Thank you for standing by, and welcome to Entergy Corporation's Fourth Quarter 2022 Earnings Release and Teleconference. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. Bill Abler, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us. We will begin today with comments from Entergy's Chairman and CEO, Drew Marsh; and then Kimberly Fontan, our CFO will review results. In an effort to accommodate everyone who has questions, we request that each person ask no more than two questions. 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, Bill, and good morning, everyone. Today, we are reporting strong results for another successful year. Our 2022 adjusted earnings per share was $6.42 in the top half of our guidance range. This is the seventh year in a row that our results have come in above our guidance midpoint. Our steady predictable financial results are underpinned by our strategy to create value for our four key stakeholders, our customers, employees, communities and owners. Our strategy starts with learning from our customers what they need from us to be successful, and then we build an investment plan to meet those demands. As a result, we are investing in our power delivery system to improve reliability and resilience and significantly expanding our clean generation to support our rapidly growing industrial load and the decarbonization goals of our customers. This customer-centric approach has delivered benefits for all our key stakeholders. We are confident this approach will continue to create meaningful value well into the future. In 2022, Entergy’s 12,000 employees worked every single day to deliver operational excellence, achieve positive regulatory outcomes, build the foundation for our long-term growth strategy and drive improved affordability for our customers. Operational excellence begins with safety. In 2022, we made important strides recording the fewest injuries in our company's history, and a total recordable injury rate that ranked in the first quartile among EEI utilities. To achieve this result, we reduced total accidents, including employees and contractors by 30% and serious injuries by more than 50%. This is an improvement that we're proud of, our work isn't done because we believe zero harm is possible. We will continue our relentless focus on keeping our employees and contractors safe all day, every day. Entergy's operational excellence is consistently on display when we respond to extraordinary circumstances. We saw this recently with winter storms Elliott and Mara. Elliott presented unique challenges due to the extremely cold temperatures. In fact, we experienced some of the highest winter loads that we have seen, including new winter peaks for Entergy Arkansas and Entergy Texas. Teams from across our organization collaborated to ensure that the system capacity and operating resources were maximized. Power availability was critical, and our generation facilities performed extremely well, buoyed by contingency planning and improvements from weatherization investments made after winter storm Yuri. Not only were we able to meet the high demand of our customers, but we also exported power to nearby systems to help other utilities meet their demand. Our teams performed extremely well during both events and for that, I am very thankful. I'm especially proud that we had no injuries, ensuring that all our employees return home safely. River Bend Station, our nuclear plant near Baton Rouge began its refueling outage after 675 days of being continuously online. That's the longest run in station history. River Bend is an important -- is important to the area it serves providing safe, clean energy that our customers can count on and tremendous support for our communities. During this outage, we will be making multiple equipment improvements to ensure long-term reliability of the unit, including replacement of condenser tubes and feed water heaters. We also made important progress on our regulatory objectives. Starting with Texas, we received approval from the PUCT to build the Orange County Advanced Power Station or OCAPS. This new highly efficient CCGT will provide near-term benefits, including lower fuel costs, lower emissions and expanding regional capacity to support growth in our Texas service area. The plant will be upgradable to enable future reconfiguration for hydrogen capability, which will increase fuel diversity and provide long-duration storage in a carbon constrained environment. For Entergy Texas rate case, parties have progressed in construct the settlement discussions and reached a tentative agreement on key terms. The hearing was put on hold to allow time to finalize the agreement. We'll provide an update on the details when available. In Louisiana, we received approval to recover the balance of Hurricane IDA cost using securitization. We work collaboratively with our regulators to find a solution that met the needs of all stakeholders. The order determined that all of the costs incurred were reasonable and prudent and Entergy Louisiana will fully recover those costs, which is vital for the credit of the company. While the commission approved our storm recovery, we want to assure you that we heard your feedback about the discussion at the meeting and the uncertainty in the process. To that end, we