Entergy Louisiana, LLC Q2 FY2025 Earnings Call

Good morning. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to Entergy's Second Quarter 2025 Earnings Conference Call. I will now turn the call over to Liz Hunter, Vice President of Investor Relations for Entergy Corporation. Liz?

Good morning. Thank you, Greg, and thanks to everyone for joining this morning. We will begin today with comments from Entergy's Chair and CEO, Drew Marsh, and then Kimberly Fontan, our CFO, will review results. 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 will turn the call over to Drew.

Thank you, Liz, good morning, everyone. Today, we are reporting second quarter adjusted earnings per share of $1.05. Our progress through the first half of the year keeps us firmly on track to achieve 2025 results in line with our guidance, and we are raising our outlook driven by our higher capital plan to meet customer expectations. We aspire to be the premier utility and to create sustainable value for each of our key stakeholders: our customers, employees, communities and owners. Our customers are listed first, so I'll start there. We have over 3 million customers, and most of them are residential. For the first time since we began tracking Net Promoter Score, we achieved a result that ranks in the first quartile for utility residential service over the past 12 months, across our enterprise and using J.D. Power data. We are not first quartile in every jurisdiction or in every category. Still, we are excited about our progress, and we are energized by the opportunity ahead to further improve our service to our customers. Our industrial growth opportunities remain robust. We continue to work with state and local leaders to attract businesses to our service area, with our economic development model driven by our vertically integrated, customer-focused electric company of welcoming communities and the economic advantages of the Gulf South. We provide one-stop shop technical solutions, while we bring key parties together to rapidly meet the needs of new customers. At the same time, we ensure strong protections for our existing 3 million customers and maintain our credit. Today, we are pleased to announce that we have secured significant new growth in Arkansas that will bring benefits to existing customers as well as communities in the state itself. With this addition, we expect our 4-year industrial sales growth rate to be approximately 13%. Consistent with our practice, we aren't commenting further on specifics or customers, although we anticipate making regulatory filings soon, which will include additional details. We are updating our 4-year capital plan to $40 billion, which will enable us to serve increased load and grow our renewable portfolio across our jurisdictions. As a point of reference, we have signed roughly 8 gigawatts of electric service agreements since the beginning of last year. As a result, our 4-year capital plan includes significant investments for customer-driven generation, including approximately 3 gigawatts of solar, 1.4 gigawatts of battery storage and 8 gigawatts of highly efficient gas units. Some of these resources are planned to come online beyond our 4-year plan period. During the last quarter, we disclosed that we entered into an exclusivity agreement for power island equipment, including 15 combined cycle combustion turbines and 2 simple-cycle combustion turbines, as in addition to the Orange County, Delta Blues and Legend projects. Collectively, these turbines provide 15 gigawatts of capacity, and that leaves 7 gigawatts for future customer growth needs with deliveries for commercial operations between 2029 and 2031. Our strategy to use standardized equipment and designs helps us effectively manage costs and schedule for our customers. Our customer pipeline continues to be robust, including our data center pipeline, which remains in the 5 to 10 gigawatt range, and significant interest remains in our traditional industrial segments as well. Our economic development model attracts large new customers that contribute to our communities, growing jobs and tax base. They also share in costs that would otherwise be covered by existing customers. The economic impact of these projects on our communities is substantial, and yet another sign to existing customers and potential customers that great things are happening in Entergy's service area. While we've made progress on our customer service, storms create moments that matter. We spoke to you at our Analyst Day last summer about our plans to better manage storms. One year removed from that conversation and in the hardest storm season, take a moment to review our progress. To start, we are executing Phase 1 of our accelerated resilience program. We have more than $2 billion approved, mostly in Entergy Louisiana. To date, we've invested roughly $400 million, and that includes energizing nine new substations designed to sustain both flooding and hurricane-force winds, installing over 8,000 hardened poles, while another 10,000 pole upgrades are in process, which is on top of the average annual run rate of 75,000 poles replaced systemwide. And in the coastal region of Texas, we've rebuilt two short transmission lines to harden standards. Earlier this month, Entergy Texas submitted its application for the Texas Energy Fund to support $200 million of resilience projects. We expect to complete about 30% of our Phase 1 projects by year-end. As a reminder, we prioritize projects with the highest benefits, so these earlier projects will have a relatively higher impact. We plan to file later this year for the next phase of accelerated resilience to support continued progress. In addition to our accelerated resilience program, new transition investments built to today's more stringent standards also improve the resilience of our grid. For example, we have several large 500 KV transmission projects in front of regulators in Louisiana and Texas that will provide resilience benefits while also supporting growth. The Mount Olive to Sarepta line in North Louisiana, aligned along the West Bank of the Mississippi River in Louisiana through a growing industrial corridor, the Southeast Texas Area Reliability Project, or SETEX, and the Cypress to Legend line that will support strong growth in the Port Arthur area. These projects and the Babel to Webre line in Louisiana to be filed later this year total 460 miles and will represent about 20% of our 500 KV system once completed. These projects will also loop existing transmission lines, such that if an event occurs at any point in the loop, power will be automatically diverted in another direction, avoiding customer outages. Altogether, we are planning $8 billion of transmission investment in our 4-year capital plan, including $5.6 billion reviewed through MISO's MTEP process. In addition to system improvements, we ensure that we are prepared for storms through planning, drills, and vegetation maintenance. Technology is also part of the journey, and we've been experimenting with cameras and information systems on planes and drones, and soon, helicopters that fly power lines to gather data with a plan to ultimately feed AI to