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Entergy Corporation (NYSE:ETR)

Q2 2009 Earnings Call

August 04, 2009 11.00 AM ET


Michele Lopiccolo - Vice President, Investor Relations

J. Wayne Leonard - Chairman and Chief Executive Officer

Leo Denault - Executive Vice President and Chief Financial Officer

Gary Taylor - Group President, Utility Operations


Greg Gordon - Morgan Stanley

Michael Lapides - Goldman Sachs

Paul Patterson - Glenrock Associates


Good day ladies and gentlemen and welcome to the Entergy Corporation Second Quarter 2009 Earnings Conference Call. One note that today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Ms. Michele Lopiccolo, of Investor Relations. Please go ahead.

Michele Lopiccolo

Good morning and thank you for joining us. We'll begin this morning with comments from our Chairman and CEO Wayne Leonard and then Leo Denault, our CFO will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions. After the Q&A session, I'll close with the applicable legal statements. Wayne?

J. Wayne Leonard

Good morning. Actually I'm not sure why I say that except out of habit. I'm looking at the screen which shows the current stock price and it's turning out to be anything but a good morning week for us. Hopefully we can address any issues that concerns in our comments and any of your questions to follow.

I'll begin with the review of regulatory developments of the utilities since our last update. Starting with storm recovery for hurricanes Gustav and Ike, Entergy Texas was encouraged that the end of last week we reached an agreement in principle that should resolve all issues in its storm cost recovery case during through an unopposed settlement. The parties expect to finalize and file the agreement this week which should permit the PUCT to vote on the settlement the following week.

In its case, Entergy Texas requested the PUCT determine that 577.5 million in system restoration costs for reasonable and necessary and that this amount plus carrying cost is eligible for recovery through securitization. Assuming the settlement agreement is finalized and is opted by the PUCT and considering the provisions of the agreement, including the timing of the securitization, collection of insurance proceeds and other offsets, Entergy Texas anticipates recording an increase in non-fuel O&M expense not to exceed $0.02 per share.

While the agreement in principle had no finding of improvements that would be the net cost of settlement versus our litigation position. In addition, ETI initiated a financing order request in mid July seeking this '08 issue 627.8 million of transition bonds in November, which includes 50.3 million of carrying costs, plus an incremental amount to cover the cost to execute the related financing.

Recall that the 2006 legislation pertaining to hurricane Rita did not require the inclusion of carrying costs. Whereas the legislation in accident 2009 does require inclusion of carrying costs at the utilities weighted average cost of capital last approved by the PUCT.

Pursuant to the evergreen legislation passed earlier this spring, the PUCT must issue financing order by October 14, the day targeted to be accelerated by three weeks under the agreement in principle.

In Louisiana, a joint storm filing was made in May. The filing seeks recovery of 241.9 million for Entergy Gulf States Louisiana and 392.3 million for Entergy Louisiana.

After considering the interim financing from storm reserves and projected carrying costs, the net retail request is 412.6 million for both companies. In addition, both companies are seeking to replenish storm reserves in the amounts of 90 million for Entergy Gulf States Louisiana and 200 million for Entergy Louisiana.

Pursuant to the procedural schedule established in July, the companies plan to summit a supplemental file around the middle of August recommending a method of cost recovery. Taken in total, the requested net cash request for both Louisiana companies is just over $700 million including storm damage cost recovery carrying costs and storm reserve replenishment. Options under considerations spread the cost impact on customers over several years, through either traditional base rate recovery or securitization with two securitization that is available.

The first securitization is pursuant to Act 64 where the utilities choose the bond. Second is pursuant to Act 55, the alternative and most decaling method successfully used for securitizing costs following hurricanes Katrina and Rita. Under this alternative method, the state issues the bonds.

The procedural schedule calls for hearings March 2010. In other regulatory updates, the LPSC unanimously accepted Entergy Louisiana's recommendation and issued an order filing the company's decision to place the Little Gypsy project in long-term suspension of three years or more was in the public interest and prudent, without prejudice to issues including timing of the decision, project management, cost recovery and whether the projects should be canceled or abandoned as opposed to merely suspended.

