Executive Summary / Key Takeaways

• Entergy (ETR) is a regulated utility positioned for accelerated growth, driven by macro trends like onshoring, the explosion of data centers, clean energy demand, and electrification across its Gulf South service territory.
• The company is executing a significantly increased $37 billion capital plan through 2028, focused on building new dispatchable generation, renewables, and transmission infrastructure to meet unprecedented customer demand.
• Recent constructive regulatory outcomes across its jurisdictions, including formula rate plan renewals, settlement of historical litigation, and approvals for resilience investments and new generation/transmission, provide crucial clarity and support for the capital deployment.
• ETR leverages its vertically integrated model, deep stakeholder relationships, and expertise in diverse generation technologies, including nuclear and carbon capture readiness, to offer a competitive "one-stop shop" solution for large, high-load customers.
• Management has affirmed its 2025 adjusted EPS guidance and raised its long-term outlook to "greater than 8%" adjusted EPS CAGR through 2028, underpinned by strong industrial sales growth expectations (11-12% CAGR) and the earnings contribution from the expanded capital plan.

Entergy: Forging a Future Powered by Growth and Strategic Investment

Entergy Corporation, a major U.S. electric utility, operates primarily through its regulated Utility segment, serving customers across Arkansas, Mississippi, Texas, and Louisiana. With a history shaped by foundational agreements like the System Agreement and Unit Power Sales Agreement, and recent strategic shifts including the exit from the merchant power business and planned divestiture of its natural gas LDCs, Entergy has honed its focus on its core regulated operations. This strategic pivot, coupled with a deliberate customer-first approach and robust stakeholder engagement, has positioned the company to capitalize on powerful macro trends reshaping the energy landscape.

The Gulf South region, Entergy's service territory, possesses inherent advantages – low power costs, extensive energy and transportation infrastructure, access to diverse energy sources, and a business-friendly environment. These factors are fueling a significant industrial renaissance, characterized by onshoring of manufacturing, surging demand from hyperscale data centers, a growing corporate focus on clean energy, and broad electrification initiatives. Entergy's strategy is intrinsically linked to powering this growth, acting as a critical enabler for businesses seeking to establish or expand operations in the region.

In the competitive utility landscape, Entergy operates alongside peers like Duke Energy (DUK), NRG Energy (NRG), The Southern Company (SO), and CMS Energy (CMS). While some competitors like DUK and SO boast larger market shares and potentially greater economies of scale, and others like NRG excel in deregulated market adaptability, Entergy differentiates itself through its vertically integrated model and deep expertise in nuclear power. This vertical integration allows ETR to offer a comprehensive technical solution – from generation and transmission to distribution and retail services – providing a "one-stop shop" appeal, particularly attractive to large industrial and data center customers seeking streamlined development. Its strong local relationships further facilitate project execution by aligning diverse stakeholder interests.

Entergy's technological foundation is anchored by its significant nuclear fleet, a core differentiator. These nuclear assets provide highly reliable, low-emission base-load power, offering inherent energy efficiency and cost stability compared to generation mixes more reliant on volatile fuel sources. While specific, directly comparable quantitative metrics across all competitors are not publicly detailed, ETR's nuclear operations contribute to its ability to offer competitive power costs and a cleaner environmental profile, which is increasingly valued by customers with decarbonization goals. The company is actively exploring potential capacity upgrades at its existing nuclear plants, totaling approximately 275-300 megawatts, which would provide incremental clean energy output. Furthermore, Entergy is evaluating options for new nuclear facilities, including small modular reactors (SMRs) through an MOU with Holtec and larger designs, participating in state working groups to explore feasibility and risk management frameworks. While new nuclear is not in the current base plan, these efforts highlight a long-term strategic interest in leveraging advanced nuclear technology, which could offer significant reliability and clean energy benefits, potentially enhancing ETR's competitive moat in the future, provided construction and commercial risks can be effectively managed.

Beyond nuclear, Entergy is investing in modern, efficient natural gas plants, configured to enable future carbon capture and storage (CCS). A FEED study is underway at the Lake Charles Power Station to assess the technical and financial viability of CCS implementation. This foresight positions ETR to comply with potential future emissions regulations and meet growing customer interest in low-carbon solutions, offering a technological pathway that differentiates it from competitors with less adaptable gas fleets. The company is also rapidly expanding its renewables portfolio, pursuing utility-owned solar and storage projects through RFPs and joint development agreements, leveraging streamlined regulatory processes to accelerate deployment and meet customer demand for green attributes.

