Entergy Corporation (ETR) Q1 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Entergy Corporation First Quarter 2016 Teleconference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, David Borde, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us. We will begin today with comments from Entergy's Chairman and CEO, Leo Denault, and then Drew Marsh, our CFO will review the results. In an effort to accommodate everyone who has questions, we request that each person ask no more than two questions. On today’s call, management will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additional information concerning these risks and uncertainties is included in the company’s SEC filings.

Thank you, David, and good morning, everyone. This quarter was a good start to another important year for Entergy. We accomplished what we set out to do by successfully executing on our to-do list. We closed the acquisition of the Union Power Station, finalized our Arkansas rate case, received a final order in our distribution cost recovery factor filing in Texas, held our first FRP with forward-looking features in Mississippi, completed the A&O in our SEA inspection, received confirmation from the New York ISO that the shutdown of FitzPatrick will not affect reliability in the region, saw over 6% industrial sales growth versus last year, and today, we are reporting first quarter operational earnings per share of $1.35 above what we expected. Well, that's a good start. You're also aware that it's early in the year and we face challenges ahead. But we are confident that we can manage these and deliver on our earnings commitments for the year as well as our adjusted utility, parent and other long-term outlook. Our results for this quarter or the outcome of the strategy we have been pursuing for some time to create sustainable value for all of our stakeholders in 2016 and beyond. At the utility, investing to benefit customers, while maintaining competitive rates with ready access to capital in timely and predictable investment recovery, which provides the financial flexibility we need to make these investments. And at EWC continuing to reduce our footprint to limit exposure from assets not supported by the market. We've already materially reduced our size, risk and volatility through the sale of the Rhode Island State Energy Center and shutdown of Vermont Yankee. This trend will only accelerate as Pilgrim and FitzPatrick come offline. We will continue to emphasize safe operations, regulatory compliance and commercial diligence at all sites. If you turn your attention to our to-do list on slide three. On March 3rd, we closed the acquisition of the Union Power Station. This acquisition has built an important driver in achieving 2016 earnings expectation and also one more important step in our broader plan to modernize our fleet and provide lower cost reliable generation for our customers. Recovery of the cost of this investment in Arkansas, Louisiana and New Orleans effectively began simultaneously with the transactions closed. Thanks to a collaborative agreement between our team, our regulators and other participants who recognize the benefits of this investment for our customers. Another important component of our supply plan is building the St. Charles Power Station. The hearing at the LPSC began April 18th and is expected to conclude today. Thus, we expect that the LPSC will be able to take up the certification decision in August. This is an important investment to serve our customers in Louisiana and as an example of the infrastructure development that we are undertaking to position the utility for the future. Beyond generation, we also continue to make significant progress in providing benefits to our customers through our transmission investments. We officially kicked off Entergy Louisiana’s Lake Charles Transmission project with a wire cutting ceremony in March. Once completed, this $159 million project will support continue reliability and service to our rapidly growing area and our service directory. On the regulatory front, we've also made progress towards better aligning the timing of our investments with the needs of our customers going forward. This will improve access to the capital needed to make the investments required to enhance reliability and capability of our system and provide lower cost, more environmentally friendly sources of generation for the benefit of our customers. This ultimately supports economic development in our service territory, which strengthens communities, creates jobs and brings more financial stability to the regions we support. This quarter, we filed our concluded several major proceedings. First, we received the final order in our Arkansas rate case and rate adjustments became effective on February 24th. We'll make our first rate plan filing in July under the new framework using the future test year, which will bring more predictability and strength in Entergy Arkansas' financial profile. This new regulatory structure as a result of collaboration among the broad group of stakeholders, it will help us be a stronger partner to attract jobs and economic expansion to Arkansas. Last month, Moody’s acknowledged this view with an upgrade to Entergy Arkansas long-term rating. Entergy Mississippi has also begun to utilize its new formula rate plan with forward-looking features made its first filing on March 15th. The filing reflects an anticipated earned ROE for the 2016 test year that is below the FRP bandwidth indicating a $32.6 million rate increase to a point within the FRP bandwidth that reflects a 9.96% earned ROE. A final order on that filing is expected before the end of the second quarter with the resulting rate adjustments to become effective around mid-year. In mid-February, the administrative law judge issued a proposal for decision with the Public Utility Commission of Texas on our transmission cost recovery filing based on the proposal for decision, we estimate $10 million to $11 million annual recovery on transmission spend incremental