The quarterly monitoring plan was also indefinitely suspended. Instead Entergy Louisiana is working cooperatively with the LPSC staff keeping them informed of activities associated with suspending the project and terminating current contracts related to the project.

On or before September 1st, Entergy Louisiana will either file an application setting forth the project cost eligible for recovery or alternatively will file a report on the status of efforts to terminate the project in an orderly way to be filed later via cost recovery application. The estimated cost at this time approximates $300 million.

On or before December 15th, 2011 Entergy Louisiana will report to the LPSC and its staff whether or not it intends to reinitiate the project including a detailed discussion of the basis for that decision.

In Texas, long sought clarity was obtained regarding the state requirement that Entergy Texas move to competitive framework for retail customers. Consistent with legislation enacted in June, mandating that Entergy Texas cease all activities related to Transition to Competition and withdraw or explain on file with the Public Utility Commission of Texas.

On June 30th, Entergy Texas filed a petition requesting dismissal of its TTC plans. On July 30th, 2009, the PUCT dismissed the TTC proceeding without prejudice to refile. Entergy Texas can now move forward implementing generation and transmission plans and discussing the needs knowing it will not become part of Electric Reliability Council of Texas. While estimates varied, incremental capital cost to interconnect to ERCOT range from around 500 million to $1 billion.

Regarding other rate proceedings, Entergy Mississippi obtained the needed $14.5 million rate increase as part of a settlement with the MPSC and formula rate plan filings. In turn, Entergy Mississippi dismissed its Mississippi Supreme Court appeal of the 2007 FRP filing.

In addition, the MPSC issued an order authorizing an audit of Entergy Mississippi's fuel adjustment clause by an independent audit firm. Entergy Mississippi was also pleased to receive the Governor's Cup Award in a large business category for its working in its community. Mississippi Governor Barbour stated Entergy Mississippi represents the finest in corporate citizenship and demonstrates an unwavering commitment to improving the quality of life for citizens across the state. Entergy Mississippi was nominated by the Hinds County Economic Development District.

In Arkansas, on July 2nd, Entergy Arkansas filed a notification with the APSC that it intends to file an application for a general change in rate charges and tariffs within 60 to 90 days.

In Louisiana, Entergy Gulf States Louisiana and Entergy Louisiana continue to work with the LPSC staff to the new formula rate plans and resolve outstanding issues. The companies were encouraged that they were able to reach an interim rate agreement approved by the LPSC while continuing to work through the remaining issues. The parties will report back to the LPSC in September on the status of negotiation.

Under the interim agreement, current base rates will remain in place but the LPSC approved capacity cost adjustments. At Entergy Gulf States Louisiana, the net increase in capacity cost of $5 million annually will be deferred for future recovery. At Entergy Louisiana, the net decrease in capacity cost of 17 million annually will be used to increase the storm reserve accrual.

In addition, Entergy Gulf States Louisiana and Entergy Louisiana will implement a new environmental adjustment clause effective for the August billing cycle. This rider was created by the LPSC to reflect recovery of cost necessary to comply with the Clean Air Interstate Rule and demonstrates continued constructive regulations by the commission.

Finally, in New Orleans, pursuant to its comprehensive rate settlement on July 2nd, Entergy New Orleans filed the Entergy Smart plan proposal that included progressive energy efficiency in demand-side management programs.

The Energy Smart plan is a result of a comprehensive and ongoing process among the company, the council and various other community stakeholders that considered a complex set of energy efficiency issues. The program commits $3.1 million annually to provide incentives to residential and business customers for energy efficiency and conservation efforts.

Entergy New Orleans projected that up to 7300 participants could benefit from Energy Smart incentives annually. The New Orleans City Council is expected to vote on this proposal in September.

At Entergy Nuclear, employees are in two of the 14 top industry practice awards given out annually by the Nuclear Energy Institute. Since the program's inception, Entergy Nuclear has been honored with 17 top industry awards.