This strategic focus on capturing growth and investing in a diverse, cleaner generation mix is reflected in Entergy's significantly increased capital plan. The company now plans to invest $37 billion between 2025 and 2028, a $7 billion increase from its previous outlook. This substantial investment is directed towards building new generation capacity (including gas and renewables), expanding and hardening the transmission and distribution system for reliability and resilience, and supporting new customer interconnections. Key projects underway or under regulatory review include the Orange County Advanced Power Station in Texas, the Delta Blues Advanced Power Station in Mississippi, Lake Catherine Unit 5 in Arkansas, new combined cycle units in Louisiana, major transmission lines like the West Bank project in Louisiana and the SETEX project in Texas, and numerous solar facilities. Management emphasizes securing critical long-lead time equipment and leveraging proven project execution capabilities to deliver these projects on schedule and budget, crucial for meeting customer timelines and realizing the investment benefits.

Recent financial performance demonstrates the initial impacts of this growth and investment trajectory. For the three months ended March 31, 2025, Entergy reported Utility operating revenues of $2.83 billion and Utility net income of $491.042 million. This compares favorably to Q1 2024 Utility net income of $195.980 million, which was significantly impacted by non-recurring charges related to regulatory matters. The Q1 2025 results were driven by strong weather-adjusted retail sales growth of 5.2%, notably a 9.3% increase in industrial sales, reflecting the impact of new and expanding customers. While operating expenses like depreciation and interest increased due to higher plant in service and debt balances financing investments, lower other O&M and favorable regulatory items contributed positively. The company's liquidity remains strong, supported by credit facilities and a commercial paper program, and it has proactively secured equity needs through 2027 and partially through 2028 via forward sale agreements, reinforcing its access to capital for the extensive investment plan. Credit metrics are healthy and projected to build towards a sustainable 15% FFO to debt, outperforming rating agency thresholds.

Looking ahead, Entergy has affirmed its 2025 adjusted EPS guidance and raised its long-term outlook, projecting a "greater than 8%" adjusted EPS CAGR through 2028. This outlook is underpinned by an expected 6% weather-adjusted retail sales growth in 2025, including robust 11-12% industrial growth. The earnings step-up in the out-years (2026-2028) is directly linked to the increased capital investment coming online. The company's dividend growth target of 6% is expected to be maintained, leading to a declining payout ratio as earnings grow, balancing capital return with investment needs. The significant pipeline of 5-10 gigawatts of data center opportunities represents potential upside to this already strong outlook.

Despite the compelling growth story, Entergy faces notable risks. Changes in international trade policy and tariffs could increase capital costs and disrupt supply chains, although management estimates the impact is manageable at ~1% of the capital plan and is pursuing mitigation strategies. Regulatory risks persist, including the need for timely approvals for new projects and cost recovery mechanisms, potential disallowances (as seen in the AR opportunity sales proceeding), and challenges to tariff structures (like the MSS-4 challenge). Storm costs and the timing of recovery remain a financial exposure, although the company utilizes storm reserves and seeks accelerated securitization processes. Environmental regulations, such as the evolving Good Neighbor Plan/CSAPR, could impose compliance costs, which ETR is monitoring. The significant capital plan itself carries execution risk, requiring skilled labor and effective project management. Finally, the pursuit of new technologies like advanced nuclear involves substantial development and construction risks that would need careful management and risk sharing with stakeholders.

Conclusion

Entergy stands at the cusp of a transformative growth phase, uniquely positioned to power the industrial expansion and clean energy transition underway in the Gulf South. The core investment thesis centers on the company's ability to translate robust customer demand, particularly from high-load industrial and data center clients, into significant, rate-base-building capital investment. Supported by a constructive regulatory environment fostered through proactive stakeholder engagement and leveraging its integrated utility model and technological capabilities in nuclear and carbon capture readiness, Entergy has laid a clear path for accelerated earnings growth. The affirmed 2025 guidance and enhanced long-term outlook, projecting greater than 8% EPS CAGR through 2028, underscore management's confidence in executing this strategy. While risks related to tariffs, regulation, and project execution exist, Entergy's focus on risk mitigation, financial strength, and a customer-first approach provides a compelling framework for navigating these challenges and delivering value to investors over the long term. The company's ability to continue attracting large customers and successfully deploy its expanded capital plan will be key determinants of its success in realizing the full potential of this promising growth story.