安特吉 (ETR) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Entergy first-quarter 2015 earnings release and teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference, Mrs. Paula Waters, Vice President of Investor Relations. Ma'am, you may begin.

Good morning, and thank you for joining us. We'll begin today with comments from Entergy's Chairman and CEO, Leo Denault; and then Drew Marsh, our CFO, will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions.

In today's call, management will make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information concerning these risks and uncertainties is included in the Company's SEC filings.

Now I'll turn the call over to Leo.

Thank you, Paula, and good morning, everyone. 2015 is an important here for Entergy because it will be one in which we continue to execute the strategy that we have been pursuing for some time. As we report results for the first quarter, I'd like to start by putting the progress we've made in some perspective.

Two years ago, we laid out an ambitious agenda for the future we wanted to create, one in which Entergy was growing because our communities and customers were prospering. One goal in that agenda was to deliver stability and efficiency by maintaining solid financial footing, and by making Entergy a more nimble organization, one more aligned with the changing energy landscape.

To that end, we joined MISO, and also began the process, transform the way we work by removing costs from our business, and aligning talent and resources with strategic Company imperatives. Another goal was to provide clarity, a well-defined path forward identifying what business initiatives the Company would focus on, and a timeline for execution. We accomplished this by first articulating our vision and mission for the future simply but precisely.

We filed and concluded several major regulatory proceedings, including four rate cases, representing 80% of utility retail sales, which provide clarity on future earnings opportunities. We also ended our efforts to spin-off and merge our transmission assets to ITC.

Finally, we said that our well-defined path would focus on seven major strategic imperatives, which we refined down to -- growing the utility business, and managing risk, and preserving optionality at Entergy Wholesale Commodities. As many of you may recall from our Analyst Day presentation last June, we outlined our plans to achieve these imperatives.

Over the past year, we have continued to provide greater detail as to how we intend to capture the opportunities available to us. And today, the picture is much more complete. We have filled in details of what we aim to achieve, how we will achieve it, and a timeline for execution.

In terms of performance, results, and growth, we continue to be in line with our expectations. In the near-term, financial results for the first quarter of 2015 include operational earnings of $1.68 per share. That's a strong start to the year. And while it's still early, it is clearly in line with our expectations for full-year results. Drew will elaborate on this in a few minutes.

On our strategic efforts, a brief look back confirms the soundness of a number of the business decisions we made over the past two years, many in partnership with our regulators. For example, joining MISO has proved enormously beneficial to our customers. In the first year alone, customers across the utility realized nearly $240 million in energy-related savings, exceeding expectations.

Consistent with our expectations, the utility also realized substantial capacity-related savings, due to the lower reserve margin required within MISO's larger footprint. With an industrial renaissance underway in the Gulf South region, fueled by low natural gas and electricity prices, it became clear that Entergy's utility business was well-positioned to capture an enormous growth opportunity.

In order to meet this opportunity, we expanded the number of people dedicated to growing our industrial customer base. This team laid out a detailed map of where the opportunities would likely materialize, and developed customized strategies to serve these new and existing customers.

Through an effective partnership with state and local officials, we have worked tirelessly to help attract industrial customers to the region. And as of March 2015, the Entergy utility business has experienced seven straight quarters of industrial sales growth. As we said we would, we are leveraging this opportunity this industrial renaissance provides to keep our customer rates low while modernizing our operations, strengthening reliability, and growing rate base.

Some important examples of this include our announcement last year to purchase the Union Power facility in Arkansas; the completed construction of Ninemile 6 ahead of schedule and under budget; and planned transmission builds in Louisiana, Texas and Arkansas. Importantly, we are also taking delivery steps to create the financial flexibility we will need to drive even more growth.

Our current effort to combine Entergy Louisiana and Entergy Gulf States Louisiana is one good example. Obtaining authorization for a purchase capacity rider in Texas, in addition to the existing transmission and distribution riders, is another.

Focusing specifically on 2015, as you can see on slide 2, it promises to be another busy year. We have set our sights on accomplishing a number of important tasks this year, and we are on track. For example, Ninemile 6 began commercial operation in late December, and we were pleased to welcome Louisiana state officials and members of the LPSC to its official grand opening in January.

We announced the construction of a new high-voltage transmission project necessary to maintain reliability in the Lake Charles area load center, among the largest in Entergy's history. MISO Board approved the project last week, and we will be filing for LPSC certification very soon. In Arkansas, Governor Hutchison signed legislation that establishes a formula rate plan with a forward test year, and also addresses evidentiary considerations in setting return on equity, and the proper method to determine the AFUDC rate.

Because it eliminates the need for a major base rate case every two to three years, this law will allow Entergy Arkansas to align rates with investments in a timely manner, to focus time and resources on activities that create sustainable value for this state, including job growth. In Mississippi, between the recently approved rate case and a new law passed this quarter, we now have a well-defined rate structure, including forward-looking features, available credit, faster recovery, that will allow us to attract new customers and businesses to the state.

