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 March 31, 20162017 |
| | 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) 9425 Pinecroft10055 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) Echelon One
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 Rþ 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 registrant was required to submit and post such files). Yes Rþ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “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 registrant has 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 Rþ
|
| | |
| Common Stock Outstanding | | Outstanding at April 29, 201628, 2017 |
| Entergy Corporation | ($0.01 par value) | 178,740,867179,465,897 |
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, 2015,2016, 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
March 31, 20162017
|
| |
| | Page Number |
| | |
| |
| |
| Part 1. Financial Information | |
| Entergy Corporation and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| |
| Notes to Financial Statements | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Entergy Arkansas, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| Entergy Louisiana, LLC and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| |
Entergy Mississippi, Inc. | |
| |
| |
| |
| |
| |
| |
Entergy New Orleans, Inc. and Subsidiaries | |
| |
| |
| |
| |
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 20162017
|
| |
| | Page Number |
| | |
| |
| |
| Entergy Mississippi, Inc. | |
| |
| |
| |
| |
| |
| |
| Entergy New Orleans, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| Entergy Texas, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| System Energy Resources, Inc. | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
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;
the termination of Entergy Arkansas’s participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement, which occurred in November 2015,long-term risks and the termination of Entergy Texas’s, Entergy New Orleans’s, and Entergy Louisiana’s participation in the System Agreement, which will occur on August 31, 2016, and will result inuncertainties associated with the termination of the System Agreement in its entirety pursuant2016, including the potential absence of federal authority to a settlement agreement approved by FERC in December 2015;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’ move toparticipation in MISO, which occurred in December 2013, 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;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;
FORWARD-LOOKING INFORMATION (Concluded)
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;
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 tax, and other laws and regulations or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, thermal energy,particulate matter, heat, and other regulated air and water emissions, and changes in costs of compliance with environmental and other 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;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 those affecting the availability ofas they affect access to capital and Entergy’s ability to refinance existing debt,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, including increased security costs,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;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 FitzPatrick and the related decommissioning of those plants and Vermont Yankee;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 merger, acquisition,strategic transactions Entergy may undertake, including mergers, acquisitions, or divestiture plans,divestitures, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture,any such strategic transaction, and the success of the business following a merger, acquisition, or divestiture.any such strategic transaction.
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below: |
| |
| Abbreviation or Acronym | Term |
AFUDC | Allowance for Funds Used During Construction |
| 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 |
ASLB | Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes |
| 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 or 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, Inc. | Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas |
| 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 (EWC) | 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, 20152016 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries |
FTR | Financial transmission right |
| Grand Gulf | Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy |
DEFINITIONS (continued)
|
| |
Abbreviation or Acronym | Term |
| 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 |
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 |
RTO | Regional transmission organization |
| 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. Entergy ArkansasThe agreement terminated its participation in the System Agreement effective December 18, 2013. Entergy Mississippi terminated its participation in the System Agreement effective November 7, 2015.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 |
DEFINITIONS (concluded)
|
| |
Abbreviation or Acronym | Term |
| 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 Gulf States Louisiana (prior to the completion of the business combination with Entergy Louisiana), Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
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 |
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
First Quarter 2017 Compared to First Quarter 2016
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 20162017 to the first quarter 20152016 showing how much the line item increased or (decreased) in comparison to the prior period:
| | | | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) | | (In Thousands) |
| 2015 Consolidated Net Income (Loss) | |
| $227,750 |
| |
| $123,432 |
| |
| ($48,253 | ) | |
| $302,929 |
| |
| 2016 Consolidated Net Income (Loss) | | |
| $199,651 |
| |
| $79,557 |
| |
| ($43,966 | ) | |
| $235,242 |
|
| | | | | | | | | | | | | | | | | |
| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | (35,427 | ) | | (60,318 | ) | | (9 | ) | | (95,754 | ) | | 29,119 |
| | 27,906 |
| | (2 | ) | | 57,023 |
|
| Other operation and maintenance | | (41,278 | ) | | 1,335 |
| | 1,748 |
| | (38,195 | ) | | 53,442 |
| | 81,437 |
| | 752 |
| | 135,631 |
|
| Asset write-offs, impairments, and related charges | | — |
| | 7,361 |
| | — |
| | 7,361 |
| | — |
| | 204,430 |
| | — |
| | 204,430 |
|
| Taxes other than income taxes | | (6,461 | ) | | (973 | ) | | (311 | ) | | (7,745 | ) | | 7,602 |
| | (1,320 | ) | | 293 |
| | 6,575 |
|
| Depreciation and amortization | | 8,619 |
| | (6,156 | ) | | (176 | ) | | 2,287 |
| | 16,450 |
| | (3,514 | ) | | 56 |
| | 12,992 |
|
| Gain on sale of assets | | | — |
| | 16,270 |
| | — |
| | 16,270 |
|
| Other income | | (8,300 | ) | | (20,530 | ) | | (923 | ) | | (29,753 | ) | | 9,440 |
| | 30,459 |
| | 61 |
| | 39,960 |
|
| Interest expense | | 966 |
| | 188 |
| | 2,755 |
| | 3,909 |
| | (3,974 | ) | | 338 |
| | 1,554 |
| | (2,082 | ) |
| Other expenses | | 5,941 |
| | (20,852 | ) | | — |
| | (14,911 | ) | | 6,411 |
| | 30,668 |
| | 1 |
| | 37,080 |
|
| Income taxes | | 16,585 |
| | (17,876 | ) | | (9,235 | ) | | (10,526 | ) | | (9,344 | ) | | (130,651 | ) | | 7,813 |
| | (132,182 | ) |
| | | | | | | | | | | | | | | | | |
| 2016 Consolidated Net Income (Loss) | |
| $199,651 |
| |
| $79,557 |
| |
| ($43,966 | ) | |
| $235,242 |
| |
| 2017 Consolidated Net Income (Loss) | | |
| $167,623 |
| |
| ($27,196 | ) | |
| ($54,376 | ) | |
| $86,051 |
|
| |
| (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.
First quarter 2017 results of operations includes $212 million ($138 million net-of-tax) of impairment charges due to costs being charged directly to expense 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $1,410 |
|
Volume/weather | (46 | ) |
Retail electric price | 23 |
|
Other | (12 | ) |
| 2016 net revenue |
| $1,375 |
|
| Retail electric price | 37 |
|
| Opportunity sales | 8 |
|
| Volume/weather | (17 | ) |
| Other | 1 |
|
| 2017 net revenue |
| $1,404 |
|
The volume/weather variance is primarily due to a decrease of 849 GWh, or 3%, in billed electricity usage primarily due to the effect of less favorable weather on residential and commercial sales. The decrease is partially offset by an increase in industrial usage, primarily due to increased growth for new and expansion customers as well as existing customers, primarily in the petroleum refining industry.
The retail electric price variance is primarily due to to:
an increase in base rates and the implementation of formula rate plan rates at Entergy Arkansas, as approved by the APSC. The new base rates were effective February 24, 2016 and began billing with2016. A significant portion of the first billing cyclebase rate increase was related to the purchase of AprilPower Block 2 of the Union Power Station in March 2016. The increase includes an interim baseformula rate adjustment surcharge,plan rates were effective with the first billing cycle of AprilJanuary 2017;
an increase in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of March 2016, to recovercollect the incrementalestimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016;
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the period February 24,City Council, effective with the first billing cycle of March 2016, throughprimarily related to the purchase of Power Block 1 of the Union Power Station in March 31,2016; and
an increase in revenues at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.
See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the first quarter 2016 to the first quarter 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $527 |
|
Nuclear realized price changes | (78 | ) |
Rhode Island State Energy Center | (15 | ) |
Nuclear volume | 12 |
|
Nuclear fuel expenses | 21 |
|
Other | (1 | ) |
2016 net revenue |
| $466 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $61 million in the first quarter 2016 as compared to the first quarter 2015 primarily due to lower realized wholesale energy prices and lower capacity prices and as a result of the sale of the Rhode Island State Energy Center in December 2015. The decrease was partially offset by higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer unplanned outage days in the first quarter 2016 as compared to the first quarter 2015, and a decrease in nuclear fuel expenses related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets in the third and fourth quarters of 2015.proceedings. See Note 114 to the financial statements in the Form 10-K for discussion of the impairments.Union Power Station purchase.
The opportunity sales variance results from the estimated net revenue effect recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements in the Form 10-K for further discussion of the opportunity sales proceeding.
The volume/weather variance is primarily due to a decrease of 517 GWh, or 2%, in billed electricity usage, partially offset by 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, partially offset by a decrease in usage by existing customers primarily in the petroleum refining industry.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the first quarter 2017 to the first quarter 2016:
|
| | | |
| Amount |
| (In Millions) |
| 2016 net revenue |
| $466 |
|
| FitzPatrick reimbursement agreement | 98 |
|
| Nuclear realized price changes | (65 | ) |
| Other | (5 | ) |
| 2017 net revenue |
| $494 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities increased by $28 million in the first quarter 2017 as compared to the first quarter 2016 primarily due to an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon is 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 the first quarter 2017 under the reimbursement agreement are offset in other operation and maintenance expenses and taxes other than income taxes and have 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. The increase was partially offset by lower realized wholesale energy prices.
Following are key performance measures for Entergy Wholesale Commodities for the first quarter 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
Owned capacity (MW) (a)(b) | 4,880 | | 5,463 | 4,800 | | 4,880 |
| GWh billed | 9,246 | | 9,592 | 8,363 | | 9,246 |
| Average revenue per MWh | $56.47 | | $67.00 | |
| | | |
| Entergy Wholesale Commodities Nuclear Fleet | | |
| Capacity factor | 90% | | 90% | 80% | | 90% |
| GWh billed | 8,688 | | 8,618 | 7,835 | | 8,688 |
| Average revenue per MWh | $57.43 | | $65.78 | |
| Refueling Outage Days: | | |
| Average energy and capacity revenue per MWh | | $55.15 | | $56.16 |
| Refueling outage days: | | |
| FitzPatrick | | 42 | | — |
| Indian Point 2 | 25 | | — | — | | 25 |
| Indian Point 3 | — | | 23 | 19 | | — |
| |
| (a) | The reduction in owned capacity is due to theEntergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 14 to the 583financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale. |
| |
| (b) | Includes the 838 MW Rhode Island State Energy CenterFitzPatrick plant, which was sold to Exelon in December 2015.March 2017. See Note 13 to the financial statements herein for discussion of the FitzPatrick sale. |
Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants” in the Form 10-K for a discussion of the effects of sustained low natural gas prices and power market structure challenges on market prices for electricity over the past few years in the power regions where the Entergy Wholesale Commodities power plants are located. As shown in the contracted sale of energy table in “Market and Credit Risk Sensitive Instruments,” Entergy Wholesale Commodities has sold forward 88% of its planned nuclear energy output for 2016 for an expected average contracted energy price of $40 per MWh based on market prices at March 31, 2016. In addition, Entergy Wholesale Commodities has sold forward 63% of its planned nuclear energy output for 2017 for an expected average contracted energy price of $46 per MWh based on market prices at March 31, 2016.
The market price trend presents a challenging economic situation for the Entergy Wholesale Commodities plants. The severity of the challenge varies for each of the plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs. In addition, currently the market design under which the plants operate does not adequately compensate merchant nuclear plants for their environmental and fuel diversity benefits in the region.
In October 2015, Entergy determined that it will close the Pilgrim and FitzPatrick plants. The decisions to shut down the plants were primarily due to the poor market conditions that have led to reduced revenues, the poor market design that fails to properly compensate nuclear generators for the benefits they provide, and increased operational costs. The Pilgrim plant is expected to cease operations on May 31, 2019. The FitzPatrick plant is expected to shut down at the end of its current fuel cycle, which is planned for January 27, 2017.
Entergy previously shut down Vermont Yankee in 2014, and, after the closures of Pilgrim and FitzPatrick, will have two remaining nuclear power generating facilities in operation in the Entergy Wholesale Commodities business, Indian Point and Palisades. Unlike the three facilities that Entergy has decided to shut down, Indian Point is a multi-unit site with both Indian Point 2 and 3 in operation that sells power at NYISO Zone G, which is a key supply region for New York City. In addition, Indian Point 2 (1,028 MW) and 3 (1,041 MW) are significantly larger plants than Vermont Yankee (605 MW), Pilgrim (688 MW), or FitzPatrick (838 MW). The Indian Point plants, however, are currently involved and face opposition in extensive licensing proceedings, which are described in “Entergy Wholesale
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Commodities Authorizations to Operate Its Nuclear Power Plants” in the Form 10-K and herein. Palisades (811 MW) is similar in size to FitzPatrick, is also a single-unit site, and the MISO market in which it operates has also experienced market price declines over the past few years. At this time, most of the Palisades output is sold under a 15-year power purchase agreement, entered at the plant’s acquisition in 2007, that expires in 2022. The power purchase agreement prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022.
In 2015, Entergy recorded impairment and other related charges to write down the carrying values of the FitzPatrick, Pilgrim, and Palisades plants and related assets to their fair values. Impairment of long-lived assets and nuclear decommissioning costs, and the factors that influence these items, are both discussed in the Form 10-K in “MANAGMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates.” If economic conditions or regulatory activity no longer support the continued operation of Indian Point or Palisades for their expected lives or no longer support the recovery of the costs of the plants, it could adversely affect Entergy’s results of operations through loss of revenue, impairment charges, increased depreciation rates, transitional costs, or accelerated decommissioning costs.
Other Income Statement Items
Utility
Other operation and maintenance expenses decreasedincreased from $555 million for the first quarter 2015 to $514 million for the first quarter 2016 to $568 million for the first quarter 2017 primarily due to:
a decrease of $22 millionthe deferral in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages infirst quarter 2016 as compared to the same period in 2015;
the deferral of $8 million of previously-incurred costs related to ANO post-Fukushima compliance and $10 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;
a decreasean increase of $15$10 million in compensation and benefits costs primarily due to a decreaserevision to estimated incentive compensation expense in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
first quarter 2016;a decrease of $6 million in energy efficiency costs, including the effects of true-ups.
The decrease was partially offset by an increase of $27$8 million in nuclearfossil-fueled generation expenses primarily due to the purchase of Union Power Station in March 2016 and an overall higher scope of work performed during plant outages in 2017 as compared to the same period in 2016; and
an increase of $7 million in loss provisions.
Also, an increase in nuclear generation expenses due to additional training and initiatives to support management’s operational goals at Grand Gulf was offset by a decrease in regulatory compliance costs and higher nuclear labor costs, including contract labor.costs. The increasedecrease in regulatory compliance costs is primarily related to additional NRC inspection activities in the first quarter 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.reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” below.in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the Grand Gulf outage.
Depreciation and amortization expenses increased primarily due to additions to plant in service.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 decreasedincreased primarily due to lowerhigher realized gains in first quarter 2017 as compared to first quarter 2016 on the decommissioning trust fund investments in 2016 as compared to the same period in 2015.investments.
Entergy Wholesale Commodities
Other income decreasedoperation and maintenance expenses increased from $214 million for the first quarter 2016 to $295 million for the first quarter 2017 primarily due to lower realized gains on decommissioning trust fund investmentsFitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being charged directly to other operation and maintenance expenses as a result of the reimbursement agreement Entergy entered into with Exelon and an increase in 2016severance and retention costs in the first quarter 2017 as compared to the same periodfirst quarter 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being charged directly to other operation and maintenance expenses as a result of the reimbursement agreement Entergy entered into with Exelon are offset by revenue and have no effect on net income. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in 2015, which included realized decommissioning trust gains that resulted from portfolio reallocationsthe Form 10-K for a discussion of management’s strategy to reduce the Vermont Yankee nuclear decommissioning trust funds.size of the Entergy Wholesale Commodities’ merchant fleet. 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 asset write-offs, impairments, and related charges variance is primarily due to $212 million ($138 million net-of-tax) of impairment charges in the first quarter 2017 due to costs being charged directly to expense as a result of
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other expenses decreasedthe 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. 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 first quarter 2017 as compared to first quarter 2016 on the decommissioning trust fund investments, including 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 herein and Note 16 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 2, Indian Point 3, 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 FitzPatrick, Pilgrim,Indian Point 3, Indian Point 2, and Palisades plants and related assets in the third and fourth quarters of 2015.assets. See Note 114 to the financial statements in the Form 10-K for discussion of the impairments.impairments and related charges.
Income Taxes
The effective income tax rate was 8.3% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to the re-determined tax basis of the FitzPatrick plant as a result of the sale on March 31, 2017 and book and tax differences related to the allowance for equity funds used during construction, partially offset by a write-off of a stock-based compensation deferred tax asset, state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions. See Note 10 to the financial statements herein for further discussion of the tax benefit associated with the sale of FitzPatrick and the write-off of the stock-based compensation deferred tax asset.
The effective income tax rate was 37.3% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 33.2% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized taxANO Damage, Outage, and interest computations for the 2006-2007 audit from the IRS, partially offset by certain bookNRC Reviews
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -ANO Damage, Outage, and tax differences related to utility plant items. See Note 3 to the financial statementsNRC Reviews” in the Form 10-K for a discussion of the 2006-2007 audit.ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 $24 million had been incurred as of March 31, 2017, and approximately $225 million from 2018 through the end of 2021. In addition, Entergy Wholesale Commodities incurred $212 million of impairment charges in the first quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged directly to expense 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 charge these costs directly to expense over the remaining operating lives of the plants.
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 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 on March 31, 2017, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit.
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 licenseslicensing proceedings for Indian Point 2 and Indian Point 3 and the NRC license renewal joint application in process for these plants.settlement reached with New York State. Following are updatesis an update to that discussion.
Indian Point NRC/ASLB Proceedings
In May 2016accordance with the NRCsettlement with New York State, in March 2017 the New York State Department of State issued a decision sustaining New York State’s appeal of the ASLB’s November 2013 Track 1 decision upholding the adequacy of Severe Accident Mitigation Alternatives (SAMA) decommissioning cost estimates. The NRC directed its staff to supplement its SAMA analysis to include sensitivity runs for two inputs to SAMA decommissioning costs. Since SAMA analysis is part of the NRC’s environmental impact analysis, and not part of its safety analysis, further supplementation of the NRC’s Final Supplemental Environmental Impact Statement will be required,concurrence with attendant impact on the schedule for completion of proceedings before the NRC. One SAMA appeal from Track 1 remains to be decided.
Indian PointPoint’s new Coastal Zone Management Act Proceedings
As discussed in the Form 10-K, in January 2016, Entergy filed suit in(CZMA) consistency certification and, on Entergy’s motion, the U.S. District Court for the Northern District of New York challengingdismissed 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’s objectionConservation (NYSDEC), in April 2017 the NYSDEC updated its environmental analysis to Entergy’s withdrawn Coastal Zone Management Act consistency certification on federal preemption grounds. Entergy’s complaint requests a determination thatreflect the objection, which cites nuclear safety concerns, is preempted and thus invalid. The New York State Department of State filed a motion to dismiss Entergy’s lawsuit in March 2016, and Entergy filed its response in May 2016.
ANO Damage, Outage, and NRC Reviews
See Note 8 toearly shutdown per the financial statements in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $19.6 million was incurred in the first quarter 2016, in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016.settlement agreement.
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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is primarily due to the net issuance of long-term debt in 2016.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 60.9 | % | | 59.1 | % | 65.4 | % | | 64.8 | % |
| Effect of excluding securitization bonds | (1.2 | %) | | (1.4 | %) | (1.0 | %) | | (1.0 | %) |
| Debt to capital, excluding securitization bonds (a) | 59.7 | % | | 57.7 | % | 64.4 | % | | 63.8 | % |
| Effect of subtracting cash | (1.9 | %) | | (2.7 | %) | (1.7 | %) | | (2.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 57.8 | % | | 55.0 | % | 62.7 | % | | 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 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 and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2020.2021. 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 0.275%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 three months ended March 31, 20162017 was 2.35%2.29% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2016:2017:
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $616 | | $7 | | $2,877 | | $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 entered intohas a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million which expires in January 2018. In the first quarter 2016, Entergy Nuclear Vermont Yankee increased the borrowing capacity of its credit facility to $100 million. As of March 31, 2016, $612017, $58 million in cash borrowings were outstanding under the credit facility. Entergy Nuclear Vermont Yankee also entered intohas an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. As of
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
March 31, 2016,2017, 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 March 31, 2016,2017, Entergy Corporation had $578 million$1.1 billion of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20162017 was 1.14%1.33%.
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 20162017 through 2018.2019. Following are updates to the discussion.
St.Lake Charles Power Station
In August 2015,November 2016, Entergy Louisiana filed an application with the LPSC an application seeking certification that the public necessityconvenience and conveniencenecessity would be served by the construction of the St.Lake Charles Power Station, a nominal 980 megawatt994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Little GypsyNelson plant in St.Calcasieu Parish. The current estimated cost of the Lake Charles Parish, Louisiana.Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. Testimony has beenwas filed by LPSC staff and intervenors, withan intervenor. The LPSC staff concludingtestimony concludes that the construction of the project serves the public convenience and necessity. Three intervenors contendThe intervenor contends that Entergy Louisiana has not established that construction of the project isa need for Lake Charles Power Station in the public interest, claiming thatproposed timeframe (2020 commercial operation date) and presents questions regarding the RFP excluded considerationscope and timing of certain resources that could be more cost effective, that the RFP provided undue preference to the self-build option,generation deactivations and that a 30-year capacity commitment is not warranted by current supply conditions.needs. The RFPrequest for proposal independent monitor also filed testimony and a report affirming that the St.Lake Charles Power Station resource was selected through an objective and fair request for proposal that showed no undue preference to any proposal. A procedural schedule has been issued, with an evidentiary hearing scheduled for May 2017. Subject to timely approval by the LPSC and 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. The current estimated cost of the New Orleans Power Station is $216 million. Subject to timely approval by the City Council and receipt of other permits and approvals, commercial operation is estimated to occur by late-2019. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In February 2017, Entergy New Orleans filed a motion to temporarily suspend the procedural schedule to allow for further analysis regarding its proposal, and that motion was granted. A status conference was held in March 2017 wherein the hearing officer suspended the procedural schedule until Entergy New Orleans files a supplemental and amending application, currently expected to occur in second quarter 2017. In April 2017, Entergy New Orleans filed a status report with the City Council advising that it was in the process of conducting additional analyses regarding generation needed to meet the future electricity needs of New Orleans and stating that it expects to include in the supplemental and amending application a request for approval of either the original New Orleans Power Station combustion turbine or an alternative proposal for an approximately 126 MW unit, as well as a commitment to pursue up to 100 MW of renewable resources to serve New Orleans.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 RFPrequest for proposal that showed no undue preference to any proposal. AnDiscovery has commenced, and a procedural schedule has been established for this proceeding, including an evidentiary hearing was held in May 2017. In March 2017 an intervenor filed direct testimony generally opposing certification of Montgomery County Power Station and proposed certain conditions if the certification is to be granted. In April 20162017, Entergy Texas and subjectthe independent monitor filed rebuttal testimony in accordance with the procedural schedule. A PUCT decision regarding the application is expected by October 2017, pursuant to regulatorya Texas statute requiring the PUCT to issue a certificate of convenience and necessity within 366 days of the filing. Subject to timely approval by the LPSCPUCT and receipt of other permits and approvals, full notice to proceed is expected to be issued in Summer 2016. Commercialcommercial operation is estimated to occur by Summer 2019. 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 is expected to be completed in 2021. Subject to relevant regulatory approvals, Entergy Louisiana will purchase the plant once it is complete.
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 Entergy’s 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 April 20162017 meeting, the Board declared a dividend of $0.85$0.87 per share.share, which is the same quarterly dividend per share that Entergy paid in the fourth quarter 2016.
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Cash and cash equivalents at beginning of period |
| $1,351 |
| |
| $1,422 |
|
| $1,188 |
| |
| $1,351 |
|
| | | | | | | |
| Cash flow provided by (used in): | |
| | |
| |
| | |
|
| Operating activities | 533 |
| | 611 |
| 529 |
| | 533 |
|
| Investing activities | (1,878 | ) | | (700 | ) | (812 | ) | | (1,878 | ) |
| Financing activities | 1,086 |
| | (152 | ) | 178 |
| | 1,086 |
|
| Net decrease in cash and cash equivalents | (259 | ) | | (241 | ) | (105 | ) | | (259 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $1,092 |
| |
| $1,181 |
|
| $1,083 |
| |
| $1,092 |
|
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreased $78was relatively unchanged, decreasing by $4 million, for the three months ended March 31, 20162017 compared to the three months ended March 31, 2015 primarily due to:2016. Significant operating cash flow activities included:
lower Entergy Wholesale Commodities net revenuesa decrease due to the timing of recovery of fuel and purchased power costs in 20162017 as compared to the same period in 2015,2016. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
a refund to customers in January 2017 of approximately $71 million as discussed previously;
an increasea result of $41 million in spending in 2016 on activitiesthe settlement approved by the LPSC related to the decommissioningWaterford 3 replacement steam generator project. See Note 2 to the financial statements in the Form 10-K for discussion of Vermont Yankee, which ceased power productionthe settlement and refund;
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in December 2014; and
an increase of $48 million in interest paid in 20162017 as compared to the same period in 20152016, 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 of $73 million in interest paid in 2017 as compared to the same period in 2016 primarily due to an an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets, partially offset by a decrease in interest paid in 2016 on the Grand Gulf sale-leaseback obligation.assets. See Note 1110 to the financial statements hereinin the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets, and see Note 10 to the financial statements in the Form 10-K for detailsassets;
income tax refunds of the Grand Gulf sale-leaseback obligation.
The decrease was partially offset by spending of $52$18 million in 2015 related2017 compared to Vermont Yankee, including the severance and retention payments accrued in 2014 and defueling activities that took place after the plant ceased power production in December 2014, and a decrease in income tax payments of $40$26 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 primarily related to the final settlementeffect of amounts outstanding associated with the 2006-2007 IRS audit paidand for jurisdictions that do not have net operating loss carryovers or jurisdictions in 2015.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.audit;
a decrease of $28 million in spending on activities related to the decommissioning of Vermont Yankee, which ceased power production in December 2014; and
proceeds of $23 million received in first quarter 2017 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Investing Activities
Net cash flow used in investing activities decreased $1,066 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 primarily due to:
the purchase of the Union Power Station for approximately $948 million in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase;
the deposit in March 2016 of $197 million held in trust as a result of the issuance by the Louisiana Public Facilities Authority of $83.68 million of 3.375% pollution control refunding revenue bonds and $115 million of 3.50% pollution control refunding revenue bonds; and
proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 13 to the financial statements herein for a discussion of the sale.
The decrease was partially offset by an increase of $158 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 $114 million in fossil-fueled generation construction expenditures primarily due to spending on the St. Charles Power Station project in 2017 and an increase of $27 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to the same period in 2016.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
InvestingFinancing Activities
Net cash flow used in investingprovided by financing activities increased $1,178decreased $908 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 2015 primarily due to:
the purchase of Union Power Station for approximately $948 million. See Note 13 to the financial statements for discussion of the Union purchase;
the deposit of $197 million held in trust as a result of the issuance by Louisiana Public Facilities Authority of $83.680 million of 3.375% pollution control refunding revenue bonds and $115 million of 3.50% pollution control refunding revenue bonds in March 2016. In April 2016 these funds were used to redeem $83.680 million of 5.0% pollution control refunding revenue bonds due September 2028 and $115 million of 5.0% pollution control refunding revenue bonds due June 2030; and
an increase in construction expenditures primarily due to an overall higher scope of work on various projects in 2016 as compared to the same period in 2015, partially offset by a decrease in spending related to compliance with NRC post-Fukushima requirements.
The increase was partially offset by a $71 million NYPA value sharing payment in 2015. See Note 15 to the financial statements in the Form 10-K for further discussion of Entergy’s NYPA value sharing agreements.
Financing Activities
Entergy’s financing activities provided $1,086long-term debt activity using approximately $575 million of cash for the three months ended March 31, 2016in 2017 compared to using $152 million of cash for the three months ended March 31, 2015 primarily due to:
long-term debt activity providing approximately $966 million of cash in 2016 compared to using approximately $197 million of cash in 2015.2016. Included in the long-term debt activity is $475 million in 2017 and $219 million in 2016 and $187 million in 2015 for the repayment of borrowings on the Entergy Corporation long-term credit facility;
facility. The decrease was partially offset by an increase of $116$588 million in 2016net issuances of commercial paper in 2017 compared to the same period in 2016 and a decreasenet increase of $68$48 million in 20152017 in short-term borrowings by the nuclear fuel company variable interest entities;
net issuances of $156 million of commercial paper in 2016 compared to net issuances of $278 million of commercial paper in 2015; and
$25 million of common stock repurchased in 2015.entities.
For the details of Entergy’s commercial paper program, and the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt see Note 4 to the financial statements herein. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for details of long-term debt.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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Rate, Cost-recovery, and Other Regulation - Federal Regulation”Note 2 to the financial statements herein for updates to the discussion in the Form 10-K for a discussion ofregarding federal regulatory proceedings. The following is an update to that discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy’s Integration Into the MISO Regional Transmission Organization
As discussed in the Form 10-K, in January 2013, Occidental Chemical Corporation filed with the FERC a petition for declaratory judgment and complaint against MISO alleging that MISO’s proposed treatment of Qualifying Facilities (QFs) in the Entergy region is unduly discriminatory in violation of sections 205 and 206 of the Federal Power Act and violates the Public Utility Regulatory Policies Act (PURPA) and the FERC’s implementing regulations. In April 2016 the FERC denied Occidental’s complaint against MISO and found that MISO’s treatment of QFs in Entergy’s service territories is consistent with the requirements of PURPA and does not violate sections 205 and 206 of the Federal Power Act. In February 2014, Occidental also filed a petition for enforcement with the FERC against the LPSC. Occidental’s petition for enforcement alleges that the LPSC’s January 2014 order, which approved Entergy Louisiana’s application for modification of Entergy’s methodology for calculating avoided cost rates paid to QFs, is inconsistent with the requirements of PURPA and the FERC’s regulations implementing PURPA. In April 2014 the FERC issued a “Notice Of Intent Not To Act At This Time” with respect to Occidental’s petition for enforcement against the LPSC. The FERC concluded that Occidental’s petition for enforcement largely raises the same issues as those raised in the January 2013 complaint and petition for declaratory order that Occidental filed against MISO, and that the two proceedings should be addressed at the same time. The FERC reserved its ability to issue a further order or to take further action at a future date should it find that doing so is appropriate. In April 2016 the FERC reviewed its earlier “Notice of Intent Not to Act as This Time” and issued another notice declining to initiate an enforcement action against the LPSC. In January 2016, in a separate proceeding, the FERC issued an order granting the Utility operating companies’ petition to terminate the requirement that they enter into new obligations or contracts with QFs with net capacity in excess of 20 MW, including Occidental’s Taft QF, effective October 2015. The FERC denied without prejudice the petition as it relates to Dow Chemical Company’s Plaquemine QF. In April 2016 the FERC denied Occidental’s request for rehearing of the order granting the Utility operating companies’ petition to terminate the QF purchase requirement for QFs with net capacity in excess of 20 MW and affirmed that Occidental failed to rebut the presumption that its Taft QF has non-discriminatory access to the MISO markets.
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 March 31, 2016 (20162017 (2017 represents the remainder of the year):
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Nuclear Portfolio
| | | | | 2016 | | 2017 | | 2018 | | 2019 | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 |
| Energy | | |
| Percent of planned generation under contract (a): | | |
| Unit-contingent (b) | | 67% | | 53% | | 21% | | 26% | | 86% | | 68% | | 20% | | —% | | —% |
| Firm LD (c) | | 42% | | 10% | | —% | | —% | | 10% | | 5% | | —% | | —% | | —% |
| Offsetting positions (d) | | (21%) | | —% | | —% | | —% | | (10%) | | (10%) | | —% | | —% | | —% |
| Total | | 88% | | 63% | | 21% | | 26% | | 86% | | 63% | | 20% | | —% | | —% |
| Planned generation (TWh) (e) (f) | | 25 | | 28 | | 29 | | 26 | | 19.9 | | 26.7 | | 18.8 | | 11.7 | | 2.9 |
| Average revenue per MWh on contracted volumes: | | |
| Minimum | | $40 | | $46 | | $56 | | $57 | | $40.5 | | $35.9 | | $37.8 | | $— | | $— |
| Expected based on market prices as of March 31, 2016 | | $40 | | $46 | | $56 | | $57 | |
| Expected based on market prices as of March 31, 2017 | | | $40.5 | | $35.9 | | $37.8 | | $— | | $— |
| Sensitivity: -/+ $10 per MWh market price change | | $40-$42 | | $46-$47 | | $56 | | $57 | | $40.5-$40.6 | | $34.8-$37.1 | | $37.8 | | $— | | $— |
| | | |
| Capacity | | |
| Percent of capacity sold forward (g): | | |
| Bundled capacity and energy contracts (h) | | 17% | | 22% | | 22% | | 25% | | 22% | | 10% | | —% | | —% | | —% |
| Capacity contracts (i) | | 25% | | 20% | | 20% | | 9% | | 28% | | 23% | | 12% | | —% | | —% |
| Total | | 42% | | 42% | | 42% | | 34% | | 50% | | 33% | | 12% | | —% | | —% |
| Planned net MW in operation (f) | | 4,406 | | 3,568 | | 3,568 | | 3,167 | |
| 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) | | $3.4 | | $5.6 | | $9.4 | | $11.1 | | $5.8 | | $9.4 | | $11.1 | | $— | | $— |
| | | |
| Total Nuclear Energy and Capacity Revenues (j) | | |
| Expected sold and market total revenue per MWh | | $44 | | $50 | | $48 | | $49 | | $49.6 | | $43.9 | | $44.6 | | $45.1 | | $51.3 |
| Sensitivity: -/+ $10 per MWh market price change | | $41-$47 | | $46-$54 | | $40-$56 | | $42-$56 | | $48.7-$50.7 | | $40.3-$47.6 | | $36.6-$52.6 | | $35.1-$55.1 | | $41.3-$61.3 |
| |
| (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. |
| |
(f) | Assumes NRC license renewals for plants with NRC license renewal applications in process. Assumes shutdown of FitzPatrick on January 27, 2017, shutdown of Pilgrim on May 31, 2019, and uninterrupted normal operation |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
at remaining plants. NRC license renewal applications are in process 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 shutdown of the FitzPatrick and Pilgrim plants, see Note 1 to the financial statements | |
| (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 PPA,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 March 31, 20162017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $79$22 million for the remainder of 2016.2017. As of March 31, 2015,2016, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $82$79 million for the remainder of 2015.2016. A negative $10 per MWh change in the annual average energy price in the markets based on March 31, 20162017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($69)19) million for the remainder of 2016.2017. As of March 31, 2015,2016, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($44)69) million for the remainder of 2015.2016.
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 March 31, 2016,2017, based on power prices at that time, Entergy had liquidity exposure of $136$130 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $5$7 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 March 31, 2016,2017, Entergy would have been required to provide approximately $50$56 million of additional cash or letters of credit under some of the agreements. As of March 31, 2016,2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $81$234 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.
As of March 31, 2016,2017, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 20192021 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 are updatesis an update to that discussion.
See “ANO Damage, Outage, and NRC Reviews”above for discussion of the NRC’s decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix, and the resulting significant additional NRC inspection activities at the ANO site.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
See Note 1 to the financial statements herein for discussion of the NRC’s decision in September 2015 to place Pilgrim in Column 4 of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures.Indian Point
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear performance improvement plan. That plan has not been fully developed, but it may result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear performance improvement plan, and an estimate of the costs associated with this plan cannot be made at this time.
Indian Point 2 outage
During the scheduled refueling and maintenance outage at Indian Point Unit 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program whichthat calls for an in-depth inspection of the reactor vessel. Inspections of more than 2,000 bolts in the reactor'sreactor’s removable insert liner identified issues with roughly 11% of the bolts that required further analysis. Entergy is replacing thereplaced bolts as necessaryappropriate, and expects that the replacement effort will extendunit returned to service in June 2016. In 2016, Entergy evaluated the outage into June 2016scope and increase costs associated with the outage. The additional costs will be accounted for as deferred refueling outage costs and amortized over the plant’s subsequent fuel cycle. The increase in the deferred refueling outage balance is expected to increase outage amortization expense in 2016, 2017, and 2018. In addition to the higher costs, Entergy will lose net revenue due to the plant being offline. Entergy estimates the negative effect on earnings to be approximately $60 million pre-tax during 2016. This estimate is subject to change depending upon final costs incurred, the restart date of the plant, and prices that would have been received for the saleduration of Indian Point 2’s power.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 is performing 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 is replacing approximately the same number of bolts at Indian Point 3 that it replaced at Indian Point 2. Entergy currently expects Indian Point 3 to be back online by the end of 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.
In February 2016As discussed in the FASB issuedForm 10-K, ASU No. 2016-02, “Leases2014-09, “Revenue from Contracts with Customers (Topic 842).606)” The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires that the assets and liabilities related to all leases with a term greater than 12 months must be recorded on the balance sheet. ASU 2016-02 is effective for Entergy for the first quarter 2019. Entergy2018. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects that ASU 2016-02 will affect materially its financial position by increasing the assets and liabilities recorded relating to its operating leases. Entergy is evaluating the ASU for other effects on the results of operations, financial position, andor 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 20162017 the FASB issued ASU No. 2016-09,2017-07, “Compensation - Stock CompensationRetirement Benefits (Topic 718)715): Improvements to Employee Share-Based Payment Accounting.Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU seeksrequires entities to simplify several aspectsreport the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the accounting for share-based payment transactions, includingsame 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 tax consequences, classificationstatement separately from the service cost component and outside a subtotal of awards as either equity or liabilities, and classification onincome from operations. In addition, the statementASU allows only the service cost component of cash flows. The statementnet benefit cost to be eligible for capitalization. ASU 2017-07 is effective beginning in 2017 andfor Entergy expects thatfor the first quarter 2018. Entergy does not expect ASU 2016-09 will prospectively increase the volatility of income tax expense related2017-07 to share-based payments. Entergy is evaluating the ASU for other effects on theaffect materially its results of operations, financial position, andor cash flows.
