Company Quick10K Filing
Entergy Arkansas
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

EAE 10Q Quarterly Report

Note 3. Equity (Entergy Corporation and Entergy Louisiana)
Note 5. Stock-Based Compensation (Entergy Corporation)
Note 9. Decommissioning Trust Funds (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
Note 10. Income Taxes (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Note 13. Dispositions (Entergy Corporation)
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part I, Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
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

Entergy Arkansas Earnings 2017-06-30

Balance SheetIncome StatementCash Flow

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

__________________________________________________________________________________________
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
 
 
 
 
 
 
 
 
__________________________________________________________________________________________







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.



ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2017

 
Page Number
 
 
Part 1. Financial Information
 
Entergy Corporation and Subsidiaries
 
Notes to Financial Statements
Entergy Arkansas, Inc. and Subsidiaries
 
Entergy Louisiana, LLC and Subsidiaries
 

i

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2017

 
Page Number
 
 
Entergy Mississippi, Inc.
 
Entergy New Orleans, Inc. and Subsidiaries
 
Entergy Texas, Inc. and Subsidiaries
 
System Energy Resources, Inc.
 
Part II.   Other Information
 


ii


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

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.


iv


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

v


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

vi


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


vii


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

1

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.

2

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.

3

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

4

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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.


5

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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.

6

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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.

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. 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.

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 551 GWh, or 1%, in billed electricity usage,

7

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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
 


8

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

(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.

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.


9

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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.

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 trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point

10

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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

11

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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

12

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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:
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500
 
$225
 
$6
 
$3,269

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.


13

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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

14

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.


15

Entergy Corporation and Subsidiaries
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

16

Entergy Corporation and Subsidiaries
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):

17

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.

18

Entergy Corporation and Subsidiaries
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.


19

Entergy Corporation and Subsidiaries
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.


20


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.
 
 
 
 
 
 
 

21





























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22


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.
 
 
 
 
 
 
 



23


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.
 
 
 
 

24