We are also making progress on tasks that we have targeted for the second quarter. For example, last Friday, Entergy Arkansas filed its base rate case requesting to recover costs that result in a $167 million increase, including a 10.2% ROE, a formula rate plan with a future test year. The latter would be per the recently approved legislation. We expect new rates to go into effect in early 2016. New rates associated with the formula rate plan would go into effect in early 2017.

It is worth noting that after this case is resolved, we expect to have two utilities operating under formula rate plans with forward-looking features. In fact, nearly 85% of expected rate base in 2017 will be under FRP's or other formulaic ratemaking mechanisms.

Over the next few years, at the utility, our priority is to continue to implement our resource plan, which we are calling Power To Grow, and which is designed to allow us to support the economic growth in our service territory, and maintain reliable service to existing customers, all while keeping rates low. And by 2020, we see a need to construct approximately $3.7 billion in new generation resources consisting of six new power plants.

We also expect 635 miles of new and upgraded transmission to come online by 2022. First, most of these projects are subject to approval by our regulators, and we will be making the necessary filings seeking those approvals. Let me give you a bit more detail about both the generation and transmission needs that comprise the utility's Power to Grow.

On the generation front, the utility's supply plans include, for example, three newbuild CCGTs. More specifically, we are planning for, whether through self-build or other agreements, one 800-megawatt plant in the Amite South region, pending the results of the RFP that is underway, to solicit proposals for new generation in this region of our system. Another plant would be in WOTAB, specifically within the Lake Charles area, which is experiencing rapid industrial expansion. Completion of this facility is targeted for 2021.

Third would be in Texas, specifically the Western region, also by 2021. New generation resources are in addition to the planned acquisition of the Union Power facility as well as the construction of Ninemile 6. It is important to note that, as with the 2020 Amite South facility, to help build projects for the other new plants I mentioned, would be market-tested via an RFP or other mechanism, as directed by our regulators.

But the need to modernize as well as to meet growing demand is clear. In addition, to support near-term needs, we anticipate adding one CT plant in the Lake Charles, Louisiana area by the end of 2020, as well as a CT in New Orleans in 2019. Both of these plants will further diversify our generation portfolio by providing quick-start peaking capability to serve growth and meet locational reliability needs.

On the transmission front, our resource plan includes significant investments in transmission to meet new and evolving NERC requirements, as well as facilitate committed and expected growth and attract future growth. Major projects include the $62 million project we announced this month in Arkansas to build 24 miles of line in part to attract new industrial customers. In Texas, over the next two years, we have approval to build three 230-kV transmission projects totaling more than 65 miles of line and more than $150 million in investment.

In Louisiana, we plan to make significant investment, about $56 million in new high-capacity transmission facilities in Amite South, which will make economic energy available to our customers, and ensure reliable service in the heart of this industrial load pocket. In addition, we intend to build an approximately $187 million project, including contingency, in the Lake Charles area, an action recently approved by the MISO Board.

I'll make a note here that everything I've just listed has been part of our capital plan for some time. We began by identifying the context in need, moved to the level of investment we thought it would take, and have now named the specific projects, which merely provide more detail and clarity.

As I have noted, the Power to Grow projects will bring significant economic and reliability benefits to the customers and communities we serve, and, if our plans are approved, will translate to $8 billion of capital expenditures over the next three years, resulting in $3 billion to $4 billion in incremental rate-based growth, $1.05 billion to $1.1 billion in utility net income, and utility parent and other midpoint earnings-per-share of between $4.50 to $4.90 by 2017.

In addition to this activity, we are in the early stages of reviewing new investments that could provide significant value to our customer. As we have before, we are identifying the need and context. And as these specifics begin to emerge, we will provide more detail.

For example, in Louisiana, the staff of the Public Service Commission issued a proposed order establishing a pilot program that would deploy instruments to stabilize natural gas costs, including acquisition of supply to a direct interest or joint venture. Recent Mississippi legislation also supports such investment by providing for rate recovery of capital investment in natural gas reserves in order to foster long-term stability in the cost of fuel.

We will also continue to evaluate opportunities for operational, reliability, and customer service improvements, as the industry continues to evolve. And these could involve investments in the grid. We will work again in partnership with regulators and policymakers to achieve legislative and regulatory frameworks that support constructive outcome, both for our business and those it serves.

This is a long list. But we know that everything on it is important. If we continue to make progress on this list, as we expect to do, we continue to deliver good customer service with a more modern and reliable system at competitive return levels, and if we do it all while maintaining our rate advantage, we will have created value for all of our stakeholders. The stability and financial flexibility created by these actions will help to put us in a position to discuss a dividend increase with our Board of Directors, a discussion that could come as early as this fall.

Turning to EWC, here, too, over the past two years, we've made progress on resolving numerous uncertainties and improving productivity. Most importantly, our EWC plants have operated safely and reliably. The nuclear fleet's average capacity factor over the past five years has exceeded 90%.

We also made it a priority to better align our commercial and operational team, as this alignment would be the foundation of everything we sought to achieve. The substantial value subsequently created by our risk management and hedging activities, particularly during periods of extreme market volatility, is evidence of our success in this regard.