to base rates. Use of this writer, along with the distribution cost writer, we have been utilizing since January of 2016 will bring us greater financial flexibility to support the needs of our customers in Texas. The Louisiana Commission also recently opened two generic dockets on income tax and corporate structure questions. The dockets were initiated in response to specific commissioner concerns regarding the CLECO transactions and the implications of that transaction structure on Texas in rate making. While the dockets are generic and in fact, all LPSC jurisdiction of utilities, we believe that the scope of the documents will be narrowly focused on those types of structures that give rise to the dockets and not on broader policy issues like tax normalization, where tax related matters previously approved by the Louisiana Public Service Commission. Furthermore, we've worked constructively and transparently with the LPSC on tax related matters. The LPSC is permitted with our tax positions, which have resulted in significant benefits to our customers. The commission has two items regarding the CLECO transactions on its business and executive session agenda on April 28th, and we are hopeful they will take that opportunity to clarify the scope of these dockets. We do not expect significant effects for ELL as a result of these dockets. Finally, we carefully monitor the effects of investments in rate actions on our customers' bills, which today remain on average 20% to 25% below the national average. In fact, our average residential rates remain below $0.10 per kilowatt hour. Looking forward, we continue to explore solutions that will meet our customer's changing expectations in the evolving landscape of the utility industry. By introducing new technologies and renewable energy resources, we can build a grid that is cleaner, more resilient and affordable and provides innovative opportunities in the way we interact and generate power for the benefit of all of our customers. We are active on the renewables front with solar pilot programs underway in Mississippi, New Orleans and Arkansas. Entergy Mississippi has completed three solar installations in three different locations, each capable of generating 500 kilowatts. Entergy New Orleans has begun construction of the one megawatt solar generation project with state-of-the-art battery storage technology. And Entergy Arkansas has entered into a power purchase agreement to facilitate construction of an 81 megawatt solar generating facility, which could be online as early as 2018. These are the first steps towards assessing feasibility of utility scale solar generation, a resource that provides one way to help meet our voluntary commitment to stabilize our carbon dioxide emissions and reduce our environmental footprint. At the same time in 2015, our existing generating fleet continue to produce electricity at one of the lowest carbon dioxide emission rates in the United States. We are building on these pilot programs and we've initiated three new requests for proposals for renewable side generation resources to help meet long-term resource planning objectives in our service territory. These RFPs are seeking up to 200 megawatts of capacity for Louisiana, 100 megawatts for Arkansas and 20 megawatts for New Orleans. Beyond pilot programs, we've also created a commercial development and innovation team dedicated to evaluating and integrating other new technologies in our operating model. That team focuses on addressing customer needs and expectations through product and service innovation, technology deployment and alternative service models and also research and development, enabling technologies that enhance the distribution grid and provide higher servicing and reliability for all of our customers. For example, as I mentioned last quarter, we are moving forward with the process to install advanced meters in our distribution system. At our Analyst day in June, we'll give you more details around the next steps for deployment of advanced meters and similar to our approach for our supply plan back in 2014, we'll provide the initial strokes around the broader plans for other potential grid modernization efforts to be followed with more details overtime. I'll take a moment now to talk about initiatives to improve our nuclear operations. First of all, our plants are safe. If they weren't they would not be running. This past year, the performance of our nuclear fleet as a whole was not in line with our standards. Operational excellence is integral to our business model in a core competency, we must maintain to maximize value for all of our stakeholders. We have made it a top priority in 2016 to strengthen the culture of operational excellence throughout our organization. I'd like to extend my thanks to Tim Mitchell, who started this, down this path as our interim Chief Nuclear Officer and welcome Chris Bakken, who has officially joined us as Executive Vice President and Chief Nuclear Officer, reporting directly to me, Chris will now lead these efforts in the nuclear organization. In January, as part of a comprehensive fleet-wide performance improvement plan, we formed a corporate event response team with industry assessments around best practices and increased engagement with all stakeholders. We are evaluating nuclear operations across our fleet from top to bottom and we continue to evaluate the need for process changes at each individual plant. And it's not just about column four, our main long-term objective is sustained operational excellence across our fleet. This could result in incremental nuclear spending and we are working hard to mitigate any financial implications. At A&O, NRC completed its supplemental inspection and announced those results at a public meeting earlier this month. The NRC is confident that the problems have been identified and a comprehensive plan is being implemented to correct them. The NRC is expected to issue a confirmatory action letter in the next several weeks and we plan to give you an update at