Entergy Arkansas Earnings 2017-06-30

Entergy Arkansas Earnings 2017-06-30

EAE 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 etr-06x30x2017x10q.htm 10-Q Document

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__________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended June 30, 2017
	OR
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ____________ to ____________



Commission File Number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.	Commission File Number	Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
1-11299	ENTERGY CORPORATION (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 72-1229752	1-35747	ENTERGY NEW ORLEANS, INC. (a Louisiana corporation) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 72-0273040


1-10764	ENTERGY ARKANSAS, INC. (an Arkansas corporation) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 71-0005900	1-34360	ENTERGY TEXAS, INC. (a Texas corporation) 10055 Grogans Mill Road The Woodlands, Texas 77380 Telephone (409) 981-2000 61-1435798


1-32718	ENTERGY LOUISIANA, LLC (a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 47-4469646	1-09067	SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777


1-31508	ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830

__________________________________________________________________________________________

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Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes þ No o

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.



	Large accelerated filer	Accelerated filer	Non- accelerated filer	Smaller reporting company	Emerging growth company
Entergy Corporation	ü
Entergy Arkansas, Inc.			ü
Entergy Louisiana, LLC			ü
Entergy Mississippi, Inc.			ü
Entergy New Orleans, Inc.			ü
Entergy Texas, Inc.			ü
System Energy Resources, Inc.			ü

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ



Common Stock Outstanding		Outstanding at July 31, 2017
Entergy Corporation	($0.01 par value)	179,520,021

Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2016 and the Quarterly Report for Form 10-Q for the quarter ended March 31, 2017, filed by the individual registrants with the SEC, and should be read in conjunction therewith.

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ENTERGY CORPORATION AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2017



	Page Number

Forward-looking information	iii
Definitions	v
Part 1. Financial Information
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis	1
Consolidated Income Statements	21
Consolidated Statements of Comprehensive Income	23
Consolidated Statements of Cash Flows	24
Consolidated Balance Sheets	26
Consolidated Statements of Changes in Equity	28
Selected Operating Results	29
Notes to Financial Statements	30
Note 1. Commitments and Contingencies	30
Note 2. Rate and Regulatory Matters	31
Note 3. Equity	39
Note 4. Revolving Credit Facilities, Lines of Credit, Short-term Borrowings, and Long-term Debt	44
Note 5. Stock-based Compensation	49
Note 6. Retirement and Other Postretirement Benefits	51
Note 7. Business Segment Information	57
Note 8. Risk Management and Fair Values	59
Note 9. Decommissioning Trust Funds	78
Note 10. Income Taxes	86
Note 11. Property, Plant, and Equipment	87
Note 12. Variable Interest Entities	87
Note 13. Dispositions	87
Note 14. Asset Retirement Obligations	88
Item 3. Quantitative and Qualitative Disclosures About Market Risk	89
Item 4. Controls and Procedures	89
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis	90
Consolidated Income Statements	99
Consolidated Statements of Cash Flows	101
Consolidated Balance Sheets	102
Consolidated Statements of Changes in Common Equity	104
Selected Operating Results	105
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis	106
Consolidated Income Statements	117
Consolidated Statements of Comprehensive Income	118
Consolidated Statements of Cash Flows	119

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ENTERGY CORPORATION AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

June 30, 2017



	Page Number

Consolidated Balance Sheets	120
Consolidated Statements of Changes in Equity	122
Selected Operating Results	123
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis	124
Income Statements	130
Statements of Cash Flows	131
Balance Sheets	132
Statements of Changes in Common Equity	134
Selected Operating Results	135
Entergy New Orleans, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis	136
Consolidated Income Statements	142
Consolidated Statements of Cash Flows	143
Consolidated Balance Sheets	144
Consolidated Statements of Changes in Common Equity	146
Selected Operating Results	147
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis	148
Consolidated Income Statements	155
Consolidated Statements of Cash Flows	157
Consolidated Balance Sheets	158
Consolidated Statements of Changes in Common Equity	160
Selected Operating Results	161
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis	162
Income Statements	166
Statements of Cash Flows	167
Balance Sheets	168
Statements of Changes in Common Equity	170
Part II. Other Information
Item 1. Legal Proceedings	171
Item 1A. Risk Factors	171
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	171
Item 5. Other Information	172
Item 6. Exhibits	176
Signature	178

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FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):


•	resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;


•	long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;

•

regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;


•	changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice;


•	changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned potential or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;


•	resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;


•	the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities;