more quickly assess damage and optimize the productivity of our teams on the ground. Capital deployment is critical, but it takes more than that to be premier. To that end, our power delivery team is launching PD Strong, short for Power Delivery Strong, to transform our power delivery team. This includes everything from work management and capability building to behaviors and culture, all with an eye towards better serving our customers every day, but especially in moments that matter, like storms. Our regulators are also supporting our storm response improvement efforts. In addition to approving resilience investments, Louisiana and Texas implemented new processes to expedite storm securitization, allowing operating companies to request recovery based on estimated storm costs and accelerated commission timelines for decisions. Those commissions, of course, retain their authority to determine the prudence of utility storm costs, and estimated costs would be trued up to actual costs once available. Louisiana's expedited process for 2025 storm costs includes a commitment to review the storm cost related financing order request at the subsequent commission meeting after the utilities filing. Accelerating storm cost recovery reduces carrying costs for our customers and supports the operating company's credit, which also keeps the cost for capital lower for our customers. This new process also gives confidence to vendors and mutual assistance partners to support storm recovery. Finally, as we deploy our capital plan throughout our service area, a smaller and smaller percentage of our infrastructure is exposed to storms along the coast, reducing our relative financial risk, which benefits our customers as well as our owners. These actions continue to build on our improved balance sheet and strong liquidity. We have made good progress over the last year reducing storm risk through accelerated resilience, hardening of our grid, financial readiness, and regulatory changes to improve outcomes for customers, and we have more plans for improvement still ahead. Meanwhile, we stand ready to respond to anything that comes our way. We have some other operational achievements that I'd like to also highlight. On July 1, we completed the sale of our gas LDC businesses to Delta Utilities. The transition for customers was smooth because of the hard work and planning by many employees, including those who have moved to Delta Utilities. We are extremely grateful for their efforts. The sale of that business allows us to focus on our core electric business. Safe and effective nuclear operations also remain a cornerstone for all stakeholders. This year, Waterford 3 and Grand Gulf are proudly celebrating 40 years of operations. The Waterford 3 refueling outage wrapped up in June on time and on budget. Work included replacement of all 3 low-pressure turbines, which will improve reliability and pave the way to increase the capacity of the unit by an estimated 40 megawatts in the fall of 2026. We've already filed the upgrade request with the LPSC. Additionally, planned turbine rod replacements in ANO 1 in the fall of this year will set us up for future upgrades there. We continue to engage with customers, regulators, vendors, and others regarding new nuclear. So we don't have any updates to report at this time. Turning to regulatory. We are making progress on important matters to meet customers' growing needs and drive improved customer outcomes. In early July, we reached a stipulated settlement with the Louisiana Public Service Commission staff and a number of parties recommending approval of our request to invest in assets to support adding Meta's transformational Hyperion data center to our system. The hearing was held in mid-July, and we presented extensive evidence on the significant benefits to our customers and communities from making these investments as well as through bringing Meta online as a customer. These benefits are in addition to the transformative benefits that Meta will create through its billions of dollars of investment in Louisiana and the high-paying good quality jobs it will provide. The procedural schedule supports commission decision no later than October of this year. The Mississippi Public Service Commission approved Entergy Mississippi's formula rate plan settlement, which does not result in a rate change. Also, Entergy Louisiana and Entergy New Orleans filed their annual formula rate plans, and new rates are expected in September. Entergy Arkansas filed its annual formula rate plan, with new rates expected to be in place at the beginning of next year. This is the tenth and final projected year in the current cycle. And in February '26, we will file a base rate case, which will include a proposal for a new formula rate plan tariff. At the federal level, FERC approved MISO's Expedited Resource Addition Study or ERAS proposal last week. We appreciate FERC's work to temporarily facilitate customer growth across MISO, while we all work together to improve MISO's existing due processes. Last quarter, we covered Arkansas legislation that allows for a rider to support investment for economic development. This quarter, the Texas legislature passed, and the governor signed three bills to provide benefits to our customers and communities. One accelerates storm securitization, which I mentioned earlier. Another allows rider recovery, a MISO-related capacity cost that are currently included in base rates. The rider may be filed annually beginning in 2026. The third is a wildfire bill that provides a potential path to improve wildfire liability. Our likelihood of experiencing wildfires is lower than in other parts of the state. We take the risk seriously and intend to use the new tools that are available. Finally, our communities are a key stakeholder, and actively supporting them beyond economic development is an important part of our strategy. Entergy has once again been named a top 50 most community-minded company and the leader in the utility sector by the Civic 50, an initiative of Points of Light. In 2024, our employees and retirees attributed more than 122,000 volunteer hours across our service area valued at over $4 million. Before I wrap up, I'd like to highlight that Lewis Ropp has been elected to our Board of Directors. A Louisiana native, Lewis brings extensive investment experience from his years of work at Barrow Hanley, historically one of our largest active investors. At Barrow Hanley, he worked as their lead equity portfolio manager and also served on the executive committee. Combined with his prior work experience, Lewis' tremendous familiarity with utilities as well as industrial companies, many of which are part of our customer base. We are very excited to have Lewis join our Board. It's been an exciting quarter. We continue to make progress on creating value for our customers, communities, employees, and owners. Our teams are working very hard to foster community and economic growth and customer growth in our states while also delivering on commitments made to improve resilience and reliability. I'll now turn the call over to Kimberly, who will review our financial results for the quarter.

