Washington, D.C. 20549
Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc.,LLC, 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-K10‑K for the calendar year ended December 31, 2016,2017, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
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):
long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, 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 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 itsEntergy’s nuclear generating facilities;
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, especially in light of the planned shutdown or sale of each of these nuclear plants;
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;
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;
the effects of changes in federal, state or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, or energy policies;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
effects of climate change, including the potential for increases in sea levels or coastal land and wetland loss;
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
Entergy’s ability to manage its capital projects and operation and maintenance costs;
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeastnorthern 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;
changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions;
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by as early as 2021,mid-2022, including the implementation of the planned shutdownshutdowns of Pilgrim, Palisades, Indian Point 2, and Indian Point 3;3, and Palisades;
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;
the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures, or divestitures,restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 20172018 to the first quarter 20162017 showing how much the line item increased or (decreased) in comparison to the prior period:
Depreciation and amortization expenses increased primarily due to additions to plant in service, includingservice.
The asset write-offs, impairments, and related charges variance is primarily due to impairment charges of $73 million ($58 million net-of-tax) in the first quarter 2018 compared to impairment charges of $212 million ($138 million net-of-tax) of impairment charges in the first quarter 20172017. The impairment charges are due to costsnuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged directly to expense as incurred as a result of
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 thewhich included a $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.
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 onto Exelon in 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 103 to the financial statements hereinin the Form 10-K 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.
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$165 million in 2017,2018, of which $24$26 million hadhas been incurred as of March 31, 2017,2018, and approximately $225$205 million from 20182019 through the end of 2021.mid-2022. 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.assets of $73 million for the three months ended March 31, 2018. These costs arewere charged directly to expense as incurred as a result of the impaired value of certain of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs directly to expense overas incurred because Entergy expects the remaining operating livesvalue of the plants.
Entergy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2018 is primarily due to the net issuance of debt in 2018.
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 has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2021. Entergy Corporation also has2022. The facility includes fronting commitments for the ability to issueissuance of letters of credit against 50%$20 million of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the three months ended March 31, 20172018 was 2.29%3.31% 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, 2017:2018:
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. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur. See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.
Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100$145 million whichthat expires in January 2018.November 2020. As of March 31, 2017, $582018, $118 million in cash borrowings were outstanding under the credit facility. Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. As of
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5$2 billion. As of March 31, 2017,2018, Entergy Corporation had $1.1 billion$655 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20172018 was 1.33%1.88%.
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its April 20172018 meeting, the Board declared a dividend of $0.87$0.89 per share, which is the same quarterly
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement and refund;
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 20172018 as compared to the same period in 2016,2017, 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;
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.litigation; and
For the details of Entergy’s commercial paper program, the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt, see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K.
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding federal regulatory proceedings.
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 also 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, 2017 (20172018 (2018 represents the remainder of the year):
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, 2017,2018, based on power prices at that time, Entergy had liquidity exposure of $130$126 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $7$8 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2017,2018, Entergy would have been required to provide approximately $56$64 million of additional cash or letters of credit under some of the agreements. As of March 31, 2017,2018, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $234$319 million for a $1 per MMBtu increase in gas prices in both the short-andshort- and long-term markets.
investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
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.
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
See Note 8 to the financial statements in the Form 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,on May 31, 2019.
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.
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.
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.
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.
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.
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 these units; however, issues have been raised related to Entergy Louisiana’s decision to retiregive up its transmission service rights in MISO for Willow Glen 2 and 4 as opposedrather than placing the units into suspended status for the three-year term permitted by MISO. In March 2018 the LPSC adopted the ALJ’s recommended order finding that Entergy Louisiana did not demonstrate that its decision to temporarily suspendingpermanently surrender transmission rights for the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmless from increased transmission expenses should 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 future deactivationunits be reactivated. Because no party or the LPSC suggested that Willow Glen 2 and 4 should be reactivated and because the LPSC initiated a generic rulemakingcost to consider whetherreturn those units to service far exceeds the LPSC should review deactivation decisions priorrevenue the units were expected to implementation.generate in MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018.
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 4 million for the three months ended March 31, 2018 and approximately 4.9 million for the three months ended March 31, 2017 and approximately 6.1 million for the three months ended March 31, 2016.2017.
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.
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, 20172018 by component:
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2017 and 2016:by component:
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2018 and 2017:
|
| | | | | | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| Beginning balance, January 1, | |
| ($46,400 | ) | |
| ($48,442 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (501 | ) | | (370 | ) |
| Net other comprehensive income (loss) for the period | | (501 | ) | | (370 | ) |
| | | | | |
| Reclassification pursuant to ASU 2018-02 | | (10,049 | ) | | — |
|
| | | | | |
| Ending balance, March 31, | |
| ($56,950 | ) | |
| ($48,812 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 20172018 and 20162017 are as follows:
| |
| Amounts reclassified
from AOCI |
| Income Statement Location | Amounts reclassified
from AOCI |
| Income Statement Location |
| | 2017 | | 2016 | | 2018 | | 2017 | |
| (In Thousands) |
| (In Thousands) |
|
| Cash flow hedges net unrealized gain (loss) |
| | |
|
| | |
|
| Power contracts |
| $51,227 |
| |
| $153,958 |
|
| Competitive business operating revenues |
| ($30,082 | ) | |
| $51,227 |
|
| Competitive business operating revenues |
| Interest rate swaps | (250 | ) | | (400 | ) |
| Miscellaneous - net | (122 | ) | | (250 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 50,977 |
| | 153,558 |
|
|
| (30,204 | ) | | 50,977 |
|
|
|
| (17,841 | ) | | (53,745 | ) |
| Income taxes | 6,343 |
| | (17,841 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $33,136 |
| |
| $99,813 |
|
|
|
| ($23,861 | ) | |
| $33,136 |
|
|
|
|
|
| | |
|
|
|
| | |
|
|
| Pension and other postretirement liabilities |
|
| | |
|
|
|
| | |
|
|
| Amortization of prior-service credit |
| $6,562 |
| |
| $7,355 |
|
| (a) |
| $5,426 |
| |
| $6,562 |
|
| (a) |
| Amortization of loss | (21,571 | ) | | (15,175 | ) |
| (a) | (24,952 | ) | | (21,571 | ) |
| (a) |
| Settlement loss | | (1,616 | ) | | — |
|
| (a) |
| Total amortization | (15,009 | ) | | (7,820 | ) |
|
| (21,142 | ) | | (15,009 | ) |
|
|
| 6,377 |
| | 258 |
|
| Income taxes | 4,568 |
| | 6,377 |
|
| Income taxes |
| Total amortization (net of tax) |
| ($8,632 | ) | |
| ($7,562 | ) |
|
|
| ($16,574 | ) | |
| ($8,632 | ) |
|
|
|
| | |
|
| | |
|
| Net unrealized investment gain (loss) |
| | |
|
| | |
|
| Realized gain (loss) |
| $4,010 |
| |
| $3,850 |
|
| Interest and investment income |
| $53,314 |
| |
| $4,010 |
|
| Interest and investment income |
| (1,965 | ) | | (1,887 | ) |
| Income taxes | (19,620 | ) | | (1,965 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $2,045 |
| |
| $1,963 |
|
|
|
| $33,694 |
| |
| $2,045 |
|
|
|
|
|
| | |
|
|
|
| | |
|
|
| Total reclassifications for the period (net of tax) |
| $26,549 |
| |
| $94,214 |
|
|
|
| ($6,741 | ) | |
| $26,549 |
|
|
|
| |
| (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) into income for Entergy Louisiana for the three months ended March 31, 20172018 and 20162017 are as follows:
| | | | | Amounts reclassified
from AOCI | | Income Statement Location | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | | 2018 | | 2017 | |
| | | (In Thousands) | | | (In Thousands) | |
| Pension and other postretirement liabilities | | | | | | | | | | |
| Amortization of prior-service credit | |
| $1,934 |
| |
| $1,947 |
| | (a) | |
| $1,934 |
| |
| $1,934 |
| | (a) |
| Amortization of loss | | (1,332 | ) | | (1,569 | ) | | (a) | | (1,257 | ) | | (1,332 | ) | | (a) |
| Total amortization | | 602 |
| | 378 |
| | | 677 |
| | 602 |
| |
| | | (232 | ) | | (115 | ) | | Income taxes | | (176 | ) | | (232 | ) | | Income taxes |
| Total amortization (net of tax) | | 370 |
| | 263 |
| | | 501 |
| | 370 |
| |
| | | | | | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $370 |
| |
| $263 |
| | |
| $501 |
| |
| $370 |
| |
| |
| (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. |
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 2021. Entergy Corporation also has2022. The facility includes fronting commitments for the ability to issueissuance of letters of credit against 50%$20 million of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the three months ended March 31, 20172018 was 2.29%3.31% 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, 2017.2018.
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $225 | | $6 | | $3,269 | | $1,125 | | $6 | | $2,369 |
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$2 billion. At March 31, 2017,2018, Entergy Corporation had $1.1 billion$655 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20172018 was 1.33%1.88%.
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, 20172018 as follows:
|
| | | | | | | | | | |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of March 31, 20172018 | | Letters of Credit Outstanding as of March 31, 20172018 |
| Entergy Arkansas | | April 20172018 | | $20 million (b) | | 2.23%3.14% | | $— | | $— |
| Entergy Arkansas | | August 20212022 | | $150 million (c) | | 2.23%3.12% | | $—50 million | | $— |
| Entergy Louisiana | | August 20212022 | | $350 million (d)(c) | | 2.23%2.94% | | $—100 million | | $3.49.1 million |
| Entergy Mississippi | | May 20172018 | | $37.5 million (e)(d) | | 2.48%3.39% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $35 million (e)(d) | | 2.48%3.39% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $20 million (e)(d) | | 2.48%3.39% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $10 million (e)(d) | | 2.48%3.39% | | $— | | $— |
| Entergy New Orleans | | November 2018 | | $25 million (f)(c) | | 2.46%3.36% | | $— | | $0.8 million |
| Entergy Texas | | August 20212022 | | $150 million (g)(c) | | 2.48%3.39% | | $— | | $4.724.4 million |
| |
| (a) | TheFor credit facilities with no borrowings as of March 31, 2018, the interest rate is the estimated interest rate as of March 31, 20172018 that would most likely applyhave been applied 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. In April 2017,2018, Entergy Arkansas renewed its credit facility through April 2018.2019. |
| |
| (c) | The credit facility allows Entergy Arkansas to issueincludes fronting commitments for the issuance of letters of credit against 50%a portion of the borrowing capacity of the facility. facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas. |
| |
| (d) | The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. |
| |
(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 0.075% 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 to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2017:2018:
|
| | | | | | |
| Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of March 31, 20172018 (a) |
| Entergy Arkansas | | $25 million | | 0.70% | | $1.01 million |
| Entergy Louisiana | | $125 million | | 0.70% | | $15.823.8 million |
| Entergy Mississippi | | $40 million | | 0.70% | | $7.116.6 million |
| Entergy New Orleans | | $15 million | | 1.00% | | $1.04.8 million |
| Entergy Texas | | $50 million | | 0.70% | | $27.625.6 million |
| |
| (a) | As of March 31, 2017,2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, and $0.1 million for Entergy Mississippi.Mississippi, and $0.2 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, 2017.2019. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements. The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from internal 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, 20172018 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
| | | | Authorized | | Borrowings | Authorized | | Borrowings |
| | (In Millions) | (In Millions) |
| Entergy Arkansas | $250 | | $31 | $250 | | $124 |
| Entergy Louisiana | $450 | | $— | $450 | | $— |
| Entergy Mississippi | $175 | | $12 | $175 | | $75 |
| Entergy New Orleans | $100 | | $— | $150 | | $— |
| Entergy Texas | $200 | | $29 | $200 | | $— |
| System Energy | $200 | | $— | $200 | | $— |
Entergy Nuclear Vermont Yankee Credit FacilitiesFacility
Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100$145 million whichthat expires in January 2018. November 2020. ��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 0.20% of the undrawn commitment amount. As of March 31, 2017, $582018, $118 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the three months ended March 31, 20172018 was 2.32%3.10% on the drawn portion of the facility.
Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. 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, 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, 2017that would most likely apply to outstanding borrowings under the facility was 2.48% on the drawn portion of the facility.
