrics across the board, compared to 2009. In Nuclear, we delivered the highest utility fleet capability factor ever at 94.1%, completed two breaker to breaker runs at Fitzpatrick and at Vermont Yankee, set new plant records in consecutive operations at Fitzpatrick and Waterford 3, while Pilgrim and Cooper record runs continue today, and recorded the highest plant production for a cycle at Indian Point 2 and for a refueling year at Palisades. 2010 ended with more than half of our nuclear plants evaluated in the excellent categories compared to its peers.

Despite this strong operational financial performance, total shareholder term for 2010 was negative. The overhang or uncertainties in New York and Vermont that I discussed earlier are certainly significant contributing factors, as is the spectre of the depressed power prices compared to previous expectations of the market as evidence by 2010 total shareholder return in which the bottom two quartiles in the Philadelphia Utility Index were dominated by the so-called hybrid or merchant generators. Having said that, we have to do a better job of driving the pace of favorably resolving the outstanding issues that we can influence, while continuing to enhance our market-based point of view on power prices and expediting the execution of our hedging strategies, but maintaining the same discipline that we always have had in that regard. Just as we have not been waiting on operational regulatory issues to resolve themselves, we have not lessened our resolve on achieving the aspirations we have previously articulated.

Despite going from leader to laggard on stock price growth, we believe we have made substantial process in meeting our aspirations going forward. Utility is one of the fastest growing in the country; EWC is one of the better-hedged merchant generators relative to near term commodity prices in a very uncertain market. Operationally, new records have been set in almost every aspect of the business. At the same time our Board of Directors and management's commitment to seek and act on transactions and create value has not changed. The goals and strategies I discussed today are the same ones we've talked about for a long time now. If at times it seems we have changed course or are saying something inconsistent with what may have been indicated only months earlier, it's only because we are a market-based point of view Company and that's how our strategies developed.

Nobody knows better than you all that markets are dynamic. Given the realities and uncertainties of the markets, a static point of view will inevitably lead to warehousing greater risk, lowering the probability of success, and ultimately it will endanger the financial viability of the firm. Options and optionality are good things, and we strive to create and preserve them in the same we think about generating free cash flow. In particular, in times of economic stress, if you have enough cash and have reserved your options, the future can look and can turn out very differently than if you are locked into a one dimensional course of action or strategy. You can rest assured we continue to refine our point of view every day and to position the Company with the flexibility and financial and operational strengths so that we can and will execute on transactional opportunities at the appropriate time consistent with realities of the marketplace.

In regards to the Board, I'm pleased to announce that former Senator Blanche Lincoln was elected to serve at the last meeting. She was one of the most respected members of Congress and will bring immediate insight to the Board and management on virtually all of the issues I discussed today. We look forward to seeing you at the analyst conference in April, and we will continue to establish the ground work for our strategies to capture opportunities for future success. Speaking of the analyst conference, we strongly encourage you to book your travel reservations now, if you have not already done so, because all flights into or out of the city have sold out in past years for the Jazz and Heritage Festival. We're in the planning stages now to make our conference the most informative and the most memorable event that we've ever hosted.

Now, I'll turn the call over to Leo.

In my remarks today, I'll cover fourth-quarter and full-year 2010 financial results, our cash performance for the quarter and the full year, an update on our share repurchase programs, and a review of our 2011 guidance, including some comments on quarterly timing of results. Before we turn to results, I'd like to note that we have revised our business segment disclosures to reflect the internal reorganization announced last June. Entergy will now report these three business segments, Utility, Entergy Wholesale Commodities or EWC, and Parent & Other. EWC is made up of all non-utility generation, a portion of which was previously reported in Parent & Other. The Utility segment has not changed. To assist in 2011 analysis, our release includes restated 2009 and 2010 financial statements on a comparable basis.

In reviewing 2010 results, a few things stand out. As Wayne mentioned, we achieved record operational earnings per share for the sixth year in a row. We completed the $750 million share repurchase program as scheduled. Utility EPS grew nearly 23% and EWC completed the planned sale of its interest in the Harrison County power plant, which resulted in a pre-tax gain of $44 million, and at our nuclear plants, we completed to two breaker to breaker runs and set two new records for consecutive operations.