•	the operation and maintenance of Entergy’s nuclear generating facilities require the commitment of substantial human and capital resources that can result in increased costs and capital expenditures;


•	Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;


•	prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;


•	the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;


•	volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;

iii

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FORWARD-LOOKING INFORMATION (Concluded)


•	changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;


•	changes in environmental laws and regulations or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter, heat, and other regulated air and water emissions, and changes in costs of compliance with environmental laws and regulations;


•	the effects of changes in federal, state or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, or energy policies;


•	uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;


•	variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;


•	effects of climate change, including the potential for increases in sea levels or coastal land and wetland loss;


•	changes in the quality and availability of water supplies and the related regulation of water use and diversion;


•	Entergy’s ability to manage its capital projects and operation and maintenance costs;


•	Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;


•	the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize;


•	the effects of Entergy’s strategies to reduce tax payments;


•	changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions;


•	actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;


•	changes in inflation and interest rates;


•	the effect of litigation and government investigations or proceedings;


•	changes in technology, including with respect to new, developing, or alternative sources of generation;


•	the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;


•	Entergy’s ability to attract and retain talented management and directors;


•	changes in accounting standards and corporate governance;


•	declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;


•	future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;


•	changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;


•	the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by as early as 2021, including the implementation of the planned shutdown of Pilgrim, Palisades, Indian Point 2, and Indian Point 3;


•	the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;


•	factors that could lead to impairment of long-lived assets; and


•	the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, or divestitures, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.

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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:



Abbreviation or Acronym	Term

ALJ	Administrative Law Judge
ANO 1 and 2	Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC	Arkansas Public Service Commission
ASU	Accounting Standards Update issued by the FASB
Board	Board of Directors of Entergy Corporation
Cajun	Cajun Electric Power Cooperative, Inc.
capacity factor	Actual plant output divided by maximum potential plant output for the period
City Council	Council of the City of New Orleans, Louisiana
D.C. Circuit	U.S. Court of Appeals for the District of Columbia Circuit
DOE	United States Department of Energy
Entergy	Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation	Entergy Corporation, a Delaware corporation
Entergy Gulf States Louisiana	Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana	Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas	Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities	Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA	United States Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FitzPatrick	James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017
Form 10-K	Annual Report on Form 10-K for the calendar year ended December 31, 2016 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf	Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh	Gigawatt-hour(s), which equals one million kilowatt-hours
Independence	Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2	Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment

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DEFINITIONS (Continued)



Abbreviation or Acronym	Term

Indian Point 3	Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS	Internal Revenue Service
ISO	Independent System Operator
kW	Kilowatt, which equals one thousand watts
kWh	Kilowatt-hour(s)
LPSC	Louisiana Public Service Commission
MISO	Midcontinent Independent System Operator, Inc., a regional transmission organization
MMBtu	One million British Thermal Units
MPSC	Mississippi Public Service Commission
MW	Megawatt(s), which equals one thousand kilowatts
MWh	Megawatt-hour(s)
Net debt to net capital ratio	Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation	Installed capacity owned and operated
NRC	Nuclear Regulatory Commission
NYPA	New York Power Authority
Palisades	Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & Other	The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
Pilgrim	Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA	Purchased power agreement or power purchase agreement
PUCT	Public Utility Commission of Texas
Registrant Subsidiaries	Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend	River Bend Station (nuclear), owned by Entergy Louisiana
SEC	Securities and Exchange Commission
System Agreement	Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy	System Energy Resources, Inc.
TWh	Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement	Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility	Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies	Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas

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DEFINITIONS (Concluded)



Abbreviation or Acronym	Term

Vermont Yankee	Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014
Waterford 3	Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage	Electric usage excluding the effects of deviations from normal weather
White Bluff	White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas

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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.


•	The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.

•

The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.

Results of Operations

Second Quarter 2017 Compared to Second Quarter 2016

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 2017 to the second quarter 2016 showing how much the line item increased or (decreased) in comparison to the prior period:



	Utility			Entergy Wholesale Commodities			Parent & Other (a)			Entergy
	(In Thousands)
2nd Quarter 2016 Consolidated Net Income (Loss)		$380,317			$250,874			($58,601	)		$572,590

Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)	25,287			(42,793		)	(13		)	(17,519		)
Other operation and maintenance	27,323			33,768			(52		)	61,039
Asset write-offs, impairments, and related charges	—			186,602			—			186,602
Taxes other than income taxes	10,604			(6,687		)	98			4,015
Depreciation and amortization	8,833			6,100			(273		)	14,660
Other income	16,843			26,306			594			43,743
Interest expense	(9,259		)	(379		)	1,993			(7,645		)
Other expenses	3,928			10,986			—			14,914
Income taxes	134,636			(219,889		)	(2,886		)	(88,139		)

2nd Quarter 2017 Consolidated Net Income (Loss)		$246,382			$223,886			($56,900	)		$413,368


(a)	Parent & Other includes eliminations, which are primarily intersegment activity.

Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.

Second quarter 2017 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant and $194 million ($126 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 10 to the financial statements herein for additional discussion of the tax elections and “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

Second quarter 2016 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016:



	Amount
	(In Millions)
2016 net revenue		$1,524
Louisiana Act 55 financing savings obligation	16
Grand Gulf recovery	15
Retail electric price	14
Volume/weather	(18		)
Other	(2		)
2017 net revenue		$1,549

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The retail electric price variance is primarily due to:


•	the implementation of formula rate plan rates at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of January 2017;


•	the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and


•	an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

The retail electric price variance is partially offset by a decrease in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016, to reflect the effects of the termination of the System Agreement.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 1,068 GWh, or 4%, in billed electricity usage, including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016:



	Amount
	(In Millions)
2016 net revenue		$293
Nuclear volume	(74		)
FitzPatrick	(44		)
Nuclear realized price changes	57
Other	18
2017 net revenue		$250

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $43 million in the second quarter 2017 as compared to the second quarter 2016 primarily due to lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in second quarter 2017 as compared to second quarter 2016 and a decrease as a result of the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale. The decrease was partially offset by higher realized wholesale energy prices and higher capacity prices.

Following are key performance measures for Entergy Wholesale Commodities for the second quarter 2017 and 2016:



	2017	2016
Owned capacity (MW) (a)	3,962	4,880
GWh billed	6,019	7,866

Entergy Wholesale Commodities Nuclear Fleet
Capacity factor	59%	76%
GWh billed	5,393	7,308
Average energy and capacity revenue per MWh	$51.76	$42.34
Refueling outage days:
Indian Point 2	—	77
Indian Point 3	47	—
Pilgrim	43	—
Palisades	27	—

(a)

The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the FitzPatrick sale and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $582 million for the second quarter 2016 to $609 million for the second quarter 2017 primarily due to:

•

an increase of $18 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews; and


•	an increase of $8 million in transmission and distribution expenses due to higher vegetation maintenance costs in second quarter 2017 as compared to second quarter 2016.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes and local franchise taxes.

Other income increased primarily due to higher realized gains in second quarter 2017 as compared to second quarter 2016 on the decommissioning trust fund investments as a result of portfolio reallocations and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project.

Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $171 million for the second quarter 2016 to $204 million for the second quarter 2017 primarily due to the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million, and an increase of $28 million in severance and retention costs in the second quarter 2017 as compared to the second quarter 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale.

The asset write-offs, impairments, and related charges variance is primarily due to $194 million ($126 million net-of-tax) of impairment charges in the second quarter 2017 due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase in impairment charges in 2017 is primarily due to the impairment of the Indian Point and Palisades plants in fourth quarter 2016 and the timing of nuclear refueling outage spending for the Pilgrim plant. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale

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Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

Other income increased primarily due to higher realized gains in second quarter 2017 as compared to second quarter 2016 on the decommissioning trust fund investments primarily as a result of portfolio reallocations.

Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trust and decommissioning liability for the Indian Point 3 plant to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.

Income Taxes

The effective income tax rate was (442.1%) for the second quarter 2017. The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 10 to the financial statements herein for additional discussion of the tax elections.

The effective income tax rate was (76.9%) for the second quarter 2016. The difference in the effective income tax rate for the second quarter 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.

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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 showing how much the line item increased or (decreased) in comparison to the prior period:



	Utility			Entergy Wholesale Commodities			Parent & Other (a)			Entergy
	(In Thousands)
2016 Consolidated Net Income (Loss)		$579,968			$330,430			($102,566	)		$807,832

Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)	54,405			(14,889		)	(11		)	39,505
Other operation and maintenance	80,763			115,205			703			196,671
Asset write-offs, impairments, and related charges	—			391,033			—			391,033
Taxes other than income taxes	18,206			(8,008		)	391			10,589
Depreciation and amortization	25,283			2,587			(216		)	27,654
Gain on sale of assets	—			16,270			—			16,270
Other income	26,282			56,768			652			83,702
Interest expense	(13,233		)	(41		)	3,546			(9,728		)
Other expenses	10,339			41,654			—			51,993
Income taxes	125,292			(350,540		)	4,925			(220,323		)

2017 Consolidated Net Income (Loss)		$414,005			$196,689			($111,274	)		$499,420


(a)	Parent & Other includes eliminations, which are primarily intersegment activity.

Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.

Results of operations for the six months ended June 30, 2017 include $405 million ($263 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and Note 10 to the financial statements herein for additional discussion of the tax elections.

Results of operations for the six months ended June 30, 2016 include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

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Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016:



	Amount
	(In Millions)
2016 net revenue		$2,899
Retail electric price	45
Grand Gulf recovery	27
Louisiana Act 55 financing savings obligation	16
Volume/weather	(30		)
Other	(3		)
2017 net revenue		$2,954

The retail electric price variance is primarily due to:


•	an increase in base rates effective February 24, 2016 and the implementation of formula rate plan rates effective with the first billing cycle of January 2017 at Entergy Arkansas, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016;


•	an increase in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016;


•	the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT;


•	an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016; and


•	an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

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including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals and industrial gases industries and expansion projects primarily in the chemicals industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016:



	Amount
	(In Millions)
2016 net revenue		$759
Nuclear volume	(79		)
FitzPatrick	(72		)
Nuclear fuel expenses	37
FitzPatrick reimbursement agreement	98
Other	1
2017 net revenue		$744

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $15 million in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 primarily due to lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 and a decrease as a result of the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale. The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the Pilgrim and Palisades plants and related assets and an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon was reimbursing Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon in 2017 under the reimbursement agreement were offset in other operation and maintenance expenses and taxes other than income taxes and had no material effect on net income. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for further discussion of the reimbursement agreement.

Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2017 and 2016:



	2017	2016
Owned capacity (MW) (a)	3,962	4,880
GWh billed	14,382	17,112

Entergy Wholesale Commodities Nuclear Fleet
Capacity factor	71%	83%
GWh billed	13,228	15,996
Average energy and capacity revenue per MWh	$53.79	$49.85
Refueling outage days:
FitzPatrick	42	—
Indian Point 2	—	102
Indian Point 3	66	—
Pilgrim	43	—
Palisades	27	—

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(a)

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,096 million for the six months ended June 30, 2016 to $1,177 million for the six months ended June 30, 2017 primarily due to:

•

an increase of $18 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, and additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews;

•

the deferral in first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;


•	an increase of $11 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 and an increase in net periodic pension and other postretirement benefits costs as a result of lower discount rates;


•	an increase of $10 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017; and


•	an increase of $5 million in information technology expenses including software maintenance costs and upgrade projects.

Taxes other than income taxes increased primarily due to increases in local franchise taxes and ad valorem taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

Other income increased primarily due to higher realized gains in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments, including portfolio reallocations, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project.

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Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $384 million for the six months ended June 30, 2016 to $500 million for the six months ended June 30, 2017 primarily due to:

•

FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the sales and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sales agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses were offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;


•	the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and

•

an increase of $39 million in severance and retention costs in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale.

The asset write-offs, impairments, and related charges variance is primarily due to $405 million ($263 million net-of-tax) of impairment charges in the six months ended June 30, 2017 due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase in impairment charges in 2017 is primarily due to the impairment of the Indian Point and Palisades plants in fourth quarter 2016 and the timing of nuclear fuel spending and nuclear refueling outage spending for the Pilgrim plant. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

The gain on sale of assets resulted from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 13 to the financial statements herein for a discussion of the sale.

Other income increased primarily due to higher realized gains in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments as a result of portfolio reallocations and the increase in value from year-end realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA.

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2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA and the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.

Income Taxes

The effective income tax rate was (193.7%) for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant, which resulted in both permanent and temporary differences under the income tax accounting standards and the re-determined tax basis of the FitzPatrick plant as a result of its sale on March 31, 2017. See Note 10 to the financial statements herein for further discussion of the tax elections and the tax benefit associated with the sale of FitzPatrick.

The effective income tax rate was (15.6%) for the six months ended June 30, 2016. The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.

ANO Damage, Outage, and NRC Reviews

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.

Entergy Wholesale Commodities Exit from the Merchant Power Business

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Following are updates to that discussion.

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet of approximately $110 million in 2017, of which $66 million had been incurred as of June 30, 2017, and approximately $250 million from 2018 through the end of 2021. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $194 million for the three months ended June 30, 2017, and $405 million for the six months ended June 30, 2017. These costs are charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets, and expects to continue to charge these costs to expense as incurred over the remaining operating lives of the plants because Entergy expects the value of those plants to continue to be impaired.

