Entergy Corporation (ETR) Q4 2022 Earnings Call Transcript

Entergy Corporation (NYSE:ETR) Q4 2022 Earnings Conference Call February 16, 2023 11:00 AM ET

Company Participants

Bill Abler - Vice President, Investor Relations

Drew Marsh - Chief Executive Officer

Kimberly Fontan - Chief Financial Officer

Rod West - President of Utility Operations

Conference Call Participants

Constantine Lednev - Guggenheim

Paul Zimbardo - Bank of America

David Arcaro - Morgan Stanley

Durgesh Chopra - Evercore ISI

Angie Storozynski - Seaport

Anthony Crowdell - Mizuho

Nicholas Campanella - Credit Suisse

Operator

Thank you for opinionated by, and invited to Entergy Corporation's Fourth Quarter 2022 Earnings Release and Teleconference. At this time, each participants are successful a listen-only mode. After nan speakers position location will beryllium a question-and-answer session. [Operator Instructions] As a reminder, today's programme is being recorded.

And now, I'd for illustration to present your big for today's program, Mr. Bill Abler, Vice President of Investor Relations. Please spell ahead, sir.

Bill Abler

Good morning, and convey you for joining us. We will statesman coming pinch comments from Entergy's Chairman and CEO, Drew Marsh; and past Kimberly Fontan, our CFO will reappraisal results.

In an effort to accommodate everyone who has questions, we petition that each personification inquire nary much than 2 questions. In today's call, guidance will make definite forward-looking statements. Actual results could disagree materially from these forward-looking statements owed to a number of factors, which are group distant successful our net release, our descent position and our SEC filings.

Entergy does not presume immoderate responsibility to update these forward-looking statements. Management will besides talk non-GAAP financial information. Reconciliations to nan applicable GAAP measures are included successful today's property merchandise and descent presentation, some of which tin beryllium recovered connected nan Investor Relations conception of our website.

And now I will move nan telephone complete to Drew.

Drew Marsh

Thank you, Bill, and bully morning, everyone. Today, we are reporting beardown results for different successful year. Our 2022 adjusted net per stock was $6.42 successful nan apical half of our guidance range. This is nan seventh twelvemonth successful a statement that our results person travel successful supra our guidance midpoint.

Our dependable predictable financial results are underpinned by our strategy to create worth for our 4 cardinal stakeholders, our customers, employees, communities and owners. Our strategy starts pinch learning from our customers what they request from america to beryllium successful, and past we build an finance scheme to meet those demands. As a result, we are investing successful our powerfulness transportation strategy to amended reliability and resilience and importantly expanding our cleanable procreation to support our quickly increasing business load and nan decarbonization goals of our customers.

This customer-centric attack has delivered benefits for each our cardinal stakeholders. We are assured this attack will proceed to create meaningful worth good into nan future. In 2022, Entergy’s 12,000 labor worked each azygous time to present operational excellence, execute affirmative regulatory outcomes, build nan instauration for our semipermanent maturation strategy and thrust improved affordability for our customers.

Operational excellence originates pinch safety. In 2022, we made important strides signaling nan fewest injuries successful our company's history, and a full recordable wounded complaint that classed successful nan first quartile among EEI utilities. To execute this result, we reduced full accidents, including labor and contractors by 30% and superior injuries by much than 50%. This is an betterment that we're proud of, our activity isn't done because we judge zero harm is possible. We will proceed our relentless attraction connected keeping our labor and contractors safe each day, each day. Entergy's operational excellence is consistently connected show erstwhile we respond to bonzer circumstances. We saw this precocious pinch wintertime storms Elliott and Mara.

Elliott presented unsocial challenges owed to nan highly acold temperatures. In fact, we knowledgeable immoderate of nan highest wintertime loads that we person seen, including caller wintertime peaks for Entergy Arkansas and Entergy Texas. Teams from crossed our statement collaborated to guarantee that nan strategy capacity and operating resources were maximized. Power readiness was critical, and our procreation accommodation performed highly well, buoyed by contingency readying and improvements from weatherization investments made aft wintertime large wind Yuri. Not only were we capable to meet nan precocious request of our customers, but we besides exported powerfulness to adjacent systems to thief different utilities meet their demand.

Our teams performed highly good during some events and for that, I americium very thankful. I'm particularly proud that we had nary injuries, ensuring that each our labor return location safely. River Bend Station, our atomic works adjacent Baton Rouge began its refueling outage aft 675 days of being continuously online. That's nan longest tally successful position history. River Bend is an important -- is important to nan area it serves providing safe, cleanable power that our customers tin count connected and tremendous support for our communities.

During this outage, we will beryllium making aggregate instrumentality improvements to guarantee semipermanent reliability of nan unit, including replacement of condenser tubes and provender h2o heaters. We besides made important advancement connected our regulatory objectives. Starting pinch Texas, we received support from nan PUCT to build nan Orange County Advanced Power Station aliases OCAPS. This caller highly businesslike CCGT will supply near-term benefits, including little substance costs, little emissions and expanding location capacity to support maturation successful our Texas work area. The works will beryllium upgradable to alteration early reconfiguration for hydrogen capability, which will summation substance diverseness and supply long-duration retention successful a c constrained environment.

For Entergy Texas complaint case, parties person progressed successful conception nan colony discussions and reached a tentative statement connected cardinal terms. The proceeding was put connected clasp to let clip to finalize nan agreement. We'll supply an update connected nan specifications erstwhile available. In Louisiana, we received support to retrieve nan equilibrium of Hurricane IDA costs utilizing securitization. We activity collaboratively pinch our regulators to find a solution that met nan needs of each stakeholders. The bid wished that each of nan costs incurred were reasonable and prudent and Entergy Louisiana will afloat retrieve those costs, which is captious for nan in installments of nan company. While nan committee approved our large wind recovery, we want to guarantee you that we heard your feedback astir nan chat astatine nan gathering and nan uncertainty successful nan process.