|
| | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | |
| | 2016 | | 2015 |
| | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | |
| Electric |
| $2,042,160 |
| |
| $2,217,989 |
|
| Natural gas | 45,613 |
| | 59,511 |
|
| Competitive businesses | 522,079 |
| | 642,590 |
|
| TOTAL | 2,609,852 |
| | 2,920,090 |
|
| | | | |
| OPERATING EXPENSES | | | |
| Operation and Maintenance: | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 504,967 |
| | 630,453 |
|
| Purchased power | 262,323 |
| | 342,023 |
|
| Nuclear refueling outage expenses | 51,230 |
| | 64,870 |
|
| Other operation and maintenance | 731,915 |
| | 770,110 |
|
| Asset write-offs, impairments, and related charges | 7,361 |
| | — |
|
| Decommissioning | 68,628 |
| | 69,899 |
|
| Taxes other than income taxes | 149,778 |
| | 157,523 |
|
| Depreciation and amortization | 334,273 |
| | 331,986 |
|
| Other regulatory charges | 1,159 |
| | 10,457 |
|
| TOTAL | 2,111,634 |
| | 2,377,321 |
|
| | | | |
| OPERATING INCOME | 498,218 |
| | 542,769 |
|
| | | | |
| OTHER INCOME | | | |
| Allowance for equity funds used during construction | 18,932 |
| | 11,738 |
|
| Interest and investment income | 32,753 |
| | 68,133 |
|
| Miscellaneous - net | (10,587 | ) | | (9,020 | ) |
| TOTAL | 41,098 |
| | 70,851 |
|
| | | | |
| INTEREST EXPENSE | | | |
| Interest expense | 173,811 |
| | 166,337 |
|
| Allowance for borrowed funds used during construction | (9,682 | ) | | (6,117 | ) |
| TOTAL | 164,129 |
| | 160,220 |
|
| | | | |
| INCOME BEFORE INCOME TAXES | 375,187 |
| | 453,400 |
|
| | | | |
| Income taxes | 139,945 |
| | 150,471 |
|
| | | | |
| CONSOLIDATED NET INCOME | 235,242 |
| | 302,929 |
|
| | | | |
| Preferred dividend requirements of subsidiaries | 5,276 |
| | 4,879 |
|
| | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION |
| $229,966 |
| |
| $298,050 |
|
| | | | |
| Earnings per average common share: | | | |
| Basic |
| $1.29 |
| |
| $1.66 |
|
| Diluted |
| $1.28 |
| |
| $1.65 |
|
| Dividends declared per common share |
| $0.85 |
| |
| $0.83 |
|
| | | | |
| Basic average number of common shares outstanding | 178,578,536 |
| | 179,658,981 |
|
| Diluted average number of common shares outstanding | 178,976,380 |
| | 180,480,523 |
|
| | | | |
| See Notes to Financial Statements. | | | |
|
| | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | |
| | 2016 | | 2015 |
| | (In Thousands) |
| | | | |
| Net Income |
| $235,242 |
| |
| $302,929 |
|
| | | |
| Other comprehensive income (loss) | | | |
| Cash flow hedges net unrealized loss | | | |
| (net of tax benefit of $5,201 and $15,898) | (9,506 | ) | | (29,330 | ) |
| Pension and other postretirement liabilities | | | |
| (net of tax expense of $258 and $3,715) | 7,562 |
| | 8,448 |
|
| Net unrealized investment gains | | | |
| (net of tax expense of $18,358 and $3,666) | 23,069 |
| | 4,003 |
|
| Foreign currency translation | | | |
| (net of tax benefit of $153 and $296) | (284 | ) | | (551 | ) |
| Other comprehensive income (loss) | 20,841 |
| | (17,430 | ) |
| | | |
| Comprehensive Income | 256,083 |
| | 285,499 |
|
| Preferred dividend requirements of subsidiaries | 5,276 |
| | 4,879 |
|
| Comprehensive Income Attributable to Entergy Corporation |
| $250,807 |
| |
| $280,620 |
|
| | | | |
| See Notes to Financial Statements. | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | |
| $235,242 |
| |
| $302,929 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 500,248 |
| | 526,008 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 75,415 |
| | 95,732 |
|
| Asset write-offs, impairments, and related charges | | 7,361 |
| | — |
|
| Changes in working capital: | | | | |
| Receivables | | 76,532 |
| | 22,288 |
|
| Fuel inventory | | (9,089 | ) | | (22,553 | ) |
| Accounts payable | | (67,364 | ) | | (153,700 | ) |
| Taxes accrued | | (15,996 | ) | | (67,941 | ) |
| Interest accrued | | (27,535 | ) | | (42,551 | ) |
| Deferred fuel costs | | 97,566 |
| | 81,271 |
|
| Other working capital accounts | | (95,291 | ) | | (90,619 | ) |
| Changes in provisions for estimated losses | | (3,968 | ) | | 1,334 |
|
| Changes in other regulatory assets | | 56,047 |
| | 93,082 |
|
| Changes in other regulatory liabilities | | 18,735 |
| | 15,857 |
|
| Changes in pensions and other postretirement liabilities | | (89,046 | ) | | (52,509 | ) |
| Other | | (226,036 | ) | | (97,670 | ) |
| Net cash flow provided by operating activities | | 532,821 |
| | 610,958 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (636,011 | ) | | (532,958 | ) |
| Allowance for equity funds used during construction | | 19,107 |
| | 13,077 |
|
| Nuclear fuel purchases | | (85,819 | ) | | (96,392 | ) |
| Payment for purchase of plant | | (947,778 | ) | | — |
|
| Insurance proceeds received for property damages | | — |
| | 12,745 |
|
| Changes in securitization account | | (1,399 | ) | | (251 | ) |
| NYPA value sharing payment | | — |
| | (70,790 | ) |
| Payments to storm reserve escrow account | | (367 | ) | | (1,865 | ) |
| Decrease (increase) in other investments | | (196,509 | ) | | 278 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 729,414 |
| | 492,841 |
|
| Investment in nuclear decommissioning trust funds | | (758,665 | ) | | (516,564 | ) |
| Net cash flow used in investing activities | | (1,878,027 | ) | | (699,879 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | |
| Electric | |
| $1,991,740 |
| |
| $2,042,160 |
|
| Natural gas | | 43,351 |
| | 45,613 |
|
| Competitive businesses | | 553,367 |
| | 522,079 |
|
| TOTAL | | 2,588,458 |
| | 2,609,852 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 417,566 |
| | 504,967 |
|
| Purchased power | | 357,768 |
| | 262,323 |
|
| Nuclear refueling outage expenses | | 42,564 |
| | 51,230 |
|
| Other operation and maintenance | | 867,546 |
| | 731,915 |
|
| Asset write-offs, impairments, and related charges | | 211,791 |
| | 7,361 |
|
| Decommissioning | | 114,374 |
| | 68,628 |
|
| Taxes other than income taxes | | 156,353 |
| | 149,778 |
|
| Depreciation and amortization | | 347,265 |
| | 334,273 |
|
| Other regulatory charges (credits) | | (85,302 | ) | | 1,159 |
|
| TOTAL | | 2,429,925 |
| | 2,111,634 |
|
| | | | | |
| Gain on sale of assets | | 16,270 |
| | — |
|
| | | | | |
| OPERATING INCOME | | 174,803 |
| | 498,218 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 19,008 |
| | 18,932 |
|
| Interest and investment income | | 56,549 |
| | 32,753 |
|
| Miscellaneous - net | | 5,501 |
| | (10,587 | ) |
| TOTAL | | 81,058 |
| | 41,098 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 171,089 |
| | 173,811 |
|
| Allowance for borrowed funds used during construction | | (9,042 | ) | | (9,682 | ) |
| TOTAL | | 162,047 |
| | 164,129 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 93,814 |
| | 375,187 |
|
| | | | | |
| Income taxes | | 7,763 |
| | 139,945 |
|
| | | | | |
| CONSOLIDATED NET INCOME | | 86,051 |
| | 235,242 |
|
| | | | | |
| Preferred dividend requirements of subsidiaries | | 3,446 |
| | 5,276 |
|
| | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | |
| $82,605 |
| |
| $229,966 |
|
| | | | | |
| Earnings per average common share: | | | | |
| Basic | |
| $0.46 |
| |
| $1.29 |
|
| Diluted | |
| $0.46 |
| |
| $1.28 |
|
| Dividends declared per common share | |
| $0.87 |
| |
| $0.85 |
|
| | | | | |
| Basic average number of common shares outstanding | | 179,335,063 |
| | 178,578,536 |
|
| Diluted average number of common shares outstanding | | 179,842,053 |
| | 178,976,380 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 2,869,808 |
| | 488,065 |
|
| Treasury stock | | 5,787 |
| | 23,156 |
|
| Retirement of long-term debt | | (1,903,670 | ) | | (685,258 | ) |
| Repurchase of common stock | | — |
| | (25,078 | ) |
| Changes in credit borrowings and commercial paper - net | | 271,730 |
| | 210,012 |
|
| Other | | (644 | ) | | (9,320 | ) |
| Dividends paid: | | | | |
| Common stock | | (151,839 | ) | | (149,257 | ) |
| Preferred stock | | (5,276 | ) | | (4,879 | ) |
| Net cash flow provided by (used in) financing activities | | 1,085,896 |
| | (152,559 | ) |
| | | | |
| Net decrease in cash and cash equivalents | | (259,310 | ) | | (241,480 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 1,350,961 |
| | 1,422,026 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $1,091,651 |
| |
| $1,180,546 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $251,305 |
| |
| $203,786 |
|
| Income taxes | |
| $26,382 |
| |
| $65,919 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| | | | | |
| Net Income | |
| $86,051 |
| |
| $235,242 |
|
| | | | |
| Other comprehensive income | | | | |
| Cash flow hedges net unrealized loss (net of tax benefit of $359 and $5,201) | | (528 | ) | | (9,506 | ) |
| Pension and other postretirement liabilities (net of tax expense of $6,377 and $258) | | 8,632 |
| | 7,562 |
|
| Net unrealized investment gains (net of tax expense of $39,294 and $18,358) | | 37,827 |
| | 23,069 |
|
| Foreign currency translation (net of tax benefit of $153) | | — |
| | (284 | ) |
| Other comprehensive income | | 45,931 |
| | 20,841 |
|
| | | | |
| Comprehensive Income | | 131,982 |
| | 256,083 |
|
| Preferred dividend requirements of subsidiaries | | 3,446 |
| | 5,276 |
|
| Comprehensive Income Attributable to Entergy Corporation | |
| $128,536 |
| |
| $250,807 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $81,624 |
| |
| $63,497 |
|
| Temporary cash investments | | 1,010,027 |
| | 1,287,464 |
|
| Total cash and cash equivalents | | 1,091,651 |
| | 1,350,961 |
|
| Accounts receivable: | | | | |
| Customer | | 559,584 |
| | 608,491 |
|
| Allowance for doubtful accounts | | (41,377 | ) | | (39,895 | ) |
| Other | | 170,771 |
| | 178,364 |
|
| Accrued unbilled revenues | | 304,446 |
| | 321,940 |
|
| Total accounts receivable | | 993,424 |
| | 1,068,900 |
|
| Deferred fuel costs | | 28,296 |
| | — |
|
| Fuel inventory - at average cost | | 226,898 |
| | 217,810 |
|
| Materials and supplies - at average cost | | 873,679 |
| | 873,357 |
|
| Deferred nuclear refueling outage costs | | 245,623 |
| | 211,512 |
|
| Prepayments and other | | 541,624 |
| | 344,872 |
|
| TOTAL | | 4,001,195 |
| | 4,067,412 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 4,653 |
| | 4,341 |
|
| Decommissioning trust funds | | 5,451,729 |
| | 5,349,953 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 221,431 |
| | 219,999 |
|
| Other | | 490,232 |
| | 468,704 |
|
| TOTAL | | 6,168,045 |
| | 6,042,997 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 46,578,818 |
| | 44,467,159 |
|
| Property under capital lease | | 610,590 |
| | 952,465 |
|
| Natural gas | | 396,687 |
| | 392,032 |
|
| Construction work in progress | | 1,426,671 |
| | 1,456,735 |
|
| Nuclear fuel | | 1,302,903 |
| | 1,345,422 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 50,315,669 |
| | 48,613,813 |
|
| Less - accumulated depreciation and amortization | | 21,333,661 |
| | 20,789,452 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 28,982,008 |
| | 27,824,361 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 776,370 |
| | 775,528 |
|
| Other regulatory assets (includes securitization property of $689,885 as of March 31, 2016 and $714,044 as of December 31, 2015) | | 4,647,907 |
| | 4,704,796 |
|
| Deferred fuel costs | | 238,951 |
| | 238,902 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 121,700 |
| | 54,903 |
|
| Other | | 620,534 |
| | 561,610 |
|
| TOTAL | | 6,782,634 |
| | 6,712,911 |
|
| | | | | |
| TOTAL ASSETS | |
| $45,933,882 |
| |
| $44,647,681 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | |
| $86,051 |
| |
| $235,242 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 531,373 |
| | 500,248 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 16,497 |
| | 75,415 |
|
| Asset write-offs, impairments, and related charges | | 145,026 |
| | 7,361 |
|
| Gain on sale of assets | | (16,270 | ) | | — |
|
| Changes in working capital: | | | | |
| Receivables | | 156,201 |
| | 76,532 |
|
| Fuel inventory | | 6,465 |
| | (9,089 | ) |
| Accounts payable | | (47,682 | ) | | (67,364 | ) |
| Taxes accrued | | (58,832 | ) | | (15,996 | ) |
| Interest accrued | | (13,921 | ) | | (27,535 | ) |
| Deferred fuel costs | | (7,389 | ) | | 97,566 |
|
| Other working capital accounts | | (7,324 | ) | | (95,291 | ) |
| Changes in provisions for estimated losses | | (4,031 | ) | | (3,968 | ) |
| Changes in other regulatory assets | | 47,497 |
| | 56,047 |
|
| Changes in other regulatory liabilities | | (18,324 | ) | | 18,735 |
|
| Changes in pensions and other postretirement liabilities | | (86,430 | ) | | (89,046 | ) |
| Other | | (199,514 | ) | | (226,036 | ) |
| Net cash flow provided by operating activities | | 529,393 |
| | 532,821 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (794,448 | ) | | (636,011 | ) |
| Allowance for equity funds used during construction | | 19,254 |
| | 19,107 |
|
| Nuclear fuel purchases | | (137,613 | ) | | (85,819 | ) |
| Payment for purchase of plant | | — |
| | (947,778 | ) |
| Proceeds from sale of assets | | 100,000 |
| | — |
|
| Insurance proceeds received for property damages | | 20,909 |
| | — |
|
| Changes in securitization account | | (963 | ) | | (1,399 | ) |
| Payments to storm reserve escrow account | | (480 | ) | | (367 | ) |
| Receipts from storm reserve escrow account | | 8,836 |
| | — |
|
| Increase in other investments | | (10,377 | ) | | (196,509 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 25,493 |
| | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 513,750 |
| | 729,414 |
|
| Investment in nuclear decommissioning trust funds | | (556,161 | ) | | (758,665 | ) |
| Net cash flow used in investing activities | | (811,800 | ) | | (1,878,027 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $796,732 |
| |
| $214,374 |
|
| Notes payable and commercial paper | | 766,079 |
| | 494,348 |
|
| Accounts payable | | 888,349 |
| | 1,071,798 |
|
| Customer deposits | | 423,564 |
| | 419,407 |
|
| Taxes accrued | | 194,081 |
| | 210,077 |
|
| Interest accrued | | 167,030 |
| | 194,565 |
|
| Deferred fuel costs | | 361,897 |
| | 235,986 |
|
| Obligations under capital leases | | 2,762 |
| | 2,709 |
|
| Pension and other postretirement liabilities | | 62,789 |
| | 62,513 |
|
| Other | | 176,065 |
| | 184,181 |
|
| TOTAL | | 3,839,348 |
| | 3,089,958 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 8,467,757 |
| | 8,306,865 |
|
| Accumulated deferred investment tax credits | | 231,610 |
| | 234,300 |
|
| Obligations under capital leases | | 26,290 |
| | 27,001 |
|
| Other regulatory liabilities | | 1,433,632 |
| | 1,414,898 |
|
| Decommissioning and asset retirement cost liabilities | | 4,808,315 |
| | 4,790,187 |
|
| Accumulated provisions | | 456,698 |
| | 460,727 |
|
| Pension and other postretirement liabilities | | 3,098,036 |
| | 3,187,357 |
|
| Long-term debt (includes securitization bonds of $751,595 as of March 31, 2016 and $774,696 as of December 31, 2015) | | 13,500,140 |
| | 13,111,556 |
|
| Other | | 392,924 |
| | 449,856 |
|
| TOTAL | | 32,415,402 |
| | 31,982,747 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 318,185 |
| | 318,185 |
|
| | | | | |
| SHAREHOLDERS' EQUITY | | | | |
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2016 and in 2015 | | 2,548 |
| | 2,548 |
|
| Paid-in capital | | 5,384,762 |
| | 5,403,758 |
|
| Retained earnings | | 9,472,040 |
| | 9,393,913 |
|
| Accumulated other comprehensive income | | 29,792 |
| | 8,951 |
|
| Less - treasury stock, at cost (76,031,187 shares in 2016 and 76,363,763 shares in 2015) | | 5,528,195 |
| | 5,552,379 |
|
| TOTAL | | 9,360,947 |
| | 9,256,791 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $45,933,882 |
| |
| $44,647,681 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 236,198 |
| | 2,869,808 |
|
| Treasury stock | | 2,448 |
| | 5,787 |
|
| Retirement of long-term debt | | (811,690 | ) | | (1,903,670 | ) |
| Changes in credit borrowings and commercial paper - net | | 908,378 |
| | 271,730 |
|
| Other | | 1,810 |
| | (644 | ) |
| Dividends paid: | | | | |
| Common stock | | (156,073 | ) | | (151,839 | ) |
| Preferred stock | | (3,446 | ) | | (5,276 | ) |
| Net cash flow provided by financing activities | | 177,625 |
| | 1,085,896 |
|
| | | | |
| Net decrease in cash and cash equivalents | | (104,782 | ) | | (259,310 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 1,187,844 |
| | 1,350,961 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $1,083,062 |
| |
| $1,091,651 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $178,134 |
| |
| $251,305 |
|
| Income taxes | |
| ($18,044 | ) | |
| $26,382 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2014 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,497,526 | ) | |
| $5,375,353 |
| |
| $10,169,657 |
| |
| ($42,307 | ) | |
| $10,101,725 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 4,879 |
| | — |
| | — |
| | — |
| | 298,050 |
| | — |
| | 302,929 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (17,430 | ) | | (17,430 | ) |
| Common stock repurchases | — |
| | — |
| | (25,078 | ) | | — |
| | — |
| | — |
| | (25,078 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 43,632 |
| | (23,663 | ) | | — |
| | — |
| | 19,969 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (149,257 | ) | | — |
| | (149,257 | ) |
| Preferred dividend requirements of subsidiaries (a) | (4,879 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (4,879 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2015 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,478,972 | ) | |
| $5,351,690 |
| |
| $10,318,450 |
| |
| ($59,737 | ) | |
| $10,227,979 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $2,548 |
| |
| ($5,552,379 | ) | |
| $5,403,758 |
| |
| $9,393,913 |
| |
| $8,951 |
| |
| $9,256,791 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 5,276 |
| | — |
| | — |
| | — |
| | 229,966 |
| | — |
| | 235,242 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 20,841 |
| | 20,841 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 24,184 |
| | (18,996 | ) | | — |
| | — |
| | 5,188 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (151,839 | ) | | — |
| | (151,839 | ) |
| Preferred dividend requirements of subsidiaries (a) | (5,276 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (5,276 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,528,195 | ) | |
| $5,384,762 |
| |
| $9,472,040 |
| |
| $29,792 |
| |
| $9,360,947 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2016 and 2015 include $5.3 million and $3.2 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $60,868 |
| |
| $129,579 |
|
| Temporary cash investments | | 1,022,194 |
| | 1,058,265 |
|
| Total cash and cash equivalents | | 1,083,062 |
| | 1,187,844 |
|
| Accounts receivable: | | | | |
| Customer | | 512,225 |
| | 654,995 |
|
| Allowance for doubtful accounts | | (12,524 | ) | | (11,924 | ) |
| Other | | 134,223 |
| | 158,419 |
|
| Accrued unbilled revenues | | 339,219 |
| | 368,677 |
|
| Total accounts receivable | | 973,143 |
| | 1,170,167 |
|
| Deferred fuel costs | | 117,971 |
| | 108,465 |
|
| Fuel inventory - at average cost | | 173,135 |
| | 179,600 |
|
| Materials and supplies - at average cost | | 681,267 |
| | 698,523 |
|
| Deferred nuclear refueling outage costs | | 160,550 |
| | 146,221 |
|
| Prepayments and other | | 208,363 |
| | 193,448 |
|
| TOTAL | | 3,397,491 |
| | 3,684,268 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 198 |
| | 198 |
|
| Decommissioning trust funds | | 6,669,326 |
| | 5,723,897 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 243,683 |
| | 233,641 |
|
| Other | | 451,715 |
| | 469,664 |
|
| TOTAL | | 7,364,922 |
| | 6,427,400 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 45,385,925 |
| | 45,191,216 |
|
| Property under capital lease | | 619,135 |
| | 619,527 |
|
| Natural gas | | 418,862 |
| | 413,224 |
|
| Construction work in progress | | 1,594,449 |
| | 1,378,180 |
|
| Nuclear fuel | | 998,013 |
| | 1,037,899 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 49,016,384 |
| | 48,640,046 |
|
| Less - accumulated depreciation and amortization | | 20,843,031 |
| | 20,718,639 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 28,173,353 |
| | 27,921,407 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 764,266 |
| | 761,280 |
|
| Other regulatory assets (includes securitization property of $576,351 as of March 31, 2017 and $600,996 as of December 31, 2016) | | 4,719,430 |
| | 4,769,913 |
|
| Deferred fuel costs | | 239,149 |
| | 239,100 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 115,134 |
| | 117,885 |
|
| Other | | 167,289 |
| | 1,606,009 |
|
| TOTAL | | 6,382,440 |
| | 7,871,359 |
|
| | | | | |
| TOTAL ASSETS | |
| $45,318,206 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $333,709 |
| |
| $364,900 |
|
| Notes payable and commercial paper | | 1,323,390 |
| | 415,011 |
|
| Accounts payable | | 1,149,498 |
| | 1,285,577 |
|
| Customer deposits | | 403,842 |
| | 403,311 |
|
| Taxes accrued | | 122,282 |
| | 181,114 |
|
| Interest accrued | | 173,308 |
| | 187,229 |
|
| Deferred fuel costs | | 104,920 |
| | 102,753 |
|
| Obligations under capital leases | | 2,721 |
| | 2,423 |
|
| Pension and other postretirement liabilities | | 73,317 |
| | 76,942 |
|
| Other | | 192,056 |
| | 180,836 |
|
| TOTAL | | 3,879,043 |
| | 3,200,096 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 7,561,382 |
| | 7,495,290 |
|
| Accumulated deferred investment tax credits | | 224,338 |
| | 227,147 |
|
| Obligations under capital leases | | 23,573 |
| | 24,582 |
|
| Other regulatory liabilities | | 1,554,605 |
| | 1,572,929 |
|
| Decommissioning and asset retirement cost liabilities | | 6,078,576 |
| | 5,992,476 |
|
| Accumulated provisions | | 477,281 |
| | 481,636 |
|
| Pension and other postretirement liabilities | | 2,953,206 |
| | 3,036,010 |
|
| Long-term debt (includes securitization bonds of $637,342 as of March 31, 2017 and $661,175 as of December 31, 2016) | | 13,927,204 |
| | 14,467,655 |
|
| Other | | 378,624 |
| | 1,121,619 |
|
| TOTAL | | 33,178,789 |
| | 34,419,344 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 203,185 |
| | 203,185 |
|
| | | | | |
| SHAREHOLDERS' EQUITY | | | | |
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2017 and in 2016 | | 2,548 |
| | 2,548 |
|
| Paid-in capital | | 5,398,079 |
| | 5,417,245 |
|
| Retained earnings | | 8,122,103 |
| | 8,195,571 |
|
| Accumulated other comprehensive income (loss) | | 10,960 |
| | (34,971 | ) |
| Less - treasury stock, at cost (75,319,784 shares in 2017 and 75,623,363 shares in 2016) | | 5,476,501 |
| | 5,498,584 |
|
| TOTAL | | 8,057,189 |
| | 8,081,809 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $45,318,206 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility Electric Operating Revenues: | | | | | | | | |
| Residential | |
| $744 |
| |
| $882 |
| |
| ($138 | ) | | (16 | ) |
| Commercial | | 538 |
| | 583 |
| | (45 | ) | | (8 | ) |
| Industrial | | 560 |
| | 576 |
| | (16 | ) | | (3 | ) |
| Governmental | | 51 |
| | 52 |
| | (1 | ) | | (2 | ) |
| Total retail | | 1,893 |
| | 2,093 |
| | (200 | ) | | (10 | ) |
| Sales for resale | | 55 |
| | 60 |
| | (5 | ) | | (8 | ) |
| Other | | 94 |
| | 65 |
| | 29 |
| | 45 |
|
| Total | |
| $2,042 |
| |
| $2,218 |
| |
| ($176 | ) | | (8 | ) |
| | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 8,137 |
| | 9,433 |
| | (1,296 | ) | | (14 | ) |
| Commercial | | 6,511 |
| | 6,721 |
| | (210 | ) | | (3 | ) |
| Industrial | | 11,055 |
| | 10,406 |
| | 649 |
| | 6 |
|
| Governmental | | 600 |
| | 592 |
| | 8 |
| | 1 |
|
| Total retail | | 26,303 |
| | 27,152 |
| | (849 | ) | | (3 | ) |
| Sales for resale | | 3,140 |
| | 1,811 |
| | 1,329 |
| | 73 |
|
| Total | | 29,443 |
| | 28,963 |
| | 480 |
| | 2 |
|
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating Revenues | |
| $522 |
| |
| $643 |
| |
| ($121 | ) | | (19 | ) |
| Billed Electric Energy Sales (GWh) | | 9,246 |
| | 9,592 |
| | (346 | ) | | (4 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $2,548 |
| |
| ($5,552,379 | ) | �� |
| $5,403,758 |
| |
| $9,393,913 |
| |
| $8,951 |
| |
| $9,256,791 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 5,276 |
| | — |
| | — |
| | — |
| | 229,966 |
| | — |
| | 235,242 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 20,841 |
| | 20,841 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 24,184 |
| | (18,996 | ) | | — |
| | — |
| | 5,188 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (151,839 | ) | | — |
| | (151,839 | ) |
| Preferred dividend requirements of subsidiaries (a) | (5,276 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (5,276 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,528,195 | ) | |
| $5,384,762 |
| |
| $9,472,040 |
| |
| $29,792 |
| |
| $9,360,947 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Balance at December 31, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,498,584 | ) | |
| $5,417,245 |
| |
| $8,195,571 |
| |
| ($34,971 | ) | |
| $8,081,809 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 3,446 |
| | — |
| | — |
| | — |
| | 82,605 |
| | — |
| | 86,051 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 45,931 |
| | 45,931 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 22,083 |
| | (19,166 | ) | | — |
| | — |
| | 2,917 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (156,073 | ) | | — |
| | (156,073 | ) |
| Preferred dividend requirements of subsidiaries (a) | (3,446 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (3,446 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2017 |
| $— |
| |
| $2,548 |
| |
| ($5,476,501 | ) | |
| $5,398,079 |
| |
| $8,122,103 |
| |
| $10,960 |
| |
| $8,057,189 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $3.4 million and $5.3 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. |
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility electric operating revenues: | | | | | | | | |
| Residential | |
| $705 |
| |
| $744 |
| |
| ($39 | ) | | (5 | ) |
| Commercial | | 536 |
| | 538 |
| | (2 | ) | | — |
|
| Industrial | | 565 |
| | 560 |
| | 5 |
| | 1 |
|
| Governmental | | 53 |
| | 51 |
| | 2 |
| | 4 |
|
| Total retail | | 1,859 |
| | 1,893 |
| | (34 | ) | | (2 | ) |
| Sales for resale | | 78 |
| | 55 |
| | 23 |
| | 42 |
|
| Other | | 55 |
| | 94 |
| | (39 | ) | | (41 | ) |
| Total | |
| $1,992 |
| |
| $2,042 |
| |
| ($50 | ) | | (2 | ) |
| | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | |
| Residential | | 7,637 |
| | 8,137 |
| | (500 | ) | | (6 | ) |
| Commercial | | 6,439 |
| | 6,511 |
| | (72 | ) | | (1 | ) |
| Industrial | | 11,117 |
| | 11,055 |
| | 62 |
| | 1 |
|
| Governmental | | 593 |
| | 600 |
| | (7 | ) | | (1 | ) |
| Total retail | | 25,786 |
| | 26,303 |
| | (517 | ) | | (2 | ) |
| Sales for resale | | 3,022 |
| | 3,140 |
| | (118 | ) | | (4 | ) |
| Total | | 28,808 |
| | 29,443 |
| | (635 | ) | | (2 | ) |
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating revenues | |
| $553 |
| |
| $522 |
| |
| $31 |
| | 6 |
|
| Billed electric energy sales (GWh) | | 8,363 |
| | 9,246 |
| | (883 | ) | | (10 | ) |
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict with certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report. Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.
Vidalia Purchased Power Agreement
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
ANO Damage, Outage, and NRC Reviews
See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, and subsequent NRC reviews.reviews, and the deferral of replacement power costs.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $19.6 million was incurred in the first quarter 2016, in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016.
Pilgrim NRC Oversight and Planned Shutdown
In September 2015See Note 8 to the NRC placed Pilgrim in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures. The preliminary estimate of direct costs of Pilgrim’s response to a planned NRC enhanced inspection ranges from $45 million to $60 million in operation and maintenance expense, including approximately $30 million in 2016, of which $5 million was incurredfinancial statements in the first quarter 2016. The estimate does not include potential capital investment or other costsForm 10-K for a discussion of the NRC’s enhanced inspections of Pilgrim and Entergy’s planned shutdown of Pilgrim no later than June 1, 2019.
Spent Nuclear Fuel Litigation
See Note 8 to address issues that may arisethe financial statements in the inspection.
Entergy determined in April 2016 that it intends to refuel Pilgrim in 2017 and then cease operations May 31, 2019. In October 2015, Entergy previously announced its intention to cease operations at Pilgrim because of poor market conditions, reduced revenues, and increased operational costs. Pilgrim currently has approximately 677 MW of Capacity Supply Obligations in ISO New England through May 2019.Form 10-K for information on Entergy’s spent nuclear fuel litigation.
Nuclear Insurance
See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Conventional Property Insurance
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.
Employment Litigationand Labor-related Proceedings
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Louisiana, Entergy New Orleans, and Entergy Texas.litigation.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Fuel and purchased power cost recovery
Entergy Arkansas
Energy Cost Recovery Rider
In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rate should be implemented with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff.
Entergy Louisiana
In April 2010As discussed in the Form 10-K, in June 2016 the LPSC authorized its staff to initiate an auditprovided notice of audits of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuelfilings and purchased gas adjustment clause by Entergy Louisiana for the period from 2005 through 2009. The LPSC staff issued its audit reportfilings. Discovery commenced in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervened in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments on the LPSC staff report. Entergy Louisiana filed responses to both the LPSC staff report and the issues raised by the intervenor. After conducting additional discovery, in April 2016 the LPSC staff consultant issued its supplemental audit report, which concluded that Entergy Louisiana was not imprudent on the issues raised by the intervenor.
In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. In March 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million, plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. A procedural schedule has not been established for this proceeding, and discovery from intervenors has not commenced.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2017.
Entergy Mississippi
Mississippi Attorney General Complaint
As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million underEntergy Services, and Entergy Power. The defendants have denied the power management rider. Pursuant to those tariffs,allegations. Discovery is currently in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August 2015 the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015, Entergy Mississippi shall file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order, Entergy Mississippi submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance for the period ending January 31, 2017 was $68 million, in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.progress.
Entergy Texas
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Courtan application to reconcile its fuel and purchased power costs for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. Both appeals are pending, but the appeals do not stay the PUCT’s decision.period April 1, 2013 through March 31, 2016. In AprilDecember 2016, Entergy Texas filedentered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the PUCT an application to refund to customers approximately $56.2 million. The refund resulted from (i) $41.8over-recovery balance of $21 million as of fuel cost recovery over-collections through FebruaryNovember 30, 2016, (ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. Entergy Texas requested that the refund be made to most customers over a four-month period beginning April 2017 through June 2016.2017. The fuel reconciliation settlement was approved by the PUCT in March 2017.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that information.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC
20152016 Formula Rate CasePlan Filing
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2015,2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with the APSC for a general change in rates, charges, and tariffs. The filing notified the APSC of Entergy Arkansas’s intent to implement a formula rate review mechanism pursuant to Arkansas legislation passed in 2015, and requested a retail rate increase of $268.4 million, with a net increase in revenue of $167 million. The filing requested a 10.2% return on common equity. In September 2015, APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate case filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rate plan tariff that provides a 50 basis point band around the 9.75% allowed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million, subject to closing adjustments. The settlement agreement also provided for amortization over a 10-year period 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. A hearing was held in January 2016. In February 2016 the APSC approved the settlement with one exception that would reduce the retail rate increase proposed in the settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rate adjustment surcharge will recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.
Entergy Arkansas plans to make its first2017 formula rate plan filing, scheduled to be made in July 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in September 2016, for rates effective withEntergy Arkansas filed an application seeking a finding from the first billing cycleAPSC that Entergy Arkansas’s deployment of January 2017.advanced metering infrastructure is in the public interest. This matter is pending before the APSC.
Filings with the LPSC
Retail Rates - Electric
Ninemile 62015 Formula Rate Plan Filing
As discussed in the Form 10-K, in July 2015,May 2016, Entergy Louisiana submitted tofiled its formula rate plan evaluation report for its 2015 calendar year operations. The LPSC’s review is pending. Also, in November 2016, Entergy Louisiana filed with the LPSC a Ninemile 6 compliance filingrequest to extend the MISO cost recovery mechanism rider provision of its formula rate plan. A procedural schedule was established, including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of approximately $648 million, or $76 million less than originally estimated, along with other project details and supporting evidence, to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filed by LPSC staff generally supports the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff has questioned the warranty coverage for one element of the project.a hearing in July 2017. In March 2016, Entergy Louisiana and2017 the LPSC staff filedsubmitted direct testimony generally supportive of a joint motionone-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time.
Waterford 3 Replacement Steam Generator Project
See Note 2 to suspend the procedural schedule pendingfinancial statements in the filingForm 10-K for discussion of an uncontested joint stipulated settlement.the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017.
Union Power Station
As discussed ina term of the Form 10-K, in October 2015 the LPSC approved aLPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station. In March 2016,Station, Entergy Louisiana acquired Power Blocksagreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 of Union Power Station for an aggregate purchase price of approximately $474 million, subjectand its decision to closing adjustments, and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.
Retail Rates - Gas
retire Little Gypsy 1. In January 2016, Entergy Louisiana filedmade its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its gas rate stabilization plandeactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the test year ended September 30, 2015.ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to retire Willow Glen 2 and 4, as opposed to temporarily suspending those units. This matter is pending before an ALJ, with an evidentiary hearing scheduled to commence in July 2017. The filing showedALJ recently dismissed claims of an earned return on common equity of 10.22%, which is within the authorized bandwidth, therefore requiring no change in rates. In March 2016industrial user regarding a proposed process for future deactivation because the LPSC staff issued its report stating that the 2015 gas rate stabilization plan filing is in compliance with the exception of several issues that require additional information, explanation, or clarification for whichinitiated a generic rulemaking to consider whether the LPSC staff has reserved the rightshould review deactivation decisions prior to further review. Discovery regarding these issues is pending, but a procedural schedule has not been established for addressing the outstanding issues. Absent approval of an extension by the LPSC, test year 2015 is the final year under the current gas rate stabilization plan. In February 2016, however, Entergy Louisiana filed a motion requesting to extend the terms of the gas rate stabilization plan for an additional three-year term. A procedural schedule has not been established.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the MPSC
In March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projected earned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing shows a $32.6 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within the formula rate plan bandwidth. The filing is currently subject to MPSC review. In April 2016 the Mississippi Public Utilities Staff filed a letter disputing the formula rate plan evaluation report subject to its continued review of the submittal. A final order is expected in second quarter 2016, with the resulting rates effective mid-year 2016. Pursuant to the terms of the formula rate plan, Entergy Mississippi also submitted an informational look-back filing for 2015 that showed Entergy Mississippi’s 2015 earned return was within the formula rate plan bandwidth.
Filings with the City Council
As discussed in the Form 10-K, in November 2015 the City Council authorized expansion of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense from Ninemile 6 as well as the revenue requirement associated with the acquisition of Power Block 1 of Union Power Station. In March 2016, Entergy New Orleans acquired Power Block 1 of Union Power Station for approximately $237 million, subject to closing adjustments, and initiated recovery of these costs with March 2016 bills.
Filings with the PUCT
2011 Rate Case
See the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas plans to petition the Texas Supreme Court to hear its appeal of the Third Court’s ruling.
Other Filings
In September 2015, Entergy Texas filed for a transmission cost recovery factor rider requesting a $13 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately $2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 million from Entergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In May 2016 the PUCT deferred final consideration of Entergy Texas’s TCRF application and opened the record to consider additional evidence to be provided by Entergy Texas and potentially other parties regarding the rate-making treatment of spare transmission-level transformers that are transferred among the Utility operating companies. It is not known when the PUCT will take up the merits of this matter, but Entergy Texas was granted interim rates as of April 14, 2016 whenever a final order is issued setting those rates.implementation.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Retail Rates - Gas
2016 Rate Stabilization Plan Filing
In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37%. As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff confirmed Entergy Louisiana’s filing was consistent with the principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan pending LPSC consideration in a separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the first billing cycle of May 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. This matter is pending before an ALJ, and an evidentiary hearing is scheduled for September 2017.
Filings with the MPSC
Formula Rate Plan
In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. The filing is currently subject to MPSC review.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.
Filings with the City Council
Retail Rates
As discussed in the Form 10-K, in February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council identify its desired level of funding for the program during this time period and approve
Entergy Corporation and Subsidiaries
Notes to Financial Statements
a cost recovery mechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the Energy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the Energy Smart program.
Internal Restructuring
As discussed in the Form 10-K, in July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Additionally, if the FERC approves the transaction prior to December 31, 2018, Entergy New Orleans will credit retail customers $5 million in each of the years 2018, 2019, and 2020.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans received intervenor testimony that is generally supportive of AMI deployment. The City Council’s advisors are scheduled to file testimony in May 2017, and a hearing is currently set for July 2017.
Filings with the PUCT
Other Filings
In September 2016, Entergy Texas filed with the PUCT a request to amend its transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider. In September 2016 the PUCT suspended the effective date of the tariff change to March 2017. In December 2016, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.
System Agreement Cost Equalization Proceedings
Rough Production Cost Equalization Rates
2015 Rate Filing Based on Calendar Year 2014 Production Costs
In May 2015, Entergy filed with the FERC the 2015 rates in accordance with the FERC’s orders in the System Agreement proceeding. The filing shows that no payments and receipts are required in 2015 to implement the FERC’s remedy based on calendar year 2014 production costs. Several parties intervened in the proceeding and the LPSC and City Council intervened and filed comments. In October 2015 the FERC accepted the 2015 rates for filing, suspended them for a nominal period, to become effective June 1, 2015, as requested, subject to refund, and set them for hearing and settlement judge procedures. In March 2016, Entergy Services filed a settlement at the FERC resolving the 2015 rate filing. In the settlement, the parties did not dispute the 2015 rates as calculated with no payments or receipts. Pursuant to the settlement, the 2015 rates are subject to a recalculation and compliance filing upon resolution of other ongoing bandwidth-related proceedings.
Interruptible Load Proceedings
See the Form 10-K for a discussion of the interruptible load proceeding. In April 2016litigation involving the System Agreement at the FERC issued an order on remand that addressed the December 2014 decision by the D.C. Circuitand in the interruptible load proceeding. The order on remand affirmed the FERC’s denial of refunds for the 15-month refund effective period. The FERC explained and clarified its policies regarding refunds and concluded that the evidence in the record demonstrated that the relevant equitable factors favored not requiring refunds in this case. The FERC also noted that, under Section 206(c) of the Federal Power Act, in a Section 206 proceeding involving two or more electric utility companies of a registered holding company system, the FERC may order refunds only if it determines the refunds would not cause the registered holding company to experience any reduction in revenues resulting from an inability of an electric utility company in the system to recover the resulting increase in costs. The FERC stated it was not able to find that the Entergy system would not experience a reduction in revenues if refunds were awarded in this proceeding, which further supported the denial of refunds.federal courts.
Entergy Arkansas Opportunity Sales Proceedings
See the Form 10-K for a discussion of the proceeding initiated at the FERC by the LPSC in June 2009 in which the LPSC initially requested that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. In April 2016 the FERC issued orders addressing the requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.Complaint Against System Energy
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The effectcomplaint seeks a reduction in the return on equity component of the FERC’s decisions, if upheld, is thatUnit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, will make paymentsEntergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to some or allEntergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the other Utility operating companies. As partcomplaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The City of New Orleans filed comments in February 2017 supporting the further proceedings requiredcomplaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC Entergy will re-run intra-system bills for a ten-year period (2000-2009) to quantify the effects of the FERC's rulings. The ALJ will issue an initial decision and FERC will issue an order reviewing that decision. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing that initial decision and Entergy submits a subsequent filing to comply with that order. Because further proceedings are required, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case, however, in the first quarter 2016 Entergy Arkansas recorded a liability of $87 million for its estimated increased costs and payment to the other Utility operating companies, including interest. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Therefore Entergy Arkansas recorded a regulatory asset of approximately $75 million, which represents its estimate of the retail portion of the costs.pending.
NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
|
| | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, |
| | 2016 | | 2015 |
| | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $230.0 |
| | 178.6 |
| |
| $1.29 |
| |
| $298.1 |
| | 179.7 |
| |
| $1.66 |
|
| Average dilutive effect of: | | | | | | | | | | | |
| Stock options | | | 0.1 |
| | — |
| | | | 0.5 |
| | (0.01 | ) |
| Other equity plans | | | 0.3 |
| | (0.01 | ) | | | | 0.3 |
| | — |
|
| Diluted earnings per share |
| $230.0 |
| | 179.0 |
| |
| $1.28 |
| |
| $298.1 |
| | 180.5 |
| |
| $1.65 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, |
| | 2017 | | 2016 |
| | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $82.6 |
| | 179.3 |
| |
| $0.46 |
| |
| $230.0 |
| | 178.6 |
| |
| $1.29 |
|
| Average dilutive effect of: | | | | | | | | | | | |
| Stock options | | | 0.1 |
| | — |
| | | | 0.1 |
| | — |
|
| Other equity plans | | | 0.4 |
| | — |
| | | | 0.3 |
| | (0.01 | ) |
| Diluted earnings per share |
| $82.6 |
| | 179.8 |
| |
| $0.46 |
| |
| $230.0 |
| | 179.0 |
| |
| $1.28 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 4.9 million for the three months ended March 31, 2017 and approximately 6.1 million for the three months ended March 31, 2016 and approximately 3.5 million for the three months ended March 31, 2015.2016.
Entergy’s stock options and other equity compensation plans are discussed in Note 5 to the financial statements herein and in Note 12 to the financial statements in the Form 10-K.
Treasury Stock
During the three months ended March 31, 2016,2017, Entergy Corporation issued 332,576303,579 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the three months ended March 31, 2016.2017.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Retained Earnings
On April 6, 2016,5, 2017, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.85$0.87 per share, payable on June 1, 2016,2017, to holders of record as of May 12, 2016.11, 2017.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 20162017 by component:
| | | | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) | (In Thousands) |
| Beginning balance, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
| |
| Beginning balance, January 1, 2017 | |
| $3,993 |
| |
| ($469,446 | ) | |
| $429,734 |
| |
| $748 |
| |
| ($34,971 | ) |
| Other comprehensive income (loss) before reclassifications | 90,307 |
| | — |
| | 25,032 |
| | (284 | ) | | 115,055 |
| 32,608 |
| | — |
| | 39,872 |
| | — |
| | 72,480 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (99,813 | ) | | 7,562 |
| | (1,963 | ) | | — |
| | (94,214 | ) | (33,136 | ) | | 8,632 |
| | (2,045 | ) | | — |
| | (26,549 | ) |
| Net other comprehensive income (loss) for the period | (9,506 | ) | | 7,562 |
| | 23,069 |
| | (284 | ) | | 20,841 |
| (528 | ) | | 8,632 |
| | 37,827 |
| | — |
| | 45,931 |
|
| Ending balance, March 31, 2016 |
| $96,464 |
| |
| ($459,042 | ) | |
| $390,626 |
| |
| $1,744 |
| |
| $29,792 |
| |
| Ending balance, March 31, 2017 | |
| $3,465 |
| |
| ($460,814 | ) | |
| $467,561 |
| |
| $748 |
| |
| $10,960 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 20152016 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2015 |
| $98,118 |
| |
| ($569,789 | ) | |
| $426,695 |
| |
| $2,669 |
| |
| ($42,307 | ) |
| Other comprehensive income (loss) before reclassifications | (20,896 | ) | | 13 |
| | 12,658 |
| | (551 | ) | | (8,776 | ) |
| Amounts reclassified from accumulated other comprehensive income (loss) | (8,434 | ) | | 8,435 |
| | (8,655 | ) | | — |
| | (8,654 | ) |
| Net other comprehensive income (loss) for the period | (29,330 | ) | | 8,448 |
| | 4,003 |
| | (551 | ) | | (17,430 | ) |
| Ending balance, March 31, 2015 |
| $68,788 |
| |
| ($561,341 | ) | |
| $430,698 |
| |
| $2,118 |
| |
| ($59,737 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
|
| Other comprehensive income (loss) before reclassifications | 90,307 |
| | — |
| | 25,032 |
| | (284 | ) | | 115,055 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (99,813 | ) | | 7,562 |
| | (1,963 | ) | | — |
| | (94,214 | ) |
| Net other comprehensive income (loss) for the period | (9,506 | ) | | 7,562 |
| | 23,069 |
| | (284 | ) | | 20,841 |
|
| Ending balance, March 31, 2016 |
| $96,464 |
| |
| ($459,042 | ) | |
| $390,626 |
| |
| $1,744 |
| |
| $29,792 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2017 and 2016:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance, January 1, 2016 | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (263 | ) |
Net other comprehensive income (loss) for the period | | (263 | ) |
Ending balance, March 31, 2016 | |
| ($56,675 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2015:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance, January 1, 2015 | |
| ($79,223 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | 380 |
|
Net other comprehensive income (loss) for the period | | 380 |
|
Ending balance, March 31, 2015 | |
| ($78,843 | ) |
|
| | | | | | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| Beginning balance, January 1, | |
| ($48,442 | ) | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (370 | ) | | (263 | ) |
| Net other comprehensive income (loss) for the period | | (370 | ) | | (263 | ) |
| Ending balance, March 31, | |
| ($48,812 | ) | |
| ($56,675 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended March 31, 2017 and 2016 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI |
| Income Statement Location |
| (In Thousands) |
|
|
Cash flow hedges net unrealized gain (loss) |
|
|
|
Power contracts |
| $153,958 |
|
| Competitive business operating revenues |
Interest rate swaps | (400 | ) |
| Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 153,558 |
|
|
|
| (53,745 | ) |
| Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $99,813 |
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
| $7,355 |
|
| (a) |
Amortization of loss | (15,175 | ) |
| (a) |
Total amortization | (7,820 | ) |
|
|
| 258 |
|
| Income taxes |
Total amortization (net of tax) |
| ($7,562 | ) |
|
|
|
|
|
|
Net unrealized investment gain (loss) |
|
|
|
Realized gain (loss) |
| $3,850 |
|
| Interest and investment income |
| (1,887 | ) |
| Income taxes |
Total realized investment gain (loss) (net of tax) |
| $1,963 |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
| $94,214 |
|
|
|
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended March 31, 2015 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI | | Income Statement Location |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | |
Power contracts |
| $13,522 |
| | Competitive business operating revenues |
Interest rate swaps | (546 | ) | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 12,976 |
| | |
| (4,542 | ) | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $8,434 |
| | |
| | | |
Pension and other postretirement liabilities | | | |
Amortization of prior-service credit |
| $5,986 |
| | (a) |
Amortization of loss | (17,588 | ) | | (a) |
Total amortization | (11,602 | ) | | |
| 3,167 |
| | Income taxes |
Total amortization (net of tax) |
| ($8,435 | ) | | |
| | | |
Net unrealized investment gain (loss) | | | |
Realized gain (loss) |
| $16,970 |
| | Interest and investment income |
| (8,315 | ) | | Income taxes |
Total realized investment gain (loss) (net of tax) |
| $8,655 |
| | |
| | | |
Total reclassifications for the period (net of tax) |
| $8,654 |
| | |
|
| | | | | | | | | |
| Amounts reclassified
from AOCI |
| Income Statement Location |
| | 2017 | | 2016 | | |
| (In Thousands) |
|
|
| Cash flow hedges net unrealized gain (loss) |
| | |
|
|
| Power contracts |
| $51,227 |
| |
| $153,958 |
|
| Competitive business operating revenues |
| Interest rate swaps | (250 | ) | | (400 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 50,977 |
| | 153,558 |
|
|
|
| (17,841 | ) | | (53,745 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $33,136 |
| |
| $99,813 |
|
|
|
|
|
| | |
|
|
| Pension and other postretirement liabilities |
|
| | |
|
|
| Amortization of prior-service credit |
| $6,562 |
| |
| $7,355 |
|
| (a) |
| Amortization of loss | (21,571 | ) | | (15,175 | ) |
| (a) |
| Total amortization | (15,009 | ) | | (7,820 | ) |
|
|
| 6,377 |
| | 258 |
|
| Income taxes |
| Total amortization (net of tax) |
| ($8,632 | ) | |
| ($7,562 | ) |
|
|
|
| | |
|
|
| Net unrealized investment gain (loss) |
| | |
|
|
| Realized gain (loss) |
| $4,010 |
| |
| $3,850 |
|
| Interest and investment income |
| (1,965 | ) | | (1,887 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $2,045 |
| |
| $1,963 |
|
|
|
|
|
| | |
|
|
| Total reclassifications for the period (net of tax) |
| $26,549 |
| |
| $94,214 |
|
|
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended March 31, 2017 and 2016 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $1,947 |
| | (a) |
Amortization of loss | | (1,569 | ) | | (a) |
Total amortization | | 378 |
| | |
| | (115 | ) | | Income taxes |
Total amortization (net of tax) | | 263 |
| | |
| | | | |
Total reclassifications for the period (net of tax) | |
| $263 |
| | |
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended March 31, 2015 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $1,867 |
| | (a) |
Amortization of loss | | (2,535 | ) | | (a) |
Total amortization | | (668 | ) | | |
| | 288 |
| | Income taxes |
Total amortization (net of tax) | | (380 | ) | | |
| | | | |
Total reclassifications for the period (net of tax) | |
| ($380 | ) | | |
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $1,934 |
| |
| $1,947 |
| | (a) |
| Amortization of loss | | (1,332 | ) | | (1,569 | ) | | (a) |
| Total amortization | | 602 |
| | 378 |
| | |
| | | (232 | ) | | (115 | ) | | Income taxes |
| Total amortization (net of tax) | | 370 |
| | 263 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $370 |
| |
| $263 |
| | |
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2020.2021. 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 0.275%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 three months ended March 31, 20162017 was 2.35%2.29% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2016.2017.