Before I talk about the full year, I'll quickly review the financial results for the quarter. First, we completed the business unwind of the infrastructure we had put in place to support the Non-Utility Nuclear spinoff. As such, this is the final quarter that results will include a special item associated with this effort. Slide 2 summarized fourth quarter 2010, as reported in operational earnings showing a decrease compared to one year ago. Turning to slide 3, the factors that drove the quarter on quarter results are outlined in more detail.

Starting with EWC, operational results were down versus fourth quarter, 2009. The decrease was due to lower net revenue and higher income tax expense. EWC's net revenue declined largely as a result of lower nuclear generation. During the fourth quarter of this year, EWC's nuclear fleet experienced 72 outage days compared to only 6 outage days in 2009. This quarter's outages included scheduled refueling outages totaled 43 days at Fitzpatrick and Palisades, as well as unplanned events, most notably the extended outage at IP2 when a main transformer had to be replaced. EWC also had some positive items in the quarter, including the gain on the sale of the EWC's interest in the Harrison County plant.

Now, turning to the Utility, earnings in the fourth quarter 2010 were lowing than last year. The major drivers were an increase in non-fuel operation and maintenance expense due largely to higher fossil outage spending, the timing of liability spending, and higher compensation and benefits costs, partially offset by the net effect of higher other income and net revenue. After excluding the effect of Regulatory Item that was offset in Other Income and the absence of the 2009 adjustments, net revenue increased $0.08 during the quarter. Sales in the fourth quarter 2010 were higher than last year and the effect of regulatory actions also contributed to higher revenue. Overall utility retail sales grew by 5.2% or 3.3% on a weather-adjusted basis. We continue to see economic recovery across our service territory that mirrors national trends with slow, but study gains in employment and a continuation of healthy industrial sector growth.

In Industrial segment, sales grew 7% quarter-over-quarter; the positive benefits of facility expansions and the economic rebound continue, although the growth has slowed somewhat as the recovery matures. Expansions accounted for about half of the growth. Looking at specific industrial segments, the trends from the first three quarters of 2010 continued. Chemicals, refining and miscellaneous manufacturing remain the strongest sectors. Our refinery customers continue to run at high utilization rates in spite of a challenging operating environment. Some of the refineries in Entergy's service area are among the largest in the country and to date have fared better than the average for their sector. The chemical segment has also done well with improvements in demand from exports and domestic end-users of chemicals in the automotive and general manufacturing industries. On the flip side, wood products continues to be a soft spot due to troubles in the housing market, but the segment is a small portion of Entergy's overall sales. We are encouraged by the steady improvement in Utility sales for all of our customer classes throughout 2010, and we continue to expect 2011 retail sales growth in the 2% range or about 1%, when you exclude industrial expansions and co-generation losses. Finally Parent & Other results declined in the fourth quarter due to several individually insignificant items. Slide 4 provides a recap of our cash flow performance for the fourth quarter. Operating cash flow in the current quarter was $761 million, or approximately $160 million below the same quarter last year. This change was due to higher pension funding, lower net revenue at EWC, and an increase in refueling outage costs for EWC's nuclear plants due to 2 refueling outages this quarter versus none last year. These decreases were partially offset by lower working capital requirements at the Utility.

Moving to full-year results, slide 5 compares 2010 as reported in operational earnings to 2009. Higher earnings at the Utility were partially offset by lower results at EWC; Parent & Other results were essentially unchanged. On an operational basis, 2010 earnings per share ended the year at $7.10, up 6.4% over 2009. The main drivers for this increase were higher utility net revenue, the absence of significant impairments on decommissioning trust investments recorded in 2009, accretion associated with Entergy share repurchase programs, and the gain on the sale of our interest in the Harrison County plant partially offset by the absence of a gain recorded on a land sale last year. Items providing a partial offset include lower net revenue at EWC, higher non-fuel operation and maintenance expense at the Utility and EWC, as well as an increase in taxes other than income associated with strong utility revenue growth. Slide 6 provides a recap of our cash flow performance for the full year. For the year 2010, operating cash flow was the highest in Company history at $3.9 billion. The $1 billion increase is due primarily to the receipt of roughly $700 million of proceeds associated with storm-related death issuances for 2008 hurricanes in Louisiana, the absence of hurricane and ice storm restoration spending at the Utility, and higher utility net revenue. Other factors including higher pension funding and lower net revenue at EWC provided a partial offset.