To that end, we are continuously evaluating our stakeholder outreach practices. Our ongoing extremity is simply a best-in-class stakeholder engagement attack that achieves alignment astir important customer outcomes. We judge location is statement pinch our regulators astir our semipermanent goals to present what our customers request to beryllium successful. Our customers are cardinal to each that we do, and we cognize we tin proceed to activity pinch our regulators to amended our processes for nan future.

Turning to nan national level. In December, we received an bid connected System Energy's uncertain taxation position and sale-leaseback complaint. For nan uncertain taxation issue, we judge that nan FERC's remedy is clear. And arsenic a result, nary further refunds are required. The remedy is important because nan rulings of nan IRS are now known and nan in installments ADIT connected a hypothetical ground nether facts now known to beryllium incorrect, would beryllium wrong.

FERC's Remedy besides recognizes that customers benefited from our actions by much than $100 cardinal successful value, including a $25 cardinal refund made by SERI successful 2021 accordant pinch nan magnitude of ADIT allowed by nan IRS, and a abstracted $18 cardinal refund for excess ADIT besides paid successful 2021. Meanwhile, SERI took connected nan consequence of liking and penalties pinch nan IRS to supply that value. Absent our actions, customers would person received nothing. And passim nan play astatine issue, customers paid not $0.01 much successful rates than they would person paid has SERI not taken nan uncertain taxation positions.

On nan waste leaseback. Sorry. SERI is progressive connected my iPad arsenic well. On nan sale-leaseback item, we are disappointed successful FERC's conclusion and we person thought rehearing of that decision. The lease renewal was a cost-efficient measurement to guarantee customers would proceed to person entree to reliable baseload cleanable power from a divers substance source. And overall, nan waste leaseback saved them complete $800 million.

On January 10, SERI issued $104 cardinal successful refunds required by nan order. We person made our compliance refund reports detailing that calculation. FERC will request to reappraisal our compliance filing and rumor a further order. There is nary statutory deadline for nan order, but we dream to get FERC's determination soon. As a reminder, SERI refunded Entergy Mississippi $235 cardinal successful November arsenic portion of its world colony pinch nan Mississippi Public Service Commission, which represents Entergy Mississippi's 40% liking successful 13 different dockets astatine nan FERC.

We still judge that a world colony pinch nan remaining unit regulators connected position akin to nan statement pinch nan MPSC would beryllium successful nan champion liking of each parties. It would resoluteness disruptive litigation uncertainty for SERI and our stakeholders, including our regulators, accelerate meaningful worth to customers, debar costly and unnecessary third-party litigation fees and let each parties to move guardant pinch less distractions arsenic we activity together to prosecute nan important priorities and outcomes that our customers demand.

Moving connected to our maturation story. Our strategy is centered connected 2 cardinal aspects of our business that are captious to helping our customers meet their goals. First, expanding our cleanable power footprint to support business income maturation and a increasing customer electrification focus; and second, accelerating nan resilience and hardening of our strategy to amended outcomes for existing customers, while giving caller customers nan assurance to put successful our communities. Our 3 twelvemonth $16 cardinal superior scheme supports this strategy, while improving reliability and our customers' experience. This superior scheme besides provides clear statement of show to our 6% to 8% adjusted EPS maturation outlook arsenic good arsenic our in installments goals.

We are aggressively investing successful cleaner power to use customers and communities. Of nan $16 billion, adjacent to $6 cardinal represents procreation investments moving america toward a cleaner future. This includes investments successful renewables, OCAPS and nuclear. Today, we person conscionable complete 800 megawatts of renewables successful service, but we're still successful nan early stages of our renewables build out. Over nan adjacent 3 years, we scheme to summation our renewable portfolio by astir 4,500 megawatts, much than 4 times our renewable capacity today, and that inclination will accelerate beyond 2025 pinch plans for up to 14 to 17 gigawatts successful work by nan extremity of 2031.

With this plan, we expect to execute our 50% c strength simplification extremity successful beforehand of our 2030 target arsenic good arsenic our caller extremity for 50% c free capacity by 2030. Our scheme for accelerated resilience and hardening, known arsenic Entergy Future Ready, is besides important to trim large wind consequence for our customers and different stakeholders. Last year, we laid retired our $15 cardinal 10 twelvemonth scheme is expected to trim large wind outages, trim early large wind restoration costs and supply a instauration for maturation for customers who are limited connected energy much than ever. Our 3 twelvemonth superior scheme includes astir $900 cardinal for this activity and much finance could beryllium added to this scheme erstwhile regulatory approvals are obtained.

We revenge our first resilience plans for New Orleans past July and our scheme for Louisiana precocious past year, and we are targeting decisions successful those jurisdictions by nan extremity of this year. For Texas, we are supporting authorities that would let for an accelerated resilience plan. We expect to make our first regulatory filing successful nan 3rd 4th of this twelvemonth aft legislative efforts are completed. We are targeting a determination from nan Texas Commission sometime adjacent year.

Of nan $16 cardinal 3 twelvemonth superior plan, $7 cardinal represents transmission and distribution investments successful summation to our accelerated resilience programme to present improved reliability and customer experience, done projects focused connected plus renewals, enhancements and grid stability. These investments are besides designed to hole nan grid for renewables description and caller customer connections. We've already seen that focused distribution investments make a meaningful difference. Where we've implemented reliability projects, we person seen a important simplification successful nan number of outages. Beyond driving important outcomes for our customers, our superior scheme provides nan instauration for our unsocial economical improvement and business income maturation story.

We proceed to spot very robust description plans from existing and imaginable caller customers, and Kimberly will talk nan cardinal drivers. Two caller cleanable power announcements of statement are an OCI task for a 1.1 cardinal metric ton bluish ammonia installation adjacent Beaumont, Texas, and a Linde task to build a bluish hydrogen installation which will proviso nan OCI plant. The database of business projects that we are search correspond an further 7 terawatt hours of maturation supra our outlook done 2025.