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $616 | | $7 | | $2,877 | | $225 | | $6 | | $3,269 |
Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation 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 maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. At March 31, 2016,2017, Entergy Corporation had $578 million$1.1 billion of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20162017 was 1.14%1.33%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 20162017 as follows:
|
| | | | | | | | | |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of March 31, 20162017 | Letters of Credit Outstanding as of March 31, 2016
2017
|
| Entergy Arkansas | | April 20162017 | | $20 million (b) | | 1.93%2.23% | | $— | $— |
| Entergy Arkansas | | August 20202021 | | $150 million (c) | | 1.68%2.23% | | $— | $— |
| Entergy Louisiana | | August 20202021 | | $350 million (d) | | 1.68%2.23% | | $— | $3.13.4 million |
| Entergy Mississippi | | May 20162017 | | $37.5 million (e) | | 1.93%2.48% | | $— | $— |
| Entergy Mississippi | | May 20162017 | | $35 million (e) | | 1.93%2.48% | | $— | $— |
| Entergy Mississippi | | May 20162017 | | $20 million (e) | | 1.93%2.48% | | $— | $— |
| Entergy Mississippi | | May 20162017 | | $10 million (e) | | 1.93%2.48% | | $— | $— |
| Entergy New Orleans | | November 2018 | | $25 million (f) | | 2.18%2.46% | | $— | $—0.8 million |
| Entergy Texas | | August 20202021 | | $150 million (f)(g) | | 1.93%2.48% | | $— | $1.34.7 million |
| |
| (a) | The interest rate is the rate as of March 31, 20162017 that would most likely apply to outstanding borrowings under the facility. |
| |
| (b) | Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option. TheIn April 2017, Entergy Arkansas renewed its credit facility expired inthrough April 2016. Entergy Arkansas plans to renew the credit facility.2018. |
| |
| (c) | The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. |
| |
| (d) | The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Entergy Mississippi expects to renew its credit facilities prior to expiration. |
| |
| (f) | The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. |
| |
| (g) | The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. |
The commitment fees on the credit facilities range from 0.125%0.075% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations related to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2016:2017:
|
| | | | | | |
| Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of March 31, 20162017 (a)
|
| Entergy Arkansas | | $25 million | | 0.70% | | $1.0 million |
| Entergy Louisiana | | $125 million | | 0.70% | | $7.015.8 million |
| Entergy Mississippi | | $40 million | | 0.70% | | $4.47.1 million |
| Entergy New Orleans | | $15 million | | 0.75%1.00% | | $6.21.0 million |
| Entergy Texas | | $50 million | | 0.70% | | $5.627.6 million |
| |
| (a) | The amountAs of March 31 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi includes $0.4Arkansas and $0.1 million related to FTR exposure.for Entergy Mississippi. See Note 8 to the financial statements herein for discussion of FTRs.financial transmission rights. |
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through October 31, 2017. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool.pool and from other internal short-term borrowing arrangements. The money pool is anand the other internal borrowing arrangements are inter-company borrowing arrangementarrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from the money poolinternal and external short term borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of March 31, 20162017 (aggregating both money poolinternal and external short-term borrowings) for the Registrant Subsidiaries:
|
| | | |
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | $— |
Entergy Louisiana | $450 | | $— |
Entergy Mississippi | $175 | | $— |
Entergy New Orleans | $100 | | $— |
Entergy Texas | $200 | | $— |
System Energy | $200 | | $— |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | |
| | Authorized | | Borrowings |
| | (In Millions) |
| Entergy Arkansas | $250 | | $31 |
| Entergy Louisiana | $450 | | $— |
| Entergy Mississippi | $175 | | $12 |
| Entergy New Orleans | $100 | | $— |
| Entergy Texas | $200 | | $29 |
| System Energy | $200 | | $— |
Entergy Nuclear Vermont Yankee Credit Facilities
Entergy Nuclear Vermont Yankee entered intohas a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million which expires in January 2018. In the first quarter 2016, Entergy Nuclear Vermont Yankee increased the borrowing capacity of its credit facility to $100 million. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. The commitment fee is currently 0.25%0.20% of the undrawn commitment amount. As of March 31, 2016, $612017, $58 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the three months ended March 31, 20162017 was 2.20%2.32% on the drawn portion of the facility.
Entergy Nuclear Vermont Yankee also entered intohas an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. As of March 31, 2016,2017, there were no cash borrowings outstanding under the credit facility. The
Entergy Corporation and Subsidiaries
Notes to Financial Statements
rate as of March 31, 20162017 that would most likely apply to outstanding borrowings under the facility was 2.18%2.48% on the drawn portion of the facility.
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 1817 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper details of which follow as of March 31, 2016:2017 as follows:
| | | Company | | Expiration Date (a) | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (b) | | Amount Outstanding as of March 31, 2016 | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2017 |
| | |
| | (Dollars in Millions) | |
| | (Dollars in Millions) |
| Entergy Arkansas VIE | | June 2016 | | $85 | | n/a | | $— | | May 2019 | | $80 | | 2.34% | | $52.3 (b) |
| Entergy Louisiana River Bend VIE | | June 2016 | | $100 | | n/a | | $— | | May 2019 | | $105 | | 1.98% | | $18.8 |
| Entergy Louisiana Waterford VIE | | June 2016 | | $90 | | 1.86% | | $77.5 (c) | | May 2019 | | $85 | | 2.25% | | $72.5 (b) |
| System Energy VIE | | June 2016 | | $125 | | 2.01% | | $111 (c) | | May 2019 | | $120 | | 2.28% | | $110.7 (b) |
| |
| (a) | Prior to expiration, the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy each plan to renew its credit facility. |
| |
(b) | Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entity for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility. |
| |
(c)(b) | Commercial paper, classified as a current liability. |
The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Louisiana VIEs and 0.125% of the undrawn commitment amount for theArkansas, Entergy ArkansasLouisiana, and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of March 31, 20162017 as follows:
|
| | | | |
| Company | | Description | | Amount |
Entergy Arkansas VIE | | 3.23% Series J due July 2016 | | $55 million |
| Entergy Arkansas VIE | | 2.62% Series K due December 2017 | | $60 million |
Entergy Arkansas VIE
| | 3.65% Series L due July 2021
| | $90 million |
| Entergy Arkansas VIE | | 3.17% Series M due December 2023 | | $40 million |
| Entergy Louisiana River Bend VIE | | 3.25% Series Q due July 2017 | | $75 million |
Entergy Louisiana River Bend VIE
| | 3.38% Series R due August 2020 | | $70 million |
Entergy Louisiana Waterford VIE
| | 3.25% Series G due July 2017 | | $25 million |
Entergy Louisiana Waterford VIE
| | 3.92% Series H due February 2021 | | $40 million |
System EnergyEntergy Louisiana Waterford VIE | | 4.02%3.22% Series HI due February 2017December 2023 | | $5020 million |
| System Energy VIE | | 3.78% Series I due October 2018 | | $85 million |
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
Debt Issuances and Redemptions
(Entergy Arkansas)
In January 2016, Entergy Arkansas issued $325 million of 3.5% Series first mortgage bonds due April 2026. Entergy Arkansas used the proceeds to pay, prior to maturity, its $175 million of 5.66% Series first mortgage bonds due February 2025, and used the remainder of the proceeds, together with other funds, towards the purchase of Power Block 2 at Union Power Station and for general corporate purposes. See Note 13 to the financial statements herein for discussion of the Union purchase.
(Entergy Louisiana)
In March 2016, Entergy Louisiana issued $200 million of 4.95% Series first mortgage bonds due January 2045. Entergy Louisiana used the proceeds to pay, together with other funds, the $60 million cash portion of the price to purchase the undivided interests of Waterford 3, to repay borrowings from the money pool, to repay borrowings under its $350 million credit facility, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together with other funds, for the purchase of Power Blocks 3 and 4 at Union Power Station. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction and Note 13 to the financial statements herein for discussion of the Union purchase.
In March 2016, Entergy Louisiana issued $425 million of 3.25% Series collateral trust mortgage bonds due April 2028. Entergy Louisiana used the proceeds to pay, together with other funds, the $60 million cash portion of the price to purchase the undivided interests of Waterford 3, to repay borrowings from the money pool, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together with other funds, for the purchase of Power Blocks 3 and 4 at Union Power Station. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction and Note 13 to the financial statements herein for discussion of the Union purchase.
In March 2016, Entergy Louisiana arranged for the issuance by the Louisiana Public Facilities Authority of (i) $83.680 million of 3.375% pollution control refunding revenue bonds (Entergy Louisiana, LLC Project) Series 2016A due September 2028, and (ii) $115 million of 3.50% pollution control refunding revenue bonds (Entergy Louisiana, LLC Project) Series 2016B due June 2030, each of which series is evidenced by a separate series of non-interest bearing collateral trust mortgage bonds of Entergy Louisiana. The proceeds from these issuances were held
Entergy Corporation and Subsidiaries
Notes to Financial Statements
in trust as of March 31, 2016Debt Issuances and were applied in April 2016 to the refunding of $198.68 million of outstanding series of pollution control revenue bonds previously issued on behalf of Entergy Louisiana.Retirements
(System Energy)
In March 2016, Entergy Louisiana issued $51.972 million of Waterford Series collateral trust mortgage notes due JulyFebruary 2017 as part of the purchase of the undivided interests in Waterford 3. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction.
In March 2016 the Entergy LouisianaSystem Energy nuclear fuel company variable interest entity redeemed,paid, at maturity, its $20$50 million of 3.30%4.02% Series FH notes.
(Entergy New Orleans)
In March 2016, Entergy New Orleans issued $110 million of 5.50% Series first mortgage bonds due April 2066. Entergy New Orleans used the proceeds to repay borrowings from the money pool, to repay borrowings under its $25 million credit facility, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together with other funds, for the purchase of Power Block 1 of Union Power Station. See Note 13 to the financial statements for discussion of the Union purchase.
(Entergy Texas)
In March 2016, Entergy Texas issued $125 million of 2.55% Series first mortgage bonds due June 2021. Entergy Texas used the proceeds for general corporate purposes.
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 20162017 are as follows:
| | | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) | (In Thousands) |
| Entergy |
| $14,296,872 |
| |
| $14,811,845 |
|
| $14,260,913 |
| |
| $14,435,145 |
|
| Entergy Arkansas |
| $2,777,649 |
| |
| $2,726,079 |
|
| $2,830,478 |
| |
| $2,676,887 |
|
| Entergy Louisiana |
| $5,620,234 |
| |
| $5,967,996 |
|
| $5,775,355 |
| |
| $5,987,581 |
|
| Entergy Mississippi |
| $1,045,430 |
| |
| $1,100,469 |
|
| $1,121,139 |
| |
| $1,109,658 |
|
| Entergy New Orleans |
| $449,892 |
| |
| $443,145 |
|
| $449,134 |
| |
| $465,593 |
|
| Entergy Texas |
| $1,552,741 |
| |
| $1,702,601 |
|
| $1,484,583 |
| |
| $1,575,584 |
|
| System Energy |
| $572,742 |
| |
| $550,080 |
|
| $501,215 |
| |
| $483,464 |
|
| |
| (a) | The values exclude lease obligations of $56 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $181$182 million at Entergy Arkansas, and the note payable to NYPA of $35 million at Entergy, and include debt due within one year. |
| |
| (b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 20152016 were as follows:
| | | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) | (In Thousands) |
| Entergy |
| $13,325,930 |
| |
| $13,578,511 |
|
| $14,832,555 |
| |
| $14,815,535 |
|
| Entergy Arkansas |
| $2,629,839 |
| |
| $2,498,108 |
|
| $2,829,785 |
| |
| $2,623,910 |
|
| Entergy Louisiana |
| $4,836,162 |
| |
| $5,018,786 |
|
| $5,812,791 |
| |
| $5,929,488 |
|
| Entergy Mississippi |
| $1,045,085 |
| |
| $1,087,326 |
|
| $1,120,916 |
| |
| $1,086,203 |
|
| Entergy New Orleans |
| $342,880 |
| |
| $351,040 |
|
| $448,994 |
| |
| $455,459 |
|
| Entergy Texas |
| $1,451,967 |
| |
| $1,590,616 |
|
| $1,508,407 |
| |
| $1,600,156 |
|
| System Energy |
| $572,667 |
| |
| $552,762 |
|
| $551,132 |
| |
| $529,520 |
|
| |
| (a) | The values exclude lease obligations of $109$57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $181$182 million at Entergy Arkansas, and the note payable to NYPA of $35 million at Entergy, and include debt due within one year. |
| |
| (b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock and stock-based awards, which are described more fully in Note 12 to the financial statements in the Form 10-K. Awards under Entergy’s plans generally vest over three years.
Effective January 1, 2017, Entergy adopted ASU 2016-09, which permits the election of an accounting policy change to the method of recognizing forfeitures of stock-based compensation. Previously, Entergy recorded an estimate of the number of forfeitures expected to occur each period. Entergy elected to change this policy to account for forfeitures when they occur. This accounting change was applied retrospectively, but did not result in an adjustment to retained earnings as of January 1, 2017.
Stock Options
Entergy granted options on 696,900791,900 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 20162017 with a weighted-average fair value of $7.40$6.54 per option. As of March 31, 2016,2017, there were options on 7,562,5766,263,626 shares of common stock outstanding with a weighted-average exercise price of $84.06.$81.50. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2016.2017. Because Entergy’s stock price at March 31, 20162017 was less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of March 31, 20162017 was zero. The intrinsic value of all “in the money” stock options was $30.5$19.8 million as of March 31, 2016.
The following table includes financial information for outstanding stock options for the three months ended March 31, 20162017 and 2015:2016:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.4 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.4 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.2 |
|
Other Equity Awards
In January 20162017 the Board approved and Entergy granted 370,000379,850 restricted stock awards and 199,800220,450 long-term incentive awards under the 2015 Equity Ownership Plan. The restricted stock awards were made effective as of January 28, 201626, 2017 and were valued at $70.56$70.53 per share, which was the closing price of Entergy’s common stock on that date. One-third of the restricted stock awards will vest upon each anniversary of the grant date. In addition, long-term incentive awards were granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. The performance units were granted effective as of January 28, 201626, 2017 and were valued at $84.52$71.40 per share. Entergy considers various factors, primarily market conditions, in determining the value of the performance units. Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period. Performance units have the same dividend rights as shares of Entergy common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $8.4 |
| |
| $8.1 |
|
| $8.2 |
| |
| $8.4 |
|
| Tax benefit recognized in Entergy’s net income |
| $3.2 |
| |
| $3.1 |
|
| $3.1 |
| |
| $3.2 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $1.8 |
| |
| $1.5 |
|
| $2.0 |
| |
| $1.8 |
|
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Components of Qualified Net Pension Cost
Entergy’s qualified pension cost, including amounts capitalized, for the first quarters of 20162017 and 2015,2016, included the following components:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $35,811 |
| |
| $43,762 |
|
| $33,410 |
| |
| $35,811 |
|
| Interest cost on projected benefit obligation | 65,403 |
| | 75,694 |
| 65,206 |
| | 65,403 |
|
| Expected return on assets | (97,366 | ) | | (98,655 | ) | (102,056 | ) | | (97,366 | ) |
| Amortization of prior service cost | 270 |
| | 390 |
| 65 |
| | 270 |
|
| Amortization of loss | 48,824 |
| | 58,981 |
| 56,930 |
| | 48,824 |
|
| Special termination benefit | — |
| | 76 |
| |
| Net pension costs |
| $52,942 |
| |
| $80,248 |
|
| $53,555 |
| |
| $52,942 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2017 and 2016, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,090 |
| |
| $6,925 |
| |
| $1,472 |
| |
| $625 |
| |
| $1,364 |
| |
| $1,536 |
|
| Interest cost on projects benefit obligation | | 12,944 |
| | 14,809 |
| | 3,732 |
| | 1,791 |
| | 3,392 |
| | 3,091 |
|
| Expected return on assets | | (20,427 | ) | | (23,017 | ) | | (6,131 | ) | | (2,800 | ) | | (6,180 | ) | | (4,663 | ) |
| Amortization of loss | | 11,640 |
| | 12,354 |
| | 3,053 |
| | 1,658 |
| | 2,310 |
| | 2,964 |
|
| Net pension cost | |
| $9,247 |
| |
| $11,071 |
| |
| $2,126 |
| |
| $1,274 |
| |
| $886 |
| |
| $2,928 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2016 and 2015, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $5,181 |
| |
| $7,049 |
| |
| $1,562 |
| |
| $656 |
| |
| $1,416 |
| |
| $1,566 |
|
| Interest cost on projected | | | | | | | | | | | | |
| benefit obligation | | 13,055 |
| | 14,870 |
| | 3,811 |
| | 1,814 |
| | 3,557 |
| | 2,992 |
|
| Expected return on assets | | (19,772 | ) | | (22,096 | ) | | (5,981 | ) | | (2,687 | ) | | (6,062 | ) | | (4,459 | ) |
| Amortization of loss | | 10,936 |
| | 11,946 |
| | 2,985 |
| | 1,615 |
| | 2,340 |
| | 2,604 |
|
| Net pension cost | |
| $9,400 |
| |
| $11,769 |
| |
| $2,377 |
| |
| $1,398 |
| |
| $1,251 |
| |
| $2,703 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $6,661 |
| |
| $8,599 |
| |
| $1,982 |
| |
| $849 |
| |
| $1,645 |
| |
| $1,957 |
|
| Interest cost on projected | | |
| | |
| | |
| | |
| | |
| | |
|
| benefit obligation | | 15,471 |
| | 17,367 |
| | 4,502 |
| | 2,108 |
| | 4,354 |
| | 3,493 |
|
| Expected return on assets | | (20,026 | ) | | (22,701 | ) | | (6,105 | ) | | (2,725 | ) | | (6,222 | ) | | (4,568 | ) |
| Amortization of loss | | 13,564 |
| | 14,951 |
| | 3,724 |
| | 2,013 |
| | 3,238 |
| | 3,264 |
|
| Net pension cost | |
| $15,670 |
| |
| $18,216 |
| |
| $4,103 |
| |
| $2,245 |
| |
| $3,015 |
| |
| $4,146 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,181 |
| |
| $7,049 |
| |
| $1,562 |
| |
| $656 |
| |
| $1,416 |
| |
| $1,566 |
|
| Interest cost on projected benefit obligation | | 13,055 |
| | 14,870 |
| | 3,811 |
| | 1,814 |
| | 3,557 |
| | 2,992 |
|
| Expected return on assets | | (19,772 | ) | | (22,096 | ) | | (5,981 | ) | | (2,687 | ) | | (6,062 | ) | | (4,459 | ) |
| Amortization of loss | | 10,936 |
| | 11,946 |
| | 2,985 |
| | 1,615 |
| | 2,340 |
| | 2,604 |
|
| Net pension cost | |
| $9,400 |
| |
| $11,769 |
| |
| $2,377 |
| |
| $1,398 |
| |
| $1,251 |
| |
| $2,703 |
|
Non-Qualified Net Pension Cost
Entergy recognized $4.3$4.6 million and $4.5$4.3 million in pension cost for its non-qualified pension plans in the first quarters of 20162017 and 2015,2016, respectively.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the first quarters of 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| Non-qualified pension cost first quarter 2016 |
| $106 |
| |
| $59 |
| |
| $59 |
| |
| $16 |
| |
| $127 |
|
| Non-qualified pension cost first quarter 2015 |
| $113 |
| |
| $68 |
| |
| $59 |
| |
| $16 |
| |
| $149 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| First quarter 2017 |
| $105 |
| |
| $48 |
| |
| $64 |
| |
| $18 |
| |
| $127 |
|
| First quarter 2016 |
| $106 |
| |
| $59 |
| |
| $59 |
| |
| $16 |
| |
| $127 |
|
Components of Net Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the first quarters of 20162017 and 2015,2016, included the following components:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $8,073 |
| |
| $11,326 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 14,083 |
| | 17,984 |
|
| Expected return on assets | (10,455 | ) | | (11,344 | ) |
| Amortization of prior service credit | (11,373 | ) | | (9,320 | ) |
| Amortization of loss | 4,554 |
| | 7,893 |
|
| Net other postretirement benefit cost |
| $4,882 |
| |
| $16,539 |
|
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $6,729 |
| |
| $8,073 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 13,960 |
| | 14,083 |
|
| Expected return on assets | (9,408 | ) | | (10,455 | ) |
| Amortization of prior service credit | (10,356 | ) | | (11,373 | ) |
| Amortization of loss | 5,476 |
| | 4,554 |
|
| Net other postretirement benefit cost |
| $6,401 |
| |
| $4,882 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the first quarters of 20162017 and 2015,2016, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $978 |
| |
| $1,869 |
| |
| $386 |
| |
| $156 |
| |
| $398 |
| |
| $334 |
|
| Interest cost on APBO | | 2,324 |
| | 3,260 |
| | 709 |
| | 448 |
| | 1,039 |
| | 529 |
|
| Expected return on assets | | (4,464 | ) | | — |
| | (1,379 | ) | | (1,154 | ) | | (2,394 | ) | | (814 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (1,368 | ) | | (1,947 | ) | | (234 | ) | | (186 | ) | | (681 | ) | | (393 | ) |
| Amortization of loss | | 1,064 |
| | 731 |
| | 223 |
| | 37 |
| | 537 |
| | 287 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| ($1,466 | ) | |
| $3,913 |
| |
| ($295 | ) | |
| ($699 | ) | |
| ($1,101 | ) | |
| ($57 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $863 |
| |
| $1,593 |
| |
| $290 |
| |
| $142 |
| |
| $372 |
| |
| $320 |
|
| Interest cost on APBO | | 2,255 |
| | 3,025 |
| | 690 |
| | 469 |
| | 1,124 |
| | 559 |
|
| Expected return on assets | | (3,959 | ) | | — |
| | (1,200 | ) | | (1,159 | ) | | (2,180 | ) | | (717 | ) |
| Amortization of prior service credit | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 1,115 |
| | 465 |
| | 419 |
| | 105 |
| | 826 |
| | 390 |
|
| Net other postretirement benefit cost | |
| ($1,004 | ) | |
| $3,149 |
| |
| ($257 | ) | |
| ($629 | ) | |
| ($437 | ) | |
| $174 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $1,739 |
| |
| $2,474 |
| |
| $507 |
| |
| $205 |
| |
| $500 |
| |
| $470 |
|
| Interest cost on APBO | | 3,130 |
| | 4,078 |
| | 859 |
| | 652 |
| | 1,342 |
| | 628 |
|
| Expected return on assets | | (4,798 | ) | | — |
| | (1,542 | ) | | (1,201 | ) | | (2,588 | ) | | (911 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (610 | ) | | (1,867 | ) | | (229 | ) | | (177 | ) | | (681 | ) | | (366 | ) |
| Amortization of loss | | 1,339 |
| | 1,780 |
| | 215 |
| | 118 |
| | 685 |
| | 300 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| $800 |
| |
| $6,465 |
| |
| ($190 | ) | |
| ($403 | ) | |
| ($742 | ) | |
| $121 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reclassification out of Accumulated Other Comprehensive Income (Loss) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $978 |
| |
| $1,869 |
| |
| $386 |
| |
| $156 |
| |
| $398 |
| |
| $334 |
|
| Interest cost on APBO | | 2,324 |
| | 3,260 |
| | 709 |
| | 448 |
| | 1,039 |
| | 529 |
|
| Expected return on assets | | (4,464 | ) | | — |
| | (1,379 | ) | | (1,154 | ) | | (2,394 | ) | | (814 | ) |
| Amortization of prior service credit | | (1,368 | ) | | (1,947 | ) | | (234 | ) | | (186 | ) | | (681 | ) | | (393 | ) |
| Amortization of loss | | 1,064 |
| | 731 |
| | 223 |
| | 37 |
| | 537 |
| | 287 |
|
| Net other postretirement benefit cost | |
| ($1,466 | ) | |
| $3,913 |
| |
| ($295 | ) | |
| ($699 | ) | |
| ($1,101 | ) | |
| ($57 | ) |
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the first quarters of 20162017 and 2015:2016:
| | | 2016 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total | |
| 2017 | |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($270 | ) |
|
| $7,738 |
|
|
| ($113 | ) |
|
| $7,355 |
|
|
| ($65 | ) |
|
| $6,717 |
|
|
| ($90 | ) |
|
| $6,562 |
|
| Amortization of loss |
| (12,482 | ) |
| (2,063 | ) |
| (630 | ) |
| (15,175 | ) |
| (18,450 | ) |
| (2,202 | ) |
| (919 | ) |
| (21,571 | ) |
|
|
| ($12,752 | ) |
|
| $5,675 |
|
|
| ($743 | ) |
|
| ($7,820 | ) |
|
| ($18,515 | ) |
|
| $4,515 |
|
|
| ($1,009 | ) |
|
| ($15,009 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $1,947 |
|
|
| $— |
|
|
| $1,947 |
|
|
| $— |
|
|
| $1,934 |
|
|
| $— |
|
|
| $1,934 |
|
| Amortization of loss |
| (836 | ) |
| (731 | ) |
| (2 | ) |
| (1,569 | ) |
| (865 | ) |
| (465 | ) |
| (2 | ) |
| (1,332 | ) |
|
|
| ($836 | ) |
|
| $1,216 |
|
|
| ($2 | ) |
|
| $378 |
|
|
| ($865 | ) |
|
| $1,469 |
|
|
| ($2 | ) |
|
| $602 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 2015 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total | |
| 2016 | | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | | | (In Thousands) | | |
| Entergy | | | | | | | | | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($389 | ) | |
| $6,482 |
| |
| ($107 | ) | |
| $5,986 |
| |
| ($270 | ) | |
| $7,738 |
| |
| ($113 | ) | |
| $7,355 |
|
| Amortization of loss | | (12,627 | ) | | (4,409 | ) | | (552 | ) | | (17,588 | ) | | (12,482 | ) | | (2,063 | ) | | (630 | ) | | (15,175 | ) |
| | |
| ($13,016 | ) | |
| $2,073 |
| |
| ($659 | ) | |
| ($11,602 | ) | |
| ($12,752 | ) | |
| $5,675 |
| |
| ($743 | ) | |
| ($7,820 | ) |
| Entergy Louisiana | | | | | | | | | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $1,867 |
| |
| $— |
| |
| $1,867 |
| |
| $— |
| |
| $1,947 |
| |
| $— |
| |
| $1,947 |
|
| Amortization of loss | | (751 | ) | | (1,779 | ) | | (5 | ) | | (2,535 | ) | | (836 | ) | | (731 | ) | | (2 | ) | | (1,569 | ) |
| | |
| ($751 | ) | |
| $88 |
| |
| ($5 | ) | |
| ($668 | ) | |
| ($836 | ) | |
| $1,216 |
| |
| ($2 | ) | |
| $378 |
|
Employer Contributions
Based on current assumptions, Entergy expects to contribute $387.5$409.9 million to its qualified pension plans in 2016.2017. As of March 31, 2016,2017, Entergy had contributed $88.2$84.2 million to its pension plans. Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their employees in 2016:2017:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2016 pension contributions |
| $82,831 |
| |
| $83,909 |
| |
| $19,913 |
| |
| $10,694 |
| |
| $15,770 |
| |
| $20,206 |
|
| Pension contributions made through March 2016 |
| $19,494 |
| |
| $20,195 |
| |
| $4,946 |
| |
| $2,434 |
| |
| $3,798 |
| |
| $4,613 |
|
| Remaining estimated pension contributions to be made in 2016 |
| $63,337 |
| |
| $63,714 |
| |
| $14,967 |
| |
| $8,260 |
| |
| $11,972 |
| |
| $15,593 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2017 pension contributions |
| $79,495 |
| |
| $87,923 |
| |
| $19,146 |
| |
| $9,920 |
| |
| $17,064 |
| |
| $18,180 |
|
| Pension contributions made through March 2017 |
| $17,265 |
| |
| $17,591 |
| |
| $4,027 |
| |
| $2,273 |
| |
| $3,294 |
| |
| $4,500 |
|
| Remaining estimated pension contributions to be made in 2017 |
| $62,230 |
| |
| $70,332 |
| |
| $15,119 |
| |
| $7,647 |
| |
| $13,770 |
| |
| $13,680 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation
Entergy’s reportable segments as of March 31, 20162017 are Utility and Entergy Wholesale Commodities. Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas utility service in portions of Louisiana.distribution business. Entergy Wholesale Commodities 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 includes the ownership ofprovides 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. “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy’s segment financial information for the first quarters of 2016 and 2015 is as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) |
| 2016 | | | | | | | | | | |
| Operating revenues | |
| $2,087,793 |
| |
| $522,079 |
| |
| $— |
| |
| ($20 | ) | |
| $2,609,852 |
|
| Income taxes | |
| $107,836 |
| |
| $52,314 |
| |
| ($20,205 | ) | |
| $— |
| |
| $139,945 |
|
| Consolidated net income (loss) | |
| $199,651 |
| |
| $79,557 |
| |
| ($12,067 | ) | |
| ($31,899 | ) | |
| $235,242 |
|
| 2015 | | | | | | | | | | |
| Operating revenues | |
| $2,277,510 |
| |
| $642,590 |
| |
| $— |
| |
| ($10 | ) | |
| $2,920,090 |
|
| Income taxes | |
| $91,251 |
| |
| $70,190 |
| |
| ($10,970 | ) | |
| $— |
| |
| $150,471 |
|
| Consolidated net income (loss) | |
| $227,750 |
| |
| $123,432 |
| |
| ($16,354 | ) | |
| ($31,899 | ) | |
| $302,929 |
|
Businesses marked with * are
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s segment financial information for the first quarters of 2017 and 2016 is as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) |
| 2017 | | | | | | | | | | |
| Operating revenues | |
| $2,035,112 |
| |
| $553,367 |
| |
| $— |
| |
| ($21 | ) | |
| $2,588,458 |
|
| Income taxes | |
| $98,492 |
| |
| ($78,337 | ) | |
| ($12,392 | ) | |
| $— |
| |
| $7,763 |
|
| Consolidated net income (loss) | |
| $167,623 |
| |
| ($27,197 | ) | |
| ($22,477 | ) | |
| ($31,898 | ) | |
| $86,051 |
|
| Total assets as of March 31, 2017 | |
| $41,194,179 |
| |
| $6,018,217 |
| |
| $1,242,423 |
| |
| ($3,136,613 | ) | |
| $45,318,206 |
|
| 2016 | | | | | | | | | | |
| Operating revenues | |
| $2,087,793 |
| |
| $522,079 |
| |
| $— |
| |
| ($20 | ) | |
| $2,609,852 |
|
| Income taxes | |
| $107,836 |
| |
| $52,314 |
| |
| ($20,205 | ) | |
| $— |
| |
| $139,945 |
|
| Consolidated net income (loss) | |
| $199,651 |
| |
| $79,557 |
| |
| ($12,067 | ) | |
| ($31,899 | ) | |
| $235,242 |
|
| Total assets as of December 31, 2016 | |
| $41,098,751 |
| |
| $6,696,038 |
| |
| $1,283,816 |
| |
| ($3,174,171 | ) | |
| $45,904,434 |
|
The Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions in 2016. Additional restructuring charges in the first quarter of 2017 were comprised of the following:
|
| | | | | | | | | | | |
| | Employee retention and severance expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of January 1, 2017 |
| $70 |
| |
| $21 |
| |
| $91 |
|
| Restructuring costs accrued | 24 |
| | — |
| | 24 |
|
| Balance as of March 31, 2017 |
| $94 |
| |
| $21 |
| |
| $115 |
|
In addition, Entergy incurred $212 million of impairment charges in the first quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged directly to expense 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.
Registrant Subsidiaries
Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business. Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.
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 and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.
Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.
Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at March 31, 20162017 is approximately 2 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 88%86% for the remainder of 2016,2017, of which approximately 60% 59%
Entergy Corporation and Subsidiaries
Notes to Financial Statements
is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 20162017 is 2519.9 TWh.
Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Certain 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 whendepending on the current market prices exceedmark-to-market values of the contracted power prices.contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of March 31, 2016, there were no2017, derivative contracts with counterparties in a liability position. Letters of credit in the amount of $66 million were required to be posted by its counterparties to the Entergy subsidiary as of March 31, 2016. As of December 31, 2015, derivative contracts with twothree counterparties were in a liability position (approximately $2$13 million total). In addition to the corporate guarantee, $9$1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $68$3 million in cash collateral was required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2016, derivative contracts with three counterparties were in a liability position (approximately $8 million total). In addition to the corporate guarantee, $2 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is typically ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures. These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy Louisiana and Entergy New Orleans. The total volume of natural gas swaps outstanding as of March 31, 20162017 is 57,500,00059,830,000 MMBtu for Entergy, including 46,330,00050,230,000 MMBtu for Entergy Louisiana and 11,170,0009,600,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.
During the second quarter 2015,2016, Entergy participated in the annual FTRfinancial transmission rights auction process for the MISO planning year of June 1, 20152016 through May 31, 2016. FTRs2017. Financial transmission rights are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records FTRsfinancial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on FTRsfinancial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on FTRs.financial transmission rights. The total volume of FTRsfinancial transmission rights outstanding as of March 31, 20162017 is 18,30518,365 GWh for Entergy, including 3,8944,197 GWh for Entergy Arkansas, 8,3857,669 GWh for Entergy Louisiana, 2,4363,142 GWh for Entergy Mississippi, 1,398883 GWh for Entergy New Orleans, and 2,0862,434 GWh for Entergy Texas. Credit support for FTRsfinancial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for FTRsfinancial transmission rights held by Entergy Wholesale Commodities is covered by cash. As of March 31, 2016, letters of credit posted with MISO covered the FTR exposure for Entergy Mississippi. No cash collateral was required to be posted for FTR exposure for the Utility operating companies or Entergy Wholesale Commodities. As of December 31, 2015, no cash or letters of credit were required to be posted for FTRfinancial transmission rights exposure for the Utility operating companies or Entergy Wholesale Commodities as of March 31, 2017 and December 31, 2016, respectively. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas and Entergy Mississippi as of March 31, 2017 and December 31, 2016, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2017 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $13 | | ($13) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $16 | | ($9) | | $7 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $24 | | ($14) | | $10 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $13 | | ($9) | | $4 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $20 | | ($5) | | $15 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $2 | | ($1) | | $1 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Prepayments and other | | $5 | | $— | | $5 | | Utility |
| Financial transmission rights | | Prepayments and other | | $9 | | ($1) | | $8 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $8 | | ($4) | | $4 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $2 | | ($2) | | $— | | Entergy Wholesale Commodities |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2016 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $120 | | ($26) | | $94 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $20 | | ($1) | | $19 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $94 | | ($24) | | $70 | | Entergy Wholesale Commodities |
| FTRs | | Prepayments and other | | $9 | | $— | | $9 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $49 | | ($49) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $9 | | $— | | $9 | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2015 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | | Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | (In Millions) | | | (In Millions) | |
| Derivatives designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $173 | | ($34) | | $139 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $25 | | ($14) | | $11 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $17 | | ($2) | | $15 | | Entergy Wholesale Commodities | | Other deferred debits and other assets (non-current portion) | | $6 | | ($6) | | $— | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $14 | | ($14) | | $— | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $11 | | ($10) | | $1 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $2 | | ($2) | | $— | | Entergy Wholesale Commodities | | Other non-current liabilities (non-current portion) | | $16 | | ($7) | | $9 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $54 | | ($13) | | $41 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $18 | | ($13) | | $5 | | Entergy Wholesale Commodities |
| FTRs | | Prepayments and other | | $24 | | ($1) | | $23 | | Utility and Entergy Wholesale Commodities | |
| Electricity swaps and options | | | Other deferred debits and other assets (non-current portion) | | $5 | | ($5) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | | Prepayments and other | | $13 | | $— | | $13 | | Utility |
| Financial transmission rights | | | Prepayments and other | | $22 | | ($1) | | $21 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $38 | | ($32) | | $6 | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $18 | | ($17) | | $1 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $9 | | $— | | $9 | | Utility | |
| Electricity swaps and options | | | Other non-current liabilities (non-current portion) | | $4 | | ($4) | | $— | | Entergy Wholesale Commodities |
| |
| (a) | Represents the gross amounts of recognized assets/liabilities |
| |
| (b) | Represents the netting of fair value balances with the same counterparty |
| |
| (c) | Represents the net amounts of assets /liabilitiesassets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance SheetsSheet |
| |
| (d) | Excludes cash collateral in the amount of $9$1 million posted and $68 million held as of December 31, 2015. There was no cash collateral required to be posted as of March 31, 2016. Also excludes letters of credit in the amount of $0.4 million posted and $66$3 million held as of March 31, 2017 and $2 million posted as of December 31, 2016. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements of operations for the three months ended March 31, 20162017 and 20152016 are as follows:
| | | Instrument | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain (loss) reclassified from AOCI into income (a) | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a) |
| | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| 2017 | | |
| Electricity swaps and options | | | $50 | | Competitive businesses operating revenues | | $51 |
| | | |
| 2016 | | |
| Electricity swaps and options | | $139 | | Competitive businesses operating revenues | | $154 | | $139 | | Competitive businesses operating revenues | | $154 |
| | | |
| 2015 | | |
| Electricity swaps and options | | ($32) | | Competitive businesses operating revenues | | $14 | |
| |
| (a) | Before taxes of $54$18 million and $5$54 million for the three months ended March 31, 20162017 and 2015,2016, respectively |
At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended March 31, 20162017 and 20152016 was ($1) million and ($1) million, respectively.
Based on market prices as of March 31, 2016, net2017, unrealized gains recorded in AOCI on cash flow hedges relating to power sales totaled $152 million.$8 million of net unrealized gains. Approximately $134$5 million is expected to be reclassified from AOCI to operating revenues in the next twelve months. The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.
Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements of operations for the three months ended March 31, 20162017 and 20152016 are as follows:
|
| | | | | | |
| Instrument |
| Amount of gain (loss) recognized in AOCI |
| Income Statement
location |
| Amount of gain (loss)
recorded in the income statement |
| | | (In Millions) | | | | (In Millions) |
| 2016 | |
| | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($24) |
| FTRs |
| $— |
| Purchased power expense | (b) | $21 |
| Electricity swaps and options de-designated as hedged items | | $25 | | Competitive business operating revenues | | $— |
| | | | | | | |
| 2015 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($19) |
| FTRs | | $— | | Purchased power expense | (b) | $33 |
| Electricity swaps and options de-designated as hedged items | | $4 | | Competitive business operating revenues | | ($34) |
|
| | | | | | |
| Instrument |
| Amount of gain (loss) recognized in accumulated other comprehensive income |
| Income Statement
location |
| Amount of gain (loss)
recorded in the income statement |
| | (In Millions) | | | | (In Millions) |
| 2017 | |
| | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($7) |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $30 |
| Electricity swaps and options | | $9 | (c) | Competitive business operating revenues | | $— |
| | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($24) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $21 |
| Electricity swaps and options | | $25 | (c) | Competitive business operating revenues | | $— |
| |
| (a) | Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (b) | Due to regulatory treatment, the changes in the estimated fair value of FTRsfinancial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the FTRsfinancial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (c) | Amount of gain (loss) recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31, 2017 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
| Assets: | | | | | | |
| Natural gas swaps | | Prepayments and other | | $3.8 | | Entergy Louisiana |
| Natural gas swaps | | Prepayments and other | | $0.7 | | Entergy Mississippi |
| | | | | | |
| Financial transmission rights | | Prepayments and other | | $0.9 | | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | | $4.1 | | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | | $1.3 | | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | | $0.5 | | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | | $1.0 | | Entergy Texas |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2016 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | | (In Millions) | | |
| Assets: | | | | | | |
FTRsNatural gas swaps | | Prepayments and other | | $3.710.9 | | Entergy ArkansasLouisiana |
FTRsNatural gas swaps | | Prepayments and other | | $3.32.3 | | Entergy LouisianaMississippi |
FTRsNatural gas swaps | | Prepayments and other | | $0.9 | | Entergy Mississippi |
FTRs | | Prepayments and other | | $0.60.2 | | Entergy New Orleans |
FTRs | | Prepayments and other | | $0.9 | | Entergy Texas |
| | | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $7.6 | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $1.8 | | Entergy Mississippi |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2015 are as follows:
|
| | | | | | |
Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
Assets: | | | | | | |
FTRsFinancial transmission rights | | Prepayments and other | | $7.95.4 | | Entergy Arkansas |
FTRsFinancial transmission rights | | Prepayments and other | | $8.5 | | Entergy Louisiana |
FTRsFinancial transmission rights | | Prepayments and other | | $2.43.2 | | Entergy Mississippi |
FTRsFinancial transmission rights | | Prepayments and other | | $1.51.1 | | Entergy New Orleans |
FTRsFinancial transmission rights | | Prepayments and other | | $2.23.1 | | Entergy Texas |
| | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $7.0 | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $1.3 | | Entergy Mississippi |
Natural gas swaps | | Other current liabilities | | $0.5 | | Entergy New Orleans |
| |
| (a) | ExcludesAs of March 31, 2017, letters of credit in the amountposted with MISO covered financial transmission rights exposure of $0.4$0.2 million posted byfor Entergy Mississippi asArkansas and $0.1 million for Entergy Mississippi. As of March 31, 2016. No cash collateral was required to be posted as of MarchDecember 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and December 31, 2015, respectively.$0.1 million for Entergy Mississippi. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended March 31, 20162017 and 20152016 are as follows:
|
| | | | | | |
| Instrument |
| Income Statement Location |
| Amount of gain
(loss) recorded
in the income statement |
| Registrant |
| | | | | (In Millions) | | |
| 2017 | | | |
| | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($6.1) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($1.1) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.1) | (a) | Entergy New Orleans |
| | | | | | |
| Financial transmission rights | | Purchased power expense | | $4.6 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $15.2 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $3.1 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $2.4 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $5.3 | (b) | Entergy Texas |
| | | | | | |
| 2016 | | | |
| | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($19.3) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.1) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.5) | (a) | Entergy New Orleans |
| | | | | | | |
FTRsFinancial transmission rights | | Purchased power expense | | $7.8 | (b) | Entergy Arkansas |
FTRsFinancial transmission rights | | Purchased power expense | | $10.5 | (b) | Entergy Louisiana |
FTRsFinancial transmission rights | | Purchased power expense | | $0.8 | (b) | Entergy Mississippi |
FTRsFinancial transmission rights | | Purchased power expense | | $0.5 | (b) | Entergy New Orleans |
FTRsFinancial transmission rights | | Purchased power expense | | $1.5 | (b) | Entergy Texas |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($16.0) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($3.0) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.5) | (a) | Entergy New Orleans |
| | | | | | |
FTRs | | Purchased power expense | | $15.1 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $14.5 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $3.3 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $1.6 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | ($1.4) | (b) | Entergy Texas |
| |
| (a) | Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (b) | Due to regulatory treatment, the changes in the estimated fair value of FTRsfinancial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the FTRs for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.
Effective first quarter 2016, Entergy retrospectively adopted ASU 2015-07, which simplifies the disclosure for fair value investments by removing the requirement to categorize within the fair value hierarchy investment for which fair value is measured using the net asset value per share as a practical expedient. For all periods presented the common trust funds have not been assigned a level and are presented within the fair value tables only as a reconciling item to the total fair value of investments.
