Good day, everyone, and welcome to the Entergy Corporation Second Quarter 2013 Earnings Teleconference. Today's call is being recorded. And at this time, for introductions and opening comments, I would like to turn the call over to the Vice President of Investor Relations, Ms. Paula Waters. Please go ahead.

Good morning, and thank you for joining us. We'll begin today with comments from Entergy's Chairman and CEO, Leo Denault; and then Drew Marsh, our CFO, will review results. [Operator Instructions] As part of today's conference call, Entergy Corporation makes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information concerning these factors is included in the company's SEC filings. With respect to the planned spin-merge transaction, ITC filed a registration statement with the SEC, registering the offer and sell of shares of ITC common stock to be issued to Entergy's shareholders in connection with proposed transaction, and the registration statement was declared effective by the SEC on February 25, 2013. ITC is expected to file a post-effective amendment to the registration statement and ITC shareholders are urged to read the prospectus included in the ITC registration statement and the post-effective amendment to the ITC registration statement, when available, for important information about Transco and the proposed transactions. In addition, on July 24, 2013, our subsidiary, Mid South TransCo LLC, filed a registration statement with the SEC, registering the offer and sell of Transco common units to be issued to Entergy's shareholders in connection with the proposed transaction. This registration statement includes the prospectus of Transco related to the proposed transactions. Entergy also will file a tender offer statement on Schedule TO with the SEC, related to a planned exchange of shares of Entergy common stock for the Transco common units. Entergy's shareholders are urged to read the prospectus included in the ITC registration statement and the post-effective amendment to the ITC registration statement when available, the Transco registration statement, the tender offer statement on Schedule TO when available, and any other relevant documents because they contain important information about ITC, Transco and the proposed transaction. These documents, and other documents related to the proposed transaction, when they're available, can be obtained free of charge from the SEC's website at www.sec.gov. The documents, when available, can also be obtained free of charge from Entergy upon written request. Now I'll turn the call over to Leo.

Thanks, Paula, and good morning, everyone. Last quarter, I laid out our roadmap for 2013, the 7 strategic imperatives we are focused on that will bring sustainable value for our owners, our customers, our employees and the communities we serve. This morning, I'll update you on progress on each imperative over the last 3 months. As a reference, the 7 strategic imperatives are listed on Slide 2 to the webcast presentation. Starting with execute on MISO and ITC. The targeted December 19 cut-over date for the Utility operating companies to join the Midcontinent Independent System Operator is approaching quickly. Many operational and regulatory activities are ongoing in parallel to ensure a seamless transition. Last month, we received additional orders from the Federal Energy Regulatory Commission on certain key MISO-related issues. We appreciate the FERC's timely action on these items. Also in May, on the implementation front, we ran a simulation on processes, situations and communications that employees will handle when MISO integration is complete. Over 100 participants from Entergy, MISO and ITC were involved over a 2-day period. The exercise did highlight areas to work on; more importantly, however, it confirmed we are well on track for accomplishing what will be a step change in how we plan and operate our system. Regarding the spinoff and merger of the transmission business with ITC, in the second quarter we received key transaction approvals from the FERC and a private letter ruling from the Internal Revenue Service, confirming the tax-free nature of the transaction structure. These items come in addition to the April 16 ITC shareholder approval I mentioned last quarter. This brings us to the retail regulatory approvals. We entered the final critical stages in the second quarter. After careful consideration of the input from parties in all of the retail…

Thank you, Leo, and good morning, everyone. In my remarks today, I will cover quarterly financial results and expectations for 2013 and beyond. This will include a discussion on human capital management. Now let's turn to the quarterly financial results. Slide 5 summarizes second quarter 2013 results on an as-reported and operational basis. Operational earnings per share were at $1.01 versus $2.11 a year ago. Second quarter as-reported earnings in both periods included special items for expenses associated with human capital management in 2013 and the spin-merge of the transmission business of ITC in 2012 and 2013. Turning to operational results, Slide 6 summarizes the major drivers by business. Utility operational earnings per share were lower in the second quarter 2013 due largely to a tax benefit and associated regulatory credit in the comparable 2012 period. Together, these 2 items provided a net benefit of approximately $0.44 in the second quarter of last year. Excluding these items, the quarter-over-quarter operational results declined approximately $0.15. The overall decrease is attributable to the net effects of higher non-fuel O&M expense and higher depreciation expense, partially offset by higher net revenue. A portion of the increased non-fuel O&M and depreciation expenses, as well as the increased net revenue, reflect investments placed in service in 2012. Previously identified higher benefit costs, primarily from pension discount rates, also contributed to the quarterly O&M variance. Second quarter 2013 net income also included approximately $7 million incremental pretax expense as a result of the ANO industrial act. This amount reflected incremental non-fuel O&M, less than estimate recorded for expected insurance proceeds and reduced refueling outage amortization expense. While on the topic of ANO, I'd like to give a quick update. First, recovery efforts of -- for ANO have progressed well. Unit 1 could return to service as…

[Operator Instructions] We'll go first to Angie Storozynski of Macquarie.