I'll now turn to an update on our share repurchase programs summarized on slide 7. During the fourth quarter, we completed roughly $213 million of share repurchases, acquiring a total of 2.9 million shares at an average price of $73 per share. Of the repurchased made during the quarter, $209 million were applied to complete the $750 million program. We also have available the $500 million share repurchase program we announced last October. As with any investment decision, execution is subject to our ongoing evaluation of business and financial conditions, including evaluation against other potential opportunities. While we did not include this program in the mid-point of our 2011 guidance, execution of it would fall within the overall range.

Slide 8 details our 2011 earnings guidance which we are affirming today. 2011 guidance ranges from $6.35 to $6.85 per share on both an as reported and operational basis. The details shown on slide 8 should be familiar to you as they have not changed since we initiated guidance last October. In keeping in pace with past practice, we have, however, adjusted a few line items to reflect actual 2010 results. One last point on earnings guidance as it relates to quarterly results, while we do not provide quarterly guidance, slide 9 outlines some key events to keep in mind when considering the quarters. Utility net revenue can be effected by the timing of regulatory rate actions such as the Entergy Arkansas and the Entergy Texas rate actions that were effective around mid-2010. For EWC scheduled refueling outages vary from year to year in both the timing and the number of outages. Overall we expect one less planned refueling outage in the fall of 2011, compared to 2010. Quarter-over-quarter non-fuel O&M variances are affected by both the timing and spending and the occurrence or absence of specific events. Finally, tax items are lumpy (inaudible) significant tax benefits in 2010 were realized in the third and fourth quarters.

In closing, I'd like to recap some accomplishments from this past year that position us well for the future. We established EWC to enhance our focus in key areas of merchant generation business, including license renewal for its nuclear plants and our analytical and market facing capabilities. In the near term, EWC is among the best-positioned merchants providing certainty in a bearish environment, adding significant hedging for 2011 and 2012 based on our point of view for those periods. Over the longer term EWC is focusing on capturing the potential upside of the business from the positive effects of ongoing economic growth and new environmental regulation. At the Utility, we made meaningful progress on the regulatory front with rate case settlements in Arkansas and Texas. While there is more work ahead, the regulatory improvements position utility to succeed as we look to the opportunity for protective infrastructure investments, including the supply plant acquisitions selected in the 2009 summer long-term RFP. While there is to doubt the 2011 will be another busy year, we'll continue to do the necessary actions to capture the near term growth we see at the utility and the long-term optionality embedded in our merchant business.

And now the Entergy senior team is available for your questions.

Thank you. The question-and-answer session is will be conducted electronically. (Operator Instructions).

And we will take our first question from Greg Gordon with Morgan Stanley.

Thank you. Good morning, gentlemen.

Good morning, Greg.

We've had a couple of companies articulate the impact of bonus depreciation on cash flow and also talk about what they are doing to either offset or not offset the resultant rate base or impact on the regulated side or the 199 tax deduction on the merchant side. Can you talk about what incremental cash flow you expect to get and what the impact that might be on sort of your base-case earnings and what you're doing to offset it?

Sure, Greg. This is Leo. We are probably a little unique in this situation. While there is benefit to bonus depreciation and -- I guess right now we've estimate it's probably about $500 million or so, we'll actually see the incremental benefit from the cash flow over time later than most people would, given the fact we have a significant NOL position right now.While the bonus depreciation does fall in line ahead of the NOL utilization, it's not going to really change the cash flow profile in the near term because it just pushes out the utilization of the NOLs.

Because of the NOL situation that we're in, we're also not only -- the production deduction falls behind the NOL, so that's out there a few years as well for us. So really no earnings impact to us from it. It gives us an incremental cash flow at the back end I guess of our planning period if you were to think about it that way; and the rate base will follow the realized benefits and the bonus depreciation, so the impact on the near term on us is going to be a lot more muted than you would see across the industry, given the NOL.