The three levels of the fair value hierarchy are:
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas hedge contracts. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability; or
| |
-– | quoted prices for similar assets or liabilities in active markets; |
| |
| – | quoted prices for identical assets or liabilities in inactive markets; |
| |
| – | inputs other than quoted prices that are observable for the asset or liability; or |
| |
| – | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 2 consists primarily of individually-owned debt instruments.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best
Entergy Corporation and Subsidiaries
Notes to Financial Statements
estimate of fair value for the asset or liability. Level 3 consists primarily of FTRsfinancial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Entergy Wholesale CommoditiesBusiness Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group. The primary functions of the Entergy Wholesale CommoditiesBusiness Unit Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Business Unit Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Accounting Policy and Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Entergy Wholesale CommoditiesBusiness Unit Risk Control group reports to the Vice President and Treasurer while the Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.
On a daily basis, Entergy Wholesale Commoditiesthe Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options. Entergy Wholesale CommoditiesThe Business Unit Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and uses multiplecompared with other sources of market implied volatilities. Moreover, on at least a monthly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis. The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects are calculated for this analysis. This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The values of FTRsfinancial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the
Entergy Wholesale CommoditiesCorporation and Subsidiaries
Notes to Financial Statements
Business Unit Risk Control group for the unregulated business and by the System Planning and Operations Risk Control group for the Utility operating companies.group. The values are calculated internally and verified against the data published by MISO. Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk Control groups report to the Vice President and Treasurer. The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 20162017 and December 31, 2015.2016. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect theirits placement within the fair value hierarchy levels.
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $1,010 |
| |
| $— |
| |
| $— |
| |
| $1,010 |
| |
| $1,022 |
| |
| $— |
| |
| $— |
| |
| $1,022 |
|
| Funds held on deposit | | 197 |
| | — |
| | — |
| | 197 |
| |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 446 |
| | — |
| | — |
| | 446 |
| | 512 |
| | — |
| | — |
| | 512 |
|
| Debt securities | | 1,060 |
| | 1,189 |
| | — |
| | 2,249 |
| | 966 |
| | 1,264 |
| | — |
| | 2,230 |
|
| Common trusts (b) | | | | | | | | 2,757 |
| | | | | | | | 3,927 |
|
| Power contracts | | — |
| | — |
| | 183 |
| | 183 |
| | — |
| | — |
| | 23 |
| | 23 |
|
| Securitization recovery trust account | | 52 |
| | — |
| | — |
| | 52 |
| | 47 |
| | — |
| | — |
| | 47 |
|
| Escrow accounts | | 454 |
| | — |
| | — |
| | 454 |
| | 415 |
| | — |
| | — |
| | 415 |
|
| FTRs | | — |
| | — |
| | 9 |
| | 9 |
| |
| Gas hedge contracts | | | 5 |
| | — |
| | — |
| | 5 |
|
| Financial transmission rights | | | — |
| | — |
| | 8 |
| | 8 |
|
| | |
| $3,219 |
| |
| $1,189 |
| |
| $192 |
| |
| $7,357 |
| |
| $2,967 |
| |
| $1,264 |
| |
| $31 |
| |
| $8,189 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $9 |
| |
| $— |
| |
| $— |
| |
| $9 |
| |
| Power contracts | | |
| $— |
| |
| $— |
| |
| $18 |
| |
| $18 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $1,287 |
| |
| $— |
| |
| $— |
| |
| $1,287 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 468 |
| | — |
| | — |
| | 468 |
|
| Debt securities | | 1,061 |
| | 1,094 |
| | — |
| | 2,155 |
|
| Common trusts (b) | | | | | | | | 2,727 |
|
| Power contracts | | — |
| | — |
| | 195 |
| | 195 |
|
| Securitization recovery trust account | | 50 |
| | — |
| | — |
| | 50 |
|
| Escrow accounts | | 425 |
| | — |
| | — |
| | 425 |
|
| FTRs | | — |
| | — |
| | 23 |
| | 23 |
|
| | |
| $3,291 |
| |
| $1,094 |
| |
| $218 |
| |
| $7,330 |
|
| Liabilities: | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $6 |
| |
| $6 |
|
| Gas hedge contracts | | 9 |
| | — |
| | — |
| | 9 |
|
| | |
| $9 |
| |
| $— |
| |
| $6 |
| |
| $15 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $1,058 |
| |
| $— |
| |
| $— |
| |
| $1,058 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 480 |
| | — |
| | — |
| | 480 |
|
| Debt securities | | 985 |
| | 1,228 |
| | — |
| | 2,213 |
|
| Common trusts (b) | | | | | | | | 3,031 |
|
| Power contracts | | — |
| | — |
| | 16 |
| | 16 |
|
| Securitization recovery trust account | | 46 |
| | — |
| | — |
| | 46 |
|
| Escrow accounts | | 433 |
| | — |
| | — |
| | 433 |
|
| Gas hedge contracts | | 13 |
| | — |
| | — |
| | 13 |
|
| Financial transmission rights | | — |
| | — |
| | 21 |
| | 21 |
|
| | |
| $3,015 |
| |
| $1,228 |
| |
| $37 |
| |
| $7,311 |
|
| Liabilities: | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $11 |
| |
| $11 |
|
| |
| (a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements for additional information on the investment portfolios. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value (NAV) as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the NAVnet asset value and trades settle at a later date. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| (In Millions) | (In Millions) |
| Balance as of January 1, |
| $189 |
| |
| $23 |
| |
| $215 |
| |
| $47 |
|
| $5 |
| |
| $21 |
| |
| $189 |
| |
| $23 |
|
| Total gains (losses) for the period (a) | | | | | | | | | | | | | | |
| Included in earnings | — |
| | — |
| | (35 | ) | | — |
| |
| Included in OCI | 139 |
| | — |
| | (26 | ) | | — |
| 50 |
| | — |
| | 139 |
| | — |
|
| Included as a regulatory liability/asset | �� |
| | 7 |
| | — |
| | 1 |
| — |
| | 17 |
| | — |
| | 7 |
|
| Purchases | — |
| | — |
| | 10 |
| | — |
| |
| Settlements | (145 | ) | | (21 | ) | | (19 | ) | | (33 | ) | (50 | ) | | (30 | ) | | (145 | ) | | (21 | ) |
| Balance as of March 31, |
| $183 |
| |
| $9 |
| |
| $145 |
| |
| $15 |
|
| $5 |
| |
| $8 |
| |
| $183 |
| |
| $9 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.4 million for the three months ended March 31, 2017 and $6 million for the three months ended March 31, 2016 and ($87) million for the three months ended March 31, 2015.2016. |
The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of March 31, 2016:2017:
| | | Transaction Type | | Fair Value as of March 31, 2016 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value | | Fair Value as of March 31, 2017 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| Power contracts - electricity swaps | | $149 | | Unit contingent discount | | +/- | 3% | | $7 | | $5 | | Unit contingent discount | | +/- | 4% | | $1 |
| Power contracts - electricity options | | $34 | | Implied volatility | | +/- | 30% | | $10 | |
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
|
| | | | | | | | |
Significant Unobservable Input | | Transaction Type | | Position | | Change to Input | | Effect on Fair Value |
| Unit contingent discount | | Electricity swaps | | Sell | | Increase (Decrease) | | Decrease (Increase) |
| Implied volatility | | Electricity options | | Sell | | Increase (Decrease) | | Increase (Decrease) |
| Implied volatility | | Electricity options | | Buy | | Increase (Decrease) | | Increase (Decrease) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of March 31, 20162017 and December 31, 2015.2016. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $13.4 |
| |
| $— |
| |
| $— |
| |
| $13.4 |
| |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 5.2 |
| | — |
| | — |
| | 5.2 |
| |
| $6.1 |
| |
| $— |
| |
| $— |
| |
| $6.1 |
|
| Debt securities | | 102.3 |
| | 208.9 |
| | — |
| | 311.2 |
| | 106.7 |
| | 203.3 |
| | — |
| | 310.0 |
|
| Common trusts (b) | | | | | | | | 469.1 |
| | | | | | | | 551.6 |
|
| Securitization recovery trust account | | 7.6 |
| | — |
| | — |
| | 7.6 |
| | 7.8 |
| | — |
| | — |
| | 7.8 |
|
| Escrow accounts | | 19.3 |
| | — |
| | — |
| | 19.3 |
| | 4.7 |
| | — |
| | — |
| | 4.7 |
|
| FTRs | | — |
| | — |
| | 3.7 |
| | 3.7 |
| |
| Financial transmission rights | | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $147.8 |
| |
| $208.9 |
| |
| $3.7 |
| |
| $829.5 |
| |
| $125.3 |
| |
| $203.3 |
| |
| $0.9 |
| |
| $881.1 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | |
| $3.0 |
| |
| $— |
| |
| $— |
| |
| $3.0 |
| |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 110.5 |
| | 193.4 |
| | — |
| | 303.9 |
| | 112.5 |
| | 196.8 |
| | — |
| | 309.3 |
|
| Common trusts (b) | | | | | | | | 464.4 |
| | | | | | | | 521.8 |
|
| Securitization recovery trust account | | 4.2 |
| | — |
| | — |
| | 4.2 |
| | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Escrow accounts | | 12.2 |
| | — |
| | — |
| | 12.2 |
| | 7.1 |
| | — |
| | — |
| | 7.1 |
|
| FTRs | | — |
| | — |
| | 7.9 |
| | 7.9 |
| |
| Financial transmission rights | | | — |
| | — |
| | 5.4 |
| | 5.4 |
|
| | |
| $129.9 |
| |
| $193.4 |
| |
| $7.9 |
| |
| $795.6 |
| |
| $127.3 |
| |
| $196.8 |
| |
| $5.4 |
| |
| $851.3 |
|
Entergy Louisiana
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $100.0 |
| |
| $— |
| |
| $— |
| |
| $100.0 |
| |
| $64.7 |
| |
| $— |
| |
| $— |
| |
| $64.7 |
|
| Funds held on deposit | | 196.6 |
| | — |
| | — |
| | 196.6 |
| |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 8.5 |
| | — |
| | — |
| | 8.5 |
| | 7.6 |
| | — |
| | — |
| | 7.6 |
|
| Debt securities | | 154.5 |
| | 267.7 |
| | — |
| | 422.2 |
| | 132.0 |
| | 307.5 |
| | — |
| | 439.5 |
|
| Common trusts (b) | | | | | | | | 634.5 |
| | | | | | | | 743.0 |
|
| Escrow accounts | | 304.9 |
| | — |
| | — |
| | 304.9 |
| | 292.5 |
| | — |
| | — |
| | 292.5 |
|
| Securitization recovery trust account | | 8.7 |
| | — |
| | — |
| | 8.7 |
| | 8.4 |
| | — |
| | — |
| | 8.4 |
|
| FTRs | | — |
| | — |
| | 3.3 |
| | 3.3 |
| |
| Gas hedge contracts | | | 3.8 |
| | — |
| | — |
| | 3.8 |
|
| Financial transmission rights | | | — |
| | — |
| | 4.1 |
| | 4.1 |
|
| | |
| $773.2 |
| |
| $267.7 |
| |
| $3.3 |
| |
| $1,678.7 |
| |
| $509.0 |
| |
| $307.5 |
| |
| $4.1 |
| |
| $1,563.6 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $7.6 |
| |
| $— |
| |
| $— |
| |
| $7.6 |
| |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $34.8 |
| |
| $— |
| |
| $— |
| |
| $34.8 |
| |
| $163.9 |
| |
| $— |
| |
| $— |
| |
| $163.9 |
|
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Equity securities | | 7.1 |
| | — |
| | — |
| | 7.1 |
| | 13.9 |
| | — |
| | — |
| | 13.9 |
|
| Debt securities | | 161.1 |
| | 248.8 |
| | — |
| | 409.9 |
| | 132.3 |
| | 292.5 |
| | — |
| | 424.8 |
|
| Common trusts (b) | | | | | | | | 625.3 |
| | | | | | | | 702.0 |
|
| Escrow accounts | | 290.4 |
| | — |
| | — |
| | 290.4 |
| | 305.7 |
| | — |
| | — |
| | 305.7 |
|
| Securitization recovery trust account | | 3.2 |
| | — |
| | — |
| | 3.2 |
| | 2.8 |
| | — |
| | — |
| | 2.8 |
|
| FTRs | | — |
| | — |
| | 8.5 |
| | 8.5 |
| |
| Gas hedge contracts | | | 10.9 |
| | — |
| | — |
| | 10.9 |
|
| Financial transmission rights | | | — |
| | — |
| | 8.5 |
| | 8.5 |
|
| | |
| $496.6 |
| |
| $248.8 |
| |
| $8.5 |
| |
| $1,379.2 |
| |
| $629.5 |
| |
| $292.5 |
| |
| $8.5 |
| |
| $1,632.5 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $7.0 |
| |
| $— |
| |
| $— |
| |
| $7.0 |
| |
Entergy Mississippi
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $112.7 |
| |
| $— |
| |
| $— |
| |
| $112.7 |
|
| Escrow accounts | | 41.8 |
| | — |
| | — |
| | 41.8 |
|
| FTRs | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $154.5 |
| |
| $— |
| |
| $0.9 |
| |
| $155.4 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $1.8 |
| |
| $— |
| |
| $— |
| |
| $1.8 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Escrow accounts | |
| $31.8 |
| |
| $— |
| |
| $— |
| |
| $31.8 |
|
| Gas hedge contracts | | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| Financial transmission rights | | — |
| | — |
| | 1.3 |
| | 1.3 |
|
| | |
| $32.5 |
| |
| $— |
| |
| $1.3 |
| |
| $33.8 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $144.2 |
| |
| $— |
| |
| $— |
| |
| $144.2 |
|
| Escrow accounts | | 41.7 |
| | — |
| | — |
| | 41.7 |
|
| FTRs | | — |
| | — |
| | 2.4 |
| | 2.4 |
|
| | |
| $185.9 |
| |
| $— |
| |
| $2.4 |
| |
| $188.3 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $1.3 |
| |
| $— |
| |
| $— |
| |
| $1.3 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $76.8 |
| |
| $— |
| |
| $— |
| |
| $76.8 |
|
| Escrow accounts | | 31.8 |
| | — |
| | — |
| | 31.8 |
|
| Gas hedge contracts | | 2.3 |
| | — |
| | — |
| | 2.3 |
|
| Financial transmission rights | | — |
| | — |
| | 3.2 |
| | 3.2 |
|
| | |
| $110.9 |
| |
| $— |
| |
| $3.2 |
| |
| $114.1 |
|
Entergy New Orleans
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $5.3 |
| |
| $— |
| |
| $— |
| |
| $5.3 |
|
| Securitization recovery trust account | | 7.4 |
| | — |
| | — |
| | 7.4 |
|
| Escrow accounts | | 88.2 |
| | — |
| | — |
| | 88.2 |
|
| FTRs | | — |
| | — |
| | 0.6 |
| | 0.6 |
|
| | |
| $100.9 |
| |
| $— |
| |
| $0.6 |
| |
| $101.5 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $87.8 |
| |
| $— |
| |
| $— |
| |
| $87.8 |
|
| Securitization recovery trust account | | 4.6 |
| | — |
| | — |
| | 4.6 |
|
| Escrow accounts | | 81.0 |
| | — |
| | — |
| | 81.0 |
|
| FTRs | | — |
| | — |
| | 1.5 |
| | 1.5 |
|
| | |
| $173.4 |
| |
| $— |
| |
| $1.5 |
| |
| $174.9 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $0.5 |
| |
| $— |
| |
| $— |
| |
| $0.5 |
|
Entergy Texas
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $64.8 |
| |
| $— |
| |
| $— |
| |
| $64.8 |
|
| Securitization recovery trust account | | 27.9 |
| | — |
| | — |
| | 27.9 |
|
| FTRs | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $92.7 |
| |
| $— |
| |
| $0.9 |
| |
| $93.6 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
Assets: | | | | | | | | | |
| Assets: | | | | | | | | | |
| Temporary cash investments | | |
| $55.0 |
| |
| $— |
| |
| $— |
| |
| $55.0 |
|
| Securitization recovery trust account | |
| $38.2 |
| |
| $— |
| |
| $— |
| |
| $38.2 |
| | 4.6 |
| | — |
| | — |
| | 4.6 |
|
| FTRs | | — |
| | — |
| | 2.2 |
| | 2.2 |
| |
| Escrow accounts | | | 86.3 |
| | — |
| | — |
| | 86.3 |
|
| Financial transmission rights | | | — |
| | — |
| | 0.5 |
| | 0.5 |
|
| | |
| $38.2 |
| |
| $— |
| |
| $2.2 |
| |
| $40.4 |
| |
| $145.9 |
| |
| $— |
| |
| $0.5 |
| |
| $146.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $255.0 |
| |
| $— |
| |
| $— |
| |
| $255.0 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 2.1 |
| | — |
| | — |
| | 2.1 |
|
| Debt securities | | 232.6 |
| | 58.8 |
| | — |
| | 291.4 |
|
| Common trusts (b) | | | | | | | | 426.3 |
|
| | |
| $489.7 |
| |
| $58.8 |
| |
| $— |
| |
| $974.8 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $222.0 |
| |
| $— |
| |
| $— |
| |
| $222.0 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 1.8 |
| | — |
| | — |
| | 1.8 |
|
| Debt securities | | 218.6 |
| | 59.2 |
| | — |
| | 277.8 |
|
| Common trusts (b) | | | | | | | | 421.9 |
|
| | |
| $442.4 |
| |
| $59.2 |
| |
| $— |
| |
| $923.5 |
|
| |
(a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements for additional information on the investment portfolios. |
| |
(b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value (NAV) as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the NAV and trades settle at a later date. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $7.9 |
| |
| $8.5 |
| |
| $2.4 |
| |
| $1.5 |
| |
| $2.2 |
|
| Gains (losses) included as a regulatory liability/asset | 3.6 |
| | 5.3 |
| | (0.7 | ) | | (0.4 | ) | | 0.2 |
|
| Settlements | (7.8 | ) | | (10.5 | ) | | (0.8 | ) | | (0.5 | ) | | (1.5 | ) |
| Balance as of March 31, |
| $3.7 |
| |
| $3.3 |
| |
| $0.9 |
| |
| $0.6 |
| |
| $0.9 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2015.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $0.7 |
| |
| $25.5 |
| |
| $3.4 |
| |
| $4.1 |
| |
| $12.3 |
|
| Gains (losses) included as a regulatory liability/asset | 15.0 |
| | (2.2 | ) | | 0.8 |
| | (1.1 | ) | | (10.3 | ) |
| Settlements | (15.1 | ) | | (14.5 | ) | | (3.3 | ) | | (1.6 | ) | | 1.4 |
|
| Balance as of March 31, |
| $0.6 |
| |
| $8.8 |
| |
| $0.9 |
| |
| $1.4 |
| |
| $3.4 |
|
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick). The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The securities held as of March 31, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,203 |
| |
| $1,638 |
| |
| $1 |
|
| Debt Securities | | 2,249 |
| | 78 |
| | 4 |
|
| Total | |
| $5,452 |
| |
| $1,716 |
| |
| $5 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2015 | | | | | | |
| Equity Securities | |
| $3,195 |
| |
| $1,396 |
| |
| $2 |
|
| Debt Securities | | 2,155 |
| | 41 |
| | 17 |
|
| Total | |
| $5,350 |
| |
| $1,437 |
| |
| $19 |
|
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $361 million and $342 million as of March 31, 2016 and December 31, 2015, respectively. The amortized cost of debt securities was $2,183 million as of March 31, 2016 and $2,124 million as of December 31, 2015. As of March 31, 2016, the debt securities have an average coupon rate of approximately 3.20%, an average duration of approximately 5.84 years, and an average maturity of approximately 8.91 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $38 |
| |
| $1 |
| |
| $196 |
| |
| $2 |
|
| More than 12 months | — |
| | — |
| | 73 |
| | 2 |
|
| Total |
| $38 |
| |
| $1 |
| |
| $269 |
| |
| $4 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $54 |
| |
| $2 |
| |
| $1,031 |
| |
| $15 |
|
| More than 12 months | 1 |
| | — |
| | 61 |
| | 2 |
|
| Total |
| $55 |
| |
| $2 |
| |
| $1,092 |
| |
| $17 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $98 |
| |
| $77 |
|
| 1 year - 5 years | 855 |
| | 857 |
|
| 5 years - 10 years | 711 |
| | 704 |
|
| 10 years - 15 years | 144 |
| | 124 |
|
| 15 years - 20 years | 58 |
| | 50 |
|
| 20 years+ | 383 |
| | 343 |
|
| Total |
| $2,249 |
| |
| $2,155 |
|
During the three months ended March 31, 2016 and 2015, proceeds from the dispositions of securities amounted to $729 million and $493 million, respectively. During the three months ended March 31, 2016 and 2015, gross gains of $10 million and $26 million, respectively, and gross losses of $3 million and $2 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings. |
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $103.0 |
| |
| $— |
| |
| $— |
| |
| $103.0 |
|
| Securitization recovery trust account | | 1.7 |
| | — |
| | — |
| | 1.7 |
|
| Escrow accounts | | 88.6 |
| | — |
| | — |
| | 88.6 |
|
| Gas hedge contracts | | 0.2 |
| | — |
| | — |
| | 0.2 |
|
| Financial transmission rights | | — |
| | — |
| | 1.1 |
| | 1.1 |
|
| | |
| $193.5 |
| |
| $— |
| |
| $1.1 |
| |
| $194.6 |
|
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2016 and December 31, 2015 are summarized as follows:Texas
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $474.3 |
| |
| $238.5 |
| |
| $0.2 |
|
| Debt Securities | | 311.2 |
| | 9.5 |
| | 0.8 |
|
| Total | |
| $785.5 |
| |
| $248.0 |
| |
| $1.0 |
|
| | | | | | | |
| 2015 | | | | | | |
| Equity Securities | |
| $467.4 |
| |
| $234.4 |
| |
| $0.2 |
|
| Debt Securities | | 303.9 |
| | 4.1 |
| | 2.2 |
|
| Total | |
| $771.3 |
| |
| $238.5 |
| |
| $2.4 |
|
The amortized cost of debt securities was $302 million as of March 31, 2016 and $301.8 million as of December 31, 2015. As of March 31, 2016, the debt securities have an average coupon rate of approximately 2.58%, an average duration of approximately 5.25 years, and an average maturity of approximately 6.16 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Securitization recovery trust account | |
| $26.3 |
| |
| $— |
| |
| $— |
| |
| $26.3 |
|
| Financial transmission rights | | — |
| | — |
| | 1.0 |
| | 1.0 |
|
| | |
| $26.3 |
| |
| $— |
| |
| $1.0 |
| |
| $27.3 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $5.0 |
| |
| $— |
| |
| $— |
| |
| $5.0 |
|
| Securitization recovery trust account | | 37.5 |
| | — |
| | — |
| | 37.5 |
|
| Financial transmission rights | | — |
| | — |
| | 3.1 |
| | 3.1 |
|
| | |
| $42.5 |
| |
| $— |
| |
| $3.1 |
| |
| $45.6 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $7.3 |
| |
| $0.2 |
| |
| $18.1 |
| |
| $0.4 |
|
| More than 12 months | — |
| | — |
| | 11.3 |
| | 0.4 |
|
| Total |
| $7.3 |
| |
| $0.2 |
| |
| $29.4 |
| |
| $0.8 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $7.8 |
| |
| $0.2 |
| |
| $111.4 |
| |
| $1.7 |
|
| More than 12 months | — |
| | — |
| | 18.5 |
| | 0.5 |
|
| Total |
| $7.8 |
| |
| $0.2 |
| |
| $129.9 |
| |
| $2.2 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $3.7 |
| |
| $1.8 |
|
| 1 year - 5 years | 142.0 |
| | 145.2 |
|
| 5 years - 10 years | 138.4 |
| | 138.5 |
|
| 10 years - 15 years | 7.5 |
| | 2.4 |
|
| 15 years - 20 years | 2.1 |
| | 2.0 |
|
| 20 years+ | 17.5 |
| | 14.0 |
|
| Total |
| $311.2 |
| |
| $303.9 |
|
During the three months endedMarch 31, 2016 and 2015, proceeds from the dispositions of securities amounted to $58.6 million and $81.9 million, respectively. During the three months ended March 31, 2016 and 2015, gross gains of $0.8 million and $5.1 million, respectively, and gross losses of $0.1 million and $1.3 thousand, respectively were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $643.0 |
| |
| $289.3 |
| |
| $0.1 |
|
| Debt Securities | | 422.2 |
| | 19.0 |
| | 0.8 |
|
| Total | |
| $1,065.2 |
| |
| $308.3 |
| |
| $0.9 |
|
| | | | | | | |
| 2015 | | | | | | |
| Equity Securities | |
| $632.4 |
| |
| $283.7 |
| |
| $0.2 |
|
| Debt Securities | | 409.9 |
| | 13.2 |
| | 2.4 |
|
| Total | |
| $1,042.3 |
| |
| $296.9 |
| |
| $2.6 |
|
The amortized cost of debt securities was $407 million as of March 31, 2016 and $399.2 million as of December 31, 2015. As of March 31, 2016, the debt securities have an average coupon rate of approximately 3.89%, an average duration of approximately 5.54 years, and an average maturity of approximately 10.24 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $8.6 |
| |
| $0.1 |
| |
| $24.0 |
| |
| $0.3 |
|
| More than 12 months | — |
| | — |
| | 11.0 |
| | 0.5 |
|
| Total |
| $8.6 |
| |
| $0.1 |
| |
| $35.0 |
| |
| $0.8 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $9.4 |
| |
| $0.2 |
| |
| $124.0 |
| |
| $2.0 |
|
| More than 12 months | — |
| | — |
| | 7.4 |
| | 0.4 |
|
| Total |
| $9.4 |
| |
| $0.2 |
| |
| $131.4 |
| |
| $2.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $31.9 |
| |
| $27.1 |
|
| 1 year - 5 years | 114.8 |
| | 124.0 |
|
| 5 years - 10 years | 121.2 |
| | 114.3 |
|
| 10 years - 15 years | 43.6 |
| | 39.3 |
|
| 15 years - 20 years | 29.7 |
| | 26.5 |
|
| 20 years+ | 81.0 |
| | 78.7 |
|
| Total |
| $422.2 |
| |
| $409.9 |
|
During the three months ended March 31, 2016 and 2015, proceeds from the dispositions of securities amounted to $53.8 million and $25.6 million, respectively. During the three months ended March 31, 2016 and 2015, gross gains of $0.9 million and $1.3 million, respectively, and gross losses of $0.1 million and $0.01 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
System Energy
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $239.6 |
| |
| $— |
| |
| $— |
| |
| $239.6 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 8.1 |
| | — |
| | — |
| | 8.1 |
|
| Debt securities | | 245.7 |
| | 61.3 |
| | — |
| | 307.0 |
|
| Common trusts (b) | | | | | | | | 500.9 |
|
| | |
| $493.4 |
| |
| $61.3 |
| |
| $— |
| |
| $1,055.6 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $245.1 |
| |
| $— |
| |
| $— |
| |
| $245.1 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 0.3 |
| | — |
| | — |
| | 0.3 |
|
| Debt securities | | 248.3 |
| | 58.3 |
| | — |
| | 306.6 |
|
| Common trusts (b) | | | | | | | | 473.6 |
|
| | |
| $493.7 |
| |
| $58.3 |
| |
| $— |
| |
| $1,025.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements for additional information on the investment portfolios. |
| |
| (b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2017.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $5.4 |
| |
| $8.5 |
| |
| $3.2 |
| |
| $1.1 |
| |
| $3.1 |
|
| Gains (losses) included as a regulatory liability/asset | 0.1 |
| | 10.8 |
| | 1.2 |
| | 1.8 |
| | 3.2 |
|
| Settlements | (4.6 | ) | | (15.2 | ) | | (3.1 | ) | | (2.4 | ) | | (5.3 | ) |
| Balance as of March 31, |
| $0.9 |
| |
| $4.1 |
| |
| $1.3 |
| |
| $0.5 |
| |
| $1.0 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $7.9 |
| |
| $8.5 |
| |
| $2.4 |
| |
| $1.5 |
| |
| $2.2 |
|
| Gains (losses) included as a regulatory liability/asset | 3.6 |
| | 5.3 |
| | (0.7 | ) | | (0.4 | ) | | 0.2 |
|
| Settlements | (7.8 | ) | | (10.5 | ) | | (0.8 | ) | | (0.5 | ) | | (1.5 | ) |
| Balance as of March 31, |
| $3.7 |
| |
| $3.3 |
| |
| $0.9 |
| |
| $0.6 |
| |
| $0.9 |
|
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System EnergyEnergy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades. The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
See Note 16 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. In January 2017, NYPA transferred to Entergy the Indian Point 3 decommissioning trust fund with a fair value of $726 million and the FitzPatrick decommissioning trust fund with a fair value of $793 million.
As discussed in Note 13 to the financial statements herein, in March 2017, Entergy closed on the sale of the FitzPatrick plant to Exelon. As part of the transaction, Entergy transferred the FitzPatrick decommissioning trust fund
Entergy Corporation and Subsidiaries
Notes to Financial Statements
to Exelon. The FitzPatrick decommissioning trust fund had a disposition-date fair value of $805 million and was classified as held for sale within other deferred debits as of December 31, 2016.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporary and therefore recorded in earnings. Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The securities held as of March 31, 20162017 and December 31, 20152016 are summarized as follows:
| | | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) | | (In Millions) |
| 2016 | | | | | | | |
| 2017 | | | | | | | |
| Equity Securities | |
| $428.4 |
| |
| $182.7 |
| |
| $0.1 |
| |
| $4,439 |
| |
| $1,823 |
| |
| $5 |
|
| Debt Securities | | 291.4 |
| | 5.5 |
| | 0.4 |
| | 2,230 |
| | 35 |
| | 22 |
|
| Total | |
| $719.8 |
| |
| $188.2 |
| |
| $0.5 |
| |
| $6,669 |
| |
| $1,858 |
| |
| $27 |
|
| | | | | | | | |
| 2015 | | | | | | | |
| Equity Securities | |
| $423.7 |
| |
| $179.2 |
| |
| $0.3 |
| |
| Debt Securities | | 277.8 |
| | 2.2 |
| | 2.3 |
| |
| Total | |
| $701.5 |
| |
| $181.4 |
| |
| $2.6 |
| |
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,511 |
| |
| $1,673 |
| |
| $1 |
|
| Debt Securities | | 2,213 |
| | 34 |
| | 27 |
|
| Total | |
| $5,724 |
| |
| $1,707 |
| |
| $28 |
|
The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2017 are $458 million for Indian Point 1, $582 million for Indian Point 2, $743 million for Indian Point 3, $426 million for Palisades, $994 million for Pilgrim, and $592 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $438 million and $399 million as of March 31, 2017 and December 31, 2016, respectively. The amortized cost of debt securities was $286.9$2,217 million as of March 31, 20162017 and $270.7$2,212 million as of December 31, 2015.2016. As of March 31, 2016,2017, the debt securities have an average coupon rate of approximately 1.93%3.21%, an average duration of approximately 5.025.79 years, and an average maturity of approximately 6.379.45 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2016:2017:
| | | | Equity Securities | | Debt Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $3.9 |
| |
| $0.1 |
| |
| $45.8 |
| |
| $0.3 |
|
| $13 |
| |
| $5 |
| |
| $1,087 |
| |
| $21 |
|
| More than 12 months | — |
| | — |
| | 2.4 |
| | 0.1 |
| — |
| | — |
| | 13 |
| | 1 |
|
| Total |
| $3.9 |
| |
| $0.1 |
| |
| $48.2 |
| |
| $0.4 |
|
| $13 |
| |
| $5 |
| |
| $1,100 |
| |
| $22 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:2016:
| | | | Equity Securities | | Debt Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $8.3 |
| |
| $0.2 |
| |
| $200.4 |
| |
| $2.2 |
|
| $23 |
| |
| $1 |
| |
| $1,169 |
| |
| $26 |
|
| More than 12 months | 0.9 |
| | 0.1 |
| | 5.0 |
| | 0.1 |
| 1 |
| | — |
| | 20 |
| | 1 |
|
| Total |
| $9.2 |
| |
| $0.3 |
| |
| $205.4 |
| |
| $2.3 |
|
| $24 |
| |
| $1 |
| |
| $1,189 |
| |
| $27 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 20162017 and December 31, 20152016 are as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $4.6 |
| |
| $2.0 |
|
| $99 |
| |
| $125 |
|
| 1 year - 5 years | 180.9 |
| | 181.2 |
| 783 |
| | 763 |
|
| 5 years - 10 years | 73.3 |
| | 63.0 |
| 742 |
| | 719 |
|
| 10 years - 15 years | 4.5 |
| | 4.4 |
| 113 |
| | 109 |
|
| 15 years - 20 years | 1.5 |
| | 1.6 |
| 69 |
| | 73 |
|
| 20 years+ | 26.6 |
| | 25.6 |
| 424 |
| | 424 |
|
| Total |
| $291.4 |
| |
| $277.8 |
|
| $2,230 |
| |
| $2,213 |
|
During the three months ended March 31, 20162017 and 2015,2016, proceeds from the dispositions of securities amounted to $188.5$514 million and $78.4$729 million, respectively. During the three months ended March 31, 20162017 and 2015,2016, gross gains of $1.6$9 million and $0.4$10 million, respectively, and gross losses of $0.3$5 million and $3 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $557.7 |
| |
| $307.2 |
| |
| $— |
|
| Debt Securities | | 310.0 |
| | 3.1 |
| | 3.6 |
|
| Total | |
| $867.7 |
| |
| $310.3 |
| |
| $3.6 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $525.4 |
| |
| $281.5 |
| |
| $— |
|
| Debt Securities | | 309.3 |
| | 3.4 |
| | 4.2 |
|
| Total | |
| $834.7 |
| |
| $284.9 |
| |
| $4.2 |
|
The amortized cost of debt securities was $310.5 million as of March 31, 2017 and $310.1 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 2.61%, an average duration of approximately 5.26 years, and an average maturity of approximately 6.10 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $17.8 |
| |
| $16.7 |
|
| 1 year - 5 years | 109.7 |
| | 106.2 |
|
| 5 years - 10 years | 162.1 |
| | 161.2 |
|
| 10 years - 15 years | 7.0 |
| | 7.7 |
|
| 15 years - 20 years | 1.0 |
| | 1.0 |
|
| 20 years+ | 12.4 |
| | 16.5 |
|
| Total |
| $310.0 |
| |
| $309.3 |
|
During the three months endedMarch 31, 2017 and 2016, proceeds from the dispositions of securities amounted to $36 million and $58.6 million, respectively. During the three months ended March 31, 2017 and 2016, gross gains of $0.5 million and $0.8 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $750.6 |
| |
| $382.7 |
| |
| $— |
|
| Debt Securities | | 439.5 |
| | 8.5 |
| | 4.3 |
|
| Total | |
| $1,190.1 |
| |
| $391.2 |
| |
| $4.3 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $715.9 |
| |
| $346.6 |
| |
| $— |
|
| Debt Securities | | 424.8 |
| | 8.0 |
| | 5.0 |
|
| Total | |
| $1,140.7 |
| |
| $354.6 |
| |
| $5.0 |
|
The amortized cost of debt securities was $435.2 million as of March 31, 2017 and $421.9 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 3.77%, an average duration of approximately 5.72 years, and an average maturity of approximately 11.20 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.6 |
| |
| $— |
| |
| $189.9 |
| |
| $4.1 |
|
| More than 12 months | — |
| | — |
| | 2.7 |
| | 0.2 |
|
| Total |
| $1.6 |
| |
| $— |
| |
| $192.6 |
| |
| $4.3 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $198.8 |
| |
| $4.8 |
|
| More than 12 months | — |
| | — |
| | 4.8 |
| | 0.2 |
|
| Total |
| $— |
| |
| $— |
| |
| $203.6 |
| |
| $5.0 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $28.1 |
| |
| $31.4 |
|
| 1 year - 5 years | 101.2 |
| | 99.1 |
|
| 5 years - 10 years | 126.4 |
| | 122.8 |
|
| 10 years - 15 years | 44.0 |
| | 41.4 |
|
| 15 years - 20 years | 30.3 |
| | 30.9 |
|
| 20 years+ | 109.5 |
| | 99.2 |
|
| Total |
| $439.5 |
| |
| $424.8 |
|
During the three months ended March 31, 2017 and 2016, proceeds from the dispositions of securities amounted to $40.6 million and $53.8 million, respectively. During the three months ended March 31, 2017 and 2016, gross gains of $0.03 million and $0.9 million, respectively, and gross losses of $0.2 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $509.0 |
| |
| $245.4 |
| |
| $— |
|
| Debt Securities | | 307.0 |
| | 2.4 |
| | 3.4 |
|
| Total | |
| $816.0 |
| |
| $247.8 |
| |
| $3.4 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $473.9 |
| |
| $221.9 |
| |
| $0.1 |
|
| Debt Securities | | 306.6 |
| | 2.0 |
| | 4.5 |
|
| Total | |
| $780.5 |
| |
| $223.9 |
| |
| $4.6 |
|
The amortized cost of debt securities was $308 million as of March 31, 2017 and $309.1 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 1.99%, an average duration of approximately 5.04 years, and an average maturity of approximately 6.45 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.0 |
| |
| $— |
| |
| $200.5 |
| |
| $3.3 |
|
| More than 12 months | — |
| | — |
| | 0.2 |
| | 0.1 |
|
| Total |
| $1.0 |
| |
| $— |
| |
| $200.7 |
| |
| $3.4 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $220.9 |
| |
| $4.4 |
|
| More than 12 months | — |
| | 0.1 |
| | 0.8 |
| | 0.1 |
|
| Total |
| $— |
| |
| $0.1 |
| |
| $221.7 |
| |
| $4.5 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $1.7 |
| |
| $6.6 |
|
| 1 year - 5 years | 188.5 |
| | 188.2 |
|
| 5 years - 10 years | 84.6 |
| | 78.5 |
|
| 10 years - 15 years | 1.4 |
| | 1.3 |
|
| 15 years - 20 years | 7.6 |
| | 7.8 |
|
| 20 years+ | 23.2 |
| | 24.2 |
|
| Total |
| $307.0 |
| |
| $306.6 |
|
During the three months ended March 31, 2017 and 2016, proceeds from the dispositions of securities amounted to $75.8 million and $188.5 million, respectively. During the three months ended March 31, 2017 and 2016, gross gains of $0.1 million and $1.6 million, respectively, and gross losses of $0.7 million and $0.3 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Other-than-temporary impairments and unrealized gains and losses
Entergy evaluates investment securities in the Entergy Arkansas, Entergy Louisiana, and System Energy evaluateWholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three months ended March 31, 20162017 and 2015.2016. The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to beis based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. Entergy did not have anyrecord material charges relating to other-than-temporary impairment of certain equity securitiesother income for the three months ended March 31, 2017 and 2016, and 2015.resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.
NOTE 10. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See “Income Tax Litigation,” “Income Tax Audits,” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax proceedings, income tax audits and other income tax matters involving Entergy. The following is an update to that discussiondiscussion.
2010-2011 IRS AuditAs discussed in the Form 10-K, in the second quarter 2016, Entergy made a tax election to treat its subsidiary that owned the FitzPatrick nuclear power plant as a corporation for federal income tax purposes. The effect of the election was that the plant and associated assets were deemed to be contributed to a new corporation for federal income tax purposes, which created permanent and temporary differences, as discussed in the Form 10-K. One permanent difference, which increased tax expense in 2016 under the applicable accounting standards, was the reduction to the plant’s tax basis to the extent that it exceeded its fair market value. Entergy sold the FitzPatrick plant on March 31,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2017. The IRS examinationremoval of the 2010contingencies regarding the sale of the plant and 2011 years has not been completed.the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis, using the closing price as indicative of a higher fair market value for the plant. The audit fieldwork is continuing and is expectedre-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.
In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to be completed beforeEmployee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the endincome statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of 2016. The Revenue Agent’s Report is expected$11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to be received shortly after the completion of field work.financial statements in the Form 10-K.
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Construction Expenditures in Accounts Payable
Construction expenditures included in accounts payable at March 31, 20162017 are $172$209 million for Entergy, $29.3$33.4 million for Entergy Arkansas, $40.5$74.4 million for Entergy Louisiana, $2.5$3.3 million for Entergy Mississippi, $0.4$0.6 million for Entergy New Orleans, $17.3$13.8 million for Entergy Texas, and $24.7$26.9 million for System Energy. Construction expenditures included in accounts payable at December 31, 20152016 are $234$253 million for Entergy, $43$40.9 million for Entergy Arkansas, $68.6$114.8 million for Entergy Louisiana, $11.4$11.5 million for Entergy Mississippi, $1.5$2.3 million for Entergy New Orleans, $33.1$9.3 million for Entergy Texas, and $6.8$6.2 million for System Energy.
Waterford 3 Transaction
See Note 10 to the financial statements in the Form 10-K for a discussion of the Waterford 3 lease obligation.
In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana will continue to make payments on the lessor debt that remains outstanding. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt will be equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.
NOTE 12. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 1817 to the financial statements in the Form 10-K for a discussion of variable interest entities. See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities and commercial paper borrowings and long-term debt.
Entergy Louisiana was considered to hold a variable interest in the lessor from which it leased an undivided interest representing approximately 9.3% of the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million and $21 million in the three months endedthrough March 31, 2016 and 2015, respectively.2016. See Note 1110 to the financial statements hereinin the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements in the Form 10-K. System Energy made payments on its lease, including interest, of $8.6 million in the three months ended March 31, 2017 and $37.6$8.6 million in the three months ended March 31, 2016 and 2015, respectively.2016.
NOTE 13. ACQUISITIONSDISPOSITIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans)Corporation)
In March 2016, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans purchased2017 the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Entergy Louisiana purchased twoNRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power blocks andplant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a 50% undivided ownership interestpurchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain assetsliabilities related to the facility,FitzPatrick plant, resulting in a pre-tax gain on the sale
Entergy Corporation and Entergy Arkansas and Entergy New Orleans each purchased one power block and a 25% undivided ownership interest in such related assets. The aggregate purchase priceSubsidiaries
Notes to Financial Statements
of $16 million. At the transaction close, Exelon paid an additional $8 million for the Union Power Stationproration of certain expenses prepaid by Entergy.
As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick on March 31, 2017, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit.
The assets and liabilities associated with the sale of FitzPatrick to Exelon were classified as held for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. The disposition-date fair value of the decommissioning trust fund was approximately $948$805 million, (approximately $237classified within other deferred debits, and the disposition-date fair value of the asset retirement obligation was $727 million, classified within other non-current liabilities. The transaction also included property, plant, and equipment with a net book value of zero, materials and supplies, and prepaid assets.
As discussed in Note 14 to the financial statements in the Form 10-K, Entergy entered into a reimbursement agreement with Exelon pursuant to which Exelon reimburses Entergy for each power blockspecified out-of-pocket costs associated with the operation of FitzPatrick. In the first quarter 2017, Entergy billed Exelon for reimbursement of $98 million of other operation and associated assets), subjectmaintenance expenses, $7 million in lost operating revenues, and $3 million in taxes other than income taxes, partially offset by a $10 million defueling credit to further adjustment.Exelon.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
See “Market and Credit Risk Sensitive Instruments” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2016,2017, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 20162017 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased slightly, by $1.4decreased $5 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by a higher effective income tax rate, lower other income, and higher interest expense.net revenue.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $307.4321.7 |
|
| Retail electric price | 23.420.2 |
|
Asset retirement obligationOpportunity sales | 7.87.5 |
|
| Volume/weather | (13.6 | ) |
Opportunity sales | (7.518.0 | ) |
| Other | 4.2(1.1 |
) |
20162017 net revenue |
| $321.7330.3 |
|
The retail electric price variance is primarily due to an increase in base rates and the implementation of formula rate plan rates, as approved by the APSC. The new base rates were effective February 24, 2016 and began billing with2016. A significant portion of the first billing cyclebase rate increase was related to the purchase of AprilPower Block 2 of the Union Power Station in March 2016. The increase includes an interim baseformula rate adjustment surcharge,plan rates were effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016.January 2017. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case.
The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the first quarter 2016 comparedcases. See Note 14 to the first quarter 2015 is primarily caused by an increasefinancial statements in regulatory credits becausethe Form 10-K for discussion of lower realized gains on decommissioning trust fund investments.
The volume/weather variance is primarily due to a decrease of 571 GWh, or 10%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.Union Power Station purchase.