I wanted to start with Slide 22, the illustrative adjusted EBITDA for EWC, and how it ties into the Slide 12. So you're showing a step down in EBITDA for the merchant business in '14, even though we have quite a considerable O&M cuts and an unlikely pick up in capacity revenues in New York. I know that there's a reduction in energy prices, but I would still expect a bit of a stronger projected EBITDA for that business.

Yes. Well, the reality is, is that we're still facing lower prices, overall. So as Drew suggested, on a per-megawatt-hour basis, we're seeing a reduction. So while we're encouraged and we've seen some uplift from areas such as the Lower Hudson Valley capacity zone, the fact is, in a lot of the other markets, specifically in the New England market, we're not getting appropriate rents in terms of capacity prices. So net-net, you're correct. We're still looking at a decline in total EBITDA for EWC for '14.

So that bar already fully incorporates cost-cutting and MISO's projections for the capacity price uplift?

I don't believe that it includes all of the HCM efforts, but it does reflect our point of view on current market conditions.

Okay. And then on Slide 12, could you just explain a little bit what is the -- this potential portfolio management activities? What do you mean by those?

Well, as we look at that portfolio, as Leo mentioned, we consider all options, and we do this on a regular basis. So obviously, we look at a hold-and-optimize scenario, where we are taking the steps to reduce our costs and be as efficient as we can at each and every facility. We also are -- explore market opportunities to determine if any asset or portfolio of assets would be better owned by another party. And we also continually evaluate the potential for a shutdown of a facility. So those are -- when we talk about options, those are kind of the 3 different areas that we constantly look at, and that's similar to what we've always done.

Okay. But why is it mentioned under corporate and not under EWC?

Well, that's -- this is Leo, Angie. That's primarily given who kind of leads some of those efforts and they work in conjunction with the folks within the business units. So the kind of people who do all that kind of activity primarily are driven out of the corporate organization, so that's more just our organizational structure than anything else.

Okay. I know I was supposed to ask only 2 questions but this last one is -- so we have the -- those projections of O&M cuts, targeted projections by 2016. Can you explain to me the timing of this announcement vis-à-vis your pending rate cases and ITC transaction? I mean, should it, you think, facilitate the ITC deal and your pending rate cases or, I mean, how will it be actually incorporated in your pending regulatory filings?

I'll let Rod take that. Rod West, who's our Chief Administrative Officer, all of the HCM effort is being directed under his organization. So I'll let Rod take that.

And to be direct in answering your question, the timing is not designed to facilitate or feed a regulatory point of view. The timing of the HCM announcement really does reflect where the companies planning process has evolved to where we think we have a clear point of view on the savings and our confidence around being able to articulate what we think the bottom line impact would be. And so as we began this process, Leo, I recall, announced at EEI last year as we were formally beginning to publicly, at least, execute on our point of view around MISO and ITC, we had perspectives around where the organization needed to be on a going-forward basis. And as we evolved, as the analysis evolved, we felt more and more comfortable about when we'd be able to communicate. So the timing, it just reflects where we are.

[Operator Instructions] We'll go next to Dan Eggers of Crédit Suisse. Dan Eggers - Crédit Suisse AG, Research Division: Just following up on the cost-cutting program and kind of the numbers out there. The overall savings are pretty significant relative to maybe what we've seen in...

Dan, could you speak up? We're having trouble hearing you. Dan Eggers - Crédit Suisse AG, Research Division: Sorry about that. Just on the magnitude of cost savings, could you share a little more color on where you guys expect to find the savings? When we've seen past M&A transactions recently, their savings have been in line or smaller than what you guys are talking about today. So just kind of trying to bucket those a little better would be helpful, I think.

Sure. Rod?

