安特吉 (ETR) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Entergy Corporation second-quarter 2015 earnings teleconference. At this time all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference call is being recorded.

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

Good morning and thank you for joining us. We will 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 will turn the call over to Leo.

Thank you, Paula, and good morning, everyone. Consistent with the first quarter, Entergy's second-quarter performance was in line with our expectations. Operational earnings per share were $0.83, about where we planned to be and we are on track to meet our full-year guidance.

Given market conditions and recent business developments, current indications point to utility, power and other earnings near the lower end of the 2016 range that we outlined on Analyst Day, still meaningful year-over-year growth in the base utility business.

We remain on track to achieve our financial outlook for 2017. To achieve the expected growth we made notable progress on our 2015 to do list as shown on slide two. These important tasks are key steps in moving forward with our near and longer-term strategies for the utility as well as Entergy wholesale commodities.

At the utility, the strategy we are implementing is centered on our opportunity as well as our obligation to invest capital in order to replace aging infrastructure, strengthen reliability, meet economic development and other growth needs and ensure that the environmental profile of our generation fleet is in line with the evolving regulatory framework.

We are also taking steps to facilitate this investment by combining the Louisiana utilities. In July, Entergy Louisiana and Entergy Gulf States Louisiana filed a unanimous settlement to combine the two companies. Pending action from the Louisiana Public Service Commission later this month, closing is on track for the fourth quarter.

In May, the New Orleans City Council approved several significant matters paving the way for more economic and efficient service for the city's residents. First, the transfer of the Algiers assets in New Orleans to Entergy New Orleans which shifts approximately 22,000 customers to the utility. And second, the $99 million securitization financing which includes three components, the recovery of hurricane Isaac storm costs, $75 million in cash storm reserves for electric restorations, and nearly $6 million for restorations for the gas system. This financing, completed in July, gives Entergy New Orleans a fully funded storm reserve.

We have come a long way since the devastation of Hurricane Katrina 10 years ago. The New Orleans City Council recognizes that our city is stronger when its power infrastructure is stronger, more efficient and more reliable.

Taken together these actions will benefit Entergy New Orleans and its customers in several ways. Stakeholders will benefit from a more streamlined and efficient regulatory process. The utility will be better able to attract capital at reasonable rates because it will have an expanded balance sheet. We will also have stronger liquidity which will be stable and it will secure lower cost efficient generation needed to more reliably serve its customers.

We are also pleased that representatives of the New Orleans City Council expressed interest in exploring Entergy New Orleans purchase of one of the units of the Union Power Station. We will be filing an application later this month seeking City Council approval for this transaction. The purchase of the Union Unit will take the place of the Power Purchase Agreement that had been previously approved by the City Council. We believe the purchase of the Union Unit is an ideal way to meet New Orleans' generation needs at approximately half the cost of building a comparable new unit.

We made other notable progress on the generation investment front. In May we announced the results of the request for proposal for long-term capacity in the [Amit] South region of Louisiana which generally covers the southeastern part of the state. Consistent with the views of an independent monitor, the Entergy Operating Committee elected to proceed with the self-build option. Next summer subject to regulatory approval, we will begin construction of the St. Charles Power Station, a natural gas fired combined cycle generating plant located in Southeast Louisiana along the Mississippi River industrial corridor. Entergy Louisiana plans to file for regulatory approval with the LPSC in the third quarter of 2015. We anticipate that the plant will begin commercial operations in the MISO market by summer of 2019, one year ahead of the schedule we presented last November at EEI.

In June, Entergy Texas distributed the final documents for its 2015 RFP which seeks both limited and long-term resources. In the long-term portion of the RFP, Entergy Texas is seeking up to 1000 megawatts of CCGT capacity and energy located in the western planning region of the state beginning in the summer of 2021. Entergy Texas intends to offer a self build option into the 2015 RFP that can provide its customers long-term capacity, energy and in-region reliability benefits.

Entergy recently provided notice that it plans to issue another RFP for new CCGT capacity beginning in the summer of 2020. Again this is one year earlier than we previously indicated. This RFP will seek long-term capacity and energy in the west of the Atchafalaya Basin planning region or WOTAB and will include a self build alternative. Capacity is needed in this region of Southwest Louisiana to mitigate supply constraints as well as to modernize aging infrastructure. Selections for both RFPs in Texas and Louisiana are targeted for early to mid-2016.

Regarding the four-unit Union Power Station transaction I mentioned earlier, we continue to anticipate a closing by the end of 2015. Entergy Arkansas and Energy Gulf States Louisiana are on track to purchase their respective units.

In addition, as I stated, Entergy New Orleans is now positioned to seek regulatory approval to purchase one of the facility's 495 megawatt trains in place of Entergy Texas. We heard the positions of the commission staff and other parties in Texas and did not see a viable path forward. We have concluded that the parties in Texas prefer a long-term market tested capacity solution located in the state of Texas. Our RFP is seeking exactly that.