Regarding license renewal, NRC took another step forward when the Nuclear Regulatory Commission issued its supplemental safety evaluation for license renewal. Additional confirmatory analysis determine for NRC net (ph) application requirements.

In addition, the Atomic Safety Licensing Board rejected the last remaining contention associated with the confirmatory analysis and terminated this proceed in July. The New England coalition who had initiated the contention has since appealed directly to the NRC to overturn the ASLB.

While NRC license renewal is still possible around year end the latest appeal could delay renewal into next year. At the Pilgrim plant, the NRC continues its review of the Pilgrim Watch appeal. Last November Pilgrim Watch filled an appeal with the NRC regarding ASLB ruling in favor of Pilgrim on the contention related to the adequacy of the Barry pipe aging management program.

The NRC requested additional legal briefings which have been filed and license renewal is anticipated before the end of the year. The employee license renewal process also continues. In its comprehensive reliability plan published May 19th, 2009, the New York ISO underscored the importance of Indian Point to its generating supply in New York. The ISO's plan noted that unexpected retirement of either Indian Point 2 or 3 at license expiration would cause an immediate violation of the reliability standard in 2014, retirement of both units because a severe storage and resources needed to maintain bulk power system reliability resulted in the probability of an involuntarily load interruption by 2018 that is approximately 40 times higher than the reliability standard requires. In order to mitigate those retirements, approximately a 1000 megawatts of capacity will need to be installed in Zone G2k for each retired unit.

This finding is consistent with the previous decision by the New York Public Service Commission that they needed a limited review of the reposed spin-off transaction and associated financing given the critical nature of Indian Point.

Since December, party to the proceeding engaged in settlement discussions, with consideration of changing markets since specific concerns to the party's further enhancements for developed to the reorganization proposal. While Entergy review this settlement -- for while Entergy viewed this settlement discussions as productive ultimately, Entergy thought that it was necessary to formally requests a schedule and process for bringing the ready conclusion.

On July 13, Entergy proposed to file an amended petition reflecting an enhancement put forward in the settlement discussions for the end for the New York Public Service Commission's consideration. Broadly speaking, the amendments are intended to further enhance financial flexibility and strength of Enexus, while at the same time, preserving the company for business reasons for pursuing this spin-off.

While Entergy believe the initially proposed terms were more than adequate to meet the standards of established for regulatory approval, nonetheless in an effort to move the process along and eliminate any reasonable basis for concern financial enhancements have been added to the plan.

The enhanced structure of Enexus reduces long-term bonds by $1 billion added in incremental cash -- add to an incremental cash on hand to $500 million and requires a minimum ongoing liquidity level of $350 million. Facilitating theses enhancements while preserving the Entergy's financial objectives include the modification of the proposed tax free exchange process.

We always communicated the potential for structuring transaction something other than its straight spin, depending on what made the most sense at that time. Instead, of a straight spin, Entergy now proposes a partial spin-off, partial split-off transaction. Approximately 80% of the Enexus shares will be distributed to Entergy shareholders at the time of the spin-off and the balance will be placed in a trust for the benefit of the Entergy and its shareholders for a fixed period of time.

During the course of bad time period, Entergy expects to exchange the remaining Enexus holdings in a tax free exchange for Entergy shares. Enexus shares not ultimately exchanged if any will be distributed to all Entergy shareholders in the same manner the previous shares were upon a spin.

Consistent with the extended time to consider the transaction and the enhanced terms of the plan, the company believes that it is very reasonable to request procedures and a schedule to enable to report at the presiding administrative law judges to be issued in time for the Public Service Commission to issue a final order no later than its regularly scheduled November meeting. So that the proposed reorganization can be accomplished by the end of the year.

This schedule also aligns with the extension obtained from the NRC for six additional months to execute the spin-off before having the recall for approval and with our access to the financial markets on increasingly attractive terms certainly as compared to what we've seen since last fall.

Consistent with our constructive past practice of combining the case to the relevant issues and moving the process forward in an orderly manner as directed by the New York Public Service Commissions, the ALJs issued a ruling on July 29th noting the extended time it has been allowed and a substantial effort by the company to comply with discovery and comments during this period.