Our confluence of factors resulted in much lower prices and less volatility this past winter in the Northeast markets. Our portfolio remains well-positioned to capture upside from volatility, as we see reserve margins decline and inadequate fuel supply infrastructure for the foreseeable future.

We also made progress towards resolving some of the uncertainty surrounding the license renewal at Indian Point. We did this in part by successfully arguing that the plant is grandfathered from review under New York's Coastal Management Program. While this decision is being appealed by the New York State Department of State, we continue to believe that, based on the facts, we will be successful in extending the license life of Indian Point into the next decade and beyond. We remain committed to working constructively with the State of New York and regulators in this process.

While the recent shutdown of Vermont Yankee, as well as the ongoing investment growth at Utility, has diminished its absolute and relative size, EWC remains an important asset in the Entergy portfolio. As we look to the future, we will continue to focus on operational excellence and adaptive commercial approaches. We will also continue to advocate for changes in price formation and reform of the Northeast market structure.

Continued out-of-market policies and intervention at state and regional levels have made clear the critical need for federal guidance and direction in independent system operators responsible for competitive regional markets. In particular, we believe guidance is needed in implementing new policies for both capacity and energy pricing, which are market-based, promote transparency, and provide fair value for attributes provided by each type of generating resource.

Entergy has been an active participant in many proceedings supporting fair and competitive market. While some initial signs of problem recognition are emerging, generators in restructured markets must see constructive changes implemented in the near future. Without such change, sustainability of otherwise viable existing generating units will continue to be at risk, especially given the investments required to properly maintain and reliably operate these facilities. We remain committed to working constructively with the FERC and the ISOs to achieve fair and balanced competitive markets in the Northeast.

In 2017, based on market prices at the end of March, we estimate EBITDA of $540 million at EWC. Two years ago, we redefined our mission to be a world-class energy company in business to create sustainable value for all of our stakeholders. We set plans and strategies to meet that aim, and I am pleased to report on our achievements for each stakeholder.

Our owners, we said our objective is to deliver top quartile returns. In 2014, we did so. Our customers, we said we wanted to achieve best-in-class service. Most important way to do this by keeping power flowing, and when the lights do go out, getting them back on as quickly as possible. This June, the Southeastern Electrics Exchange will recognize Entergy with its Chairman's Award, our transmission team's work restoring power quickly and safely after last year's tornadoes.

Also this year, for similar reasons, and for the 17th year in a row, EEI awarded us with its Emergency Recovery Award. We said we would maintain our rate advantage. Today, our average retail customer rates across all classes are 20% below the national average. We said we'd maintain our commitment to support the communities we serve. Last year alone, we contributed more than $16 million to numerous agencies, foundations, and other organizations, all working to make our communities better.

In recognition of our performance on this front, we were recently named to Corporate Responsibility Officer Magazine's ranking of 100 Best Corporate Citizens. We are proud to be number 36 overall, as well as the top-ranked utility.

And finally, to our employees, we said we would cultivate a culture that rewards and fosters achievement, and in doing so, that we would create a company that everyone is proud to call their own. This effort will never have an endpoint, but everything I've talked about today is evidence of our success on this front. And the credit goes entirely to the 13,000-plus people across Entergy.

So again today, it is clear that Entergy is on a path to create sustainable long-term value for its core stakeholders. We believe our track record of achievement over the past two years serves as evidence of what we can achieve in the years to come. Again, in terms of performance, results and growth at Entergy, we are where we expect to be, and we are on track to accomplish what we set out to achieve.

And with that, I'll turn it over to Drew. Drew?

Thank you, Leo, and good morning, everyone. Before I get to the quarter's results, I'd like to spend just a few seconds on our new quarterly earnings package. The release and appendices focus largely on results, while our forward-looking disclosures are primarily in the webcast presentation.

We've also made a few additions, some of which I'll point out to as I go through the results. In case you are having trouble finding a particular item, we have provided a cross-reference on page 22 of the release. Our earnings package is organized a little differently, but the disclosures that you depend on are still provided. I hope you will find the new items are responsive to your feedback. If you find that is not the case, please let us know.

Now let's turn to the quarterly results. Slide 3 summarizes first-quarter consolidated earnings-per-share. Operational results exclude special items from the decision to close Vermont Yankee and the ACM implementation in 2014. Operational earnings-per-share were $1.68 in the first quarter of 2015, lower than the $2.29 per share earned in 2014. The quarter-over-quarter decline was largely attributable to lower wholesale energy prices at EWC.

Slide 4 summarizes first-quarter EPS for the Utility and parent and other. Combined operational EPS was $0.97 per share in the current period compared to $0.90 in the first quarter in 2014. Utility net revenue was the biggest driver, and billed retail sales increased 1.5% on a weather-adjusted basis. Once again, the strongest growth was in the industrial class.

Quarter-over-quarter, non-fuel O&M increased mostly in line with our expectation. [Off-wood]expenses were higher by $0.07, due primarily to planned maintenance outages. Nuclear spending increased $0.04 due largely to higher regulatory compliance expenses. Other expense increases contributed $0.10 to the quarterly variance, most of which had direct cost recovery and net revenue, including energy efficiency costs and MISO administrative fees.