Our objective is to obtain the support of the staff and customer groups for our approach to meeting generation resource needs in Texas. We look forward to continuing to work with the Public Utility Commission of Texas and other stakeholders to develop strategies to meet the state's future generation resource needs.

We also continue to make productive investments in transmission. In April we announced that in the fourth quarter of 2015, Entergy Arkansas will begin constructing a new approximately $62 million transmission line from Monticello to Reed crossing parts of Drew and Desha Counties. The project will include expanded electrical facilities including a new substation in Reed to move power more reliably and efficiently into the region.

Also in April, Entergy Louisiana filed for certification of an approximately $57 million transmission line in Southeast Louisiana with an in-service date of December of 2018. This project is expected to lead to $515 million in savings to Louisiana customers over its first 20 years which will be realized through a lower fuel adjustment clause.

We are taking advantage of MISO market opportunities to meet the needs of the changing generation landscape. In May, we announced a significant $30 million transmission investment to upgrade the connection of the New Orleans Metro area to Ninemile 6, a Michoud generating facility which currently supplies the area was placed in service in the 1960s and will soon be deactivated. The upgrades we are making now are required by MISO prior to deactivation.

In June, Entergy Gulf States Louisiana filed for certification of an up to $187 million transmission project with an in-service date of June, 2018. This project will expand capacity in the WOTAB region in order to strengthen reliability there. It will also facilitate industrial growth.

Improvements to ETI's transmission system are progressing including upgrading of existing transmission lines and the construction of three new transmission lines receiving PUCT approval in 2014 and 2015. The new transmission line projects totaling about $165 million will add approximately 64 miles of 230 kilowatts transmission lines along with other transmission facilities. These projects are expected to be in service by the summer of 2016.

Entergy Mississippi has four transmission projects in various stages of development. These projects represent more than $280 million in investments in Mississippi to support economic growth and provide additional reliability. In-service dates are scheduled in 2018.

As we have said many times before, one of Entergy's priorities is to invest in infrastructure to better serve our customers while maintaining reasonable rates. Our rates across all classes are approximately 20% below the national average. Industrial rates in Louisiana and Texas are 15% to 20% below the national average. In addition, there is every indication that natural gas prices in the United States will retain their competitive advantage for some time in relation to the rest of the world.

We believe that these low energy costs combined with our competitive power rates and other regional advantages will continue to attract jobs and businesses to the communities we serve. The resulting increase in industrial and others sales can and will facilitate our investment opportunity. It is important to remember however, that there are significant drivers of the need for that investment in addition to sales.

On that note, I know many of you have questions as to why industrial sales were lower this quarter following seven straight quarters of robust growth. Macroeconomic factors as well as outages by some of our large customers masked expansion by others as well as the fact that other new customers began to come online. Drew will provide more detail in a minute but the vast majority of projects in our plan that were in advanced stages of development earlier this year remain on course.

The fundamentals driving the industrial renaissance in our region, low natural gas prices, sophisticated connected infrastructure, a ready, talented workforce, all remain strong. We therefore continue to be optimistic about the opportunities for sustained industrial growth in our region.

The significant economic development prospects for Southeast Louisiana in particular have garnered recognition from the federal government. Last month the US Department of Commerce named the New Orleans to Lake Charles Chemical Corridor to a program launched in 2013 designed to accelerate the resurgence of manufacturing in America. This designation may result in federal incentives and grants for the 12 new regions selected of which ours is one. Entergy is proud to have worked with local officials and other stakeholders to help this area achieve this distinction.

All of this progress as well as that made in the first quarter of this year is due to the sustained hard work of Entergy employees, Entergy's collective efforts to work more collaboratively with our regulators and other stakeholders and of course our regulators' commitment to balance the best interest of our customers, our communities and this Company.

I will say again that we remain on track to execute our investment program. That is the backbone of the commitments we have made to our customers and other stakeholders. We continue to make progress on short and midterm objectives and expect substantial gains to result from that progress. We are doing what we said we would do and there is every reason to believe that we will achieve the financial performance that we have targeted.

The EWC strategy revolves around executing well on what we control, the operations of the plants and the commercial transactions to hedge the risk. In the second quarter our plants ran well. Aside from Indian Point 3, the EWC nuclear fleet delivered approximately 92% capacity factor which includes a 34-day outage to refuel Pilgrim. As many of you know the transformer outage at Indian Point resulted in a 16-day shutdown of Unit 3. You have heard me say before that EWC is a volatile business. We felt the negative impact of that volatility this quarter, must as we felt the positive impact in past quarters.

Average Northeast power prices for the second quarter were more than 40% below last year's levels. Moreover, forward power prices continue their decline following an average of more than 6% for our plants in the Northeast since the end of March this year. These low prices are coupled with a market structure that does not reflect the value of nuclear power.