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 17 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 issueissued commercial paper as of March 31, 20172018 as follows:
| | | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2017 | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2018 |
| | |
| | (Dollars in Millions) | |
| | (Dollars in Millions) |
| Entergy Arkansas VIE | | May 2019 | | $80 | | 2.34% | | $52.3 (b) | | May 2019 | | $80 | | 3.74% | | $43.9 (b) |
| Entergy Louisiana River Bend VIE | | May 2019 | | $105 | | 1.98% | | $18.8 | | May 2019 | | $105 | | 2.82% | | $52.3 |
| Entergy Louisiana Waterford VIE | | May 2019 | | $85 | | 2.25% | | $72.5 (b) | | May 2019 | | $85 | | 3.35% | | $62.9 (b) |
| System Energy VIE | | May 2019 | | $120 | | 2.28% | | $110.7 (b) | | May 2019 | | $120 | | 3.46% | | $43.2 (b) |
| |
| (a) | 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. |
| |
| (b) | CommercialThe total amount outstanding as of March 31, 2018 is commercial paper, and is classified as a current liability. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, 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.
The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of March 31, 20172018 as follows:
|
| | | | |
| Company | | Description | | Amount |
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 |
| Entergy Louisiana Waterford VIE | | 3.22% Series I due December 2023 | | $20 million |
| System Energy VIE | | 3.78% Series I due October 2018 | | $85 million |
| System Energy VIE | | 3.42% Series J due April 2021 | | $100 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Debt Issuances and Retirements
(Entergy Louisiana)
In March 2018, Entergy Louisiana issued $750 million of 4.00% collateral trust mortgage bonds due March 2033. Entergy Louisiana is using the proceeds, together with other funds, to finance the construction of the Lake Charles Power Station and St. Charles Power Station; to repay, at maturity, its $375 million of 6.0% Series first mortgage bonds due May 2018; to repay borrowings from the money pool; to repay borrowings under its $350 million credit facility; and for general corporate purposes.
(System Energy)
In February 2017March 2018 the System Energy nuclear fuel companytrust variable interest entity paid, at maturity, its $50issued $100 million of 4.02%3.42% Series H notes.J notes due April 2021. The System Energy nuclear fuel trust variable interest entity used the proceeds to purchase additional nuclear fuel.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 20172018 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 |
| $14,260,913 |
| |
| $14,435,145 |
|
| $16,851,636 |
| |
| $16,771,585 |
|
| Entergy Arkansas |
| $2,830,478 |
| |
| $2,676,887 |
|
| $2,978,569 |
| |
| $2,812,019 |
|
| Entergy Louisiana |
| $5,775,355 |
| |
| $5,987,581 |
|
| $6,938,439 |
| |
| $7,022,323 |
|
| Entergy Mississippi |
| $1,121,139 |
| |
| $1,109,658 |
|
| $1,270,399 |
| |
| $1,252,877 |
|
| Entergy New Orleans |
| $449,134 |
| |
| $465,593 |
|
| $436,995 |
| |
| $446,981 |
|
| Entergy Texas |
| $1,484,583 |
| |
| $1,575,584 |
|
| $1,562,555 |
| |
| $1,603,892 |
|
| System Energy |
| $501,215 |
| |
| $483,464 |
|
| $601,582 |
| |
| $576,121 |
|
| |
| (a) | The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $182$184 million at Entergy Arkansas, 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.herein. |
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 20162017 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 |
| $14,832,555 |
| |
| $14,815,535 |
|
| $15,075,266 |
| |
| $15,367,453 |
|
| Entergy Arkansas |
| $2,829,785 |
| |
| $2,623,910 |
|
| $2,952,399 |
| |
| $2,865,844 |
|
| Entergy Louisiana |
| $5,812,791 |
| |
| $5,929,488 |
|
| $6,144,071 |
| |
| $6,389,774 |
|
| Entergy Mississippi |
| $1,120,916 |
| |
| $1,086,203 |
|
| $1,270,122 |
| |
| $1,285,741 |
|
| Entergy New Orleans |
| $448,994 |
| |
| $455,459 |
|
| $436,870 |
| |
| $455,968 |
|
| Entergy Texas |
| $1,508,407 |
| |
| $1,600,156 |
|
| $1,587,150 |
| |
| $1,661,902 |
|
| System Energy |
| $551,132 |
| |
| $529,520 |
|
| $551,488 |
| |
| $529,119 |
|
| |
| (a) | The values exclude the lease obligations of $57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $182$183 million at Entergy Arkansas, 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.herein. |
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 changeCorporation and Subsidiaries
Notes 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.Financial Statements
Stock Options
Entergy granted options on 791,900687,400 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 20172018 with a weighted-average fair value of $6.54$6.99 per option. As of March 31, 2017,2018, there were options on 6,263,6264,393,990 shares of common stock outstanding with a weighted-average exercise price of $81.50.$74.39. 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, 2017. Because Entergy’s stock price at March 31, 2017 was less than the weighted average exercise price, the2018. The aggregate intrinsic value of the stock options outstanding as of March 31, 20172018 was zero. The intrinsic value of all “in the money” stock options was $19.8 million as of March 31, 2017. $19.3 million.
The following table includes financial information for outstanding stock options for the three months ended March 31, 20172018 and 2016:2017:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.1 |
|
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.4 |
| |
| $0.4 |
|
| $0.3 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.2 |
|
| $0.2 |
| |
| $0.2 |
|
Other Equity Awards
In January 20172018 the Board approved and Entergy granted 379,850333,850 restricted stock awards and 220,450182,408 long-term incentive awards under the 2015 Equity Ownership Plan. The restricted stock awards were made effective as of January 26, 201725, 2018 and were valued at $70.53$78.08 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. Beginning with the 2018-2020 performance period, a cumulative utility earnings metric has been added to the Long-Term Performance Unit Program to supplement the relative total shareholder return measure that historically has been used in this program with each measure equally weighted. The performance units were granted effective as of January 26, 201725, 2018 and half were valued at $71.40$78.08 per share. Entergy considersshare, the closing price of Entergy’s common stock on that date; and half were valued at $86.75 per share based on various factors, primarily market conditions,conditions. See Note 12 to the financial statements in determining the valueForm 10-K for a description of the performance units.Long-Term Performance Unit Program. 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, 20172018 and 2016:2017:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $8.2 |
| |
| $8.4 |
|
| $8.8 |
| |
| $8.2 |
|
| Tax benefit recognized in Entergy’s net income |
| $3.1 |
| |
| $3.2 |
|
| $2.2 |
| |
| $3.1 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $2.0 |
| |
| $1.8 |
|
| $2.3 |
| |
| $2.0 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy implemented ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018. The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations and are presented in miscellaneous - net in other income. The amendment regarding the presentation of net benefit cost was required to be applied retrospectively for all periods presented. In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization on a prospective basis. In accordance with the regulatory treatment of net benefit cost of the Registrant Subsidiaries, a regulatory asset/liability will be recorded in other regulatory assets/liabilities for the non-service cost components of net benefit cost that would have been capitalized. The retroactive presentation changes resulted in decreases (increases) in other operation and maintenance expenses and decreases (increases) in other income for the three months ended March 31, 2017, with no change in net income, of $21 million for Entergy, $2.8 million for Entergy Arkansas, $6.1 million for Entergy Louisiana, $0.6 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, ($0.2) million for Entergy Texas, and $0.9 million for System Energy. The retroactive effect of the change for the year ended December 31, 2017 would be decreases in other operation and maintenance expenses and decreases in other income, with no change in net income, of $108 million for Entergy, $13.7 million for Entergy Arkansas, $27.8 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.3 million for Entergy New Orleans, $0.2 million for Entergy Texas, and $6.2 million for System Energy. The retroactive effect of the change for the year ended December 31, 2016 would be decreases (increases) in other operation and maintenance expenses and decreases (increases) in other income, with no change in net income, of $71 million for Entergy, $13.4 million for Entergy Arkansas, $26.1 million for Entergy Louisiana, $2.4 million for Entergy Mississippi, $1 million for Entergy New Orleans, ($1.1) million for Entergy Texas, and $5.1 million for System Energy. The retroactive effect of the change for the year ended December 31, 2015 would be decreases in other operation and maintenance expenses and decreases in other income, with no change in net income, of $148 million for Entergy, $30.7 million for Entergy Arkansas, $50.7 million for Entergy Louisiana, $6.3 million for Entergy Mississippi, $4 million for Entergy New Orleans, $4 million for Entergy Texas, and $10.2 million for System Energy.
Components of Qualified Net Pension Cost
Entergy’s qualified pension cost, including amounts capitalized, for the first quarters of 20172018 and 2016,2017, included the following components:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $33,410 |
| |
| $35,811 |
|
| $38,752 |
| |
| $33,410 |
|
| Interest cost on projected benefit obligation | 65,206 |
| | 65,403 |
| 66,854 |
| | 65,206 |
|
| Expected return on assets | (102,056 | ) | | (97,366 | ) | (110,535 | ) | | (102,056 | ) |
| Amortization of prior service cost | 65 |
| | 270 |
| 99 |
| | 65 |
|
| Amortization of loss | 56,930 |
| | 48,824 |
| 68,526 |
| | 56,930 |
|
| Net pension costs |
| $53,555 |
| |
| $52,942 |
|
| $63,696 |
| |
| $53,555 |
|
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 2018 and 2017, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2018 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $6,189 |
| |
| $8,446 |
| |
| $1,822 |
| |
| $673 |
| |
| $1,589 |
| |
| $1,776 |
|
| Interest cost on projects benefit obligation | | 13,004 |
| | 14,940 |
| | 3,769 |
| | 1,813 |
| | 3,348 |
| | 3,227 |
|
| Expected return on assets | | (21,851 | ) | | (24,809 | ) | | (6,502 | ) | | (2,993 | ) | | (6,523 | ) | | (4,991 | ) |
| Amortization of loss | | 13,412 |
| | 14,450 |
| | 3,610 |
| | 1,954 |
| | 2,626 |
| | 3,715 |
|
| Net pension cost | |
| $10,754 |
| |
| $13,027 |
| |
| $2,699 |
| |
| $1,447 |
| |
| $1,040 |
| |
| $3,727 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 projected 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 |
|
Non-Qualified Net Pension Cost
Entergy recognized $8.9 million and $4.6 million in pension cost for its non-qualified pension plans in the first quarters of 2018 and 2017, respectively. Reflected in the pension cost for non-qualified pension plans in the first quarter of 2018 is a $4.4 million settlement charge related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the first quarters of 2018 and 2017:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2018 |
| $132 |
| |
| $50 |
| |
| $80 |
| |
| $21 |
| |
| $137 |
|
| 2017 |
| $105 |
| |
| $48 |
| |
| $64 |
| |
| $18 |
| |
| $127 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs in the first quarter of 2018 is $12 thousand in settlement charges related to the payment of lump sum benefits out of this plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the first quarters of 2018 and 2017, included the following components:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $6,782 |
| |
| $6,729 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 12,681 |
| | 13,960 |
|
| Expected return on assets | (10,373 | ) | | (9,408 | ) |
| Amortization of prior service credit | (9,251 | ) | | (10,356 | ) |
| Amortization of loss | 3,432 |
| | 5,476 |
|
| Net other postretirement benefit cost |
| $3,271 |
| |
| $6,401 |
|
The Registrant Subsidiaries’ qualified pensionother postretirement benefit cost, including amounts capitalized, for their employees for the first quarters of 20172018 and 2016,2017, included the following components:
| | | 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| 2018 | | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,090 |
| |
| $6,925 |
| |
| $1,472 |
| |
| $625 |
| |
| $1,364 |
| |
| $1,536 |
| |
| $793 |
| |
| $1,556 |
| |
| $321 |
| |
| $129 |
| |
| $330 |
| |
| $306 |
|
| Interest cost on projects benefit obligation | | 12,944 |
| | 14,809 |
| | 3,732 |
| | 1,791 |
| | 3,392 |
| | 3,091 |
| |
| Interest cost on APBO | | | 1,997 |
| | 2,789 |
| | 683 |
| | 417 |
| | 939 |
| | 500 |
|
| Expected return on assets | | (20,427 | ) | | (23,017 | ) | | (6,131 | ) | | (2,800 | ) | | (6,180 | ) | | (4,663 | ) | | (4,342 | ) | | — |
| | (1,303 | ) | | (1,313 | ) | | (2,446 | ) | | (783 | ) |
| Amortization of prior service credit | | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 11,640 |
| | 12,354 |
| | 3,053 |
| | 1,658 |
| | 2,310 |
| | 2,964 |
| | 289 |
| | 388 |
| | 377 |
| | 34 |
| | 206 |
| | 233 |
|
| Net pension cost | |
| $9,247 |
| |
| $11,071 |
| |
| $2,126 |
| |
| $1,274 |
| |
| $886 |
| |
| $2,928 |
| |
| Net other postretirement benefit cost | | |
| ($2,541 | ) | |
| $2,799 |
| |
| ($378 | ) | |
| ($919 | ) | |
| ($1,550 | ) | |
| ($122 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 $4.6 million and $4.3 million in pension cost for its non-qualified pension plans in the first quartersReclassification out of 2017 and 2016, respectively.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the first quarters of 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | |
| | 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 NetAccumulated Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the first quarters of 2017 and 2016, included the following components:
|
| | | | | | | |
| | 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 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 | |
| $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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 20172018 and 2016:2017:
|
| | | | | | | | | | | | | | | | |
| 2018 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($99 | ) |
|
| $5,595 |
|
|
| ($70 | ) |
|
| $5,426 |
|
| Amortization of loss |
| (21,957 | ) |
| (1,932 | ) |
| (1,063 | ) |
| (24,952 | ) |
| Settlement loss |
| — |
|
| — |
|
| (1,616 | ) |
| (1,616 | ) |
|
|
| ($22,056 | ) |
|
| $3,663 |
|
|
| ($2,749 | ) |
|
| ($21,142 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $1,934 |
|
|
| $— |
|
|
| $1,934 |
|
| Amortization of loss |
| (867 | ) |
| (388 | ) |
| (2 | ) |
| (1,257 | ) |
|
|
| ($867 | ) |
|
| $1,546 |
|
|
| ($2 | ) |
|
| $677 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($65 | ) | |
| $6,717 |
| |
| ($90 | ) | |
| $6,562 |
|
| Amortization of loss | | (18,450 | ) | | (2,202 | ) | | (919 | ) | | (21,571 | ) |
| | |
| ($18,515 | ) | |
| $4,515 |
| |
| ($1,009 | ) | |
| ($15,009 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $1,934 |
| |
| $— |
| |
| $1,934 |
|
| Amortization of loss | | (865 | ) | | (465 | ) | | (2 | ) | | (1,332 | ) |
| | |
| ($865 | ) | |
| $1,469 |
| |
| ($2 | ) | |
| $602 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($270 | ) | |
| $7,738 |
| |
| ($113 | ) | |
| $7,355 |
|
| Amortization of loss | | (12,482 | ) | | (2,063 | ) | | (630 | ) | | (15,175 | ) |
| | |
| ($12,752 | ) | |
| $5,675 |
| |
| ($743 | ) | |