Analyst Day. Finally, it’s important to emphasize that the NRC did recognize that the plan is safe to continue power operations and that the actions taken to-date have further improved the margin of safety not only at A&O, but at all of our other nuclear facilities. Pilgrim is also working toward process improvements and the NRC will complete a supplementary inspection of that plant that will focus on the corrective action program weaknesses that resulted in entry into column IV and the safety culture assessment. We will inform the NRC when we are ready for that inspection, which we expect to be in the second-half of this year. Also after careful consideration of the circumstances surrounding the plant’s operations, we intend to refuel the plant in spring of 2017 and run the plant safety to its current capacity market commitments with the ISO New England until the plant shutdown date of May 31st, 2019. At any point, we are committed to resolving performance deficiencies and ensuring recovery and plant performance. We performed in completed comprehensive inspections during our planed refueling outage at unit 2. We detected additional work involving [indiscernible], which were fully addressed before restarting the plant. Subject to the completion of engineering analysis, we expect to be done with the additional work and have the plant back online around late June. Finally, we remained focused on safely operating the FitzPatrick plant through January 27th, 2017 followed by a safe shutdown and eventual decommissioning of the facility. The decisions to shut down assets are very difficult. We are proud of our employees who remain focused on safe operations and finishing strong. I'll reiterate our commitment to support them and the communities affected by the difficult decisions we've made for these plants. Speaking of the communities we serve, we recognize that we play an important role as a corporate citizen in every region, where we operate and our core values resonate in the ways we support our communities. Improving education and economic opportunities for customers in our communities is one way we demonstrate our commitment. It's part of a five-year, $5 million initiative to support workforce development training, we made a $250,000 grant jobs for America’s graduates. This program equips at risk SKUs with the skills needed to transition successfully to careers or college addressing critical workforce needs, closing skills gaps and creating a competitive advantage for local communities. The benefits of program like this one are long-lasting, providing opportunities for those who might not otherwise have some and helping to raise the standard of living for a family for generations to come. We've also made a two year, $450,000 grant to the Red Cross to support disaster response in our communities. Recent floods damaged nearly 13,000 homes in Louisiana and damage is still being assessed from this month's flood in Texas. Highlighting the importance of a fast response in times of disaster. To our partnership with Red Cross, Entergy has able to direct funds to communities following storms or other disasters as they are needed, allowing help to be provided more quickly to those in need. I am also proud of our initiatives, which help us maintain a diverse and engaged workforce. Veterans and active reserve make valuable contributions to our company and recognition of our efforts to support National Guard and reserve members; we have been selected as a finalist for the 2016 Secretary of Defense Employer Support Freedom Award. We are pleased to be considered for this honor and we appreciate the sacrifices these employees and their families make in their service to our country as well as the unique skills and experiences that they bring to Entergy. These are just some of the efforts that got us ranked, top quartile and corporate responsibility magazines, annual list of the 100 best corporate citizens. This is the 7th time we've been included on this list, which recognizes company’s taking sustainable responsible actions in areas such as employee relations, philanthropy and community support, environment and climate change. Nowhere these quality is more important apparent and when our employees go above and beyond to serve our customers during their most difficult times. Many of you may have seen or read about the significant flooding in our service territory this quarter. Though our system which stood the conditions quite well, our employees were also diligent in safely restoring powers to those that needed it, repair and damage infrastructure and even saving lives. I am excited by all that we've done so far in 2016 to execute on our strategy. This quarter was a good start to the year. The major undertakings, we've completed will help drive our 2016 results. We're also aware of the challenges ahead and more works needs to be done to deliver on our commitments for the year. Everything we do is designed to support our objective to create value for each of our four stakeholders. We strive to deliver top quartile returns for our owners, provide top quartile satisfaction for our customers to achieve top quartile organizational health scores and top decile safety performance for our employees and maintain an active role in supporting our communities by achieving top decile performance for corporate social responsibility. With these objectives in minds, we remain focused on the strategy we've developed to achieve those objectives that will grow the utility by investing the benefit customers while maintaining competitive rates with ready access to capital in timely and predictable investment recovery, providing the financial strength and flexibility we need to make those investments and continue to reduce the EWC footprint, while ensuring safe operations, regulatory compliance and commercial due diligence for our assets. We're off to a good start and we'll continue to execute through the remainder of the year on the plans that we've laid out. With that, I'll turn the call over to Drew.