For our planning, we probability set nan outcomes because we expect that not each of those will execute operations aliases that whitethorn show up connected a slower clip line. With this backdrop, we stay assured successful our longer-term 6% business income maturation expectations, accordant pinch what we laid retired astatine Analyst Day.

Affordability remains a halfway tenant successful our pursuit of greater sustainability and reliability for customers. Aggressively pursuing commercialized and business maturation is besides important for affordability arsenic it spreads customer-centric investments complete a larger customer base. Beyond income growth, we are supporting customer affordability by moving to amended efficiencies and trim costs, which will construe into benefits for customers.

We person historically focused our continuous betterment mostly connected operating costs. But fixed nan increasing superior needs to support customer-centric projects, we person expanded our CI efforts to superior investments. To equilibrium our customers' needs, affordability, reliability and sustainability, we must guarantee that we put superior dollars arsenic efficiently arsenic possible.

Higher state prices and basking upwind challenged customer affordability this past summer. The bully news is that earthy state prices person travel down successful caller months, and that will amended affordability for our customers, peculiarly successful Entergy Louisiana and Entergy New Orleans, wherever their substance clauses set monthly. We proceed to activity connected behalf of our customers to prosecute national backing arsenic a imaginable intends to trim costs, peculiarly for investments that accelerate nan way towards a much resilient future. To that end, we are pleased to study each 5 of our operating companies received encouragement letters to proceed pinch afloat applications for nan first information of DOE's grid resilience and invention partnerships program.

All of our proposals are to amended resilience successful disadvantaged communities. This information of programme backing is expected to reason this summertime and winning submissions will person backing for half of their task costs. If we were successful connected each 5 projects, nan awards would full $190 million. Finally, successful 2022, shareholder contributions totaled $25 million. This included $10 cardinal successful donations for measure assistance programs. We besides stepped up our efforts connected power ratio and weatherization programs to supply semipermanent measure relief.

Our effect for our customers and communities goes good beyond charitable donations. Our labor logged much than 110,000 hours of unpaid service. We helped low-income customers entree $125 cardinal successful LIHEAP funding. And done our unpaid income taxation assistance program, we helped spot 12,000 low-income families connected a way to economical stableness by helping them declare $22 cardinal successful earned income taxation credits.

We are very proud of nan activity of our labor and our firm societal work squad arsenic they supply captious thief to fortify nan communities we serve. 2022 was different successful twelvemonth for Entergy, yet we still person a batch of activity to do. We are laser-focused connected successfully delivering worth for our cardinal stakeholders. That includes executing nan superior scheme earlier america and laying nan groundwork for nan important semipermanent opportunities successful renewable generation, cleanable electrification, and resilience acceleration. It besides includes improving operational outcomes, building alignment pinch stakeholders, reducing unnecessary sound and distractions, and executing financially to fortify our equilibrium expanse and support credit. All of this is foundational to achieving our 6% to 8% adjusted EPS maturation scheme and delivering important benefits to Entergy's cardinal stakeholders, which will guarantee nan sustainability of our business for decades to come.

I'll now move nan telephone complete to Kimberly who will reappraisal our financial results for nan twelvemonth and our outlook.

Kimberly Fontan

Thank you, Drew. Good morning, everyone. As Drew said, today, we are reporting beardown 2022 results successful nan apical half of our guidance range. We executed connected cardinal deliverables passim nan twelvemonth and erstwhile again accrued our dividend by 6%. We are assured that we will proceed to present connected our commitments, and we are initiating 2023 guidance and affirming our longer-term outlook.

I will statesman by reviewing results for 2022, and past supply an overview of cardinal drivers for our 2023 guidance. Starting connected Slide 3, Entergy adjusted EPS for 2022 was $6.42, $0.40 higher than 2021. Turning to Slide 4, our net maturation was driven by beardown unit income and nan important investments we've made to support our customers. Weather adjusted unit income maturation was much than 3% for nan twelvemonth arsenic income rebounded from COVID-19 and Hurricane Ida impacts.

Industrial income were strong, astir 5% higher than 2021, driven by continued maturation from caller and description customers arsenic good arsenic higher than expected request from cogeneration customers. Overall, upwind successful 2022 accrued our unit sales. This enabled america to flex our spending for nan use of customers.

Higher powerfulness transportation expenses included accrued spending connected reliability, information and training, and vegetation maintenance, which was partially owed to inflation. Higher prices for chemicals utilized successful our procreation processes contributed to increases successful some atomic and non-nuclear procreation spending. We besides accrued our telephone halfway support spending to amended customer work levels. Higher costs, which consequence from superior finance specifically depreciation expense, taxes different than income taxes, and liking disbursal were besides reflected successful 2022 results.

Slides 5 and 6 show that nan fundamentals for our business customers remained beardown and support our maturation outlook. Commodity spreads, operating margins, and utilization rates proceed to beryllium robust crossed cardinal business segments that we serve. On a related note, earthy state curves person declined. This is bully news for customer bills. Since our EEI update, nan value curve has dropped astir $2 for 2023, which will construe into astir 4% little bills for customers. In nan longer term, little earthy state prices would besides intends higher atomic accumulation taxation credits from nan IRA, which would thrust further customer value.

The results for EWC are summarized connected Slide 7 and bespeak nan upwind down of that business, which wrapped up successful 2022. With nan successful exit of nan merchant atomic business, EWC will nary longer beryllium a reportable conception successful 2023, and therefore, will nary longer beryllium a broad adjustment. Any remaining activity from that business will beryllium included successful genitor & other.

On Slide 8, operating rate travel for nan twelvemonth was astir $2.6 billion, $285 cardinal higher than past year. Higher inferior gross was a ample driver of nan increase. The receipt of Entergy New Orleans large wind securitization proceeds successful December besides contributed. Increased substance and acquisition powerfulness payments astatine nan inferior and nan effects of nan EWC atomic plants' shutdowns were partial offsets.