| ($7,820 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $1,947 |
| |
| $— |
| |
| $1,947 |
|
| Amortization of loss | | (836 | ) | | (731 | ) | | (2 | ) | | (1,569 | ) |
| | |
| ($836 | ) | |
| $1,216 |
| |
| ($2 | ) | |
| $378 |
|
Employer Contributions
Based on current assumptions, Entergy expects to contribute $409.9$352.1 million to its qualified pension plans in 2017.2018. As of March 31, 2017,2018, Entergy had contributed $84.2$91.8 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 2017:2018:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2018 pension contributions |
| $64,062 |
| |
| $71,917 |
| |
| $14,933 |
| |
| $7,250 |
| |
| $10,883 |
| |
| $13,786 |
|
| Pension contributions made through March 2018 |
| $17,373 |
| |
| $19,510 |
| |
| $4,194 |
| |
| $2,061 |
| |
| $3,873 |
| |
| $3,715 |
|
| Remaining estimated pension contributions to be made in 2018 |
| $46,689 |
| |
| $52,407 |
| |
| $10,739 |
| |
| $5,189 |
| |
| $7,010 |
| |
| $10,071 |
|
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, 20172018 are Utility and Entergy Wholesale Commodities. Utility 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. 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 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. “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s segment financial information for the first quarters of 20172018 and 20162017 is as follows:
| | | | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Entergy | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) | | (In Thousands) |
| 2018 | | | | | | | | | | | |
| Operating revenues | | |
| $2,304,990 |
| |
| $418,924 |
| |
| $— |
| |
| ($33 | ) | |
| $2,723,881 |
|
| Income taxes | | |
| $52,224 |
| |
| ($1,078 | ) | |
| ($7,483 | ) | |
| $— |
| |
| $43,663 |
|
| Consolidated net income (loss) | | |
| $217,940 |
| |
| ($17,779 | ) | |
| ($32,063 | ) | |
| ($31,898 | ) | |
| $136,200 |
|
| Total assets as of March 31, 2018 | | |
| $43,690,561 |
| |
| $5,504,233 |
| |
| $834,463 |
| |
| ($2,747,732 | ) | |
| $47,281,525 |
|
| 2017 | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $2,035,112 |
| |
| $553,367 |
| |
| $— |
| |
| ($21 | ) | |
| $2,588,458 |
| |
| $2,035,112 |
| |
| $553,367 |
| |
| $— |
| |
| ($21 | ) | |
| $2,588,458 |
|
| Income taxes | |
| $98,492 |
| |
| ($78,337 | ) | |
| ($12,392 | ) | |
| $— |
| |
| $7,763 |
| |
| $98,492 |
| |
| ($78,337 | ) | |
| ($12,392 | ) | |
| $— |
| |
| $7,763 |
|
| Consolidated net income (loss) | |
| $167,623 |
| |
| ($27,197 | ) | |
| ($22,477 | ) | |
| ($31,898 | ) | |
| $86,051 |
| |
| $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 |
| |
| Total assets as of December 31, 2017 | | |
| $42,978,669 |
| |
| $5,638,009 |
| |
| $1,011,612 |
| |
| ($2,921,141 | ) | |
| $46,707,149 |
|
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. Additionalcontributions.
Total restructuring charges infor the first quarter 2018 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, 2018 |
| $83 |
| |
| $14 |
| |
| $97 |
|
| Restructuring costs accrued | 26 |
| | — |
| | 26 |
|
| Balance as of March 31, 2018 |
| $109 |
| |
| $14 |
| |
| $123 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges for the first quarter 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$73 million of impairment charges in the first quarter 2018 and $212 million in the first quarter 2017 of impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Going forward, Entergy Wholesale Commodities 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 $165 million in 2018, of which $26 million has been incurred as of March 31, 2018, and approximately $205 million from 2019 through mid-2022.
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.
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 Corporation and Subsidiaries
Notes to Financial Statements
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 Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at March 31, 20172018 is approximately 23 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 86%98% for the remainder of 2017,2018, of which approximately 59%
Entergy Corporation and Subsidiaries
Notes to Financial Statements
79% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 20172018 is 19.920.7 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.
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 depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of March 31, 2018, derivative contracts with one counterparty were in a liability position (approximately $0.3 million total). In addition to the corporate guarantee, $0.5 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $6 million in cash collateral and $69 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2017, derivative contracts with threeeight counterparties were in a liability position (approximately $13$65 million total). In addition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $3$4 million in cash collateral wasand $34 million in letters of credit were 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 Corporation and Subsidiaries
Notes to Financial Statements
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, 20172018 is 59,830,00063,890,000 MMBtu for Entergy, including 50,230,00053,730,000 MMBtu for Entergy Louisiana and 9,600,00010,160,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateralizationcollateral based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.requests for collateral.
During the second quarter 2016,2017, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 20162017 through May 31, 2017.2018. 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 financial 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 financial 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 financial transmission rights. The total volume of financial transmission rights outstanding as of March 31, 20172018 is 18,36518,490 GWh for Entergy, including 4,1974,153 GWh for Entergy Arkansas, 7,6698,162 GWh for Entergy Louisiana, 3,1422,562 GWh for Entergy Mississippi, 883943 GWh for Entergy New Orleans, and 2,4342,541 GWh for Entergy Texas. Credit support for financial 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 financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of March 31, 20172018 and December 31, 2016, respectively.2017. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Mississippi, and Entergy MississippiTexas as of March 31, 20172018 and December 31, 2016, respectively.2017.
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, 2018 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 | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $63 | | ($14) | | $49 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $31 | | ($5) | | $26 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $13 | | ($13) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $5 | | ($5) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $3 | | ($3) | | $— | | Entergy Wholesale Commodities |
| Financial transmission rights | | Prepayments and other | | $9 | | ($1) | | $8 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $4 | | ($4) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $1 | | $— | | $1 | | 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, 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 | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Business |
| | | (In Millions) | | | (In Millions) | |
| Derivatives designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $25 | | ($14) | | $11 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $19 | | ($19) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $6 | | ($6) | | $— | | Entergy Wholesale Commodities | | Other deferred debits and other assets (non-current portion) | | $19 | | ($14) | | $5 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $11 | | ($10) | | $1 | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $86 | | ($20) | | $66 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $16 | | ($7) | | $9 | | Entergy Wholesale Commodities | | Other non-current liabilities (non-current portion) | | $17 | | ($14) | | $3 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $18 | | ($13) | | $5 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $9 | | ($9) | | $— | | 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 | | Prepayments and other | | $22 | | ($1) | | $21 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $18 | | ($17) | | $1 | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $9 | | ($8) | | $1 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $4 | | ($4) | | $— | | Entergy Wholesale Commodities | |
| Natural gas swaps | | | Other current liabilities | | $6 | | $— | | $6 | | Utility |
| |
| (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/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet |
| |
| (d) | Excludes cash collateral in the amount of $1 million posted and $3$6 million held as of March 31, 20172018 and $2$1 million posted and $4 million held as of December 31, 2016.2017. Also excludes $69 million in letters of credit held as of March 31, 2018 and $34 million in letters of credit held as of December 31, 2017. |
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 for the three months ended March 31, 20172018 and 20162017 are as follows:
| | | Instrument | | 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) | | Amount of gain 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) |
| 2018 | | |
| Electricity swaps and options | | | $91 | | Competitive businesses operating revenues | | ($30) |
| | | |
| 2017 | | |
| Electricity swaps and options | | $50 | | Competitive businesses operating revenues | | $51 | | $50 | | Competitive businesses operating revenues | | $51 |
| | | |
| 2016 | | |
| Electricity swaps and options | | $139 | | Competitive businesses operating revenues | | $154 | |
| |
| (a) | Before taxes of $18($6) million and $54$18 million for the three months ended March 31, 20172018 and 2016,2017, 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, 2018 and 2017 and 2016 was ($1)$13.3 million and ($1) million, respectively.
Based on market prices as of March 31, 2017,2018, unrealized gains recorded in AOCIaccumulated other comprehensive income on cash flow hedges relating to power sales totaled $8$65 million of net unrealized gains. Approximately $5$41 million is expected to be reclassified from AOCIaccumulated other comprehensive income to operating revenues in the next twelve months. The actual amount reclassified from AOCI,accumulated other comprehensive income, 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 for the three months ended March 31, 20172018 and 20162017 are as follows:
|
| | | | | | |
| 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) |
| 2018 | |
| | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $— |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $32 |
| Electricity swaps and options | | $— | (c) | Competitive business operating revenues | | $1 |
| | | | | | |
| 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 financial 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 financial 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, 20172018 are as follows:shown in the table below. Certain investments are subject to master netting agreements and are presented on the balance sheets on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | |
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 |
|
| | | | | | | | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | | (In Millions) | | |
| Assets: | | | | | | | | | | |
| Financial transmission rights | | Prepayments and other | |
| $1.9 |
| |
| ($0.1 | ) | |
| $1.8 |
| | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | |
| $3.8 |
| |
| ($0.4 | ) | |
| $3.4 |
| | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | |
| $0.9 |
| |
| $— |
| |
| $0.9 |
| | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | |
| $0.7 |
| |
| $— |
| |
| $0.7 |
| | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | |
| $1.4 |
| |
| $— |
| |
| $1.4 |
| | Entergy Texas |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Natural gas swaps | | Other current liabilities | |
| $1.2 |
| |
| $— |
| |
| $1.2 |
| | Entergy Louisiana |
| Natural gas swaps | | Other current liabilities | |
| $0.2 |
| |
| $— |
| |
| $0.2 |
| | Entergy Mississippi |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 20162017 are as follows:
|
| | | | | | |
Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
Assets: | | | | | | |
Natural gas swaps | | Prepayments and other | | $10.9 | | Entergy Louisiana |
Natural gas swaps | | Prepayments and other | | $2.3 | | Entergy Mississippi |
Natural gas swaps | | Prepayments and other | | $0.2 | | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Prepayments and other | | $5.4 | | Entergy Arkansas |
Financial transmission rights | | Prepayments and other | | $8.5 | | Entergy Louisiana |
Financial transmission rights | | Prepayments and other | | $3.2 | | Entergy Mississippi |
Financial transmission rights | | Prepayments and other | | $1.1 | | Entergy New Orleans |
Financial transmission rights | | Prepayments and other | | $3.1 | | Entergy Texas |
|
| | | | | | | | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | | (In Millions) | | |
| Assets: | | | | | | | | | | |
| Financial transmission rights | | Prepayments and other | |
| $3.2 |
| |
| ($0.2 | ) | |
| $3.0 |
| | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | |
| $11.0 |
| |
| ($0.8 | ) | |
| $10.2 |
| | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | |
| $2.1 |
| |
| $— |
| |
| $2.1 |
| | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | |
| $2.2 |
| |
| $— |
| |
| $2.2 |
| | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | |
| $3.6 |
| |
| ($0.2 | ) | |
| $3.4 |
| | Entergy Texas |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Natural gas swaps | | Other current liabilities | |
| $5.0 |
| |
| $— |
| |
| $5.0 |
| | Entergy Louisiana |
| Natural gas swaps | | Other current liabilities | |
| $1.2 |
| |
| $— |
| |
| $1.2 |
| | Entergy Mississippi |
| Natural gas swaps | | Other current liabilities | |
| $0.2 |
| |
| $— |
| |
| $0.2 |
| | Entergy New Orleans |
| |
| (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/liabilities presented on the Registrant Subsidiaries’ balance sheets |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (d) | As of March 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.2 million for Entergy Texas. As of December 31, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, and $0.1 million for Entergy Mississippi. As of December 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3Mississippi, and $0.05 million for Entergy Arkansas and $0.1 million for Entergy Mississippi.Texas. |
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, 20172018 and 20162017 are as follows:
|
| | | | | | |
| Instrument |
| Income Statement Location |
| Amount of gain
(loss) recorded
in the income statement |
| Registrant |
| | | | | (In Millions) | | |
| 2018 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.2) | (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 | | $8.0 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $17.6 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $7.8 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $3.3 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | ($3.5) | (b) | Entergy Texas |
| | | | | | |
| 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 |
| | | | | | | |
Financial transmission rights | | Purchased power expense | | $7.8 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $10.5 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $0.8 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.5 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $1.5 | (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 financial 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 financial transmission rights 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.