Utility first-quarter 2015 results included an income tax benefit as well. You probably noticed that we added a new adjusted earnings view that endeavors to highlight the underlying performance of the Utility business with parent and other, which, combined, form the basis of our dividend policy.

Turning back to industrial sales for a moment on slide 5, they came in 2.9% higher than last year. The growth was again across almost all customer segments. Chemicals saw the highest increase, primarily due to chloralkali and petrochemicals customers. Transportation segment was also strong. Other industrial sales increased -- oh, excuse me -- although industrial sales increased, they were lower than we expected due to customer outages and some delays with new customers and expansion projects.

Moving on to EWC, slide 6 shows both EBITDA and EPS for the quarter. EWC operational adjusted EBITDA was $254 million in the current quarter, about $200 million lower than last year. The closure of Vermont Yankee and its mostly unhedged position last year accounted for more than half of the quarter-over-quarter decrease.

Closure of VY also affects every line item, and that makes understanding detailed drivers difficult. Therefore, slides 27 and 28 in the Appendix provide additional information to help you navigate. Excluding VY, net revenue was still the main driver for the EBITDA decline, as wholesale energy prices in the first quarter of last year were significantly higher. Non-VY nuclear generation increased on fewer refueling outage days.

On an EPS basis, EWC's operational earnings were $0.71 per share, lower than the $1.39 earned a year ago. In addition to the drivers already noted, EWC had a higher effective tax rate and higher realized earnings on the decommissioning trust, about half of which was for VY.

Briefly moving to slide 7, OCF was $611 million in the current quarter, about $150 million lower than 2014. The most significant driver was lower net revenue from lower wholesale energy prices at EWC, partially offset by higher net revenue at the Utility.

Now let's turn to forward-looking information. Slide 8 summarizes our 2015 operational earnings guidance, which we affirmed today with the midpoint of $5.50 and a range of plus or minus $0.40. We are ahead of expectations through the first quarter, but it's still early in the year. And our expectations for the full-year remain on track with our original guidance.

As we look at the longer-term expectations, slide 9 summarizes our EWC EBITDA outlook based on market prices as of quarter-end. You will note that they have not changed much since the end of the year, despite the volatility between then and now. We are still bullish on power natural gas versus the current market, but not as bullish as we were. And that means that we now expect EWC's EBITDA will be below our previous point of view expectations.

That said, we've received consistent feedback that the POV-based EBITDA has been a source of confusion since we introduced it last summer. Markets have been within our point of view range and below our point of view at multiple times over the last year, proving again and again that EWC markets and, by extension, earnings, are volatile.

To simplify, we are returning to our previous practice of externally communicating only the market-based EBITDA expectation, since it is grounded in the reality of today. We will continue to provide our point of view on the market, but not the specific point of view EBITDA estimates.

While on EWC, continue to receive questions regarding impairment. As of the current quarter, we have not incurred an impairment loss, but we continue to monitor this issue, which includes consideration of the expectation of future economic conditions, particularly price levels, as well as the state of operations and the carrying value of the asset. Keep in mind accounting impairments would not affect our decisions with respect to continued operations of the plant.

Slide 10 reflects our 2017 outlook for Utility and parent and other. The Utility outlook remains on track for 2017 operational earnings of $1.05 billion to $1.1 billion. As we have said before, this includes a statutory tax rate and a pension discount rate of 5%. The foundation for Utility's growth outlook is its capital investment plan. Continue to expect 5% to 7% rate-based growth through 2017, led by the nearly $1 billion Union acquisition and other potential generations to refresh our aging fleet, as well as to meet new customer load requirements, and by transmission investments to meet NERC requirements and customer reliability needs with the industrial expansion.

In addition to the capital investment plan, we will need to execute on rate cases in Arkansas and Texas this year to achieve our objectives. A few final comments on financing activity before I conclude.

Entergy Corporation had $550 million five-year notes, which will come due in September of this year. We plan to refinance those notes in advance of the maturity date, possibly as early as this quarter. We are also amending Entergy Corp.'s $3.5 billion credit facility, along with $650 million of companion operating company lines of credit to extend for one year and to account for the ELL/EGSL business combination.

Lastly, on March 31, S&P revised its rating outlook for Entergy Corp. and its subsidiaries to positive from stable. S&P specifically noted increased focus on our regulated businesses, the expectation for above-average utility sales growth, the recently passed Arkansas legislation, and other factors that are expected to continue to strengthen our business risk profile over time.

As Leo said, we've made a lot of progress in the last couple of years, and remain on track to achieve our objectives over the next few years, and create real and sustainable value for our key stakeholders -- our owners, our customers, our employees, and our community.

And now, the Entergy team is available for questions.

(Operator Instructions) Julien Dumoulin-Smith, UBS.

Good morning and congrats on the quarter. Now, could we address, first off, the sales growth? You addressed it at length in the commentary, but perhaps can you jive the -- just the first-quarter 1.5% relative to the full-year target? And also in contrast, I see that the -- I suppose, in your guidance, you talk about utility revenue up $0.55 for the year. And you -- I think you hit it net about $0.25? So, a constructive commentary there. Where do you stand vis-a-vis the EPS as well? So, the percent change and the EPS on the utility, if you can.