In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition

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to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy. See Note 13 to the financial statements herein for further discussion of the sale of FitzPatrick. As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” in the Form 10-K for a discussion of the NRC operating licensing proceedings for Indian Point 2 and Indian Point 3 and the settlement reached with New York State. Following are updates to that discussion.

In accordance with the settlement with New York State, in March 2017 the New York State Department of State issued a concurrence with Indian Point’s new Coastal Zone Management Act (CZMA) consistency certification and, on Entergy’s motion, the U.S. District Court for the Northern District of New York dismissed Entergy’s appeal related to the initial Indian Point CZMA consistency certification. Also in March 2017 the Atomic Safety and Licensing Board of the NRC granted the motion of New York State and Riverkeeper to withdraw their pending contentions on the NRC license renewal application and terminated the proceedings. Subsequent to the issuance of the water quality certification and water discharge permit in January 2017 by the New York State Department of Environmental Conservation (NYSDEC), in April 2017 the NYSDEC updated its environmental analysis to reflect the early shutdown per the settlement agreement. Both the water quality certification and the CZMA concurrence were filed with the NRC in April 2017.

In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named.

Liquidity and Capital Resources

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy’s capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.



	June 30, 2017		December 31, 2016
Debt to capital	65.5	%	64.8	%
Effect of excluding securitization bonds	(0.8	%)	(1.0	%)
Debt to capital, excluding securitization bonds (a)	64.7	%	63.8	%
Effect of subtracting cash	(1.5	%)	(2.0	%)
Net debt to net capital, excluding securitization bonds (a)	63.2	%	61.8	%


(a)	Calculation excludes the Arkansas, Louisiana, New Orleans, and Texas securitization bonds, which are non-recourse to Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas, respectively.

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common

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shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2021. Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the six months ended June 30, 2017 was 2.38% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2017:

A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur. See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million, which expires in January 2018. As of June 30, 2017, $71 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the six months ended June 30, 2017 was 2.44% on the drawn portion of the facility. Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million, which expires in January 2018. As of June 30, 2017, there were no cash borrowings outstanding under the uncommitted credit facility. See Note 4 to the financial statements herein for additional discussion of the Vermont Yankee facilities.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. As of June 30, 2017, Entergy Corporation had $1.1 billion of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 2017 was 1.38%.

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital,” that sets forth the amounts of planned construction and other capital investments by operating segment for 2017 through 2019. Following are updates to the discussion.

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Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2020.

New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In July 2017 the Utility Committee of the City Council established a procedural schedule that provides for a hearing in December 2017 and the City Council’s decision in February 2018. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals.

Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017, parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Also in June 2017, the administrative law judge issued a proposed order and remanded the proceeding to the PUCT for final decision. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

Washington Parish Energy Center

In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 360 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with a hearing in March 2018.

Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its July 2017 meeting, the Board declared a dividend of $0.87 per share, which is the same quarterly dividend per share that Entergy has paid since the fourth quarter 2016.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2017 and 2016 were as follows:



	2017			2016
	(In Millions)
Cash and cash equivalents at beginning of period		$1,188			$1,351

Cash flow provided by (used in):
Operating activities	820			1,252
Investing activities	(1,770		)	(2,266		)
Financing activities	697			659
Net decrease in cash and cash equivalents	(253		)	(355		)

Cash and cash equivalents at end of period		$935			$996

Operating Activities

Net cash flow provided by operating activities decreased by $432 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:


•	an increase of $160 million in spending on nuclear refueling outages in 2017 as compared to the same period in 2016;


•	lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2017 as compared to the same period in 2016, as discussed above. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;


•	a decrease due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;


•	an increase of $94 million in severance and retention payments in 2017 as compared to the same period in 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” above and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; and


•	a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement and refund.

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Management's Financial Discussion and Analysis

The decrease was partially offset by:

•

income tax refunds of $15 million in 2017 compared to income tax payments of $85 million in 2016. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax audit;

•

a decrease of $76 million in interest paid in 2017 as compared to the same period in 2016 primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets; and


•	a decrease of $23 million in spending in 2017 as compared to the same period in 2016 on activities related to the decommissioning of Vermont Yankee, which ceased power production in December 2014.

Investing Activities

Net cash flow used in investing activities decreased $496 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the purchase of the Union Power Station for approximately $948 million in March 2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase and Note 13 to the financial statements herein for a discussion of the sale of FitzPatrick.