Okay. So, really it's $500 million of cash, but that cash would have come in one -- from other -- you would have been utilizing the NOL to get a commensurate amount of cash had you not gotten the bonus depreciation, so it's basically a status quo situation? Is that --

Well, it is more money. So that is a good thing, but it's just going to be -- it will fall in line in front, but then it will add that $500 million basically to the back end.

So why not double the buyback? I know that's a rhetorical question. Thank you, guys.

And next we will go to Paul Patterson with Glenrock Associates.

Good morning.

Good morning.

My first question has to deal with some news reports out of Vermont about some speculation that even if Vermont does not approve the re-licensing that you guys might opt to continue to run the plant and to challenge that in the federal jurisdiction so to speak, and I was wondering if you could comment on that?

Rick, do you want -- do you have anything to say?

Well, I don't think we would comment on what is reported out of the papers in Vermont. There is something reported every day up there and speculating what might happen probably isn't helpful for any of the situations right now. We're currently still working with the utilities to get PPA in place, and we expect to file something with the commission around the certificate of public good, and then we'll see what the legislature tells the commission they can do with that.

Okay. So, I mean, I guess take it one step at a time approach, is that how I should read it.

Yes, I think that's right.

Okay. The second question that I have is the EPS guidance for 2011, you mentioned in the prepared remarks that there was a potential to do sort of Harrison County sale perhaps or something of the sort in terms of your flexibility. I was wondering if anything like that was in 2011 guidance? And for the nuclear decommissioning trust, what is your expectations for the performance of that, whether that was in 2011 guidance? Could you elaborate on that?

As far as Harrison County, I guess that was -- are you asking if there is --

If there is a similar -- I got the impression and maybe I heard it wrong, but I got the impression there might be similar opportunities in the future for you guys to do similar things like what you do with Harrison County and I wonder if that was in EPS guidance for 2011 or period. And the second question was whether -- what the expectation for 2011 nuclear decommissioning trust earnings would be?

Okay. As far as Harrison county, certainly that was something that we had in the works already in 2010. If you think about the way we've managed the non-nuclear wholesale assets business, which is where Harrison County fits. Now under EWC, since we got out of the IPP development business, the ongoing strategic and operational efforts there have been to capitalize on operational improvements, to enter into a contracting strategy similar to what we with do with any asset that we have, but also restructuring of those plants and their ownership as well as sales. And we've had sales in 2006 and 2008 of some of the properties that we owned in that business as well.

I'm not going to really comment about what is or isn't in guidance. Similar to last year -- last year we did have some opportunities there with Harrison County we were looking at, but certainly they were confidential. Right now, as we look at 2011, there is really nothing on horizon, but there could always be some sort of transaction around assets in that business. There is other plants in that business. There is the district energy business that falls under there with some combined heat and cooling assets. So I guess for right now there is nothing in the works, but at any point in time we could have some transactions around some of those facilities.

Okay.

As far as the decommissioning earnings, we do not really make public estimates about what may or may not be going on in there in terms of the way that works. As you know, it's a lot more draconian in terms of the accounting. If the market really deteriorates as you recall in 2009 we had some significant other than temporary impairments on some of the assets within the decommissioning trust funds, and as we go forward they are more or less just as investments are made and securities are turned over inside those funds, that's when we recognize some of those gains. So, it's a lot different going down than it is going up but we do not really -- we do not really specify too much about what is in that.

Okay.

It's not significant, most of the time.

Thanks a lot, guys.

Yes.

And next we will go to Steve Fleischman with Bank of America.

Yes, hi guys.

Hi, Steve.

Just, I apologize to ask for this clarification, but just on the RFP's at the Utility, can you just go through the detail again on potential -- the different acquisition versus new build and timing of those events?

Gary, do you want to try it this time.