are continuously evaluating our stakeholder outreach practices. Our ongoing goal is a best-in-class stakeholder engagement approach that achieves alignment around important customer outcomes. We believe there is agreement with our regulators around our long-term goals to deliver what our customers need to be successful. Our customers are central to all that we do, and we know we can continue to work with our regulators to improve our processes for the future. Turning to the federal level. In December, we received an order on System Energy's uncertain tax position and sale-leaseback complaint. For the uncertain tax issue, we believe that the FERC's remedy is clear. And as a result, no additional refunds are required. The remedy is important because the rulings of the IRS are now known and the credit ADIT on a hypothetical basis under facts now known to be incorrect, would be wrong. FERC's Remedy also recognizes that customers benefited from our actions by more than $100 million in value, including a $25 million refund made by SERI in 2021 consistent with the amount of ADIT allowed by the IRS, and a separate $18 million refund for excess ADIT also paid in 2021. Meanwhile, SERI took on the risk of interest and penalties with the IRS to provide that value. Absent our actions, customers would have received nothing. And throughout the period at issue, customers paid not $0.01 more in rates than they would have paid has SERI not taken the uncertain tax positions. On the sale leaseback. Sorry. SERI is active on my iPad as well. On the sale-leaseback item, we are disappointed in FERC's conclusion and we have thought rehearing of that decision. The lease renewal was a cost-efficient way to ensure customers would continue to receive access to reliable baseload clean energy from a diverse fuel source. And overall, the sale leaseback saved them over $800 million. On January 10, SERI issued $104 million in refunds required by the order. We have made our compliance refund reports detailing that calculation. FERC will need to review our compliance filing and issue a further order. There is no statutory deadline for the order, but we hope to get FERC's decision soon. As a reminder, SERI refunded Entergy Mississippi $235 million in November as part of its global settlement with the Mississippi Public Service Commission, which represents Entergy Mississippi's 40% interest in 13 different dockets at the FERC. We still believe that a global settlement with the remaining retail regulators on terms similar to the agreement with the MPSC would be in the best interest of all parties. It would resolve disruptive litigation uncertainty for SERI and our stakeholders, including our regulators, accelerate meaningful value to customers, avoid costly and unnecessary third-party litigation fees and allow all parties to move forward with fewer distractions as we work together to pursue the important priorities and outcomes that our customers demand. Moving on to our growth story. Our strategy is centered on two key aspects of our business that are critical to helping our customers meet their goals. First, expanding our clean energy footprint to support industrial sales growth and a growing customer electrification focus; and second, accelerating the resilience and hardening of our system to improve outcomes for existing customers, while giving new customers the confidence to invest in our communities. Our three year $16 billion capital plan supports this strategy, while improving reliability and our customers' experience. This capital plan also provides clear line of sight to our 6% to 8% adjusted EPS growth outlook as well as our credit goals. We are aggressively investing in cleaner energy to benefit customers and communities. Of the $16 billion, close to $6 billion represents generation investments moving us toward a cleaner future. This includes investments in renewables, OCAPS and nuclear. Today, we have just over 800 megawatts of renewables in service, but we're still in the early stages of our renewables build out. Over the next three years, we plan to increase our renewable portfolio by approximately 4,500 megawatts, more than 4 times our renewable capacity today, and that trend will accelerate beyond 2025 with plans for up to 14 to 17 gigawatts in service by the end of 2031. With this plan, we expect to achieve our 50% carbon intensity reduction goal in advance of our 2030 target as well as our new goal for 50% carbon free capacity by 2030. Our plan for accelerated resilience and hardening, known as Entergy Future Ready, is also important to reduce storm risk for our customers and other stakeholders. Last year, we laid out our $15 billion 10 year plan is expected to reduce storm outages, reduce future storm restoration costs and provide a foundation for growth for customers who are dependent on electricity more than ever. Our three year capital plan includes about $900 million for this work and more investment could be added to this plan once regulatory approvals are obtained. We filed our initial resilience plans for New Orleans last July and our plan for Louisiana late last year, and we are targeting decisions in those jurisdictions by the end of this year. For Texas, we are supporting legislation that would allow for an accelerated resilience plan. We