Good day, ladies and gentlemen and welcome to the Entergy's Third Quarter Earnings Teleconference. At this time, all participants are in a listen-only mode. [Operator Instructions] Later we'll conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I’d now like to introduce your host for today's conference, Mr. David Borde, Vice President, Investor Relations. Sir, please go ahead.

Thank you, Liz. 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 results. In an effort to accommodate everyone who has questions, we request that each person ask no more than one question and one follow-up. In today's call, management will make certain 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. Management will also discuss non-GAAP financial information and reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found in the Investor Relations section of our website. And now I will turn the call over to Leo.

Thank you, David and good morning, everyone. Today, we are announcing another solid quarter with operational earnings per share of $2.31. Adjusted earnings of $1.98 for our core utility parent and other business were substantially higher than last year and in line with our growth expectations. We remain on track to meet this year's guidance for utility parent and other adjusted earnings per share. As our results show we continue to execute on our strategy and meet our objectives both at the utility and EWC. At the beginning of year, we set out our to do list as shown on Slide 3 and with three quarters of 2016 now behind us, I am happy to say that we successfully completed most of those tax. Each of these accomplishments supports our objective of steady and predictable growth at the utility while managing risk and reducing our EWC footprint. At the utility we continue to make needed investments, which will modernize our system and enhance its efficiency and reliability for benefit of our customers. We have a number of generation projects in front of us which will meet this purpose. First the St. Charles Power Station is a 980 megawatt CCGT to be constructed and placed into service in Montz Louisiana by June of 2019. The Administrative Law Judge recommended supporting the certification of this project in July and we are waiting a final regulatory decision from the Louisiana Public Service Commission. The commission has faced some scheduling challenges and it's been difficult for the full commission to take up major items for vote. However we anticipate that the commission will be able to make a decision on this project before the end of the year. On October 7, Entergy Texas made its filing with the Public Utility Commission of Texas seeking…

Thank you, Leo and good morning, everyone. In addition to reviewing the quarterly results, I'll take some time today to talk about our longer term outlook. We know that you're all anticipating an update on our nuclear investments and it's financial effects, it's time to give you key information in advance of EEI to help you better prepare for those meetings I'll start with the key takeaways from our third quarter results on Slide 4, beginning with the consolidated results in the top left corner. As reported earnings included special items related to EWC nuclear plant that we've identified to close or sell. Last year results included significant impairment for the FitzPatrick and Pilgrim plants. On an operational view, our consolidated earnings for $2.31 per share in the current period that compares to $1.90 a share year ago. The increase was due to growth in our core utility parent and other business shown in the top right corner. Utility parent and other adjusted earnings increased more than 25% above last year, which I'll discuss shortly. Just a reminder our adjusted view normalizes for special items, the estimated effects of weather and income taxes. Looking at the bottom left corner, EWC operational results were essentially flat. Operational earnings per share for utility parent and other increased $0.40 quarter over quarter shown on Slide 5. Looking at the Orange bars on an adjusted view, utility parent and other results increased $0.42. This growth reflects rate actions to recover productive investments to benefit customers and improves returns. Specific drivers include Entergy Arkansas' rate case, the Union Power Station acquisition, Entergy Mississippi's recent formula rate plan and Entergy Texas new transmission cost recovery writer. Build retail sales for the quarter were lower than a year ago. We continue to see weakness in both residential…

[Operator Instructions] Our first question comes from the line of Greg Gordon with Evercore ISI. Your line is now open.

Thank you. Good morning.

Good morning, Greg.

I'm just wondering as we look at the magnitude of the rate actions that you think you're going to be able to recover over the next several years associated with the increase in nuclear spending, how we think about the prudence of those -- that spend and the recovery? Can you explain us what your benchmarking looks like in terms of your current spending on those plants and what the increase in spend then with efforts you relative to other nuclear operations across the country and how you are going to show that those recoveries are necessary and prudent for customers as opposed to being a function of some level of mismanagement historically that should be borne by the shareholder?