The decrease was partially offset by:

•

an increase of $425 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $251 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017, including the St. Charles Power Station project, an increase of $73 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017, and an increase of $61 million in distribution construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;


•	fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and


•	proceeds of $25 million received in 2017 compared to proceeds of $89 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

Financing Activities

Net cash flow provided by financing activities increased $38 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to an increase of $372 million in net issuances of commercial paper in 2017 compared to the same period in 2016.

The increase was partially offset by:


•	long-term debt activity providing approximately $170 million of cash in 2017 compared to providing approximately $437 million of cash in 2016. Included in the long-term debt activity is $475 million in 2017 and $595 million in 2016 for the repayment of borrowings on the Entergy Corporation long-term credit facility; and

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Management's Financial Discussion and Analysis


•	a decrease of $67 million in 2017 in short-term borrowings by the nuclear fuel company variable interest entities.

For the details of Entergy’s commercial paper program, the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K.

Rate, Cost-recovery, and Other Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Rate, Cost-recovery, and Other Regulation” in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.

State and Local Rate Regulation and Fuel-Cost Recovery

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.

Federal Regulation

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding federal regulatory proceedings.

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. Certain hedge volumes have price downside and upside relative to market price movement. The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of June 30, 2017 (2017 represents the remainder of the year):

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Entergy Wholesale Commodities Nuclear Portfolio



	2017	2018	2019	2020	2021
Energy
Percent of planned generation under contract (a):
Unit-contingent (b)	89%	76%	41%	—%	—%
Firm LD (c)	9%	7%	—%	—%	—%
Offsetting positions (d)	(9%)	(10%)	—%	—%	—%
Total	89%	73%	41%	—%	—%
Planned generation (TWh) (e) (f)	15.0	26.7	18.8	11.7	2.9
Average revenue per MWh on contracted volumes:
Minimum	$40.7	$35.9	$35.3	$—	$—
Expected based on market prices as of June 30, 2017	$40.7	$35.9	$35.3	$—	$—
Sensitivity: -/+ $10 per MWh market price change	$40.7-$40.8	$34.9-$36.9	$35.3	$—	$—

Capacity
Percent of capacity sold forward (g):
Bundled capacity and energy contracts (h)	24%	11%	—%	—%	—%
Capacity contracts (i)	41%	24%	14%	—%	—%
Total	65%	35%	14%	—%	—%
Planned net MW in operation (average) (f)	3,568	3,365	2,356	1,384	347
Average revenue under contract per kW per month (applies to capacity contracts only)	$8.5	$9.1	$10.5	$—	$—

Total Nuclear Energy and Capacity Revenues (j)
Expected sold and market total revenue per MWh	$47.4	$43.6	$43.9	$44.3	$50.0
Sensitivity: -/+ $10 per MWh market price change	$46.2-$48.6	$41.0-$46.3	$38.0-$49.8	$34.3-$54.3	$40.0-$60.0


(a)	Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are not classified as hedges are netted in the planned generation under contract.

(b)

Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.

(c)

Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised.


(d)	Transactions for the purchase of energy, generally to offset a Firm LD transaction.


(e)	Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch.

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Management's Financial Discussion and Analysis

(f)

Assumes the planned shutdown of Palisades on October 1, 2018, planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, and planned shutdown of Indian Point 3 on April 30, 2021, and reflects the sale of FitzPatrick in March 2017. Assumes NRC license renewals for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the Palisades, Pilgrim, Indian Point 2, and Indian Point 3 plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K. For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” above and in the Form 10-K.


(g)	Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.


(h)	A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.


(i)	A contract for the sale of an installed capacity product in a regional market.


(j)	Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $19 million for the remainder of 2017. As of June 30, 2016, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $50 million for the remainder of 2016. A negative $10 per MWh change in the annual average energy price in the markets based on June 30, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($17) million for the remainder of 2017. As of June 30, 2016, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($32) million for the remainder of 2016.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of credit support. At June 30, 2017, based on power prices at that time, Entergy had liquidity exposure of $116 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2017, Entergy would have been required to provide approximately $50 million of additional cash or letters of credit under some of the agreements. As of June 30, 2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $236 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.

As of June 30, 2017, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2021 is with counterparties or their guarantors that have public investment grade credit ratings.

Nuclear Matters

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.