expect to make our initial regulatory filing in the third quarter of this year after legislative efforts are completed. We are targeting a decision from the Texas Commission sometime next year. Of the $16 billion three year capital plan, $7 billion represents transmission and distribution investments in addition to our accelerated resilience program to deliver improved reliability and customer experience, through projects focused on asset renewals, enhancements and grid stability. These investments are also designed to prepare the grid for renewables expansion and new customer connections. We've already seen that focused distribution investments make a meaningful difference. Where we've implemented reliability projects, we have seen a significant reduction in the number of outages. Beyond driving important outcomes for our customers, our capital plan provides the foundation for our unique economic development and industrial sales growth story. We continue to see very robust expansion plans from existing and potential new customers, and Kimberly will discuss the key drivers. Two recent clean energy announcements of note are an OCI project for a 1.1 million metric ton blue ammonia facility near Beaumont, Texas, and a Linde project to build a blue hydrogen facility which will supply the OCI plant. The list of industrial projects that we are tracking represent an additional seven terawatt hours of growth above our outlook through 2025. For our planning, we probability adjust the outcomes because we anticipate that not all of those will achieve operations or that may show up on a slower time line. With this backdrop, we remain confident in our longer-term 6% industrial sales growth expectations, consistent with what we laid out at Analyst Day. Affordability remains a core tenant in our pursuit of greater sustainability and reliability for customers. Aggressively pursuing commercial and industrial growth is also important for affordability as it spreads customer-centric investments over a larger customer base. Beyond sales growth, we are supporting customer affordability by working to improve efficiencies and reduce costs, which will translate into benefits for customers. We have historically focused our continuous improvement largely on operating costs. But given the growing capital needs to support customer-centric projects, we have expanded our CI efforts to capital investments. To balance our customers' needs, affordability, reliability and sustainability, we must ensure that we invest capital dollars as efficiently as possible. Higher gas prices and hot weather challenged customer affordability this past summer. The good news is that natural gas prices have come down in recent months, and that will improve affordability for our customers, particularly in Entergy Louisiana and Entergy New Orleans, where their fuel clauses adjust monthly. We continue to work on behalf of our customers to pursue federal funding as a potential means to reduce costs, particularly for investments that accelerate the path towards a more resilient future. To that end, we are pleased to report all five of our operating companies received encouragement letters to proceed with full applications for the first round of DOE's grid resilience and innovation partnerships program. All of our proposals are to improve resilience in disadvantaged communities. This round of program funding is expected to conclude this summer and winning submissions will receive funding for half of their project costs. If we were successful on all five projects, the awards would total $190 million. Finally, in 2022, shareholder contributions totaled $25 million. This included $10 million in donations for bill assistance programs. We also stepped up our efforts on energy efficiency and weatherization programs to provide long-term bill relief. Our impact for our customers and communities goes well beyond charitable donations. Our employees logged more than 110,000 hours of volunteer service. We helped low-income customers access $125 million in LIHEAP funding. And through our volunteer income tax assistance program, we helped place 12,000 low-income families on a path to economic stability by helping them claim $22 million in earned income tax credits. We are very proud of the work of our employees and our corporate social responsibility team as they provide critical help to strengthen the communities we serve. 2022 was another successful year for Entergy, yet we still have a lot of work to do. We are laser-focused on successfully delivering value for our key stakeholders. That includes executing the capital plan before us and laying the groundwork for the significant long-term opportunities in renewable generation, clean electrification, and resilience acceleration. It also includes improving operational outcomes, building alignment with stakeholders, reducing unnecessary noise and distractions, and executing financially to strengthen our balance sheet and maintain credit. All of this is foundational to achieving our 6% to 8% adjusted EPS growth plan and delivering important benefits to Entergy's key stakeholders, which will ensure the sustainability of our business for decades to come. I'll now turn the call over to Kimberly who will review our financial results for the year and our outlook.