Congress continues to indicate its concern about these specific market structure challenges. On July 8, the Chairs of the Senate and House Committees and Subcommittees responsible for energy and power, Sen. [Rakowski] and Congressmen Upton and Whitfield, communicated this concern in a letter to the Federal Energy Regulatory Commission Chairman, Norman Bay. In the letter, the Committee Chairs raised concerns about organized wholesale electricity markets including the impact certain market rules were having on reliable base load plants including nuclear plants and ultimately on consumers.

Entergy shares these concerns and we are encouraged by FERC's willingness to consider these issues. We are also hopeful that FERC will take substantive actions as soon as it can.

Our mission at EWC is today what it has always been, to optimize asset value and minimize risk. We continue to pursue this mission through effective commercial operations and by vigorously pursuing fair regulatory processes and frameworks.

The latter would include an improvement in the design of the Northeastern power markets as well as constructive outcomes on Indian Point. On that note, over the years many different studies have provided clear evidence of Indian Point's importance to the region. We saw the release of another last month by the Nuclear Energy Institute.

This study found that Indian Point contributes an estimated $1.6 billion to the economy of New York State annually and $2.5 billion to the nation as a whole all while contributing to New York state and national clean air goals. Quantification of these important benefits reaffirms the value of this facility and provides yet another reason why we believe Indian Point must and will operate into the next decade at the least.

That said, based on 2015 guidance, EWC is currently less than 15% of Entergy's earnings. Our robust utility growth grounded in $8 billion of investment and $3 billion to $4 billion in rate base growth both through 2017 will continue to reduce this percentage.

Also as most of you know, the US EPA issued the final version of its Clean Power Plan yesterday. The rule is complex and it will take time for us to conduct a full analysis. While we continue to be concerned about the legality of the EPA's approach, that analysis will focus on five key issues. One, the compliance timing; two, the requirements the rule will impose on each state; three a state's ability to elect a mass-based approach and establish a trading ready plan; four, the impact on the nation's existing nuclear fleet which in 2014 comprised nearly 63% of the US's emissions free generation; and five, the overall impact the rule could have on our customers. You should expect to hear more from us on the final rule in the weeks and months to come.

In conclusion, I would note that as we have said in the past, our business is a long-term play. Short and even midterm volatility is embedded in it but that does not detract from this Company's strong fundamentals. We are confident that the growth opportunity in our utilities service area is intact, that we have a solid strategy to realize that opportunity, that we remain focused on managing risk and preserving optionality in EWC and that we will vigorously pursue our business plans and continue to make productive investments that help achieve long-term growth.

As a result, Entergy's performance for the quarter as well as the year is in line with our expectations. Earnings expectations for 2016 remain in sight and we are on track with our 2017 outlook. As we noted last quarter, we expect that the stability and financial flexibility created by our actions this quarter, this year and indeed over the last several years will put us in a position to begin to act on one of our major objectives of sustained dividend growth starting with a discussion with our Board as early as this fall.

With that, let me turn the call over to Drew.

Thank you, Leo. I will start by covering our second-quarter results and then I will turn to our longer-term financial targets.

Slide three summarizes consolidated earnings per share. In the second quarter of 2015, Entergy earned $0.83 per share, in line with our expectations. Additional details on the results are provided in the press release and slides published this morning.

I will cover some highlights on the results starting on slide four where utility, parent and other had combined earnings per share of $0.87 on an adjusted basis. This compares to $0.98 per share last year. Details of quarter-over-quarter variances can be found in Appendix B1 of the release and here are some of the key points.

Despite a 0.5% decline in sales volume quarter-over-quarter on a weather adjusted basis, our overall net revenue variance was positive. This is partly driven by capital investments that benefit customers such as the new Ninemile 6 plant. Residential sales growth also contributed as well as new industrial customers and expansion projects.

The increase in net revenue was offset by a corresponding rise in related depreciation, operations and maintenance expenses and other items. O&M increases not offset in net revenue include an increased nuclear related expense of about $0.09. Over half was from increased Nuclear Regulatory Commission oversight at the Arkansas Nuclear One plant. Earlier this year, ANO was placed in column four of the NRC's reactor oversight process. The increased levels of cost for ANO are expected to continue into 2016.

I will take a moment now to talk a little more about industrial sales volume this quarter on slide five. In total, the segment was down 1.5% driven by our existing customers. Refineries were down the most quarter-over-quarter due to their turnaround season. We anticipated a more significant turnaround season than last year however, it was a bit more extensive than we expected due to macroeconomic factors such as high product inventories and a strong dollar.

Chloralkali was also down quarter-over-quarter and more so versus our expectations. Utilization from this sector was lower than anticipated due to unplanned outages compounded by margin pressure from lower demand on the market's recently added supply including our customers.

The decline in our existing large industrial group's mass growth from expansions and four new customers who began to ramp up this quarter. Continuing a trend from last quarter, these new customers and customer expansions are coming online and ramping up more slowly than expected. We will talk more about that later as part of our forward-looking view.