Moving to in installments connected Slide 9. We expect to execute in installments metrics that are accordant pinch standing agency expectations by nan extremity of 2023. Since our past update, we've made important advancement successful strengthening our equilibrium sheet. Deferred substance balances person declined astir $450 cardinal successful nan past quarter. Given nan little guardant state curves and our businesslike substance betterment mechanisms, we expect these balances to travel down importantly successful 2023. Entergy New Orleans received proceeds from securitization bonds related to Hurricane Ida large wind recovery. This served to found a large wind reserve of $75 cardinal and provided astir $125 cardinal of large wind costs recovery. Entergy New Orleans is awaiting nan council's last determination connected nan prudence of Ida restoration cost. We expect their determination successful nan 4th fourth of this year.

As Drew discussed, nan LPSC voted to o.k. securitization of nan Ida large wind restoration cost. We successfully worked pinch our Louisiana regulators to find a solution that reduced nan magnitude financed by $180 million, which represents nan worth that customers person from nan deferred taxes associated pinch nan storm. We expect to person Louisiana securitization proceeds successful nan 2nd 4th and nan costs will beryllium utilized to trim debt. Drew besides mentioned that we received orders from FERC regarding SERI successful precocious December. As a result, SERI paid $104 cardinal successful refunds, nan mostly of which we are appealing. Based connected FERC's December bid and study of nan remaining litigation, we wished that its existing reserve was adequate.

Turning to remaining equity needs connected Slide 10. In November, we settled 7.7 cardinal shares from our equity distribution programme pinch rate proceeds of astir $850 million. We utilized nan mostly of nan proceeds to trim short-term debt. We person completed astir each of our projected equity issuances done 2024 pinch conscionable $130 cardinal remaining.

On Slide 11, we are initiating our 2023 adjusted EPS guidance and affirming outlooks accordant pinch our erstwhile disclosures. Our 2023 adjusted EPS guidance scope is $6.55 to $6.85 pinch a midpoint of $6.70. As you know, our extremity is to present dependable predictable maturation for our owners. We proceed to expect to execute 6% to 8% yearly adjusted EPS growth.

The cardinal drivers for 2023 are highlighted connected Slide 12. We expect to spot maturation from continued customer-centric investments including depreciation expense, liking expense, and taxes different than income taxes resulting from these investments. AFUDC is besides expected to summation pinch longer-term projects specified arsenic Orange County Advanced Power Station. We expect unit income measurement to beryllium astir 1% higher connected a weather-adjusted basis. This is mostly driven by robust business income maturation from caller and description customers chiefly successful business gases, superior metals, and petrochemical industries. The maturation for caller and description projects is expected to beryllium partially offset by little cogen sales, which were higher than planned successful 2020.

O&M was elevated successful 2022 owed to adaptable operating costs to support higher income measurement and our flex guidance program. We scheme for O&M to return to normal levels successful 2023. And we person besides taken into relationship higher costs for materials, statement labor, and chemicals arsenic we person seen prices summation for these items. Our extremity is to present steady, predictable outcomes and we will utilize our flex devices arsenic needed. We besides stay focused connected continuous betterment to execute sustained company-wide ratio gains.

Finally, changes successful genitor & other, excluding nan effects of liking connected intercompany preferred investments that are offset successful inferior are expected to lend to our year-over-year adjusted EPS growth. The timing of charitable contributions and residual effects from nan shutdown of EWC are cardinal drivers. Effects from higher liking rates are expected to beryllium offset by little indebtedness balances. 2023 results will besides bespeak higher shares outstanding. The appendix of our webcast position contains further specifications regarding nan circumstantial drivers. It besides outlines quarterly considerations and earning sensitivities.

In closing, 2022 was different successful twelvemonth for Entergy and we're proud of what we person accomplished. We proceed to present steady, predictable adjusted net and dividend maturation and adjusted EPS erstwhile again successful nan apical half of our guidance range. Our scheme is to proceed this inclination supported by robust fundamentals and nan spot of our customer base. By prioritizing nan needs of our customers, we will present worth for each of our cardinal stakeholders. We person a unsocial maturation opportunity and we look guardant to sharing our advancement arsenic nan twelvemonth unfolds.

And now, nan Entergy squad is disposable to reply questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility comes from nan statement of Shar Pourreza from Guggenheim. Your question, please.

Constantine Lednev

Hi. Good afternoon, Drew and team. It's really Constantine present for Shar. Congrats connected a awesome quarter. Can we commencement disconnected pinch a mobility connected nan 2023 readying assumptions and immoderate of nan moving pieces there? I spot that nan load stepped up from nan anterior first look up to 1% and O&M seems to person a flimsy tick up. Can you talk astir what drove those changes, and what different changes are now embedded versus nan early outlook? And connected O&M specifically, is that portion attributed to flex O&M aliases much of recurring costs?

Kimberly Fontan

Sure. Thanks for that. This is Kimberly. As you pointed out, our 2023 income are up a small spot and our O&M is up a small spot from EEI. As you cognize that early outlooks are preliminary estimates and we've continued to refine our guidance and our outlooks. And arsenic we did that, we recovered further tailwinds some successful blimpish readying principles and further opportunities successful sales. There are immoderate humble opportunities successful liking rates expense, and that enabled america to adhd further O&M for customer-centric spending for illustration vegetation, arsenic good arsenic telephone halfway support and things for illustration that.

I will statement that we proceed to beryllium squarely successful nan mediate of our guidance range, and we do scheme to usage flex spending aliases flex levers that we person to proceed to negociate 2023 some from a upwind imaginable effects arsenic good arsenic immoderate different effects that travel along.

Constantine Lednev

Great. That's very helpful. And shifting to SERI, there's still a fewer proceedings outstanding. Just to explain immoderate of nan caller developments from nan December order, really overmuch further refund are unit regulators lending? And much broadly connected nan process fixed benignant of nan individual complaints astatine receiving orders and nan colony that -- pinch Mississippi, does that supply immoderate visibility to an eventual solution timeframe? And is location immoderate benignant of much constructive colony chat positions astatine this point?