Thank you, Drew. Good morning, everyone. As Drew said, today, we are reporting strong 2022 results in the top half of our guidance range. We executed on key deliverables throughout the year and once again increased our dividend by 6%. We are confident that we will continue to deliver on our commitments, and we are initiating 2023 guidance and affirming our longer-term outlook. I will begin by reviewing results for 2022, and then provide an overview of key drivers for our 2023 guidance. Starting on Slide 3, Entergy adjusted EPS for 2022 was $6.42, $0.40 higher than 2021. Turning to Slide 4, our earnings growth was driven by strong retail sales and the significant investments we've made to support our customers. Weather adjusted retail sales growth was more than 3% for the year as sales rebounded from COVID-19 and Hurricane Ida impacts. Industrial sales were strong, nearly 5% higher than 2021, driven by continued growth from new and expansion customers as well as higher than expected demand from cogeneration customers. Overall, weather in 2022 increased our retail sales. This enabled us to flex our spending for the benefit of customers. Higher power delivery expenses included increased spending on reliability, safety and training, and vegetation maintenance, which was partially due to inflation. Higher prices for chemicals used in our generation processes contributed to increases in both nuclear and non-nuclear generation spending. We also increased our call center support spending to improve customer service levels. Higher costs, which result from capital investment specifically depreciation expense, taxes other than income taxes, and interest expense were also reflected in 2022 results. Slides 5 and 6 show that the fundamentals for our industrial customers remained strong and support our growth outlook. Commodity spreads, operating margins, and utilization rates continue to be robust across key industrial segments that we serve. On a related note, natural gas curves have declined. This is good news for customer bills. Since our EEI update, the price curve has dropped approximately $2 for 2023, which will translate into roughly 4% lower bills for customers. In the longer term, lower natural gas prices would also means higher nuclear production tax credits from the IRA, which would drive additional customer value. The results for EWC are summarized on Slide 7 and reflect the wind down of that business, which wrapped up in 2022. With the successful exit of the merchant nuclear business, EWC will no longer be a reportable segment in 2023, and therefore, will no longer be a blanket adjustment. Any remaining activity from that business will be included in parent & other. On Slide 8, operating cash flow for the year was nearly $2.6 billion, $285 million higher than last year. Higher utility revenue was a large driver of the increase. The receipt of Entergy New Orleans storm securitization proceeds in December also contributed. Increased fuel and purchase power payments at the utility and the effects of the EWC nuclear plants' shutdowns were partial offsets. Moving to credit on Slide 9. We expect to achieve credit metrics that are consistent with rating agency expectations by the end of 2023. Since our last update, we've made significant progress in strengthening our balance sheet. Deferred fuel balances have declined nearly $450 million in the last quarter. Given the lower forward gas curves and our efficient fuel recovery mechanisms, we expect these balances to come down significantly in 2023. Entergy New Orleans received proceeds from securitization bonds related to Hurricane Ida storm recovery. This served to establish a storm reserve of $75 million and provided approximately $125 million of storm cost recovery. Entergy New Orleans is awaiting the council's final determination on the prudence of Ida restoration cost. We expect their decision in the fourth quarter of this year. As Drew discussed, the LPSC voted to approve securitization of the Ida storm restoration cost. We successfully worked with our Louisiana regulators to find a solution that reduced the amount financed by $180 million, which represents the value that customers receive from the deferred taxes associated with the storm. We expect to receive Louisiana securitization proceeds in the second quarter and the funds will be used to reduce debt. Drew also mentioned that we received orders from FERC regarding SERI in late December. As a result, SERI paid $104 million in refunds, the majority of which we are appealing. Based on FERC's December order and analysis of the remaining litigation, we determined that its existing reserve was adequate. Turning to remaining equity needs on Slide 10. In November, we settled 7.7 million shares from our equity distribution program with cash proceeds of approximately $850 million. We used the majority of the proceeds to reduce short-term debt. We have completed nearly all of our projected equity issuances through 2024 with just $130 million remaining. On Slide 11, we are initiating our 2023 adjusted EPS guidance and affirming outlooks consistent with our previous disclosures. Our 2023 adjusted EPS guidance range is $6.55 to $6.85 with a midpoint of $6.70. As you know, our goal is to deliver steady predictable growth for our owners. We continue to expect to achieve 6% to 8% annual adjusted EPS growth. The key drivers for 2023 are highlighted on Slide 12. We expect to see growth from continued customer-centric investments including depreciation expense, interest expense, and taxes other than income taxes resulting from these investments. AFUDC is also expected to increase with longer-term projects such as Orange County Advanced Power Station. We expect retail sales volume to be roughly 1% higher on a weather-adjusted basis. This is largely driven by robust industrial sales growth from new and expansion customers mainly in industrial gases, primary metals, and petrochemical industries. The growth for new and expansion projects is expected to be partially offset by lower cogen sales, which were higher than planned in 2020. O&M was elevated in 2022 due to variable operating costs to support higher sales volume and our flex management program. We plan for O&M to return to normal levels in 2023. And we have also taken into account higher costs for materials, contract labor, and chemicals as we have seen prices increase for these items. Our goal is to deliver steady, predictable outcomes and we will utilize our flex tools as needed. We also remain focused on continuous improvement to achieve sustained company-wide efficiency gains. Finally, changes in parent & other, excluding the effects of interest on intercompany preferred investments that are offset in utility are expected to contribute to our year-over-year adjusted EPS growth. The timing of charitable contributions and residual effects from the shutdown of EWC are key drivers. Effects from higher interest rates are expected to be offset by lower debt balances. 2023 results will also reflect higher shares outstanding. The appendix of our webcast presentation contains additional details regarding the specific drivers. It also outlines quarterly considerations and earning sensitivities. In closing, 2022 was another successful year for Entergy and we're proud of what we have accomplished. We continue to deliver steady, predictable adjusted earnings and dividend growth and adjusted EPS once again in the top half of our guidance range. Our plan is to continue this trend supported by robust fundamentals and the strength of our customer base. By prioritizing the needs of our customers, we will deliver value for all of our key stakeholders. We have a unique growth opportunity and we look forward to sharing our progress as the year unfolds. And now, the Entergy team is available to answer questions.