Drew -- or Theo, why don't you start? And then Drew can --.

So, Julien, I'll maybe address your first question in terms of the growth. As Drew said, the 1.5% is primarily impacted by what we saw in the industrial sector in terms of where it came in at 2.9%. Most of that -- that was driven primarily in two areas -- the timing of new and expansion projects that we expected in the first quarter, as well as some one-time unexpected issues, obviously, to some of our existing customers.

And those two issues roughly represented about 50% of the difference in terms of where -- what we expected versus where we ended up. You know, so clearly, that means we've had some softening in the first quarter. Clearly, some of that we will see pick up as we go out into the year and in 2016 and 2017.

So it doesn't change our overall expectation as it relates to -- in relation to 2017 at this point in time. What I will also say, though, even with the 1.5% growth, as you mentioned, our revenues were still strong. And revenues got clearly much closer to our expectations. And so, it's still early and we're still assessing what we believe will be as we go through the year.

But I mean the first quarter delays clearly could dampen our 2015 results. But, again, as Drew mentioned earlier, we still see ourselves in our earnings guidance for 2015.

This is Drew. And I'll just add that, in addition to what Theo said, we do have some cost in that top line which are offset in O&M. So, I think in my comments, I talked about around $0.10 as other stuff is what some things like MISO costs and energy efficiency costs that were a little ahead of where we expected them to be. And they were offset in that net revenue line. So that's part of why the net revenue line is higher than maybe what you were anticipating as well.

Got it. But just to be clear on the sales growth, it's fundamental in delays not necessarily shift in the fundamental outlook for a decline in the commodities, et cetera?

Yes, I mean what we saw primarily was just shifts in timing. As we said, from an oil price perspective, we still don't see any significant impact. I mean, we fundamentally believe a large majority of our industrial growth through 2017 is coming from projects that are already in advanced stages of development. And first-quarter didn't change that.

And -- this is Leo. I'll just add we've mentioned this before, but I guess it just garners some reinforcement. A lot of these expansions into our new customers, they are big projects. And they target a date but it's not uncommon for most capital projects in the hundreds of millions of dollars or in some cases the multibillion-dollar range to slip a month or two here and there. So, we -- but that may or may not occur is in line with what we would've expected from time to time also.

And then secondly, if you don't mind, a kind of bigger picture question on dividend. You alluded to it earlier. What's your targeted payout ratio? Or how do you think about the dividend in the context of the EWC business and the utilities at this point or prospectively?

Well, from an EWC business, we don't think about it at all. The dividend is purely from utility, parent and other. And we had outlined at the Analyst Day our expectation that a 65% to 75% payout ratio of utility of utility, parent and other earnings was our target.

Got it. So perhaps in looking at that initially here, remaining towards the top end of that range, would that be a fair statement as you think about growing that in the 2016 timeframe?

Well, when we look at it, just to put some context about it, the -- if you -- our objective being to return capital to shareholders and to do it on a protracted sustained basis, we are looking to create an era of sustained dividend growth. So, as we look at the growth in that segment of the business, we are not going to chase the payout ratio and have the dividend jumping around a lot.

We're going to look for what is sustained growth in the business, and we'll make recommendations of the Board to put together a path with the dividends that achieves that, consistent with what those long-term earnings growth are -- would be. So, we're going to review that, as we always do every year.

But when we get into this fall, it's going to be reviewed in the context of the growth that we continue to believe is going to occur within that segment, as well as other factors that the Board will consider, like the reinvestment dollars that we have to put into the dividend, et cetera, or into the Utility business. But that's primarily the way we're thinking about it.

Great. Well, thank you for the time.

Thank you.

Paul Patterson, Glenrock Associates.

I was looking -- I was a little bit confused by the decommissioning benefit that you guys have in the release. As I recall, you guys were expecting the decommissioning expenses to increase. So I was wondering, is that decommissioning -- how should we think of that decommissioning and guidance? The decommissioning trust fund and what have you, and the benefit that you saw in the quarter versus the rest of the year?

That's a good question, Paul. So, when we were at EEI, we talked about $20 million to $25 million of net income drag from Vermont Yankee in 2015 and 2016, and then it kind of trails off to about $10 million after that. So, we do expect it to come down as critical aspects of the decommissioning process wind up -- wind off, I should say.

But -- and since EEI, and as we got closer to the actual shutdown date, and we started to need to make decisions around how we were going to manage that decommissioning trust, it became clear that we needed to be derisking that trust, as we move through the first phase of decommissioning, which caused us to have to turn over our portfolio a little bit more than we had previously anticipated. And so we are trying to do that at a nice ratable basis as we go through the year.

It started a little bit last year, and it will probably continue on into a little bit into the first quarter, maybe even next year. But it should be about $0.04 or so each quarter, is kind of what our expectation is. And that, over the course of the year, is going to take up a lot of the offset drag that we were anticipating for 2015.