The ALJs indicated that they will determine the schedule and procedures after the company files the amended petition making it clear to everyone, what has been changed, added or deleted and what exactly remains compared to the original filing, essentially asking for a redline version to avoid any confusion and expedite the review. The company expects to make this filing around August 10th.

Although spin-off has clearly taken longer than initially anticipated, in large part as a result of the tumultuous financial market conditions experienced last fall as well as a longer regulatory approval process than originally expected, both the Board and the management team remains committed to pursuing this initiative as in the best interest of our stakeholders.

The value proposition remains and in some instances, it is even stronger or more clear today given that they've been transpiring since last fall. At the same time, as you all understand as shareholders you still own the non-utility nuclear plants and the underlying value continues to accrual to you.

As you know, we have reduced our earnings guidance for 2009. In my eleven years of CEO at Entergy, we've always set aggressive but achievable target. This is the first time, we have reduced financial guidance for our operating performance. You may recall that we've refined guidance in 2004 when we announced the sale of Entergy-Koch trading. And we suspended guidance in 2005 after hurricane Katrina entirely changed the landscape. I guess I should say entirely, it literally changed the landscape. But except for that year and that event, we have never missed bottom line Entergy annual operating earnings targets.

Given the gas trends and nuclear trust impairments despite our best efforts to make up the shortfall in some other ways, the reality is we can't get there and not put our operations at risk that is our customers or assets.

We acknowledge that in lowering guidance for 2009 and I assure you it was not a good day for any of us. We've taken great pride in the goals over the years and missing the targets for both 2009 earnings and the timing of closing a spin off has been very disappointing to say the least. All I can say is we are committed to getting back on track and achieving our aspirations.

Now let me turn the call over to Leo. Leo?

Leo Denault

Thank you Wayne and good morning everyone.

In my remarks today I will cover the quarterly results and our cash flow performance followed by our revised 2009 earnings guidance and outlook for the rest of the year. I will close with some thoughts on long-term value opportunities for both Entergy and Enexus.

Starting with our financial results for the quarter on slide two, second quarter earnings decreased compared to a year ago driven by lower results of Entergy Nuclear. However, I would like to point out that through the first half of 2009 we would be close to our original earnings expectations but for the two factors Wayne mentioned, at Entergy Nuclear, a sustained decrease in market value on certain decommissioning trust investments and significantly lower realized power prices and our unsold position versus the forward prices at the end of 2008.

To date our efforts to find positive offsets have not overcome the magnitude of these two developments. That said, we continue to pursue accretive opportunities to mitigate these effects over the rest of the year. The lower as reported results for Entergy Nuclear in the second quarter 2009 were partially offset by higher as reported earnings at utility, parent and other and the non-nuclear wholesale assets business.

As reported earnings include two special items related to our rolling readiness position for the spin off. Third party expenses incurred in both periods at utility, plant and other to execute the spin-off transaction an increment of dis-synergies reflected in the Entergy Nuclear segment results in 2009. Both of these items are excluded from operational results.

Slide 3 presents the facts that drove the quarter-on-quarter results. Utility, plant and other's modest operational earnings decline was primarily the result of lower net revenue and higher expenses that offset the benefit of lower income taxes during the quarter. The decrease in income taxes is consistent with our previously stated expectations for overall 2009 effective tax rate of approximately 37% versus the 38.4% statutory rate.

Utility net revenue was down in the second quarter of 2009 primarily due to a regulatory charge.

The May FERC order results in cost (ph) as a result of inconsistent state commission allocations of the 2007 rough production cost equalization payment between the former Texas and the Louisiana jurisdictions of Entergy Gulf States.

Weather was not a fact -- a significant driver versus second quarter 2008 factor considering both billed and unbilled sales periods. Sales volume statistics and the weather impacts on EPS reflect near normal weather built through much of the quarter as opposed to normal than normal weather last year. However, the second half of June saw some of the highest daily average temperatures throughout our service territory in 10 years. This warm weather at quarter end was primarily reflected in unbilled sales.