Greg, that's a good question because as you know customer bills, customer rates is an extremely important factor in our business and something that we spent a lot of time to maintain. As you know we already have some of the lowest rates in the country, 20% to 25% and below the national average and as far as the expenditures go, if they weren’t prudence expenditures to make we would make them. Between our mitigation actions as well as the other items that are well announced like [indiscernible] securitizations that I mentioned in Mississippi $55 million in 2018, we have roughly $1 billion of securitization bonds rolling out of the Louisiana jurisdictions and that in utilizing our normal regulatory processes. We do believe that all the prudently incurred expenditures will be recovered and also keep in mind here that when we look at the jurisdictions that are most impacted by the nuclear spend namely honestly Arkansas and Louisiana where the plants reside. You put everything together not just the spend that we got the tradition here, but everything and over the period that we're talking about, we wouldn't expect the customer rates to increase by much more than 1% including everything so far less than the rate of inflation annually. And so the impact here we're trying to manage as much as we can all the expenditures will be prudently incurred. We're putting all of our operations in line with what the industry is. As you know, every plant in the country is different, but that's certainly something that we've kept in my. We've outlined this plan in terms of amount, in terms of timing, in terms of what we need to do to balance the equation, not only for the operational side of things but for our customers. And again we would envision we come out the backside of this by the time we get to 2019 with still having some of the most competitive rates in the country.

Okay. Thanks. One follow-up as I've looked at the numbers and just rough math at this point for EWC, net of the reduction in EBITDA as a function of the increased operating costs, but also the increase CapEx, am I right that it looks like you're actually cash flow negative over the next several years at EWC or are there some -- is there some mitigation happening here that will allow you to maintain at least the neutral value proposition there as you unwind that business.

Greg, this is Drew and we haven't ever discussed specifically but you can do the math like we can and so we as Leo mentioned in his remarks, we continue to remain vigilant and disciplined on our approach to reducing the footprint in that business and so I think that you could count us to continue to maintain that posture.

But to the extent that the business is cash flow negative, how would you fund that?

To the extent that it is at any given period it's going to be mostly from the parent and you look at this overall forecast. including the changes at EWC, the incremental investment at the utility, we have a parent debt level that could go up about 150 basis points from where we were originally targeting it, which was slightly above our target range and our target range is 18% to 20% and we were talking about a forecast the got us around the neighborhood of 21% that we were working on. Obviously this and as I said maybe another 150 basis points to that and so that's not going in the right direction and that if we financed everything with parent debt and so we're thinking about other options around how do we manage it starting with the business itself and can we continue to find ways to be more efficient.

Okay. Thank you, guys.

Thank you.

Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Your line is now open.

Good morning, guys.

Good morning, Jonathan.

This sounds again on the mitigating rate actions that Greg was asking about, can you give us a little bit of a sense of where the trajectory there is coming from, which jurisdictions, which formula, which will be actual rate cases just so we can get a sense of what we should be tracking just to see that offset come in.

Well I'll start and then Theo can follow-up Greg, Jonathan sorry about that. We're not planning on using any special regulatory mechanisms at this point in time, everything would just float through the normal mechanisms. So for example Arkansas will flow today FRP, Louisiana will flow the FRP in the near-term but we do have some reset capability by the time we get out to 2019. Those are the major implications in terms of where the plants reside and again from -- yes asked about the trajectory and if you look at the plan as we've laid out now and not just that spend but everything together, in those jurisdictions we're talking about a trajectory of about that we wouldn't expect to be more than 1% a year from a rate standpoint and remember it's not only our mitigating actions that Drew outlined that are on the slides in your deck, things like the securitizations rolling off the low growth that we have, the continuation of the investments that we're making. As I outlined, all those investments related to the new power plants etcetera, we envision that those are going to provide production cost benefits as they're more efficient etcetera. So all that works together to keep that trajectory still in line with one of the best in the industry. I don't know Theo if you want to add to that.

Jonathan, this is Theo. Just a couple of other points, the other plant clearly over making investment is Grande Golf which is owned by Siri and like your PPA back to for the operating companies. That plan is subject to FERC formula rate cost of service base rate. Also in Louisiana just additional clarification, we've got an opportunity for FRP reset and '18 timeframe and we would expect that reset to occur just that rate changes would happen within the 2018 calendar year. So you see the full impact of that in 2019. Also in Arkansas, the forward-looking test year FRP with forward-looking features also has a true-up mechanisms associated with it. So if in fact our forecasted test year is different than actual, we have the opportunity to come back and implement rate changes to true that up to the actual costs within the context of that particular test year

Great. Thank you. That's it. And on the management task on the mitigation to the expense line where you have it at $0.25 already in '17 and they are holding more or less at that level through the period, how much of that have you have already identified and/or implemented?

Hi, this is Drew, and pretty much all of it we've already identified and implemented. So a lot of the $0.10 of the attendance of the $0.25 this year are in '17 would be associated with interest expense and so that's all the financings that we've done this year would contribute to that engine. After that the other $0.15 are various elements from the laundry list of things that I read off that have already been put into place.