Sure. Dan, I think, as we've discussed in prior conversations, the -- what you know and what we call the HCM process has been centered around 4 work streams, and both Drew and Leo alluded to them. The first is the Oregon process and I think that one answers your question in terms of where we think the lion's share of, at least, what we've communicated today, rest, particularly as we look to what's meaningful in '13 going to '14. Then you have comp and benefits, procurement costs, management and then the non-employee related operational expenses. And so the lion's share of the savings, order of magnitude, 1/2 to 2/3 perhaps, comes from our Oregon and process point of view. Dan Eggers - Crédit Suisse AG, Research Division: And I guess, just -- yes, you guys reiterated the 6% earnings growth of the utilities. That would then include the 2014 savings, I guess? So was there a bit of a backfill on supporting that 6% growth or is that number actually biased higher because you'll have more savings in those numbers for next year?

We're not considering it added to the 6%, as I mentioned. There could be some small benefits short term but, ultimately, we expect it to be recognized in filings when it's sort of known and measurable and within the regulatory process of the utility. So we're not counting it really as incremental to the 6% target.

[Operator Instructions] We'll go next to Jonathan Arnold at Deutsche Bank.

Just to clarify on the ITC mitigation plan, as proposed, how would you envisage kind of those credits flowing through the financial statements or not? I mean, how...

Drew?

It's -- we're still looking at it. Preliminarily, we would expect it to be a part of -- it would be reflected in the net revenue. But there's -- it could change with final orders that we ultimately get. The only change that we would see would sort of be whether or not we would recognize a liability on the balance sheet for the first 5 years. After that, everything is contingent and so it, clearly, wouldn't be a balance sheet liability. But, at this point, we expect it to flow through in net revenue.

Just flow through in net revenue as incurred, basically?

Correct.

Okay. And then my second one. On Page 12 under EWC, you have this -- you mentioned depreciation as a driver for '14. And then declining useful life of nuclear assets. Can you clarify that latter part of that statement?

Yes. That was related to a potential change where, currently, we had accelerating depreciation as we get closer and closer to the end of life of the units, and we may make a change where we flatten that out a little bit. But that's -- I think that's the primary thing we're talking about there.

So that would be beneficial to earnings? Sorry, just to make sure I...

No. Well, it would be beneficial to the end tail of the earnings. It would be against earnings. It would be harmful to earnings, actually.

So it's a negative '14 driver?

Yes.

And how -- is that included in the sort of EBITDA look that you put on the later slide?

No, no it's not.

Okay. Any sort of idea how much that might be or is it small?

We don't have -- we're not -- we don't have that information right now. But we'll give you additional details later.

And we'll go next to Andy Levi at Avon Capital.

Just on -- getting back to the cost savings. So on the EWC side, you have -- 35% to 40% of that segment would realize the cost savings. And then as you said, you have the EBITDA on that slide kind of coming down in '14. So -- and then you kind of were kind of vague on whether, ultimately, the savings were going to be incorporated in '14. So does that mean that we'll see them in '15 or -- I just kind of need some clarification. And then I have one other quick follow-up.

I think, Andy, the clarification was is that the EBITDA number did not include HCM, but we would anticipate there would be some...

In '14. Yes, the bulk of the segment we would expect to see for EWC in '14.

Okay. But that slide does not include the savings from HCM?

Correct.

Perfect. Okay. And then the other thing, just moving on to ITC very quickly. You have all these kind of rate mitigation things for the various states. Can you give us a breakdown on how much of those savings are from, let's say, the System Agreement versus just kind of other savings?

Can you repeat that question, Andy?

On the ITC Entergy deal, there's savings from the System Agreements going away, right? And then there's savings, and so I'm just wondering what the breakdown of that is? So let's say -- I'm just throwing out a number. Let's say in Louisiana it's $100 million of rate mitigation that's going to the customer. What's kind of the breakdown of that?

Andy, are you referring -- this is Theo. Are you referring to the avoided cost...

Yes, exactly.

Column on Page 3 -- Slide 3?

I don't know if it's on Page 3, but...

If you're referring to the Avoided Cost column, it includes costs that would go away as a result of the transmission business going away. And, therefore, there's no more MSS-2 transactions potentially between the various operating companies. And also I think it also reflects maybe some impacts of zonal -- a change in pricing zone structures. I don't have in front of me the various pieces and parts as it relates to those 2 components, but I think we could follow up and get that to you.

And we'll go next to Greg Gordon at ISI Group.

So when I think about the HCM program in terms of its impact on your Utility businesses, should I just think about this as being -- driving the ability for you guys to have a higher confidence level in earning at your authorized returns across the jurisdictions prospectively? I mean, I think your guidance this year, for instance, presumes a significant level of under earnings. So the HCM program would have 2 benefits: one, it would reduce the necessity for rate increases, but also keep your cost profile from creating regulatory [indiscernible]. Is that the right way to think about it?