On weather adjusted basis, the weak economy continues to affect utility sales most notably in the industrial segment. As we mentioned last quarter, facility in demand charges paid by industrial customers that do not vary with volume, tampered the revenue effect of the reduced sales.

The fixed charges were approximately 50% of industrial gross margin during the second quarter. The biggest and the lasting impact occurs when customers go out of business. But we took write-off of two large customer bankruptcies in the quarter, both customers continue to operate.

In addition, we're starting to see some positive trends for the hardest hit industrial sectors of chemicals, refineries and primary metals. And despite some delays, the prime industrial expansions for this year remain on track. However, recovery will depend in large part on how the economy fares for the rest of the year and beyond.

Turning to Entergy Nuclear quarterly results were below the prior year due primarily to lower revenue from additional planned and unplanned outages and a significant impairment record on certain decommissioning trust fund investments.

Again this quarter the decline in production stemmed largely from the front end loaded refueling outage schedule this year. Refueling outage dates at three plants resulted in an additional of 59 outage days over the one refueling outage we had in the second quarter of 2008. Lower revenue was partially offset by a reduction in operation and maintenance expense as costs were deferred for resources supporting refueling activities.

The next refueling outages for the non-utility nuclear fleet are planned for the spring of 2010, a year in which we have four nuclear units scheduled for refueling versus three in 2009.

Decommissioning trust fund impairments recorded this quarter were significantly higher than impairments recorded in the second quarter of 2008 results. Accounting rules require that unrealized losses sustained over a period of time must be recognized as an other than temporary impairment. Specifically the rules call for an assessment to possible impairment in each quarter.

Looking at each individual decommissioning fund and within each fund assessing the market value of each investment versus its historical cost basis. While broad market indices have rebounded strongly since the early March lows, those recoveries have not made up for the loss in market value against the historical cost of the investment. This loss was created by market conditions in 2008, and early part of 2009.

Finally, the non-nuclear wholesale asset business' results improved this quarter due primarily to lower income taxes.

Slide 4 recaps our cash flow performance for the quarter. Operating cash flow increased by 177 million compared to the same period last year driven by deferred fuel contribution of 350 million at the utility, lower income tax payments of $93 million at the utility, parent and other and the reduction in working capital of $28 million at the non-nuclear wholesale assets business.

Offsets include a $160 million increase in utility working capital and at Entergy Nuclear lower revenues of $62 million due to additional outages and fueling outage costs and spin off dis-synergies of 52 million.

Looking ahead our overall liquidity position remains very strong, as shown on slide 5. In fact, our outlook on liquidity enabled us to substantially reduce our outstanding result for the balance. Untapped revolver capacity now stands at just under 1.6 billion at the end of the second quarter compared to 725 million last quarter and we still have nearly $1.3 billion in cash.

For the year, we continue to project net liquidity resources of about $2 billion. Projected 2009 liquidity usage continue to include the completion of the roughly $600 million remaining under our share repurchase programs. Consistent with prior statements, the share repurchases were expected to be weighted towards the second half of 2009. No share repurchases were made through June 30th of this year. After the close of the second quarter, however, our projected solid liquidity position enabled us to resume share repurchases suspended since the fall of 2008.

Slide 6 details are revised 2009 operational earnings guidance of 6.20 to 6.80 per share announced last month. As reported earnings guidance is now $6 to 6.60 per share reflecting $0.14 of spin-off dis-synergies and the $0.06 of spin-off transactions costs incurred year-to-date.

Like any year, some of them have turned against us since the time we initially set guidance although this has been positive. We plan for a range of outcomes in guidance in fact to widen range this year to reflect a larger unsold energy position at Entergy Nuclear. As the years unfolded however, the combination of two specific market events caused us to revise our guidance. First the unprecedented financial market conditions triggered recognition of an additional significant decommissioning trust impairment of $0.19 per share in the second quarter of 2009 on top of the $0.05 recorded in the first quarter. That outcome was not reflected in our initial guidance because of the inherent difficulty in predicting financial market performance, particularly in these uncertain times.