Great. Thank you. You made some comments about dividend growth and talked about giving us more of an update at EEI and last year I think you had the dividend increase right at the end of October. You're coming up to the -- can you give us some thoughts about how we -- how does this dampening of the trajectory in the short term feed into your thinking around dividend and this obviously it seems to be the timing of the airway you illustrated.

That's another good question Jonathan, obviously the dividend is a Board of Directors decision that they’ll make in due course. You're right on timing. Traditionally the fall is when we make that determination. As far as, what this has done to our trajectory again, the earnings trajectory here through 2019 is pretty similar to where we were before, it's the same number by 2019. We still see growth in '17 and '18. So while obviously it's a consideration through our mitigation actions, the rate levels that we have, the regulatory constructs that we have and the work of a lot of really talented people here at Entergy, we still see the growth outlook that we've been on for that utility parent and other earnings that supports the dividend growth. So our objective to continue to grow dividend is still out there, it's still something that we take very seriously and predictable growth in earnings in the dividend that's our objective.

Okay. Thank you, Leo.

Thank you.

Our next question comes from the line of Stephen Byrd - Morgan Stanley. Your line is now open.

Hi. Good morning.

Good morning, Stephen.

Wanted to focus on Slide 10 in the revised retail sales growth, could you just lay out what's your revised growth rate is and what the sensitivity is, you have a appendix slide that shows the sensitivity in near-term to 1% changes. I just wanted to confirm sensitivity, the changes in low growth assumptions in the out years.

Yeah, this is Drew. So you're referencing the slide in the back. Was there in anything particular Stephen that you wanted to discuss that's 35 I think that's slide 42.

Sure yes I guess so on Slide 10 what's the revised retail sales growth percentage for residential and commercial and what was the 1% movement in that assumption? I think the appendix should imply $0.11 for commercial and residential commodity. I just wanted to confirm that.

Yeah I think that's still fairly correct Stephen. So we saw two or three quarters of this year were down about six tenths of a percent versus the 1% or so just below 1% expectation for this year. And so we have a different starting point going into next year than what we are anticipating that's the first thing. And then the second thing is the growth rate going forward and we've brought that down as I mentioned in my remarks, but I think it will be probably closer to about 0.5% rather than almost 1%.

Okay. Understood and just shifting gears to the sale of nuclear assets to Exelon. I know there are several conditions that were listed in the release in terms of approval by federal and state agencies. There was recently a lawsuit filed in court opposing the credits provided in New York in the event that in course the credits were overturned, what would be the impact to the sale of those assets.

Stephen it really on the timing of the court action. So our point of view is that is unique in that it places a value on carbon free attribute of the units. So we feel pretty strongly that we will survive that legal challenge, but it really would depend at what point in the transaction that occurred. So right now we're anticipating approval by the PSC on November 17, approval of the contracts November 23 and then NRC approvals to follow and closing of the transaction in the second quarter of next year.

Okay. And if the Zacks were overturned before second quarter of next year would that trigger cancellation of the transaction.

Well certainly it could be a consideration there and than it really depends on who's taking responsibility for that and so the contract had some commercial terms which deal with that specific issue, so it really becomes more of an issue of can you close and who has liability for the investments in the refueling etcetera.

Okay. Thank you.

Our next question comes from the line of Michael Lapides with Goldman Sachs. Your line is now open.

Hey guys, couple of easy ones. First does your utility parent and another guidance incorporate any external equity or equity like security issuances over the next few years.

This is Drew. It does not incorporate anything like that.

Got it. Second on the EWC side, when you look at Palisades and in Indian point and kind of the guidance of increased costs how do these plants look from a cost structure relative to what you would consider their benchmark peers.

This is Chris Bakken. The Indian point of cost structure is reflective of the market it operates in which is the high labor costs but spending we believe is appropriate for the remaining life of the plant. In terms of Palisades, I would say it's consistent with the industry and again we're making prudent investment in the plants given the remaining lifecycle of the plant.

Got it. Last thing back to the regulated type, can you put John some numbers around the size and scale of the AMI program filings in Arkansas and New Orleans and how should we think about what size and scale through 2019 or 2020 or so you anticipate in some of the other jurisdictions?

