Q4 2024 Earnings Summary
- Strong Industrial Sales Growth Driven by Large Customers: Entergy (ETR) is experiencing significant industrial sales growth, with industrial sales up 15% for the fourth quarter of 2024 and expecting industrial sales compound annual growth of 12% to 13% from 2024 through 2028. This growth is fueled by large customers, including data centers and industrial facilities, such as a new electric service agreement with a large customer in Mississippi and an anticipated capacity expansion with Meta.
- Increased Capital Investment Supporting Earnings Growth: ETR has increased its capital plan by $2.7 billion, primarily directed towards generation and renewables, to support customer growth and reliability. This increase has led to an upward revision of its long-term adjusted EPS growth rate, now projected to be well above 8% through 2028. The company notes that growth in most years is now greater than the previous range of 8% to 9%, indicating strong earnings potential.
- Strong Credit Metrics and Positive Financial Outlook: ETR closed 2024 with strong credit metrics, achieving a book FFO to adjusted debt ratio of 14.7%, outperforming rating agency thresholds. In December, S&P upgraded ETR's issuer credit rating, which should result in lower borrowing costs and benefit stakeholders. This strong financial position provides ETR with flexibility to capitalize on growth opportunities and return value to shareholders.
- The anticipated benefits from new large customers, such as Meta's expanded capacity needs, are largely outside the forecast period, suggesting that sales volume increases may be delayed.
- The company acknowledges that rates are expected to increase slightly above previous expectations due to increased investment before sales growth materializes, which may impact affordability for customers.
- There is uncertainty regarding the inclusion and impact of the nuclear production tax credit, as the company is still waiting on treasury guidance and it is not included in the forecast, potentially affecting credit metrics and financial outlook.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EPS Guidance (FY 2025) | FY 2025 | "$3.75 to $3.95 (maintained) " | "$3.75 to $3.95 " | no change |
Industrial Sales CAGR | 2024–2028 | "11% to 12% " | "12% to 13% from 2024 through 2028 " | raised |
Credit Metrics | 2024–2028 | "15% credit metric " | "15% FFO to debt ratio " | no change |
Capital Plan | 4-year | no prior guidance (Q3 guidance was for a 2024–2028 plan ) | "4‐year $37 billion capital plan, $2.7 billion higher than the previous plan " | no prior guidance |
Storm Cost Recovery | FY 2025 | no prior guidance | "$220M to $240M (85% in Louisiana; with $254M in Louisiana escrows and $83M in New Orleans) " | no prior guidance |
DOE Loan Applications | FY 2025 | no prior guidance | "$2.4 billion in DOE loan applications in the second phase " | no prior guidance |
Long-Term Growth Rate | 2024–2028 | no prior guidance | "greater than 8% through 2028 " | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Industrial and Large Customer Growth | Q1 focused on signing 8 new electric service agreements, incremental industrial sales (down 0.6% quarter‐over‐quarter) and broad sector diversity including data centers, metals and petrochemicals. | Q4 emphasized strong industrial sales growth (8% annual, 15% Q4), a robust outlook with a 12–13% CAGR, and adding large hyperscale data centers along with new electric service agreements with large customers. | Improved performance and optimism: More concrete growth numbers and expanded customer agreements in Q4 indicate a shift from cautious diversity to strong, measurable industrial growth. |
Capital and Resiliency Investments | Q1 highlighted Louisiana’s grid hardening plan including 2,100 projects over 5 years, a Texas resilience filing, and projects such as the Bayu Power Station with a total investment of about $1.9 billion. | Q4 announced an expanded capital plan of $37 billion over 2025–2028, increased investments in Mississippi and Louisiana, additional transmission projects and legislative support to drive resiliency and customer benefits. | Acceleration and increased scale: Investments have grown notably in both magnitude and coverage, signaling a heightened commitment to infrastructure and system resilience. |
Credit Metrics and Rating Agency Outlook | Q1 discussed a strong 14% FFO-to-debt ratio with ongoing debt issuance balanced over time and constructive discussions with rating agencies, though with a negative Moody’s outlook and mixed signals overall. | Q4 reported a solid 14.7% FFO-to-debt ratio, a forecast aimed at reaching a 15% target, and an S&P upgrade from BB+ to BBB–, suggesting improved credit standing and reduced borrowing costs. | Enhanced credit strength: There is a clear step-up in credit metrics and rating upgrades, reflecting improved financial flexibility and investor sentiment. |
Regulatory Uncertainty and Rate Adjustments | Q1 focused on resolving SERI-related risks through settlements across multiple jurisdictions, active rate case settlements, and frameworks to protect customer rates while managing industrial customer attractiveness. | Q4 continues to address regulatory issues through an active 2025 filing calendar, clarifying cost recovery for storm-related costs, and careful rate adjustments while leveraging accelerated reviews for renewables in targeted areas. | Moderate improvement amid ongoing challenges: While both periods deal with regulatory uncertainties, Q4 shows progress in developing structured rate adjustments and clearer cost recovery mechanisms. |
