Entergy issues guidance, expenditure plan
by MBJ Staff
Published: November 9,2011
NEW ORLEANS — Entergy Corporation has issued 2012 earnings guidance and outlined its preliminary three-year capital expenditure plan for the period 2012 through 2014. In addition, Entergy affirmed its long-term financial outlook.
Entergy is initiating 2012 earnings guidance in the range of $5.40 to $6.20 per share on both as-reported and operational bases. While Entergy affirms its updated 2011 earnings guidance range of $7.15 to $7.65 per share on as-reported and operational bases, the 2011 starting point by business segment was adjusted consistent with current indications.
The company believes top-quartile total shareholder return is achieved by: operating the business with the highest expectations and standards; executing on earnings growth opportunities while managing commodity and other business risks; delivering returns at or above the risk-adjusted cost of capital for each initiative, project, business, etc.; maintaining credit quality and flexibility; deploying capital in a disciplined manner, whether for new investments, share repurchases, dividends or debt retirements; and, being disciplined as either a buyer or a seller consistent with the market or Entergy’s proprietary point of view.
The current long-term financial outlook for 2010 through 2014 includes the following:
• Utility net income: 6 to 8 percent compound annual net income growth rate over the 2010 – 2014 horizon (2009 base year)
• Entergy Wholesale Commodities results: Revenue projections through 2014 will experience increased volatility due to commodity market activities – one of the most important fundamental drivers for this business. At current sold and forward prices with its existing asset portfolio and in-the-money hedges that will roll off in the coming few years, EWC is expected to deliver declining adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization and interest and investment income, excluding decommissioning expense, other than temporary impairment losses on decommissioning trust fund assets and special items) for the period through 2014 compared to 2010, with a 2013 inflection point (i.e., declining through 2013; 2014 trend turns to increasing). However, Entergy Wholesale Commodities offers a long-term option from the potential positive effects of ongoing economic growth (driving increased load, market heat rates, capacity prices and natural gas prices), new environmental legislation and/or enforcement of additional environmental regulation.
• Corporate results: Results will vary depending upon factors including future effective income tax and interest rates and the amount/timing of share repurchases.
• Capital deployment: A balanced capital investment/return program. Entergy continues to see value-added investment opportunities at the Utility in the coming years, as well as an investment outlook at Entergy Wholesale Commodities. Entergy aspires to fund this capital program without issuing traditional common equity, while maintaining a competitive capital return program. Given the company’s financial profile with a mix of utility and non-utility businesses, return of capital is expected to be provided similar to the past through a combination of common stock dividends and share repurchases. Absent other investment opportunities, capital deployment through dividends and share repurchases could total as much as $4 billion – $5 billion from 2010 – 2014 under the current long-term business outlook. The amount of share repurchases may vary as a result of material changes in business results, capital spending or new investment opportunities
• Credit quality: Strong liquidity. Solid credit metrics that support ready access to capital on reasonable terms.
The preliminary capital plan for 2012 through 2014 anticipates $7.1 billion for investment, including $3.2 billion of maintenance capital. The remaining $3.9 billion is for specific investments and other initiatives such as:
• Utility: The Utility’s portfolio transformation strategy including the 620 MW Hot Spring and 450 MW Hinds power plant acquisitions (including planned plant upgrades, transaction costs, and contingencies), an approximate 178 MW uprate project at the Grand Gulf nuclear plant, Entergy Louisiana, LLC’s Ninemile 6 new CCGT project, as well as the associated transmission investment; the steam generator replacement at Entergy Louisiana’s Waterford 3 nuclear unit; transmission upgrades and spending to support the Utility’s plan to join the MISO RTO by December 2013.
• Entergy Wholesale Commodities: Dry cask storage, nuclear license renewal efforts, component replacement and identified repairs across the fleet, NYPA value sharing, the Indian Point Independent Safety Evaluation, and wedgewire screens at the Indian Point site.
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