Yes. Steve, I think I hear you understand you want acquisition versus new builds and the relative timing for those. Those basically, we said, we are still in negotiations with two of the counter-parties. We would hope that here in the first quarter; we would expect to come to conclusion with that. The self-build itself is actually scheduled and will not go into service until the fourth quarter of 2014 to 2015. In each of those, they have their cases that we would bring in front of the LPSC for their portions of the ones that we consider or the other utilities and depending on those they are typically an individual proceeding, not so in this coverage through the FRP -- outside the FRP process.

Okay. So the self-build is already pre-approved?

No. We'll have to file for that at CCN as well and then we, basically, would go through traditional rate-making for it.

Okay. And the two parties on -- would those be two separate plants or two parties vying for one plant?

I cannot really kind of --

Okay.

Elaborate on that until we really conclude the negotiations.

Okay. One other question for Wayne. Just we're starting to see more large-scale M&A in the sector. Just kind of get your does that make a difference in any of your strategic thinking and should we -- should we take the view that given that you've been pretty aggressively hedging your -- at least your near-term power price exposure that you're more inclined to be comfortable on the regulated side of the business, strategically?

Well I think the opportunities on the unregulated side are pretty risky at the current time. Not only in terms of the outcome, but with the rating agencies also, where it puts a little bit more pressure on our capital structure and our ability to execute more commodity driven than we appear to be. There would be some benefits to adding to the regulated side I think in terms of credit quality and freeing up cash flows and maybe optimizing the balance sheet. The real issue with regard to I think large-scale transactions, that really hasn't changed a lot -- you know the difficulty. We're already in multiple states. Other possible combinations would be multiple states. It could be tied up for quite some time, even if you had a transaction that made sense.

So the difficulty in a transaction like this is a transaction is more than just stapling two business plans together. It has to create real value and be articulated and executed in a way that shareholders actually can see what the strategy is other than just getting bigger and allowing any cash flows to fall into the operational slack for the organization and you never see it. That's tough to do. It's tough to find somebody that's like-minded and also has the right set of circumstances where you can pinpoint where the -- what the strategy would be and where the additional cash flows for opportunity will be from that. The fact that you have other companies out there getting bigger and you have other companies out there that are focused on that, as their strategy, doesn't really change our own point of view.

Frankly, I do have a point of view that these companies can get too big. There is a lot of issues to manage in these companies, regulatory-wise. At some point in time I think you're beyond scale, where the regulatory issues are being managed too low in the Company and they're not being managed as well as they might be if the company that was a little smaller, a little focused. At our current size, it's a busy, busy schedule around this place to keep track and keep our best people on top of these issues. Other people may just -- may do it better than we do, but that's a lot of jurisdictions to manage for a lot of these companies.

Having said that, like we told you before, we continue to look at small transactions, larger transactions, all of the time. We have for the last 12 years and sometimes they make sense, they look like they make sense and you may have exploratory discussions and realize they make no sense from a standpoint of the bad data or you just see the world differently and it's a potential train wreck. Nonetheless, we don't -- we haven't stopped trying to find one that works, large scale or small scale, but as you indicated, at this point in time, given the way the world looks, you probably would err on the side of trying to find something on the regulated than the non-regulated. But that's, like I said, very hard to do.

Okay. Thank you.

And next we will go to Michael Lapides with Goldman Sachs.

Hello. One high level question, one granular one. High level question -- you guys give out EPS growth expectations for the Utility, but just curious, looking at the forward curve, what do you think consolidated EPS growth looks like over the next couple of years? That's a high level question. Granular one. Can you refresh us in terms of how much cash in-flow you expect from deferred tax benefits over the next few years?

Leo?

As far as overall earnings growth, we really haven't necessarily put out an aspiration or anything on that. Certainly if you look at what the forward price curve is and you look at where we're hedged particularly in the near-term, EBITDA that is coming out of the EWC business should be reasonably flat to declining, as we've said in the past. And so just to continue to offset that with growth in the Utility is what we see happening over the course of the next couple of years. It's longer term, we see a lot of growth in the business, but certainly, like all of the merchants in the near term, we've got the declining EBITDA to deal with it as relates to the -- as it relates to what is going on in the EWC business.