So I think Vermont overall for the year would be anticipated now to be about flat or maybe even slightly positive. And I would say about flat is the expectation.

For the full-year?

For the full-year, yes.

Okay. So there's going to be -- okay. And then in terms of the zone changes in New England, I was wondering if there was any impact on you guys -- and this is in terms of the point of view change -- well, not the point of view change, but has there been any quantitative change in the point of view? I know you -- directionally, you guys are bullish, but has the been any -- anything in terms of your outlook for the markets that has changed quantifiably?

Paul, we have, in fact, lowered our point of view from a natural gas perspective. And obviously that flows through power prices. However, we still do remain bullish compared to the market overall.

As it relates to the zone in New England, it's really a tough call in terms of where those markets end up. We're still working through that. But really, there is a wide range of outcomes depending on supply/demand balance. And so, right now, I don't have anything to share specifically as it relates to a price range. We're trying to get more information from the ISO and further evaluate that.

Okay. Thanks a lot.

Thank you.

Greg Gordon, Evercore ISI.

Can you talk about the -- what your earned return on equity has been in Arkansas? And given the recent changes in the regulatory structure there, and your intent on filing under the new structure, whether you think you'll see -- over what trajectory you think you'll see improvement in that return?

Yes. Sure, Greg. This is Theo. I believe if you look at the packet, the webcast packet, with the slides, normalized was about 5.9% for the last 12 months ending March 31 of this year. And clearly, with the reform and with the rate case filing, we expect to see that change. And if you think about the impact of the rate case filing and the revenue impacts, as well as net income impacts, we see Arkansas, as we go forward to 2016 and beyond, with the formula rate plans for the test years making significant movement to earnings there allowed returns.

Okay. So you think the balance -- that you'll be litigating that case for the balance of 2015. And to the extent there is a change, and we'll see that show up in 2016?

Yes. I mean there will be an effect. There's I think a long statutory period in Arkansas. And while we don't have a procedural schedule set just yet, we would expect to see the case playing out through the remainder of 2015. And we would see, at the latest, rate impacts 10 months from the filing date, which was last Friday -- this past Friday.

Great. Thank you.

Thank you, Greg.

Daniel Eggers, Credit Suisse.

Just going back to the point of view comment or kind of the change there, I think previously it looked like you had about $100 million or $150 million of POV uplift for 2017. How much has that point of view changed? And does that have any bearing on kind of the 2% to 4% EPS growth target you guys provided starting back at your Analyst Day?

This is Drew. I'll take first crack at it and then I don't know if anybody else will jump in. But the -- as it relates to the EBITDA uplift that we were talking about before, I think it was $650 million to $700 million. And as we've kind of gone along and prices have stayed low, and we've gotten closer and closer to those periods, it's less and less likely that we would make it into the range.

And so, our point of view has slipped in the time frames that we've talked about, below that $650 million threshold. I think, last quarter, we were right about the edge, and now we are a little bit below. So, that's what's happening with it. As we look out, we still have a bullish point of view that it starts to rise as we get beyond the period that we are talking about. But it's been pushed further out as we've gone along.

As it relates to the 2% to 4%, I think the primary driver at the utility continues to be right on track, the utility and the parent and other, combined entity. In fact, we've given those ranges for 2016 and 2017. Those are still very much intact. In fact, we have some -- we are looking for additional opportunities maybe even in the 2017 timeframe.

But as EWC is the volatile part of that earnings mix, it doesn't look like at this point that that -- that EWC would allow us to make it back into that particular range. However, you never know. Stranger things have happened. And 2017, in particular, is still pretty far away. So, we wouldn't say we can't make it, but right now, as we look at our view, we are probably just below that level.

Got it. Thank you. And I guess just on the gas reserves and rate base conversation, can you maybe just share a little more detail on how those two processes are going to work? And what you guys have from an overall annual natural gas burn rate?

In terms of -- Dan, it's Theo -- in terms of how the process works, I mean, we have the pilot program Leo mentioned in Louisiana, and we'll be filing comments relative to that this month. And that will progress based on the Commission's directive, in terms of how they see that -- how that moves along.

At this point, we are just -- we're exploring our options. And the timing of that is going to depend on the form of the investment, and again, how that plays through the regulatory process. In terms of gas burn today, I'm not certain I can tell you exactly how much it is. We'll probably just have to follow-up and give you that information.

I would just say, Dan, I mean, obviously given the nature of our fleet, our gas burn is pretty significant. I don't, off the top of my head, have the -- how many [b's] a day we are talking about, but it's trivial.

Well, I'll say -- this is Drew -- I'll say it's going to be a small amount of our overall gas burn to begin with. You know we are not going to be able to jump in and hedge our entire supply, as Leo said. I mean, it's very large. I mean, we're spending in the neighborhood of $3 billion a year on gas supply -- maybe a little lower, since prices are lower today.

But it's a significant amount. And so, we would be trying to carve out, at least initially, a small layer that would allow us to kind of get our feet under us and really appreciate how this is going to work through all the various operational processes, as well as regulatory processes.