Michael this is Theo. I don't have the specific numbers in front of me in terms of Arkansas versus New Orleans. I know when we talked about this, initially we talked about on a system basis the investment being $900 million or so. When you think about it as it related to the again the entire system in terms of timing as you can see as you go through the filings you will see that there were some costs we're asking to differ that will get fully incurred prior to the full functionality of the meters themselves. And we believe that's consistent with the matching of that cost with the benefit that you'll see that will get implemented as a result of the implementation of the meters themselves. There is also I think as you recognized as Drew mentioned some asset investments that's made in advance of meter deployment basically to develop the backbone to support the meter deployment. And our view is that asset investment is consistent with what we've seen from kind of a timing perspective and the necessity to get the employees in order to allow the efficient use of the meters themselves once they are fully deployed and to recognized benefits of it. We also believe that infrastructure is useful for other systems as well. So I think our perspective is the cost is consistent with what we've seen in implementations across the country and will be supported and supportive of the benefits that Leo mentioned as we think about the implementation overall. We have to get the specificity for you in terms of years, but we don't view that investment to be significant investment at risk in advance of the meter deployment.

Got it. Thank you, guys. Much appreciated.

And if I just add I think in the forecast period in the $900 that Theo was discussing, it's a couple hundred million in the forecast period. Most of its beyond '19 when the significant portion of the meter deployment really kicks in.

Got it. Thank you, Drew. Much appreciated.

Our next question comes from the line of Praful Mehta with Citigroup. Your line is now open.

Thanks so much. Hey guys.

Good morning.

So the first question was more strategic which is there seems to be a lot of defense right now, which is both in EWC where the focus is just the reduce the strength and size and even on the utility side, things like retail sales growth isn’t coming out where you guys expected. So I am trying to figure out from a offense perspective or future growth how are you looking at what are the dimensions that you can push and grow going forward coming out from the defensive kind of view right now.

We don't view ourselves in a defensive view at all Praful. So we are on offense here. We had a significant amount of investment that I outlined that goes into the generation and transmission footprint of our regulated utility. That has not changed and we continue to make those modernizing investments that will lower production cost, provide significant benefits to our customers, improve the reliability, reduce our environmental footprint. And that which is a continuing to grow service territory, particularly as it relates to what we see on the industrial side, all while we maintain some of the lowest rates in the country. In addition to that what we just in response to the question from Michael around AMI, AMI is the first step and we've just now started to make regulatory filings but first we'll get the back office and the backbone of the system to make it smart, we don't want to deploy the meters until mill actually have something to do for us. So we're putting all of that in place in advance of actually beginning to deploy the meters in 2019. There are other technologies that we will deploy on the system then that we're looking at today in terms of asset management technologies and other things that will go from that point and forward that will provide even greater benefit savings helping us to manage the load for our customers and provide that needed investment that will provide us an earnings opportunity but at the same point in time it will help us help customers manage their bills through the ability to manage how much they use, when they use it etcetera. So that for us is again total offense and extremely, extremely exciting for us as we look to the future. When we look…

Got you. Fair enough Leo. Thank you. And on Slide 16 just a more detailed question, the increased CapEx around EWC you also made the point about the remaining useful life of considering the remaining useful life of assets. Just wanted to understand how you're thinking remaining useful life for both Indian point and Palisades? Is there any change in view of we understand the relicensing, but apart from that, is there any change in view around that, given the CapEx spend?

There is not a change in view around that Praful other than what we always do as we continue to evaluate those facilities, but right now there is no change in point of view around those plants. Palisades nearly we got the contract through 2022 and then we got the ability to see what we think the MISO market goes at that point in time. And Indian point, continues to be very, very valuable asset. I think the ISO just came out with their study showing that it was required for reliability in the region. So it continues to be needed in that region. So there's really no change in outlook for those assets at this point. That said, we continue to be disciplined in how we look at these on a regular basis and will look at them, we're always refining our point of view about them, that's all.

Fair enough. Thanks Leo.

Thank you, Praful. Operator Our next question comes from the line of Brian Chin with Bank of America. Your line is now open.

Hi. Good morning.

Good morning, Brian.

I wanted to go back to an earlier question about the court challenge to the zero omissions credits proposal. If that challenge is successful and the court overturns I think you made reference to it's possible under certain conditions that it might impact the sale. You mean to say that those conditions are spelled out and there is one party who might be at fault at that, can you just give a little bit more clarity on what exactly you meant?

It's difficult to predict what the impact of it could be without understanding what the specific ruling is, but we have put terms in the commercial agreement that tried to separate those risk. I really can't tell you what the eventual outcome of that would be. Typically we don't discuss litigation especially for future litigation, but we have tried to address and mitigate those risk in our sale agreement with Exelon.