The opportunity sales variance results from the estimated net revenue effect ofrecorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the opportunity sales proceeding.
Entergy Arkansas, Inc.the unbilled sales period including less favorable weather and Subsidiaries
Management's Financial Discussion and Analysis
decreased usage.
Other Income Statement Variances
Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages as compared to the previous outages.
Other operation and maintenance expenses decreasedincreased primarily due to:
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 as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
beginning March 2016. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case settlement;
a decreasean increase of $5.4$2.7 million in energy efficiencydistribution expenses primarily due to timing differences in the vegetation maintenance costs including the effectsincurred in 2017;
an increase of true-ups$2.6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2017 as compared to the energy efficiency filingssame period in March 2015 for fixed costs to be collected from customers;2016; and
a decreasean increase of $5.3$2.4 million in compensation and benefits costs primarily due to a decreaserevision to estimated incentive compensation expense in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “first quarter 2016MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs..
The decreaseincrease was partially offset by an increasea decrease of $21.5$13.2 million in nuclear generation expenses primarily due to an increasea decrease in regulatory compliance costs and an overall higher scope of work done during plant outages as compared to the prior year. The increasedecrease in regulatory compliance costs is primarily related to additional NRC inspection activities in the first quarter 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.reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” below.
Taxes other than income taxes decreased primarily due toin the Form 10-K for a decrease in payroll taxes.discussion of the ANO stator incident and subsequent NRC reviews.
Depreciation and amortization expenses increased primarily due to additions to plant in service.service, including Power Block 2 of 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 decreasedincreased primarily due to lowerhigher realized gains in the first quarter 20162017 as compared to the first quarter 20152016 on the decommissioning trust fund investments, partially offset by an increase in the allowance for equity funds used during construction resulting from increased transmission spending in 2016.investments.
Interest expense increaseddecreased primarily due to $5.1 million in estimated interest expense recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the opportunity sales proceeding.
Income Taxes
The effective income tax rate was 44.4% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to a write-off of a stock-based compensation deferred tax asset, state income taxes, and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 39.8% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 27.3% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS and book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items and state income taxes.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
See Note 3 to the financial statements in the Form 10-K for a discussion of the finalized tax and interest computations for the 2006-2007 audit.
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, and subsequent NRC reviews.reviews, and the deferral of replacement power costs.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy70
Entergy Arkansas, incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediationInc. and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $19.6 million was incurred in the first quarter 2016, in support of NRC inspection activitiesSubsidiaries
Management's Financial Discussion and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016.Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $9,135 |
| |
| $218,505 |
|
| $20,509 |
| |
| $9,135 |
|
| | | | | | | |
| Cash flow provided by (used in): |
|
| | |
|
|
| | |
|
| Operating activities | 139,613 |
| | 68,919 |
| 154,541 |
| | 139,613 |
|
| Investing activities | (395,106 | ) | | (138,537 | ) | (207,097 | ) | | (395,106 | ) |
| Financing activities | 280,137 |
| | (29,397 | ) | 32,522 |
| | 280,137 |
|
| Net increase (decrease) in cash and cash equivalents | 24,644 |
| | (99,015 | ) | (20,034 | ) | | 24,644 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $33,779 |
| |
| $119,490 |
|
| $475 |
| |
| $33,779 |
|
Operating Activities
Net cash flow provided by operating activities increased $70.7$14.9 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
an increase indue to the timing of recovery of fuel and purchased power costs;
income tax payments of $7.2 million in 2016 in accordance with an intercompany income tax allocation agreement;
a decrease of $13.5$3.7 million in interest paid; and
a decrease of $2.2 million in pension contributions in 2017. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
The increase was partially offset by an increase of $3.5 million in spending on nuclear refueling outages in 2016;2017.
a decrease of $10.3
Investing Activities
Net cash flow used in investing activities decreased $188 million in income tax paymentsfor the three months ended March 31, 2017 compared to the three months ended March 31, 2016 primarily due to the final settlementpurchase of amounts outstanding associated withPower Block 2 of the 2006-2007 IRS audit paidUnion Power Station in March 2016 for approximately $237 million and a decrease of $15.6 million in transmission construction expenditures due to a lower scope of work performed in 2017. The decrease was partially offset by the fluctuations in nuclear fuel activity because of variations from year to year in the first quartertiming and pricing of 2015.fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle and an increase of $18.6 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017. See Note 314 to the financial statements in the Form 10-K for a discussion of the income tax audits; and
a decrease of $5.2 million in storm spending in 2016.Union Power Station purchase.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
InvestingFinancing Activities
Net cash flow used in investingprovided by financing activities increased $256.6decreased $247.6 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
the purchase of Power Block 2 of Union Power Station in March 2016 for approximately $237 million. See Note 13 to the financial statements herein for discussion of the Union purchase; and
an increase in transmission construction expenditures primarily due to a higher scope of non-storm related work performed in 2016.
The increase was partially offset by the decrease in nuclear construction expenditures primarily due to decreased spending on compliance with NRC post-Fukushima requirements and a decrease in transmission and distribution construction expenditures primarily due to higher storm restoration spending in 2015.
Financing Activities
Entergy Arkansas’s financing activities provided $280.1 million of cash for the three months ended March 31, 2016 compared to using $29.4 million of cash for the three months ended March 31, 2015 primarily due to the following activity:
the issuance of $325 million of 3.5% Series first mortgage bonds in January 2016, a portion of the proceeds of which were used to pay, prior to maturity, $175 million of 5.66% Series first mortgage bonds. Entergy Arkansas used the remainder of the proceeds, together with other funds, for the purchase of Power Block 2 of Union Power Station as discussed above, and for general corporate purposes; and
a $200 million capital contribution received from Entergy Corporation in March 2016;2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station.
The decrease was partially offset by net borrowings of $52.3 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017 compared to net repayments of $11.7 million in 2016 and
money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $20.2 million in 2017 compared to decreasing by $52.7 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Decreases in Entergy Arkansas’s payable See Note 14 to the money pool are a usefinancial statements in the Form 10-K for discussion of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $52.7 million for the three months ended March 31, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Union Power Station purchase.
Capital Structure
Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for Entergy Arkansas is primarily due to the capital contribution received from Entergy Corporation in March 2016.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 55.5 | % | | 56.8 | % | 55.6 | % | | 55.3 | % |
| Effect of excluding the securitization bonds | (0.5 | %) | | (0.6 | %) | (0.4 | %) | | (0.4 | %) |
| Debt to capital, excluding securitization bonds (a) | 55.0 | % | | 56.2 | % | 55.2 | % | | 54.9 | % |
| Effect of subtracting cash | (0.3 | %) | | (0.1 | %) | — | % | | (0.2 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 54.7 | % | | 56.1 | % | 55.2 | % | | 54.7 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas. |
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas 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 Arkansas’s financial condition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Arkansas 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 Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
March 31, 2016 | | December 31, 2015 | | March 31, 2015 | | December 31, 2014 |
| (In Thousands) |
| $1,842 | | ($52,742) | | $15,219 | | $2,218 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($31,008) | | ($51,232) | | $1,842 | | ($52,742) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in August 2020.2021. Entergy Arkansas also has a $20 million credit facility which was scheduled to expire in April 2016. The credit facility expired in April 2016.2017, but was renewed by Entergy Arkansas plans to renew the credit facility.through April 2018. The $150 million credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2016,2017, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of March 31, 2016,2017, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $85$80 million scheduled to expire in June 2016. Entergy Arkansas’s nuclear fuel company variable interest entity plans to renew its credit facility prior to expiration.May 2019. As of March 31, 2016, no2017, $52.3 million in letters of credit were outstanding under the credit facility.facility to support commercial paper issued by the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
20152016 Formula Rate CasePlan Filing
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2015,2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, scheduled to be made in July 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking a finding from the APSC for a general change in rates, charges, and tariffs. The filing notified the APSC ofthat Entergy Arkansas’s intent to implement a formula rate review mechanism pursuant to Arkansas legislation passeddeployment of advanced metering infrastructure is in 2015, and requested a retail rate increase of $268.4 million, with a net increase in revenuethe public interest. This matter is pending before the APSC.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
of $167 million. The filing requested a 10.2% return on common equity. Energy Cost Recovery Rider
In September 2015, APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015,March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the APSC staff, and certain of the intervenorsenergy cost recovery rider, which reflected an increase in the rate casefrom $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rate plan tariff that provides a 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisitiontestimony in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million, subject to closing adjustments. The settlement agreement also provided for amortization over a 10-year period 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. A hearing was held in January 2016. In February 20162017 recommending that the APSC approved the settlement with one exception that would reduce the retailredetermined rate increase proposed in the settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billingshould be implemented with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding2017 under the new rates that included an interim basenormal operation of the tariff. Accordingly, the redetermined rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 throughwent into effect on March 31, 2016. The interim base rate adjustment surcharge will recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.
Entergy Arkansas plans to make its first formula rate plan filing in July 2016 for rates effective with the first billing cycle of January 2017.
Opportunity Sales Proceeding
See the Form 10-K for a discussion of the proceeding initiated at the FERC by the LPSC in June 2009 in which the LPSC initially requested that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. In April 2016 the FERC issued orders addressing the requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs2017 pursuant to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.
The effect of the FERC’s decisions, if upheld, is that Entergy Arkansas will make payments to some or all of the other Utility operating companies. As part of the further proceedings required by the FERC, Entergy will re-run intra-system bills for a ten-year period (2000-2009) to quantify the effects of the FERC's rulings. The ALJ will issue an initial decision and FERC will issue an order reviewing that decision. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing that initial decision and Entergy submits a subsequent filing to comply with that order. Because further proceedings are required, the amount and recipients of
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case, however, in the first quarter 2016 Entergy Arkansas recorded a liability of $87 million for its estimated increased costs and payment to the other Utility operating companies, including interest. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Therefore Entergy Arkansas recorded a regulatory asset of $75 million, which represents its estimate of the retail portion of the costs.tariff.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
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.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear performance improvement plan. That plan has not been fully developed, but it may result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear performance improvement plan, and an estimate of the costs associated with this plan cannot be made at this time.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 Arkansas’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.benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $474,351 |
| |
| $465,373 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 99,409 |
| | 80,937 |
|
| Purchased power | | 55,133 |
| | 61,804 |
|
| Nuclear refueling outage expenses | | 19,619 |
| | 15,069 |
|
| Other operation and maintenance | | 165,857 |
| | 152,906 |
|
| Decommissioning | | 13,895 |
| | 13,103 |
|
| Taxes other than income taxes | | 24,051 |
| | 23,086 |
|
| Depreciation and amortization | | 67,066 |
| | 63,173 |
|
| Other regulatory charges (credits) - net | | (10,526 | ) | | 917 |
|
| TOTAL | | 434,504 |
| | 410,995 |
|
| | | | | |
| OPERATING INCOME | | 39,847 |
| | 54,378 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 4,350 |
| | 4,932 |
|
| Interest and investment income | | 6,932 |
| | 3,594 |
|
| Miscellaneous - net | | (107 | ) | | (775 | ) |
| TOTAL | | 11,175 |
| | 7,751 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 27,252 |
| | 32,782 |
|
| Allowance for borrowed funds used during construction | | (1,962 | ) | | (2,715 | ) |
| TOTAL | | 25,290 |
| | 30,067 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 25,732 |
| | 32,062 |
|
| | | | | |
| Income taxes | | 11,428 |
| | 12,768 |
|
| | | | | |
| NET INCOME | | 14,304 |
| | 19,294 |
|
| | | | | |
| Preferred dividend requirements | | 357 |
| | 1,718 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $13,947 |
| |
| $17,576 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $465,373 |
| |
| $511,253 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 80,937 |
| | 104,872 |
|
| Purchased power | | 61,804 |
| | 99,814 |
|
| Nuclear refueling outage expenses | | 15,069 |
| | 12,063 |
|
| Other operation and maintenance | | 152,906 |
| | 160,545 |
|
| Decommissioning | | 13,103 |
| | 12,304 |
|
| Taxes other than income taxes | | 23,086 |
| | 25,704 |
|
| Depreciation and amortization | | 63,173 |
| | 60,102 |
|
| Other regulatory charges (credits) - net | | 917 |
| | (807 | ) |
| TOTAL | | 410,995 |
| | 474,597 |
|
| | | | | |
| OPERATING INCOME | | 54,378 |
| | 36,656 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 4,932 |
| | 2,374 |
|
| Interest and investment income | | 3,594 |
| | 10,952 |
|
| Miscellaneous - net | | (775 | ) | | (167 | ) |
| TOTAL | | 7,751 |
| | 13,159 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 32,782 |
| | 26,487 |
|
| Allowance for borrowed funds used during construction | | (2,715 | ) | | (1,231 | ) |
| TOTAL | | 30,067 |
| | 25,256 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 32,062 |
| | 24,559 |
|
| | | | | |
| Income taxes | | 12,768 |
| | 6,694 |
|
| | | | | |
| NET INCOME | | 19,294 |
| | 17,865 |
|
| | | | | |
| Preferred dividend requirements | | 1,718 |
| | 1,718 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $17,576 |
| |
| $16,147 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $14,304 |
| |
| $19,294 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 105,721 |
| | 102,975 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 16,361 |
| | 20,645 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 53,355 |
| | (4,405 | ) |
| Fuel inventory | | (5,747 | ) | | (5,825 | ) |
| Accounts payable | | (73,635 | ) | | 55,077 |
|
| Prepaid taxes and taxes accrued | | 7,175 |
| | 1,210 |
|
| Interest accrued | | 8,562 |
| | 5,228 |
|
| Deferred fuel costs | | (9,137 | ) | | (37,198 | ) |
| Other working capital accounts | | 15,485 |
| | 15,203 |
|
| Provisions for estimated losses | | 1,997 |
| | 355 |
|
| Other regulatory assets | | 1,815 |
| | 892 |
|
| Pension and other postretirement liabilities | | (19,553 | ) | | (24,288 | ) |
| Other assets and liabilities | | 37,838 |
| | (9,550 | ) |
| Net cash flow provided by operating activities | | 154,541 |
| | 139,613 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (165,496 | ) | | (171,090 | ) |
| Allowance for equity funds used during construction | | 4,557 |
| | 5,080 |
|
| Payment for purchase of plant | | — |
| | (236,947 | ) |
| Nuclear fuel purchases | | (88,537 | ) | | (22,692 | ) |
| Proceeds from sale of nuclear fuel | | 51,029 |
| | 40,336 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 36,013 |
| | 58,604 |
|
| Investment in nuclear decommissioning trust funds | | (40,961 | ) | | (63,039 | ) |
| Changes in money pool receivable - net | | — |
| | (1,842 | ) |
| Changes in securitization account | | (3,702 | ) | | (3,413 | ) |
| Other | | — |
| | (103 | ) |
| Net cash flow used in investing activities | | (207,097 | ) | | (395,106 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 321,289 |
|
| Retirement of long-term debt | | — |
| | (175,002 | ) |
Capital contribution from parent
| | — |
| | 200,000 |
|
| Changes in short-term borrowings - net | | 52,300 |
| | (11,690 | ) |
| Change in money pool payable - net | | (20,224 | ) | | (52,742 | ) |
| Dividends paid: | | | | |
| Preferred stock | | (357 | ) | | (1,718 | ) |
| Other | | 803 |
| | — |
|
| Net cash flow provided by financing activities | | 32,522 |
| | 280,137 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (20,034 | ) | | 24,644 |
|
| Cash and cash equivalents at beginning of period | | 20,509 |
| | 9,135 |
|
| Cash and cash equivalents at end of period | |
| $475 |
| |
| $33,779 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $17,311 |
| |
| $20,998 |
|
| Income taxes | |
| $— |
| |
| $7,242 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $139 |
| |
| $20,174 |
|
| Temporary cash investments | | 336 |
| | 335 |
|
| Total cash and cash equivalents | | 475 |
| | 20,509 |
|
| Securitization recovery trust account | | 7,842 |
| | 4,140 |
|
| Accounts receivable: | | | | |
| Customer | | 91,838 |
| | 102,229 |
|
| Allowance for doubtful accounts | | (1,197 | ) | | (1,211 | ) |
| Associated companies | | 32,096 |
| | 35,286 |
|
| Other | | 38,312 |
| | 58,153 |
|
| Accrued unbilled revenues | | 80,246 |
| | 100,193 |
|
| Total accounts receivable | | 241,295 |
| | 294,650 |
|
| Deferred fuel costs | | 105,778 |
| | 96,690 |
|
| Fuel inventory - at average cost | | 38,507 |
| | 32,760 |
|
| Materials and supplies - at average cost | | 176,958 |
| | 182,600 |
|
| Deferred nuclear refueling outage costs | | 70,579 |
| | 81,313 |
|
| Prepayments and other | | 9,387 |
| | 14,293 |
|
| TOTAL | | 650,821 |
| | 726,955 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 867,746 |
| | 834,735 |
|
| Other | | 5,538 |
| | 7,912 |
|
| TOTAL | | 873,284 |
| | 842,647 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,459,549 |
| | 10,488,060 |
|
| Property under capital lease | | 679 |
| | 716 |
|
| Construction work in progress | | 391,018 |
| | 304,073 |
|
| Nuclear fuel | | 266,045 |
| | 307,352 |
|
| TOTAL UTILITY PLANT | | 11,117,291 |
| | 11,100,201 |
|
| Less - accumulated depreciation and amortization | | 4,610,294 |
| | 4,635,885 |
|
| UTILITY PLANT - NET | | 6,506,997 |
| | 6,464,316 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 63,986 |
| | 62,646 |
|
| Other regulatory assets (includes securitization property of $37,988 as of March 31, 2017 and $41,164 as of December 31, 2016) | | 1,424,874 |
| | 1,428,029 |
|
| Deferred fuel costs | | 66,947 |
| | 66,898 |
|
| Other | | 20,149 |
| | 14,626 |
|
| TOTAL | | 1,575,956 |
| | 1,572,199 |
|
| | | | | |
| TOTAL ASSETS | |
| $9,607,058 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $114,700 |
| |
| $114,700 |
|
| Short-term borrowings | | 52,300 |
| | — |
|
| Accounts payable: | | | | |
| Associated companies | | 161,666 |
| | 239,711 |
|
| Other | | 155,810 |
| | 185,153 |
|
| Customer deposits | | 97,817 |
| | 97,512 |
|
| Taxes accrued | | 14,369 |
| | 7,194 |
|
| Interest accrued | | 25,142 |
| | 16,580 |
|
| Other | | 28,114 |
| | 36,557 |
|
| TOTAL | | 649,918 |
| | 697,407 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,200,404 |
| | 2,186,623 |
|
| Accumulated deferred investment tax credits | | 35,005 |
| | 35,305 |
|
| Other regulatory liabilities | | 329,342 |
| | 305,907 |
|
| Decommissioning | | 938,247 |
| | 924,353 |
|
| Accumulated provisions | | 20,679 |
| | 18,682 |
|
| Pension and other postretirement liabilities | | 404,654 |
| | 424,234 |
|
| Long-term debt (includes securitization bonds of $48,216 as of March 31, 2017 and $48,139 as of December 31, 2016) | | 2,715,778 |
| | 2,715,085 |
|
| Other | | 14,417 |
| | 13,854 |
|
| TOTAL | | 6,658,526 |
| | 6,624,043 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 31,350 |
| | 31,350 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2017 and 2016 | | 470 |
| | 470 |
|
| Paid-in capital | | 790,243 |
| | 790,243 |
|
| Retained earnings | | 1,476,551 |
| | 1,462,604 |
|
| TOTAL | | 2,267,264 |
| | 2,253,317 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $9,607,058 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $19,294 |
| |
| $17,865 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 102,975 |
| | 97,294 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 20,645 |
| | 17,847 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (4,405 | ) | | (8,086 | ) |
| Fuel inventory | | (5,825 | ) | | (8,232 | ) |
| Accounts payable | | 55,077 |
| | (24,651 | ) |
| Prepaid taxes and taxes accrued | | 1,210 |
| | (18,923 | ) |
| Interest accrued | | 5,228 |
| | 4,338 |
|
| Deferred fuel costs | | (37,198 | ) | | 14,933 |
|
| Other working capital accounts | | 15,203 |
| | (27,858 | ) |
| Provisions for estimated losses | | 355 |
| | 46 |
|
| Other regulatory assets | | 892 |
| | 29,585 |
|
| Pension and other postretirement liabilities | | (24,288 | ) | | (19,074 | ) |
| Other assets and liabilities | | (9,550 | ) | | (6,165 | ) |
| Net cash flow provided by operating activities | | 139,613 |
| | 68,919 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (171,090 | ) | | (128,399 | ) |
| Allowance for equity funds used during construction | | 5,080 |
| | 3,700 |
|
| Payment for purchase of plant | | (236,947 | ) | | — |
|
| Nuclear fuel purchases | | (22,692 | ) | | (21,392 | ) |
| Proceeds from sale of nuclear fuel | | 40,336 |
| | 28,296 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 58,604 |
| | 81,852 |
|
| Investment in nuclear decommissioning trust funds | | (63,039 | ) | | (85,620 | ) |
| Changes in money pool receivable - net | | (1,842 | ) | | (13,001 | ) |
| Changes in securitization account | | (3,413 | ) | | (3,973 | ) |
| Other | | (103 | ) | | — |
|
| Net cash flow used in investing activities | | (395,106 | ) | | (138,537 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 321,289 |
| | — |
|
Capital contribution from parent
| | 200,000 |
| | — |
|
| Retirement of long-term debt | | (175,002 | ) | | — |
|
| Changes in short-term borrowings - net | | (11,690 | ) | | (28,462 | ) |
| Change in money pool payable - net | | (52,742 | ) | | — |
|
| Dividends paid: | | | | |
| Preferred stock | | (1,718 | ) | | (1,718 | ) |
| Other | | — |
| | 783 |
|
| Net cash flow provided by (used in) financing activities | | 280,137 |
| | (29,397 | ) |
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | 24,644 |
| | (99,015 | ) |
| Cash and cash equivalents at beginning of period | | 9,135 |
| | 218,505 |
|
| Cash and cash equivalents at end of period | |
| $33,779 |
| |
| $119,490 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $20,998 |
| |
| $20,761 |
|
| Income taxes | |
| $7,242 |
| |
| $17,587 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $20,416 |
| |
| $9,066 |
|
| Temporary cash investments | | 13,363 |
| | 69 |
|
| Total cash and cash equivalents | | 33,779 |
| | 9,135 |
|
| Securitization recovery trust account | | 7,617 |
| | 4,204 |
|
| Accounts receivable: | | | | |
| Customer | | 120,539 |
| | 108,636 |
|
| Allowance for doubtful accounts | | (34,312 | ) | | (34,226 | ) |
| Associated companies | | 37,130 |
| | 32,987 |
|
| Other | | 72,420 |
| | 84,216 |
|
| Accrued unbilled revenues | | 75,666 |
| | 73,583 |
|
| Total accounts receivable | | 271,443 |
| | 265,196 |
|
| Deferred fuel costs | | 28,296 |
| | — |
|
| Fuel inventory - at average cost | | 68,514 |
| | 62,689 |
|
| Materials and supplies - at average cost | | 173,554 |
| | 169,919 |
|
| Deferred nuclear refueling outage costs | | 52,195 |
| | 67,834 |
|
| Prepaid taxes | | 29,081 |
| | 30,291 |
|
| Prepayments and other | | 11,611 |
| | 15,145 |
|
| TOTAL | | 676,090 |
| | 624,413 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 785,503 |
| | 771,313 |
|
| Other | | 20,118 |
| | 12,895 |
|
| TOTAL | | 805,621 |
| | 784,208 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,021,925 |
| | 9,536,802 |
|
| Property under capital lease | | 812 |
| | 844 |
|
| Construction work in progress | | 358,522 |
| | 388,075 |
|
| Nuclear fuel | | 233,578 |
| | 286,341 |
|
| TOTAL UTILITY PLANT | | 10,614,837 |
| | 10,212,062 |
|
| Less - accumulated depreciation and amortization | | 4,479,132 |
| | 4,349,809 |
|
| UTILITY PLANT - NET | | 6,135,705 |
| | 5,862,253 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 62,158 |
| | 61,438 |
|
| Other regulatory assets (includes securitization property of $51,360 as of March 31, 2016 and $54,450 as of December 31, 2015) | | 1,332,161 |
| | 1,333,773 |
|
| Deferred fuel costs | | 66,749 |
| | 66,700 |
|
| Other | | 20,440 |
| | 14,989 |
|
| TOTAL | | 1,481,508 |
| | 1,476,900 |
|
| | | | | |
| TOTAL ASSETS | |
| $9,098,924 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $55,000 |
| |
| $55,000 |
|
| Short-term borrowings | | — |
| | 11,690 |
|
| Accounts payable: | | | | |
| Associated companies | | 129,526 |
| | 110,464 |
|
| Other | | 136,648 |
| | 177,758 |
|
| Customer deposits | | 120,060 |
| | 118,340 |
|
| Interest accrued | | 25,111 |
| | 19,883 |
|
| Deferred fuel costs | | — |
| | 8,853 |
|
| Other | | 48,269 |
| | 45,219 |
|
| TOTAL | | 514,614 |
| | 547,207 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,998,112 |
| | 1,982,812 |
|
| Accumulated deferred investment tax credits | | 36,206 |
| | 36,506 |
|
| Other regulatory liabilities | | 257,879 |
| | 242,913 |
|
| Decommissioning | | 885,448 |
| | 872,346 |
|
| Accumulated provisions | | 5,907 |
| | 5,552 |
|
| Pension and other postretirement liabilities | | 434,865 |
| | 459,153 |
|
| Long-term debt (includes securitization bonds of $61,326 as of March 31, 2016 and $61,249 as of December 31, 2015) | | 2,722,649 |
| | 2,574,839 |
|
| Other | | 17,660 |
| | 18,438 |
|
| TOTAL | | 6,358,726 |
| | 6,192,559 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 116,350 |
| | 116,350 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2016 and 2015 | | 470 |
| | 470 |
|
| Paid-in capital | | 788,493 |
| | 588,493 |
|
| Retained earnings | | 1,320,271 |
| | 1,302,695 |
|
| TOTAL | | 2,109,234 |
| | 1,891,658 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $9,098,924 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 19,294 |
| | 19,294 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,718 | ) | | (1,718 | ) |
| | | | | | | | | |
| Balance at March 31, 2016 | |
| $470 |
| |
| $788,493 |
| |
| $1,320,271 |
| |
| $2,109,234 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,462,604 |
| |
| $2,253,317 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 14,304 |
| | 14,304 |
|
| Preferred stock dividends | | — |
| | — |
| | (357 | ) | | (357 | ) |
| | | | | | | | | |
| Balance at March 31, 2017 | |
| $470 |
| |
| $790,243 |
| |
| $1,476,551 |
| |
| $2,267,264 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2014 | |
| $470 |
| |
| $588,471 |
| |
| $1,235,296 |
| |
| $1,824,237 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 17,865 |
| | 17,865 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,718 | ) | | (1,718 | ) |
| | | | | | | | | |
| Balance at March 31, 2015 | |
| $470 |
| |
| $588,471 |
| |
| $1,251,443 |
| |
| $1,840,384 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 19,294 |
| | 19,294 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,718 | ) | | (1,718 | ) |
| | | | | | | | | |
| Balance at March 31, 2016 | |
| $470 |
| |
| $788,493 |
| |
| $1,320,271 |
| |
| $2,109,234 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | Electric Operating Revenues: | | | | | | | Electric Operating Revenues: | | | | | | |
| Residential | |
| $192 |
| |
| $222 |
| |
| ($30 | ) | | (14 | ) | |
| $183 |
| |
| $192 |
| |
| ($9 | ) | | (5 | ) |
| Commercial | | 110 |
| | 111 |
| | (1 | ) | | (1 | ) | | 106 |
| | 110 |
| | (4 | ) | | (4 | ) |
| Industrial | | 100 |
| | 98 |
| | 2 |
| | 2 |
| | 96 |
| | 100 |
| | (4 | ) | | (4 | ) |
| Governmental | | 4 |
| | 4 |
| | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Total retail | | 406 |
| | 435 |
| | (29 | ) | | (7 | ) | | 389 |
| | 406 |
| | (17 | ) | | (4 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | (32 | ) | | 29 |
| | (61 | ) | | (210 | ) | | 32 |
| | (32 | ) | | 64 |
| | 200 |
|
| Non-associated companies | | 38 |
| | 40 |
| | (2 | ) | | (5 | ) | | 45 |
| | 38 |
| | 7 |
| | 18 |
|
| Other | | 53 |
| | 7 |
| | 46 |
| | 657 |
| | 8 |
| | 53 |
| | (45 | ) | | (85 | ) |
| Total | |
| $465 |
| |
| $511 |
| |
| ($46 | ) | | (9 | ) | |
| $474 |
| |
| $465 |
| |
| $9 |
| | 2 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 2,024 |
| | 2,485 |
| | (461 | ) | | (19 | ) | | 1,927 |
| | 2,024 |
| | (97 | ) | | (5 | ) |
| Commercial | | 1,340 |
| | 1,415 |
| | (75 | ) | | (5 | ) | | 1,315 |
| | 1,340 |
| | (25 | ) | | (2 | ) |
| Industrial | | 1,576 |
| | 1,611 |
| | (35 | ) | | (2 | ) | | 1,681 |
| | 1,576 |
| | 105 |
| | 7 |
|
| Governmental | | 56 |
| | 56 |
| | — |
| | — |
| | 56 |
| | 56 |
| | — |
| | — |
|
| Total retail | | 4,996 |
| | 5,567 |
| | (571 | ) | | (10 | ) | | 4,979 |
| | 4,996 |
| | (17 | ) | | — |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 425 |
| | 510 |
| | (85 | ) | | (17 | ) | | 446 |
| | 425 |
| | 21 |
| | 5 |
|
| Non-associated companies | | 2,556 |
| | 1,469 |
| | 1,087 |
| | 74 |
| | 1,962 |
| | 2,556 |
| | (594 | ) | | (23 | ) |
| Total | | 7,977 |
| | 7,546 |
| | 431 |
| | 6 |
| | 7,387 |
| | 7,977 |
| | (590 | ) | | (7 | ) |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy Louisiana and Entergy Gulf States Louisiana Business Combination
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K for a discussion of the combination of the businesses formerly conducted by Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility on October 1, 2015. The effect of the business combination has been retrospectively applied to the first quarter 2015 Entergy Louisiana financial statements that are presented in this report.
Results of Operations
Net Income
Net income decreased $14.5$17.2 million primarily due to lower net revenue, a higher effective income tax rate, and lower other income, partially offset by lower other operation and maintenance expenses.expenses and higher depreciation and amortization expenses, partially offset by higher other income.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $579.1 |
|
Volume/weather | (17.8 | ) |
Retail electric price | 7.8 |
|
Other | (5.2 | ) |
| 2016 net revenue |
| $563.9 |
|
| Net wholesale revenue | (9.8 | ) |
| Volume/weather | (4.3 | ) |
| Transmission equalization | (3.1 | ) |
| Retail electric price | 18.7 |
|
| Other | (4.3 | ) |
| 2017 net revenue |
| $561.1 |
|
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.
The volume/weather variance is primarily due to a decrease of 95296 GWh, or 1%2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales partially offset by an increaseand a decrease in industrial usage. The increasedecrease in industrial usage is primarily due to increased demandextended seasonal outages for an existing large refinery customers, new customers, andcustomer, partially offset by expansion projects primarily in the chemicals industry.
The transmission equalization variance is primarily due to changes in transmission investments, including Entergy Louisiana’s exit from the System Agreement in August 2016.
The retail electric price variance is primarily due to an increase in the formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the acquisitionpurchase of Power Blocks 3 and 4 of the Union Power Station.Station in March 2016. See Note 2 to the financial statements herein and in the Form 10-K for more discussion.further discussion of formula rate plan revenues.
Other Income Statement Variances
Other operation and maintenance expenses decreasedincreased primarily due to:
a decreasean increase of $9.4$5.9 million in fossil-fueled generation expenses primarily due to loss provisions;
an overall lower scopeincrease of work done during plant outages in 2016 as compared to the same period in 2015; and
a decrease of $7.1$4.7 million in compensation and benefits costs primarily due to a decreaserevision to estimated incentive compensation expense in net periodic pensionfirst quarter 2016; and other postretirement costs as a result of higher discount rates used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.
The decrease was partially offset by an increase of $5.3$4.7 million in nuclearfossil-fueled generation expenses primarily due to higher nuclear labor costs,the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including contract labor.Power Blocks 3 and 4 of 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 decreasedincreased primarily due to higher realized gains in 2015 on the River Bend and Waterford 3 decommissioning trust fund investments and a decrease of $3 million as a result of income collected in 2015 from contracts with independent power producers. The decrease was partially offset by an increase in the allowance for equity funds used during construction resulting from increased distribution spendingdue to higher construction work in 2016.progress in 2017, which included the St. Charles Power Station project, and higher realized gains in 2017 on the River Bend and Waterford 3 decommissioning trust fund investments.
Income Taxes
The effective income tax rate was 31.3% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rate was 30.8% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes.
The effective income tax rate was 25.3% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS, partially offset by state income taxes. Louisiana Tax Legislation
See Note 3 to the financial statements“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Louisiana Tax Legislation” in the Form 10-K for a discussion of the finalizedLouisiana tax and interest computations for the 2006-2007 audit.legislation.
Louisiana tax legislation
In first quarter 2016 the Louisiana Legislature conducted a special session in which various corporate tax changes passed and were enacted. Entergy Louisiana does not consider any current changes to be material to results of operations, financial position, or cash flows. A summary of the changes is described below:
Restrictions were enacted on the utilization of net operating loss carryovers. Entergy Louisiana has determined that no additional valuation allowance is necessary at this time on its Louisiana net operating loss carryovers.
Depending on the outcome of a statewide election to amend the Louisiana Constitution in November 2016, the applicable Louisiana corporate tax rate may change slightly. It would require a deferred tax adjustment for Entergy companies that have Louisiana nexus; however, the net effect would be less than a 1% increase in the applicable tax rate for such companies.
Effective January 1, 2017, franchise tax will be applicable to limited liability companies that elect to be taxed as corporations for income tax purposes. Entergy currently estimates that its consolidated Louisiana franchise tax liability will increase in the range of $4 million to $10 million as a result of such franchise tax change.
The Louisiana state sales tax rate was increased by 1% and certain tax exemptions were made temporarily inoperable. The combination of the two will likely increase Entergy Louisiana’s costs related to fuel, capital expenditures, and other operating expenses. These temporary provisions are currently scheduled to be in place through mid-2018.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $35,102 |
| |
| $320,516 |
|
| $213,850 |
| |
| $35,102 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 148,481 |
| | 281,737 |
| 339,704 |
| | 148,481 |
|
| Investing activities | (872,761 | ) | | (316,169 | ) | (472,011 | ) | | (872,761 | ) |
| Financing activities | 801,126 |
| | (3,498 | ) | (14,250 | ) | | 801,126 |
|
| Net increase (decrease) in cash and cash equivalents | 76,846 |
| | (37,930 | ) | (146,557 | ) | | 76,846 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $111,948 |
| |
| $282,586 |
|
| $67,293 |
| |
| $111,948 |
|
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreased $133.3increased $191.2 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
income tax refunds of $116.9 million in 2017 compared to income tax payments of $22.7 million in 2016. Entergy Louisiana received income tax refunds in 2017 and made income tax payments in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the utilization of Entergy Louisiana’s net operating losses. The income tax payments in 2016 related to the 2016 payments for state taxes resulting from the effect of the final settlement of the 2006-2007 IRS audit. See Note 3 to the financial statements in the Form 10-K for a discussion of the audit;
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 11assets; and
the timing of collections from customers and payments to the financial statements herein for vendors.
The increase was partially offset by:
a discussionrefund to customers in January 2017 of approximately $71 million as a result of the purchase of a beneficial interest insettlement approved by the LPSC related to the Waterford 3 leased assets;
income tax payments of $22.7 million in 2016 compared to income tax refunds of $4.1 million in 2015. Entergy Louisiana made income tax payments of $22.7 million in 2016 related to the 2016 payments for state taxes resulting from the correlative effect of the final settlement of the 2006-2007 IRS audit. Entergy Louisiana received income tax refunds of $4.1 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax refunds in 2015 resulted primarily from an Entergy Louisiana overpayment associated with the final settlement of amounts outstanding from the 2006-2007 IRS audit.replacement steam generator project. See Note 32 to the financial statements in the Form 10-K for a discussion of the 2006-2007 IRS audit;settlement and refund;
a decrease due to the timing of recovery of fuel and purchased power costs in 2017; and
an increase of $10.6 million in storm spending; and
the timing of payments to vendors.spending on nuclear refueling outages in 2017.
Investing Activities
Net cash flow used in investing activities increased $556.6decreased $400.8 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $474 million in March 2016. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase; and
the deposit in March 2016 of $197 million held in trust as a result of the issuance by the Louisiana Public Facilities Authority of $83.680$83.68 million of 3.375% pollution control refunding revenue bonds and $115 million of 3.50% pollution control refunding revenue bonds. In April 2016 these funds were used to redeem the $83.680 million of 5.0% pollution control revenue bonds due September 2028 and the $115 million of 5.0% pollution control revenue bonds due June 2030, previously issued on behalf of Entergy Louisiana.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The increasedecrease was partially offset by:
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 service deliveries, and the timing of cash payments during the nuclear fuel cycle;
an increase of $102 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station project in 2017;
an increase of $28.1 million in transmission construction expenditures due to a higher scope of work performed in 2017 as compared to the same period in 2016; and
money pool activity.an increase of $16.8 million due in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017.
Increases in
Entergy Louisiana’s receivable from the money pool are a use of cash flow,Louisiana, LLC and Entergy Louisiana’s receivable from the money pool increased by $7.6 million for the three months ended March 31, 2016 compared to increasing by $35 million for the three months ended March 31, 2015. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy Louisiana’s financing activities providedused $14.3 million of cash for the three months ended March 31, 2017 compared to providing $801.1 million of cash for the three months ended March 31, 2016 compared to using $3.5 million of cash for the three months ended March 31, 2015 primarily due to:to the following activity:
the net retirement of $57.5 million of long-term debt in 2017 compared to the net issuance of $200$783.2 million of 4.95% Series first mortgage bonds in March 2016;
common equity distributions of $42.1 million in first quarter 2017. There were no distributions in first quarter 2016 in anticipation of the issuancepurchase of $425 millionPower Blocks 3 and 4 of 3.25% Series collateral trust mortgage bonds in March 2016;
the issuance of $115 million of 3.50% pollution control refunding revenue bonds in March 2016;Union Power Station; and
an increase in net borrowings of $70.4 million on the issuance of $83.68 million of 3.375% pollution control refunding revenue bondsnuclear fuel company variable interest entities’ credit facilities in March 2016.2017.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of long-term debt in 2016 and the increase in cash and cash equivalents.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 54.0 | % | | 50.8 | % | 53.3 | % | | 53.4 | % |
| Effect of excluding securitization bonds | (0.5 | %) | | (0.6 | %) | (0.5 | %) | | (0.5 | %) |
| Debt to capital, excluding securitization bonds (a) | 53.5 | % | | 50.2 | % | 52.8 | % | | 52.9 | % |
| Effect of subtracting cash | (0.5 | %) | | (0.2 | %) | (0.3 | %) | | (0.9 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 53.0 | % | | 50.0 | % | 52.5 | % | | 52.0 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana. |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana 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 Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana 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 Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Louisiana’s receivables from the money pool were as follows:
|
| | | | | | |
March 31, 2016 | | December 31, 2015 | | March 31, 2015 | | December 31, 2014 |
| (In Thousands) |
| $13,713 | | $6,154 | | $37,826 | | $2,815 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $30,550 | | $22,503 | | $13,713 | | $6,154 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in August 2020.2021. The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2016,2017, there were no cash borrowings and $3.1$3.4 million of letters of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of March 31, 2016,2017, a $7$15.8 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, one in the amount of $100$105 million and one in the amount of $90$85 million, both scheduled to expire in June 2016.May 2019. As of March 31, 2017, $18.8 million in loans were outstanding under the credit facility for the Entergy Louisiana’sLouisiana River Bend nuclear fuel company variable interest entities each plan to renew its credit facility prior to expiration. As of March 31, 2016, $77.5entity and $72.5 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Louisiana Waterford 3 nuclear fuel company variable interest entity and there were no letters of credit outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
St.Lake Charles Power Station
In August 2015,November 2016, Entergy Louisiana filed an application with the LPSC an application seeking certification that the public necessityconvenience and conveniencenecessity would be served by the construction of the St.Lake Charles Power Station, a nominal 980 megawatt994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Little GypsyNelson plant in St.Calcasieu Parish. The current estimated cost of the Lake Charles Parish, Louisiana.Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. Testimony has beenwas filed by LPSC staff and intervenors, withan intervenor. The LPSC staff concludingtestimony concludes that the construction of the project serves the public convenience and necessity. Three intervenors contendThe intervenor contends that Entergy Louisiana has not established that construction of the project isa need for Lake Charles Power Station in the public interest, claiming thatproposed timeframe (2020 commercial operation date) and presents questions regarding the RFP excluded considerationscope and timing of certain resources that could be more cost effective, that the RFP provided undue preference to the self-build option,generation deactivations and that a 30-year capacity commitment is not warranted by current supply conditions.needs. The RFPrequest for proposal independent monitor also filed testimony and a report affirming that the St.Lake Charles Power Station resource was selected through an objective and fair RFPrequest for proposal that showed no undue preference to any proposal. AnA procedural schedule has been issued, with an evidentiary hearing was held in April 2016 and, subjectscheduled for May 2017. Subject to regulatorytimely approval by the LPSC and receipt of other permits and approvals, full notice to proceed is expected to be issued in Summer 2016. Commercialcommercial operation is estimated to occur by Summer 2019. mid-2020.
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 is expected to be completed in 2021. Subject to relevant regulatory approvals, Entergy Louisiana will purchase the plant once it is complete.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel cost recovery. The following are updates to that discussion.
Retail Rates - Electric
88
2015 Formula Rate Plan Filing
As discussed in the Form 10-K, in May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. The LPSC’s review is pending. Also, in November 2016, Entergy Louisiana
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Retail Rates - Electricfiled with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. A procedural schedule was established, including a hearing in July 2017. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time.
Ninemile 6Waterford 3 Replacement Steam Generator Project
As discussedSee Note 2 to the financial statements in the Form 10-K in July 2015, Entergy Louisiana submittedfor discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC a Ninemile 6 compliance filing including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of approximately $648 million, or $76 million less than originally estimated, along with other project details and supporting evidence,was made to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filed by LPSC staff generally supports the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff has questioned the warranty coverage for one element of the project. In March 2016, Entergy Louisiana and the LPSC staff filed a joint motion to suspend the procedural schedule pending the filing of an uncontested joint stipulated settlement.customers in January 2017.
Union Power Station
As discussed ina term of the Form 10-K, in October 2015 the LPSC approved aLPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station.Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1. In MarchJanuary 2016, Entergy Louisiana acquired Power Blocks 3made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of Union Power Stationthese units; however, issues have been raised related to Entergy Louisiana’s decision to retire Willow Glen 2 and 4, as opposed to temporarily suspending those units. This matter is pending before an ALJ, with an evidentiary hearing scheduled to commence in July 2017. The ALJ recently dismissed claims of an industrial user regarding a proposed process for an aggregate purchase price of approximately $474 million, subjectfuture deactivation because the LPSC initiated a generic rulemaking to closing adjustments, and implemented ratesconsider whether the LPSC should review deactivation decisions prior to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.implementation.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. This matter is pending before an ALJ, and an evidentiary hearing is scheduled for September 2017.
Retail Rates - Gas
2016 Rate Stabilization Plan Filing
In January 2016,2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2015.2016. The filing showedof the evaluation report for test year 2016 reflected an earned return on common equity of 10.22%, which is within6.37%. As part of the authorized bandwidth, therefore requiring no changeoriginal filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in rates. In Marchdeferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff issued its report stating thatconfirmed Entergy Louisiana’s filing was consistent with the 2015principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan filing ispending LPSC consideration in compliancea separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the exceptionfirst billing cycle of several issues that require additional information, explanation, or clarification for which the LPSC staff has reserved the right to further review. Discovery regarding these issues is pending, but a procedural schedule has not been established for addressing the outstanding issues. Absent approval of an extension by the LPSC, test year 2015 is the final year under the current gas rate stabilization plan. In February 2016, however, Entergy Louisiana filed a motion requesting to extend the terms of the gas rate stabilization plan for an additional three-year term. A procedural schedule has not been established.May 2017.