Though some companies treat impairments of special items, we report them within our operational results.

Also, power prices on Entergy Nuclear's open position declined significantly during the second quarter averaging in a low $30 per megawatt range. Current market conditions reflected in published power prices when we revised our guidance to adjust the balance of the year pricing around the mid $30 per megawatt range.

Considering results for the first half of the year we now expect the average 2009 price for Entergy Nuclear's merchant position to approach $40 per megawatt hour. A drop of nearly 20 hours in megawatt hour from the level originally assumed in the guidance.

In spite of these challenges the shift we have made in our revised 2009 guidance range is less than implied based solely on the decommissioning impairments and lower prices. While we continue to face pressure on utility sales compared to the initial guidance assumptions, we could see other opportunities to make up some long lost ground in 2009 including achieving constructive regulatory outcomes into utility, operating the non-utility nuclear fleet safely and efficiently now that the refueling outages are behind us, pursuing efforts to control spending while protecting value and executing our share repurchase program while maintaining our financial flexibility and strength.

While we're disappointed that we are unable to hold on to our original guidance range, you can be assured that the management team remains committed to achieving positive outcomes on the variables it does control.

Before closing I'd like to offer some thoughts on what has changed and more importantly what hasn't changed since we originally announced our plan for the spin-off in November of 2007. We continue to see multiple leverage to create long term value in both of our businesses as illustrated on slide 7 through both high and low price environment and exercise opportunities for growth.

The non-nuclear fleet is well positioned to benefit as the economy rebounds and carbon constrained world becomes a reality. In contrast, acquisitions when prices are low could add to EBITDA while expanding product offerings, reducing risk and improving credit. The amended petition we will file next week in New York will demonstrate enhancements to Enexus' already robust financial strength and flexibility.

The pursuit of opportunities of Enexus will be more efficient once the separation is complete. In some cases, efforts to enhance the financial profile of Enexus would not be possible in our current structure. For the utility our earnings story remains unchanged with underlying growth of 3 to 4%, with ample investment opportunities that benefit customers and meet our obligations to serve.

In addition, we continue to see another 3 to 4% from recapitalization of Entergy Fund to spin. The new split-off structure is simply a different means to the same end. We still expect to use a portion of the proceeds from the spin-off transactions to reduce debt at Entergy and repurchase Entergy shares.

However, now the full extent on the share reduction will be achieved through a combination of traditional repurchases and a split-off future whereby Enexus shares initially held in trust are expected to be exchanged for Entergy shares. The exact mix of debt and equity retired will alternatively depend upon a number of factors, including free cash flow to Enexus through to date of the spin off and future stock prices of Entergy and Enexus.

While we affirm Entergy's post spin-off aspiration of 68% per year annualized earnings per share growth through 2012 we continue to explore our line of sight to grow the utility even more through additional capital deployment and improving ROEs at each utility operating company.

A point of view driven company requires discipline and flexibility to adjust our tactics along the way as the business environment changes. Our five-year financial aspirations for Entergy and Enexus that we set back in 2007 are essentially unchanged. What also hasn't changed is our believe that the potential value proposition for the spin-off remains strong. And now the Entergy's team is available for your questions.

Question-and-Answer Session


Thank you. (Operator Instructions). We'll first to Greg Gordon with Morgan Stanley.

Greg Gordon - Morgan Stanley

Thanks. Good morning guys.

J. Wayne Leonard

Good morning Greg.

Greg Gordon - Morgan Stanley

As we look at the new guidance, well there is a recently articulated guidance range. Yeah, you guys go to a lot of detail on pages 5 and 6 of your quarterly press release. For one of the things that you say on page 6 is that the -- and I presume this is all to the middle of the range that which presumes normal weather and retail sales growth of just under 3% as drivers for the utility. But when I look at the weather adjusted sales, you take the utility, I don't remember what page it's on here, they're down a little more than 1% on residential and little less than 10% on industrial.