As far as how much cash is coming out of deferred taxes, we do not necessarily get that granular with where the cash flow comes from. We still see that we are in the range to be able to return the $4 billion to $5 billion that we have as an aspiration over the next several years. And as you might guess, we're always looking to try and get more rather than less because we believe from a financial point of view that returning the cash that you've all invested with us is the right thing to do, so that continues to be an objective. We continue to see ourselves in that range of being able to provide it and we'll continue to work on making more.

Okay. Thanks, guys. Much appreciated.

Next we will go Marc De Croisset with FBR Capital Markets.

Hello, thank you. Two very quick questions. It looks like you had some pretty strong cost control at EWC in the fourth quarter. In fact, I think it's an $0.08 benefit year-on-year from lower O&M. I was a little surprised to see that, since you have so many refueling days in the quarter and I believe that was 72 days. Could you elaborate on how you managed O&M with all of this activity?

Well, there is a couple of things. One, as it relates to the outages when there is an outage, you'll see less O&M show up, because of the way the accounting for the outages work. So that's one thing working in our favor from the O&M. If you look at the cash flow statement, how operating cash, you said, was offset some extent by the cost of the outages, so that -- that spend actually tends to not show up as higher O&M costs, necessarily. And so what we also had was we had some costs in 2009 as it related to -- we had some incremental maintenance work done actually at Harrison County that showed up in 2009 that then wasn't there in 2010.

So it sounds like some of the O&M is capitalized, would that be correct?

It's deferred on the balance sheet and then amortized over the period after the outage.

Got you. Second question on your capacity contracts, and I don't know how these -- how material these may be, but I see some uplift in 2013 and 2014. Could you give us any color on what is happening in the capacity markets?

Well, I mean. This is Rick.I think it's a little bit of an expectation that the economy is slowly rebounding out of the recession that we've been dealing with in the last couple of years, so with that higher load growth and you're into higher heat rates and so there is an expectation that that's converting into higher capacity prices.

If you're talking about -- I think Rick got the market in general. If you're talking about in our sold forward table, we did have a FERC order that set the VY capacity price around the D-list. So, the dynamic D-list, we went in and got that capacity price was set at the capacity price that was bid for the D-list which is a little bit higher than we were before.

Thank you very much.

And next we will go to Ashar Khan with Visium Asset Management.

Good morning. Wayne, can I just ask you, you mentioned the Vermont decision would occur by the middle of the year. Could you just tell us why the middle of the year? What happens by the middle of the year that makes that decision-making process come to a conclusion?

Well, there's a number of factors. Again, we're expecting that the NRC will move forward and some time within this time frame we're expecting to get a license renewal from them. That's a critical issue. At the same time as we've indicated before, there are substantial expenditures, refueling outage and things of that nature that occurred later in the year that somewhat force our hand in terms of make something decisions relative to the future of this plant and we do not -- it's not really timely to get into what those choices are, but they are critical choices that we'll need to make probably somewhere around the midyear.

It's choices that certainly affect all of you and choices that affect 650 people that work at that plant, and like some of the business leaders have pointed out, time is running out in terms of Vermont themselves, influencing the destiny of that plant, but we strongly believe, as obviously the Senate does, that this is federal jurisdiction and we have choices that need to be made and we'll make them at the appropriate time.

So we should not look at anything in the legislature, is that a fair point, happening? The Vermont legislature from your perspective?

Well we certainly are looking for support from the people in Vermont. We're looking for support for the utilities. We want to be regarded as good partners with Vermont, but at the same time, in some respects, they're -- we're being pushed into a bit of a corner here. And there is a point where there is a line in the sand and we have to make a decision whether we're pushed any further or not.

We're not ignoring the legislature, we're not ignoring the Governor, and we're not ignoring -- and I'm sure they're not ignoring the IBM or the business leaders and other people also. It's a very complicated situation, but, like we said, we will -- despite all of the different things that are said that may or may not be accurate, we're going to make the right decision for all of our stakeholders.

Okay. Thank you so much.

That concludes today's question-and-answer session. I would now like to turn the call back over to Paula Waters for any additional comments or closing statements.

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 220-2485. This concludes our call. Thank you.

And that concludes today's conference and we thank you for participating.