Good day, ladies and gentlemen, and welcome to the Entergy Corporation Second Quarter 2019 Earnings Teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the conference over to David Borde, Vice President of Investor Relations. Sir, 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. [Operator Instructions] In today's call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors, which are set forth in our earnings release, our slide presentation and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements. Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the Investor Relations section of our website. And now I'll turn the call over to Leo.

Thank you, David, and good morning, everyone. We had a productive quarter and today we are reporting adjusted earnings of a $1.35 per share. Drew will go over the details, but the bottom line is that these are strong results that keep us firmly on track to achieve our 2019 guidance. With our success over the past three years and our confidence in our strategy going forward, I'm pleased to announce that we are increasing our three-year investment plan for the benefit of our customers. As a result, we are also raising our earnings outlook midpoints in 2020 and 2021, narrowing our guidance and outlook ranges and providing clarity on our dividend with an expectation to align the dividend growth rate with our earnings growth rate by the end of 2021. This is possible because we were finding ways to optimize our operating costs through automation and other continuous improvement efforts. With this new plan, we are investing to enhance our level of service and the lower O&M creates head room to help us manage the effects on our customer's bills. Today, we're a world class utility with a proven track record of successful execution, a solid investment plan, and an outlook that will deliver their earnings and dividend growth that investors expect of a premier utility. Beyond our three-year horizon, we see no shortage of investment opportunities to benefit our customers and maintain our growth aspirations well into the future. For example, we currently plan to add 7,000 to 8,000 megawatts of new generation from 2022 through 2030. This is necessary to continue to modernize our infrastructure, serve load growth, and achieve our environmental commitments. We anticipate that up to half of this new generation would be renewables, primarily solar with the balance being highly efficient gas generation. While…

Thank you, Leo. Good morning, everyone. As you heard from Leo, we had another productive quarter with good results and we are firmly on track to meet our full-year guidance. With our updated capital investment profile and cost expectations, we are raising our earnings outlook midpoints in 2020 and 2021. In addition, we are narrowing our guidance in outlook ranges. I'll provide details on these changes and more. But first, let's turn to the quarter. You can see on Slide 4, on a per share basis, Entergy adjusted earnings were $1.35, $0.07 lower than second quarter 2018, including the effects of dilution. Turning into the utility on Slide 5, rate actions in Arkansas, the Louisiana and Texas contributed positively to the quarter’s results. Also, last year's results included regulatory charges to return the benefits of the lower federal tax rate to customers. Partially offsetting these increases were lower sales volume and the unbilled period and the effects of weather which was less favorable this quarter compared to one year-ago. Regarding industrial sales, we experienced higher customer unplanned outages, fewer cogent customer outages and then usually wet weather in Arkansas leading to low sales to agriculture customers. The fundamentals that support the industrial customers and our region remains strong and our long-term industrial sales outlook remains intact. Other drivers for the quarters results included higher non-fuel O&M due largely to higher plans spending on nuclear operations, information technology and initiatives to explore new customer products and services. Drivers related to our growth such as hired appreciating depreciation expense including the St. Charles Power Station, which came online at the end of May. And lastly, the higher share count affected this quarter's results on a per year basis. Looking at EWC second quarter results on Slide 6. As reported earnings were $0.18…

[Operator Instructions] Our first question comes from Praful Mehta of Citi. Your line is now open.

Thanks so much. Hi guys.

Good morning, Praful.

Good morning. Great call and sounds like everything's going really well at the Entergy. So I guess my first question with the increased guidance, it sounds like you are still maintaining within the 5 to 7, but Leo, as you talked about this significant incremental investment opportunity that you see including the 7,000 megawatts you talked about. What are the other levers you see that could potentially increase, if not through 2021, but beyond in terms of the growth opportunities you see at the utility side?

Praful, from an investment standpoint if you can go back to our last Analysts Day even we were talking about the number of things that we can do not only to upgrade the technology associated with our generating fleet technology and signup new load, attach new generation the transmission pride, but also a significant amount of distribution energy resources, technological advancements that we can make. Those are the types of things that we're still looking at. Nothing that we're talking about today. Nothing that enters the plan are outside of the balance with the sorts of things that we've been talking about for some time with all of you, and certainly working on for even longer internally to the company. As we looked at it, as we've always said, what we're always balancing every day, every decision we make is because that three pronged outcomes that we need for our customers, one it has to improve the level of service that we provide them and two, we have to do it to manage their bills. That managing the bills is the governor in terms of how much we can spend on upgrading the reliability of the system. We've got to balance that. And then obviously the sustainability objectives that we end our customers and all of you as investors have. So it is more of the same in terms of what we have to do to be looking at to upgrade that system. The 7,000 to 8,000 megawatts of generation, that's a continuation of what we've been doing and that is modernizing the fleet to lower O&M lower fuel cost, improve emissions across the board as we look to deactivate 40 and 50 year old units and replaced them with new capacity. So if you look at our system, we used to put out that histogram of the age of our fleet. We still have some older units some of what we're spending the money on right now. Some of those new dollars are actually to go into some of those legacy gas units to make sure they continue to operate reliably while they get into queue to be replaced by the newer stuff. So it's nothing new. It's nothing that we haven't been talking about before. It's really just the focus on making sure that we balance those three objectives. We want to make sure that we improve the level of service, maintain some of the lowest rates in the country, work on the customer's bills, keep them below the level inflation while we continue to improve our sustainability footprint. But importantly, as I mentioned, the sustainability of our customers that's very important to them as well.