Thank you, Leo. Good morning, everyone. As Leo mentioned, this is a good start to the year. I'll get straight to the results for the quarter. Turning to slide four, our operational earnings excluding special items were $1.35 per share higher than the expected. This compares to $1.68 the year ago. This quarter's results varied from last year due to the effect of weather and a 2015 income tax item at utility, parent and other and lower wholesale power prices at EWC. These declines were partially offset by growth in the utility business. In both periods, as reported results included special items related to EWC nuclear plants as we've identified the close. These special items are for severance and retention costs as well as capital spending, which is being expensed. Burning the utility, parent and other results on slide five, operational earnings per share decreased $0.13 quarter-over-quarter. However, the adjusted view on slide six, which excludes the effects of weather and income tax items increased $0.19. The growth in our base business as a result of our efforts in the last year to execute on our strategy to make productive investment to benefit customers and proved returns at our operating companies. Consistent with that strategy, Entergy Arkansas rate case is an important driver for the quarterly results. Rate adjustment were in fact of starting February 24 and included recovery for the Union Power Station acquisition. In addition, the final order allowed for deferral that sticks into previously expensed Fukushima and flood barrier compliance cost, which we collected over 10 years. Combined, these items contributed about $0.15 in this quarter's earnings. A second driver of note was improved efforts to manage non-appeal O&M expense, which decreased $0.07 after excluding the deferral I just noted. The scope for lavish spending and benefit costs, including pension were lower, while nuclear spending increased. This quarter, we also recorded a charge of approximately $0.05 associated with FERC orders in the Entergy Arkansas opportunity sales proceedings, which came out last Thursday. The charge represents the portion at EAI's estimated liability that would be attributable to its wholesale business and is not recoverable. This is a complex and technical case to continue on as a FERC and its ultimate outcome is uncertain. We provide additional details in our Form 10-Q. Turning to sales, we also saw earnings contribution from over 6% industrial sales growth. Slide seven provides a breakdown of the increase. About 70% of this quarter's increase came from new and expansion customers across several sectors as they continue to ramp and come online. Higher sales to existing customers were driven by petroleum refiners as fewer and shorter outages drove industrial sales growth in the quarter. This is expected to continue into 2Q. Growth in new and expansion customers are also expected to continue through the rest of the year. However, given how strong refiners ran in the second half of last year and expected outages and changes in operational levels later this year, we expect industrial growth to be weighted towards the first half of 2016. Turning to EWC's first quarter results, summarized on slide eight. Operational earnings were $0.51 in the current quarter, $0.20 lower than the prior year. The single most significant factor was lower wholesale prices. The nuclear fleet average price was down more than $8 per megawatt hour or 13%. In addition, realized earnings on decommissioning trust declined due to last year's pre-balancing activity for BY trust, which resulted in higher interest income in 2015. On the other hand, the effect last year's impairment reduced fuel, nuclear refueling outage and depreciation expenses, which benefited earnings approximately $0.16 this quarter. Slide nine shows operating cash flow for this quarter of $533 million, about $80 million lower than the same quarter in 2015. The largest driver was reduced net revenue at EWC. Our 2016 earnings guidance is summarized on slide 10. As of today, we see adjusted utility, parent and other earnings at our guidance midpoint. Recall, this excludes the effect of any weather or tax items. For our consolidated guidance, we must also consider negative weather to-date, EWC price decline since year-end and the extended outage of Indian [ph] point unit two. For IP2, we have not yet completed our engineering analysis, but based on information to-date, our preliminary estimate is that the extended outage will reduce earnings by approximately $0.20. This is primarily from loss revenue, that also includes higher refueling outage costs, which we currently estimate to be around $20 million. The higher outage cost will be amortized over the life of the outage for the bulk of the earnings effect in 2017. Looking at the balance of the year, there are additional risks and opportunities that could apply to both utility, parent and another as well as Entergy overall. As Leo mentioned, we have the potential for higher nuclear spending, as we execute on our nuclear performance improvement plans. And as always there are potential risks to our sales forecast, we also see opportunities to mitigate these challenges or provide upside, starting with management of our spending some of which began in the first quarter. In addition, as we mentioned in our last quarterly call, there is potential for income tax items, possibly as early as second quarter of this year. Considering all these factors, we are affirming our guidance for the year. Moving to the longer-term view, slide 11 shows our adjusted utility, parent and another outlook, which is unchanged. Some of the challenges and opportunities that we've noted for '16 exist on an ongoing basis, and added uncertainty for, with an added uncertainty for pension expenses. But also with the added benefits of efficient regulatory mechanisms. Our strategy to realize these results remains the same, as we focus on making productive investment to benefit customers, while maintaining competitive rates, with timely and predictable investment recovery. Slide 12 provides EWC's EBITDA outlook, assuming market prices as of March 31st. One thing to note is the root cause analysis being in point two both issues could prompt an accelerated inspection scheduled for unit 3 at Indian [ph] point. This is not reflective in our current estimates and we plan to provide more information once our analysis is complete. Before closing, I'd like to give you a little more detail on our Analyst Day on June 9th in New York City in Midtown. We’ll talk about what's next for Entergy and the utility growth opportunities before us. We’ll also provide some longer-term five-year views and more detailed on our nuclear performance improvement plans. Our extended management team including our new Chief Nuclear Officer, Chris Bakken will be there to give you an opportunity to talk with them about their areas of responsibility, I look forward to seeing you there, and now the Entergy team is available to answer your question.