Switching over for a minute to EWC, slide six indicates operational earnings per share this quarter were about breakeven as expected. You may recall that we said on the first-quarter earnings call that the bulk of 2015 earnings were completed at that time. The quarter-to-quarter decline was driven by a $5 per megawatt decrease in revenue on the operating nuclear plants and lower volume from the 34-day refueling outage at Pilgrim compared to none last year.

This decline in EWC nuclear revenue was the primary factor in the operating cash flow change as shown on slide seven. Also reflected was improved net revenue at the utility largely triggered by productive investments put in service to benefit customers.

For the full-year view on slide eight, today we affirmed our 2015 earnings per share guidance with a midpoint of $5.50 and a range of plus or minus $0.40. Recognizing we still have the summer to go, we remain on track at each of our segments to meet full-year expectations. You may recall that we expect some tax items to come into play this year but we currently do not expect any tax items in the third quarter.

Slide nine recaps the 2015 guidance midpoint for utility, parent and other adjusted for weather, tax and special items and 2016 and 2017 midpoint outlooks. These outlooks are consistent with our previous disclosures last year at Analyst Day and at EEI. The slide also provides 2013 and 2014 results on a comparable basis.

This presentation illustrates how the base business has grown with expectations for continuing growth through 2017. The two main drivers for this growth are making productive investments and improving our utility return on equity as shown on slide 10.

Importantly, our plans for capital investments to modernize our infrastructure, maintain and enhance reliability and meet new compliance standards have not changed. Our 2016 rate base growth includes the Union Power Plant acquisition which approved by the required regulators would contribute roughly $0.02 per share per month in 2016.

While we have made some adjustments to the structure, our regulatory procedural schedules in required jurisdictions still allow for us to close by the end of the year.

In addition, we have moved up the projected in-service date of the St. Charles Power Station project. Assuming LPSC approval next summer, the new construction drawdown schedule would accelerate about $0.03 per share of AFUDC into 2016 and $0.08 per share into 2017. Approximately 90% of our $8 billion of planned investment from 2015 through 2017 will fall under a formula rate plan, rider or other constructive regulatory mechanism.

This percentage includes the forward test year FRP proposed in the Entergy Arkansas rate case. New rates will be effective by early 2016 for the rate case and in early 2017, if changes are warranted in the first FRP review.

Regarding sales growth for the balance of the year, we are already seeing evidence that the refining sector is once again performing as expected. However, with the chloralkali markets challenged the balance recently added supply, overall usage from these customers for the remainder of the year may not reach the levels we had anticipated. Still, new customers and expansions are coming online. Previously we had indicated that the vast majority of our large industrial customers were already under construction or had reached their final investment decisions. This is still the case.

However, we have seen them trail their own expectations the last couple of quarters. Of 17 large industrial projects expected during the year, 14 are complete or under construction. Of the 14, most have experienced delays getting online and a few have lower ramp rates than expected or lower peak usage than expected.

Of the three that are not under construction that currently are delayed and represent only about 0.1% of our expected industrial sales next year. O&M expense is another element of managing our return on equity. We are anticipating some benefit over time from the rolloff of temporary nuclear compliance costs and an estimate -- an approximate 50 to 75 basis point increase in discount pension rate to 4.75% in 2016 and 5% in 2017.

Looking further ahead, we expect our capital investments in plant infrastructure, transmission and other distribution system improvements will openly lower O&M costs for our customers while enhancing reliability in our service territories. We will persist in looking for every opportunity to control O&M costs as part of our plan to meet our commitments to all our key stakeholders.

Given current considerations such as capital investment, rate actions, cost changes and interest rate assumptions, our financial outlook continues to support our previously stated expectations for utility, parent and other earnings per share. As illustrated on the slide for 2016, we are currently near the lower end of the range.

For EWC, EBITDA projections have declined on slide 11. Our expected energy and capacity prices have dropped by $1 to $2 per megawatt hour since March 31. As you know, wholesale prices are volatile. We continue to follow our hedging philosophy that allows us to benefit from upward price movements while protecting against operational and credit risks.

All in all our actions this quarter and plans for the future represent sizable utility, parent and other earnings growth potential in the coming years. The fundamentals in the utility business to achieve this growth are in place including our solid credit profile reflected on slide 12. Backed by these credentials, we are maintaining a sound financial foundation to make investments and better serve our customers.

We will continue to execute on the plan we have laid out for you. Every plan faces challenges; we are confident in our ability to meet them and succeed. Our mission as a Company is to create sustainable value for our four stakeholders -- our owners, our customers, our employees and the communities we operate rate in. That mission is foremost in what we do every day.

And now the Entergy team is available for questions.

(Operator Instructions). Greg Gordon, Evercore.

Thanks. I have two questions. At what point when we are looking at the 2017 midpoint outlook do you reassess the ramp rate on the industrial projects that are already up and running and the expected in service date of those that are still in queue? And give us a full update, it would seem that you really wouldn't have visibility with any degree of certainty until some point in early mid-2016. Is that fair?