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 |
| |
| – | 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.
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 financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group. The primary functions of the Business 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 Business 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, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options. The 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 compared 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.
The values of financial 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 Corporation and Subsidiaries
Notes to Financial Statements
Business Unit Risk Control 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, 20172018 and December 31, 2016.2017. 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.
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $1,022 |
| |
| $— |
| |
| $— |
| |
| $1,022 |
| |
| $1,148 |
| |
| $— |
| |
| $— |
| |
| $1,148 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 512 |
| | — |
| | — |
| | 512 |
| | 577 |
| | — |
| | — |
| | 577 |
|
| Debt securities | | 966 |
| | 1,264 |
| | — |
| | 2,230 |
| | 1,084 |
| | 1,535 |
| | — |
| | 2,619 |
|
| Common trusts (b) | | | | | | | | 3,927 |
| | | | | | | | 3,920 |
|
| Power contracts | | — |
| | — |
| | 23 |
| | 23 |
| | — |
| | — |
| | 75 |
| | 75 |
|
| Securitization recovery trust account | | 47 |
| | — |
| | — |
| | 47 |
| | 52 |
| | — |
| | — |
| | 52 |
|
| Escrow accounts | | 415 |
| | — |
| | — |
| | 415 |
| | 398 |
| | — |
| | — |
| | 398 |
|
| Gas hedge contracts | | 5 |
| | — |
| | — |
| | 5 |
| |
| Financial transmission rights | | — |
| | — |
| | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | 8 |
|
| | |
| $2,967 |
| |
| $1,264 |
| |
| $31 |
| |
| $8,189 |
| |
| $3,259 |
| |
| $1,535 |
| |
| $83 |
| |
| $8,797 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $18 |
| |
| $18 |
| |
| Gas hedge contracts | | |
| $1 |
| |
| $— |
| |
| $— |
| |
| $1 |
|
|
| | | | | | | | | | | | | | | | |
| 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 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 and 2016:
|
| | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| (In Millions) |
| Balance as of January 1, |
| $5 |
| |
| $21 |
| |
| $189 |
| |
| $23 |
|
| Total gains (losses) for the period (a) | | | | | | | |
| Included in OCI | 50 |
| | — |
| | 139 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 17 |
| | — |
| | 7 |
|
| Settlements | (50 | ) | | (30 | ) | | (145 | ) | | (21 | ) |
| Balance as of March 31, |
| $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. |
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, 2017:
|
| | | | | | | | | |
| Transaction Type | | Fair Value as of March 31, 2017 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | | | | | | (In Millions) |
| Power contracts - electricity swaps | | $5 | | Unit contingent discount | | +/- | 4% | | $1 |
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) |
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, 2017 and December 31, 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
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $6.1 |
| |
| $— |
| |
| $— |
| |
| $6.1 |
|
| Debt securities | | 106.7 |
| | 203.3 |
| | — |
| | 310.0 |
|
| Common trusts (b) | | | | | | | | 551.6 |
|
| Securitization recovery trust account | | 7.8 |
| | — |
| | — |
| | 7.8 |
|
| Escrow accounts | | 4.7 |
| | — |
| | — |
| | 4.7 |
|
| Financial transmission rights | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $125.3 |
| |
| $203.3 |
| |
| $0.9 |
| |
| $881.1 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 112.5 |
| | 196.8 |
| | — |
| | 309.3 |
|
| Common trusts (b) | | | | | | | | 521.8 |
|
| Securitization recovery trust account | | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Escrow accounts | | 7.1 |
| | — |
| | — |
| | 7.1 |
|
| Financial transmission rights | | — |
| | — |
| | 5.4 |
| | 5.4 |
|
| | |
| $127.3 |
| |
| $196.8 |
| |
| $5.4 |
| |
| $851.3 |
|
Entergy Louisiana
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $64.7 |
| |
| $— |
| |
| $— |
| |
| $64.7 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 7.6 |
| | — |
| | — |
| | 7.6 |
|
| Debt securities | | 132.0 |
| | 307.5 |
| | — |
| | 439.5 |
|
| Common trusts (b) | | | | | | | | 743.0 |
|
| Escrow accounts | | 292.5 |
| | — |
| | — |
| | 292.5 |
|
| Securitization recovery trust account | | 8.4 |
| | — |
| | — |
| | 8.4 |
|
| Gas hedge contracts | | 3.8 |
| | — |
| | — |
| | 3.8 |
|
| Financial transmission rights | | — |
| | — |
| | 4.1 |
| | 4.1 |
|
| | |
| $509.0 |
| |
| $307.5 |
| |
| $4.1 |
| |
| $1,563.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $163.9 |
| |
| $— |
| |
| $— |
| |
| $163.9 |
|
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
|
| Equity securities | | 13.9 |
| | — |
| | — |
| | 13.9 |
|
| Debt securities | | 132.3 |
| | 292.5 |
| | — |
| | 424.8 |
|
| Common trusts (b) | | | | | | | | 702.0 |
|
| Escrow accounts | | 305.7 |
| | — |
| | — |
| | 305.7 |
|
| Securitization recovery trust account | | 2.8 |
| | — |
| | — |
| | 2.8 |
|
| Gas hedge contracts | | 10.9 |
| | — |
| | — |
| | 10.9 |
|
| Financial transmission rights | | — |
| | — |
| | 8.5 |
| | 8.5 |
|
| | |
| $629.5 |
| |
| $292.5 |
| |
| $8.5 |
| |
| $1,632.5 |
|
Entergy Mississippi
|
| | | | | | | | | | | | | | | | |
| 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 |
|
|
| | | | | | | | | | | | | | | | |
| 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
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $55.0 |
| |
| $— |
| |
| $— |
| |
| $55.0 |
|
| Securitization recovery trust account | | 4.6 |
| | — |
| | — |
| | 4.6 |
|
| Escrow accounts | | 86.3 |
| | — |
| | — |
| | 86.3 |
|
| Financial transmission rights | | — |
| | — |
| | 0.5 |
| | 0.5 |
|
| | |
| $145.9 |
| |
| $— |
| |
| $0.5 |
| |
| $146.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 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 Texas
|
| | | | | | | | | | | | | | | | |
| 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 |
|
|
| | | | | | | | | | | | | | | | |
| 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 |
|
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
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $725 |
| |
| $— |
| |
| $— |
| |
| $725 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 526 |
| | — |
| | — |
| | 526 |
|
| Debt securities | | 1,125 |
| | 1,425 |
| | — |
| | 2,550 |
|
| Common trusts (b) | | | | | | | | 4,136 |
|
| Power contracts | | — |
| | — |
| | 5 |
| | 5 |
|
| Securitization recovery trust account | | 45 |
| | — |
| | — |
| | 45 |
|
| Escrow accounts | | 406 |
| | — |
| | — |
| | 406 |
|
| Financial transmission rights | | — |
| | — |
| | 21 |
| | 21 |
|
| | |
| $2,827 |
| |
| $1,425 |
| |
| $26 |
| |
| $8,414 |
|
| Liabilities: | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $70 |
| |
| $70 |
|
| Gas hedge contracts | | 6 |
| | — |
| | — |
| | 6 |
|
| | |
| $6 |
| |
| $— |
| |
| $70 |
| |
| $76 |
|
| |
| (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. |
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, 2018 and 2017:
|
| | | | | | | | | | | | | | | |
| | 2018 | | 2017 |
| | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| (In Millions) |
| Balance as of January 1, |
| ($65 | ) | |
| $21 |
| |
| $5 |
| |
| $21 |
|
| Total gains (losses) for the period (a) | | | | | | | |
| Included in earnings | 14 |
| | (1 | ) | | — |
| | — |
|
| Included in other comprehensive income | 91 |
| | — |
| | 50 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 20 |
| | — |
| | 17 |
|
| Settlements | 35 |
| | (32 | ) | | (50 | ) | | (30 | ) |
| Balance as of March 31, |
| $75 |
| |
| $8 |
| |
| $5 |
| |
| $8 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.2 million for the three months ended March 31, 2018 and $0.4 million for the three months ended March 31, 2017. |
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, 2018:
|
| | | | | | | | | |
| Transaction Type | | Fair Value as of March 31, 2018 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | (In Millions) | | | | | | | (In Millions) |
| Power contracts - electricity swaps | | $75 | | Unit contingent discount | | +/- | 4% - 4.75% | | $5 - $7 |
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) |
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2018 and December 31, 2017. 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
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 111.3 |
| | 239.5 |
| | — |
| | 350.8 |
|
| Common trusts (b) | | | | | | | | 581.3 |
|
| Securitization recovery trust account | | 7.9 |
| | — |
| | — |
| | 7.9 |
|
| Financial transmission rights | | — |
| | — |
| | 1.8 |
| | 1.8 |
|
| | |
| $122.8 |
| |
| $239.5 |
| |
| $1.8 |
| |
| $945.4 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $11.7 |
| |
| $— |
| |
| $— |
| |
| $11.7 |
|
| Debt securities | | 115.8 |
| | 232.4 |
| | — |
| | 348.2 |
|
| Common trusts (b) | | | | | | | | 585.0 |
|
| Securitization recovery trust account | | 3.7 |
| | — |
| | — |
| | 3.7 |
|
| Escrow accounts | | 2.4 |
| | — |
| | — |
| | 2.4 |
|
| Financial transmission rights | | — |
| | — |
| | 3.0 |
| | 3.0 |
|
| | |
| $133.6 |
| |
| $232.4 |
| |
| $3.0 |
| |
| $954.0 |
|
Entergy Louisiana
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $561.9 |
| |
| $— |
| |
| $— |
| |
| $561.9 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 12.2 |
| | — |
| | — |
| | 12.2 |
|
| Debt securities | | 145.6 |
| | 370.7 |
| | — |
| | 516.3 |
|
| Common trusts (b) | | | | | | | | 775.9 |
|
| Escrow accounts | | 285.6 |
| | — |
| | — |
| | 285.6 |
|
| Securitization recovery trust account | | 9.5 |
| | — |
| | — |
| | 9.5 |
|
| Financial transmission rights | | — |
| | — |
| | 3.4 |
| | 3.4 |
|
| | |
| $1,014.8 |
| |
| $370.7 |
| |
| $3.4 |
| |
| $2,164.8 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $1.2 |
| |
| $— |
| |
| $— |
| |
| $1.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $30.1 |
| |
| $— |
| |
| $— |
| |
| $30.1 |
|
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
|
| Equity securities | | 15.2 |
| | — |
| | — |
| | 15.2 |
|
| Debt securities | | 143.3 |
| | 350.5 |
| | — |
| | 493.8 |
|
| Common trusts (b) | | | | | | | | 803.1 |
|
| Escrow accounts | | 289.5 |
| | — |
| | — |
| | 289.5 |
|
| Securitization recovery trust account | | 2.0 |
| | — |
| | — |
| | 2.0 |
|
| Financial transmission rights | | — |
| | — |
| | 10.2 |
| | 10.2 |
|
| | |
| $480.1 |
| |
| $350.5 |
| |
| $10.2 |
| |
| $1,643.9 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $5.0 |
| |
| $— |
| |
| $— |
| |
| $5.0 |
|
Entergy Mississippi
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $0.3 |
| |
| $— |
| |
| $— |
| |
| $0.3 |
|
| Escrow accounts | | 32.1 |
| | — |
| | — |
| | 32.1 |
|
| Financial transmission rights | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $32.4 |
| |
| $— |
| |
| $0.9 |
| |
| $33.3 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $4.5 |
| |
| $— |
| |
| $— |
| |
| $4.5 |
|
| Escrow accounts | | 32.0 |
| | — |
| | — |
| | 32.0 |
|
| Financial transmission rights | | — |
| | — |
| | 2.1 |
| | 2.1 |
|
| | |
| $36.5 |
| |
| $— |
| |
| $2.1 |
| |
| $38.6 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $1.2 |
| |
| $— |
| |
| $— |
| |
| $1.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $1.3 |
| |
| $— |
| |
| $— |
| |
| $1.3 |
|
| Securitization recovery trust account | | 4.8 |
| | — |
| | — |
| | 4.8 |
|
| Escrow accounts | | 79.8 |
| | — |
| | — |
| | 79.8 |
|
| Financial transmission rights | | — |
| | — |
| | 0.7 |
| | 0.7 |
|
| | |
| $85.9 |
| |
| $— |
| |
| $0.7 |
| |
| $86.6 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $32.7 |
| |
| $— |
| |
| $— |
| |
| $32.7 |
|
| Securitization recovery trust account | | 1.5 |
| | — |
| | — |
| | 1.5 |
|
| Escrow accounts | | 81.9 |
| | — |
| | — |
| | 81.9 |
|
| Financial transmission rights | | — |
| | — |
| | 2.2 |
| | 2.2 |
|
| | |
| $116.1 |
| |
| $— |
| |
| $2.2 |
| |
| $118.3 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
|
Entergy Texas