Thank you, Drew. Good morning, everyone. Today, I will review our financial results for the quarter, our capital plan update and our guidance and outlook. I will also cover effects from the final budget reconciliation bill. Starting with earnings. Our adjusted EPS for the quarter was $1.05. This result keeps us firmly on track for our guidance for the year. Adjusted EPS is shown on Slide 5. Primary drivers were the net effect of investments made for our customers, higher retail sales volume, and higher other income. These increases were partially offset by higher other O&M, consistent with the estimate we provided last quarter, and higher MISO capacity cost at Entergy Texas, which are currently recovered in base rates. New legislation allows those costs to be recovered through a rider beginning in 2026. Earnings contribution from retail sales volume was positive despite the weather being milder than the second quarter of last year. Weather-adjusted retail sales growth for the quarter was very strong at 4.5%. Industrial sales were the largest contributor with close to 12% growth, primarily from new and expansion customers that continue to ramp up their operations. Slide 6 summarizes our credit ratings and affirmed that our credit metric outlooks remain better than agency thresholds. Over the past several years, we have strengthened our balance sheet to support our operations and the growth opportunity before us. Our liquidity as of June 30 is very strong, including $2.3 billion of unsettled equity forwards, which are available if needed. Turning to tax credits. With the passage of the most recent budget reconciliation bill, we now have better clarity on renewable tax credits, and we have adjusted our cash flow forecast accordingly. Our forecast includes updates to the timing of monetization of investment tax credits associated with projects that we expect to safe harbor. The changes include shifting our expected tax credits out one year. We now have approximately $175 million of cash benefit in 2028 and additional cash benefit beyond our outlook period. We continue to monitor for Treasury guidance that could affect these cash flows. As you may recall, we previously had not included the cash benefits from nuclear PTCs in our forecast. However, based on our current analysis, in the quarter, we recorded nuclear tax credits of approximately $570 million across our 5 nuclear units. We treated the recognition of these credits as an uncertain tax position, pending either guidance from the Treasury Department on the calculation or final determination on audit. We expect to monetize the nuclear PTCs and receive the cash benefit later this year. We are working with our regulators on how and over what time period we provide this benefit to customers. As you can see from the chart on Slide 7, the nuclear PTCs are highly dependent on the average revenue per megawatt hour, which includes both capacity and energy revenues, and therefore, we are not counting on these credits for future years in our outlook. Our credit outlook provided includes these changes, and our estimated Moody's metric continues to grow to 15% over the forecast period. As Drew noted and as shown on Slide 8, we are increasing our 4-year capital plan by $3 billion, including new renewables and battery storage to meet customer needs. We're also providing updates on retail sales growth, rate base, credit metrics and operating cash flow as well as operating company capital plans in the appendix of our presentation. As you can see on Slide 9, our equity needs are unchanged despite the higher capital investment. Higher operating cash flow, including monetization of nuclear PTCs and utilization of Arkansas's new infrastructure rider allows us to maintain our financial metrics and current equity needs. As a reminder, we've contracted approximately 2/3 of our equity needs through 2028. In the second quarter, we settled approximately $800 million of equity forwards or about 15.6 million shares, and we are using those funds to continue to invest for our customers. As shown on Slide 10, we are affirming our adjusted EPS guidance and updating our longer-term outlook. For 2025, we're firmly on track. Positive year-to-date results allow us to flex other O&M to manage the business. Looking ahead to the third quarter, we expect other O&M to be roughly $0.05 higher than the third quarter of last year, partly due to the timing of vegetation maintenance and nonnuclear plant outages. And we expect Entergy Texas to have higher MISO capacity costs in July and August, totaling approximately $0.06. We remain confident that we will deliver on our 2025 guidance. Looking past 2025 at our longer-term outlook, we continue to see growth as evidenced by our higher capital plan. Our adjusted EPS for 2026 remains unchanged, and we are increasing 2027 by $0.05 and 2028 by $0.10, while maintaining strong credit metrics throughout the forecast period. Our results in the first half of this year have been solid, and we are once again raising our capital plan to support our growing customer needs. We still have significant opportunities before us, and we remain well positioned to execute and deliver successful outcomes. And now the Entergy team is available for questions.