Greg, this is Theo Bunting. As part of our planning process we try to get as much information around as we possibly can and I think in terms of when you would expect us to see some updates relative to that would probably be pointing toward EEI in that timeframe. As you said and as Drew mentioned in his opening comments, that information does change from time to time and our expectation is we will try to stay abreast of that as best we can and continue to update it as new information becomes available so that we can roll that into our overall expectations.

Greg, this is Leo. I will just add while we -- and we have that this since the beginning as it relates to the addition of these customers, they are big projects, $1 billion investments, some cases $10 billion investments. Schedule is always an issue in that kind of thing. Our sector has the same issue when we build big projects that are first in the kind or unique or whatever. The issue here is while it is coming and some may come early, some may come late, they may ramp differently, the investment profile that we have got between now and then remains intact. And as you recall, the way the business model works, rate base growth is kind of what we are targeting here.

And so if you look out there whether they come in a little bit late, a little bit early doesn't really change when these power plants are coming. The only changes we have made I think Drew outlined them in a little more detail so did I in the script, is a couple of the capital projects that we had are actually coming up earlier than we had originally planned just given the timing and the need. And it is a combination of this growth from the sector but also the need to replace the aging infrastructure that we have and the opportunity to get these things done and constructed. So it is not just the sales piece of it that we need to look at it from a timing standpoint, it is coming. Some of it is coming later because of the size of the projects and other factors but the investment profile that we have got over the next several years through the first part of the decade is pretty much on track.

Understood. So to get to your guidance aspiration for 2017 then, if we flex expectations for topline revenues from industrial, you would have to either readdress your expectations for revenue requirement from other customer classes or flex your cost spend?

I think that is true and on a short-term basis. As Leo said, these productive investments we would expect to ultimately get into rates and if the sales aren't where we would expect them to be in any given period, you are right, we would have to adjust in another area.

Okay. Second question is on EWC. Obviously the power curve has come off quite a bit in New York and New England. Can we attribute that to winter premiums coming off or is it summer discounts getting steeper, some combination of both? And do you think there is any marked activity that you can see in the foreseeable future that might reverse that trend?

Greg, this is Bill. A couple of things. Obviously we have seen gas prices come off tremendously, probably $1 since last summer. We have also seen some folks take some steps to try to mitigate and gas supply issues, that type of thing in terms of using LNG facilities for base loading of plants, that type of thing.

So I think there is a number of issues in the market that have driven those prices down. As we look forward, we are slightly bullish gas prices. We look into 2016 that increases a little bit over time but we are seeing some movement in New England in terms of some market structure improvements that would come on in the 2017, 2018 timeframe and some energy price formation issues that could be constructive.

I don't anticipate at this point seeing the numbers we saw in 2014. That was largely driven by the polar vortex and kind of the aftermath of that. But we do see some constructive positive steps from an energy price formation perspective.

The reason I ask is because you moved your hedging -- the construct of your hedges around a bit for next year and hedged up just a fair amount more. But there were no more demonstrable changes in your hedge profile beyond 2016. Is that a function of your point of view?

Yes, that is a function of our point of view, and to be frank what we are seeing out in the market as well. There is a little bit less liquidity out in the market. Obviously we don't want to put ourselves in a situation where we are locking in at these low prices at this point in time. So we are of evaluating that as we go and we think there is some upside.

Thank you.

Paul Patterson, Glenrock Associates.

Good morning. Just I guess I wanted to follow up on that letter that you mentioned from Rakowski and some other Republican leaders regarding market reforms. And I noticed it as well and I guess what I am wondering is how quickly do you think anything from that will actually come about and I mean -- I don't know, they also threatened legislation that they couldn't get it done.

I don't know I just was wondering if you could elaborate a little bit more what you think the practical benefit of that would actually maybe be?

Sure. As it relates to that letter, I think it is on track with our general thoughts in terms of what needs to happen in the market. We have had similar discussions with the ISOs and a number of other stakeholders. We think that in general depending on what gets implemented, there is upside potential of say $3 to $6 a megawatt hour as a result of these changes to energy price formation.

Now the question on timing, this will come probably in increments and as you look at the timing of being implemented, you are probably looking at a timeframe of 2017, 2018 before they could actually make those changes to their systems and get those in place where we would see that uplift.

Now the exception there is what we have got going in ISO New England as it relates to the winter reliability program. That is currently being reviewed by FERC as we speak. We could see some uplift there in the upcoming winter if we get a decision in our favor as it relates to that.

So it will kind of evolve over time but we see that happening across the next five years or so, three to five years.

And it will be a series of steps is that we are talking about I guess as opposed to one sort of legislative (multiple speakers) ?

That is what I would think, Paul, I think just having discussions with the ISO, there are some practical issues you have to deal with in terms of how you can change the systems associated with that and so there more likely would be steps taken along the way as opposed to just one big massive change.