That's fair, Greg. I mean, the major component is to become more efficient, and through the efficiency, we should end up with lower rates, lower costs to our customers, and have a better shot at earning the rate of return that we're allowed. That's correct.

Right. And if -- my one follow-up. If you were to be ordered to implement the rate mitigation plans by establishing regulatory liabilities, as opposed to running it through on a -- running it through the P&L, we should assume then that's an offset to rate base, right, that lowers your rate base? Is that right?

Drew?

Well, we would only get to do that if we got a rate order, a rate deferral. I would think of it more as a regulatory asset that we would be able to realize over time on a one-time incurred costs.

Well, if you had a regulatory liability, right, that would flow through as a contra-expense but you'd have a reduction in revenue. So you'd wind up having sort of an upfront write-down and then flow the cash -- there would be a cash impact as you flowed the credit risk back [ph], but not an earning impact? Right?

This is Theo. I think what would happen if, in fact, you booked it upfront, you would recognize the liability. But the cost, obviously, would be recognized as an expense at the time you booked the liability, if in fact that was the case. As Drew said, that's not what we're saying, at this point in time, would be the case. If in fact, you had a liability as part of a regulatory construct, I would imagine that you're not likely to see that as it relates to regulatory rate setting going forward.

Great. But you're -- so -- Okay, so you think that the most likely outcome should these mitigation plans be approved is they'll flow through as you flow back the -- as they flow back the customers, you'll incur the expense. Your human -- your cost-cutting plans allow you to sort of plow through that and still close the gap between your current ROEs and your future authorized ROEs?

As you state, I mean, the -- if in fact, it happens as we see it or expect it today, you would see the impacts of the rate mitigation flowing through currently as reduction to revenue, which obviously would have a -- put downward pressure on ROEs. You would also have, as the regulatory processes move forward, you would see the impacts of cost-cutting making their way through the regulatory process. That could happen at various points in time. Obviously, as that happens, as Leo mentioned earlier, we would see rates being adjusted to reflect those changes in cost structure within the utility. So for a period of time, there is a potential that you could have offsets but, again, as you go forward and the regulatory process encompasses those rate reductions within the setting of rates, the rates would be adjusted commensurate with that and those benefits would flow back to customers at that point in time.

And we'll go next to Steven Fleishman at Wolfe Research.

Yes. Two questions in 10 parts. Just on the percent O&M increase, could you possibly breakout that 0.5% to 2.5% just for the EWC business?

I don't have that in front of me right now, Steve.

Okay. And then also on the target of 6% growth in 2014, if you achieve that in 2014, would you generally be earning your allowed returns in your regulatory jurisdictions, overall? Or would you still be under-earning?

Steve, this is Theo. Yes, I believe -- if we achieve that, we would -- I think we'd be -- I think, yes. I think the answer is yes, we'd be pretty much be earning our allowed ROEs within the constructs of the jurisdictions.

Okay. So in theory that -- the cost-cutting is kind of helping you to get to earn it and will in the future at the utilities, I guess. One last just thing on the HCM. The compensation benefits procurement that you mentioned, are those included in the $200 million to $250 million or not?

Steve, this is Rod. They are currently included. I was just making the point earlier that the lion's share of that number was in the Oregon process, but all 4 work streams are and will continue to contribute to our point of view on the 200 to 250.

We'll go next to Charles Fishman at MorningStar.

On the rate mitigation plan in year 6, when it's determined by the savings, who is the arbitrator of that savings? Is it MISO? Is it the state commissions? Do you hire an independent consultant? In other words, who is making that decision of what the savings are?

Charles, I think if you look at what has been filed as a part of that rate mitigation plan, I think what we would -- what has been proposed is you would have an independent third-party that would be approved by some regulatory -- would be mutually agreed upon between ITC and some -- a regulatory body.

And unfortunately that is all the time that we have for questions today. I'd like to turn the conference back over to Ms. Waters for any additional or closing remarks.

Thank you, Anthony, and thanks to all for participating this morning. Before we close, we remind you to refer to our release and website for Safe Harbor and Regulation G compliance statements. Our call was recorded and can be accessed on our website or by dialing (719) 457-0820, replay code 4532989. The recording will be available as soon as practical after the transcript is filed with the U.S. Securities and Exchange Commission due to filing requirements associated with proposed spin-merge transaction with ITC. The telephone replay will be available through August 7. This concludes our call. Thank you.

And this does conclude today's presentation. We thank everyone for their participation.