It looks like our first question today comes from Jeremy Tonet with JPMorgan.

Exciting update there. A lot of interest in this new Arkansas customer and appreciate somewhat limited what you can say at this point, but just wondering if there's any color you could share with regards to the industry of the customer or even the ramp. And so it seems like not a lot of change to sales growth through '28, but just curious, any shades of color you could provide on the post '28 ramp, what that might look like?

Yes. Well, I don't think we can talk specifically about the customer or any customers, I guess. It's consistent with where we've been, Jeremy and our previous announcements. We are sticking with the filings, and the filings should be out in the next 2 to 3 weeks, which is where we're aiming. And that will have a lot of the detail I think that you would be looking forward to with that question.

Got it. Makes sense there. And I just want to pivot, I guess, to the gas generation picture that you have there. And I think you referenced 7 gigawatts of gas generation available for new load. Is this after the Arkansas project or some of this be dedicated to Arkansas? Just trying to understand how that falls out.

So that is related to projects that we have not announced to date or that you aren't aware of. So if you think about the projects that are out there, yes, we have three projects in Texas, two in Arkansas, three in Louisiana, two in Mississippi. And then I think there's one more that's in our capital plan that isn't publicly announced. So the 7 gigawatts would be other projects beyond those that are not in our capital plan but are out there and available for us to serve new customer growth that we anticipate will be an opportunity for us going forward given our strong pipeline.

And our next question comes from the line of Nicholas Campanella with Barclays.

A lot of stuff here. Yes. Just wanted to ask, you talked about Meta a little bit in the prepared remarks. Have you already started the regulatory approval process for the upsizing of Hyperion to the 5 gigs like they've been talking about? Or is that still on the come?