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $39.0 |
| |
| $— |
| |
| $— |
| |
| $39.0 |
|
| Securitization recovery trust account | | 29.7 |
| | — |
| | — |
| | 29.7 |
|
| Financial transmission rights | | — |
| | — |
| | 1.4 |
| | 1.4 |
|
| | |
| $68.7 |
| |
| $— |
| |
| $1.4 |
| |
| $70.1 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $115.5 |
| |
| $— |
| |
| $— |
| |
| $115.5 |
|
| Securitization recovery trust account | | 37.7 |
| | — |
| | — |
| | 37.7 |
|
| Financial transmission rights | | — |
| | — |
| | 3.4 |
| | 3.4 |
|
| | |
| $153.2 |
| |
| $— |
| |
| $3.4 |
| |
| $156.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
|
| | | | | | | | | | | | | | | | |
| 2018 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $278.7 |
| |
| $— |
| |
| $— |
| |
| $278.7 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 2.3 |
| | — |
| | — |
| | 2.3 |
|
| Debt securities | | 172.5 |
| | 153.1 |
| | — |
| | 325.6 |
|
| Common trusts (b) | | | | | | | | 568.3 |
|
| | |
| $453.5 |
| |
| $153.1 |
| |
| $— |
| |
| $1,174.9 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $287.1 |
| |
| $— |
| |
| $— |
| |
| $287.1 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 3.1 |
| | — |
| | — |
| | 3.1 |
|
| Debt securities | | 187.2 |
| | 143.3 |
| | — |
| | 330.5 |
|
| Common trusts (b) | | | | | | | | 572.1 |
|
| | |
| $477.4 |
| |
| $143.3 |
| |
| $— |
| |
| $1,192.8 |
|
| |
| (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 herein 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, 2018.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $3.0 |
| |
| $10.2 |
| |
| $2.1 |
| |
| $2.2 |
| |
| $3.4 |
|
| Gains included as a regulatory liability/asset | 6.8 |
| | 10.8 |
| | 6.6 |
| | 1.8 |
| | (5.5 | ) |
| Settlements | (8.0 | ) | | (17.6 | ) | | (7.8 | ) | | (3.3 | ) | | 3.5 |
|
| Balance as of March 31, |
| $1.8 |
| |
| $3.4 |
| |
| $0.9 |
| |
| $0.7 |
| |
| $1.4 |
|
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, 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 Energy)
Entergy holds debt and equity securities classified asand available-for-sale debt securities 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 toEntergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding those accounted for under the financial statementsequity method or resulting in the Form 10-K for discussionconsolidation of the trust transfer agreementinvestee, to be measured at fair value with NYPA to transferchanges recognized in net income. Entergy implemented this ASU using a modified retrospective method, and Entergy recorded an adjustment increasing retained earnings and reducing accumulated other comprehensive loss by $633 million as of January 1, 2018 for the cumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that do not meet the criteria for regulatory accounting treatment. Going forward, unrealized gains and decommissioning liabilities forlosses on investments in equity securities held by the Indian Point 3 and FitzPatrick plants to Entergy. In January 2017, NYPA transferred to Entergy the Indian Point 3nuclear decommissioning trust fundfunds will be recorded in earnings as they occur rather than in other comprehensive income. In accordance with a fair valuethe regulatory treatment 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 salefunds of the FitzPatrick plantRegistrant Subsidiaries, an offsetting amount of unrealized gains/(losses) will continue 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 withinbe recorded in other deferred debits as of December 31, 2016.regulatory liabilities/assets.
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 recordedrecords an offsetting amount of unrealized gains/(losses) in other deferred credits.credits for the excess trust earnings not currently expected to be needed to decommission the plant. 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/losses recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the assetsavailable-for-sale debt securities in thesethe trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale.equity. Unrealized losses (where cost exceeds fair market value) on the assetsavailable-for-sale debt securities in thesethe trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporaryother 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 unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still 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 | |
| $4,439 |
| |
| $1,823 |
| |
| $5 |
|
| Debt Securities | | 2,230 |
| | 35 |
| | 22 |
|
| Total | |
| $6,669 |
| |
| $1,858 |
| |
| $27 |
|
|
| | | | | | | | | | | | |
| | | 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 $2,217 million as of March 31, 2017 and $2,212 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 3.21%, an average duration of approximately 5.79 years, and an average maturity of approximately 9.45 years.2018 were ($64) million. The equity securities are generally held in funds that are designed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
59The available-for-sale securities held as of March 31, 2018 and December 31, 2017 are summarized as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2018 | | | | | | |
| Debt Securities | | 2,619 |
| | 23 |
| | 48 |
|
| | | | | | | |
| 2017 | | | | | | |
| Equity Securities | |
| $4,662 |
| |
| $2,131 |
| |
| $1 |
|
| Debt Securities | | 2,550 |
| | 44 |
| | 16 |
|
| Total | |
| $7,212 |
| |
| $2,175 |
| |
| $17 |
|
The unrealized gains/(losses) above are reported before deferred taxes of $472 million as of December 31, 2017 for equity securities, and ($2) million as of March 31, 2018 and $7 million as of December 31, 2017 for debt securities. The amortized cost of debt securities was $2,643 million as of March 31, 2018 and $2,539 million as of December 31, 2017. As of March 31, 2018, the debt securities have an average coupon rate of approximately 3.26%, an average duration of approximately 6.18 years, and an average maturity of approximately 10.09 years.
The fair value and gross unrealized losses of the 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, 2017:2018:
| | | | Equity Securities | | Debt Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | | (In Millions) |
| Less than 12 months |
| $13 |
| |
| $5 |
| |
| $1,087 |
| |
| $21 |
| |
| $1,667 |
| |
| $35 |
|
| More than 12 months | — |
| | — |
| | 13 |
| | 1 |
| | 241 |
| | 13 |
|
| Total |
| $13 |
| |
| $5 |
| |
| $1,100 |
| |
| $22 |
| |
| $1,908 |
| |
| $48 |
|
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, 2016:2017:
| | | | 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 |
| $23 |
| |
| $1 |
| |
| $1,169 |
| |
| $26 |
|
| $8 |
| |
| $1 |
| |
| $1,099 |
| |
| $7 |
|
| More than 12 months | 1 |
| | — |
| | 20 |
| | 1 |
| — |
| | — |
| | 265 |
| | 9 |
|
| Total |
| $24 |
| |
| $1 |
| |
| $1,189 |
| |
| $27 |
|
| $8 |
| |
| $1 |
| |
| $1,364 |
| |
| $16 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 20172018 and December 31, 20162017 are as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $99 |
| |
| $125 |
|
| $89 |
| |
| $74 |
|
| 1 year - 5 years | 783 |
| | 763 |
| 928 |
| | 902 |
|
| 5 years - 10 years | 742 |
| | 719 |
| 784 |
| | 812 |
|
| 10 years - 15 years | 113 |
| | 109 |
| 152 |
| | 147 |
|
| 15 years - 20 years | 69 |
| | 73 |
| 101 |
| | 100 |
|
| 20 years+ | 424 |
| | 424 |
| 565 |
| | 515 |
|
| Total |
| $2,230 |
| |
| $2,213 |
|
| $2,619 |
| |
| $2,550 |
|
During the three months ended March 31, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $514$1,091 million and $729$514 million, respectively. During the three months ended March 31, 20172018 and 2016,2017, gross gains of $9$1 million and $10$9 million, respectively, and gross losses of $7 million and $5 million, and $3 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2018 are $485 million for Indian Point 1, $614 million for Indian Point 2, $789 million for Indian Point 3, $453 million for Palisades, $1,048 million for Pilgrim, and $591 million for Vermont Yankee. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2017 are $491 million for Indian Point 1, $621 million for Indian Point 2, $798 million for Indian Point 3, $458 million for Palisades, $1,068 million for Pilgrim, and $613 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Entergy Arkansas
Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2018 and December 31, 2017 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2018 | | | | | | |
| Debt Securities | | 350.8 |
| | 0.5 |
| | 9.7 |
|
| | | | | | | |
| 2017 | | | | | | |
| Equity Securities | |
| $596.7 |
| |
| $354.9 |
| |
| $— |
|
| Debt Securities | | 348.2 |
| | 2.1 |
| | 3.0 |
|
| Total | |
| $944.9 |
| |
| $357.0 |
| |
| $3.0 |
|
The amortized cost of debt securities was $360 million as of March 31, 2018 and $349.1 million as of December 31, 2017. As of March 31, 2018, the debt securities have an average coupon rate of approximately 2.67%, an average duration of approximately 5.48 years, and an average maturity of approximately 6.90 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($8) million. The equity securities are generally held in funds that are designed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 the available-for-sale 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, 2018:
|
| | | | | | | | |
| | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| Less than 12 months | |
| $277.8 |
| |
| $7.2 |
|
| More than 12 months | | 42.5 |
| | 2.5 |
|
| Total | |
| $320.3 |
| |
| $9.7 |
|
The fair value and gross unrealized losses of the available-for-sale 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, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $168.0 |
| |
| $1.2 |
|
| More than 12 months | — |
| | — |
| | 41.4 |
| | 1.8 |
|
| Total |
| $— |
| |
| $— |
| |
| $209.4 |
| |
| $3.0 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2018 and December 31, 2017 are as follows:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Millions) |
| less than 1 year |
| $14.1 |
| |
| $13.0 |
|
| 1 year - 5 years | 130.6 |
| | 123.4 |
|
| 5 years - 10 years | 177.9 |
| | 180.6 |
|
| 10 years - 15 years | 3.4 |
| | 4.8 |
|
| 15 years - 20 years | 7.0 |
| | 3.4 |
|
| 20 years+ | 17.8 |
| | 23.0 |
|
| Total |
| $350.8 |
| |
| $348.2 |
|
During the three months endedMarch 31, 2018 and 2017, proceeds from the dispositions of securities amounted to $34.9 million and $36 million, respectively. During the three months ended March 31, 2018 and 2017, gross gains of $0.1 million and $0.5 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy ArkansasLouisiana
Entergy ArkansasLouisiana holds debt and equity securities classified asand available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 20172018 and December 31, 20162017 are summarized as follows:
| | | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | | (In Millions) |
| 2018 | | | | | | | |
| Debt Securities | | | 516.3 |
| | 5.7 |
| | 8.4 |
|
| | | (In Millions) | | | | | | |
| 2017 | | | | | | | | | | | | |
| Equity Securities | |
| $557.7 |
| |
| $307.2 |
| |
| $— |
| |
| $818.3 |
| |
| $461.2 |
| |
| $— |
|
| Debt Securities | | 310.0 |
| | 3.1 |
| | 3.6 |
| | 493.8 |
| | 10.9 |
| | 3.6 |
|
| Total | |
| $867.7 |
| |
| $310.3 |
| |
| $3.6 |
| |
| $1,312.1 |
| |
| $472.1 |
| |
| $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$519 million as of March 31, 20172018 and $310.1$490 million as of December 31, 2016.2017. As of March 31, 2017,2018, the debt securities have an average coupon rate of approximately 2.61%3.83%, an average duration of approximately 5.266.05 years, and an average maturity of approximately 6.1011.85 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($10.8) million. 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 the 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, 2017:2018:
| | | | Equity Securities | | Debt Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | | (In Millions) |
| Less than 12 months |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
| |
| $254.9 |
| |
| $4.6 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
| | 78.8 |
| | 3.8 |
|
| Total |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