Fuel and purchased power cost recovery
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. The LPSC staff issued its audit report in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervened in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments on the LPSC staff report. Entergy Louisiana filed responses to both the LPSC staff report and the issues raised by the intervenor. After conducting additional discovery, in April 2016 the LPSC staff consultant issued its supplemental audit report, which concluded that Entergy Louisiana was not imprudent on the issues raised by the intervenor.
In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. In March
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Fuel and purchased power cost recovery
As discussed in the Form 10-K, in June 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended thatprovided notice of audits of Entergy Louisiana refund approximately $8.6 million, plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. A procedural schedule has not been established for this proceeding,filings and discovery from intervenors has not commenced.
Other dockets
Inpurchased gas adjustment clause filings. Discovery commenced in March 2016 the LPSC opened two dockets to examine, on a generic basis, issues that it identified in connection with its review of the Cleco-Macquarie transaction. The first docket is captioned “In re: Investigation of double leveraging issues for all LPSC-jurisdictional utilities,” and the second is captioned “In re: Investigation of tax structure issues for all LPSC-jurisdictional utilities.” In April 2016 the LPSC clarified that the concerns giving rise to the two dockets arose as a result of its review of the structure of the recently-approved Cleco-Macquarie transaction and that the specific intent of the directives is to seek more information regarding intra-corporate debt financing of a utility’s capital structure as well as the use of investment tax credits to mitigate the tax obligation at the parent level of a consolidated entity. No schedule has been set for either docket.2017.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following are updates to that discussion.
Waterford 3’s operating license is currently due to expire in December 2024. In March 2016, Entergy Louisiana filed an application with the NRC for an extension of Waterford 3’s operating license to 2044.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear performance improvement plan. That plan has not been fully developed, but it may result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear performance improvement plan, and an estimate of the costs associated with this plan cannot be made at this time.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 Louisiana’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.
Entergy Louisiana, LLCbenefits, and Subsidiaries
Management's Financial Discussion and Analysis
other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | |
| | | | | Three Months Ended |
| | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $936,431 |
| |
| $1,044,810 |
| |
| $864,076 |
| |
| $936,431 |
|
| Natural gas | | 18,714 |
| | 24,381 |
| | 16,707 |
| | 18,714 |
|
| TOTAL | | 955,145 |
| | 1,069,191 |
| | 880,783 |
| | 955,145 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 202,083 |
| | 219,658 |
| | 154,044 |
| | 202,083 |
|
| Purchased power | | 191,398 |
| | 271,198 |
| | 239,827 |
| | 191,398 |
|
| Nuclear refueling outage expenses | | 12,780 |
| | 11,130 |
| | 12,185 |
| | 12,780 |
|
| Other operation and maintenance | | 206,064 |
| | 220,801 |
| | 223,230 |
| | 206,064 |
|
| Decommissioning | | 11,508 |
| | 10,645 |
| | 12,123 |
| | 11,508 |
|
| Taxes other than income taxes | | 42,362 |
| | 43,890 |
| | 45,283 |
| | 42,362 |
|
| Depreciation and amortization | | 109,591 |
| | 106,868 |
| | 115,630 |
| | 109,591 |
|
| Other regulatory credits - net | | (2,259 | ) | | (775 | ) | | (74,187 | ) | | (2,259 | ) |
| TOTAL | | 773,527 |
| | 883,415 |
| | 728,135 |
| | 773,527 |
|
| | | | | | | | | |
| OPERATING INCOME | | 181,618 |
| | 185,776 |
| | 152,648 |
| | 181,618 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 7,238 |
| | 5,472 |
| | 9,990 |
| | 7,238 |
|
| Interest and investment income | | 37,416 |
| | 40,016 |
| | 39,830 |
| | 37,416 |
|
| Miscellaneous - net | | (3,745 | ) | | (200 | ) | | (3,024 | ) | | (3,745 | ) |
| TOTAL | | 40,909 |
| | 45,288 |
| | 46,796 |
| | 40,909 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 65,076 |
| | 65,281 |
| | 67,315 |
| | 65,076 |
|
| Allowance for borrowed funds used during construction | | (3,897 | ) | | (3,128 | ) | | (5,174 | ) | | (3,897 | ) |
| TOTAL | | 61,179 |
| | 62,153 |
| | 62,141 |
| | 61,179 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 161,348 |
| | 168,911 |
| | 137,303 |
| | 161,348 |
|
| | | | | | | | | |
| Income taxes | | 49,742 |
| | 42,802 |
| | 42,925 |
| | 49,742 |
|
| | | | | | | | | |
| NET INCOME | | 111,606 |
| | 126,109 |
| |
| $94,378 |
| |
| $111,606 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | — |
| | 1,944 |
| |
| | | | | | |
| EARNINGS APPLICABLE TO COMMON EQUITY | |
| $111,606 |
| |
| $124,165 |
| |
| | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | |
| | 2016 | | 2015 |
| | (In Thousands) |
| | | | |
| Net Income |
| $111,606 |
| |
| $126,109 |
|
| Other comprehensive loss | | | |
| Pension and other postretirement liabilities | | | |
| (net of tax expense (benefit) of ($115) and $288) | (263 | ) | | 380 |
|
| Other comprehensive income (loss) | (263 | ) | | 380 |
|
| Comprehensive Income |
| $111,343 |
| |
| $126,489 |
|
| | | | |
| See Notes to Financial Statements. | | | |
(page left blank intentionally) |
| | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | |
| | Three Months Ended |
| | 2017 | | 2016 |
| | (In Thousands) |
| | | | |
| Net Income |
| $94,378 |
| |
| $111,606 |
|
| Other comprehensive loss | | | |
| Pension and other postretirement liabilities (net of tax benefit of $232 and $115) | (370 | ) | | (263 | ) |
| Other comprehensive loss | (370 | ) | | (263 | ) |
| Comprehensive Income |
| $94,008 |
| |
| $111,343 |
|
| | | | |
| See Notes to Financial Statements. | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $111,606 |
| |
| $126,109 |
| |
| $94,378 |
| |
| $111,606 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 146,870 |
| | 145,069 |
| | 151,472 |
| | 146,870 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 172,887 |
| | 60,884 |
| | 163,299 |
| | 172,887 |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | (25,879 | ) | | (49,211 | ) | | 75,196 |
| | (25,879 | ) |
| Fuel inventory | | (2,538 | ) | | (3,153 | ) | | 3,066 |
| | (2,538 | ) |
| Accounts payable | | (110,500 | ) | | 7,886 |
| | (7,846 | ) | | (110,500 | ) |
| Prepaid taxes and taxes accrued | | (104,444 | ) | | 14,463 |
| | 22,563 |
| | (104,444 | ) |
| Interest accrued | | (2,185 | ) | | 717 |
| | 5,983 |
| | (2,185 | ) |
| Deferred fuel costs | | 45,511 |
| | 14,633 |
| | (19,487 | ) | | 45,511 |
|
| Other working capital accounts | | 1,387 |
| | (25,286 | ) | | (20,810 | ) | | 1,387 |
|
| Changes in provisions for estimated losses | | (2,695 | ) | | 2,329 |
| | (4,059 | ) | | (2,695 | ) |
| Changes in other regulatory assets | | 30,033 |
| | 22,417 |
| | 28,922 |
| | 30,033 |
|
| Changes in other regulatory liabilities | | | (59,969 | ) | | (998 | ) |
| Changes in pension and other postretirement liabilities | | (19,115 | ) | | (10,720 | ) | | (17,054 | ) | | (19,115 | ) |
| Other | | (92,457 | ) | | (24,400 | ) | | (75,950 | ) | | (91,459 | ) |
| Net cash flow provided by operating activities | | 148,481 |
| | 281,737 |
| | 339,704 |
| | 148,481 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (206,572 | ) | | (180,634 | ) | | (360,693 | ) | | (206,572 | ) |
| Allowance for equity funds used during construction | | 7,238 |
| | 5,472 |
| | 9,990 |
| | 7,238 |
|
| Payment for purchase of plant | | | — |
| | (473,888 | ) |
| Nuclear fuel purchases | | (26,684 | ) | | (108,613 | ) | | (139,620 | ) | | (26,684 | ) |
| Proceeds from the sale of nuclear fuel | | 47,565 |
| | 18,123 |
| | 28,884 |
| | 47,565 |
|
| Receipts from storm reserve escrow account | | | 8,836 |
| | — |
|
| Payments to storm reserve escrow account | | — |
| | (19 | ) | | (332 | ) | | — |
|
| Changes to securitization account | | (5,506 | ) | | (5,433 | ) | | (5,527 | ) | | (5,506 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 53,793 |
| | 25,566 |
| | 40,586 |
| | 53,793 |
|
| Investment in nuclear decommissioning trust funds | | (64,337 | ) | | (35,579 | ) | | (51,393 | ) | | (64,337 | ) |
| Changes in money pool receivable - net | | (7,559 | ) | | (35,011 | ) | | (8,047 | ) | | (7,559 | ) |
| Funds held on deposit | | (196,568 | ) | | — |
| | — |
| | (196,568 | ) |
| Payment for purchase of plant | | (473,888 | ) | | — |
| |
| Insurance proceeds | | | 5,305 |
| | — |
|
| Other | | (243 | ) | | (41 | ) | | — |
| | (243 | ) |
| Net cash flow used in investing activities | | (872,761 | ) | | (316,169 | ) | | (472,011 | ) | | (872,761 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 809,369 |
| | — |
| | — |
| | 809,369 |
|
| Retirement of long-term debt | | (26,189 | ) | | (16,083 | ) | | (57,499 | ) | | (26,189 | ) |
| Changes in credit borrowings - net | | 17,094 |
| | 22,260 |
| | 87,504 |
| | 17,094 |
|
| Distributions paid: | | | | | | | | |
| Preferred membership interests | | — |
| | (1,944 | ) | |
| Common equity | | | (42,125 | ) | | — |
|
| Other | | 852 |
| | (7,731 | ) | | (2,130 | ) | | 852 |
|
| Net cash flow provided by (used in) financing activities | | 801,126 |
| | (3,498 | ) | | (14,250 | ) | | 801,126 |
|
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 76,846 |
| | (37,930 | ) | | (146,557 | ) | | 76,846 |
|
| Cash and cash equivalents at beginning of period | | 35,102 |
| | 320,516 |
| | 213,850 |
| | 35,102 |
|
| Cash and cash equivalents at end of period | |
| $111,948 |
| |
| $282,586 |
| |
| $67,293 |
| |
| $111,948 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $125,589 |
| |
| $62,655 |
| |
| $59,261 |
| |
| $125,589 |
|
| Income taxes | |
| $22,676 |
| |
| ($4,056 | ) | |
| ($116,937 | ) | |
| $22,676 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $11,957 |
| |
| $348 |
| |
| $2,639 |
| |
| $49,972 |
|
| Temporary cash investments | | 99,991 |
| | 34,754 |
| | 64,654 |
| | 163,878 |
|
| Total cash and cash equivalents | | 111,948 |
| | 35,102 |
| | 67,293 |
| | 213,850 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 166,483 |
| | 179,051 |
| | 173,598 |
| | 213,517 |
|
| Allowance for doubtful accounts | | (5,781 | ) | | (4,209 | ) | | (6,889 | ) | | (6,277 | ) |
| Associated companies | | 139,816 |
| | 94,418 |
| | 136,949 |
| | 155,794 |
|
| Other | | 60,825 |
| | 56,793 |
| | 48,471 |
| | 54,186 |
|
| Accrued unbilled revenues | | 141,227 |
| | 143,079 |
| | 152,848 |
| | 159,176 |
|
| Total accounts receivable | | 502,570 |
| | 469,132 |
| | 504,977 |
| | 576,396 |
|
| Fuel inventory | | 50,583 |
| | 48,045 |
| | 47,672 |
| | 50,738 |
|
| Materials and supplies - at average cost | | 287,314 |
| | 282,688 |
| | 286,906 |
| | 294,421 |
|
| Deferred nuclear refueling outage costs | | 52,679 |
| | 66,984 |
| | 58,207 |
| | 22,535 |
|
| Funds held on deposit | | 196,568 |
| | — |
| |
| Prepaid taxes | | | 87,541 |
| | 110,104 |
|
| Prepayments and other | | 29,965 |
| | 28,294 |
| | 35,109 |
| | 41,687 |
|
| TOTAL | | 1,231,627 |
| | 930,245 |
| | 1,087,705 |
| | 1,309,731 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliate preferred membership interests | | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
|
| Decommissioning trust funds | | 1,065,165 |
| | 1,042,293 |
| | 1,190,105 |
| | 1,140,707 |
|
| Storm reserve escrow account | | 290,665 |
| | 290,422 |
| | 282,981 |
| | 291,485 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 207,963 |
| | 206,293 |
| | 227,684 |
| | 217,494 |
|
| Other | | 28,976 |
| | 14,776 |
| | 24,261 |
| | 28,844 |
|
| TOTAL | | 2,983,356 |
| | 2,944,371 |
| | 3,115,618 |
| | 3,069,117 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 18,729,802 |
| | 17,629,077 |
| | 18,937,417 |
| | 18,827,532 |
|
| Natural gas | | 162,314 |
| | 159,252 |
| | 175,438 |
| | 172,816 |
|
| Property under capital lease | | — |
| | 341,514 |
| |
| Construction work in progress | | 390,215 |
| | 420,874 |
| | 799,802 |
| | 670,201 |
|
| Nuclear fuel | | 326,280 |
| | 386,524 |
| | 361,069 |
| | 249,807 |
|
| TOTAL UTILITY PLANT | | 19,608,611 |
| | 18,937,241 |
| | 20,273,726 |
| | 19,920,356 |
|
| Less - accumulated depreciation and amortization | | 8,505,828 |
| | 8,302,774 |
| | 8,475,891 |
| | 8,420,596 |
|
| UTILITY PLANT - NET | | 11,102,783 |
| | 10,634,467 |
| | 11,797,835 |
| | 11,499,760 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 475,657 |
| | 478,243 |
| | 472,806 |
| | 470,480 |
|
| Other regulatory assets (includes securitization property of $109,773 as of March 31, 2016 and $114,701 as of December 31, 2015) | | 1,190,427 |
| | 1,217,874 |
| |
| Other regulatory assets (includes securitization property of $88,126 as of March 31, 2017 and $92,951 as of December 31, 2016) | | | 1,136,810 |
| | 1,168,058 |
|
| Deferred fuel costs | | 168,122 |
| | 168,122 |
| | 168,122 |
| | 168,122 |
|
| Other | | 24,286 |
| | 14,125 |
| | 20,982 |
| | 16,003 |
|
| TOTAL | | 1,858,492 |
| | 1,878,364 |
| | 1,798,720 |
| | 1,822,663 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $17,176,258 |
| |
| $16,387,447 |
| |
| $17,799,878 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $61,004 |
| |
| $29,372 |
| |
| $161,506 |
| |
| $200,198 |
|
| Short-term borrowings | | 77,450 |
| | 60,356 |
| | 72,497 |
| | 3,794 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 86,379 |
| | 165,419 |
| | 71,512 |
| | 82,106 |
|
| Other | | 193,603 |
| | 276,280 |
| | 308,209 |
| | 358,741 |
|
| Customer deposits | | 147,709 |
| | 146,555 |
| | 149,063 |
| | 148,601 |
|
| Taxes accrued | | 20,698 |
| | 125,142 |
| |
| Interest accrued | | 72,195 |
| | 74,380 |
| | 81,581 |
| | 75,598 |
|
| Deferred fuel costs | | 110,745 |
| | 65,234 |
| | 28,724 |
| | 48,211 |
|
| Other | | 77,000 |
| | 79,982 |
| | 70,178 |
| | 80,013 |
|
| TOTAL | | 846,783 |
| | 1,022,720 |
| | 943,270 |
| | 997,262 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,668,395 |
| | 2,506,956 |
| | 2,849,713 |
| | 2,691,118 |
|
| Accumulated deferred investment tax credits | | 130,505 |
| | 131,760 |
| | 125,523 |
| | 126,741 |
|
| Regulatory liability for income taxes - net | | — |
| | 2,473 |
| |
| Other regulatory liabilities | | 817,625 |
| | 818,623 |
| | 821,005 |
| | 880,974 |
|
| Decommissioning | | 1,041,300 |
| | 1,027,862 |
| | 1,096,846 |
| | 1,082,685 |
|
| Accumulated provisions | | 307,587 |
| | 310,282 |
| | 306,713 |
| | 310,772 |
|
| Pension and other postretirement liabilities | | 814,000 |
| | 833,185 |
| | 763,093 |
| | 780,278 |
|
| Long-term debt (includes securitization bonds of $120,615 as of March 31, 2016 and $120,549 as of December 31, 2015) | | 5,559,230 |
| | 4,806,790 |
| |
| Long-term payables - associated companies | | 671 |
| | 1,073 |
| |
| Long-term debt (includes securitization bonds of $99,282 as of March 31, 2017 and $99,217 as of December 31, 2016) | | | 5,613,849 |
| | 5,612,593 |
|
| Other | | 141,514 |
| | 188,411 |
| | 146,178 |
| | 137,039 |
|
| TOTAL | | 11,480,827 |
| | 10,627,415 |
| | 11,722,920 |
| | 11,622,200 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Member's equity | | 4,905,323 |
| | 4,793,724 |
| | 5,182,500 |
| | 5,130,251 |
|
| Accumulated other comprehensive loss | | (56,675 | ) | | (56,412 | ) | | (48,812 | ) | | (48,442 | ) |
| TOTAL | | 4,848,648 |
| | 4,737,312 |
| | 5,133,688 |
| | 5,081,809 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $17,176,258 |
| |
| $16,387,447 |
| |
| $17,799,878 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | | Common Equity | | | Common Equity | | |
| | Preferred Membership Interests | | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total |
| | | | (In Thousands) | | | (In Thousands) | | |
| | | | | | | | | | | | | |
| Balance at December 31, 2014 |
| $100,000 |
| |
| $4,316,210 |
| |
| ($79,223 | ) | |
| $4,336,987 |
| |
| Balance at December 31, 2015 | |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
|
| | | | | | | | | | | | | |
| Net income | — |
| | 126,109 |
| | — |
| | 126,109 |
| 111,606 |
| | — |
| | 111,606 |
|
| Other comprehensive income | — |
| | — |
| | 380 |
| | 380 |
| — |
| | (263 | ) | | (263 | ) |
| Distributions declared on preferred membership interests | — |
| | (1,944 | ) | | — |
| | (1,944 | ) | |
| Other | — |
| | (8 | ) | | — |
| | (8 | ) | |
| | | | | | | | | |
| Balance at March 31, 2015 |
| $100,000 |
| |
| $4,440,367 |
| |
| ($78,843 | ) | |
| $4,461,524 |
| |
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
| |
| | | | | | | | | |
| Net income | — |
| | 111,606 |
| | — |
| | 111,606 |
| |
| Other comprehensive loss | — |
| | — |
| | (263 | ) | | (263 | ) | |
| Other | — |
| | (7 | ) | | — |
| | (7 | ) | (7 | ) | | — |
| | (7 | ) |
| | | | | | | | | | | | | |
| Balance at March 31, 2016 |
| $— |
| |
| $4,905,323 |
| |
| ($56,675 | ) | |
| $4,848,648 |
|
| $4,905,323 |
| |
| ($56,675 | ) | |
| $4,848,648 |
|
| | | | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2016 | |
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| | | | | | | |
| Net income | | 94,378 |
| | — |
| | 94,378 |
|
| Other comprehensive loss | | — |
| | (370 | ) | | (370 | ) |
| Distributions declared on common equity | | (42,125 | ) | | — |
| | (42,125 | ) |
| Other | | (4 | ) | | — |
| | (4 | ) |
| | | | | | | |
| Balance at March 31, 2017 | |
| $5,182,500 |
| |
| ($48,812 | ) | |
| $5,133,688 |
|
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | SELECTED OPERATING RESULTS (a) | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $254 |
| |
| $307 |
| |
| ($53 | ) | | (17 | ) | |
| $221 |
| |
| $254 |
| |
| ($33 | ) | | (13 | ) |
| Commercial | | 209 |
| | 232 |
| | (23 | ) | | (10 | ) | | 195 |
| | 209 |
| | (14 | ) | | (7 | ) |
| Industrial | | 326 |
| | 342 |
| | (16 | ) | | (5 | ) | | 325 |
| | 326 |
| | (1 | ) | | — |
|
| Governmental | | 16 |
| | 17 |
| | (1 | ) | | (6 | ) | | 15 |
| | 16 |
| | (1 | ) | | (6 | ) |
| Total retail | | 805 |
| | 898 |
| | (93 | ) | | (10 | ) | | 756 |
| | 805 |
| | (49 | ) | | (6 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 89 |
| | 96 |
| | (7 | ) | | (7 | ) | | 62 |
| | 89 |
| | (27 | ) | | (30 | ) |
| Non-associated companies | | 6 |
| | 12 |
| | (6 | ) | | (50 | ) | | 14 |
| | 6 |
| | 8 |
| | 133 |
|
| Other | | 36 |
| | 39 |
| | (3 | ) | | — |
| | 32 |
| | 36 |
| | (4 | ) | | — |
|
| Total | |
| $936 |
| |
| $1,045 |
| |
| ($109 | ) | | (10 | ) | |
| $864 |
| |
| $936 |
| |
| ($72 | ) | | (8 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 3,054 |
| | 3,507 |
| | (453 | ) | | (13 | ) | | 2,852 |
| | 3,054 |
| | (202 | ) | | (7 | ) |
| Commercial | | 2,566 |
| | 2,673 |
| | (107 | ) | | (4 | ) | | 2,540 |
| | 2,566 |
| | (26 | ) | | (1 | ) |
| Industrial | | 7,023 |
| | 6,567 |
| | 456 |
| | 7 |
| | 6,961 |
| | 7,023 |
| | (62 | ) | | (1 | ) |
| Governmental | | 199 |
| | 190 |
| | 9 |
| | 5 |
| | 193 |
| | 199 |
| | (6 | ) | | (3 | ) |
| Total retail | | 12,842 |
| | 12,937 |
| | (95 | ) | | (1 | ) | | 12,546 |
| | 12,842 |
| | (296 | ) | | (2 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 1,569 |
| | 1,632 |
| | (63 | ) | | (4 | ) | | 994 |
| | 1,569 |
| | (575 | ) | | (37 | ) |
| Non-associated companies | | 288 |
| | 207 |
| | 81 |
| | 39 |
| | 295 |
| | 288 |
| | 7 |
| | 2 |
|
| Total | | 14,699 |
| | 14,776 |
| | (77 | ) | | (1 | ) | | 13,835 |
| | 14,699 |
| | (864 | ) | | (6 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
(a) Amounts have been retrospectively adjusted to reflect the effects of the Entergy Louisiana and Entergy Gulf States Louisiana business combination for the first quarter 2015. See Note 1 to the financial statements in the Form 10-K for a discussion of the business combination.
| |
ENTERGY MISSISSIPPI, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $7.8 million primarily dueremained relatively unchanged for the first quarter 2017 compared to lower net revenue and higher depreciation and amortization expenses, partially offset by lower other operation and maintenance expenses.the first quarter 2016.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).credits. Following is an analysis of the change in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $175.8 |
|
Retail electric price | (10.4 | ) |
Volume/weather | (8.6 | ) |
Reserve equalization | (2.8 | ) |
Other | (4.4 | ) |
| 2016 net revenue |
| $149.6 |
|
| Retail electric price | 6.3 |
|
| Volume/weather | (2.3 | ) |
| Other | 0.5 |
|
| 2017 net revenue |
| $154.1 |
|
The retail electric price variance is primarily due to a $19.4 million net annual increase in revenues, as approved by the effectMPSC, effective with the first billing cycle of the realignment of certain costs from collection in riders to base rates on first quarter 2015 unbilled revenue and a decrease in the storm damage rider.July 2016. See Note 2 to the financial statements herein and in the Form 10-K for afurther discussion of the formula rate case and the storm damage rider.plan.
The volume/weather variance is primarily due to a decrease of 20275 GWh, or 6%2%, in billed electricity usage, including the effect of less unfavorablefavorable weather on residential and commercial sales.
sales, partially offset by an increase in industrial usage.The reserve equalization revenue varianceincrease in industrial usage is primarily due to an increase in usage by the absence of reserve equalization revenue as comparedmid to small industrial sector, expansion projects in the same periodpulp and paper industry, and new customers in 2015 resulting from Entergy Mississippi’s exit from the System Agreement in November 2015.wood products industry.
Other Income Statement Variances
Other operation and maintenance expenses decreasedincreased primarily due to:
an increase of $1.4 million in compensation and benefits costs primarily due to a decrease of $9.3 millionrevision to estimated incentive compensation expense in fossil-fueled generation expenses primarily due to a lower scope of work done during plant outages in 2016 as compared to the same period in 2015 and a decrease of $3.5 million in storm damage accruals. The decrease was partially offset by first quarter 2016;
an increase of $2.3$0.8 million in distribution expenses primarily due to higher vegetation maintenance. See Note 2 tomaintenance; and
an increase of $0.6 million in energy efficiency costs.
Income Taxes
The effective income tax rate was 41.0% for the financial statementsfirst quarter 2017. The difference in the Form 10-Keffective income tax rate for a discussionthe first quarter 2017 versus the federal statutory rate of storm cost recovery.
Depreciation and amortization expenses increased35% was primarily due to additionsa write-off of a stock-based compensation deferred tax asset and state income taxes, partially offset by book and tax differences related to plant in service.the allowance for equity funds used during construction.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate was 39.3% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items.
The effective income tax rate was 39.2% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $145,605 |
| |
| $61,633 |
|
| $76,834 |
| |
| $145,605 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 30,276 |
| | 65,167 |
| (9,132 | ) | | 30,276 |
|
| Investing activities | (61,178 | ) | | (42,340 | ) | (79,691 | ) | | (61,178 | ) |
| Financing activities | (757 | ) | | (749 | ) | 12,036 |
| | (757 | ) |
| Net increase (decrease) in cash and cash equivalents | (31,659 | ) | | 22,078 |
| |
| Net decrease in cash and cash equivalents | | (76,787 | ) | | (31,659 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $113,946 |
| |
| $83,711 |
|
| $47 |
| |
| $113,946 |
|
Operating Activities
Net cash flow provided byEntergy Mississippi’s operating activities decreased $34.9used $9.1 million of cash for the three months ended March 31, 2017 compared to providing $30.3 million of cash for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 primarily due to decreasedthe timing of recovery of fuel and purchased power costs in 20162017 as compared to the same period in 2015,2016 and $15.1 million in insurance proceeds received in the first quartertiming of 2015 related to the Baxter Wilson plant event.collections from customers. The decrease was partially offset by an increase of $8.9 million in income tax refunds in 2017 compared to the same period in 2016. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 and $6.2 million for the three months ended March 31,in 2016 compared toin accordance with an intercompany income tax payments of $0.6 million for the three months ended March 31, 2015. Entergy Mississippi receivedallocation agreement. The income tax refunds in accordance with2017 resulted from the intercompany state income tax sharing arrangements. See Note 3 to the financial statements in the Form 10-K for a discussioncarryback of the income tax audits and Note 8 to the financial statements in the Form 10-K for a discussion on the Baxter Wilson plant event.net operating losses.
Investing Activities
Net cash flow used in investing activities increased $18.8$18.5 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to to:
an increase of $13.5 million in transmission construction expenditures primarily due to a higher scope of work doneperformed in 20162017 as compared to the same period in 2015, and insurance proceeds2016;
an increase of $12.7$6.6 million received in the first quarterdistribution construction expenditures primarily due to a higher scope of 2015non-storm related work performed in 2017 as compared to the Baxter Wilsonsame period in 2016; and
an increase of $5.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed during plant event, partially offset byoutages in 2017 compared to the same period in 2016.
Financing Activities
Entergy Mississippi’s financing activities provided $12 million of cash for the three months ended March 31, 2017 compared to using $0.8 million of cash for the three months ended March 31, 2016 primarily due to money pool activity. See Note 8 to the financial statements in the Form 10-K for a discussion on the Baxter Wilson plant event.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
DecreasesIncreases in Entergy Mississippi’s receivable frompayable to the money pool are a source of cash flow, and Entergy Mississippi’s receivable frompayable to the money pool decreasedincreased by $10.4$12.3 million for the three months ended March 31, 2016 compared to increasing by $9.9 million for the three months ended March 31, 2015.2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Capital Structure
Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 49.3 | % | | 49.7 | % | 49.8 | % | | 50.2 | % |
| Effect of subtracting cash | (2.9 | %) | | (3.8 | %) | — | % | | (1.8 | %) |
| Net debt to net capital | 46.4 | % | | 45.9 | % | 49.8 | % | | 48.4 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
| March 31, 2016 | | December 31, 2015 | | March 31, 2015 | | December 31, 2014 |
| (In Thousands) |
| $15,549 | | $25,930 | | $10,522 | | $644 |
|
| | | | | | |
| March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($12,324) | | $10,595 | | $15,549 | | $25,930 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire in May 2016.2017. Entergy Mississippi expects to renew its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of March 31, 2016.2017. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of March 31, 2016,2017, a $4.4$7.1 million letter of credit was outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Formula Rate Plan
In March 2016,2017, Entergy Mississippi submitted its formula rate plan 20162017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 20162017 calendar year to be below the formula rate plan bandwidth. The filing shows a $32.6 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within the formula rate plan bandwidth.bandwidth, resulting in no change in rates. The filing is currently subject to MPSC review.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In April 2016May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a letter disputing the formula rate plan evaluation report subject to its continued review of the submittal. A final order is expected in second quarter 2016, with the resulting rates effective mid-year 2016. Pursuant to the terms of the formula rate plan, Entergy Mississippi also submitted an informational look-back filing for 2015 that showed Entergy Mississippi’s 2015 earned return was within the formula rate plan bandwidth.
Fuel and Purchased Power Cost Recovery
Entergy Mississippi had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million under the power management rider. Pursuant to those tariffs, in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August 2015, the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts sincejoint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI is in November 2015,the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall filecontinue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.
Mississippi Attorney General Complaint
As discussed in the Form 10-K, the Mississippi attorney general filed a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order,complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance forServices, and Entergy Power. The defendants have denied the period ending January 31, 2017 was $68 million,allegations. Discovery is currently in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.progress.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 Mississippi’s accounting for 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.
Entergy Mississippi, Inc.
Management's Financial Discussionbenefits, and Analysis
other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $258,443 |
| |
| $263,046 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 39,140 |
| | 61,380 |
|
| Purchased power | | 71,070 |
| | 55,383 |
|
| Other operation and maintenance | | 55,173 |
| | 51,273 |
|
| Taxes other than income taxes | | 23,972 |
| | 23,497 |
|
| Depreciation and amortization | | 35,317 |
| | 33,298 |
|
| Other regulatory credits - net | | (5,837 | ) | | (3,358 | ) |
| TOTAL | | 218,835 |
| | 221,473 |
|
| | | | | |
| OPERATING INCOME | | 39,608 |
| | 41,573 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,843 |
| | 1,286 |
|
| Interest and investment income | | 26 |
| | 121 |
|
| Miscellaneous - net | | (425 | ) | | (705 | ) |
| TOTAL | | 1,444 |
| | 702 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 12,672 |
| | 14,742 |
|
| Allowance for borrowed funds used during construction | | (720 | ) | | (667 | ) |
| TOTAL | | 11,952 |
| | 14,075 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 29,100 |
| | 28,200 |
|
| | | | | |
| Income taxes | | 11,942 |
| | 11,082 |
|
| | | | | |
| NET INCOME | | 17,158 |
| | 17,118 |
|
| | | | | |
| Preferred dividend requirements and other | | 238 |
| | 707 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $16,920 |
| |
| $16,411 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $263,046 |
| |
| $360,815 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 61,380 |
| | 90,611 |
|
| Purchased power | | 55,383 |
| | 92,158 |
|
| Other operation and maintenance | | 51,273 |
| | 65,072 |
|
| Taxes other than income taxes | | 23,497 |
| | 25,020 |
|
| Depreciation and amortization | | 33,298 |
| | 30,830 |
|
| Other regulatory charges (credits) - net | | (3,358 | ) | | 2,285 |
|
| TOTAL | | 221,473 |
| | 305,976 |
|
| | | | | |
| OPERATING INCOME | | 41,573 |
| | 54,839 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,286 |
| | 771 |
|
| Interest and investment income | | 121 |
| | 28 |
|
| Miscellaneous - net | | (705 | ) | | (802 | ) |
| TOTAL | | 702 |
| | (3 | ) |
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 14,742 |
| | 14,246 |
|
| Allowance for borrowed funds used during construction | | (667 | ) | | (417 | ) |
| TOTAL | | 14,075 |
| | 13,829 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 28,200 |
| | 41,007 |
|
| | | | | |
| Income taxes | | 11,082 |
| | 16,072 |
|
| | | | | |
| NET INCOME | | 17,118 |
| | 24,935 |
|
| | | | | |
| Preferred dividend requirements and other | | 707 |
| | 707 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $16,411 |
| |
| $24,228 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
| | ENTERGY MISSISSIPPI, INC. | STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $17,118 |
| |
| $24,935 |
| |
| $17,158 |
| |
| $17,118 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | |
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | | |
| Depreciation and amortization | | 33,298 |
| | 30,830 |
| | 35,317 |
| | 33,298 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (7,095 | ) | | (51,789 | ) | | 13,505 |
| | (7,095 | ) |
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (5,118 | ) | | 20,385 |
| | 17,890 |
| | (5,118 | ) |
| Fuel inventory | | (3,244 | ) | | (4,628 | ) | | 2,672 |
| | (3,244 | ) |
| Accounts payable | | (3,329 | ) | | (12,413 | ) | | (19,639 | ) | | (3,329 | ) |
| Taxes accrued | | (24,009 | ) | | 21,501 |
| | (38,825 | ) | | (24,009 | ) |
| Interest accrued | | (2,033 | ) | | (6,218 | ) | | (2,953 | ) | | (2,033 | ) |
| Deferred fuel costs | | 40,350 |
| | 40,244 |
| | (5,236 | ) | | 40,350 |
|
| Other working capital accounts | | (979 | ) | | (997 | ) | | (578 | ) | | (979 | ) |
| Provisions for estimated losses | | (2,016 | ) | | (157 | ) | | (1,772 | ) | | (2,016 | ) |
| Other regulatory assets | | 751 |
| | 15,065 |
| | (10,918 | ) | | 751 |
|
| Pension and other postretirement liabilities | | (6,015 | ) | | (4,153 | ) | | (4,613 | ) | | (6,015 | ) |
| Other assets and liabilities | | (7,403 | ) | | (7,438 | ) | | (11,140 | ) | | (7,403 | ) |
| Net cash flow provided by operating activities | | 30,276 |
| | 65,167 |
| |
| Net cash flow provided by (used in) operating activities | | | (9,132 | ) | | 30,276 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (72,764 | ) | | (45,976 | ) | | (92,087 | ) | | (72,764 | ) |
| Allowance for equity funds used during construction | | 1,286 |
| | 771 |
| | 1,843 |
| | 1,286 |
|
| Insurance proceeds | | — |
| | 12,745 |
| |
| Changes in money pool receivable - net | | 10,381 |
| | (9,878 | ) | | 10,595 |
| | 10,381 |
|
| Other | | (81 | ) | | (2 | ) | | (42 | ) | | (81 | ) |
| Net cash flow used in investing activities | | (61,178 | ) | | (42,340 | ) | | (79,691 | ) | | (61,178 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Change in money pool payable - net | | | 12,324 |
| | — |
|
| Dividends paid: | | | | | | | | |
| Preferred stock | | (707 | ) | | (707 | ) | | (238 | ) | | (707 | ) |
| Other | | (50 | ) | | (42 | ) | | (50 | ) | | (50 | ) |
| Net cash flow used in financing activities | | (757 | ) | | (749 | ) | |
| Net cash flow provided by (used in) financing activities | | | 12,036 |
| | (757 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (31,659 | ) | | 22,078 |
| |
| Net decrease in cash and cash equivalents | | | (76,787 | ) | | (31,659 | ) |
| Cash and cash equivalents at beginning of period | | 145,605 |
| | 61,633 |
| | 76,834 |
| | 145,605 |
|
| Cash and cash equivalents at end of period | |
| $113,946 |
| |
| $83,711 |
| |
| $47 |
| |
| $113,946 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $16,137 |
| |
| $19,813 |
| |
| $15,036 |
| |
| $16,137 |
|
| Income taxes | |
| ($6,175 | ) | |
| $597 |
| |
| ($15,087 | ) | |
| ($6,175 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY MISSISSIPPI, INC. | BALANCE SHEETS | ASSETS | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $1,277 |
| |
| $1,426 |
| |
| $40 |
| |
| $16 |
|
| Temporary cash investments | | 112,669 |
| | 144,179 |
| | 7 |
| | 76,818 |
|
| Total cash and cash equivalents | | 113,946 |
| | 145,605 |
| | 47 |
| | 76,834 |
|
| Accounts receivable: | | |
| | |
| | |
| | |
|
| Customer | | 50,148 |
| | 56,685 |
| | 52,724 |
| | 51,218 |
|
| Allowance for doubtful accounts | | (499 | ) | | (718 | ) | | (554 | ) | | (549 | ) |
| Associated companies | | 46,141 |
| | 34,964 |
| | 27,529 |
| | 45,973 |
|
| Other | | 5,009 |
| | 8,276 |
| | 6,112 |
| | 12,006 |
|
| Accrued unbilled revenues | | 40,429 |
| | 47,284 |
| | 45,679 |
| | 51,327 |
|
| Total accounts receivable | | 141,228 |
| | 146,491 |
| | 131,490 |
| | 159,975 |
|
| Deferred fuel costs | | | 12,193 |
| | 6,957 |
|
| Fuel inventory - at average cost | | 54,517 |
| | 51,273 |
| | 48,200 |
| | 50,872 |
|
| Materials and supplies - at average cost | | 39,113 |
| | 39,491 |
| | 41,833 |
| | 41,146 |
|
| Prepayments and other | | 6,292 |
| | 5,184 |
| | 7,799 |
| | 8,873 |
|
| TOTAL | | 355,096 |
| | 388,044 |
| | 241,562 |
| | 344,657 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
| | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,621 |
| | 4,625 |
| | 4,604 |
| | 4,608 |
|
| Escrow accounts | | 41,752 |
| | 41,726 |
| | 31,826 |
| | 31,783 |
|
| TOTAL | | 46,373 |
| | 46,351 |
| | 36,430 |
| | 36,391 |
|
| | | | | | | | | |
| UTILITY PLANT | | |
| | |
| | |
| | |
|
| Electric | | 4,133,487 |
| | 4,083,933 |
| | 4,333,218 |
| | 4,321,214 |
|
| Property under capital lease | | 2,613 |
| | 2,942 |
| | 1,234 |
| | 1,590 |
|
| Construction work in progress | | 116,595 |
| | 114,067 |
| | 154,285 |
| | 118,182 |
|
| TOTAL UTILITY PLANT | | 4,252,695 |
| | 4,200,942 |
| | 4,488,737 |
| | 4,440,986 |
|
| Less - accumulated depreciation and amortization | | 1,554,988 |
| | 1,534,522 |
| | 1,601,042 |
| | 1,602,711 |
|
| UTILITY PLANT - NET | | 2,697,707 |
| | 2,666,420 |
| | 2,887,695 |
| | 2,838,275 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
| | |
| | |
|
| Regulatory assets: | | |
| | |
| | |
| | |
|
| Regulatory asset for income taxes - net | | 45,814 |
| | 45,790 |
| | 38,694 |
| | 38,284 |
|
| Other regulatory assets | | 327,906 |
| | 328,681 |
| | 352,721 |
| | 342,213 |
|
| Other | | 5,335 |
| | 2,121 |
| | 5,732 |
| | 2,320 |
|
| TOTAL | | 379,055 |
| | 376,592 |
| | 397,147 |
| | 382,817 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $3,478,231 |
| |
| $3,477,407 |
| |
| $3,562,834 |
| |
| $3,602,140 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
| | |
| | |
|
| Currently maturing long-term debt | |
| $125,000 |
| |
| $125,000 |
| |
| Accounts payable: | | |
| | |
| | |
| | |
|
| Associated companies | | 31,226 |
| | 38,496 |
| |
| $53,350 |
| |
| $43,647 |
|
| Other | | 46,536 |
| | 51,502 |
| | 54,982 |
| | 80,227 |
|
| Customer deposits | | 82,493 |
| | 81,583 |
| | 84,619 |
| | 84,112 |
|
| Taxes accrued | | 19,452 |
| | 43,461 |
| | 25,215 |
| | 64,040 |
|
| Interest accrued | | 18,798 |
| | 20,831 |
| | 18,700 |
| | 21,653 |
|
| Deferred fuel costs | | 148,104 |
| | 107,754 |
| |
| Other | | 21,627 |
| | 22,754 |
| | 8,351 |
| | 9,554 |
|
| TOTAL | | 493,236 |
| | 491,381 |
| | 245,217 |
| | 303,233 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
| | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 804,273 |
| | 810,635 |
| | 873,335 |
| | 861,331 |
|
| Accumulated deferred investment tax credits | | 4,605 |
| | 4,645 |
| | 8,627 |
| | 8,667 |
|
| Asset retirement cost liabilities | | 8,367 |
| | 8,252 |
| | 8,844 |
| | 8,722 |
|
| Accumulated provisions | | 46,046 |
| | 48,062 |
| | 52,668 |
| | 54,440 |
|
| Pension and other postretirement liabilities | | 114,199 |
| | 120,217 |
| | 104,941 |
| | 109,551 |
|
| Long-term debt | | 920,430 |
| | 920,085 |
| | 1,121,139 |
| | 1,120,916 |
|
| Other | | 8,233 |
| | 11,699 |
| | 15,971 |
| | 20,108 |
|
| TOTAL | | 1,906,153 |
| | 1,923,595 |
| | 2,185,525 |
| | 2,183,735 |
|
| | | | | | | | | |
| Commitments and Contingencies | | |
| | |
| | |
| | |
|
| | | | | | | | | |
| Preferred stock without sinking fund | | 50,381 |
| | 50,381 |
| | 20,381 |
| | 20,381 |
|
| | | | | | | | | |
| COMMON EQUITY | | |
| | |
| | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2016 and 2015 | | 199,326 |
| | 199,326 |
| |
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2017 and 2016 | | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | (690 | ) | | (690 | ) | | 167 |
| | 167 |
|
| Retained earnings | | 829,825 |
| | 813,414 |
| | 912,218 |
| | 895,298 |
|
| TOTAL | | 1,028,461 |
| | 1,012,050 |
| | 1,111,711 |
| | 1,094,791 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,478,231 |
| |
| $3,477,407 |
| |
| $3,562,834 |
| |
| $3,602,140 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) | |
| | | | | | | | | |
| Balance at December 31, 2014 |
| $199,326 |
| |
| ($690 | ) | |
| $763,534 |
| |
| $962,170 |
| |
| | | | | | | | | |
| Net income | — |
| | — |
| | 24,935 |
| | 24,935 |
| |
| Preferred stock dividends | — |
| | — |
| | (707 | ) | | (707 | ) | |
| | | | | | | | | |
| Balance at March 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $787,762 |
| |
| $986,398 |
| |
| | | | | | | | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | | | | | | | | |
| Net income | — |
| | — |
| | 17,118 |
| | 17,118 |
| — |
| | — |
| | 17,118 |
| | 17,118 |
|
| Preferred stock dividends | — |
| | — |
| | (707 | ) | | (707 | ) | — |
| | — |
| | (707 | ) | | (707 | ) |
| | | | | | | | | | | | | | | |
| Balance at March 31, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $829,825 |
| |
| $1,028,461 |
|
| $199,326 |
| |
| ($690 | ) | |
| $829,825 |
| |
| $1,028,461 |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2016 | |
| $199,326 |
| |
| $167 |
| |
| $895,298 |
| |
| $1,094,791 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 17,158 |
| | 17,158 |
|
| Preferred stock dividends | | — |
| | — |
| | (238 | ) | | (238 | ) |
| | | | | | | | | |
| Balance at March 31, 2017 | |
| $199,326 |
| |
| $167 |
| |
| $912,218 |
| |
| $1,111,711 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | |
| | Increase/ | | |
| | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| | (Dollars In Millions) | | |
| Electric Operating Revenues: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | |
| $116 |
| |
| $154 |
| |
| ($38 | ) | | (25 | ) | |
| $111 |
| |
| $116 |
| |
| ($5 | ) | | (4 | ) |
| Commercial | | 92 |
| | 113 |
| | (21 | ) | | (19 | ) | | 92 |
| | 92 |
| | — |
| | — |
|
| Industrial | | 34 |
| | 40 |
| | (6 | ) | | (15 | ) | | 36 |
| | 34 |
| | 2 |
| | 6 |
|
| Governmental | | 10 |
| | 12 |
| | (2 | ) | | (17 | ) | | 9 |
| | 10 |
| | (1 | ) | | (10 | ) |
| Total retail | | 252 |
| | 319 |
| | (67 | ) | | (21 | ) | | 248 |
| | 252 |
| | (4 | ) | | (2 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 22 |
| | (22 | ) | | (100 | ) | |
| Non-associated companies | | 5 |
| | 3 |
| | 2 |
| | 67 |
| | 5 |
| | 5 |
| | — |
| | — |
|
| Other | | 6 |
| | 17 |
| | (11 | ) | | (65 | ) | | 5 |
| | 6 |
| | (1 | ) | | (17 | ) |
| Total | |
| $263 |
| |
| $361 |
| |
| ($98 | ) | | (27 | ) | |
| $258 |
| |
| $263 |
| |
| ($5 | ) | | (2 | ) |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,285 |
| | 1,488 |
| | (203 | ) | | (14 | ) | | 1,190 |
| | 1,285 |
| | (95 | ) | | (7 | ) |
| Commercial | | 1,079 |
| | 1,110 |
| | (31 | ) | | (3 | ) | | 1,062 |
| | 1,079 |
| | (17 | ) | | (2 | ) |
| Industrial | | 549 |
| | 517 |
| | 32 |
| | 6 |
| | 586 |
| | 549 |
| | 37 |
| | 7 |
|
| Governmental | | 98 |
| | 98 |
| | — |
| | — |
| | 98 |
| | 98 |
| | — |
| | — |
|
| Total retail | | 3,011 |
| | 3,213 |
| | (202 | ) | | (6 | ) | | 2,936 |
| | 3,011 |
| | (75 | ) | | (2 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 474 |
| | (474 | ) | | (100 | ) | |
| Non-associated companies | | 132 |
| | 38 |
| | 94 |
| | 247 |
| | 181 |
| | 132 |
| | 49 |
| | 37 |
|
| Total | | 3,143 |
| | 3,725 |
| | (582 | ) | | (16 | ) | | 3,117 |
| | 3,143 |
| | (26 | ) | | (1 | ) |
ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Algiers Asset Transfer
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Algiers Asset Transfer” in the Form 10-K for a discussion of the Algiers asset transfer on September 1, 2015. The effect of the Algiers transfer has been retrospectively applied to the first quarter 2015 Entergy New Orleans financial statements that are presented in this report.