We haven't started any process. And we couldn't comment on that anyway. You have to ask Meta on their exact plans. The filings that we have are related to the previous announcements that we've already made starting last fall. So that's where we sit overall today. We are excited that Meta is talking publicly about the potential for expansion at that Hyperion site. That's one of the reasons why they chose that site. And so we're excited to hear, and not just us, I'm sure Richland Parish is excited to hear that, State of Louisiana is excited to hear that. But we don't have anything else to say about the potential for expansion today.

Okay. No, I appreciate that. And then just on the new nuclear side, just outside of the upgrades, I know you said no major updates, but just has the conversation pulled back a little? Or where would you kind of put that now or frame that now if you have to kind of mark to market it? And like what is the ideal framework in your mind if you were to kind of move forward with this? Are you expecting a hyperscaler or a large load customer to take on construction risk before this could be transferred to rate base? Or just how do you kind of think about the ability to grow this generation while keeping the risk profile acceptable to the various constituents?

That's a great question, Nick. We're considering that our operating companies aren't large enough to manage the risks associated with constructing nuclear units. Therefore, we're exploring ways to mitigate that risk. While it could involve contributions from customers, they are also reluctant to take on significant uncertainty. We're addressing this issue and looking into potential support from state, vendor, or federal sources to improve the risk profile. Additionally, there have been discussions about sovereign funds and other entities possibly assuming some of these risks. However, it's clear that a substantial balance sheet is necessary for this to materialize. There are stakeholders contemplating these options, and we're navigating through those discussions, which has taken some time to coordinate.

And our next question comes from the line of Julien Dumoulin-Smith.

Nicely done again. Maybe to follow up on the earlier question Jeremy was kind of posing to you. I mean, it seems like you have these 15 combined cycles and 2 CTs secured with deposits seems versus what's in the plan. Maybe to press a little bit further, there's upside outside of the plan that you're alluding to, but it seems like you guys have made tangible actions. So if you can elaborate maybe as best you understand and see it from your customers, the timing and magnitude of some of these opportunities. It does seem as if you're certainly advanced, and I appreciate why you would be advanced considering the commercial needs of your customers to act decisively. But I'd love to hear how you think about this coming together, if you will.

The timing of that would align with our plans, where 8 gigawatts of the 15 is clearly outlined in our capital plan. You can see that. The additional 7 gigawatts will have 4 commercial operations dates between 2029 and 2031, which is consistent with our previous disclosures. The turbine deliveries will occur a bit earlier, and the plants will come online 9 to 12 months after those deliveries. This provides a framework for our discussions. You could see additional capital if all these elements align as we hope towards the end of our forecast period.

Excellent. And just to reconcile, I know you guys are updating here on the nuclear PTC benefits, and that seems to go hand in glove with some of the updates you're providing here. How do you think about that fitting into the financing plan, if you can speak to it, not just in terms of what you're recognizing here with the $570 million, but writ large across the opportunity of the PTCs, how that fits into the pie chart that you show about equity needs.

Julien, it's Kimberly. As you know, we have worked to use a variety of ways in order to manage the equity that we need. And as we add capital, we would look to do the same thing. So we've done that through incrementing cash flows, through mechanisms that, for example, throw cash out there in construction that actually save costs for customers over the longer run, but also support our credit in that period. We've done that with customer support as they ramp up, and there are a variety of ways that we've done that. But we will continue to look to do that and manage our equity needs, but we'll evaluate each of the financings as we add capital and see what we need to do there. Our plan does continue for what we have here to target that same 10% to 15% run rate that we've had for the last couple of years.

Got it. Yes. Understood. All right. Well, look, I'll leave it there. Nicely done. Congrats again. Incredible. Looking forward to more.

And our next question comes from the line of Bill Appicelli with UBS.

Just following up on that equity needs question. I mean, as we think through the update today and the CapEx increase, there's no additional equity. I mean, how much additional headroom would you say you have before you would need to contemplate issuing equity in terms of the CapEx upside?

Yes, Bill, we have assumed in the base plan that run rate of about 10% to 15% in any additional capital that we might consider. We will evaluate what that means in relation to the cash flows generated, any other factors, and the equity requirements. Therefore, I consider it less about specific room and more about the overall framework and how we approach our equity, and we will continue to think about it in that manner.