| |
| $333.7 |
| |
| $8.4 |
|
The fair value and gross unrealized losses of the 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, 2016:2017:
| | | | 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 |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
| $— |
| |
| $— |
| |
| $135.3 |
| |
| $1.1 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | 84.4 |
| | 2.5 |
|
| Total |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
| $— |
| |
| $— |
| |
| $219.7 |
| |
| $3.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 20172018 and December 31, 20162017 are as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $17.8 |
| |
| $16.7 |
|
| $28.1 |
| |
| $23.2 |
|
| 1 year - 5 years | 109.7 |
| | 106.2 |
| 136.7 |
| | 122.8 |
|
| 5 years - 10 years | 162.1 |
| | 161.2 |
| 108.4 |
| | 109.3 |
|
| 10 years - 15 years | 7.0 |
| | 7.7 |
| 52.9 |
| | 52.7 |
|
| 15 years - 20 years | 1.0 |
| | 1.0 |
| 44.7 |
| | 50.7 |
|
| 20 years+ | 12.4 |
| | 16.5 |
| 145.5 |
| | 135.1 |
|
| Total |
| $310.0 |
| |
| $309.3 |
|
| $516.3 |
| |
| $493.8 |
|
During the three months endedMarch 31, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $36$125.5 million and $58.6$40.6 million, respectively. During the three months ended March 31, 20172018 and 2016,2017, gross gains of $0.5 million and $0.8$0.03 million, respectively, and gross losses of $0.1$0.8 million and $0.1$0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Entergy LouisianaSystem Energy
Entergy LouisianaSystem Energy holds debt and equity securities classified asand available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 20172018 and December 31, 20162017 are summarized as follows:
| | | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | | (In Millions) |
| 2018 | | | | | | | |
| Debt Securities | | | 325.6 |
| | 1.4 |
| | 5.8 |
|
| | | (In Millions) | | | | | | |
| 2017 | | | | | | | | | | | | |
| Equity Securities | |
| $750.6 |
| |
| $382.7 |
| |
| $— |
| |
| $575.2 |
| |
| $308.6 |
| |
| $— |
|
| Debt Securities | | 439.5 |
| | 8.5 |
| | 4.3 |
| | 330.5 |
| | 4.2 |
| | 1.2 |
|
| Total | |
| $1,190.1 |
| |
| $391.2 |
| |
| $4.3 |
| |
| $905.7 |
| |
| $312.8 |
| |
| $1.2 |
|
| | | | | | | | |
| 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$330 million as of March 31, 20172018 and $421.9$327.5 million as of December 31, 2016.2017. As of March 31, 2017,2018, the debt securities have an average coupon rate of approximately 3.77%2.72%, an average duration of approximately 5.726.38 years, and an average maturity of approximately 11.209.39 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($7.8) million. 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 the 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, 2017:2018:
| | | | Equity Securities | | Debt Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $1.6 |
| |
| $— |
| |
| $189.9 |
| |
| $4.1 |
| |
| $240.7 |
| |
| $5.5 |
|
| More than 12 months | — |
| | — |
| | 2.7 |
| | 0.2 |
| | 10.2 |
| | 0.3 |
|
| Total |
| $1.6 |
| |
| $— |
| |
| $192.6 |
| |
| $4.3 |
| |
| $250.9 |
| |
| $5.8 |
|
The fair value and gross unrealized losses of the 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, 2016:2017:
| | | | 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 |
| $— |
| |
| $— |
| |
| $198.8 |
| |
| $4.8 |
|
| $— |
| |
| $— |
| |
| $196.9 |
| |
| $1.0 |
|
| More than 12 months | — |
| | — |
| | 4.8 |
| | 0.2 |
| — |
| | — |
| | 10.4 |
| | 0.2 |
|
| Total |
| $— |
| |
| $— |
| |
| $203.6 |
| |
| $5.0 |
|
| $— |
| |
| $— |
| |
| $207.3 |
| |
| $1.2 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 20172018 and December 31, 20162017 are as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $28.1 |
| |
| $31.4 |
|
| $5.5 |
| |
| $4.1 |
|
| 1 year - 5 years | 101.2 |
| | 99.1 |
| 164.5 |
| | 173.0 |
|
| 5 years - 10 years | 126.4 |
| | 122.8 |
| 78.4 |
| | 78.5 |
|
| 10 years - 15 years | 44.0 |
| | 41.4 |
| 3.8 |
| | 1.0 |
|
| 15 years - 20 years | 30.3 |
| | 30.9 |
| 10.7 |
| | 6.9 |
|
| 20 years+ | 109.5 |
| | 99.2 |
| 62.7 |
| | 67.0 |
|
| Total |
| $439.5 |
| |
| $424.8 |
|
| $325.6 |
| |
| $330.5 |
|
During the three months ended March 31, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $40.6$54.2 million and $53.8$75.8 million, respectively. During the three months ended March 31, 20172018 and 2016,2017, gross gains of $0.03$0.1 million and $0.9$0.1 million, respectively, and gross losses of $0.2$0.6 million and $0.1$0.7 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notesrelated to Financial Statements
System Energy
System Energy holds debt and equityavailable-for-sale 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 investmentthe available-for-sale debt securities in the Entergy Wholesale 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three months ended March 31, 20172018 and 2016. The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is 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.2017. 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 record material charges to other income for the three months endedMarch 31, 2017 and 2016, 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 Audits” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits, the Tax Cuts and Jobs Act, and other income tax matters involving Entergy. The following is an updateare updates to that discussion.
As discussed in the Form 10-K, the Tax Cuts and Jobs Act limits the deduction for net business interest expense in certain circumstances. The limitation does not apply to interest expense allocable to the Utility. In Notice 2018-28 released on April 2, 2018, the IRS announced that it intends to issue proposed regulations that will provide guidance to assist taxpayers in complying with the new interest provisions under the Tax Cuts and Jobs Act. The notice provides general and limited information of the IRS’s interpretation regarding methodologies that could be used for the allocation of the interest expense limitation. As a result of the new provision contained in the second quarter 2016,Tax Cuts and Jobs Act, Entergy maderecorded 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 removal of the contingencies regarding the sale of the plant and 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 re-determined basis resulted in a $44 million income tax benefitlimitation in the first quarter 2017.2018 which did not have a material effect on financial position, results of operations, or cash flows.
InFor a discussion of proceedings commenced or other responses by Entergy’s regulators to the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed inTax Cuts and Jobs Act, see Note 122 to the financial statements herein and 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, 20172018 are $209$280 million for Entergy, $33.4$39.1 million for Entergy Arkansas, $74.4$119.4 million for Entergy Louisiana, $3.3$7.5 million for Entergy Mississippi, $0.6$5.6 million for Entergy New Orleans, $13.8$14.8 million for Entergy Texas, and $26.9$41.9 million for System Energy. Construction expenditures included in accounts payable at December 31, 20162017 are $253$368 million for Entergy, $40.9$58.8 million for Entergy Arkansas, $114.8$160.4 million for Entergy Louisiana, $11.5$17.1 million for Entergy Mississippi, $2.3$2.5 million for Entergy New Orleans, $9.3$32.8 million for Entergy Texas, and $6.2$33.9 million for System Energy.
NOTE 12. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 17 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 through March 2016. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of 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, 20172018 and $8.6 million in the three months ended March 31, 2016.2017.
NOTE 13. DISPOSITIONS (Entergy Corporation)Entergy Corporation and Subsidiaries
Notes to Financial Statements
InNOTE 13. REVENUE RECOGNITION(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Revenue Recognition
Entergy implemented ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” effective January 1, 2018. Topic 606 requires entities to “recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to achieve the core principle. This accounting was applied to all contracts using the modified retrospective method, which requires an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date. Because the standard did not result in any material change in how Entergy recognizes revenue, however, no adjustment to retained earnings was required. Similarly, there was no effect on revenues recognized under Topic 606 for the three months ended March 2017 the NRC approved31, 2018.
Revenues from electric service and 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 additionnatural gas are recognized when services are transferred to the assumption by Exeloncustomer in an amount equal to what Entergy has the right to bill the customer because this amount represents the value of certain liabilities relatedservices provided to customers.
Entergy’s total revenues for the FitzPatrick plant, resulting in a pre-tax gain on the salethree months ended March 31, 2018 were as follows:
|
| | | | |
| | 2018 |
| | (In Thousands) |
| Utility: | | |
| Residential | |
| $892,085 |
|
| Commercial | | 595,720 |
|
| Industrial | | 597,186 |
|
| Governmental | | 56,478 |
|
| Total billed retail | | 2,141,469 |
|
| | |
| Sales for resale (a) | | 69,526 |
|
| Other electric revenues (b) | | 27,433 |
|
| Non-customer revenues (c) | | 9,834 |
|
| Total electric revenues | | 2,248,262 |
|
| | |
| Natural gas | | 56,695 |
|
| | |
| Entergy Wholesale Commodities: | | |
| Competitive businesses sales (a) | | 409,135 |
|
| Non-customer revenues (c) | | 9,789 |
|
| Total competitive businesses | | 418,924 |
|
| | |
| Total operating revenues | |
| $2,723,881 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of $16 million. At the transaction close, Exelon paid an additional $8 millionThe Registrant Subsidiaries’ total revenues for the proration of certain expenses prepaid by Entergy.three months ended March 31, 2018 were as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| 2018 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| | | | | | | | | | | |
| Residential | |
| $235,524 |
| |
| $295,517 |
| |
| $148,342 |
| |
| $64,575 |
| |
| $148,126 |
|
| Commercial | | 120,634 |
| | 224,928 |
| | 110,460 |
| | 54,272 |
| | 85,427 |
|
| Industrial | | 111,477 |
| | 352,336 |
| | 42,501 |
| | 7,570 |
| | 83,302 |
|
| Governmental | | 4,648 |
| | 17,310 |
| | 10,848 |
| | 17,691 |
| | 5,981 |
|
| Total billed retail | | 472,283 |
|
| 890,091 |
|
| 312,151 |
|
| 144,108 |
|
| 322,836 |
|
| | | | | | | | | | | |
| Sales for resale (a) | | 66,103 |
| | 89,255 |
| | 1,993 |
| | 13,337 |
| | 23,361 |
|
| Other electric revenues (b) | | 10,024 |
| | 20,503 |
| | (719 | ) | | (3,111 | ) | | 2,264 |
|
| Non-customer revenues (c) | | 2,614 |
| | 5,257 |
| | 2,318 |
| | 1,484 |
| | 479 |
|
| Total electric revenues | | 551,024 |
|
| 1,005,106 |
|
| 315,743 |
|
| 155,818 |
|
| 348,940 |
|
| | | | | | | | | | | |
| Natural gas | | — |
| | 24,238 |
| | — |
| | 32,457 |
| | — |
|
| | | | | | | | | | | |
| Total operating revenues | |
| $551,024 |
|
|
| $1,029,344 |
|
|
| $315,743 |
|
|
| $188,275 |
|
|
| $348,940 |
|
| |
| (a) | Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments, and includes them as part of customer revenues. |
| |
| (b) | Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue. |
| |
| (c) | Non-customer revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees. |
Electric Revenues
As discussedEntergy’s primary source of revenue is from retail electric sales sold under tariff rates approved by regulators in Note 10its various jurisdictions. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas. Energy is provided on demand throughout the month, measured by a meter located at the customer’s property. Approved rates vary by customer class due to differing requirements of the customers and market factors involved in fulfilling those requirements. Entergy issues monthly bills to customers at rates approved by regulators for power and related services provided during the previous billing cycle.