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Management's Financial Discussion and Analysis

Indian Point

During the scheduled refueling and maintenance outage at Indian Point 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program that calls for an in-depth inspection of the reactor vessel. Inspections of more than 2,000 bolts in the reactor’s removable insert liner identified issues with roughly 11% of the bolts that required further analysis. Entergy replaced bolts as appropriate, and the unit returned to service in June 2016. In 2016, Entergy evaluated the scope and duration of Indian Point 3’s scheduled refueling outage planned for 2017, which began in March 2017. Based on the results of the 2016 evaluation and analysis, Entergy extended Indian Point 3’s planned 2017 outage duration. Entergy performed the same in-depth inspection of the reactor vessel at Indian Point 3 during Indian Point 3’s spring 2017 refueling and maintenance outage that it performed for Indian Point 2. Based on inspection data, Entergy replaced approximately the same number of bolts at Indian Point 3 that it replaced at Indian Point 2 before returning the plant to service in May 2017.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - New Accounting Pronouncements” in the Form 10-K for a discussion of new accounting pronouncements. Following are updates to that discussion.

As discussed in the Form 10-K, ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” is effective for Entergy for the first quarter 2018. Entergy has selected the modified retrospective transition method. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects will affect materially its results of operations, financial position, or cash flows. Entergy continues to monitor the development and finalization of industry-specific application guidance that could have an effect on this assessment.

In March 2017 the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for Entergy for the first quarter 2018. Entergy does not expect ASU 2017-07 to affect materially its results of operations, financial position, or cash flows.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)

	Three Months Ended						Six Months Ended
	2017			2016			2017			2016
	(In Thousands, Except Share Data)
OPERATING REVENUES
Electric		$2,271,220			$2,093,331			$4,262,960			$4,135,492
Natural gas	30,075			25,121			73,426			70,734
Competitive businesses	317,255			344,110			870,622			866,189
TOTAL	2,618,550			2,462,562			5,207,008			5,072,415

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	395,947			381,465			813,513			886,432
Purchased power	416,497			242,672			774,264			504,996
Nuclear refueling outage expenses	38,288			47,045			80,853			98,276
Other operation and maintenance	820,297			759,258			1,687,845			1,491,174
Asset write-offs, impairments, and related charges	193,571			6,969			405,362			14,329
Decommissioning	100,296			76,625			214,669			145,253
Taxes other than income taxes	153,264			149,249			309,616			299,027
Depreciation and amortization	350,328			335,668			697,593			669,939
Other regulatory charges (credits)	6,553			21,353			(78,749		)	22,512
TOTAL	2,475,041			2,020,304			4,904,966			4,131,938

Gain on sale of assets	—			—			16,270			—

OPERATING INCOME	143,509			442,258			318,312			940,477

OTHER INCOME
Allowance for equity funds used during construction	22,376			13,860			41,384			32,792
Interest and investment income	80,097			46,375			136,646			79,128
Miscellaneous - net	(6,872		)	(8,377		)	(1,371		)	(18,963		)
TOTAL	95,601			51,858			176,659			92,957

INTEREST EXPENSE
Interest expense	173,377			177,631			344,466			351,442
Allowance for borrowed funds used during construction	(10,523		)	(7,132		)	(19,565		)	(16,813		)
TOTAL	162,854			170,499			324,901			334,629

INCOME BEFORE INCOME TAXES	76,256			323,617			170,070			698,805

Income taxes	(337,112		)	(248,973		)	(329,350		)	(109,027		)

CONSOLIDATED NET INCOME	413,368			572,590			499,420			807,832

Preferred dividend requirements of subsidiaries	3,446			5,276			6,892			10,552

NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION		$409,922			$567,314			$492,528			$797,280

Earnings per average common share:
Basic		$2.28			$3.17			$2.75			$4.46
Diluted		$2.27			$3.16			$2.74			$4.45
Dividends declared per common share		$0.87			$0.85			$1.74			$1.70

Basic average number of common shares outstanding	179,475,346			178,808,149			179,405,592			178,693,342
Diluted average number of common shares outstanding	180,234,694			179,503,582			180,032,233			179,233,209

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)

	Three Months Ended						Six Months Ended
	2017			2016			2017			2016
	(In Thousands)

Net Income		$413,368			$572,590			$499,420			$807,832

Other comprehensive income (loss)
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $10,684, ($34,576), $10,325, and ($39,777))	19,949			(64,041		)	19,421			(73,547		)
Pension and other postretirement liabilities (net of tax expense of $5,839, $2,779, $12,216, and $3,037)	10,916			5,043			19,548			12,605
Net unrealized investment gains (net of tax expense of $2,870, $19,515, $42,164, and $37,873)	11,696			20,955			49,523			44,024
Foreign currency translation (net of tax benefit of $403, $487, $403, and $640)	(748		)	(904		)	(748		)	(1,188		)
Other comprehensive income (loss)	41,813			(38,947		)	87,744			(18,106		)