So, does that mean that we're trending towards lower end of the new guidance range right now if you were to annualize those types of sales numbers?

J. Wayne Leonard

No, Greg, it doesn't those sales levels are things that we made in the normal range of guidance, we're actually working to overcome. So, it's taken into consideration when we set the new guidance range where sales levels would be going forward.

Greg Gordon - Morgan Stanley

Thank you.


And next we'll go to Paul Patterson with Glenrock Associates.

Paul Patterson - Glenrock Associates

Good morning guys.

J. Wayne Leonard

Good morning Paul.

Paul Patterson - Glenrock Associates

I want to touch basically on the spin-off and the Vermont decommissioning issue and I guess the contract negotiations. And just where you see those heading and when do you think we will get some sort of clarity on that?

J. Wayne Leonard

Good morning, Paul. Somewhere to what we've been doing in New York we've been having a variety of conversations with the parties up in Vermont to work towards a new PPA that would be factored in with the Certificate Of Public that we have to get from both the commission and the legislature. And as it relates to the -- I mean those things are moving along and we have a schedule of meetings that we've laid out to see if we get to some agreement on that.

As it relates to the decommissioning I think it's within the second week of August we'll be filing with the NRC a plan to deal with the minimum funding requirement shortfall that we have in Vermont.

Paul Patterson - Glenrock Associates

Well, I guess what I meant was the license extension issue, I mean it seems like all since you wrapped on the contract negotiations and just sort of -- I mean then we got the spin in there as well, I mean do you think that there is a possibility for global settlement here in terms of getting all those issues resolved or?

J. Wayne Leonard

Yeah, definitely I mean, we're really dealing with both issues up there, both the PPA negotiations and spin itself. So, the timeframe that we're looking at is we'll get those completed and orders out the commission before the end of the year.

Paul Patterson - Glenrock Associates

And in terms of New York and the new structure that we are talking about in general, has there been in terms of rating agency or what have you, have they re-assessed what the Enexus situation might be because of this -- these enhancements that you guys have made? And could you share those with us?

Leo Denault

Paul, this is Leo. Obviously, we continue to have dialogue with rating agencies about where we are heading with the entire company Entergy and Enexus pre and post spin. The details of those, we really wouldn't get into but it's safe to say that we have a continuing dialogue with them all the time regardless of our strategies and that the kinds of things that we'd be looking out, we've informed them of and provide them that kind of information.

Paul Patterson - Glenrock Associates

Okay, thanks a lot.


(Operator Instructions). We'll go on to Goldman Sachs, Michael Lapides.

Michael Lapides - Goldman Sachs

Hey guys actually, couple of questions on the utilities. First of all, I notice the -- in the appendix for that has the authorized rate of returns of the various utilities that the band is a little bit different in Mississippi that it previously had been. Can you address that? Can you also address in Louisiana, the formula rate plans and whether the current structure of the formula rate plans gives you an opportunity to actually earn your ROEs in future years?

Gary Taylor

Hey well, hi Michael. How are you? It's Gary. I guess I really start with the Louisiana first because when we look at where we are and I think the formula rate plans have served us well in both jurisdictions but they are calculated differently. In Louisiana though we really are focusing on where the target is normally set to the bottom of the band, once you are below it, is trying to make improvements that allow us to set that closer to the midpoint of the band as part of what we think is important as this FRP going forward to allow us to be able the opportunity especially in the cost environment to get closer to that target ROE. And we've focused on that.

In Mississippi, it's actually calculated each time and it's based on a number of different calculations that they had done and as it floats from year-to-year based on the inputs to that.

Michael Lapides - Goldman Sachs

Okay, thank you.


And there are no further questions at this time. Ms. Lopiccolo I'll turn things back over to you.

Michele Lopiccolo

Okay. Thank you, operator 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 compliant statements. Our call was recorded and can be accessed for the next seven days by dialing 719-457-0820, replay code 4219567. This concludes our call. Thank you.


Once again ladies and gentlemen that does conclude today's conference. We thank you for your participation. You may now disconnect.

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