Rod West

So this is Rod. I'll effort to unpack nan procedural aspects of SERI updates, and I deliberation I'll fto Kimberly reside thing arsenic it relates to immoderate caller financial claims. But 2 superior matters to update astir nan uncertain taxation position and nan sale-leaseback. One is nan compliance filing and nan different being nan -- our opposing party's petition for rehearing. On nan compliance filing, really today, we're filing our consequence to nan regulator's guidance to our filing. And location is nary circumstantial timeline that FERC has to enactment connected that, truthful that's 1 update.

The second, a week from now location is nan petition outstanding by nan guidance of -- for rehearing connected nan decisions that nan FERC made astatine nan extremity of nan year. There is simply a deadline location that FERC has imposed connected itself of February 23rd, truthful it's really a week from today. That's nan petition for rehearing revenge by nan parties there. So 2 updates there. We'll person to reappraisal nan bid to find what if immoderate adjacent steps we person successful that regard, but those are nan 2 superior updates for nan SERI proceedings astir nan uncertain taxation position and sale-leaseback.

Kimberly Fontan

And conscionable to adhd arsenic acold arsenic from a financial perspective, arsenic you know, we reflected nan complete effect of nan SERI Mississippi colony for each companies successful June. About $235 cardinal of that $550 cardinal astir complaint that was taken past June went to Mississippi and nan remainder is reserved. I deliberation Drew mentioned arsenic I did that location was astir $104 cardinal of refunds retired of nan determination that came successful December, and those were paid by SERI to nan operating companies successful early January.

Constantine Lednev

And conscionable arsenic a travel up. Does nan benignant of information, does this benignant of group you up for a amended position for immoderate benignant of colony discussions conscionable fixed nan truth that immoderate of these issues are starting to get disconnected nan table?

Rod West

Well, I'll -- This is Rod again. I tin respond location to nan grade that we are progressing pinch FERC being clear astir its intentions. It does group up a clear way to settlement. And I deliberation what's upcoming and outstanding that being FERC having an opportunity to explain its anterior determination successful December arsenic good arsenic addressing immoderate of nan issues upon which nan rehearing is being requested. Again, it further clarifies those outstanding issues that whitethorn beryllium opinionated successful nan measurement of settlement. Our position is settlements successful nan champion liking of our customers and different stakeholders, and we will stay fierce successful pursuing that. But it's successful FERC's area correct now to explain their extremity of 2022 determination that I deliberation will guideline our adjacent steps connected settlement.

Drew Marsh

And I'll conscionable adhd that -- this is Drew. Whenever we were backmost successful December, we did person conversations going whenever nan FERC did determine that they were going to put an bid out. It halted those conversations to spot what those orders were. And so, pending that accusation and clarity astir that arsenic Rod said, we would dream to beryllium capable to get backmost to nan array pinch them.

Constantine Lednev

That's very helpful. Thank you for taking nan questions. I'll jump backmost successful nan queue.

Drew Marsh

Great. Thanks.

Operator

Thank you. One infinitesimal for our adjacent question. And our adjacent mobility comes from nan statement of Paul Zimbardo from Bank of America. Your question, please.

Paul Zimbardo

Hi. Good morning. Thank you, all.

Drew Marsh

Good morning.

Rod West

Hey, bully morning.

Paul Zimbardo

Just a mates of smaller ones. Just connected nan -- you put connected your descent that pension is little of an O&M resistance year-over-year successful 2023. Just -- if you could quantify that, and besides really overmuch was nan pension publication that you made past twelvemonth successful 2022?

Kimberly Fontan

Paul, this is Kimberly. I whitethorn request to get backmost pinch you connected nan circumstantial numbers, but successful general, our pension disbursal is down arsenic you noted arsenic nan funded position has accrued astir $500 cardinal to astir 85%. We did summation nan publication astatine nan extremity of nan year, but I'll person Bill travel up pinch nan circumstantial number connected that. Our pension liability came down owed to nan summation successful liking rates, which, of course, is reflected successful nan discount complaint for that liability, but that was offset by little than expected returns connected nan plus broadside of our investments. But connected a nett basis, we are successful a amended funded position position astatine nan extremity of nan year.

Drew Marsh

Yeah. The liability was helped by a number of retirements on pinch liking rates. I deliberation nan number for nan publication was astir $400 cardinal successful that ballpark, Paul, but Bill tin springiness you nan nonstop number.

Paul Zimbardo

Okay.

Drew Marsh

And it's going to beryllium successful nan K.

Paul Zimbardo

Okay. Great. And past also, I noticed location was a $33 cardinal depreciation accommodation for SERI you had successful your net release. If you could conscionable springiness immoderate accusation connected what that related to.

Kimberly Fontan

Sure. As Rod said, nan determination that came retired successful December had a number of components and connected nan sale-leaseback side, it had a constituent astir betterment of nan costs of nan information that's owned by a 3rd statement and really that sale-leaseback was. So erstwhile nan play that backmost through, nan nett complaint guidelines that was charged complete clip had been depreciated erstwhile you use nan effects of nan sale-leaseback changes that nan FERC bid judge wished aliases nan FERC wished that depreciation is simply a turnaround of that effect connected that complaint guidelines that was depreciated complete that time. So it's benignant of -- you person to return that portion arsenic good arsenic I deliberation you'll spot different benignant of nett liability location and each those are adjusted out. It's related to that -- those items are each related to really you unwind nan sale-leaseback constituent that came retired of that order.

Paul Zimbardo

Okay, great. Thank you for that. Appreciate it.

Drew Marsh

Thanks, Paul.

Operator

Thank you. [Operator Instructions] And our adjacent mobility comes from nan statement of David Arcaro from Morgan Stanley. Your question, please.

David Arcaro

Hi. Thanks truthful overmuch for taking my question.

Drew Marsh

Absolutely. Good morning.

David Arcaro

I was funny astir nan Louisiana Commission astatine slightest immoderate of nan commissioners look to beryllium focused connected reliability and moreover extracurricular of awesome storms. So wondering if there's a way to reside that facet of things, benignant of areas that look to possibly autumn retired of nan circumstantial 10-year resiliency plan, conscionable possibly normal day-to-day extracurricular awesome large wind reliability?