And I don't want to ask a detailed question, but I'm going to anyway. The EWC guidance for this year at $0.70 versus the $0.71 you did in the first quarter, I know you don't want to update guidance too early, but is there a plausible case where you guys would not make money at EWC for the rest of the year?

Well, if prices went lower, yes. But I don't think that's our expectation. I think we're a little ahead of schedule through the first quarter. And we expected to earn a little bit more. But, as we've gone along, the nature of that EWC business in particular has gotten highly seasonal and anchored towards really the winter timeframe. And so, while we do expect to make a little bit more money at EWC over the course of the year, the bulk of the earnings at this point are completed through the first quarter.

Got it. Thank you, guys.

Thank you.

Steven Fleishman, Wolfe Research.

Just a little more flavor this morning on the natural gas pilot. And I guess you mentioned both Louisiana and Mississippi. Could you maybe give us a sense of just rather than an amount of gas, just potential investment size? Is this tens of millions? Hundreds of millions? Billions? Just some rough idea of potential scale of these investments.

This is Drew. I'll -- it's certainly not in the billions at this point. And tens of millions is probably too small. So it's going to be, I'll say, in the neighborhood of $200 million to $300 million maybe initially in that range. It could be a little higher or lower but something like that -- if we decide to move forward with this.

Is that just Louisiana or is that both states?

No, that would probably be both states. I mean, Louisiana would be the bulk of it. Mississippi's fuel burn is considerably smaller than Louisiana.

Okay. And just -- you mentioned in your prepared remarks that you have no impairments on EWC, as of the current quarter. Just -- why did you even mention that? Is there something that you are particularly focused on there, to bring that up?

Well, it's something that we get questions on from time to time. And because of that, we think it's something that's been on investors' minds. So, we wanted to just make sure we were forthright with a discussion about it, and make sure that everybody knew that it is on our radar screen. It's something that we are paying close attention to. That was the primary reason for it.

Okay. And just lastly, in the kind of overall utility outlook that you provided through 2017, would you say the kind of improved Arkansas environment was kind of assumed in there? Or would you say it's a potential kind of upside to the utility plant?

Hi, Steve. This is Theo. I mean, clearly, as we laid out our plan, we had an expectation about improving our results in Arkansas. And so I would say yes, if you look at the growth that we see, there are primarily three main elements, especially when you move from 2015 to 2016 in the Utility. So it's the sales growth; it's regulatory improvements in Arkansas; and clearly, it's the Union investment. And so, we did have an expectation around that.

In terms of whether there is upside or not will be more defined as we go forward, and we move through the process of the case itself, and then to build the case. But we had an expectation to provide improved results in Arkansas as we laid forth -- as we laid our plans out for 2016 and 2017.

Okay, thank you.

Thank you, Steve.

Michael Lapides, Goldman Sachs.

Hey, guys, two questions. One, any plans regarding -- both near-term and long-term -- regarding the holding company level debt? Meaning is your anticipation to leave that debt there? Is your anticipation to make sure all of it is financed long-term and there's no short-term? You've done a good chunk of that already.

Is the goal to kind of pay that down, so whenever EWC has cash flow, you can kind of get back to the mode, like you used to do a number of years ago, of being able to use EWC's free cash to buy back stock? Like, how are you thinking about short-term, one or two years? And then a three to five year cycle about what to do with the parent debt?

All right. I'm not sure where to start on that one, Michael. There's a lot going on in that question. The -- in terms of the capital structure, I talked a little bit in my prepared remarks about the parent financing that we have coming up. I think we are going to do the fixed rate notes, we are going to refinance those this fall -- or maybe even much earlier than that.

We have a lot of financing activity going on, on the second half of the year, with the parent note coming due, the anticipation of the Union acquisition, and all of the -- and the financings that will have to go on with that at the utility level. And then, because of the ELL-EGSL combination, we have to redo revolvers for those businesses. And while we are at it, we're going to go ahead and redo the entire thing.

So we're going to probably do that a little earlier in anticipation of the ability to close that combination. So, those are the main activity things.

In terms of going forward, we are continuing to anticipate that we are going to carry that short-term debt for a while, and that it's going to continue to float. So the short-term rates haven't moved too much, and certainly we have a lot of exposure to interest rates on the pension side of our books. So, any movement on that side is balanced pretty well on the interest rate side for the roughly $1.5 billion of short-term debt that we have.

So we wouldn't anticipate that we would change that any time soon. And as we think about the overall parent debt capital structure, including both the short-term variable and the fixed rate piece, we are still targeting that 18% to 20% parent debt to total debt ratio. And so we're going to probably be a little bit above that this year as we close through the, I guess, the Union deal. We'll probably draw a little bit more on that.

But over the next few years, we do see it trending down and provided we don't come up with a whole bunch more investment opportunities. So, those are -- I think those are kind of the main things. And we're going to continue to kind of maintain our capital structure at the parent level for the time being as it is today. But obviously, we'll be looking for other ideas and opportunities as we go along.

Got it.

And I don't know if I answered everything that you had in your question, Michael, but --?