[Operator Instructions]. And our first question comes from the line of Roselynn Armstrong from Barclays. Your question please.

Hi, could you go back to the Indian [ph] point two discussions and just clarify, is the additional $0.20 of on outage related expenses or is that included in the 420 to 450 of utility, parent and other adjusted earnings or is that outside of it and then separately could you talk a little bit about where you are in that process have you identified the number of bolts that need to be replaced, this equipment onsite, when will the replacement begin et cetera. However, you can add.

Okay. Good morning, Roselynn. This is Drew. I’ll take the first part of the question and then I'll turn it over to Bill, so first part of the question was, it's a $0.20 of IP2 included in the affirmation of the outlook. In the overall consolidated number, it is included and we do believe there are things that will get us back into the range. For utility, parent and other of course that's separate from EWC. So, we wouldn't include IP2 within that.

Right. Fair enough. Okay.

It is included in the overall guidance range.

Okay. Thank you.

Yes, as it relates to the number of bolts and the timing of the return of the unit, we're still in the process of completing the engineering as to the specific number of bolts. However, we do have the equipment onsite and are in fact, replacing bolts as we speak. That was a little long lead time item. But we are in the process of doing that right now and obviously are working very closely with the NRC. So we get concurrence on our analysis and final repairs.

Okay. Thank you.

Thank you.

Thank you. Our next question comes from the line of Michael Lapides from Goldman Sachs. Your question please.

Hey, guys. One follow-up in Indian [ph] point and then over to the regulated side. On the Indian [ph] point on the IP2 issues is the bulk of that an issue that impact second quarter 2016 in terms of that $0.20 or does this drag throughout 2016 and even into 2017.

This is Drew again. So it's going to be the bulk of it in the second quarter, because most of it as I said and my remarks was net revenue and we are not expecting that plant to come on toward until near the end of June. So that's basically the entire quarter is going to be loss from net revenue perspective. The refueling outage expenses are going to move across the new fuel cycle and it's a little shorter than it typically is. It's usually I guess 23 months or so and it's now going to be probably a 20 months. So it's - I don't know seven or so cents associated with that most of that maybe $0.05 will show up in 70 into the amortization. So, maybe a penny this year and maybe a penny in '18.

Got it. Thank you. And overall on the regulated side, you've talked a little bit about smart meters. You've talked a little down and it's been a while since you've done so about natural gas reserves and rate bases. Outside of adding new generation to the fleet, can you talk a little bit about what other items could have the biggest impact over the next three to five years to potential rate base growth and just kind of walk us through high level, where you see the greatest opportunities that may not actually be in your current CapEx forecast.

Michael, that's - I guess I was giving you a little bit of a teaser of what we wanted to talk a little bit about at Analyst day. So if I let Theo go off on that now I'll take away that surprise. But the fact of the matter is we are in the process of evaluating a lot of that right now. Certainly getting the meter technology on to the system is the first step along with all the back office systems in meter data management systems and likely go with that. So that's in the near term that's what we are talking about. Some of these two - extended out beyond that 2018 timeframe that we're talking about.

Got it. Thanks, Leo. Much appreciate it.

Thank you, Michael.

Thank you. Our next question comes from the line of Jonathan Arnold from Deutsche Bank. Your question please.

Good morning, guys.

Good morning, Jon.

Just curious if you could talk a little to what it was that drove the quarter so much higher than the 1/10 you were speaking to on the - I guess the Q4 call, it sounds like weather continued to be wild, were you not counting on the Arkansas decision perhaps or just trying to understand what surprised you in that sort of back half of the quarter.

Okay. Thanks Jonathan. This is Drew. So there were a couple of things that broke our way in the quarter and some of things that were determined and some of the things were timing. So in EWC there was some mark-to-market and elements that they came in about $0.04 of that and then about $0.03 of volume as we actually ran better in the quarter before the outages, the planned outages took over. So, we actually were about $0.07, $0.08 ahead at EWC versus our previous expectation. The balance of it that was the utility some of it was - are the bulk of the O&M savings that we saw above expectation. We're in the fossil area as we came through the outage fees and then we actually did much better than we have historically and then the balance of it as you referenced, there was some conservatism built into the Arkansas rate case. So that was justified right at the very end, we did lose 5 million of comp, but that’s spread out differently than we built the conservatism into our case. Some of those Fukushima and floor barrier cost were not part of our expectations for the quarter, but we're able to stay in, in that final order and then some timing elements were for the period between February 24th and April 1st went in our favor, but they ran our overall expectations. So that’s more of a timing shift between periods. So that’s really the bulk of those items and so hopefully that helps close the gap for you a little bit.

That's really helpful. Thank you. And could I just had similar vein, the - you made a comment about I think you were hinting that there could be some tax items as early as the second quarter and you made that comment in the context of having maintain guidance. Are you maintaining guidance, because of that item or you see that more as an upside?

I think, it’s a big piece of how we're able to maintain guidance on Entergy overall. As you know on the utility side, our adjusted utility, parent and other, it doesn’t include taxes or weather. And so for that part of the business, we're solidly saying we're right at the midpoint, but when we go back to the overall consolidated business, we have the big one-time outage at IP2. We have the negative weather and then of course the prices of EWC. Those put us down there or below the bottom of our range, but with the expectation that we would get some benefit out of taxes. Possibly I said as early as next quarter, we think we're going to get back into the range, so it’s too early to make that call now.

Okay, but those are the moving pieces that's directionally. Thank you.

And your next question comes from the line of Stephen Byrd from Morgan Stanley.

Hi, good morning.

Good morning, Stephen.

I wanted to get your view on the commercial and residential low growth numbers that we saw after the quarter. They were weather adjusted fairly weak, is this something that’s just sort of a quarterly fluctuations or are there driver that you see there any color you can provide on that?