Okay, great. On Friday there was an order out of FERC that denied the authorization that subsidiaries were seeking to issue and sell securities and what have you. I can't recall seeing that before with FERC. I think it is kind of run of the mill maybe I am wrong so I was a little surprised to see that they rejected it. I know that you guys can without prejudice you can refile. I was just wondering, is there any significance to this or is this just sort of a hiccup that happened because of the format which they seem to be unhappy with or how you guys reported it? Could you just elaborate a little bit more on that?

I think you hit on most of it in terms of the format. And they have a way of using backward-looking results to assess what the coverage ratio ought to be and we had suggested some changes to that and they didn't want to put them in.

So I think it is a bit of a technical challenge but we should be able to put the new filing in and get that complete fairly quickly.

Okay. Thanks a lot.

Michael Weinstein, UBS.

Good morning. It is Julien. So perhaps first question just as it relates to Texas and the station and the decision to pull that out, I would just be curious, could you jive that with the RFP and what the ultimate thought process is around pursuing self-build options or acquisitions on a rate base? I suppose what drove the decision, provide a little context there and ultimately next steps?

Julian, this is Theo. As Leo indicated, really in Texas it came down to -- it was clear that a clear path in Texas that the parties really preferred a long-term capacity solution located in the state of Texas and as he said earlier, our Western RFP is seeking just that.

Our objective in Texas is to obtain support of the staff and the customer groups for approaches that meet the generation of resource needs in Texas and clearly as the record indicated as it relates to Union transaction, that was not the case. And as Leo mentioned in the script also in his opening comments, there has been interest expressed in New Orleans and we are pursuing regulatory approvals, we will pursue regulatory approvals in New Orleans with the City Council relative to that.

The second part of your question I am not sure I understood when you said kind of what is next?

Right, I suppose fundamentally there is not necessarily any opposition to doing rate based or self-owned options per se. This was more about a locational angle on the plant rather than your ownership of the unit per se, correct?

We don't believe there is any opposition to self build. Matter of fact, if you go explore the record, they were mentioned by the other parties around another option being a self build option in Texas. So we don't clearly believe there is any opposition to it.

It was just a preference in Texas, the interveners and other parties in Texas. And clearly, I think their views and comments relative to other options made it clear that a self build is something that could be pursued in the future.

Got it. Then separately on transmission, I know you provided some background here, but I would be curious; I suppose MISO did an out-of-cycle study on MISO (inaudible) during the quarter. Could you elaborate on that and as it relates to the studies that you discussed yourself at the various capabilities? And ultimately, how that jives with your capital budgeting process, and if that is already reflected in your CapEx expectation?

Sure, I'm not -- we have had one out-of-cycle project, I believe, which was the Lake Charles project. But in terms of just transmission and MISO in general, as you know we have a fairly robust transmission investment in 2015 through 2017 capital cycle. We really nearly doubled in 2015 versus 2014.

And as Leo went through his opening comments, he mentioned a number of transmission projects that are currently in the process of being approved and will be underway shortly; approximately almost $800 million of transmission projects. So we feel good about the fact that we have transmission opportunities.

In terms of the MISO study, the VLR study in that MISO accelerated six projects into MTEP15 and largely most of those projects were already in our plan but where we do see potentially is an opportunity for acceleration of some of those projects and the fact that MISO is moving forward in that process gives us our confidence that these projects will be approved by MISO.

And then perhaps just to clarify, is that already reflected in your CapEx outlook as it stands today?

For the most part, yes.

All right, great. Thank you.

Dan Eggers, Credit Suisse.

Good morning, guys. Leo, just on the industrial outlook and kind of maybe the longer-term prospects, can you share a little bit about how much time you are spending on economic development and [quoting] industrial customers, you were pretty busy last year. How is that changing if at all right now?

I will let Theo jump in but we continue to work that process across all of our jurisdictions. Seeing a lot of success obviously with things that are under construction in the near-term in the Louisiana, Texas, Arkansas and others but we've -- as we mentioned earlier, as we went through our reorganization last year one of the things that we had done was beef up business in the economic development functions and we continue to have those folks out working the process, things like the region designation here in Louisiana and other things we're working to sure we help continue to promote the region.

So I guess how much time we spend -- quite a bit. Some people -- we have departments that is their full-time job working with the states and obviously states aren't backing off of this either as all of them are working very, very diligently to try and help bring economic development. So that includes -- we continue to utilize our site selection database, we continue to try and pre-certify sites, we continue to build transmission into areas that could house more manufacturing but for the fact that they are not necessarily ready yet.

So all of those things both our activities from an economic development operationally and also from the regulatory process, we are continuing to push it forward on all of that. Theo, I don't if you want to add anything?

They one thing I will add in addition is we continue to work very closely with states in which we serve. As Leo mentioned in the regulatory environment itself, if you will look at some of the transmission projects he mentioned that we have done, some of those transmission projects are specific around working to foster economic development in the regions. So we have a lot of people dedicated full-time to helping the regions that we serve grow; that is part of our growth story.

So I guess if I think about the economic growth from here -- maybe I will say it a different way. If you look at industrial demand or industrial recruitment today, are the whiteboards more full or less full than they were six or nine months ago? Meaning is the population of opportunity changing as you talk to customers?