To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies record an estimate for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and market prices of power in the respective jurisdiction. The inputs are revised as needed to approximate actual usage and cost. Each month, estimated unbilled amounts are recorded as unbilled revenue and accounts receivable, and the prior month’s estimate is reversed. Price and volume differences resulting from factors
Entergy Corporation and Subsidiaries
Notes to Financial Statements
such as weather affect the calculation of unbilled revenues from one period to the other. This may result in variability of reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy may record revenue based on rates that are subject to refund. Such revenues are reduced by estimated refund amounts when Entergy believes refunds are probable based on the status of rate proceedings as of the date financial statements herein,are prepared. Because these refunds will be made through a reduction in future rates, and not as a resultreduction in bills previously issued, they are presented as non-customer revenue in the table above.
System Energy’s only source of revenue is the sale of FitzPatrickelectric power and capacity generated from its 90% interest in the Grand Gulf nuclear plant to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy issues monthly bills to its affiliated customers equal to its actual operating costs plus a return on March 31, 2017,common equity approved by the FERC.
Entergy’s Utility operating companies also sell excess power not needed for its own customers, primarily through transactions with MISO, a regional transmission organization that maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. In the MISO market, Entergy re-determinedoffers its generation and bids its load into the plant’s tax basis, resultingmarket. MISO settles these offers and bids based on locational marginal prices. These represent pricing for energy at a given location based on a market clearing price that takes into account physical limitations on the transmission system, generation, and demand throughout the MISO region. MISO evaluates each market participant’s energy offers and demand bids to economically and reliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO market and reports in operating revenues when in a $44 million income tax benefit.net selling position and in operating expenses when in a net purchasing position.
Natural Gas
Entergy Louisiana and Entergy New Orleans also distribute natural gas to retail customers in and around Baton Rouge, Louisiana, and the City of New Orleans, including Algiers, respectively. Gas transferred to customers is measured by a meter at the customer’s property. Entergy issues monthly invoices to customers at rates approved by regulators for the volume of gas transferred to date.
Competitive Businesses Revenues
The assetsEntergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power and liabilities associatedcapacity produced by its operating plants to wholesale customers. The majority of Entergy Wholesale Commodities revenues are from Entergy’s nuclear power plants located in the northern United States. Entergy issues monthly invoices to the counterparties for these electric sales at the respective contracted or ISO market rate of electricity and related services provided during the previous month.
Most of the Palisades nuclear plant output is sold under a 15-year PPA with Consumers Energy, executed as part of the saleacquisition of FitzPatrickthe plant in 2007 and expiring in 2022. The PPA prices are for a set price per MWh and escalate each year, up to Exelon were classified$61.50/MWh in 2022. Entergy issues monthly invoices to Consumers Energy for electric sales based on the actual output of electricity and related services provided during the previous month at the contract price. Additionally, as heldthe PPA pricing was considered below-market at the time of acquisition, a liability was recorded for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. The disposition-datethe fair value of the decommissioning trust fund was $805 million, classified within other deferred debits,below-market PPA, and is being amortized to revenue over the disposition-date fairlife of the agreement.
Practical Expedients and Exceptions
Entergy has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected term of one year or less, or for revenue recognized in an amount equal to what Entergy has the asset retirement obligation was $727 million, classifiedright to bill the customer for services performed.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Most of Entergy’s contracts, except in a few cases where there are defined minimums or stated terms, are on demand. This results in customer bills that vary each month based on an approved tariff and usage. Entergy imposes monthly or annual minimum requirements on some customers primarily as credit and cost recovery guarantees and not as pricing for unsatisfied performance obligations. These minimums typically expire after the initial term or when specified costs have been recovered. The minimum amounts are part of each month’s bill and recognized as revenue accordingly. Some of the subsidiaries within other non-current liabilities.the Entergy Wholesale Commodities segment have operations and maintenance services contracts that have fixed components and terms longer than one year. The transaction also included property, plant,total fixed consideration related to these unsatisfied performance obligations, however, is not material to Entergy revenues.
Recovery of Fuel Costs
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and equipmentEntergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are based on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net book value of zero, materials and supplies, and prepaid assets.basis, excluding them from revenues.
As discussed in
NOTE 14. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 149 to the financial statements in the Form 10-K Entergy entered intofor a reimbursement agreement with Exelon pursuantdiscussion of asset retirement obligations. Following are updates to which Exelon reimburses Entergy for specified out-of-pocket costs associated with the operation of FitzPatrick. that discussion.
In the first quarter 2017,2018, Entergy billed ExelonLouisiana recorded a revision to its estimated decommissioning cost liability for reimbursementRiver Bend as a result of $98a revised decommissioning cost study. The revised estimate resulted in an $85.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of other operation and maintenance 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 Exelon.the unit.
________________
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, 2017,2018, 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, 20172018 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 decreased $5increased $22 million primarily due to higher net revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses, partially offset by higher net revenue.depreciation and amortization expenses, higher taxes other than income taxes, and higher nuclear refueling outage 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).credits. Following is an analysis of the change in net revenue comparing the first quarter 20172018 to the first quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $321.7330.3 |
|
| Retail electric price | 20.2 |
|
Opportunity sales | 7.522.4 |
|
| Volume/weather | (18.020.4 | )
|
| Other | (1.11.0 | )
|
20172018 net revenue |
| $330.3374.1 |
|
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. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016. The formula rate plan rates were effective with the first billing cycle of January 2017.2018 and an increase in the energy efficiency rider effective January 2018, each as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate cases. See Note 14 to the financial statements in the Form 10-K for discussion of the 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.plan filing.
The volume/weather variance is primarily due to an increase of 599 GWh, or 12%, in billed electricity usage, including the effect of the unbilled sales period including lessmore favorable weather on residential and decreasedcommercial sales and an increase in industrial usage. The increase in industrial usage is primarily due to a new customer in the primary metals industry.
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 increased primarily due to:
to an increase of $6.5 million in nuclear generation expenses primarily due to higher labor costs, including contract labor, to position the deferralnuclear fleet to meet its operational goals and an increase of $3.7 million in first quarter 2016energy efficiency costs. The increase was partially offset by higher nuclear insurance refunds 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$3.6 million. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the APSC as partForm 10-K for a discussion of the 2015 rate case settlement. Theseincreased operating costs are being amortized over a ten-year periodto position the nuclear fleet to meet its operational goals.
Taxes other than income taxes increased primarily due to increases in local franchise taxes and payroll taxes. The increase in local franchise taxes is primarily due to higher billing factors and higher electric retail revenues.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
an increase of $2.7 million in distribution expenses primarily due to timing differences in the vegetation maintenance costs incurred in 2017;
an increase of $2.6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2017 as compared to the same period in 2016; and
an increase of $2.4 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation expense in first quarter 2016.
The increase was partially offset by a decrease of $13.2 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs as compared to the prior year. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews.
Depreciation and amortization expenses increased primarily due to additions to plant in 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.service.
Other incomeInterest expense increased primarily due to higher realized gainsthe issuance of $220 million of 3.5% Series first mortgage bonds in 2017 as compared to 2016 on the decommissioning trust fund investments.
Interest expense decreased 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 in the Form 10-K for further discussion of the opportunity sales proceeding.May 2017.
Income Taxes
The effective income tax rate was 20.7% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items 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 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.
ANO Damage, Outage, and NRC ReviewsIncome Tax Legislation
See the “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Income Tax LegislationANO Damage, Outage,” section of Entergy Corporation and NRC Reviews”Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews,Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the deferraluncertainties associated with accounting for the Tax Act, and Note 2 to the financial statements herein and in the Form 10-K contains discussion of replacement power costs.proceedings commenced or other responses by Entergy’s regulators to the Tax Act.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $20,509 |
| |
| $9,135 |
|
| $6,216 |
| |
| $20,509 |
|
| | | | | | | |
| Cash flow provided by (used in): |
|
| | |
|
|
| | |
|
| Operating activities | 154,541 |
| | 139,613 |
| 179,890 |
| | 154,541 |
|
| Investing activities | (207,097 | ) | | (395,106 | ) | (161,344 | ) | | (207,097 | ) |
| Financing activities | 32,522 |
| | 280,137 |
| (23,839 | ) | | 32,522 |
|
| Net increase (decrease) in cash and cash equivalents | (20,034 | ) | | 24,644 |
| |
| Net decrease in cash and cash equivalents | | (5,293 | ) | | (20,034 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $475 |
| |
| $33,779 |
|
| $923 |
| |
| $475 |
|
Operating Activities
Net cash flow provided by operating activities increased $14.9$25.3 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to:
an increase due to the timing of payments to vendors and 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 $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 wascosts, partially offset by an increasethe timing of $3.5 million in spending on nuclear refueling outages in 2017.receivables from customers.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $188$45.8 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million and a decrease in cash used of $15.6$49 million in transmission construction expenditures due toas a lower scoperesult 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 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 and a decrease of $15.8 million in transmission construction expenditures primarily due to a lower scope of work performed in 2018 as compared to the same period in 2017. The decrease was partially offset by an increase of $18.6$8.6 million in information technology construction expenditures primarily due to increased spending on various technology projects and an increase of $6.1 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017. See Note 142018 as compared to the financial statements for discussion of the Union Power Station purchase.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
same period in 2017.
Financing Activities
Net cash flow provided byEntergy Arkansas’s financing activities decreased $247.6used $23.8 million of cash for the three months ended March 31, 2018 compared to providing $32.5 million of cash for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 primarily due to:
the issuancenet repayments of $325short-term borrowings of $6.1 million of 3.5% Series first mortgage bonds in January 2016, a portion ofon 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 and for general corporate purposes; and
a $200 million capital contribution received from Entergy Corporationnuclear fuel company variable interest entity credit facility in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station.
The decrease was partially offset by2018 as compared to net short-term borrowings of $52.3 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017 compared to net repayments2017;
borrowings of $11.7$50 million in 20162018 on the Entergy Arkansas long-term credit facility;
repayment of $24.9 million of long-term borrowings in 2018 on the Entergy Arkansas nuclear fuel company variable interest entity credit facility; 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$42.3 million in 20172018 compared to decreasing by $52.7$20.2 million in 2016.2017. 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. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Capital Structure
Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 55.6 | % | | 55.3 | % | 55.3 | % | | 55.5 | % |
| Effect of excluding the securitization bonds | (0.4 | %) | | (0.4 | %) | (0.3 | %) | | (0.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 55.2 | % | | 54.9 | % | 55.0 | % | | 55.2 | % |
| Effect of subtracting cash | — | % | | (0.2 | %) | — | % | | — | % |
| Net debt to net capital, excluding securitization bonds (a) | 55.2 | % | | 54.7 | % | 55.0 | % | | 55.2 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas. |
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
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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)payables to the money pool were as follows:
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($31,008) | | ($51,232) | | $1,842 | | ($52,742) |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $123,858 | | $166,137 | | $31,008 | | $51,232 |
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 2021.2022. Entergy Arkansas also has a $20 million credit facility which was scheduled to expire in April 2017, but was renewed by Entergy Arkansas through April 2018.2019. The $150 million credit facility allows Entergy Arkansas to issueincludes fronting commitments for the issuance of letters of credit against 50%$5 million of the borrowing capacity of the facility. As of March 31, 2017, there were no2018, cash borrowings of $50 million and no letters of credit were 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 to MISO. As of March 31, 2017,2018, 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 $80 million scheduled to expire in May 2019. As of March 31, 2017, $52.32018, $43.9 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued bywere outstanding under the Entergy Arkansas nuclear fuel company variable interest entity.entity credit facility. 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.
2016 Formula Rate Plan FilingRetail Rates
Internal Restructuring
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In Aprilin November 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 fromwith the APSC seeking authorization to undertake a restructuring that Entergy Arkansas’s deployment of advanced metering infrastructure iswould result in the public interest. This mattertransfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring is pending beforesubject to regulatory review and approval by the APSC.
APSC, the FERC, and the NRC. Entergy Arkansas also filed a notice with the Missouri Public Service Commission in December 2017 out of
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
an abundance of caution, although Entergy Arkansas does not serve any retail customers in Missouri. In April 2018 the Missouri Public Service Commission approved Entergy Arkansas’s filing. If the appropriate approvals are obtained, Entergy Arkansas expects the restructuring will be consummated on or before December 1, 2018.