Well that's super helpful. Leo, thank you for that. And then maybe just quickly switching to the Nuclear Operations side, I wanted to understand any more color on the ANO outage. It seems to be delayed to just any color on what's going on there? And when that would be back online would be helpful?

Good morning, Praful. It's Rod. We're pleased to report for our customers that ANO is in fact back online and sync to the grid, I believe beginning on Monday. And so that that's moving forward, so that's progress for us.

Gotcha. Anything specific Rod, that increased the delay?

The significance was the reactor cooling promoter that that failed and it's a highly specialized equipment that you can't buy off the shelf. And we have tested that equipment during the outage in 2018 and it passed all the tests and the fact that it failed was anomalous for us, but at the end of the day, it takes a long time to replace and repair on that that motor, and that was the cause of the delay and nothing more. And so we're happy that it's back online.

All right. Thanks, Rod, and thank you, guys.

Thank you, Praful.

Thank you. And our next question comes from Julien Dumoulin-Smith of Bank of America. Your line is now open.

Hey, good morning.

Good morning, Julien.

Good morning, Julien.

Hey. So perhaps just to come back to this cost question. Can you elaborate a little bit on how you're thinking about the cost benefits flowing back to customers? Obviously, you just filed an FRP in Arkansas, which reflected less rate inflation in past years. Is some of the O&M that your reductions already in place or is this more prospective and should that kind of limit the inflation here for Arkansas for next years FRP as well? And then maybe just the nuance here, should we expect some transient benefits? Or is this largely given the annualized nature of all these filings going to flow pretty simultaneously back to customers?

Julien, this is Drew. So in terms of the flow back to customers, we would expect that pretty much all of it, we flow back to customers. In the course of time as you're noting, depending on the jurisdiction, some would float back to customers faster than others. And I think that's actually a critical piece of the overall strategy here because we are aiming to manage our customer's bills. And by doing that, we are creating space in the bill for incremental capital investment to improve reliability. And I think there's – we don't have it in the main slides, but there's an appendix slide, I think it's like a Slide 38 or so that talks about how our earnings are expected to change a while it's happens. You'll notice that net revenue line doesn't really move all that much. And O&M line is – that's creating that space for us. So we would expect that that would flow back to customers, because we're not, we're not anticipating their bills really moving at all as a result of this incremental capital. In terms of some of the O&M, and the progress that we've made, I think the answer is yes. We have made some progress this year. That's part of what gives us confidence that we can execute on this going forward. And I don't know if all of it is in rates today. But it will get into rates very quickly. This year as you know, we're using it to offset some of the negative weather that we had in the first quarter, plus I've mentioned in my remarks, industrial sales growth was a little bit below our expectations year-to-date. But it would be fine long-term, but in the meantime we need to make sure that we are managing to hit our expectations for this year. So some of that is happening now as part of what gives us confidence going forward and it should all flow back into rates.

Excellent. Just on the CapEx budget, a little bit more further elaboration, some of it seems like with distribution as well. And then also just what does the Texas legislation mean for you guys from a CapEx perspective and is that reflected as well?

Well, I'll take the capital and then I'll let Rob answer the regulation piece of it. From a capital perspective, yes, a good chunk of it is in distribution, as you noted. And as Leo mentioned in his remarks and his answer to Praful's question, it's a lot of what we have been doing. Not all of it is – some of it is putting in new smart equipment and stuff like that that can communicate with our network. But a lot of it is just replacing poles and cross arms and transformers that are – that need frankly, just need to be updated, and so that's on the distribution front. On the transmission side, there is quite a bit of economic developments along the corridor between New Orleans and Baton Rouge. That's prompting new reliability investment opportunities for us from a transmission perspective. That frankly we weren't planning at the beginning of the year, front mainly along the west side of the Mississippi River. And then we have a lot of customer products and services investment that we're making as Leo alluded to in his script. So those are some of the main kinds of investment opportunities that we're looking at in terms of this near-term incremental capital. And I'll turn that over to Rod for the regulatory question.