Rod West

Yeah, reliability is really a portion and parcel of our resilience conversation. They are very overmuch connected. And coming retired of nan backmost extremity of 2022 wherever our customers were experiencing financial hardship because of rising commodity prices, precocious usage and nan like, nan regulators were looking for alleviation and immoderate disruption to our customers was viewed arsenic a situation for nan regulators. But it didn't extremity our stakeholder engagement strategy astir reinforcing nan request for continued investment, customer-centric investments and reliability. And it will proceed to beryllium portion of our resilience filing and it's portion of nan lawsuit that we've made and nan lawsuit will proceed to make to nan Louisiana Commission. They are aligned pinch america connected those customer-centric investments, and we expect to spot improvements successful reliability crossed nan board. So they've been interested. It's been aligned pinch our engagement pinch them frankincense far. We expect to proceed to person their support, particularly astir our efforts to accelerate nan investments.

Drew Marsh

And I'll adhd to Rod's comments that we had aliases we person a resilience and reliability programme that we've been operating for nan past years that has shown improvements successful our stats. And erstwhile I was mentioning continuous betterment moving complete into nan superior abstraction successful my remarks, 1 of nan areas wherever we are focusing that is successful this power transportation abstraction because we person a reliability program. We are upgrading our resilience program. We besides person customer efforts going on, integrating those 3 things and making it overmuch much optimized. It's a abstraction wherever we deliberation we tin execute each nan outcomes that we're looking for and do it much efficiently. So that is simply a spot wherever each these things are starting to travel together and not -- and are really abstracted efforts going connected internally successful nan business.

David Arcaro

Got it. Thanks. That's helpful. And you alluded to it successful nan prepared remarks, obviously, nan past securitization process was a challenging 1 and I was conscionable wondering if you could elaborate? Is location a measurement to little nan consequence astir large wind costs securitization processes going guardant successful Louisiana? Just what benignant of initiatives tin you prosecute specifically to benignant of align parties much smoothly going forward?

Drew Marsh

I'll commencement and I'll fto Rod jump in. But I deliberation nan main point that we tin do is embark connected a resilience programme together. And that is simply a large opportunity we have, filings successful Louisiana and successful New Orleans, and arsenic I said we -- we're readying to do that successful Texas later this year. That's nan biggest opportunity and that will move each of our stakeholders guardant successful position of preparing for storms and responding much efficaciously to storms. So, Rod, I'll fto you...

Rod West

Yeah, and I deliberation that's nan point. Our customers are agnostic arsenic to whether nan finance is simply a reliability finance aliases a resiliency investment, and erstwhile location is simply a large wind and nan customers are interrupted, they are experiencing nan hardships of that interruption. That's what was portion of nan driver for nan heightened hostility some successful our -- from nan regulators arsenic good arsenic our finance plans successful pursuing accelerated investments successful resiliency because our customers had nan recency of nan acquisition pinch storms.

And so, Drew's constituent is correct connected constituent that if we tin get alignment astir accelerated resiliency investments, our customers will really acquisition amended reliability experiences arsenic well. They are rather connected.

David Arcaro

Yeah, that makes sense. Okay, great. Thanks truthful much.

Drew Marsh

Thank you.

Operator

Thank you. One infinitesimal for our adjacent question. And our adjacent mobility comes from nan statement of Durgesh Chopra from Evercore ISI. Your question, please.

Durgesh Chopra

Hey, team. Thank you for giving maine time. Hey, just...

Drew Marsh

Absolutely. Good morning.

Durgesh Chopra

Good morning, Drew. Just -- conscionable clarification. What to expect connected February 2020 -- February 22nd? So is nan FERC really going to put retired an bid wherever they will benignant of -- you person nan compliance refund, will they affirm nan compliance refund report? I'm conscionable trying to benignant of fig retired what to look for there?

Rod West

We expect them by February 23rd if I'm proceeding your mobility correctly. We are expecting nan FERC to respond to nan parties' petition for rehearing. So immoderate substantive aspects of that is chartless to us, but our anticipation is that FERC will respond to nan parties' petition to person definite of those issues reheard, not needfully a substantive ruling 1 measurement aliases nan other.

Durgesh Chopra

I see. So if they fundamentally opportunity nary to nan rehearing, past I guess, does that clear measurement nan way to you benignant of going done different settlements and putting that to bed? Is that nan correct model that I'm reasoning about?

Rod West

Well, nan parties will person nan opportunity to entreaty if they're not satisfied pinch nan outcome. I deliberation from our vantage point, location were definite advantages to springiness FERC nan opportunity to reaffirm nan first position it took, and we had immoderate challenges pinch nan sale-leaseback portion of nan order. And so, what we're looking for retired of this candidly is clarity. And we'll hold to spot what -- really FERC responds successful nan adjacent week to bid our adjacent steps.

Durgesh Chopra

Understood. Thank you, guys. That's each I had. All my different questions person been answered. Thanks, again.

Drew Marsh

Excellent. Thank you.

Rod West

Thank you.

Operator

Thank you. One infinitesimal for our adjacent question. And our adjacent mobility comes from nan statement of Angie Storozynski from Seaport. Your question, please.

Angie Storozynski

Thank you. So nan first connected FERC and SERI. So FERC scheduled hearings and that's a past situation that talks astir nan prudence of nan up rates of Grand Gulf, which I mean connected its ain frankly, it's difficult to judge that this situation wasn't outright rejected. So I mean, is location immoderate publication through? Are you proceeding thing from FERC why those hearings were moreover scheduled?

Rod West

Hey, Angie. It's Rod. You're -- I'm assuming you're talking astir nan orders -- nan rehearing bid that nan FERC released coming wherever they declined our mobility to...

Angie Storozynski

Yes.

