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Entergy Corporation (ETR)
Q1 2010 Earnings Call Transcript
April 29, 2010 11:00 am ET
Michele Lopiccolo – VP, IR
Wayne Leonard – Chairman and CEO
Leo Denault – EVP and CFO
Mark Savoff – EVP, Operations
Curt Hebert – EVP, External Affairs
Reza Hatefi – Decade Capital
Paul Patterson – Glenrock Associates
Dan Eggers – Credit Suisse
Michael Lapides – Goldman Sachs
Marc DeCroisset – FBR
Jonathan Arnold – Deutsche Bank
Daniele Seitz – Dudack Research
Previous Statements by ETR
» Entergy Corporation Q4 2009 Earnings Call Transcript
» Entergy Corporation Q3 2009 Earnings Conference Call
» Entergy Q2 2009 Earnings Transcript
Good morning and thank you for joining us. We'll begin this morning with comments from our Chairman and CEO, Wayne Leonard and then Leo Denault, 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. After the Q&A session, I will close with the applicable legal statements. Wayne?
Good morning. As we spoke with you last earlier this month, I'll try to be brief particularly as it pertains to matters in New York – at doctor's orders, not Michele's. Today, some 35 days after the decision, we have yet to receive an order from the New York Public Service Commission.
Since the ability to appeal or take legal out action doesn't start until we actually receive an order, any legal recourse is automatically preserved. Consistent with our previously stated intent, we have now begun the process of unwinding the business infrastructure associated with Enexus and EquaGen. Under the direction of Rick Smith and the corporate steering committee, the project management office is aggressively eliminating duplicate functions and infrastructure created for the two new businesses that is no longer needed, while preserving options to restructure the business with consideration to everything we learned during the spin-off process. How the marketplace has changed and what our next step might be to capture the unrealized value of this business.
Turning to the utility, during the quarter progress continued on. (inaudible) always active regulatory agenda. With the 2010 hurricane season rapidly approaching, resolution of regulatory proceedings associated with Hurricanes Gustav and Ike from 2008 was essential for Entergy Gulf States Louisiana and Entergy Louisiana.
Earlier this month, Louisiana's Public Service Commission approved uncontested stipulated settlements resolving all issues pertaining to storm restoration recovery, the establishment of storm reserves and the plan for financing those costs using the same financing structure used for Katrina and Rita. That is Act 55 of the Louisiana legislature and through the Louisiana Utilities and Restoration Corporation.
Efforts are now focused on completing the financing for the balance of the system restoration costs and storm reserves, which is targeted to occur before the peak of the 2010 storm season. Due to the constructive actions of the LPSC both Entergy Gulf States Louisiana and Entergy Louisiana will have as solid a financial standing as reasonably possible to face storms with $290 million of dedicated storm cash reserves in the bank after financing the curves.
Total financing proceeds are roughly $700 million. Just as 2005 repeatedly shattered numerous records with 28 tropical and subtropical storms of which a record 15 became hurricanes, 2009 was one of the quietest on record. With nine tropical storms, three becoming hurricanes and only one tropical storm Claudette making landfall in the United States.
Nonetheless with a service territory that stretches north and south just over 500 miles, we always seem to have the opportunity to prove our planning and execution process. We prepare for the worst and as a direct result of continuous process improvement, customers can count on Entergy to be there when it matters most.
In fact, our pre-hurricane season planning storm drill in 2008 has uncanny similarity to Hurricanes Gustav and Ike. The storm drill scenario predicted a Labor Day category four hurricane strike west of New Orleans followed seven days later by a second strike. In fact, Hurricane Gustav was a Labor Day category two plus hurricane strike Southwest of New Orleans, followed 12 days later by Hurricane Ike.
Among other things, Entergy's drill efforts included evacuation of New Orleans, pressure restore major refineries, transition grade instability and idling of generation all of which had unfolded during Gustav and Ike.
Likewise, Entergy prepared for events very similar to what unfolded for Hurricanes Katrina and Rita, including the flooding of New Orleans of about 20 feet in our drill event. This year, Entergy was recognized once again with the Edison Electric Institute recovery award for its work restoring power following the destructive ice storm in Arkansas last year.
Entergy is the only company to be honored every year since the inception of the EEI recognition, having earned the EEI recovery and/or EEI assistance awards for 12 consecutive years. And you thought all we did was run nuclear plants and sit in regulatory hearings. At least those things seem to dominate our conversations and for good reason. They have a big impact on whether we earn a fair return or not.
In fact as a utility, the able to earn mid point or allow returns across all jurisdictions may be the most significant thing we need to do to enhance the utility's operating company's financial prospects and efforts to do so continue during the quarter.