Sure Stephen. This is Leo, I think when we think about those two particular classes, we continue to see impacts from energy efficiency as we've talked about on previous calls both kind of federal type programs as well some of our local energy efficiency programs that we see in our jurisdiction. In terms of what we expected, I mean given some of the economic data that we utilize and to try and forecast sales, we did see some economic weakening in the first quarter and somewhat expected that. So while I do agree it was fairly low for the first quarter, it was a little bit below our expectations, but it wasn’t necessarily a big surprise to us and as we go forward throughout the year, we expect to see that to come back as we look at gross stake products and regions that we serve particularly Louisiana and Texas, we see that’s starting to kind of fill out and began to trend upward and we think that will help move those growth rate by more typical level but again energy efficiency will continue to have an impact on our residential and commercial sectors.

Understood. And can you remind me as you thought about guidance for '16 and where you're headed, what your expectations are for full year low growth or commercial and residential?

I think as we go forward, we have - we continue to monitor various variables and inputs relative to that and we'll talk more about at our Analyst Day. But clearly what we saw in our first quarter we are going to continue to monitor what we expect for the remainder of the year make adjustments as necessary, but what I'll also say is given where we are as it relates to sales growth we brought, we did consider that and our reaffirming of our guidance. And so, we feel like we'll continue to evaluate it. But I feel like we will still as it affects us going forward will not take a side of our guidance range at this point.

Understood. Thank you very much.

Thank you. Our next question comes from the line of Praful Mehta from Citigroup. Your question, please.

Thank you. Hi guys. On the strategic side, given your transition now to become more utility pure play, clearly are right now, M&A opportunities in this space on the utility side there are utilities coming out of bankruptcy potentially. How are you seeing strategically where Entergy should be going an area that you think from an M&A perspective as strategic direction perspective, you would like to go more broadly.

Thanks Praful. The main thing to keep in mind is the same three criteria that exists today that have always existed. Anything we do would need to be consistent with the internal plan that we have right now. And as you know we have a lot of organic growth that is happening because of the modernization of our infrastructure in both transmission and generation and then some of the things that we've talked about as it relates to new technologies that we can deploy whether it's the solar RFPs et cetera that I've talked about or the advanced metering or what's become next. So we've got a significant organic growth opportunity and working through the investment plan the financing plan and the regulatory structure of around that to make it beneficial to our customers first and for most of our undermined. So anything we do would have to be consistent with that objective or with that strategy, so that's the first screen we go through it's what would help as if now whether it's cash flow balance sheet other growth opportunities technological synergies et cetera. Secondly, we would want it to be translatable something that we know we can have a really chance of getting done both through counterparty engagement price that make sense to us on whatever side of the table we would sit out and regulatory execution. And three it cannot distract us from doing number one. we don't want to have a couple of years of not doing the growth organic growth that we have today while we try to do something that supposed to help us to get that done. So those three criteria continue. And the way we look at it. As you know we evaluate this kind of thing on a regular ongoing basis as it comes up, we'll obviously let you know. But we still look at it at that way there is nothing to change in regard to that.

Fair enough. Thanks Leo. And secondly just on EWC, I saw that you brought down your guidance or the EBITDA for EWC in 2018. Is that more commodity curves or is there something else that's driving it? And secondly as more plants retire due our expected O&M per megawatt hour to go up given there is now less synergy given you have smaller fleet. And is there any impact of that flowing into the reduced EBITDA guidance for '18?

Well, I'll take I guess I'll try to answer it and then Bill can cover with any color. So it is primarily energy driven profitable. There are some capacity elements actually pushing back against that a little bit. Our capacity price expectations are little higher in '17 and '18 in New York. But it's primarily energy price drive. And I don't think there is any big changes in O&M or do like energy spend a little bit on this because that does not a whole lot when we talk about '18. And then the second question was?

Yeah on the overhead, we've been looking at that very closely. So we are implementing a plan to decrease the associated overhead consistent with the downsizing of EWC. And I couldn't tell you at this point in time exactly where that stands in terms of what may and how that maybe split. Because we run as a fleet, but I can assure that we've been looking at that very closely and setting up a plan, where we will reduce those costs overtime commensurate with the downsizing of the fleet in the North East.

Got you. Thank you. And just to clarify Drew the underlying gas price that's driving 2018 EBITDA, have you put that out or do you know what that is?

I mean I think it's consistent with whatever the market is. So I don't know a little bit below 3 bucks.

A little bit below 3 bucks, correct.

Got you. Thank you, guys.

Yeah, we use mark-to-market on those EBITDA [indiscernible] as of March 31st.

Thank you. Our next question comes from the line of Brian Chin from Merrill Lynch. Your question please.

Hi, good morning.

Good morning, Brian.

Just a follow-up to your answer to Jon Arnold’s question. I think you said that part of the beat for the quarter was based on some conservatism that was built into the numbers from the Entergy Arkansas recent decision. Just remind me or say one more time what was that amount and when did that benefit weaken in the quarter?

Okay, so the effective date of the order was February 24, and Bill went into effect on April 1st. So we had modeled it so that we would start collecting the revenues on April 1st, but the accounting ultimately allowed us to accrue it during the first quarter. So I think there was a little bit of timing switch there, that was may be $0.05 then I am sorry.