Comprehensive Income	455,181			533,643			587,164			789,726
Preferred dividend requirements of subsidiaries	3,446			5,276			6,892			10,552
Comprehensive Income Attributable to Entergy Corporation		$451,735			$528,367			$580,272			$779,174

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
	2017			2016
	(In Thousands)
OPERATING ACTIVITIES
Consolidated net income		$499,420			$807,832
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	1,042,671			1,012,753
Deferred income taxes, investment tax credits, and non-current taxes accrued	(324,227		)	(170,026		)
Asset write-offs, impairments, and related charges	220,828			14,329
Gain on sale of assets	(16,270		)	—
Changes in working capital:
Receivables	6,091			(57,673		)
Fuel inventory	6,213			9,586
Accounts payable	9,687			45,412
Taxes accrued	(2,202		)	7,056
Interest accrued	(3,947		)	(9,543		)
Deferred fuel costs	(127,945		)	3,757
Other working capital accounts	(91,505		)	(121,929		)
Changes in provisions for estimated losses	(7,340		)	1,533
Changes in other regulatory assets	62,612			109,700
Changes in other regulatory liabilities	(8,250		)	70,505
Changes in pensions and other postretirement liabilities	(180,346		)	(168,856		)
Other	(265,807		)	(302,356		)
Net cash flow provided by operating activities	819,683			1,252,080

INVESTING ACTIVITIES
Construction/capital expenditures	(1,719,712		)	(1,294,498		)
Allowance for equity funds used during construction	41,877			33,152
Nuclear fuel purchases	(209,756		)	(124,107		)
Payment for purchase of plant	—			(947,903		)
Proceeds from sale of assets	100,000			—
Insurance proceeds received for property damages	26,157			—
Changes in securitization account	10,028			13,239
Payments to storm reserve escrow account	(1,124		)	(805		)
Receipts from storm reserve escrow account	8,836			—
Decreases in other investments	1,705			57
Litigation proceeds for reimbursement of spent nuclear fuel storage costs	25,493			89,407
Proceeds from nuclear decommissioning trust fund sales	1,462,698			1,232,672
Investment in nuclear decommissioning trust funds	(1,516,406		)	(1,267,452		)
Net cash flow used in investing activities	(1,770,204		)	(2,266,238		)

See Notes to Financial Statements.

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10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-07
10-K	2017-12-31	Filed 2018-02-26
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2016-09-30	Filed 2016-11-04
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-26

8-K	2019-10-30
8-K	2019-08-14
8-K	2019-07-31
8-K	2019-06-28
8-K	2019-06-21
8-K	2019-05-01
8-K	2019-03-19
8-K	2019-02-20
8-K	2019-01-25
8-K	2018-11-20
8-K	2018-05-11

EX-10.A	exhibit10aq217.htm
EX-12.A	exhibit12aq217.htm
EX-12.B	exhibit12bq217.htm
EX-12.C	exhibit12cq217.htm
EX-12.D	exhibit12dq217.htm
EX-12.E	exhibit12eq217.htm
EX-12.F	exhibit12fq217.htm
EX-31.A	exhibit31aq217.htm
EX-31.B	exhibit31bq217.htm
EX-31.C	exhibit31cq217.htm
EX-31.D	exhibit31dq217.htm
EX-31.E	exhibit31eq217.htm
EX-31.F	exhibit31fq217.htm
EX-31.G	exhibit31gq217.htm
EX-31.H	exhibit31hq217.htm
EX-31.I	exhibit31iq217.htm
EX-31.J	exhibit31jq217.htm
EX-31.K	exhibit31kq217.htm
EX-31.L	exhibit31lq217.htm
EX-31.M	exhibit31mq217.htm
EX-31.N	exhibit31nq217.htm
EX-32.A	exhibit32aq217.htm
EX-32.B	exhibit32bq217.htm
EX-32.C	exhibit32cq217.htm
EX-32.D	exhibit32dq217.htm
EX-32.E	exhibit32eq217.htm
EX-32.F	exhibit32fq217.htm
EX-32.G	exhibit32gq217.htm
EX-32.H	exhibit32hq217.htm
EX-32.I	exhibit32iq217.htm
EX-32.J	exhibit32jq217.htm
EX-32.K	exhibit32kq217.htm
EX-32.L	exhibit32lq217.htm
EX-32.M	exhibit32mq217.htm
EX-32.N	exhibit32nq217.htm

Borrowings

Letters
of Credit

Capacity
Available

(In Millions)