[Operator Instructions] Our first question comes from the line of Shar Pourreza from Guggenheim. Your question, please.

Hi. Good afternoon, Drew and team. It's actually Constantine here for Shar. Congrats on a great quarter. Can we start off with a question on the 2023 planning assumptions and some of the moving pieces there? I see that the load stepped up from the prior first look up to 1% and O&M seems to have a slight tick up. Can you talk about what drove those changes, and what other changes are now embedded versus the early outlook? And on O&M specifically, is that piece attributed to flex O&M or more of recurring costs?

Sure. Thanks for that. This is Kimberly. As you pointed out, our 2023 sales are up a little bit and our O&M is up a little bit from EEI. As you know that early outlooks are preliminary estimates and we've continued to refine our guidance and our outlooks. And as we did that, we found additional tailwinds both in conservative planning principles and additional opportunities in sales. There are some modest opportunities in interest rates expense, and that enabled us to add additional O&M for customer-centric spending like vegetation, as well as call center support and things like that. I will note that we continue to sit squarely in the middle of our guidance range, and we do plan to use flex spending or flex levers that we have to continue to manage 2023 both from a weather potential effects as well as any other effects that come along.

Great. That's very helpful. And shifting to SERI, there's still a few proceedings outstanding. Just to clarify some of the new developments from the December order, how much additional refund are retail regulators lending? And more broadly on the process given kind of the individual complaints at receiving orders and the settlement that -- with Mississippi, does that provide some visibility to an ultimate resolution timeframe? And is there any kind of more constructive settlement discussion positions at this point?

So this is Rod. I'll try to unpack the procedural aspects of SERI updates, and I think I'll let Kimberly address anything as it relates to any new financial claims. But two primary matters to update around the uncertain tax position and the sale-leaseback. One is the compliance filing and the other being the -- our opposing party's request for rehearing. On the compliance filing, actually today, we're filing our response to the regulator's opposition to our filing. And there is no specific timeline that FERC has to act on that, so that's one update. The second, a week from now there is the request outstanding by the opposition of -- for rehearing on the decisions that the FERC made at the end of the year. There is a deadline there that FERC has imposed on itself of February 23rd, so it's actually a week from today. That's the request for rehearing filed by the parties there. So two updates there. We'll have to review the order to determine what if any next steps we have in that regard, but those are the two primary updates for the SERI proceedings around the uncertain tax position and sale-leaseback.

And just to add as far as from a financial perspective, as you know, we reflected the complete effect of the SERI Mississippi settlement for all companies in June. About $235 million of that $550 million roughly charge that was taken last June went to Mississippi and the remainder is reserved. I think Drew mentioned as I did that there was about $104 million of refunds out of the decision that came in December, and those were paid by SERI to the operating companies in early January.

And just as a follow up. Does the kind of information, does this kind of set you up for a better position for any kind of settlement discussions just given the fact that some of these issues are starting to get off the table?

Well, I'll -- This is Rod again. I can respond there to the extent that we are progressing with FERC being clear about its intentions. It does set up a clear path to settlement. And I think what's upcoming and outstanding that being FERC having an opportunity to clarify its prior decision in December as well as addressing any of the issues upon which the rehearing is being requested. Again, it further clarifies those outstanding issues that may be standing in the way of settlement. Our position is settlements in the best interest of our customers and other stakeholders, and we will remain aggressive in pursuing that. But it's in FERC's corner right now to clarify their end of 2022 decision that I think will guide our next steps on settlement.

And I'll just add that -- this is Drew. Whenever we were back in December, we did have conversations going whenever the FERC did decide that they were going to put an order out. It halted those conversations to see what those orders were. And so, pending that information and clarity around that as Rod said, we would hope to be able to get back to the table with them.

That's very helpful. Thank you for taking the questions. I'll jump back in the queue.

Great. Thanks.

Thank you. One moment for our next question. And our next question comes from the line of Paul Zimbardo from Bank of America. Your question, please.

Hi. Good morning. Thank you, all.

Good morning.

Hey, good morning.

Just a couple of smaller ones. Just on the -- you put on your slide that pension is less of an O&M drag year-over-year in 2023. Just -- if you could quantify that, and also how much was the pension contribution that you made last year in 2022?

Paul, this is Kimberly. I may need to get back with you on the specific numbers, but in general, our pension expense is down as you noted as the funded status has increased about $500 million to about 85%. We did increase the contribution at the end of the year, but I'll have Bill follow up with the specific number on that. Our pension liability came down due to the increase in interest rates, which, of course, is reflected in the discount rate for that liability, but that was offset by lower than expected returns on the asset side of our investments. But on a net basis, we are in a better funded status position at the end of the year.

Yeah. The liability was helped by a number of retirements along with interest rates. I think the number for the contribution was around $400 million in that ballpark, Paul, but Bill can give you the exact number.

Okay.

And it's going to be in the K.

Okay. Great. And then also, I noticed there was a $33 million depreciation adjustment for SERI you had in your earnings release. If you could just give some information on what that related to.