Results of Operations
Net Income
Net income remained relatively unchanged, decreasing by $0.1$0.2 million, for the first quarter 20162017 compared to the first quarter 2015 primarily2016 because lowerhigher net revenue was substantially offset by lowerhigher taxes other operationthan income taxes and maintenancehigher depreciation and amortization expenses.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).charges. Following is an analysis of the changes in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $72.2 |
|
Volume/weather | (2.5 | ) |
Net gas revenue | (2.1 | ) |
Retail electric price | 2.5 |
|
Other | (2.1 | ) |
| 2016 net revenue |
| $68.0 |
|
| Retail electric price | 5.1 |
|
| Net gas revenue | (1.9 | ) |
| Volume/weather | (3.1 | ) |
| Other | 2.1 |
|
| 2017 net revenue |
| $70.2 |
|
The volume/weather variance is primarily due to a decrease of 66 GWh, or 5%, in billed electricity usage, including the effect of less favorable weather, primarily on residential sales. The decrease is partially offset by a 2% increase in the average number of electric customers.
The net gas revenue variance is primarily due to the effect of less favorable weather, primarily in the residential sector.
The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the acquisitionpurchase of Power Block 1 of the Union Power Station. The increase was partially offset by lower storm reserve rider revenues due to the cessation of the storm riderStation in August 2015. See Note 13 to the financial statements herein for discussion of the Union purchase.March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of storm costs recovery.the purchased power and capacity acquisition cost recovery rider.
The net gas revenue variance is primarily due to the effect of less favorable weather, primarily on residential sales.
The volume/weather variance is primarily due to a decrease of 35 GWh, or 3%, in billed electricity usage, primarily in the residential sector.
Other Income Statement Variances
Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher electric retail revenues in 2017 as compared to the same period in 2016 and an increase in ad valorem taxes resulting from higher assessments, offset by higher capitalized taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Block 1 of the Union Power Station in March 2016, partially offset by the deactivation of Michoud Units 2 and 3 effective May 2016.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement VariancesTaxes
Other operation and maintenance expenses decreased primarily due to:
a decreaseThe effective income tax rate was 36.4% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of $1.9 million35% was primarily due to storm reserve accruals booked in 2015, as discussed above;state income taxes, certain book and tax differences related to utility plant items, and a write-off of a stock-based compensation deferred tax asset, partially offset by flow-through tax accounting.
a decrease of $1.4 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO; and
a decrease of $1.2 million in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages in 2016 as compared to the same period in 2015.
Income Taxes
The effective income tax rate was 37.2% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting.
The effective income tax rate was 34.6% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to flow-through tax accounting, partially offset by state income taxes and certain book and tax differences related to utility plant items.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $88,876 |
| |
| $42,389 |
|
| $103,068 |
| |
| $88,876 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 4,453 |
| | 7,227 |
| 5,619 |
| | 4,453 |
|
| Investing activities | (242,386 | ) | | (20,000 | ) | (40,751 | ) | | (242,386 | ) |
| Financing activities | 155,025 |
| | (7,566 | ) | (11,868 | ) | | 155,025 |
|
| Net decrease in cash and cash equivalents | (82,908 | ) | | (20,339 | ) | (47,000 | ) | | (82,908 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $5,968 |
| |
| $22,050 |
|
| $56,068 |
| |
| $5,968 |
|
Operating Activities
Net cash flow provided by operating activities decreased $2.8increased $1.2 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to an increaseincome tax payments of $2.5 million in income taxes paid and the timing of collections from customers, partially offset by $3.2 million in2016 primarily due to payments made in the first quarter 2015 related to settlements on asbestos claims and the timing of payments to vendors.for state tax liabilities.
Investing Activities
Net cash flow used in investing activities increased $222.4decreased $201.6 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016, partially offset by money pool activity.activity and an increase of $7 million in storm spending in 2017. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase.
Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $12.1 million in 2017 compared to decreasing $15.1 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $15.1 million in 2016 compared to increasing $2.4 million in 2015. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Entergy New Orleans’s financing activities providedused $11.9 million of cash for the three months ended March 31, 2017 compared to providing $155 million of cash for the three months ended March 31, 2016 compared to using $7.6 million of cash for the three months ended March 31, 2015 primarily due to to:
the issuance of $110 million of 5.5%5.50% Series first mortgage bonds in March 2016, 2016;
a $47.8 million capital contribution received from Entergy Corporation in March 2016 in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station; and $7.3
$12.2 million in common stock dividends paid in 2015. first quarter 2017. There were no common stock dividends paid in first quarter 2016 in anticipation of the purchase of Power Block 1 of the Union Power Station in March 2016.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Capital Structure
Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is due to the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016, partially offset by the $47.8 million capital contribution received from Entergy Corporation in March 2016.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 51.2 | % | | 48.1 | % | 50.2 | % | | 50.1 | % |
| Effect of excluding securitization bonds | (6.0 | %) | | (8.1 | %) | (5.2 | %) | | (5.2 | %) |
| Debt to capital, excluding securitization bonds (a) | 45.2 | % | | 40.0 | % | 45.0 | % | | 44.9 | % |
| Effect of subtracting cash | (0.4 | %) | | (10.0 | %) | (4.1 | %) | | (8.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 44.8 | % | | 30.0 | % | 40.9 | % | | 36.9 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans. |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, long-term debt, including the currently maturing portion, and the long-term payable to Entergy Louisiana. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans 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 New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans 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 New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources”in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy New Orleans’s receivables from the money pool were as follows:
|
| | | | | | |
| March 31, 2016 | | December 31, 2015 | | March 31, 2015 | | December 31, 2014 |
| (In Thousands) |
| $735 | | $15,794 | | $2,849 | | $442 |
|
| | | | | | |
| March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $26,315 | | $14,215 | | $735 | | $15,794 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2018. NoThe credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. As of March 31, 2017, there were no cash borrowings wereand a $0.8 million letter of credit was outstanding under the facility as of March 31, 2016.facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of March 31, 2016,2017, a $6.2$1 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
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. The current estimated cost of the New Orleans Power Station is $216 million. Subject to timely approval by the City Council and receipt of other permits and approvals, commercial operation is estimated to occur by late-2019. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In February 2017, Entergy New Orleans filed a motion to temporarily suspend the procedural schedule to allow for further analysis regarding its proposal, and that motion was granted. A status conference was held in March 2017 wherein the hearing officer suspended the procedural schedule until Entergy New Orleans files a supplemental and amending application, currently expected to occur in second quarter 2017. In April 2017, Entergy New Orleans filed a status report with the City Council advising that it was in the process of conducting additional analyses regarding generation needed to meet the future electricity needs of New Orleans and stating that it expects to include in the supplemental and amending application a request for approval of either the original New Orleans Power Station combustion turbine or an alternative proposal for an approximately 126 MW unit, as well as a commitment to pursue up to 100 MW of renewable resources to serve New Orleans.
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following is an updateare updates to that discussion.
Retail Rates
As discussed in the Form 10-K, in November 2015February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council authorized expansionidentify its desired level of funding for the program during this time period and approve a cost recovery mechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the purchased powerEnergy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost
Entergy New Orleans, Inc. and capacity acquisition cost Subsidiaries
Management's Financial Discussion and Analysis
recovery ridermechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the non-fuel purchased power expense from Ninemile 6 as well asEnergy Smart program.
Internal Restructuring
As discussed in the revenue requirement associated with the acquisition of Power Block 1 of Union Power Station. In MarchForm 10-K, in July 2016, Entergy New Orleans acquired Power Block 1filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of Union Power Stationsubstantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Additionally, if the FERC approves the transaction prior to December 31, 2018, Entergy New Orleans will credit retail customers $5 million in each of the years 2018, 2019, and 2020.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans received intervenor testimony that is generally supportive of AMI deployment. The City Council’s advisors are scheduled to file testimony in May 2017, and a hearing is currently set for approximately $237 million, subject to closing adjustments, and initiated recovery of these costs with March 2016 bills.July 2017.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “See“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.further discussion.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 New Orleans’s accounting for 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.benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
| | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | |
| | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $122,441 |
| |
| $121,495 |
| |
| $142,345 |
| |
| $122,441 |
|
| Natural gas | | 26,899 |
| | 35,131 |
| | 26,644 |
| | 26,899 |
|
| TOTAL | | 149,340 |
| | 156,626 |
| | 168,989 |
| | 149,340 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 10,921 |
| | 21,623 |
| | 30,075 |
| | 10,921 |
|
| Purchased power | | 68,525 |
| | 63,135 |
| | 68,359 |
| | 68,525 |
|
| Other operation and maintenance | | 22,842 |
| | 28,000 |
| | 22,512 |
| | 22,842 |
|
| Taxes other than income taxes | | 11,512 |
| | 11,893 |
| | 12,846 |
| | 11,512 |
|
| Depreciation and amortization | | 11,764 |
| | 11,520 |
| | 13,050 |
| | 11,764 |
|
| Other regulatory charges (credits) - net | | 1,896 |
| | (290 | ) | |
| Other regulatory charges - net | | | 385 |
| | 1,896 |
|
| TOTAL | | 127,460 |
| | 135,881 |
| | 147,227 |
| | 127,460 |
|
| | | | | | | | | |
| OPERATING INCOME | | 21,880 |
| | 20,745 |
| | 21,762 |
| | 21,880 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 313 |
| | 320 |
| | 450 |
| | 313 |
|
| Interest and investment income | | 69 |
| | 26 |
| | 135 |
| | 69 |
|
| Miscellaneous - net | | (245 | ) | | 364 |
| | 98 |
| | (245 | ) |
| TOTAL | | 137 |
| | 710 |
| | 683 |
| | 137 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 4,373 |
| | 4,341 |
| | 5,343 |
| | 4,373 |
|
| Allowance for borrowed funds used during construction | | (126 | ) | | (150 | ) | | (158 | ) | | (126 | ) |
| TOTAL | | 4,247 |
| | 4,191 |
| | 5,185 |
| | 4,247 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 17,770 |
| | 17,264 |
| | 17,260 |
| | 17,770 |
|
| | | | | | | | | |
| Income taxes | | 6,603 |
| | 5,972 |
| | 6,282 |
| | 6,603 |
|
| | | | | | | | | |
| NET INCOME | | 11,167 |
| | 11,292 |
| | 10,978 |
| | 11,167 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 241 |
| | 241 |
| | 241 |
| | 241 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $10,926 |
| |
| $11,051 |
| |
| $10,737 |
| |
| $10,926 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $10,978 |
| |
| $11,167 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 13,050 |
| | 11,764 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,102 |
| | (9,742 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (2,659 | ) | | (5,346 | ) |
| Fuel inventory | | 1,798 |
| | 1,518 |
|
| Accounts payable | | (11,920 | ) | | (101 | ) |
Prepaid taxes and taxes accrued
| | (1,992 | ) | | 14,187 |
|
| Interest accrued | | 34 |
| | (579 | ) |
| Deferred fuel costs | | 6,096 |
| | (5,288 | ) |
| Other working capital accounts | | (13,106 | ) | | (11,382 | ) |
| Provisions for estimated losses | | (655 | ) | | (532 | ) |
| Other regulatory assets | | 300 |
| | 6,270 |
|
| Pension and other postretirement liabilities | | (3,915 | ) | | (4,102 | ) |
| Other assets and liabilities | | 508 |
| | (3,381 | ) |
| Net cash flow provided by operating activities | | 5,619 |
| | 4,453 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (26,079 | ) | | (17,931 | ) |
| Allowance for equity funds used during construction | | 450 |
| | 313 |
|
| Payment for purchase of plant | | — |
| | (236,944 | ) |
| Investment in affiliates | | — |
| | (38 | ) |
| Changes in money pool receivable - net | | (12,100 | ) | | 15,059 |
|
| Receipts from storm reserve escrow account | | — |
| | 3 |
|
| Payments to storm reserve escrow account | | (110 | ) | | (102 | ) |
| Changes in securitization account | | (2,912 | ) | | (2,746 | ) |
| Net cash flow used in investing activities | | (40,751 | ) | | (242,386 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | (10 | ) | | 106,786 |
|
| Capital contribution from parent | | — |
| | 47,750 |
|
| Dividends paid: | | | | |
| Common stock | | (12,200 | ) | | — |
|
| Preferred stock | | (241 | ) | | (241 | ) |
| Other | | 583 |
| | 730 |
|
| Net cash flow provided by (used in) financing activities | | (11,868 | ) | | 155,025 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (47,000 | ) | | (82,908 | ) |
| Cash and cash equivalents at beginning of period | | 103,068 |
| | 88,876 |
|
| Cash and cash equivalents at end of period | |
| $56,068 |
| |
| $5,968 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $5,043 |
| |
| $4,654 |
|
| Income taxes | |
| $— |
| |
| $2,500 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $11,167 |
| |
| $11,292 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 11,764 |
| | 11,520 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (9,742 | ) | | 4,883 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (5,346 | ) | | 4,474 |
|
| Fuel inventory | | 1,518 |
| | 1,360 |
|
| Accounts payable | | (101 | ) | | (3,829 | ) |
| Taxes accrued | | 14,187 |
| | — |
|
| Interest accrued | | (579 | ) | | (1,315 | ) |
| Deferred fuel costs | | (5,288 | ) | | (3,949 | ) |
| Other working capital accounts | | (11,382 | ) | | (9,271 | ) |
| Provisions for estimated losses | | (532 | ) | | (2,012 | ) |
| Other regulatory assets | | 6,270 |
| | (676 | ) |
| Pension and other postretirement liabilities | | (4,102 | ) | | (3,013 | ) |
| Other assets and liabilities | | (3,381 | ) | | (2,237 | ) |
| Net cash flow provided by operating activities | | 4,453 |
| | 7,227 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (17,931 | ) | | (16,110 | ) |
| Allowance for equity funds used during construction | | 313 |
| | 320 |
|
| Payment for purchase of plant | | (236,944 | ) | | — |
|
| Investment in affiliates | | (38 | ) | | — |
|
| Changes in money pool receivable - net | | 15,059 |
| | (2,407 | ) |
| Receipts from storm reserve escrow account | | 3 |
| | 3 |
|
| Payments to storm reserve escrow account | | (102 | ) | | (1,806 | ) |
| Change in securitization account | | (2,746 | ) | | — |
|
| Net cash flow used in investing activities | | (242,386 | ) | | (20,000 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 106,786 |
| | — |
|
| Capital contributions from parent | | 47,750 |
| | — |
|
| Dividends paid: | | | | |
| Common stock | | — |
| | (7,250 | ) |
| Preferred stock | | (241 | ) | | (241 | ) |
| Other | | 730 |
| | (75 | ) |
| Net cash flow provided by (used in) financing activities | | 155,025 |
| | (7,566 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (82,908 | ) | | (20,339 | ) |
| Cash and cash equivalents at beginning of period | | 88,876 |
| | 42,389 |
|
| Cash and cash equivalents at end of period | |
| $5,968 |
| |
| $22,050 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $4,654 |
| |
| $5,405 |
|
| Income taxes | |
| $2,500 |
| |
| $40 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $1,026 |
| |
| $28 |
|
| Temporary cash investments | | 55,042 |
| | 103,040 |
|
| Total cash and cash equivalents | | 56,068 |
| | 103,068 |
|
Securitization recovery trust account
| | 4,650 |
| | 1,738 |
|
| Accounts receivable: | | | | |
| Customer | | 45,409 |
| | 43,536 |
|
| Allowance for doubtful accounts | | (3,090 | ) | | (3,059 | ) |
| Associated companies | | 28,835 |
| | 16,811 |
|
| Other | | 10,688 |
| | 5,926 |
|
| Accrued unbilled revenues | | 14,385 |
| | 18,254 |
|
| Total accounts receivable | | 96,227 |
| | 81,468 |
|
| Deferred fuel costs | | — |
| | 4,818 |
|
| Fuel inventory - at average cost | | 43 |
| | 1,841 |
|
| Materials and supplies - at average cost | | 9,588 |
| | 8,416 |
|
| Prepaid taxes | | 6,371 |
| | 4,379 |
|
| Prepayments and other | | 18,610 |
| | 6,587 |
|
| TOTAL | | 191,557 |
| | 212,315 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,547 |
| | 81,437 |
|
| Other | | 4,787 |
| | 7,160 |
|
| TOTAL | | 87,350 |
| | 89,613 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,251,117 |
| | 1,258,934 |
|
| Natural gas | | 243,424 |
| | 240,408 |
|
| Construction work in progress | | 34,337 |
| | 24,975 |
|
| TOTAL UTILITY PLANT | | 1,528,878 |
| | 1,524,317 |
|
| Less - accumulated depreciation and amortization | | 600,391 |
| | 604,825 |
|
| UTILITY PLANT - NET | | 928,487 |
| | 919,492 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $80,152 as of March 31, 2017 and $82,272 as of December 31, 2016) | | 267,806 |
| | 268,106 |
|
| Other | | 1,597 |
| | 963 |
|
| TOTAL | | 273,483 |
| | 273,149 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,480,877 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Payable due to Entergy Louisiana | |
| $2,104 |
| |
| $2,104 |
|
| Accounts payable: | | | | |
| Associated companies | | 40,414 |
| | 39,260 |
|
| Other | | 21,095 |
| | 35,920 |
|
| Customer deposits | | 28,714 |
| | 28,667 |
|
| Interest accrued | | 5,477 |
| | 5,443 |
|
| Deferred fuel costs | | 1,278 |
| | — |
|
| Other | | 9,084 |
| | 11,415 |
|
| TOTAL CURRENT LIABILITIES | | 108,166 |
| | 122,809 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 342,757 |
| | 334,953 |
|
| Accumulated deferred investment tax credits | | 590 |
| | 622 |
|
| Regulatory liability for income taxes - net | | 7,491 |
| | 9,074 |
|
| Asset retirement cost liabilities | | 2,924 |
| | 2,875 |
|
| Accumulated provisions | | 87,858 |
| | 88,513 |
|
| Pension and other postretirement liabilities | | 32,835 |
| | 36,750 |
|
| Long-term debt (includes securitization bonds of $84,836 as of March 31, 2017 and $84,776 as of December 31, 2016) | | 428,607 |
| | 428,467 |
|
| Long-term payable due to Entergy Louisiana | | 18,423 |
| | 18,423 |
|
| Gas system rebuild insurance proceeds | | — |
| | 447 |
|
| Other | | 5,963 |
| | 4,910 |
|
| TOTAL NON-CURRENT LIABILITIES | | 927,448 |
| | 925,034 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 19,780 |
| | 19,780 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2017 and 2016 | | 33,744 |
| | 33,744 |
|
| Paid-in capital | | 171,544 |
| | 171,544 |
|
| Retained earnings | | 220,195 |
| | 221,658 |
|
| TOTAL | | 425,483 |
| | 426,946 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,480,877 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $652 |
| |
| $1,068 |
|
| Temporary cash investments | | 5,316 |
| | 87,808 |
|
| Total cash and cash equivalents | | 5,968 |
| | 88,876 |
|
Securitization recovery trust account
| | 7,366 |
| | 4,620 |
|
| Accounts receivable: | | | | |
| Customer | | 39,245 |
| | 34,627 |
|
| Allowance for doubtful accounts | | (289 | ) | | (268 | ) |
| Associated companies | | 9,063 |
| | 23,248 |
|
| Other | | 6,099 |
| | 3,753 |
|
| Accrued unbilled revenues | | 15,328 |
| | 17,799 |
|
| Total accounts receivable | | 69,446 |
| | 79,159 |
|
| Fuel inventory - at average cost | | 394 |
| | 1,912 |
|
| Materials and supplies - at average cost | | 15,257 |
| | 13,244 |
|
| Prepayments and other | | 17,932 |
| | 10,263 |
|
| TOTAL | | 116,363 |
| | 198,074 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,102 |
| | 81,002 |
|
| Other | | 7,119 |
| | — |
|
| TOTAL | | 89,237 |
| | 82,018 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,390,403 |
| | 1,051,239 |
|
| Natural gas | | 234,374 |
| | 232,780 |
|
| Construction work in progress | | 18,582 |
| | 29,027 |
|
| TOTAL UTILITY PLANT | | 1,643,359 |
| | 1,313,046 |
|
| Less - accumulated depreciation and amortization | | 740,029 |
| | 648,081 |
|
| UTILITY PLANT - NET | | 903,330 |
| | 664,965 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $89,585 as of March 31, 2016 and $91,599 as of December 31, 2015) | | 259,052 |
| | 265,322 |
|
| Other | | 2,089 |
| | 685 |
|
| TOTAL | | 265,221 |
| | 270,087 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,374,151 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Payable due to Entergy Louisiana | |
| $4,973 |
| |
| $4,973 |
|
| Associated companies | | 35,163 |
| | 37,467 |
|
| Other | | 22,583 |
| | 21,471 |
|
| Customer deposits | | 28,497 |
| | 28,392 |
|
| Taxes accrued | | 14,187 |
| | — |
|
| Interest accrued | | 4,330 |
| | 4,909 |
|
| Deferred fuel costs | | 23,733 |
| | 29,021 |
|
| Other | | 9,525 |
| | 6,216 |
|
| TOTAL CURRENT LIABILITIES | | 142,991 |
| | 132,449 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 203,650 |
| | 214,061 |
|
| Accumulated deferred investment tax credits | | 722 |
| | 753 |
|
| Regulatory liability for income taxes - net | | 11,841 |
| | 13,199 |
|
| Asset retirement cost liabilities | | 2,733 |
| | 2,687 |
|
| Accumulated provisions | | 83,655 |
| | 84,187 |
|
| Pension and other postretirement liabilities | | 39,507 |
| | 43,609 |
|
| Long-term debt (includes securitization property of $95,930 as of March 31, 2016 and $95,867 as of December 31, 2015) | | 424,392 |
| | 317,380 |
|
| Long-term payable due to Entergy Louisiana | | 20,527 |
| | 20,527 |
|
| Gas system rebuild insurance proceeds | | 10,269 |
| | 12,788 |
|
| Other | | 5,376 |
| | 3,692 |
|
| TOTAL NON-CURRENT LIABILITIES | | 802,672 |
| | 712,883 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 19,780 |
| | 19,780 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2016 and 2015 | | 33,744 |
| | 33,744 |
|
| Paid-in capital | | 171,544 |
| | 123,794 |
|
| Retained earnings | | 203,420 |
| | 192,494 |
|
| TOTAL | | 408,708 |
| | 350,032 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,374,151 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in
Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 11,167 |
| | 11,167 |
|
| Capital contribution from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $203,420 |
| |
| $408,708 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $221,658 |
| |
| $426,946 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 10,978 |
| | 10,978 |
|
| Common stock dividends | — |
| | — |
| | (12,200 | ) | | (12,200 | ) |
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2017 |
| $33,744 |
| |
| $171,544 |
| |
| $220,195 |
| |
| $425,483 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in
Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2014 |
| $33,744 |
| |
| $36,294 |
| |
| $157,987 |
| |
| $228,025 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 11,292 |
| | 11,292 |
|
| Net income attributable to Entergy Louisiana | — |
| | — |
| | (238 | ) | | (238 | ) |
| Common stock dividends | — |
| | — |
| | (7,250 | ) | | (7,250 | ) |
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2015 |
| $33,744 |
| |
| $36,294 |
| |
| $161,550 |
| |
| $231,588 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 11,167 |
| | 11,167 |
|
| Capital contributions from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $203,420 |
| |
| $408,708 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS (a) | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | |
| | |
| | |
| | | | | | | | |
| Residential | |
| $47 |
| |
| $48 |
| |
| ($1 | ) | | (2 | ) | |
| $53 |
| |
| $47 |
| |
| $6 |
| | 13 |
|
| Commercial | | 44 |
| | 41 |
| | 3 |
| | 7 |
| | 54 |
| | 44 |
| | 10 |
| | 23 |
|
| Industrial | | 7 |
| | 6 |
| | 1 |
| | 17 |
| | 8 |
| | 7 |
| | 1 |
| | 14 |
|
| Governmental | | 15 |
| | 13 |
| | 2 |
| | 15 |
| | 18 |
| | 15 |
| | 3 |
| | 20 |
|
| Total retail | | 113 |
| | 108 |
| | 5 |
| | 5 |
| | 133 |
| | 113 |
| | 20 |
| | 18 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 7 |
| | 9 |
| | (2 | ) | | (22 | ) | | — |
| | 7 |
| | (7 | ) | | (100 | ) |
| Non-associated companies | | | 9 |
| | — |
| | 9 |
| | — |
|
| Other | | 2 |
| | 4 |
| | (2 | ) | | (50 | ) | | — |
| | 2 |
| | (2 | ) | | (100 | ) |
| Total | |
| $122 |
| |
| $121 |
| |
| $1 |
| | 1 |
| |
| $142 |
| |
| $122 |
| |
| $20 |
| | 16 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 499 |
| | 559 |
| | (60 | ) | | (11 | ) | | 456 |
| | 499 |
| | (43 | ) | | (9 | ) |
| Commercial | | 510 |
| | 506 |
| | 4 |
| | 1 |
| | 515 |
| | 510 |
| | 5 |
| | 1 |
|
| Industrial | | 101 |
| | 103 |
| | (2 | ) | | (2 | ) | | 98 |
| | 101 |
| | (3 | ) | | (3 | ) |
| Governmental | | 178 |
| | 186 |
| | (8 | ) | | (4 | ) | | 184 |
| | 178 |
| | 6 |
| | 3 |
|
| Total retail | | 1,288 |
| | 1,354 |
| | (66 | ) | | (5 | ) | | 1,253 |
| | 1,288 |
| | (35 | ) | | (3 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 242 |
| | 214 |
| | 28 |
| | 13 |
| | — |
| | 242 |
| | (242 | ) | | (100 | ) |
| Non-associated companies | | 14 |
| | 4 |
| | 10 |
| | 250 |
| | 507 |
| | 14 |
| | 493 |
| | 3,521 |
|
| Total | | 1,544 |
| | 1,572 |
| | (28 | ) | | (2 | ) | | 1,760 |
| | 1,544 |
| | 216 |
| | 14 |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| (a) Amounts have been retrospectively adjusted to reflect the effects of the transfer of the Algiers assets for the first quarter 2015. See Note 1 to the financial statements in the Form 10-K for a discussion of the Algiers asset transfer. | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $2$3.7 million primarily due to lower net revenue,higher depreciation and amortization expense and higher taxes other than income taxes, partially offset by lower other operation and maintenance expenses.higher net revenue.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing the first quarter 20162017 to the first quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $143.7 |
|
Volume/weather | (10.3 | ) |
Reserve equalization | 5.3 |
|
Other | (0.5 | ) |
| 2016 net revenue |
| $138.2 |
|
| Volume/weather | 10.3 |
|
| Purchased power capacity | 7.6 |
|
| Retail electric price | 3.9 |
|
| Net wholesale revenue | (18.6 | ) |
| Other | (1.1 | ) |
| 2017 net revenue |
| $140.3 |
|
The volume/weather variance is primarily due to an increase in usage during the unbilled sales period, partially offset by a decrease of 21497 GWh, or 9%2%, in billed electricity usage, primarily in the residential and commercial sales, including the effect of less favorable weather. This decrease was partially offset by an increase in industrial usage, primarily due to higher usage by petroleum refining customers.sectors.
The reserve equalizationpurchased power capacity variance is primarily due to a reductiondecreased expenses due to the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in reserve equalization expenseAugust 2016.
The retail electric price variance is primarily due to changesthe implementation of the transmission cost recovery factor rider, as approved by the PUCT and implemented in September 2016. See Note 2 to the financial statements in the Entergy System generation mix compared to the same period in 2015 as a resultForm 10-K for further discussion of the executiontransmission cost recovery factor rider filing.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of a new purchasethe purchased power agreementagreements between Entergy Louisiana and Entergy Mississippi’s exit from the System Agreement, eachTexas in November 2015.August 2016.
Other Income Statement Variances
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments, partially offset by higher capitalized taxes, and an increase in local franchise taxes resulting from an increase in gross receipts taxes and city franchise tax.
Other operation and maintenance expensesincome decreased primarily due to a decrease of $2 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done in the prior year,allowance for equity funds used during construction resulting from decreased transmission spending in 2017.
Entergy Texas, Inc. and a decrease of $1 million in energy efficiency costs.Subsidiaries
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate was 43.2% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to a write-off of a stock-based compensation deferred tax asset and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 37.9% for the first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 33.3% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by the provision for uncertain tax positions and certain book and tax differences related to utility plant items.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $2,182 |
| |
| $30,441 |
|
| $6,181 |
| |
| $2,182 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 75,735 |
| | 66,325 |
| 59,580 |
| | 75,735 |
|
| Investing activities | (88,057 | ) | | (57,511 | ) | (69,587 | ) | | (88,057 | ) |
| Financing activities | 76,473 |
| | (23,743 | ) | 3,914 |
| | 76,473 |
|
| Net increase (decrease) in cash and cash equivalents | 64,151 |
| | (14,929 | ) | (6,093 | ) | | 64,151 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $66,333 |
| |
| $15,512 |
|
| $88 |
| |
| $66,333 |
|
Operating Activities
Net cash flow provided by operating activities increased $9.4decreased $16.2 million for the three months ended March 31, 2016 as2017 compared to the three months ended March 31, 20152016 primarily due to increasedthe timing of recovery of fuel and purchased power costscosts. The decrease was partially offset by a decrease in interest paid in 2017 and an increase of $2.7 million in income tax refunds in 2017 as compared to prior year.the same period in 2016. Entergy Texas received income tax refunds of $3.4 million in 2017 and $0.8 million in 2016 in accordance with an intercompany income tax allocation agreement.
Investing Activities
Net cash flow used in investing activities increased $30.5decreased $18.5 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to a decrease of $28.7 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to the same period in 2016 and money pool activity. The decrease was partially offset by cash collateral of $14 million posted in March 2017 to support Entergy Texas’s obligations to MISO and an increase of $6.6 million in transmissiondistribution construction expenditures primarily due to a higher scope of work performed in 20162017 as compared to the same period in 2015, and money pool activity.2016.
IncreasesDecreases in Entergy Texas’s receivable from the money pool are a usesource of cash flow, and Entergy Texas’s receivable from the money pool increaseddecreased by $0.7 million for the three months ended March 31, 2017 compared to increasing by $8.9 million for the three months ended March 31, 2016 compared to increasing by $1.5 million for the three months ended March 31, 2015.2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy Texas’sNet cash flow provided by financing activities provided $76.5decreased $72.6 million of cash for the three months ended March 31, 20162017 compared to using $23.7 million of cash for the three months ended March 31, 20152016 primarily due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, partially offset by money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
DecreasesIncreases in Entergy Texas’s payable to the money pool are a usesource of cash flow, and Entergy Texas’s payable to the money pool decreasedincreased by $28.9 million for the three months ended March 31, 2017 compared to decreasing by $22.1 million for the three months ended March 31, 2016.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Texas as of March 31, 2016 is primarily due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 61.4 | % | | 60.2 | % | 57.9 | % | | 58.5 | % |
| Effect of excluding the securitization bonds | (8.9 | %) | | (10.4 | %) | (7.9 | %) | | (8.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 52.5 | % | | 49.8 | % | 50.0 | % | | 50.2 | % |
| Effect of subtracting cash | (1.6 | %) | | — | % | — | % | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 50.9 | % | | 49.8 | % | 50.0 | % | | 50.1 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas 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 Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas 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 Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
March 31,
2016 | | December 31, 2015 | | March 31,
2015 | | December 31, 2014 |
| (In Thousands) |
| $8,938 | | ($22,068) | | $1,838 | | $306 |
|
| | | | | | |
March 31,
2017 | | December 31, 2016 | | March 31,
2016 | | December 31, 2015 |
| (In Thousands) |
| ($28,941) | | $681 | | $8,938 | | ($22,068) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2020.2021. The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
of March 31, 2016,2017, there were no cash borrowings and $1.3$4.7 million of letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of March 31, 2016,2017, a $5.6$27.6 million letter of credit was outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Montgomery County Power Station
In October 2016, Entergy Texas Inc.filed an application with the PUCT seeking certification that the public convenience and Subsidiaries
Management's Financial Discussionnecessity 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 Analysis
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 that showed no undue preference to any proposal. Discovery has commenced, and a procedural schedule has been established for this proceeding, including an evidentiary hearing in May 2017. In March 2017 an intervenor filed direct testimony generally opposing certification of Montgomery County Power Station and proposed certain conditions if the certification is to be granted. In April 2017, Entergy Texas and the independent monitor filed rebuttal testimony in accordance with the procedural schedule. A PUCT decision regarding the application is expected by October 2017, pursuant to a Texas statute requiring the PUCT to issue a certificate of convenience and necessity within 366 days of the filing. Subject to timely approval by the PUCT and receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
FilingsIn September 2016, Entergy Texas filed with the PUCT
2011 Rate Case
See the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order a request to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issuedamend its opinion affirming the District Court’s decision on all points. Entergy Texas plans to petition the Texas Supreme Court to hear its appeal of the Third Court’s ruling.
Other Filings
In September 2015, Entergy Texas filed for a transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider requesting a $13is designed to collect approximately $29.5 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately $2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 millionannually from Entergy Texas’s $13retail customers. This amount includes the approximately $10.5 million request, but recommendingannually that Entergy Texas is currently authorized to collect through the PUCT not accept the load growth offset.TCRF rider. In MaySeptember 2016 the PUCT deferred final considerationsuspended the effective date of Entergy Texas’s TCRF application and opened the recordtariff change to consider additional evidence to be provided byMarch 2017. In December 2016, Entergy Texas and potentially other parties regarding the rate-making treatment of spare transmission-level transformers that are transferred among the Utility operating companies. It is not known when the PUCT will take upreached a settlement agreeing to the meritsamended TCRF annual revenue requirement of this matter, but Entergy Texas was granted interim rates as of April 14, 2016 whenever$29.5 million. The PUCT approved the settlement and issued a final order is issued setting those rates.in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.