Yes, that's perfect. An unrelated question. A while ago, a year or a year and a half ago, there was a lot of discussion about Palisades in terms of operating performance -- NRC oversight, a handful of other things. Can you just kind of touch base on that a little bit? It's been a while since I think you've talked about it, so I just want a sanity check what's out there.

Sure. Michael, this is Bill. Look, Palisades has been running extremely well, above the 90% capacity factor. You know, the one issue we have out there is the embrittlement issue, which is still under review by the NRC. We expect clarity on that by this summer. And again, I think, based on our own analysis, we really do not believe there's any issues there, and hope that that will get verified in July. But, no, Palisades is back on track and operating very, very well.

Got it. Thanks, guys. Much appreciated.

Thanks.

Jonathan Arnold, Deutsche Bank.

Just a quick one back on sales growth, I'm afraid. I was just curious on slide 5, where you talk about existing large customers down largely on outages. But you know it would have been up absent outages. Can you -- how significant was the outage piece? And can you just size that relative to the delays you saw on the new customer stuff?

Yes, Jonathan. This is Theo. I think I mentioned, as part of the first question, roughly, when we -- in terms of where we landed versus our expectation, it was approximately half and half. About half of it was really due to timing of new and expansion projects, and half was really due to really one-time unexpected issues or outages with some of our existing customers.

Okay, great. That was it. Thank you.

Thank you, Jonathan.

Thank you. And in the interest of time, our last question will come from the line of Charles Fishman of Morningstar. Your line is now open.

My Arkansas question got answered, so let me move to Mississippi with just one question. Is the new law -- I mean pre- the new law, you can make an investment in infrastructure; let's say the development didn't happen, and the Commission could come back with a used-and-useful argument and disallow that investment. Is that what this eliminates?

Charles, when you speak to the new law, I assume you're talking about what was passed recently as it relates to the ability to make investment in anticipation of economic growth?

And --

Yes. The thing you referred to on the first page of your release.

Yes. I think it, really more than anything, gave clarity as it relates to how you can make that investment in anticipation of that growth. But I think it really goes to what's happening in Mississippi in terms of improving relationships, and their recognition that -- of the importance of economic development and growth, economic growth in the state.

Again, the clarity, I think, was more around, you can make that investment and there's an expectation -- we should have an expectation that that investment would be viewed as necessary, and from a rate recovery perspective, make it less controversial.

Okay. That was it. Thank you.

And you know, Charles, I'll just add what we've been doing over the last couple of years is working really in partnership with all of our stakeholders in each jurisdiction. And that partnership is around what it is that we are all jointly trying to accomplish. We are all jointly trying to accomplish economic prosperity in the communities that we serve, and that they regulate or that they have administrative control over, if you are the Governor or what have you.

So we spend a lot of time on that overall objective. And that objective being to promote economic development and prosperity in those economies. That has resulted in a better understanding between us all about what our objectives are that we share and what processes that we can utilize that we can agree on. So, at the end of the day, legislation and laws aren't all going to show up the way we would design them. They are going to come up the way that, jointly, between us, Governors, legislative bodies, economic development agencies and regulators, believe is in the best interest of those -- of their jurisdictions and our customers.

And so what I think you've seen in Arkansas, what you've seen in Mississippi, what we've seen with the proceedings around capacity and transmission distribution riders in Texas, what we hope to see as we continue to go forward in Louisiana is, things that work to promote job creation and economic prosperity and better communities where we serve. That's really all we've done.

But it should turn out well for us if it turns out well for the communities. And I think that's what you're seeing in those types of legislative efforts and regulatory outcomes that we've seen over the last couple of years.

Okay. Thanks, Leo. But it certainly gives you more confidence in your 2017 outlook for the utilities in what's happened in Arkansas and Mississippi recently?

It absolutely does. And the reason that confidence is important is, if you think about what is happening in all these jurisdictions, in Arkansas, we have a major customer coming online. We have a steel mill that we provide a lot of electricity to in Louisiana. We've got significant growth along the Gulf Coast as it relates to the petrochemical business.

And in Texas, we see not only the industrial expansion, but in Texas, we see significant commercial and residential loan growth as well. And we have to be ready, willing and able to serve that load, and do that while we continue with the process we started on 10 years ago of refreshing the generating portfolio, and continuing to meet an ever-evolving set of reliability requirements as it relates to transmission.

And so, the confidence is good, because it gives us the ability to deploy that capital more quickly and in ways that better meet those customers' needs. So it's a win-win for everybody.

Okay, thank you.

Thank you.

Thank you. And I would like to turn the call back over to Ms. Paula Waters for any closing remarks.

Thanks. 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. We will file our Quarterly Report on Form 10-Q with the SEC within the next two weeks. The Form 10-Q provides more details and disclosures about our financial statements.

Please note that events that occur prior to the date of our 10-Q filings that provide additional evidence about conditions that existed at the date of the balance sheet will be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. Our call was recorded and can be accessed on our website or by dialing 855-859-2056, conference ID 87440452. The telephone replay will be available until May 5.

This concludes our call. Thank you.

Ladies and gentlemen, thank you for your participation on today's conference. This concludes the program. You may now disconnect. Everyone have a great day.