Okay. Could you discuss the tariff structure in Arkansas for new large load customers and how it compares to the tariffs for customers in Louisiana? Any details on the favorable mechanisms in Arkansas would be appreciated.

Yes, we won't speak specifically to customers. But as it relates to the infrastructure rider that may be what you're asking about, the Arkansas legislation did issue legislation around a new infrastructure rider that provides for timely recovery of large transmission and generation. It provides for good credit support during the period, and it also enables Arkansas to continue to grow from an economic development perspective beyond its 4% cap. So really nice mechanism there for all parties as we think about how to use that.

Okay, great. You mentioned nuclear, but regarding the uprate, could you remind us if there's anything planned for that? Also, what would be the scale in terms of megawatts or capital expenditure opportunities related to the uprates?

Yes. The Waterford uprate does not require significant capital investment, and you can consider those figures included in the forecast.

Okay. But anything in terms of beyond that, I mean, what is sort of the opportunity set that's out there?

Yes. As we said, each of those upgrades needs to stand alone from a business case perspective and to the extent that they are some are more expensive than others, and to the extent that there are significant capital investments. If the decision is made to move forward, there could be some incremental capital there.

Yes. And I'll add to that, Bill, that we are talking with potential customers about those upgrades. And so we would be looking for customer support for them as we go forward at the same time.

And our next question comes from the line of David Arcaro from Morgan Stanley.

I was wondering if you could elaborate on what boosted the operating cash flow outlook cumulatively through 2028. Was that primarily due to the Arkansas rider and the nuclear PTC for one year?

Yes, David. Those are the primary drivers is riders or mechanisms that enable good credit support in the construction period and then obviously, the large nuclear credits that were earned in '24 and we expect to monetize this year. Those are the two primary drivers.

Okay. Great. And then maybe just looking ahead a little bit in Arkansas as you think about the next rate case filing. Would you anticipate major changes at this point in terms of what you'd be requesting for the next kind of iteration of formula rate plans? Any reflection on the current plan? And how it's worked, and if anything, major needs to be changed looking ahead?

Yes, we are beginning preparations for that. However, it's premature to discuss specifics at this time. The teams are assessing our future needs. Generally, our formula rate plan in Arkansas has proven to be quite effective. The recent legislative changes that promote economic growth have positively impacted us in ways not initially anticipated. These are likely our starting points, offering a solid foundation that is forward-looking, along with the new legislative support for economic development in the state. We will provide more updates on this soon.

And our next question comes from the line of Ross Fowler with Bank of America.

Drew, you highlighted a lot of transmission CapEx in the plan that's moving through that MISO MTEP process. Can you remind us of what the next phase of that process is? And would we get updates on that? Kind of some color around what the CapEx upside could be there?

The next submittal will be this fall. And so we probably have some updates on what we put in at that point. I think there's probably an approval coming up, but I don't have that timing off the top of my head from previous filings. But our next submittal will probably be this fall.

Okay. Perfect. And then following on to Nick's earlier question a little bit. The Meta approval process in Louisiana, you're expecting that decision to come in October. As we look to not necessarily Hyperion, although that would be great if that's out there. But as you look to other large load opportunities in the state, can you kind of just contextualize, give us some color around what were, from your perspective, the main intervenor concerns through that process?

The main concerns from intervenors are the usual ones, such as the effects on customer bills and any potential impacts on reliability or resilience. When we examine the Meta project, I mentioned earlier that it offers significant advantages for current customers from various sources. Firstly, from a cost standpoint, these standard tariffs will alleviate a considerable portion of expenses that our existing customers would have otherwise absorbed, including costs linked to storms and MTEP transmission, as well as overheads. These factors will be beneficial for our existing customers. Additionally, I want to emphasize the resilience benefits derived from constructing these new assets. We discussed the C Tech and the Babel to Webre lines, which form a 500 kV system stretching from the north side of Baton Rouge across Louisiana to Texas and then down into the north side of Houston towards Conroe. This infrastructure is substantial and can accommodate a lot of capacity; it will be built to stringent standards. This will loop together all the transmission lines along the coast that have historically been vulnerable to hurricanes, resulting in a much more robust grid for our Gulf Coast customers. We are eager to see this happen, as it represents a significant advantage for our current customers. These are the types of inquiries that our customers have been raising throughout the regulatory processes. I’d like to add one more point. In our various regulatory approval processes, there's no dispute regarding the necessity for new capacity or transmission. The discussion in transmission revolves around selecting the optimal route. In the generation sector, it's primarily about who will incur the costs and the benefits of that investment. There’s a strong consensus on the need for these assets, with the key questions focusing on management and placement.