That was $0.05 from the order date till the end of the quarter is that right?

Yeah. And then the other big piece was the $0.06 of the regulatory assets that we got from Fukushima and flood barrier pieces and that is kind of a one-time deal that is the breakout.

Understood. And then going back to that $0.05 for Arkansas should we assume a similar run rate of conservatism if we pro rata that out that is embedded in the remaining quarters of 2016?

No, I think we were expecting to collect that over the remaining quarters. So I don’t think there is going to be any extra opportunity there from the rate case on an annual basis.

Got you. I'm sorry, go ahead.

No I was trying to see if that answers your question, sound like it did.

Yes, it did. And then, I guess in your prepared remarks you made reference to the Louisiana commissions next meeting I guess on April 28th here and the thought is to narrow the scope of the dockets, could you just give a little bit more color on what’s your expectations of how they are going to narrow that scope there?

I think Leo pretty much summed it up in his opening comments, I think it was clear based on what is seeing forward as relates to the docket the question refers to exactly what the commission's intent was and the stated we have a perspective as to what we believe - that’s where hopefully that’s where we will see it go when they do hopefully bring it up again on the 28th.

Okay. Thank you very much.

Thank you, Brian.

Thank you. Our next question comes from the line of Julien Dumoulin-Smith from UBS. Your question please.

Hi, good morning.

Good morning, Julien.

So just wanted to follow a little bit up on some of the last questions here, as you transition your portfolio back towards a more regulated outlook, can you comment a bit on the opportunity eventually buy yourself out of some of the existing contracts for instance Palisades if that has been an opportunity you’ve export or you have conversations with them?

You do have - the objective we have as I stated in my remarks around strategies to reduce footprint of EWC and we have done that rise Vermont Yankee and told FitzPatrick to follow and the plants that aren't supported by the market or that are and no longer fit the portfolio. As far as the operating plants just lump I think Indian [ph] point and Palisades in together, you certainly can currently today they are not in the same situation necessarily is the other plants as far as being cash flows positive if they are not operating versus cash flows positive if they are, remember when we made those positions around those faculties we worked at three different things. One, what is the NPV of the facilities that may get positive, two, what is the near-term cash flows burn rate positive or negative and three, how does it change the risk profile of the company I think we achieved our objectives with all of those including the rise sale around that and we continue to evaluate the other plants in this similar manner. The difference being obviously the PPA supports the cost structured, Palisades and the market supports the cost structure at Indian [ph] point. As far as any kind of opportunities that we will have around those facilities outside of the decisions we've already made. I can't really comment and wouldn't comment on that. Just because once we start down that path our strategy or our policy has just not comment on those sort of things. But like I said we are looking at those in the same way from an MPD cash flow and risk stand point. What our options with those facilities and we will pick the one that we believe creates the best value for us stakeholders and again as the MPD positive to run versus whatever alternatively become that will be a major driver. Cash flow positive or negative particularly in the near terms. One of those alternative or to run the plan and third it's the there's a change to risk profile and obviously our GU is big, making that footprint smaller doesn't prove the risk profile of the company and then last thing we always need to look at it's the execution opportunity is a company, similar to what I discussed on the question around M&A. These are lot of things we could do, we had to make sure anything we do is executable both with the counter party. Our own point of view and through the regulatory process.

Great, thank you. As a follow-up to the prior question here. So a little explicit. Are you guys expecting to participate and submit a self-build option into the renewable RFP upstanding in Louisiana.

That we can't comment on that, one way of the other way really at this point.

Okay. But mid perhaps generically would you be open to participating in generation opportunities outside of gas?

We already, as I mentioned we are building the 1 megawatt plant with battery storage here in New Orleans, we dealt to three facilities in Mississippi. We are not building the plan our consult. But we are having excluded by our contract for the power out of that. So we already participate in that arena and we would continue to look at those sorts of things going forward because we think that's again as I said my prepared remarks that's a way for us to continue at resiliency away for us to continue to add good service to our customer, high reliability, more a beneficial environmental foot print. It's largely to get cost, right, because we do value the fact that our pricing is lower than majority of the rest of the companies United States won't stay there.

Great. Thank you.

Thank you.

Thank you. Our next question comes from the line of David Passé [ph] from Wolfe Research. Your question please.

Hey, good morning. Just a couple of quick ones. Why did your 2017 EWC EBITDA outlook remain unchanged around $510 million what were the drivers of that?

The big driver is we've seen an uplift in LHB pricing. So approximately couple of hours KW month that's probably about a $48 million impact on positive side, so that's offset some of the commodity energy pricing and energy price decrease we've seen.

Okay. That's a big one. Okay and then just on MI and great month. Are those plans already in here, were those already in here weight based outlook that you gave us.

Some of the cost associated with the metering is in there.

But the bulk of it is outside there? Outside your '16 '18 plan?

Correct.