Yes. And the benefit of the generation rider legislation in Texas is really reducing lag for purposes of the CapEx that we have in the plan for Texas. So but it's remember it's an enabling legislation that gives the Texas Commission, the opportunity to provide a more efficient regulatory recovery, predominantly for those generation investments that Drew made reference to. So it's a risk reduction and the lag reduction opportunity for us as Drew, I believe stated and Leo in his statement to align the recovery mechanisms with the timing of our investments and benefits to customers.

Thank you very much.

Thank you, Julien.

Thanks Julien.

Thank you. Our next question comes from Sophie Karp with KeyBanc. Your line is now open.

Hi, good morning. Thank you for taking my questions.

Good morning.

Just maybe the follow-up on Texas. So as the commission moves on and alliance sort of legislative intent with the actual recovery mechanisms? Is there any potential further upside to your CapEx plans in Texas?

I think the potential for upside has to do with our ability to manage the cost associated with service delivery. The capital plan we have for Texas is pretty straight forward and we think set. But pulling the levers that Leo and Andrew mentioned a little earlier provides us an opportunity to move closer to our aloud and as I just mentioned the Texas Commission having tools to help us reduce lag as well. You have the opportunity to do that as well.

Right. Thank you. And then I know it's some time all the activity on the FERC docket. But I guess what is your range of expectations with what happens there? With respect to Siri?

That's true. And I'll tackle that one. So they're in material updates right now. It continues to be going through the process at FERC. And in terms of our expectations as we said for a while, we have a reserve on our ROE and then for whatever the outcome maybe there, based on our expectations, and then the other elements of the various complaints there are reflected in the outlook that we put out today. So there's no – all of the expectations that we have are reflected in fourth series outcomes are reflected in our outlook.

Thank you.

Thank you.

Thank you. And our last question comes from Charles Fishman of MorningStar Research. Your line is now open.

Thank you. Good morning. Leo, in your comments about the 7,000 megawatts to 2023, does that include the four plants under construction and the one in Choctaw?

It does not. The 7,000 to 8,000 megawatts that we're talking about is 2022 through 2030. And as I mentioned, probably be roughly half renewables and half gas. As we look at it today, obviously subject to what happens technologically and cost wise to the construction of those different facilities. But again, that 7,000 to 8,000 new megawatts.

Okay. So I realize it's not a long time, but is that still being driven by the industrial load?

It's still being driven by the need to technologically improve the system. So if you remember, Charles, we've been going through this portfolio transformation with our generation fleet, given the age and the vintage of those facilities which served us really well, but when they started pushing 40-plus years of age, the new plants efficiency, the O&M levels, emission levels, and then obviously the fact that they're starting brand new life that overtakes what the maintenance of those older plants would be. So for example, the St. Charles plant, over the life of a plant that's going to benefit our customers by $1.3 billion given the lower production costs associated with that plant vis-a-vis what's on our system today and in the market. So that's really the continuation. The load growth obviously is important, but in large part what that does is keeps the price point down for our customers as well.

Okay. And since I'm the last questioner, I going to take the liberty of asking one more. On dividend increase, I understood the 2021 review will be reviewed by the board later this year in the fourth quarter? I'm assuming it's going to stick to that fourth quarter schedule as well as 2020. Do you anticipate like similar 2% to 3% increases until then? Are you weren't saying it's going to be no increases until fourth quarter at 2021? Is my assumption correct?

We were not saying it would be no increase that you're correct. We will take the dividend up every year as it always does. We were just signaling, because we've had this objective that we've stated for a while that we want to have our dividend growth match our earnings growth. And as you point out for the last few years, it's been lagging earnings growth. We believe that we'll be at a point in time by the fourth quarter of 2021 to put those in line with our expectation of earnings growth.

Okay. Appreciate it. Thanks for the clarification. That's all I had.

Thank you, Charles.

Thank you. And we do have a question from Neil Kalton of Wells Fargo Securities. Your line is now open.

Hi, guys. I'm sorry. I jumped in last minute, but quick question and I apologize if I've missed this. With the new CapEx flowing in, have you discussed sort of incremental equity needs or how we should think about that over the next few years?

Yes, Neil. This is Drew. So in my remarks, I mentioned that our equity expectations are exactly as they were at Analyst Day. So it's not until – we won't have any need for equity until after 2020, sometime 2021 or beyond. And that expectation is around 5% to 10% of our overall capital needs – that before.

Yes. Okay, and should we think about that likely being that that rule of thumb holding true as well in 2022 and 2023 based on what you're seeing right now?

Yes, I think kind of looking out on a long-term basis, yes.

All right, perfect. Thank you

Thank you, Neil.

Thank you. And Ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to David Borde for any closing remarks.

Thank you, Sonia, and thanks to everyone for participating this morning. Our Annual Report on Form 10-Q is due to the SEC on August 9 and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles. Also as a reminder, we maintain a webpage as part of Entergy's Investor Relations in website on regulatory and other information, which provides key updates, regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information, you should not rely exclusively on this page for all relevant company information. And this concludes our call. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.