Sure. As Rod said, the decision that came out in December had a number of components and on the sale-leaseback side, it had a component around recovery of the cost of the portion that's owned by a third party and how that sale-leaseback was. So when the play that back through, the net rate base that was charged over time had been depreciated when you apply the effects of the sale-leaseback changes that the FERC order judge determined or the FERC determined that depreciation is a turnaround of that effect on that rate base that was depreciated over that time. So it's kind of -- you have to take that piece as well as I think you'll see another sort of net liability there and all those are adjusted out. It's related to that -- those items are all related to how you unwind the sale-leaseback component that came out of that order.

Okay, great. Thank you for that. Appreciate it.

Thanks, Paul.

Thank you. [Operator Instructions] And our next question comes from the line of David Arcaro from Morgan Stanley. Your question, please.

Hi. Thanks so much for taking my question.

Absolutely. Good morning.

I was curious about the Louisiana Commission at least some of the commissioners seem to be focused on reliability and even outside of major storms. So wondering if there's a path to address that aspect of things, kind of areas that seem to maybe fall out of the specific 10-year resiliency plan, just maybe normal day-to-day outside major storm reliability?

Yeah, reliability is actually a part and parcel of our resilience conversation. They are very much connected. And coming out of the back end of 2022 where our customers were experiencing financial hardship because of rising commodity prices, high usage and the like, the regulators were looking for relief and any disruption to our customers was viewed as a challenge for the regulators. But it didn't stop our stakeholder engagement strategy around reinforcing the need for continued investment, customer-centric investments and reliability. And it will continue to be part of our resilience filing and it's part of the case that we've made and the case will continue to make to the Louisiana Commission. They are aligned with us on those customer-centric investments, and we expect to see improvements in reliability across the board. So they've been interested. It's been aligned with our engagement with them thus far. We expect to continue to have their support, especially around our efforts to accelerate the investments.

And I'll add to Rod's comments that we had or we have a resilience and reliability program that we've been operating for the last years that has shown improvements in our stats. And when I was mentioning continuous improvement moving over into the capital space in my remarks, one of the areas where we are focusing that is in this energy delivery space because we have a reliability program. We are upgrading our resilience program. We also have customer efforts going on, integrating those three things and making it much more optimized. It's a space where we think we can achieve all the outcomes that we're looking for and do it more efficiently. So that is a place where all these things are starting to come together and not -- and are actually separate efforts going on internally in the business.

Got it. Thanks. That's helpful. And you alluded to it in the prepared remarks, obviously, the last securitization process was a challenging one and I was just wondering if you could elaborate? Is there a way to lower the risk around storm cost securitization processes going forward in Louisiana? Just what kind of initiatives can you pursue specifically to kind of align parties more smoothly going forward?

I'll start and I'll let Rod jump in. But I think the main thing that we can do is embark on a resilience program together. And that is a big opportunity we have, filings in Louisiana and in New Orleans, and as I said we -- we're planning to do that in Texas later this year. That's the biggest opportunity and that will move all of our stakeholders forward in terms of preparing for storms and responding more effectively to storms. So, Rod, I'll let you...

Yeah, and I think that's the point. Our customers are agnostic as to whether the investment is a reliability investment or a resiliency investment, and when there is a storm and the customers are interrupted, they are experiencing the hardships of that interruption. That's what was part of the driver for the heightened tension both in our -- from the regulators as well as our investment plans in pursuing accelerated investments in resiliency because our customers had the recency of the experience with storms. And so, Drew's point is right on point that if we can get alignment around accelerated resiliency investments, our customers will actually experience better reliability experiences as well. They are quite connected.

Yeah, that makes sense. Okay, great. Thanks so much.

Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Durgesh Chopra from Evercore ISI. Your question, please.

Hey, team. Thank you for giving me time. Hey, just...

Absolutely. Good morning.

Good morning, Drew. Just -- just clarification. What to expect on February 2020 -- February 22nd? So is the FERC actually going to put out an order where they will kind of -- you have the compliance refund, will they affirm the compliance refund report? I'm just trying to kind of figure out what to look for there?

We expect them by February 23rd if I'm hearing your question correctly. We are expecting the FERC to respond to the parties' request for rehearing. So any substantive aspects of that is unknown to us, but our expectation is that FERC will respond to the parties' request to have certain of those issues reheard, not necessarily a substantive ruling one way or the other.

I see. So if they basically say no to the rehearing, then I guess, does that clear way the path to you kind of going through other settlements and putting that to bed? Is that the right framework that I'm thinking about?

Well, the parties will have the opportunity to appeal if they're not satisfied with the outcome. I think from our vantage point, there were certain advantages to give FERC the opportunity to reaffirm the initial position it took, and we had some challenges with the sale-leaseback part of the order. And so, what we're looking for out of this candidly is clarity. And we'll wait to see what -- how FERC responds in the next week to order our next steps.