And our next question comes from the line of Steve Fleishman with Wolfe Research.

Thanks for the updates. Drew, could you go over the changes related to the storm recovery again, particularly for Louisiana? Also, have the rating agencies commented on any further risk reduction?

I'll defer the question about rating agencies to Kimberly. Regarding the situation in Louisiana, there was an order from the court last month that bypassed the usual process. We have submitted a request for a regular order to facilitate a long-term solution for quicker securitization. The court has established a mechanism that allows us to recover our securitization costs more rapidly, enabling us to submit estimated costs ahead of our NA meeting, after which we'll make a filing to be reviewed by the commission at their next meeting. The expectation is a very quick turnaround. This approach benefits customers by reducing their carrying costs since the carrying cost will reflect the securitization rate, which is a AAA rate and significantly lower. Additionally, this move may lead to a lower cost of capital, which should be viewed favorably by the agencies. Also, this should instill confidence in our vendors, especially those involved in large storm recovery, about our creditworthiness and our ability to cover storm-related costs. I'll turn it over to Kimberly so she can speak on the credit aspect.

Yes. As we talk to the rating agencies about the improvements in the financial space regarding storms, they view that as very positive and the ability to return that cash quicker, much quicker than what we have had previously. So positive outlook there.

That should help us with our credit metrics, too, because as you know, Steve, historically, when we've had a very long time between the time of the storm and the time of the securitization, our credit metrics will dip, and this should shorten that quite a bit.

Great. And then one other question just on the gas build. I mean, you're probably going to be the largest builder of new gas plants late this decade. So just in addition to the turbines that you've locked up, how are you feeling about the EPC and just overall ability to get all these projects done on time and budget?

Yes, that's a great question, Steve. We have been preparing thoroughly for this. We have strong relationships with EPCs and extensive experience from recent projects like the J. Wayne Leonard plant, Lake Charles plant, and Montgomery County plant. The Orange County project is currently under construction and is expected to be operational by next spring, definitely before next summer. We are leveraging our existing relationships and experience to ensure smooth execution. Additionally, we have simplified our design approach by transitioning from two-on-one stations to one-on-one stations and are using Mitsubishi's larger turbines to facilitate this change, which makes the projects easier to construct. We anticipate that as we progress, we will gain more insights to speed up our operations and find ways to reduce costs. Furthermore, we are actively working on our supply chain, ensuring access to critical equipment such as transformers and high-voltage breakers that are essential for meeting our timelines. We have visibility on these aspects, and while some resources may not be completely secured, they remain accessible through various channels. We are confident in our ability to manage these projects effectively.

And our next question comes from the line of Sophie Karp with KeyBanc Capital Markets.

Congratulations on the strong update. My question pertains to how storms and data center customers will coexist in your area. It appears that this isn't a significant concern for them, as customers are choosing to enter your market. However, is there an additional opportunity for you to address this since they likely require very reliable power? How do you perceive this situation? How do your customers view it? Is there a potential for offering storm hardening or backup generation services for them?

Thanks, Sophie. Yes, it's a great question. I think the customers themselves start by locating further away from the coast. So where these data center customers are showing up and we have two examples at this point, Meta and Amazon in Mississippi. They are further away from the coast. So the Meta project is in Northeast Louisiana and the Amazon projects on the north side of Jackson, Mississippi in two locations. And so they are further away from the coast. And then, of course, we're building generation to support them, which is further away from the coast as well, along with some of these 500 kV lines that we're talking about, which are further away from the coast. I gave you the example of the C Techs and the Babel to Webre line, those are further away from the coast. So that's really the strategy right now. It's to use modern, more, I guess, modernized equipment that is built to the more stringent standards that we have for storms and wind loadings and things like that and to build it just simply further away from the coast where the risk is going to be reduced.