Nuclear Operations and Tax Credit/Capacity Challenges | Q1 discussed operational issues such as the Waterford 3 transformer failure and Grand Gulf’s refueling outage, alongside tax credit adjustments and capacity challenges related to industrial load planning. | Q4 focused on awaiting Treasury guidance for the nuclear production tax credit, state‐level discussions for nuclear development, and interest in tools like a potential Texas nuclear fund to manage risk, while maintaining bipartisan momentum for new nuclear projects. | Shift towards strategic repositioning: Earlier operational challenges are giving way to a more forward-looking approach in nuclear investments, though uncertainties around tax credits remain. |
Delayed Benefit Realization from New Large Customer Agreements | Q1 did not explicitly mention delayed benefit realization; focus was on immediate new electric service agreements with industrial customers, representing 1.1 gigawatts of new load and significant margin improvements. | Q4 explicitly noted that while new large customer agreements (including a Mississippi customer and an expansion with Meta) contribute to current earnings via AFUDC and related investments, the incremental sales volume benefits will materialize primarily beyond 2028. | Emergence of delayed realization recognition: A new qualitative insight in Q4 recognizes that substantial sales impact from new agreements will be deferred, highlighting a more nuanced understanding of future revenues. |
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Financing $3B CapEx with Minimal Equity
Q: How are you financing $3B CapEx with only $300M equity?
A: Entergy is optimizing operating cash flow, utilizing mechanisms like cash and CWIP, and ensuring large customers pay their fair share during ramp periods through options like KAYAK or minimum bills. This approach allows them to manage the equity need with only $300 million of incremental equity for the $3 billion in CapEx. -
Data Center Growth Outlook
Q: How do new data center customers impact growth?
A: The growth rate is now uncapped with a pipeline of 5 to 10 gigawatts, but each new customer is unique regarding the investment needed. Investments are driving growth, with $2.7 billion covering various investments. The exact impact on CAGR depends on the specifics of each customer. -
Plans for New Nuclear Projects
Q: What are your plans regarding new nuclear projects?
A: Entergy is exploring all forms of new nuclear, including large-scale reactors like the AP1000 and small modular reactors (SMRs). They have an MOU with Holtec and are considering technologies from GE and others. Their focus is on risk management and stakeholders' best interests, but there's nothing imminent to announce this year. , , -
Credit Metrics and Nuclear PTC
Q: Is the nuclear PTC included in your credit metrics?
A: Entergy has not included the nuclear PTC in their metrics as they await treasury guidance. They view it as credit positive and will decide how to proceed later this year if no definition is provided. -
ROE Outlook Amid Increased CapEx
Q: How are earned ROEs impacted by increased CapEx?
A: Entergy expects ROEs to improve over the forecast period from 9% to 9.5%, working with stakeholders to manage this as investments ramp up. They continue to expect this improvement despite increased CapEx. -
Dividend Growth Commitment
Q: Is the 6% annual dividend growth commitment firm given additional capital?
A: Entergy maintains an expectation of 6% annual dividend growth. While the payout ratio, historically 60% to 65%, may decline somewhat over the outlook period due to growth, they are not changing the dividend percentage. -
Rate Impacts and Affordability
Q: How do you see rates changing through the forecast period?
A: Entergy focuses heavily on affordability. They expect some increase driven by the forward curve on gas, with rates excluding fuel increasing about 3.5%, slightly above that range due to increased investments. Sales coming in after investments are expected to moderate rate impacts. -
Legislative Support in Texas and Arkansas
Q: What legislative activities support growth in Texas and Arkansas?
A: Entergy is working with stakeholders to facilitate economic development in Arkansas through potential bills aiding large customers like data centers. In Texas, they're focusing on growth elements and resilience, such as accelerated cost recovery and managing recovery of assets when resilience investments are made. -
Competition for Large Load Customers
Q: Who are you competing with for large load customers?
A: Entergy competes globally as data centers can locate anywhere. They offer a strong value proposition with a vertically integrated utility model providing complete technical solutions and strong community relationships, making them competitive worldwide. -
Gas Turbine Availability and Pricing
Q: What is the situation with gas turbine availability and pricing?
A: Entergy has secured turbines, transformers, critical equipment, and labor for announced projects and has capacity beyond that. The market is different from 18 months ago, with tougher pricing and higher costs for slots, but nothing materially changes their expectations.
Research analysts covering ENTERGY CORP /DE/.