Understood. Thank you, guys. That's all I had. All my other questions have been answered. Thanks, again.

Excellent. Thank you.

Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Angie Storozynski from Seaport. Your question, please.

Thank you. So the first on FERC and SERI. So FERC scheduled hearings and that's a last challenge that talks about the prudence of the up rates of Grand Gulf, which I mean on its own frankly, it's hard to believe that this challenge wasn't outright rejected. So I mean, is there any read through? Are you hearing anything from FERC why those hearings were even scheduled?

Hey, Angie. It's Rod. You're -- I'm assuming you're talking about the orders -- the rehearing order that the FERC released today where they declined our motion to...

Yes.

Rehear. Yeah. So the order is procedural only as we read it. It doesn't order any refunds or require any further actions. And they went so far as to explain that in setting the prudence complaint for hearing and settlement, it imposes no obligation on us. It doesn't deny us any of our rights. It fixes no legal relationships, but it simply initiates further proceedings. And they're with holding their right and ability to address anything substantive along the lines. It's not unexpected for us, but it's -- again, it's a procedural and not a substantive order. So there's not anything to read from it from a subsidy standpoint.

And, Angie, to be sure we appreciate your sentiment.

Yeah. And the next step is the settlement offer March -- SERI settlement offer to the parties on March 1st, but again, Angie, taking it as a procedural matter, not a substantive one.

Okay. And then, completely -- changing topics completely here. So I mean, I was just wondering there is this discussion in the industry overall about switching from solar ITC to solar PTC. Obviously, from a regulatory utility perspective that's helpful given no issue with ITC normalization, but is there -- I mean, as you look at it, right, especially that your solar resource would be superior or above average, I mean, is this shift -- would that be actually in any way EPS accretive? I mean, I'm just thinking about the earnings recognition under the -- on the solar PTCs versus the ITC.

Yeah. Good question, Angie. The way we think about the PTCs is they provide -- and any IRA in general is it provides opportunity for incremental investment. We'll need to work with our regulators as we have over a number of years successfully to provide back the tax credits to customers in a way that provides them the value, but continues to support our credit and our balance sheet. And so, we've begun those conversations early, but how those play out will be a matter of discussion with our regulators. We've talked about using those as credits against rate base as compared to direct credit, for example, to customers as it gives us an opportunity to manage our balance sheet as well as ensure the opportunity to customers. And it also helps with the volatility associated with customers' bills on PTCs, particularly as it relates to the nuclear PTC.

And Angie, this is Drew. I would add to Kimberly's comments that we have a 50% planning assumption to the extent that this does help make us more competitive. There might be an opportunity for incremental investment over and above what we're planning, but we still have to go achieve that. So we're continuing to work to get more competitive. And this is certainly helping level the playing field for us as you said versus the ITC framework. But that's an opportunity for us that we will have to go achieve out there in the future.

Okay. And then, lastly, you did make comments about changes in forward power curves and the quantification of the nuclear PTC benefit that would accrue to your customers, but we haven't yet received any guidelines from the IRS and it sounds like it's not expected until the early summer. But is there -- but have you been in discussions with the IRS about how they will potentially quantify the current energy stream that nuclear plants are getting?

Yes, we're certainly working through EEI with our partners and with the other utilities on getting clarification on these nuclear PTCs. We'll obviously have to wait with the rest of the industry on what that actually comes out as, but we do believe that that's an opportunity for us and we'd be eligible for those. And it provides, as Drew said, an opportunity for customers, both to manage builds as well as an opportunity for incremental investment depending on how those come out. But we have definitely been in discussions with them through EEI.

And we did anticipate that they would be probably a little slower on this because they had more time. It doesn't kick in until 2024. And so, we anticipated that they're going to cover a lot of other things like the corporate minimum tax and other important elements first before they got to that.

Awesome. Thank you. Thank you, both.

Thank you.

Thank you. One moment for our next question. And our next question comes from the line of Anthony Crowdell from Mizuho. Your question, please.

Hey, good morning. Hopefully, just two quick ones. I -- you may have addressed them, but just curious. I guess there's two issues going on with SERI. What is a reasonable expectation when you think of all of the challenges that will play out at FERC like what's a reasonable assumption when all that is over? Is that within six months or you think it could carry longer?