Rod West

Rehear. Yeah. So nan bid is procedural only arsenic we publication it. It doesn't bid immoderate refunds aliases require immoderate further actions. And they went truthful acold arsenic to explicate that successful mounting nan prudence title for proceeding and settlement, it imposes nary responsibility connected us. It doesn't contradict america immoderate of our rights. It fixes nary ineligible relationships, but it simply initiates further proceedings. And they're pinch holding their correct and expertise to reside thing substantive on nan lines. It's not unexpected for us, but it's -- again, it's a procedural and not a substantive order. So there's not thing to publication from it from a subsidy standpoint.

Drew Marsh

And, Angie, to beryllium judge we admit your sentiment.

Rod West

Yeah. And nan adjacent measurement is nan colony connection March -- SERI colony connection to nan parties connected March 1st, but again, Angie, taking it arsenic a procedural matter, not a substantive one.

Angie Storozynski

Okay. And then, wholly -- changing topics wholly here. So I mean, I was conscionable wondering location is this chat successful nan manufacture wide astir switching from star ITC to star PTC. Obviously, from a regulatory inferior position that's adjuvant fixed nary rumor pinch ITC normalization, but is location -- I mean, arsenic you look astatine it, right, particularly that your star assets would beryllium superior aliases supra average, I mean, is this displacement -- would that beryllium really successful immoderate measurement EPS accretive? I mean, I'm conscionable reasoning astir nan net nickname nether nan -- connected nan star PTCs versus nan ITC.

Kimberly Fontan

Yeah. Good question, Angie. The measurement we deliberation astir nan PTCs is they supply -- and immoderate IRA successful wide is it provides opportunity for incremental investment. We'll request to activity pinch our regulators arsenic we person complete a number of years successfully to supply backmost nan taxation credits to customers successful a measurement that provides them nan value, but continues to support our in installments and our equilibrium sheet. And so, we've begun those conversations early, but really those play retired will beryllium a matter of chat pinch our regulators. We've talked astir utilizing those arsenic credits against complaint guidelines arsenic compared to nonstop credit, for example, to customers arsenic it gives america an opportunity to negociate our equilibrium expanse arsenic good arsenic guarantee nan opportunity to customers. And it besides helps pinch nan volatility associated pinch customers' bills connected PTCs, peculiarly arsenic it relates to nan atomic PTC.

Drew Marsh

And Angie, this is Drew. I would adhd to Kimberly's comments that we person a 50% readying presumption to nan grade that this does thief make america much competitive. There mightiness beryllium an opportunity for incremental finance complete and supra what we're planning, but we still person to spell execute that. So we're continuing to activity to get much competitive. And this is surely helping level nan playing section for america arsenic you said versus nan ITC framework. But that's an opportunity for america that we will person to spell execute retired location successful nan future.

Angie Storozynski

Okay. And then, lastly, you did make comments astir changes successful guardant powerfulness curves and nan quantification of nan atomic PTC use that would accrue to your customers, but we haven't yet received immoderate guidelines from nan IRS and it sounds for illustration it's not expected until nan early summer. But is location -- but person you been successful discussions pinch nan IRS astir really they will perchance quantify nan existent power watercourse that atomic plants are getting?

Kimberly Fontan

Yes, we're surely moving done EEI pinch our partners and pinch nan different utilities connected getting explanation connected these atomic PTCs. We'll evidently person to hold pinch nan remainder of nan manufacture connected what that really comes retired as, but we do judge that that's an opportunity for america and we'd beryllium eligible for those. And it provides, arsenic Drew said, an opportunity for customers, some to negociate builds arsenic good arsenic an opportunity for incremental finance depending connected really those travel out. But we person decidedly been successful discussions pinch them done EEI.

Drew Marsh

And we did expect that they would beryllium astir apt a small slower connected this because they had much time. It doesn't footwear successful until 2024. And so, we anticipated that they're going to screen a batch of different things for illustration nan firm minimum taxation and different important elements first earlier they sewage to that.

Angie Storozynski

Awesome. Thank you. Thank you, both.

Drew Marsh

Thank you.

Operator

Thank you. One infinitesimal for our adjacent question. And our adjacent mobility comes from nan statement of Anthony Crowdell from Mizuho. Your question, please.

Anthony Crowdell

Hey, bully morning. Hopefully, conscionable 2 speedy ones. I -- you whitethorn person addressed them, but conscionable curious. I conjecture there's 2 issues going connected pinch SERI. What is simply a reasonable anticipation erstwhile you deliberation of each of nan challenges that will play retired astatine FERC for illustration what's a reasonable presumption erstwhile each that is over? Is that wrong six months aliases you deliberation it could transportation longer?

Rod West

We can't opportunity because FERC has -- connected nan issues we conscionable alluded to, doesn't person a circumstantial timeline. They are successful power of nan schedule there. The updates that I've fixed was nan filing we were making coming that -- wherever nan FERC has nary scheduled deadline. That's successful respect to our compliance filing. Then, nan different was a week from today, nan timing that FERC imposed connected itself to reply to nan petition for rehearing from each nan different parties, but it is successful FERC’s domain to determine erstwhile they make these decisions. So I could not springiness immoderate expected timeframes to resoluteness each of these. That's different 1 of nan reasons why we're truthful fierce successful engaging pinch nan regulators to prosecute a colony to region nan uncertainty inherent successful FERC's operations. No disrespect to our FERC commissioners.

Anthony Crowdell

Great. And conscionable lastly, successful Slide 9 you spell done immoderate in installments and liquidity metrics there. You talk astir possibly astir by twelvemonth end, you dream to beryllium astatine nan scope aliases better. Your FFO to debt, particularly pinch Moody's trying to beryllium astatine 14%. I guess, do you person a targeted in installments cushion aliases a targeted level you dream to beryllium possibly by 2024 that you could share?

Kimberly Fontan

Sure. As you pointed out, we are targeting to beryllium supra 14% by nan extremity of 2023 and closing retired nan securitization for Louisiana that was approved successful January is simply a important thief to alteration that. As acold arsenic longer term, we are targeting 15% and we're targeting that complete nan outlook period. So you'll spot america proceed to attraction connected strengthening our equilibrium expanse complete nan outlook play to get to that target of astir 15%.

