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    Entergy Corp (ETR)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$53.59Last close (Apr 23, 2024)
    Post-Earnings Price$52.83Open (Apr 24, 2024)
    Price Change
    $-0.76(-1.42%)

    What went well

    • Entergy received approval for $1.9 billion in resiliency investments, with $1.5 billion to be spent in the next three years, including an incremental $700 million for Louisiana, which could increase near-term capital expenditures and drive growth.
    • Entergy is adding large industrial customers, including data centers, and ensuring these customers support infrastructure investments, benefiting both the company and other customers, thus driving load growth and revenue.
    • Entergy is maintaining strong credit metrics, achieving the 14% FFO-to-debt target and working towards 15%, aligning with rating agency expectations, which supports potential rating upgrades and financial flexibility.

    What went wrong

    • Moody's continues to maintain a negative outlook on Entergy despite the company's efforts to improve credit metrics.
    • Regulatory uncertainty in Louisiana regarding the Formula Rate Plan (FRP) process and rate cases may impact Entergy's financial performance, as settlement discussions are still ongoing.
    • The Waterford nuclear plant will operate at reduced capacity (90%) during the summer due to a transformer failure, impacting generation output until a new transformer can be installed.

    Q&A Summary

    1. Industrial Sales Growth
      Q: What's driving the stronger industrial sales outlook?
      A: We see significant growth from our traditional industrial customers along the Gulf Coast, who are online and taking power currently. Additionally, we have strong interest from data centers, metals, blue ammonia, and carbon capture sectors across Arkansas, Louisiana, and Mississippi.

    2. Data Center Investments Impact
      Q: How will data center investments affect earnings?
      A: The Mississippi data center ramps up over time, so its impact will be outside the three-year outlook period. While it will contribute about $150 million of new gross margin from 1.1 gigawatts of load, the associated infrastructure investments and financing costs will offset some of that on the bottom line.

    3. CapEx Plan Updates
      Q: Any updates on the CapEx plan given resiliency projects?
      A: We received $1.9 billion approved, with about $1.5 billion in the next three years, adding an incremental $700 million for Louisiana. We'll update the capital plan at Analyst Day, including effects of the rider and financing plan.

    4. SIRI Settlements Progress
      Q: What's the progress on SIRI settlements?
      A: Approximately 85% of the SIRI risk has been addressed through settlement. We're pursuing settlements with Louisiana stakeholders to resolve the remaining issues, aiming to avoid litigation.

    5. Credit Ratings Outlook
      Q: Can you update on credit ratings and FFO-to-debt ratios?
      A: Our FFO-to-debt remains strong, above the 14% target. We're in constructive discussions with rating agencies, and hitting our thresholds is important as we work towards 15%.

    6. Resiliency Filings in Texas
      Q: How is the Texas resiliency filing shaping up?
      A: We'll file in the second quarter, considering contributions from state grants and impact on affordability and credit. The investment amount may adjust due to growth in our service territory and upcoming legislative sessions.

    7. Data Centers and Customer Rates
      Q: Are there tariff changes for data centers to protect residential customers?
      A: We're ensuring data center pricing supports the needed infrastructure while protecting other customers. In Mississippi, we worked closely with the legislature to achieve this balance, and we'll apply similar principles elsewhere.

    8. Waterford Plant Transformer
      Q: What's the status of the Waterford plant transformer?
      A: A new transformer won't be ready by summer due to backlog. We have an interim transformer that will restore about 90% capacity by summertime.

    9. MISO Transmission Planning
      Q: When will MISO address transmission in Entergy’s zone?
      A: MISO is expected to release plans for our area later this year, focusing on long-term planning.

    10. Grand Gulf Nuclear Plant Utilization
      Q: Could Grand Gulf serve data centers to reduce disputes?
      A: Currently, the plant's output is contracted to operating companies for the life of the unit. We're exploring alternatives to mitigate litigation risk but have nothing to discuss now.

    11. Cogent Sales Margin Impact
      Q: Are low-margin Cogent sales affecting growth expectations?
      A: Cogent sales are low margin and were down this quarter, but incremental industrial sales support achieving our year-end objectives.

    12. Gas LDC Sale Update
      Q: Any update on the gas LDC sale timing?
      A: The sale is on schedule, with regulatory approvals progressing. We expect completion by third quarter of 2025.

    13. CapEx Split for Industrial Growth
      Q: What's the CapEx split between T&D and generation for new industrial customers?
      A: Both transmission and generation investments are needed. Data centers are likely heavier on generation and transmission, and planning principles are similar across all customer types.

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