We can't say because FERC has -- on the issues we just alluded to, doesn't have a specific timeline. They are in control of the schedule there. The updates that I've given was the filing we were making today that -- where the FERC has no scheduled deadline. That's in regard to our compliance filing. Then, the other was a week from today, the timing that FERC imposed on itself to reply to the request for rehearing from all the other parties, but it is in FERC’s domain to decide when they make these decisions. So I could not give any expected timeframes to resolve all of these. That's another one of the reasons why we're so aggressive in engaging with the regulators to pursue a settlement to remove the uncertainty inherent in FERC's operations. No disrespect to our FERC commissioners.

Great. And just lastly, in Slide 9 you go through some credit and liquidity metrics there. You talk about maybe about by year end, you hope to be at the range or better. Your FFO to debt, especially with Moody's trying to be at 14%. I guess, do you have a targeted credit cushion or a targeted level you hope to be maybe by 2024 that you could share?

Sure. As you pointed out, we are targeting to be above 14% by the end of 2023 and closing out the securitization for Louisiana that was approved in January is a significant help to enable that. As far as longer term, we are targeting 15% and we're targeting that over the outlook period. So you'll see us continue to focus on strengthening our balance sheet over the outlook period to get to that target of around 15%.

Great. Thanks for taking my questions.

Thank you.

Thank you. One moment for our next question. And our next question is a follow-up from Constantine from Guggenheim. Your question, please.

Hi. Thanks for taking my follow up. Maybe just to elaborate on the O&M targets and conditions that you're seeing, you kind of mentioned some of the costs escalating, but just trying to get a sense on what percentage of O&M is subject to some of these external factors, and how do those elevated costs play into regulatory relief just given the FRP revenue increase caps?

Sure. Thanks for the follow up. As far as inflation, we do have some inflation costs in our 2023 guidance. We've talked about costs like commodity costs and chemicals that have increased. We've seen some labor cost increase in our vegetation contracts, for example. But as I said, we have seen some relief on that, particularly on the commodity side as it relates to either the resources that go into our capital plan. Things like copper, nickel, steel, all these are down year-over-year. So there are some -- it's a blend, if you will, but we do think we have some flex levers in 2023 to help us manage both our O&M and our overall -- where we are in the guidance range.

So, no kind of impact on the regulatory relief just given some of that flex that you have. I think the early outlook has like a 9% utility book ROE, any change in thinking around there?

Yeah. So as far as Louisiana and Arkansas where Arkansas certainly has an FRP, we continue to work to manage within that cap. Increased sales which U.S. Steel will come in over the outlook period will certainly help us in that regard. From a Louisiana perspective, as you know, in June is the last filing of our FRP in the current cycle and we would expect to have either a rate case or new FRP filing. Those modifications out of those outcomes would help us move up -- but you'd see their ROEs move up hopefully depending on the outcomes associated with those rate mechanisms.

Great and quick follow-up on the question around credit metrics. Just are capital market conditions changing your thoughts around the process or kind of capital allocation or dividend decisions? And kind of more broadly, how are you thinking about optimizing those financing needs, especially with CapEx ramps up in the second half of the decade?

Yeah. We certainly -- as we noted from an equity perspective, we've met our needs through 2024 largely. We have about $130 million left. We've talked about a total need between 2025 and 2026. We haven't broken that out, but as we accelerate capital investments and we see additional renewable growth in the back half, we'll definitely have to look at how we are financing that most effectively. But we continue to watch interest rates as well as other mechanisms to finance, but we don't have anything as far as alternate financing or anything like that, that we have that's executable at this point.

And it's not changing our capital mix really either at this time. We're using the internal tool for continuous improvement and trying to flex around those internal options rather than try to adjust what we're doing on an external basis at this point.

Excellent. That's very helpful. Thanks so much and great quarter.

Thanks, Constantine.

Thank you. And our final question for today comes from the line of Nicholas Campanella from Credit Suisse. Your question, please.

Hey, everyone. Thanks for getting me in here. Just one from me today. In Louisiana, I know you're kind of on the last year of the FRP cadence and I guess you'll either file for an extension in the third quarter or a rate case. Can you just give us a sense of where you're leaning there and any additional thoughts around that? Thank you.

Well, we are prepared for both tracks and the filing of a rate case. It doesn't prevent us from continuing to work with the commission and our related stakeholders on an extension or renewal of the FRP. So they are parallel paths, not inconsistent with the prior as I recall in my two iterations of review. So the process will likely be the same. Given the fact that we have the accelerated resilience filing and any anticipated tweaks along those lines, we'd be looking to figure out with our stakeholders what's the most efficient path for us to incorporate the resilience components aside from the rest of the components of our capital plan and rate design. So more to come but parallel paths.

Thanks for that. Have a great day.

Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Bill Abler for any further remarks.

Thank you, Jonathan, and thanks to everyone for participating this morning. Our annual report on Form 10-K is due to the SEC on March 1st and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-K 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.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.