Okay. Great. And then just on the nuclear spending. How can we think about what ongoing nuke spend will be going forward at the utility segment or at EWC or just both, how should we think about that?

This is Drew and I'll just say that's going to be a big topic at the Analyst Day here in a few weeks and we are trying to give you some framework around that. But we are still getting our hands around, our performance improvement plan and of course as you know (Chris) has just been here for a couple of weeks. So he is getting his hands around as well. But I think the important thing for us is that at the same time we are doing now. We're also looking for opportunities to mitigate that in the business. And some of them you've already seen show up. Things like insurance rebase or lower interest costs, because the interest rate environment and then we have some O&M opportunities that we found that with and the first quarter like the powerful outage management something like that. So there are opportunities that we have identified to begin with the offset that. Obviously we're now done looking for those. But at this point we see if we can manage those costs within the framework of the expectations that we have look at and outlooks right now.

Okay. All right. And your full year impacts for the A&O and Pilgrim still the same, in other words I think $50 million for A&O and $30 million for Pilgrim.

They are currently the same. We just got the report the initial report I guess on A&O. And we're looking as we have mentioned for the letter from the NRC. Once we get that we'll have a better idea if there any incremental risk associated with A&O. And Pilgrim's inspection we expect it to be sometimes in the second half of this year. And we'll have better information then. So as if now those costs are the same in fact.

Great. Thank you.

Thank you. Our next question comes from the line of Shayla Theresa [ph] from Guggenheim Partners. Your question please.

Hey guys, question is answered. Thanks so much.

Thank you. And our final question for today due to time comes from the line Paul Patterson from Glenrock Associates. Your question please.

Hi. How you're doing?

Good morning, Paul.

Just everything is pretty much being asked and answered. But just I'm sorry if I missed this. But you mentioned the generic stuff in Louisiana and so which you think might be unfold in the air. Do you have any picture at this point on what might be happening in Texas with sort of a similar issue? Or is just too early?

Encore and the REIT assessments?

Right as I guess that you're doing a little bit more generically as well, right?

Paul I mean at this point we may have to get back with you in follow-up. But I don't I'm not sure it's been move forward enough for us to get a I think the perspective as to how it impact that. But I mean that I don't we don't see that having a major impact on us at this point. But again we will follow up with you if in fact that just different. But again it's just fairly generic and so we get more specificity relative to that. We don't necessarily see it having an impact on that.

Okay great and then just in terms of the FitzPatrick. There are constant discussions about New York coming with some of plans of rescue the news what have you. And I know that you guys have basically been indicating this one of that that it's really too far along. But again you keep I hearing that the governor is hopeful that it's going to be able to keep it up. And is there sort of a point of no return at all in terms of cost that already with respect to FitzPatrick or how should we think about that where we can we keep on hearing that? He wants to do something for the nuclear plant.

So for the first thing I would say Paul is that obviously we - standpoint closely of FitzPatrick the right thing to do and we would have loved further to have been a way around that, if the economics could have been different and we've for example we've been promoting a clean energy standard in New York that would include nuclear plants for several years. And the reason obviously that we do that is wanted the right thing to do from a public policy standpoint and it certainly the right thing to do from an environmental standpoint from an energy price standpoint for the markets reliability the whole nine yards, And we've been promoting it for a number of years because obviously these things must take their course in the regulatory arena and then in the legislative or legislative or if the courts and obviously you can always expect there to be intervention into anything that comes up and these things just take a long time to develop. And so right now there is no nothing in place, we don't know if there was something in place what it would be, we don’t know if we knew how restructured what it would provide, we don’t know if what it provides it would be enough to support the economics plant. And we don’t know that the timing of it could ever be done before, we had to make the decision to ahead and refuel which then recommend to several hundred million dollars of losses so, we are out of time. It is not that we against any of those proposals in terms of on their face other than I would say that obviously we believe there is clean energy standards in New York that includes nuclear, it should include all of the nuclear plants. And we commend for the efforts because we think that is the right thing to do and we would have been proposing it for the last couple of years but I mean you hit the nail on head on this point of no return aspect it is not in place, we don’t know what it is? We don’t know what it will provide? We don’t know what the economics would be for it run its course again we get to the point we're unfortunately we likely out of time. So anything that says we are opposed to clean energy standard in the like we are not we have fully those all along again we do thing that should incorporate all the plants in the state. We would be - all plants in the country actually to be consistent but right now there is nothing in place that we could look at, that would provide us the opportunity to change our decision.

Okay, thank you very much.

Thank you.

Thank you. And this does conclude the question-and-answer session of today’s program. I’d like to hand the program back to David Borde for any further remarks.

Great, thank you. 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 quarterly report on Form 10-K is due to the SEC by May 10th and provides more details and disclosures about our financial statements. Please note that events that occur prior to the date of our 10-Q filing that provide additional evidence and conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. The call was recorded and can be accessed on our website or by dialing 855-859-2056, confirmation ID 85413992. The telephone replay will be available until May 3rd. And this concludes our call. Thank you.

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