Got it. Okay.

Brian one thing that I'll add too is the way we're working through this process we're going down the parallel paths. We're confident that we'll close the transaction that we in the end game but certainly the way it's structured worst case for us we get back to the position we we're in beforehand and that is we have to make the decision to shut down the plant around the same time we are planning on it.

Got it. Appreciate it. Thanks a lot. That's all I got.

All right. Thanks.

And our last question comes from the line of Steven Fleishman with Wolfe. Your line is now open.

Hi. Good morning. Just had a simple question could you just be clear what is not working right in the Merck nuclear program right now that you're spending so much money?

First and foremost the plants are safe Steve, what we wouldn't run them. I would say that the challenges that we face stem from a desire to run a lean operation and that lien operation meant to benefit our customers, we're getting the right balance between operational excellence and the cost structure. What we found obviously we had a couple of situations with clients going to call for what we found is that we potentially didn't get the balance as right as we want. And so to get ourselves up to the standards that we hold ourselves to and to the standards of the industry, we've got to change our strategy around how we operate the plants. As you know, we made organizational changes last year. It was six months ago we brought Chris and Chris's been responsible for developing with that strategy is. We've changed not only who it is but where reports where is it used reported to the COO, it now reports directly to me and so Chris and his team along with his discussions with people in the industry and with our regulators etcetera have devised this change in strategy to get ourselves up to where we need to be to meet our own standards and operational excellence standards of the of the industry.

And would there be some filing at the NRC that goes through the full plan or is it going to be like plant by plant?

There is no filing, we're just -- the only really filings will be when we include these in a retail regulatory these costs just like the cost of the new CCGT's and CT and AMI, these plans are vital to the reliability of the system. They provide over 30% of the energy used on our system. They are large base load zero emitting resource that's very valuable. They are anchors to the community in terms of tax base and jobs and community support. So these are very vital asset. They limit fuel volatility when you look at what could and has happened in the natural gas markets and reliance on natural gas of us and others. So they're very, very vital. They fit right in with the strategy that we've got everywhere else whether it's investing in CCGT's that reduce production costs and improve their emissions or whether it's looking at something in the gas and ground investment that would limit fuel volatility. So these assets fit right into our strategy, right into the need for our communities or customers and we just again have to change the strategy from that lien operations into one more focused a little bit more on operational excellence side of it and then we'll get right back on track. And again as I mentioned earlier we're going to use any special regulatory mechanisms and no special filings with the NRC. It's just us working through this process and getting right.

And as their spending, part of that it sounds like higher ongoing stamping, part of this next three years is the way to split out between spending to fix the program where you want it to be versus spending that's just ongoing higher levels or ongoing higher levels.

The way to look at it and obviously you got to remember too Steve, capital dollars are lumpy in these big plants and things like that, but the way we're looking at it is what's the take to run these plant and Chris's task has been to put together a plan what does it take to run the plant on an all in basis. And so we're doing that certainly getting ourselves out of column four and things like that are going to be important and those are costs that will go away but for the most part all that we've asked them to do was come up with capital plan required to put us in the operational excellence category that we want to be in this is it and we've included it all it. The plan we're going to use the regular regulatory mechanisms to recover it and as we mentioned earlier between our mitigating actions, between other things that are happening in the company like securitization roll-off through loan growth that we have in investments that we're making that lower cost, the impact on our customers going to be minimized as much of it can.

And just one last thing Grande Golf can you just talk about what the outage is related to?

This is Chris again. First and foremost the Grande Golf is safe to operate, however reflecting on some of our equipment in human performance over the last several months that didn't meet our standards of excellence. So we've taken a decision to take the end of service. Systematically understand the performance shortfalls to excellence. We've training programs and some maintenance plans to correct that. It's well understood and we're in the process now of working through those issues and expect to have the unit back in service early part of next year.

Okay. Thank you.

Thank you.

And that concludes today's question-and-answer session. I would like to turn the call back to Mr. Borde for closing remarks.

Thank you, Liz and thank you 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-Q is due to the SEC on November 9 and provides more detail and disclosures about financial statements. Please note that events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. The call was recorded and can be accessed on our website or by dialing 855-859-2056 confirmation ID 85417477 and the telephone replay will be available until November 1. And this concludes our call. Thank you all very much.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program and you may now disconnect. Everyone have a great day.