Fuel and purchased power cost recovery
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Courtan application to reconcile its fuel and purchased power costs for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. Both appeals are pending, but the appeals do not stay the PUCT’s decision.period April 1, 2013 through March 31, 2016. In AprilDecember 2016, Entergy Texas filedentered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the PUCT an application to refund to customers approximately $56.2 million. The refund resulted from (i) approximately $41.8over-recovery balance of $21 million as of fuel cost recovery over-collections through FebruaryNovember 30, 2016, (ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. Entergy Texas requested that the refund be made to most customers over a four-month period beginning April 2017 through June 2016.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
2017. The fuel reconciliation settlement was approved by the PUCT in March 2017.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters. The following is an update to thatfurther discussion.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear performance improvement plan. That plan has not been fully developed, but it may result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear performance improvement plan, and an estimate of the costs associated with this plan cannot be made at this time.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of 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.benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | |
| | | |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $378,304 |
| |
| $411,211 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 92,404 |
| | 73,807 |
|
| Purchased power | | 130,412 |
| | 174,205 |
|
| Other operation and maintenance | | 53,035 |
| | 56,525 |
|
| Taxes other than income taxes | | 18,310 |
| | 18,270 |
|
| Depreciation and amortization | | 25,619 |
| | 24,847 |
|
| Other regulatory charges - net | | 17,255 |
| | 19,544 |
|
| TOTAL | | 337,035 |
| | 367,198 |
|
| | | | | |
| OPERATING INCOME | | 41,269 |
| | 44,013 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 2,432 |
| | 1,224 |
|
| Interest and investment income (loss) | | 200 |
| | (213 | ) |
| Miscellaneous - net | | (416 | ) | | 64 |
|
| TOTAL | | 2,216 |
| | 1,075 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 21,601 |
| | 20,996 |
|
| Allowance for borrowed funds used during construction | | (1,581 | ) | | (794 | ) |
| TOTAL | | 20,020 |
| | 20,202 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 23,465 |
| | 24,886 |
|
| | | | | |
| Income taxes | | 8,903 |
| | 8,295 |
|
| | | | | |
| NET INCOME | |
| $14,562 |
| |
| $16,591 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $363,927 |
| |
| $378,304 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 58,013 |
| | 92,404 |
|
| Purchased power | | 150,384 |
| | 130,412 |
|
| Other operation and maintenance | | 53,906 |
| | 53,035 |
|
| Taxes other than income taxes | | 19,444 |
| | 18,310 |
|
| Depreciation and amortization | | 28,111 |
| | 25,619 |
|
| Other regulatory charges - net | | 15,227 |
| | 17,255 |
|
| TOTAL | | 325,085 |
| | 337,035 |
|
| | | | | |
| OPERATING INCOME | | 38,842 |
| | 41,269 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,281 |
| | 2,432 |
|
| Interest and investment income | | 201 |
| | 200 |
|
| Miscellaneous - net | | (182 | ) | | (416 | ) |
| TOTAL | | 1,300 |
| | 2,216 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 21,808 |
| | 21,601 |
|
| Allowance for borrowed funds used during construction | | (761 | ) | | (1,581 | ) |
| TOTAL | | 21,047 |
| | 20,020 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 19,095 |
| | 23,465 |
|
| | | | | |
| Income taxes | | 8,241 |
| | 8,903 |
|
| | | | | |
| NET INCOME | |
| $10,854 |
| |
| $14,562 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $10,854 |
| |
| $14,562 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 28,111 |
| | 25,619 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (25,678 | ) | | (26,970 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (683 | ) | | 2,118 |
|
| Fuel inventory | | 4,581 |
| | 2,860 |
|
| Accounts payable | | (1,150 | ) | | (17,346 | ) |
| Prepaid taxes and taxes accrued | | 16,110 |
| | 18,871 |
|
| Interest accrued | | (6,816 | ) | | (9,978 | ) |
| Deferred fuel costs | | 20,375 |
| | 54,192 |
|
| Other working capital accounts | | 1,422 |
| | 1,957 |
|
| Provisions for estimated losses | | 663 |
| | 662 |
|
| Other regulatory assets | | 23,762 |
| | 24,310 |
|
| Pension and other postretirement liabilities | | (5,814 | ) | | (6,505 | ) |
| Other assets and liabilities | | (6,157 | ) | | (8,617 | ) |
| Net cash flow provided by operating activities | | 59,580 |
| | 75,735 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (68,765 | ) | | (91,843 | ) |
| Allowance for equity funds used during construction | | 1,320 |
| | 2,460 |
|
| Increase in other investments | | (14,000 | ) | | — |
|
| Changes in money pool receivable - net | | 681 |
| | (8,938 | ) |
| Changes in securitization account | | 11,177 |
| | 10,264 |
|
| Net cash flow used in investing activities | | (69,587 | ) | | (88,057 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 123,786 |
|
| Retirement of long-term debt | | (24,188 | ) | | (23,458 | ) |
| Change in money pool payable - net | | 28,941 |
| | (22,068 | ) |
| Other | | (839 | ) | | (1,787 | ) |
| Net cash flow provided by financing activities | | 3,914 |
| | 76,473 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (6,093 | ) | | 64,151 |
|
| Cash and cash equivalents at beginning of period | | 6,181 |
| | 2,182 |
|
| Cash and cash equivalents at end of period | |
| $88 |
| |
| $66,333 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $27,986 |
| |
| $30,969 |
|
| Income taxes | |
| ($3,446 | ) | |
| ($756 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $14,562 |
| |
| $16,591 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 25,619 |
| | 24,847 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (26,970 | ) | | (75,378 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | 2,118 |
| | 22,233 |
|
| Fuel inventory | | 2,860 |
| | (3,976 | ) |
| Accounts payable | | (17,346 | ) | | (14,776 | ) |
| Prepaid taxes and taxes accrued | | 18,871 |
| | 66,279 |
|
| Interest accrued | | (9,978 | ) | | (8,952 | ) |
| Deferred fuel costs | | 54,192 |
| | 15,517 |
|
| Other working capital accounts | | 1,957 |
| | 4,686 |
|
| Provisions for estimated losses | | 662 |
| | 1,252 |
|
| Other regulatory assets | | 24,310 |
| | 26,065 |
|
| Pension and other postretirement liabilities | | (6,505 | ) | | (4,387 | ) |
| Other assets and liabilities | | (8,617 | ) | | (3,676 | ) |
| Net cash flow provided by operating activities | | 75,735 |
| | 66,325 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (91,843 | ) | | (66,371 | ) |
| Allowance for equity funds used during construction | | 2,460 |
| | 1,237 |
|
| Changes in money pool receivable - net | | (8,938 | ) | | (1,532 | ) |
| Changes in securitization account | | 10,264 |
| | 9,155 |
|
| Net cash flow used in investing activities | | (88,057 | ) | | (57,511 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 123,786 |
| | — |
|
| Retirement of long-term debt | | (23,458 | ) | | (22,769 | ) |
| Change in money pool payable - net | | (22,068 | ) | | — |
|
| Other | | (1,787 | ) | | (974 | ) |
| Net cash flow provided by (used in) financing activities | | 76,473 |
| | (23,743 | ) |
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | 64,151 |
| | (14,929 | ) |
| Cash and cash equivalents at beginning of period | | 2,182 |
| | 30,441 |
|
| Cash and cash equivalents at end of period | |
| $66,333 |
| |
| $15,512 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $30,969 |
| |
| $29,004 |
|
| Income taxes | |
| ($756 | ) | |
| ($933 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $59 |
| |
| $1,216 |
|
| Temporary cash investments | | 29 |
| | 4,965 |
|
| Total cash and cash equivalents | | 88 |
| | 6,181 |
|
| Securitization recovery trust account | | 26,274 |
| | 37,451 |
|
| Accounts receivable: | | | | |
| Customer | | 64,907 |
| | 71,803 |
|
| Allowance for doubtful accounts | | (794 | ) | | (828 | ) |
| Associated companies | | 38,832 |
| | 39,447 |
|
| Other | | 15,901 |
| | 14,756 |
|
| Accrued unbilled revenues | | 46,061 |
| | 39,727 |
|
| Total accounts receivable | | 164,907 |
| | 164,905 |
|
| Fuel inventory - at average cost | | 32,596 |
| | 37,177 |
|
| Materials and supplies - at average cost | | 37,456 |
| | 36,631 |
|
| Prepayments and other | | 26,857 |
| | 18,599 |
|
| TOTAL | | 288,178 |
| | 300,944 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 595 |
| | 600 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 18,909 |
| | 18,801 |
|
| TOTAL | | 19,880 |
| | 19,777 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,334,548 |
| | 4,274,069 |
|
| Construction work in progress | | 96,598 |
| | 111,227 |
|
| TOTAL UTILITY PLANT | | 4,431,146 |
| | 4,385,296 |
|
| Less - accumulated depreciation and amortization | | 1,528,921 |
| | 1,526,057 |
|
| UTILITY PLANT - NET | | 2,902,225 |
| | 2,859,239 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 105,339 |
| | 105,816 |
|
| Other regulatory assets (includes securitization property of $370,084 as of March 31, 2017 and $384,609 as of December 31, 2016) | | 716,871 |
| | 740,156 |
|
| Other | | 9,269 |
| | 7,149 |
|
| TOTAL | | 831,479 |
| | 853,121 |
|
| | | | | |
| TOTAL ASSETS | |
| $4,041,762 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Associated companies | |
| $76,272 |
| |
| $47,867 |
|
| Other | | 81,186 |
| | 77,342 |
|
| Customer deposits | | 43,630 |
| | 44,419 |
|
| Taxes accrued | | 31,461 |
| | 15,351 |
|
| Interest accrued | | 19,161 |
| | 25,977 |
|
| Deferred fuel costs | | 74,918 |
| | 54,543 |
|
| Other | | 6,671 |
| | 9,388 |
|
| TOTAL | | 333,299 |
| | 274,887 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 999,737 |
| | 1,027,647 |
|
| Accumulated deferred investment tax credits | | 12,696 |
| | 12,934 |
|
| Other regulatory liabilities | | 6,004 |
| | 8,502 |
|
| Asset retirement cost liabilities | | 6,559 |
| | 6,470 |
|
| Accumulated provisions | | 8,247 |
| | 7,584 |
|
| Pension and other postretirement liabilities | | 61,507 |
| | 67,313 |
|
| Long-term debt (includes securitization bonds of $405,008 as of March 31, 2017 and $429,043 as of December 31, 2016) | | 1,484,583 |
| | 1,508,407 |
|
| Other | | 49,282 |
| | 50,343 |
|
| TOTAL | | 2,628,615 |
| | 2,689,200 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 548,402 |
| | 537,548 |
|
| TOTAL | | 1,079,848 |
| | 1,068,994 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,041,762 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $1,550 |
| |
| $2,153 |
|
| Temporary cash investments | | 64,783 |
| | 29 |
|
| Total cash and cash equivalents | | 66,333 |
| | 2,182 |
|
| Securitization recovery trust account | | 27,897 |
| | 38,161 |
|
| Accounts receivable: | | | | |
| Customer | | 53,133 |
| | 61,870 |
|
| Allowance for doubtful accounts | | (495 | ) | | (474 | ) |
| Associated companies | | 66,773 |
| | 42,279 |
|
| Other | | 10,537 |
| | 11,054 |
|
| Accrued unbilled revenues | | 31,796 |
| | 40,195 |
|
| Total accounts receivable | | 161,744 |
| | 154,924 |
|
| Fuel inventory - at average cost | | 44,082 |
| | 46,942 |
|
| Materials and supplies - at average cost | | 35,415 |
| | 34,994 |
|
| Prepayments and other | | 11,693 |
| | 17,975 |
|
| TOTAL | | 347,164 |
| | 295,178 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 613 |
| | 620 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 20,426 |
| | 20,186 |
|
| TOTAL | | 21,415 |
| | 21,182 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 3,947,837 |
| | 3,923,100 |
|
| Construction work in progress | | 239,695 |
| | 210,964 |
|
| TOTAL UTILITY PLANT | | 4,187,532 |
| | 4,134,064 |
|
| Less - accumulated depreciation and amortization | | 1,479,969 |
| | 1,477,529 |
|
| UTILITY PLANT - NET | | 2,707,563 |
| | 2,656,535 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 107,650 |
| | 107,499 |
|
| Other regulatory assets (includes securitization property of $439,167 as of March 31, 2016 and $453,317 as of December 31, 2015) | | 788,401 |
| | 812,862 |
|
| Other | | 8,084 |
| | 5,326 |
|
| TOTAL | | 904,135 |
| | 925,687 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,980,277 |
| |
| $3,898,582 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Associated companies | |
| $74,610 |
| |
| $106,065 |
|
| Other | | 63,654 |
| | 87,421 |
|
| Customer deposits | | 44,806 |
| | 44,537 |
|
| Taxes accrued | | 24,204 |
| | 5,333 |
|
| Interest accrued | | 19,228 |
| | 29,206 |
|
| Deferred fuel costs | | 79,316 |
| | 25,124 |
|
| Other | | 6,179 |
| | 10,363 |
|
| TOTAL | | 311,997 |
| | 308,049 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 977,049 |
| | 1,006,834 |
|
| Accumulated deferred investment tax credits | | 13,609 |
| | 13,835 |
|
| Other regulatory liabilities | | 6,446 |
| | 6,396 |
|
| Asset retirement cost liabilities | | 6,209 |
| | 6,124 |
|
| Accumulated provisions | | 9,981 |
| | 9,319 |
|
| Pension and other postretirement liabilities | | 71,023 |
| | 77,517 |
|
| Long-term debt (includes securitization bonds of $473,724 as of March 31, 2016 and $497,030 as of December 31, 2015) | | 1,552,741 |
| | 1,451,967 |
|
| Other | | 55,204 |
| | 57,085 |
|
| TOTAL | | 2,692,262 |
| | 2,629,077 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2016 and 2015 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 444,572 |
| | 430,010 |
|
| TOTAL | | 976,018 |
| | 961,456 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,980,277 |
| |
| $3,898,582 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 14,562 |
| | 14,562 |
|
| | | | | | | | |
| Balance at March 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $444,572 |
| |
| $976,018 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 10,854 |
| | 10,854 |
|
| | | | | | | | |
| Balance at March 31, 2017 |
| $49,452 |
| |
| $481,994 |
| |
| $548,402 |
| |
| $1,079,848 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2014 |
| $49,452 |
| |
| $481,994 |
| |
| $360,385 |
| |
| $891,831 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 16,591 |
| | 16,591 |
|
| | | | | | | | |
| Balance at March 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $376,976 |
| |
| $908,422 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 14,562 |
| | 14,562 |
|
| | | | | | | | |
| Balance at March 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $444,572 |
| |
| $976,018 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $135 |
| |
| $156 |
| |
| ($21 | ) | | (13 | ) | |
| $137 |
| |
| $135 |
| |
| $2 |
| | 1 |
|
| Commercial | | 84 |
| | 90 |
| | (6 | ) | | (7 | ) | | 90 |
| | 84 |
| | 6 |
| | 7 |
|
| Industrial | | 94 |
| | 91 |
| | 3 |
| | 3 |
| | 100 |
| | 94 |
| | 6 |
| | 6 |
|
| Governmental | | 6 |
| | 6 |
| | — |
| | — |
| | 6 |
| | 6 |
| | — |
| | — |
|
| Total retail | | 319 |
| | 343 |
| | (24 | ) | | (7 | ) | | 333 |
| | 319 |
| | 14 |
| | 4 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 53 |
| | 58 |
| | (5 | ) | | (9 | ) | | 13 |
| | 53 |
| | (40 | ) | | (75 | ) |
| Non-associated companies | | 6 |
| | 7 |
| | (1 | ) | | (14 | ) | | 5 |
| | 6 |
| | (1 | ) | | (17 | ) |
| Other | | — |
| | 3 |
| | (3 | ) | | (100 | ) | | 13 |
| | — |
| | 13 |
| | — |
|
| Total | |
| $378 |
| |
| $411 |
| |
| ($33 | ) | | (8 | ) | |
| $364 |
| |
| $378 |
| |
| ($14 | ) | | (4 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,275 |
| | 1,459 |
| | (184 | ) | | (13 | ) | | 1,213 |
| | 1,275 |
| | (62 | ) | | (5 | ) |
| Commercial | | 1,017 |
| | 1,047 |
| | (30 | ) | | (3 | ) | | 1,006 |
| | 1,017 |
| | (11 | ) | | (1 | ) |
| Industrial | | 1,807 |
| | 1,609 |
| | 198 |
| | 12 |
| | 1,790 |
| | 1,807 |
| | (17 | ) | | (1 | ) |
| Governmental | | 70 |
| | 66 |
| | 4 |
| | 6 |
| | 63 |
| | 70 |
| | (7 | ) | | (10 | ) |
| Total retail | | 4,169 |
| | 4,181 |
| | (12 | ) | | — |
| | 4,072 |
| | 4,169 |
| | (97 | ) | | (2 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 1,422 |
| | 1,188 |
| | 234 |
| | 20 |
| | 338 |
| | 1,422 |
| | (1,084 | ) | | (76 | ) |
| Non-associated companies | | 149 |
| | 93 |
| | 56 |
| | 60 |
| | 77 |
| | 149 |
| | (72 | ) | | (48 | ) |
| Total | | 5,740 |
| | 5,462 |
| | 278 |
| | 5 |
| | 4,487 |
| | 5,740 |
| | (1,253 | ) | | (22 | ) |
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.
Net income remained relatively flat, increasing by $0.4decreased $5.6 million forprimarily due to a higher effective income tax rate in 2017 and provisions against revenue being recorded in 2017 in connection with the first quarter 2016 comparedcomplaint against System Energy’s return on equity. See Note 2 to the firstfinancial statements herein and “quarterFederal Regulation2015. - Complaint Against System Energy” below for further discussion of the complaint against System Energy.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $230,661 |
| |
| $223,179 |
|
| $245,863 |
| |
| $230,661 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 73,156 |
| | 39,719 |
| 65,776 |
| | 73,156 |
|
| Investing activities | (159,100 | ) | | (35,153 | ) | (65,068 | ) | | (159,100 | ) |
| Financing activities | 110,985 |
| | (51,837 | ) | (6,163 | ) | | 110,985 |
|
| Net increase (decrease) in cash and cash equivalents | 25,041 |
| | (47,271 | ) | (5,455 | ) | | 25,041 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $255,702 |
| |
| $175,908 |
|
| $240,408 |
| |
| $255,702 |
|
Operating Activities
Net cash flow provided by operating activities increased $33.4decreased $7.4 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
to timing of payments to vendors and income tax refunds of $6.6 million for the three months ended March 31,in 2016 compared to income tax payments of $25.3 million for the three months ended March 31, 2015. System Energy made income tax payments of $25.3 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement primarily related to the final settlement of amounts outstanding associated with the 2006-2007 IRS audit. See Note 3 to the financial statements in the Form 10-K for a discussion of the finalizedan intercompany income tax and interest computations for the 2006-2007 IRS audit; and
allocation agreement. The decrease was partially offset by a decrease in interest paidspending of $19.8 million on the Grand Gulf sale-leaseback obligationnuclear refueling outages in 20162017 as compared to the same period in 2015 due to renewal of the leases in 2015. See Note 10 to the financial statements in the Form 10-K for details on the Grand Gulf sale-leaseback obligation.2016.
The increase in net cash flow was partially offset by an increase in spending on nuclear refueling outages in 2016 as compared to the same period in 2015.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $123.9decreased $94 million for the three months ended March 31, 20162017 compared to the three months ended March 31, 20152016 primarily due to:
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
an increasea decrease of $21.3 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 2016 on nuclearGrand Gulf outage projects.projects and lower spending in 2017 on compliance with NRC post-Fukushima requirements.
The increasedecrease was partially offset by money pool activity.
DecreasesIncreases in System Energy’s receivable from the money pool are a sourceuse of cash flow and System Energy’s receivable from the money pool decreasedincreased by $80.7 million for the three months ended March 31, 2017 compared to decreasing by $4.7 million for the three months ended March 31, 2016 compared to increasing by $20.9 million for the three months ended March 31, 2015.2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
System Energy’s financing activities providedused $6.2 million of cash for the three months ended March 31, 2017 compared to providing $111 million of cash for the three months ended March 31, 2016 compared to using $51.8 million of cash for the three months ended March 31, 2015 primarily due to:
an increaseto a decrease in net borrowings of $111$67.2 million on the nuclear fuel company variable interest entity’s credit facility in 20162017 compared to paymentsthe same period in 2016 and the payment in February 2017, at maturity, of $20.4$50 million onof the System Energy nuclear fuel company variable interest entity’s credit facility in 2015;
$20 million in common stock dividends paid in 2015; and
a decrease in principal payments on the Grand Gulf sale-leaseback obligation in 2016 as compared to the same period in 2015 due to renewal of the lease in 2015. See Note 10 to the financial statements in the Form 10-K for details on the Grand Gulf sale-leaseback obligation.4.02% Series H notes.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
System Energy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for System Energy as of March 31, 2016 is primarily due to the System Energy borrowings of $111 million on the nuclear fuel company variable interest entity’s credit facility.
| | | | March 31, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 45.9 | % | | 42.3 | % | 44.6 | % | | 45.5 | % |
| Effect of subtracting cash | (11.2 | %) | | (11.8 | %) | (11.7 | %) | | (12.0 | %) |
| Net debt to net capital | 34.7 | % | | 30.5 | % | 32.9 | % | | 33.5 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
System Energy’s receivables from the money pool were as follows:
|
| | | | | | |
| March 31, 2016 | | December 31, 2015 | | March 31, 2015 | | December 31, 2014 |
| (In Thousands) |
| $35,198 | | $39,926 | | $23,246 | | $2,373 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $114,553 | | $33,809 | | $35,198 | | $39,926 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $125$120 million scheduled to expire in June 2016. System Entergy’s nuclear fuel company variable interest entity plans to renew its credit facility prior to expiration. May 2019. As of March 31, 2016, $1112017, $110.7 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the System Energy nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaint Against System Energy
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The City of New Orleans filed comments in February 2017 supporting the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC is pending.
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.
Based upon the recent performance history
System Energy Resources, Inc.
Management's Financial Discussion and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear performance improvement plan, and an estimate of the costs associated with this plan cannot be made at this time. Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits.benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2016 and 2015 |
| (Unaudited) |
| | | |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $137,693 |
| |
| $156,039 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 13,428 |
| | 20,473 |
|
| Nuclear refueling outage expenses | | 4,584 |
| | 5,682 |
|
| Other operation and maintenance | | 32,160 |
| | 35,706 |
|
| Decommissioning | | 12,387 |
| | 11,703 |
|
| Taxes other than income taxes | | 6,252 |
| | 7,208 |
|
| Depreciation and amortization | | 34,707 |
| | 37,060 |
|
| Other regulatory credits - net | | (13,291 | ) | | (9,577 | ) |
| TOTAL | | 90,227 |
| | 108,255 |
|
| | | | | |
| OPERATING INCOME | | 47,466 |
| | 47,784 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 2,729 |
| | 1,651 |
|
| Interest and investment income | | 3,274 |
| | 4,213 |
|
| Miscellaneous - net | | (92 | ) | | (221 | ) |
| TOTAL | | 5,911 |
| | 5,643 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 9,552 |
| | 13,013 |
|
| Allowance for borrowed funds used during construction | | (696 | ) | | (436 | ) |
| TOTAL | | 8,856 |
| | 12,577 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 44,521 |
| | 40,850 |
|
| | | | | |
| Income taxes | | 18,563 |
| | 15,317 |
|
| | | | | |
| NET INCOME | |
| $25,958 |
| |
| $25,533 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $154,787 |
| |
| $137,693 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 15,334 |
| | 13,428 |
|
| Nuclear refueling outage expenses | | 4,773 |
| | 4,584 |
|
| Other operation and maintenance | | 48,401 |
| | 32,160 |
|
| Decommissioning | | 13,232 |
| | 12,387 |
|
| Taxes other than income taxes | | 6,424 |
| | 6,252 |
|
| Depreciation and amortization | | 35,441 |
| | 34,707 |
|
| Other regulatory credits - net | | (10,362 | ) | | (13,291 | ) |
| TOTAL | | 113,243 |
| | 90,227 |
|
| | | | | |
| OPERATING INCOME | | 41,544 |
| | 47,466 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,094 |
| | 2,729 |
|
| Interest and investment income | | 4,674 |
| | 3,274 |
|
| Miscellaneous - net | | (128 | ) | | (92 | ) |
| TOTAL | | 5,640 |
| | 5,911 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 9,119 |
| | 9,552 |
|
| Allowance for borrowed funds used during construction | | (267 | ) | | (696 | ) |
| TOTAL | | 8,852 |
| | 8,856 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 38,332 |
| | 44,521 |
|
| | | | | |
| Income taxes | | 17,985 |
| | 18,563 |
|
| | | | | |
| NET INCOME | |
| $20,347 |
| |
| $25,958 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $25,958 |
| |
| $25,533 |
| |
| $20,347 |
| |
| $25,958 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 58,717 |
| | 66,660 |
| | 61,562 |
| | 58,717 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 49,894 |
| | (10,618 | ) | | 18,293 |
| | 49,894 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | 9,121 |
| | 2,952 |
| | 13,953 |
| | 9,121 |
|
| Accounts payable | | 16,257 |
| | (6,919 | ) | | (3,008 | ) | | 16,257 |
|
| Prepaid taxes and taxes accrued | | (38,617 | ) | | (14,444 | ) | | (15,032 | ) | | (38,617 | ) |
| Interest accrued | | 837 |
| | (14,282 | ) | | 295 |
| | 837 |
|
| Other working capital accounts | | (30,111 | ) | | 600 |
| | (1,111 | ) | | (30,111 | ) |
| Other regulatory assets | | (8,319 | ) | | (2,493 | ) | | (1,571 | ) | | (8,319 | ) |
| Pension and other postretirement liabilities | | (4,576 | ) | | (3,188 | ) | | (4,187 | ) | | (4,576 | ) |
| Other assets and liabilities | | (6,005 | ) | | (4,082 | ) | | (23,765 | ) | | (6,005 | ) |
| Net cash flow provided by operating activities | | 73,156 |
| | 39,719 |
| | 65,776 |
| | 73,156 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (34,747 | ) | | (13,324 | ) | | (14,096 | ) | | (34,747 | ) |
| Allowance for equity funds used during construction | | 2,729 |
| | 1,651 |
| | 1,094 |
| | 2,729 |
|
| Nuclear fuel purchases | | (122,320 | ) | | (16,699 | ) | | (21,765 | ) | | (122,320 | ) |
| Proceeds from the sale of nuclear fuel | | — |
| | 22,563 |
| | 60,188 |
| | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 188,506 |
| | 78,361 |
| | 75,787 |
| | 188,506 |
|
| Investment in nuclear decommissioning trust funds | | (197,996 | ) | | (86,832 | ) | | (85,532 | ) | | (197,996 | ) |
| Changes in money pool receivable - net | | 4,728 |
| | (20,873 | ) | | (80,744 | ) | | 4,728 |
|
| Net cash flow used in investing activities | | (159,100 | ) | | (35,153 | ) | | (65,068 | ) | | (159,100 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Retirement of long-term debt | | (1 | ) | | (11,405 | ) | | (50,001 | ) | | (1 | ) |
| Changes in credit borrowings - net | | 111,012 |
| | (20,404 | ) | | 43,851 |
| | 111,012 |
|
| Dividends paid: | | | | | |
| Common stock | | — |
| | (20,000 | ) | |
| Other | | (26 | ) | | (28 | ) | | (13 | ) | | (26 | ) |
| Net cash flow provided by (used in) financing activities | | 110,985 |
| | (51,837 | ) | | (6,163 | ) | | 110,985 |
|
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 25,041 |
| | (47,271 | ) | | (5,455 | ) | | 25,041 |
|
| Cash and cash equivalents at beginning of period | | 230,661 |
| | 223,179 |
| | 245,863 |
| | 230,661 |
|
| Cash and cash equivalents at end of period | |
| $255,702 |
| |
| $175,908 |
| |
| $240,408 |
| |
| $255,702 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $8,593 |
| |
| $26,208 |
| |
| $8,593 |
| |
| $8,593 |
|
| Income taxes | |
| ($6,598 | ) | |
| $25,304 |
| |
| $— |
| |
| ($6,598 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | ASSETS | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $698 |
| |
| $8,681 |
| |
| $797 |
| |
| $786 |
|
| Temporary cash investments | | 255,004 |
| | 221,980 |
| | 239,611 |
| | 245,077 |
|
| Total cash and cash equivalents | | 255,702 |
| | 230,661 |
| | 240,408 |
| | 245,863 |
|
| Accounts receivable: | | | | | | | | |
| Associated companies | | 76,847 |
| | 93,724 |
| | 170,154 |
| | 104,390 |
|
| Other | | 7,602 |
| | 4,574 |
| | 4,664 |
| | 3,637 |
|
| Total accounts receivable | | 84,449 |
| | 98,298 |
| | 174,818 |
| | 108,027 |
|
| Materials and supplies - at average cost | | 78,850 |
| | 87,366 |
| | 84,032 |
| | 82,469 |
|
| Deferred nuclear refueling outage costs | | 39,352 |
| | 5,605 |
| | 20,100 |
| | 24,729 |
|
| Prepaid taxes | | 47,944 |
| | 9,327 |
| | 30,914 |
| | 15,882 |
|
| Prepayments and other | | 6,849 |
| | 1,955 |
| | 8,408 |
| | 4,229 |
|
| TOTAL | | 513,146 |
| | 433,212 |
| | 558,680 |
| | 481,199 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | 719,769 |
| | 701,460 |
| | 815,975 |
| | 780,496 |
|
| TOTAL | | 719,769 |
| | 701,460 |
| | 815,975 |
| | 780,496 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 4,313,474 |
| | 4,253,949 |
| | 4,341,221 |
| | 4,331,668 |
|
| Property under capital lease | | 575,027 |
| | 575,027 |
| | 585,084 |
| | 585,084 |
|
| Construction work in progress | | 74,726 |
| | 92,546 |
| | 44,636 |
| | 43,888 |
|
| Nuclear fuel | | 285,426 |
| | 183,706 |
| | 220,030 |
| | 259,635 |
|
| TOTAL UTILITY PLANT | | 5,248,653 |
| | 5,105,228 |
| | 5,190,971 |
| | 5,220,275 |
|
| Less - accumulated depreciation and amortization | | 2,992,700 |
| | 2,961,842 |
| | 3,094,345 |
| | 3,063,249 |
|
| UTILITY PLANT - NET | | 2,255,953 |
| | 2,143,386 |
| | 2,096,626 |
| | 2,157,026 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 96,933 |
| | 98,230 |
| | 90,931 |
| | 93,127 |
|
| Other regulatory assets | | 357,446 |
| | 347,830 |
| | 414,979 |
| | 411,212 |
|
| Other | | 4,881 |
| | 4,757 |
| | 4,591 |
| | 4,652 |
|
| TOTAL | | 459,260 |
| | 450,817 |
| | 510,501 |
| | 508,991 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $3,948,128 |
| |
| $3,728,875 |
| |
| $3,981,782 |
| |
| $3,927,712 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $50,002 |
| |
| $2 |
| |
| $3 |
| |
| $50,003 |
|
| Short-term borrowings | | 111,012 |
| | — |
| | 110,744 |
| | 66,893 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 3,663 |
| | 7,391 |
| | 4,124 |
| | 5,843 |
|
| Other | | 58,048 |
| | 34,010 |
| | 43,094 |
| | 50,558 |
|
| Interest accrued | | 15,020 |
| | 14,183 |
| | 14,344 |
| | 14,049 |
|
| Other | | 1,940 |
| | 1,926 |
| | 2,959 |
| | 2,957 |
|
| TOTAL | | 239,685 |
| | 57,512 |
| | 175,268 |
| | 190,303 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,065,590 |
| | 1,019,075 |
| | 1,127,742 |
| | 1,112,865 |
|
| Accumulated deferred investment tax credits | | 44,646 |
| | 45,451 |
| | 40,714 |
| | 41,663 |
|
| Other regulatory liabilities | | 344,950 |
| | 337,424 |
| | 394,263 |
| | 370,862 |
|
| Decommissioning | | 815,792 |
| | 803,405 |
| | 867,434 |
| | 854,202 |
|
| Pension and other postretirement liabilities | | 107,688 |
| | 112,264 |
| | 113,663 |
| | 117,850 |
|
| Long-term debt | | 522,740 |
| | 572,665 |
| | 501,212 |
| | 501,129 |
|
| Other | | | 2,316 |
| | 15 |
|
| TOTAL | | 2,901,406 |
| | 2,890,284 |
| | 3,047,344 |
| | 2,998,586 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2016 and 2015 | | 719,350 |
| | 719,350 |
| |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016 | | | 679,350 |
| | 679,350 |
|
| Retained earnings | | 87,687 |
| | 61,729 |
| | 79,820 |
| | 59,473 |
|
| TOTAL | | 807,037 |
| | 781,079 |
| | 759,170 |
| | 738,823 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,948,128 |
| |
| $3,728,875 |
| |
| $3,981,782 |
| |
| $3,927,712 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Three Months Ended March 31, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) | |
| | | | | | | |
| Balance at December 31, 2014 |
| $789,350 |
| |
| $81,161 |
| |
| $870,511 |
| |
| | | | | | | |
| Net income | — |
| | 25,533 |
| | 25,533 |
| |
| Common stock dividends | — |
| | (20,000 | ) | | (20,000 | ) | |
| | | | | | | |
| Balance at March 31, 2015 |
| $789,350 |
| |
| $86,694 |
| |
| $876,044 |
| |
| | | | | | | (In Thousands) |
| | | | | | | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| | | | | | | | | | | |
| Net income | — |
| | 25,958 |
| | 25,958 |
| — |
| | 25,958 |
| | 25,958 |
|
| | | | | | | | | | | |
| Balance at March 31, 2016 |
| $719,350 |
| |
| $87,687 |
| |
| $807,037 |
|
| $719,350 |
| |
| $87,687 |
| |
| $807,037 |
|
| | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2016 | |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | | |
| Net income | | — |
| | 20,347 |
| | 20,347 |
|
| | | | | | | |
| Balance at March 31, 2017 | |
| $679,350 |
| |
| $79,820 |
| |
| $759,170 |
|
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy. Also see Note 1 and Note 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in “PART I, Item 1A, Risk Factors” in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (a)
|
| | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (b) |
| | | | | | | | | |
1/01/2016-1/2017-1/31/20162017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
2/01/2016-2/29/20162017-2/28/2017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
3/01/2016-3/2017-3/31/20162017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
| Total | | — |
| |
| $— |
| | — |
| | |
In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities. In addition, in the first quarter 2016,2017, Entergy withheld 19,399 shares of its common stock at $68.09 per share, 36,4391,054 shares of its common stock at $70.58 per share, and 82,619122,148 shares of its common stock at $71.60$70.61 per share, and 31,243 shares of its common stock at $71.89 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.
| |
| (a) | See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. |
| |
| (b) | Maximum amount of shares that may yet be repurchased relates only to the $500 million plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans. |
Item 5. Other Information
Regulation of the Nuclear Power Industry
Following are updates to the Regulation of the Nuclear Power Industry section of Part I, Item 1 of the Form 10-K.
Nuclear Waste Policy Act of 1982
Spent Nuclear Fuel
See the discussion in Part I, Item 1 in the Form 10-K for information regarding litigation against the DOE related to DOE's breach of its obligations to remove spent fuel from nuclear sites. The following is an update to that discussion.
In April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $29.4 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. Also in April 2015 the U.S. Court of Federal Claims issued a judgment in favor of System Energy and against the DOE in the second round Grand Gulf damages case in the amount of $44.4 million. In June 2015, Entergy Arkansas and System Energy appealed to the U.S. Court of Appeals for the Federal Circuit portions of those decisions relating to cask loading costs. In April 2016, the Federal Circuit issued a decision in both appeals in favor of Entergy Arkansas and System Energy, and remanded the cases back to the trial courts for further proceedings. In December 2015 the U.S. Court of Federal Claims issued a judgment in favor of Entergy Nuclear Indian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case in the amount of $80.9 million. Entergy Nuclear Indian Point 3 and Entergy FitzPatrick moved for reconsideration on a portion of the disallowed costs, and in March 2016, the court denied the motion. In January 2016, the U.S. Court of Federal Claims issued a judgment in the amount of $49.4 million in favor of Entergy Louisiana and against the DOE in the first round Waterford 3 damages case. In April 2016, Entergy Louisiana appealed to the U.S. Court of Appeals for the Federal Circuit the portion of that decision relating to cask loading costs. In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42.3 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolution of the appeal on the same issues in the Entergy Arkansas and System Energy cases. Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the government of the U.S. Court of Federal Claims damage awards.
Nuclear Plant Decommissioning
See the discussion in Part I, Item 1 in the Form 10-K for information regarding decommissioning funding for the nuclear plants. Following is an updateare updates to that discussion.
In March 2016,2017 filings with the NRC were made for certain Entergy subsidiaries’ nuclear plants reporting on decommissioning funding. Those reports showed that decommissioning funding for each of those nuclear plants met the NRC’s financial assurance requirements.
NRC Reactor Oversight Process
See the discussion in Part I, Item 1 in the Form 10-K for information regarding the NRC’s Reactor Oversight Process and the status of each of Entergy’s nuclear plants. In March 20162017, Entergy closed on the NRC notified Entergysale of its decisionthe FitzPatrick plant to place Indian Point 3 inExelon, and as part of the “regulatory response column,” or Column 2,transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of its Reactor Oversight Process Action Matrix. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs.transaction.
Environmental Regulation
Following are updates to the Environmental Regulation section of Part I, Item 1 of the Form 10-K.
Clean Air Act and Subsequent Amendments
Potential SO2NonattainmentRegional Haze
TheIn June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a final rule in June 2010 adopting anrequirement to install SO2 1-hour national ambient air quality standardand NOx pollution control technology as Best Available Retrofit Control Technology (BART) to continue operating certain of 75 parts per billion.Entergy’s fossil generation units. The EPA designationsrule leaves certain CAVR determinations to the states.
In Arkansas, the Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for counties in attainment and nonattainment were originally due in JuneArkansas facilities to implement its obligations under the CAVR. In April 2012 but the EPA initially indicated thatfinalized a decision addressing the Arkansas Regional Haze SIP, in which it would delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violationsdisapproved a large portion of the new standard. In August 2013Arkansas Regional Haze SIP, including the EPA issued final designationsemission limits for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for theNOx and SO2 1-hour national ambient air quality standard of 75 parts per billion. Entergy does not have a generation asset in that parish. Pursuant to a courtat White Bluff. By Court order, issued in a proceeding in the U.S. District Court for the Northern District of California, the EPA will finalize another roundhad to issue a final federal implementation plan (FIP) for Arkansas Regional Haze by no later than August 31, 2016. In April 2015 the EPA published a proposed FIP for Arkansas, taking comment on requiring installation of designationsscrubbers and low NOx burners to continue operating both units at the White Bluff plant and both units at the Independence plant and NOx controls to continue operating the Lake Catherine plant. Entergy filed comments by July 2, 2016, for areas with newly monitored violations of the 2010 standard and those with stationary sources that emit over a threshold amount ofdeadline in August 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergy proposed to meet more stringent SO2. Counties and parishesNOx limits at both White Bluff and Independence within three years of the effective date of the final FIP and to cease the use of coal at the White Bluff units in which Entergy owns2027 and operates fossil generating facilities that are expected to be assessed in this round of designations include Independence County and Jefferson County, Arkansas and Calcasieu Parish, Louisiana. 2028.
In other areas, analysis is required onceSeptember 2016 the EPA issues additionalpublished the final regulationsArkansas Regional Haze FIP. In most respects, the EPA finalized its original proposal but shortened the time for compliance for installation of the NOx controls. The FIP requires an emission limitation consistent with SO2 scrubbers at both White Bluff and guidance.Independence by October 2021 and NOx controls by April 2018. The EPA declined to adopt Entergy’s proposals related to ceasing coal use as an alternative to SO2 scrubbers for White Bluff SO2 BART. For some or all of the FIP, Entergy anticipates that Arkansas will submit a SIP to replace the FIP. In September 2015November 2016, Entergy and other interested parties such as the State of Arkansas recommended designations of “Unclassifiable/Attainment” for Independence and Jefferson Counties. In September 2015 the State of Louisiana recommended a designation of “Attainment” for Calcasieu Parish. In February 2016 the EPA responded to these state recommendations and proposed a designation of “Unclassifiable/Attainment” for Jefferson County and designations of “unclassifiable” for Independence County and Calcasieu Parish. In August 2015 the EPA issued a final data requirement rule for the SO2 1-hour standard. This rule will guide the process to be followed by the states and the EPA to determine the appropriate designation for the remaining unclassified areas in the country. Additional capital projects or operational changes may be required to continue operating Entergy facilities in areas eventually designated as in non-attainment of the standard or designated as contributing to non-attainment areas.filed
Hazardous Air Pollutants
Thepetitions for administrative reconsideration and stay at the EPA releasedas well as petitions for judicial review to the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which has a compliance date, with a widely granted one-year extension, of April 2016. In June 2015 the U.S. Supreme Court reversed a U.S. Court of Appeals for the D.C.Eighth Circuit. In February 2016, Entergy, the State of Arkansas, and other parties requested the Court to judicially stay the FIP. In March 2017 the EPA granted in part the petitions for reconsideration and stated its intent to stay the FIP compliance deadlines by at least 90 days. Subsequently, the Eighth Circuit decisiongranted the government’s motion to hold the appeal litigation in abeyance for 90 days.
In Louisiana, Entergy is working with the Louisiana Department of Environmental Quality (LDEQ) and remandedthe EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. A proposed federal implementation plan is likely to be issued by the end of June 2017 with finalization in December 2017. At this time, it is premature to predict what controls, if any, might be required for compliance. Entergy continues to monitor the submission and to file comments in the process as appropriate.
New and Existing Source Performance Standards for Greenhouse Gas Emissions
As a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016. In January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants. Entergy has been actively engaged in the rulemaking process, having submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existing sources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires states to develop compliance plans with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and the EPA’s finding that it was appropriateU.S. Supreme Court, if review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and necessary to regulate power plants under Clean Air Act section 112, ruling thatEconomic Growth” instructing the EPA must consider costs. Thisto review, suspend, revise, or rescind the Clean Power Plan if appropriate. The EPA finding underpins the MATS rule. In November 2015 the EPA released a Proposed Supplemental Finding that consideration of costs does not alter its previous conclusion that it is appropriate and necessary to regulate hazardous air pollutants from power plants. In December 2015subsequently asked the D.C. Circuit issuedto hold the challenges to the Clean Power Plan and the greenhouse gas new source performance standards in abeyance and signed a rulingnotice of withdrawal of the proposed federal plan, model trading rules and the Clean Energy Incentive Program. EPA Administrator Scott Pruitt also sent a letter to leave the affected governors explaining that states are not currently required to meet Clean Power Plan deadlines, some of which have passed.
Clean Water Act
The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States. The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted. Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.
316(b) Cooling Water Intake Structures
The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in effect whilewater use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the EPA finalizes the appropriate and necessary finding to consider costs. In April 2016rule. After litigation, in May 2014 the EPA issued a cost analysis meantnew final 316(b) rule, followed by publication in the Federal Register in August 2014, with the final rule effective in October 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.
Entergy filed a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The case will be heard in the U.S. Court of Appeals for the Second Circuit. Briefing is complete and Entergy expects oral argument to affirmbe scheduled in mid-2017.
Federal Jurisdiction of Waters of the United States
In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized in January 2015. The Final Rule was published in the Federal Register in June 2015. The rule could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. Entergy is actively engaged with the EPA and the U.S. Army Corps of Engineers to identify issues that require clarification in expected technical and policy guidance documents. The final rule has been challenged in federal court by several parties, including most states. In August 2015 the District Court for North Dakota issued a preliminary injunction staying the new rule in 13 states. In October 2015 the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule. The rule remains in placeEntergy will continue to monitor this rulemaking and effective and additional litigation is likely. Complianceensure compliance with MATS was required byexisting permitting processes. In response to the Clean Air Act within three years, or by 2015, although certain extensions of this deadline were available from state permit authoritiesstay, the EPA and the EPA. Entergy applied for and received a one-year extension for its affected facilities in Arkansas and Louisiana. The required controls have been installed and are operational at Entergy’s White Bluff and Independence units. At Entergy’s Nelson 6 unit, controls continue to be testedU.S. Army Corps resumed nationwide use of the agencies’ regulations as they existed prior to full scale operationAugust 27, 2015. In February 2017 the current administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of the United States rule and to confirm regulatory compliance. Operations are being modifiedrevise or rescind, as necessary to maintain compliance throughout this process. Additional expenditures or operational modifications could be required for compliance depending on the final outcome of testing.
Groundwater at Certain Nuclear Sites
As discussed in the Form 10-K, in February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells that are part of Indian Point’s groundwater monitoring program. Investigation of the source of elevated tritium continues. The likely cause based on the investigation to date is related to the processing of water in preparation for the regularly scheduled refueling outage at Indian Point 2. The system was secured and is no longer in use or required to be used for the next two years.appropriate.
Earnings Ratios (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
| | | | | Ratios of Earnings to Fixed Charges | | Ratios of Earnings to Fixed Charges |
| | | Twelve Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | March 31, | | December 31, | | March 31, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 4.31 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 2.05 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 1.92 |
| Entergy Louisiana | | 2.90 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.33 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.01 |
| Entergy Mississippi | | 3.55 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.37 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 3.23 |
| Entergy New Orleans | | 4.72 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.94 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 4.09 |
| Entergy Texas | | 2.34 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.19 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 1.86 |
| System Energy | | 3.85 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 4.93 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 5.11 |
| | | | | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends/Distributions | | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends/Distributions |
| | | Twelve Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | March 31, | | December 31, | | March 31, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 3.83 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 1.87 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 1.88 |
| Entergy Louisiana | | 2.74 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.26 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.01 |
| Entergy Mississippi | | 3.27 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.13 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 3.14 |
| Entergy New Orleans | | 4.25 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.54 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 3.83 |
The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.
Item 6. Exhibits *
|
| | |
| 4(a) - | Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.38 to Post-Effective Amendment No. 3 to Form S-3 filed November 25, 2015 in 333-190911-07). |
| | |
| 4(b) - | Officer’s Certificate No. 1-B-1, dated March 18, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015, establishing the terms of the Collateral Trust Mortgage Bonds, LPFA 2016A Series due 2028 and Collateral Trust Mortgage Bonds, LPFA 2016B Series due 2030 (4(e) to Form 8-K filed March 18, 2016 in 1-32718). |
| | |
| 4(c) - | Officer’s Certificate No. 2-B-2, dated March 17, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed March 24, 2016 in 1-32718). |
| | |
| *4(d) - | Officer’s Certificate No. 3-B-3, dated March 28, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015. |
| | |
| 4(e) - | First Supplemental Indenture, dated as of March 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4(f) to Form 8-K filed March 18, 2016 in 1-32718). |
| | |
| 4(f) - | Second Supplemental Indenture, dated as of March 15, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4.40 to Form 8-K filed March 24, 2016 in 1-32718). |
| | |
| *4(g) - | Third Supplemental Indenture, dated as of March 17, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015. |
| | |
|
| | |
| *4(h) - | Fourth Supplemental Indenture, dated as of April 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015. |
| | |
| 4(i) - | Eighty-third Supplemental Indenture, dated as of March 15, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944 (4(g) to Form 8-K filed March 18, 2016 in 1-32718). |
| | |
| 4(j) - | Eighty-fourth Supplemental Indenture, dated as of March 17, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944 (4.33 to Form 8-K filed March 24, 2016 in 1-32718). |
| | |
| *4(k) - | Eighty-fifth Supplemental Indenture, dated as of March 17, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944. |
| | |
| 4(l) - | Eighty-fourth Supplemental Indenture, dated as of March 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of September 1, 1926 (4.42 to Form 8-K filed March 24, 2016 in 1-32718). |
| | |
| *4(m) - | Eighteenth Supplemental Indenture, dated as of March 3, 2016, to Entergy New Orleans Mortgage and Deed of Trust, dated as of May 1, 1987. |
| | |
| 4(n) - | Nineteenth Supplemental Indenture, dated as of March 15, 2016, to Entergy New Orleans Mortgage and Deed of Trust, dated as of May 1, 1987 (4.02 to Form 8-K dated March 22, 2016 in 0-05807). |
| | |
| 4(o) - | Officer’s Certificate No. 9-B-7 dated March 8, 2016, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4.40 to Form 8-K dated March 11, 2016 in 1-34360). |
| | |
| 10(a) - | Loan Agreement, dated as of March 1, 2016, between the Louisiana Public Facilities Authority and Entergy Louisiana relating to Refunding Revenue Bonds (Entergy Louisiana, LLC Project) Series 2016A (4(b) to Form 8-K filed March 18, 2016 in 1-32718). |
| | |
| 10(b) - | Loan Agreement, dated as of March 1, 2016, between Louisiana Public Facilities Authority and Entergy Louisiana relating to Refunding Revenue Bonds (Entergy Louisiana, LLC Project) Series 2016B (4(d) to Form 8-K filed March 18, 2016 in 1-32718). |
| | |
| | *12(a) - | Entergy Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(b) - | Entergy Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined. |
| | | |
| | *12(c) - | Entergy Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(d) - | Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(e) - | Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
| | | |
| | *12(f) - | System Energy’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
| | | |
| | *31(a) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
| | | |
| | *31(b) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
| | | |
| | *31(c) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
| | | |
| | *31(d) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
| | | |
| | *31(e) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
| | | |
| | *31(f) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
| | | |
| | *31(g) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
| | | |
| | *31(h) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
| | | |
| | *31(i) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
| | | |
| | *31(j) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
|
| | |
| | | |
| | *31(k) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
| | | |
| | *31(l) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
| | | |
| | *31(m) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
| | | |
| | *31(n) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
| | | |
| | *32(a) - | Section 1350 Certification for Entergy Corporation. |
| | | |
| | *32(b) - | Section 1350 Certification for Entergy Corporation. |
| | | |
| | *32(c) - | Section 1350 Certification for Entergy Arkansas. |
| | | |
| | *32(d) - | Section 1350 Certification for Entergy Arkansas. |
| | | |
| | *32(e) - | Section 1350 Certification for Entergy Louisiana. |
| | | |
| | *32(f) - | Section 1350 Certification for Entergy Louisiana. |
| | | |
| | *32(g) - | Section 1350 Certification for Entergy Mississippi. |
| | | |
| | *32(h) - | Section 1350 Certification for Entergy Mississippi. |
| | | |
| | *32(i) - | Section 1350 Certification for Entergy New Orleans. |
| | | |
| | *32(j) - | Section 1350 Certification for Entergy New Orleans. |
| | | |
| | *32(k) - | Section 1350 Certification for Entergy Texas. |
| | | |
| | *32(l) - | Section 1350 Certification for Entergy Texas. |
| | | |
|
| | |
| | *32(m) - | Section 1350 Certification for System Energy. |
| | | |
| | *32(n) - | Section 1350 Certification for System Energy. |
| | | |
| | *101 INS - | XBRL Instance Document. |
| | | |
| | *101 SCH - | XBRL Taxonomy Extension Schema Document. |
| | | |
| | *101 PRE - | XBRL Taxonomy Presentation Linkbase Document. |
| | | |
| | *101 LAB - | XBRL Taxonomy Label Linkbase Document. |
| | | |
| | *101 CAL - | XBRL Taxonomy Calculation Linkbase Document. |
| | | |
| | *101 DEF - | XBRL Definition Linkbase Document. |
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
|
| |
| * | Filed herewith. |
+ | Management contracts or compensatory plans or arrangements. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
|
|
ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY LOUISIANA, LLC ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. ENTERGY TEXAS, INC. SYSTEM ENERGY RESOURCES, INC. |
| |
| |
| /s/ Alyson M. Mount |
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer) |
Date: May 6, 20165, 2017