I would say we are continuing to pursue more opportunities and trying to keep that pipeline growing. That is our objective quite frankly is to do as much as we can to continue to see growth in the pipeline in terms of where we are now versus six months ago. I would have to go back and look at the data specifically but it is something we focus on and we understand that having a strong pipeline is really key to having success in the economic development area.

I will just add the investments that we are making in the system make again the area more conducive so we are modernizing the generation fleet. We are improving the fuel costs because of that, we are improving reliability because we are building things like the Lake Charles Transmission Project that is going to not only help serve the customers that are under construction down there but it is going to beef up the system down there to be able to handle more. So we kind of get out.

While we are replacing the aging infrastructure, beefing up the reliability to meet new requirements and to meet existing construction of those facilities, it puts us in a better position to bring those in so the investment profile helps fulfill not only what we are doing right now but bring other stuff in as well.

Separate from market reforms, when you guys think about your model and your point of view, do you see gaps against the fours, where you think New England New York prices should be today and maybe help quantify what you think the delta is with the selloff in power prices?

I think what we are seeing obviously from a supply perspective is continued growth in the supply in Marcellus. Obviously that is creating a discount to Henry Hub and as look forward in terms of our pricing, we don't see those numbers going above four anytime in the near future. We see that staying fairly consistent with now but again, I said we are bullish so we see it rising but not getting above that level.

So that is kind of where we sit and obviously the power prices are commensurate with that as you look at that from an energy price perspective.

That is true. I will just add that once you get out a little further on the curve and Bill mentioned this earlier, there is a bit of a liquidity discount that is out there and we have seen this in the past as you roll the props, some of that comes out of the market and improves things a little bit but some of that had gone away last year but it seems to have reasserted itself again.

So I guess but for some backwardation because of liquidity you think the curves are pretty realistic to where the fundamental value is?

No, I said we are still slightly bullish for 2016, we are a little bullish and that kind of increases as we go out over time but relative to where we were a year ago, it is obviously a lower price level.

Okay, got it. Thank you, guys.

Jonathan Arnold, Deutsche Bank

Good morning. Leo, could you just help us kind of parse your statement about the dividend still being potentially up for discussion? In the fall when we look at your utility, parents and other, the low end of guidance for 2016 would put the payout ratio above the 65% to 75% target a little bit so are you going to be thinking about other things beyond payout?

What we are looking at is a long-term perspective, Jonathan, and the growth in the business so I think the way I have characterized it in the past is that we are looking out several years. We are looking at sustained dividend path, we are not going to jump around with it to follow when earnings go up a bunch one year, raise it a lot when they don't go up, raise it a little. We are trying to get ourselves more of a glide path view about the long-term prospects of the Company.

As we have said, we look at the investment profile that we have for the aging infrastructure, for the reliability requirements, for environmental needs as well as the growth we are seeing in the business and that helps facilitate all of that. And we see an upward sloping long-term trajectory that would indicate to us that the time is right to look at when to start to follow that earnings path and that could be as early as this fall.

Okay, thank you.

Anthony Crowdell, Jefferies.

Good morning, just two quick questions. I wanted to follow up on Dan's question, your view on gas, is it closer to the $3 number or the $4 number? Second, in your comments, Leo, you had stressed or stated that EWC makes up roughly 15% of the consolidated Company's earnings. Where is the sweet spot there with EWC?

I think on the gas price, you guys know where it is right now, we are closer to the $3 level than the $4 level at the front end of the curve.

As far as the sweet spot, I wouldn't say there is a sweet spot or not, it is just the fact of the matter is right now the investment profile that we have in the utility is very, very robust. The opportunity for returns are very good there. The need for the investment because of as we have mentioned before, 75% of our nonnuclear facilities and the utility are over 30 years old. I mentioned the Michoud plant for example in my prepared remarks. That is a plant that has been online since 1960s and there are more efficient ways currently once we beef up the transmission system and meet the MISO requirements to be able to serve that load and deactivate that unit. We have deactivated 25 units since 2010 and we continue to go on a path to have more and bigger units in that realm as we add to the system.

The risk/reward trade-off is just better at the utility then it is at EWC for our deployment of capital. So it is less than 15% and I'm being generous with that because I take out the tax benefits that were showing up in the 2015 numbers before you get close to 15% in 2015. And if you just project out forward what is happening with the utility business and the growth profile we have there, 15 become smaller -- the 15% become smaller and smaller as we go through time given that trade-off.

So there is no sweet spot. It is just a fact and as it relates to the business itself, it is a different business, should have a different investor mix, should have a different dividend profile, should have a different commercial reality. And so our objectives right now are to grow the utility business and we have no plans to grow the EWC business, the merchant business given that risk/reward trade-off and the different investor base.

But the fact is over time between now and 2020 in particular, we are going to become in more and more and more a utility, that is just a fact.

Great, thanks for taking my question.

