Entergy Corporation (ETR)

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Entergy (ETR)

Q2 2011 Earnings Call

August 02, 2011 11:00 am ET


Gary Taylor - President of Utility Operations

J. Leonard - Chairman, Chief Executive Officer and Chairman of Executive Committee

Michael Kansler -

Roderick West - Chief Administrative Officer, Executive Vice President and Chairman of Entergy New Orleans Inc

Charles Rice - Chief Executive Officer of Entergy New Orleans and President of Entergy New Orleans

Leo Denault - Chief Financial Officer and Executive Vice President

Paula Waters - Vice President of Investor Relations


Michael Lapides - Goldman Sachs Group Inc.

Dan Eggers - Crédit Suisse AG

Paul Patterson - Glenrock Associates

Ashar Khan - SAC Capital

Julien Dumoulin-Smith - UBS Investment Bank

Steven Fleishman - BofA Merrill Lynch



Good day, everyone, and welcome to the Entergy Corporation Second Quarter 2011 Earnings Release Conference Call. Today's call is being recorded. At this time, for introductions and opening comments, I would like to turn the call over to the Vice President of Investor Relations, Ms. Paula Waters. Please go ahead, ma'am.

Paula Waters

Good morning, and thank you for joining us. We'll begin this morning with comments from Entergy's Chairman and CEO, Wayne Leonard; and Leo Denault, our CFO, will review results. [Operator Instructions] After the Q&A session, I will close with the applicable legal statements. Wayne?

J. Leonard

Good morning, everyone. I'm pleased to report another quarter of solid financial performance, which Leo will review with you in a moment. Quarterly operational earnings per share topped the second quarter records that's just 1 year ago, despite the effect of the depressed power pricing on the wholesale business, the power price contracts roll off. We continue to pursue a full agenda of strategic initiatives that will take some time to fully play out. In the meantime, the commodity markets, which are showing some signs of long-term recovery, will continue to be a drag on earnings for at least the next couple of years.

I'll begin today by providing an update on the progress that we've made on some of those key initiatives. Starting at utility. Our utility companies have worked hard for a long time to secure regulatory structures and mechanisms that allow a real opportunity to earn returns commensurate with investment alternatives at comparable risk. You will see that these efforts are coming to fruition, as you review the financial results. For example, since the end of 2001, average residential rates have increased a little over 0.5% per year over the near 10-year period or almost flat for 10 years, while utility operational earnings per share at the midpoint of the 2011 guidance is nearly double the operational results 10 years ago. At the same time, our operational and our safety performance and our environmental record continues to set new company standards.

Our voluntary CO2 emissions reductions put us over 20% below the year 2000 level. Formula rate plan filing for 2010 reflects earnings consistent with each company's bandwidth ranges in Louisiana and Mississippi, and we are above the range in New Orleans. Unseasonable weather in 2010, both a warm summer and a cold winter, contributed to these results, with industry Gulf States Louisiana -- Entergy Louisiana and Entergy New Orleans, near the top end or above the range.

In total, the New Orleans 2010 FRP filing reflected a $7.6 million decrease in electric and gas rates. Also included in the Entergy New Orleans May filing was the request to increase storm funding by about $20 million to replace the cash storm reserve after expenditures for hurricanes Gustav and Ike, allowing the cash storm reserve to reach the approved $75 million level on schedule by 2017. The electric and gas rate changes are expected to be effective in October.

Turning to Texas. Legislation was enacted in May, allowing for a special rider to periodically adjust rates for changes in distribution estimate. The Public Utility Commission of Texas is now in the process of repairing the rule-making and rate filing package to be completed by late September. Entergy Texas also continues efforts to achieve a purchased power capacity rider after the PUCT reopened a rule-making earlier this year. The introduction of a distribution rider and a purchased power capacity rider, coupled with the transmission rider, already authorized, would provide industry Texas' additional tools similar to those in place in other jurisdictions that efficiently and effectively promote the public interest and align shareholder and customer economic interests. If final rules are adopted, ETI has the opportunity to file for 1 or more of the 3 riders in 2012, depending on circumstances related to a more complete review of overall cost.

The utility also continued to execute its capital investment commitments related to last year's resource selections in the summer 2009 long-term request for proposal. In June, Entergy Louisiana filed a request seeking Louisiana Public Service Commission approval to construct the 550-megawatt Ninemile 6 combined-cycle plant. The total project cost is estimated at $721 million, excluding interconnection and transmission upgrade.

Under the current proposed structure, Entergy Louisiana would own the plant retain 55% of the energy and capacity, and sell the balance under a life-of-the-unit power purchase agreement to Entergy Gulf States Louisiana and Entergy New Orleans. The June LPSC filing also requested approval for Entergy Gulf States Louisiana to enter into the PPA for its 25% share of the output of Ninemile 6.

Entergy New Orleans also filed with the City Council seeking authorization to purchase 20% under its life-of-unit PPA with Entergy Louisiana. LPSC approval was requested by January 2012 in order to issue full notice to proceed and maintain the construction scheduled for a targeted commercial operations date by the summer of 2015.

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