Anthony Crowdell

Great. Thanks for taking my questions.

Drew Marsh

Thank you.

Operator

Thank you. One infinitesimal for our adjacent question. And our adjacent mobility is simply a follow-up from Constantine from Guggenheim. Your question, please.

Constantine Lednev

Hi. Thanks for taking my travel up. Maybe conscionable to elaborate connected nan O&M targets and conditions that you're seeing, you benignant of mentioned immoderate of nan costs escalating, but conscionable trying to get a consciousness connected what percent of O&M is taxable to immoderate of these outer factors, and really do those elevated costs play into regulatory alleviation conscionable fixed nan FRP gross summation caps?

Kimberly Fontan

Sure. Thanks for nan travel up. As acold arsenic inflation, we do person immoderate ostentation costs successful our 2023 guidance. We've talked astir costs for illustration commodity costs and chemicals that person increased. We've seen immoderate labour costs summation successful our vegetation contracts, for example. But arsenic I said, we person seen immoderate alleviation connected that, peculiarly connected nan commodity broadside arsenic it relates to either nan resources that spell into our superior plan. Things for illustration copper, nickel, steel, each these are down year-over-year. So location are immoderate -- it's a blend, if you will, but we do deliberation we person immoderate flex levers successful 2023 to thief america negociate some our O&M and our wide -- wherever we are successful nan guidance range.

Constantine Lednev

So, nary benignant of effect connected nan regulatory alleviation conscionable fixed immoderate of that flex that you have. I deliberation nan early outlook has for illustration a 9% inferior book ROE, immoderate alteration successful reasoning astir there?

Kimberly Fontan

Yeah. So arsenic acold arsenic Louisiana and Arkansas wherever Arkansas surely has an FRP, we proceed to activity to negociate wrong that cap. Increased income which U.S. Steel will travel successful complete nan outlook play will surely thief america successful that regard. From a Louisiana perspective, arsenic you know, successful June is nan past filing of our FRP successful nan existent rhythm and we would expect to person either a complaint lawsuit aliases caller FRP filing. Those modifications retired of those outcomes would thief america move up -- but you'd spot their ROEs move up hopefully depending connected nan outcomes associated pinch those complaint mechanisms.

Constantine Lednev

Great and speedy follow-up connected nan mobility astir in installments metrics. Just are superior marketplace conditions changing your thoughts astir nan process aliases benignant of superior allocation aliases dividend decisions? And benignant of much broadly, really are you reasoning astir optimizing those financing needs, particularly pinch CapEx ramps up successful nan 2nd half of nan decade?

Kimberly Fontan

Yeah. We surely -- arsenic we noted from an equity perspective, we've met our needs done 2024 largely. We person astir $130 cardinal left. We've talked astir a full request betwixt 2025 and 2026. We haven't surgery that out, but arsenic we accelerate superior investments and we spot further renewable maturation successful nan backmost half, we'll decidedly person to look astatine really we are financing that astir effectively. But we proceed to watch liking rates arsenic good arsenic different mechanisms to finance, but we don't person thing arsenic acold arsenic alternate financing aliases thing for illustration that, that we person that's executable astatine this point.

Drew Marsh

And it's not changing our superior operation really either astatine this time. We're utilizing nan soul instrumentality for continuous betterment and trying to flex astir those soul options alternatively than effort to set what we're doing connected an outer ground astatine this point.

Constantine Lednev

Excellent. That's very helpful. Thanks truthful overmuch and awesome quarter.

Drew Marsh

Thanks, Constantine.

Operator

Thank you. And our last mobility for coming comes from nan statement of Nicholas Campanella from Credit Suisse. Your question, please.

Nicholas Campanella

Hey, everyone. Thanks for getting maine successful here. Just 1 from maine today. In Louisiana, I cognize you're benignant of connected nan past twelvemonth of nan FRP cadence and I conjecture you'll either record for an hold successful nan 3rd 4th aliases a complaint case. Can you conscionable springiness america a consciousness of wherever you're leaning location and immoderate further thoughts astir that? Thank you.

Rod West

Well, we are prepared for some tracks and nan filing of a complaint case. It doesn't forestall america from continuing to activity pinch nan committee and our related stakeholders connected an hold aliases renewal of nan FRP. So they are parallel paths, not inconsistent pinch nan anterior arsenic I callback successful my 2 iterations of review. So nan process will apt beryllium nan same. Given nan truth that we person nan accelerated resilience filing and immoderate anticipated tweaks on those lines, we'd beryllium looking to fig retired pinch our stakeholders what's nan astir businesslike way for america to incorporated nan resilience components speech from nan remainder of nan components of our superior scheme and complaint design. So much to travel but parallel paths.

Nicholas Campanella

Thanks for that. Have a awesome day.

Rod West

Thank you.

Operator

Thank you. This does reason nan question-and-answer convention of today's program. I'd for illustration to manus nan programme backmost to Bill Abler for immoderate further remarks.

Bill Abler

Thank you, Jonathan, and acknowledgment to everyone for participating this morning. Our yearly study connected Form 10-K is owed to nan SEC connected March 1st and provides much specifications and disclosures astir our financial statements. Events that hap anterior to nan day of our 10-K filing that supply further grounds of conditions that existed astatine nan day of nan equilibrium expanse would beryllium reflected successful our financial statements successful accordance pinch mostly accepted accounting principles.

Also, arsenic a reminder, we support a web page arsenic portion of Entergy's Investor Relations website called Regulatory and Other Information, which provides cardinal updates of regulatory proceedings and important milestones connected our strategical execution. While immoderate of this accusation whitethorn beryllium considered worldly information, you should not trust exclusively connected this page for each applicable institution information. And this concludes our call. Thank you very much.

Operator

Thank you, ladies and gentlemen, for your information successful today's conference. This does reason nan program. You whitethorn now disconnect. Good day.