Michael Lapides, Goldman Sachs.

Just I wanted to make sure I understood something on the utility capital spending levels in the utility demand trends. It strikes me that your tone today was that the demand trends a little bit softer or maybe a little bit more delayed than expected. But then when you talked about the capital spending trends and the generation, it seems as if several new projects have moved forward a year or so.

Just curious, seems like if demand were pushed out a little bit maybe projects would get pushed out, not accelerated but can you just kind of walk me through the difference there?

I will start and let others jump in, Michael. Remember, for almost a decade we have had a -- I think we called it the portfolio transformation strategy where we have been working to replace the generation fleet over the course of the last several years, maybe not quite a decade but maybe close. We have seen an ever-changing landscape of reliability requirements out of the NERC and certainly a continuation of environmental policies, etc. whether it is MATS or now CPP or what have you.

All of those things have created a real need for us to continue to modernize our generation fleet, to add new transmission facilities and to make investments in environmental compliance and we are going to continue to do that. We are at a point now where as we change out that generation fleet, it is turning more and more absent the union projects, turning more and more to construction to replace that aging fleet.

So that part of the process is reasonably agnostic to what the demand growth is. You are changing out a megawatt for a megawatt because you are getting a more efficient new power plan in place versus one that with O&Ms creeping up, etc., because of its age. That just happens over time. So that has really not changed one way or another.

The growth whether it is a little bit delayed or not is still pretty crisp and we are making plans to build generation to replace the aging infrastructure as well as meet that new demand. If a plant slips a year, it doesn't really change the capital program and in fact even as long ago as Analyst Day when we were asked so what could beef up your capital program, we said not very much because you've got to plan this stuff in advance. So even back then we had mentioned that the capital program around the edges wouldn't change a lot as long as the demand growth stayed in a recently close proximity to what we were seeing.

So delays one way or the other were what we mentioned back there might have some impact that projects might move around but that they were still going to show up. So all it is is sharpening the pencil on the need for the facilities and when we can get it done based on the age of the fleet, the interaction with the transmission system, and when the stuff is showing up. And right now there hasn't been big enough shifts in anything to change the construction program versus where we were.

Yes, a couple of projects we are going to market test for an earlier project. We are bringing the new generation here at St. Charles Project online a little earlier. We brought Ninemile 6 online early and I think we have learned from that in terms of the timing it takes so we were embedding in some of these projects how long it would take to go from planning to development to construction and we have proven we can do it faster and at lower cost. And that is what happened to Ninemile and that is what we would anticipate would happen at St. Charles Project and likely happen in some of the other stuff as well.

The construction program meets many needs, sales growth is one of them and an important one. We have to be ready, willing and able to serve these customers when they show up and if they show up six months later than they had planned, we still want to be there with a reliable system when they show up and that is really all we are doing.

Got it. One question on EWC, what do you see as the impact and do you think it is already embedded in market expectations for some of the new pipeline projects, maybe Constitution which is coming online in New York? There is also some smaller pipelines that actually came on in New York pretty recently as well as some of the more longer dated projects, the Eversource inspector project for the Kinder Morgan one to get new gas up into New England?

I think the Eversource vector project is one that is included in the current market expectations. Obviously in New York I think those are progressing well and are also kind of already included in the market. I think the issue is going to be how do some of those get paid for specifically in New England and what is the cost recovery mechanism going to be and how is that going to work? Is it going to go through the legislative process? But I think a lot of that is built into expectations going forward.

Got it. Thank you, guys. Much appreciated.

David Paz, Wolfe Research.

Good morning. I believe your 2017 utility outlook expected 3.25% to 3.75% retail sales growth on average. Just want to make sure is that still -- does your outlook still expect to reflect that figure?

We have continued to look at that and as Theo mentioned, we will have a fuller update later this fall, probably at EEI. But our expectations given a number of changing variables are that we are still in the middle of that range.

Great. I don't know if you have given this before, but what would every 100 basis point change in that figure do to your 2017 target all else equal?

I don't know that we have published a rule of thumb on the growth rate of industrial change. Certainly a 1% change in our existing base is about $0.11. So it is like $0.02 for industrial; $0.04 for commercial; $0.05 or $0.06 or so for the residential fee. And that is a 1% change across all segments on the existing piece but I don't know that we have published a rule of thumb around sensitivities for the industrial change in the growth piece 1%. It would be a little different than the existing piece because the existing piece has the demand charges built into it already and so you would only be seeing the variability around the Entergy piece that we actually sell to the customer. So that is about 50% of the margin for the industrial piece. It seems like that might be about $0.04 but I don't have those numbers in front of me.

Okay, no, that is helpful. Thank you.

I would now like to turn the call over to Paula Waters for any closing remarks.

Thank you 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. As a reminder we plan to file our quarterly report on Form 10-Q with the SEC this week. 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 filing that provide additional evidence about conditions that existed at the time 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 44024303. The telephone replay will be available until August 11, 2015. This concludes our call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.