And our next question comes from the line of Anthony Crowdell with Mizuho.

Drew, I just have a follow-up from Nick's question, probably very easy. I think Nick had asked about like a new nuclear deal, and you mentioned the importance of a bigger balance sheet, you threw out maybe a state solution, a federal solution or maybe the hyperscaler or even sovereign wealth, if you had to pick of those options or the options you spoke about, which one is in the lead or which one do you think is more likely to go ahead with a new nuclear deal? Like what builds the next nuclear plant in your jurisdictions?

I wish I could provide a solid answer to that. We are engaging with all the mentioned parties regarding this matter. However, at this moment, I do not have a specific option that I would endorse. Essentially, we are hoping that one of these conversations will yield a solution. We are pushing the limits to find someone who can assist us with this particular risk by involving entities with the necessary balance sheet to ensure this can come to fruition. Unfortunately, we haven't found the right solution yet, so I don't have a satisfactory answer for you, Anthony. We are still actively working on it.

And our next question comes from the line of Angie Storozynski from Seaport Research Partners.

Two questions. One about residential sales being weak, weather-normalized residential sales being weak this quarter and basically flattish year-to-date despite some uptick in the customer account count. And I'm just wondering if we're seeing this from other companies as well. The residential sales typically have a higher margin. And so I'm just asking, is it a weakening economy? Do you incorporate that in your future earnings trajectory? And then secondly, just wondering, we're seeing this inflation in the cost of new build for gas plants. You have this basically a framework of an agreement for the equipment supplier. And I'm just wondering how you're managing the cost and its reflection in any future data center deals.

Angie, I'll start with your residential sales question. You may recall in the first quarter; our residential sales were really strong. And when we saw that, we looked at how those came out over the course of the year. And what you've seen is a little bit of that coming back a little softer in the second quarter. But over the full year, we're about flat. And so I think you're just seeing some volatility in the data, not a real pattern, nothing that we have baked in or expect to see over the long term. So you're just seeing some variances month-over-month, that isn't an indicator of an overall weakness. As it relates to inflation on the cost of new build, we certainly have continued to work to manage the cost of increases related to all of our investments. We have a lot of continuous improvement efforts, both on the capital and on the O&M side to try to manage those costs. And we have mechanisms within various contracts that enable us to manage those costs. It depends by customer. But obviously, we are very focused on affordability for our customers and working to manage the overall cost, and we continue to be quite competitive on our new build cost relative to what you're seeing as sort of the industry estimates.

Great. And just one quick follow-up. I'm just looking at the re-rating of your stock and how it should have impacted your dilution math in your growth rate. And I'm just wondering if you've already captured it in this updated plan for the EPS growth, the fact that you're basically issuing equity at a much higher price than likely initially anticipated.

Well, Angie, as you know, we have sold forward into 2027. We have our forward contracts in place and a price assumption for what we need in 2027 and 2028. Certainly, if prices move positively, it will help reduce ongoing dilution.

And our final question today comes from the line of Paul Patterson with Glenrock Associates.

I am following up on your comments about safe harboring and the current construction of the bill. Regarding the July 7 executive order, do you have any insights on what we might expect from that? If so, could you share that with us? Additionally, how do you assess any potential changes that the executive order might bring about? How are you managing that, or how are you planning for it in terms of your future activities?

We're certainly engaged, Paul, with our industry partners and other companies around understanding what could come out, but I don't have any specific insights that I can share on that. As far as safe harboring, we have worked within the existing rules to do what we need on the projects in order to safe harbor those. If the executive order and the outcome of that changes that, we'll obviously need to make adjustments, but we'll have to see what those are specifically. But we've been working for the last couple of months to make sure that we could meet as much of our renewables could be safe harbored as possible under the rules that we have, and we continue to watch for what else may change there, and we'll adjust as we need to, Paul.

And that does conclude our Q&A session today. So at this time, I will turn the call back over to Liz. Liz?

Thank you, Greg, and thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on August 11 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 web page as part of Entergy's Investor Relations website called Regulatory and other information, which provides key updates of 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.

Thanks, Liz. And again, this concludes today's conference call. You may now disconnect.