Energy Cost Recovery Rider
In March 2017,2018, 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$0.01547 per kWh to $0.01547$0.01882 per kWh. The Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate the amount of the redetermination or, alternatively, to allow recovery subject to refund. Among the reasons the Arkansas Attorney General cited for suspension were questions pertaining to how Entergy Arkansas forecasted sales and potential implications of the Tax Cuts and Jobs Act. Entergy Arkansas replied to the Arkansas Attorney General’s filing and stated that, to the extent there are questions pertaining to its load forecasting or the operation of the energy cost recovery rider, those issues exceed the scope of the instant rate redetermination. Entergy Arkansas also stated that potential effects of the Tax Cuts and Job Act are appropriately considered in the APSC’s separate proceeding looking at potential implications of the new tax law. The APSC general staff filed testimonya reply to the Arkansas Attorney General’s filing and agreed that Entergy Arkansas’s filing complied with the terms of the energy cost recovery rider. In April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s energy cost recovery rider rate and declining to require further investigation of the issues suggested by the Attorney General in March 2017 recommending that the proceeding at this time. The redetermined rate should be implementedbecame effective 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.2018.
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.
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, 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.discussion of new accounting pronouncements.
|
| | | | | | | | |
| 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 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 INCOME STATEMENTS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | |
| | | |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $551,024 |
| |
| $474,351 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 108,306 |
| | 99,409 |
|
| Purchased power | | 71,972 |
| | 55,133 |
|
| Nuclear refueling outage expenses | | 23,402 |
| | 19,619 |
|
| Other operation and maintenance | | 169,358 |
| | 163,008 |
|
| Decommissioning | | 14,760 |
| | 13,895 |
|
| Taxes other than income taxes | | 27,905 |
| | 24,051 |
|
| Depreciation and amortization | | 71,981 |
| | 67,066 |
|
| Other regulatory credits - net | | (3,307 | ) | | (10,526 | ) |
| TOTAL | | 484,377 |
| | 431,655 |
|
| | | | | |
| OPERATING INCOME | | 66,647 |
| | 42,696 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 4,008 |
| | 4,350 |
|
| Interest and investment income | | 6,814 |
| | 6,932 |
|
| Miscellaneous - net | | (3,871 | ) | | (2,956 | ) |
| TOTAL | | 6,951 |
| | 8,326 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 29,766 |
| | 27,252 |
|
| Allowance for borrowed funds used during construction | | (1,890 | ) | | (1,962 | ) |
| TOTAL | | 27,876 |
| | 25,290 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 45,722 |
| | 25,732 |
|
| | | | | |
| Income taxes | | 9,467 |
| | 11,428 |
|
| | | | | |
| NET INCOME | | 36,255 |
| | 14,304 |
|
| | | | | |
| Preferred dividend requirements | | 357 |
| | 357 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $35,898 |
| |
| $13,947 |
|
| | | | | |
| 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 CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $36,255 |
| |
| $14,304 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 115,976 |
| | 105,721 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 11,877 |
| | 16,361 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 31,033 |
| | 53,355 |
|
| Fuel inventory | | (13,868 | ) | | (5,747 | ) |
| Accounts payable | | (26,924 | ) | | (73,635 | ) |
| Taxes accrued | | 10,072 |
| | 7,175 |
|
| Interest accrued | | 9,748 |
| | 8,562 |
|
| Deferred fuel costs | | 1,971 |
| | (9,137 | ) |
| Other working capital accounts | | 5,591 |
| | 15,485 |
|
| Provisions for estimated losses | | 6,520 |
| | 1,997 |
|
| Other regulatory assets | | 13,835 |
| | 1,815 |
|
| Other regulatory liabilities | | (13,546 | ) | | 23,435 |
|
| Pension and other postretirement liabilities | | (19,277 | ) | | (19,553 | ) |
| Other assets and liabilities | | 10,627 |
| | 14,403 |
|
| Net cash flow provided by operating activities | | 179,890 |
| | 154,541 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (167,485 | ) | | (165,496 | ) |
| Allowance for equity funds used during construction | | 4,143 |
| | 4,557 |
|
| Nuclear fuel purchases | | (19,391 | ) | | (88,537 | ) |
| Proceeds from sale of nuclear fuel | | 30,907 |
| | 51,029 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 34,865 |
| | 36,013 |
|
| Investment in nuclear decommissioning trust funds | | (40,238 | ) | | (40,961 | ) |
| Changes in securitization account | | (4,145 | ) | | (3,702 | ) |
| Net cash flow used in investing activities | | (161,344 | ) | | (207,097 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 175,000 |
| | — |
|
| Retirement of long-term debt | | (149,904 | ) | | — |
|
| Changes in short-term borrowings - net | | (6,087 | ) | | 52,300 |
|
| Changes in money pool payable - net | | (42,279 | ) | | (20,224 | ) |
| Dividends paid: | | | | |
| Preferred stock | | (357 | ) | | (357 | ) |
| Other | | (212 | ) | | 803 |
|
| Net cash flow provided by (used in) financing activities | | (23,839 | ) | | 32,522 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (5,293 | ) | | (20,034 | ) |
| Cash and cash equivalents at beginning of period | | 6,216 |
| | 20,509 |
|
| Cash and cash equivalents at end of period | |
| $923 |
| |
| $475 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $18,761 |
| |
| $17,311 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $891 |
| |
| $6,184 |
|
| Temporary cash investments | | 32 |
| | 32 |
|
| Total cash and cash equivalents | | 923 |
| | 6,216 |
|
| Securitization recovery trust account | | 7,893 |
| | 3,748 |
|
| Accounts receivable: | | | | |
| Customer | | 127,821 |
| | 110,016 |
|
| Allowance for doubtful accounts | | (1,250 | ) | | (1,063 | ) |
| Associated companies | | 34,105 |
| | 38,765 |
|
| Other | | 46,631 |
| | 65,209 |
|
| Accrued unbilled revenues | | 79,707 |
| | 105,120 |
|
| Total accounts receivable | | 287,014 |
| | 318,047 |
|
| Deferred fuel costs | | 61,282 |
| | 63,302 |
|
| Fuel inventory - at average cost | | 43,226 |
| | 29,358 |
|
| Materials and supplies - at average cost | | 198,585 |
| | 192,853 |
|
| Deferred nuclear refueling outage costs | | 49,047 |
| | 56,485 |
|
| Prepayments and other | | 9,597 |
| | 12,108 |
|
| TOTAL | | 657,567 |
| | 682,117 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 935,728 |
| | 944,890 |
|
| Other | | 786 |
| | 3,160 |
|
| TOTAL | | 936,514 |
| | 948,050 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 11,111,420 |
| | 11,059,538 |
|
| Construction work in progress | | 361,843 |
| | 280,888 |
|
| Nuclear fuel | | 226,435 |
| | 277,345 |
|
| TOTAL UTILITY PLANT | | 11,699,698 |
| | 11,617,771 |
|
| Less - accumulated depreciation and amortization | | 4,827,210 |
| | 4,762,352 |
|
| UTILITY PLANT - NET | | 6,872,488 |
| | 6,855,419 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets (includes securitization property of $24,682 as of March 31, 2018 and $28,583 as of December 31, 2017) | | 1,553,602 |
| | 1,567,437 |
|
| Deferred fuel costs | | 67,145 |
| | 67,096 |
|
| Other | | 20,397 |
| | 13,910 |
|
| TOTAL | | 1,641,144 |
| | 1,648,443 |
|
| | | | | |
| TOTAL ASSETS | |
| $10,107,713 |
| |
| $10,134,029 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Short-term borrowings | |
| $43,887 |
| |
| $49,974 |
|
| Accounts payable: | | | | |
| Associated companies | | 308,104 |
| | 365,915 |
|
| Other | | 169,916 |
| | 215,942 |
|
| Customer deposits | | 97,885 |
| | 97,687 |
|
| Taxes accrued | | 57,393 |
| | 47,321 |
|
| Interest accrued | | 27,963 |
| | 18,215 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 386,489 |
| | — |
|
| Other | | 28,730 |
| | 29,922 |
|
| TOTAL | | 1,120,367 |
| | 824,976 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,205,470 |
| | 1,190,669 |
|
| Accumulated deferred investment tax credits | | 33,803 |
| | 34,104 |
|
| Regulatory liability for income taxes - net | | 597,025 |
| | 985,823 |
|
| Other regulatory liabilities | | 352,354 |
| | 363,591 |
|
| Decommissioning | | 995,973 |
| | 981,213 |
|
| Accumulated provisions | | 41,249 |
| | 34,729 |
|
| Pension and other postretirement liabilities | | 334,016 |
| | 353,274 |
|
| Long-term debt (includes securitization bonds of $34,739 as of March 31, 2018 and $34,662 as of December 31, 2017) | | 2,978,569 |
| | 2,952,399 |
|
| Other | | 4,885 |
| | 5,147 |
|
| TOTAL | | 6,543,344 |
| | 6,900,949 |
|
| | | | | |
| 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 2018 and 2017 | | 470 |
| | 470 |
|
| Paid-in capital | | 790,264 |
| | 790,264 |
|
| Retained earnings | | 1,621,918 |
| | 1,586,020 |
|
| TOTAL | | 2,412,652 |
| | 2,376,754 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $10,107,713 |
| |
| $10,134,029 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | | | | |
| | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $183 |
| |
| $192 |
| |
| ($9 | ) | | (5 | ) |
| Commercial | | 106 |
| | 110 |
| | (4 | ) | | (4 | ) |
| Industrial | | 96 |
| | 100 |
| | (4 | ) | | (4 | ) |
| Governmental | | 4 |
| | 4 |
| | — |
| | — |
|
| Total retail | | 389 |
| | 406 |
| | (17 | ) | | (4 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 32 |
| | (32 | ) | | 64 |
| | 200 |
|
| Non-associated companies | | 45 |
| | 38 |
| | 7 |
| | 18 |
|
| Other | | 8 |
| | 53 |
| | (45 | ) | | (85 | ) |
| Total | |
| $474 |
| |
| $465 |
| |
| $9 |
| | 2 |
|
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 1,927 |
| | 2,024 |
| | (97 | ) | | (5 | ) |
| Commercial | | 1,315 |
| | 1,340 |
| | (25 | ) | | (2 | ) |
| Industrial | | 1,681 |
| | 1,576 |
| | 105 |
| | 7 |
|
| Governmental | | 56 |
| | 56 |
| | — |
| | — |
|
| Total retail | | 4,979 |
| | 4,996 |
| | (17 | ) | | — |
|
| Sales for resale: | | | | | | | | |
| Associated companies | | 446 |
| | 425 |
| | 21 |
| | 5 |
|
| Non-associated companies | | 1,962 |
| | 2,556 |
| | (594 | ) | | (23 | ) |
| Total | | 7,387 |
| | 7,977 |
| | (590 | ) | | (7 | ) |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) |
| | | | | | | | | |
| 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 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2017 | |
| $470 |
| |
| $790,264 |
| |
| $1,586,020 |
| |
| $2,376,754 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 36,255 |
| | 36,255 |
|
| Preferred stock dividends | | — |
| | — |
| | (357 | ) | | (357 | ) |
| | | | | | | | | |
| Balance at March 31, 2018 | |
| $470 |
| |
| $790,264 |
| |
| $1,621,918 |
| |
| $2,412,652 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | | | | | |
| | | | | | | | | |
| | |
| | Increase/ | | |
| Description | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $236 |
| |
| $183 |
| |
| $53 |
| | 29 |
|
| Commercial | | 121 |
| | 106 |
| | 15 |
| | 14 |
|
| Industrial | | 111 |
| | 96 |
| | 15 |
| | 16 |
|
| Governmental | | 5 |
| | 4 |
| | 1 |
| | 25 |
|
| Total billed retail | | 473 |
| | 389 |
| | 84 |
| | 22 |
|
| Sales for resale: | | | | | | | | |
| Associated companies | | 30 |
| | 32 |
| | (2 | ) | | (6 | ) |
| Non-associated companies | | 36 |
| | 45 |
| | (9 | ) | | (20 | ) |
| Other | | 12 |
| | 8 |
| | 4 |
| | 50 |
|
| Total | |
| $551 |
| |
| $474 |
| |
| $77 |
| | 16 |
|
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 2,329 |
| | 1,927 |
| | 402 |
| | 21 |
|
| Commercial | | 1,365 |
| | 1,315 |
| | 50 |
| | 4 |
|
| Industrial | | 1,828 |
| | 1,681 |
| | 147 |
| | 9 |
|
| Governmental | | 56 |
| | 56 |
| | — |
| | — |
|
| Total retail | | 5,578 |
| | 4,979 |
| | 599 |
| | 12 |
|
| Sales for resale: | | | | | | | | |
| Associated companies | | 487 |
| | 446 |
| | 41 |
| | 9 |
|
| Non-associated companies | | 1,717 |
| | 1,962 |
| | (245 | ) | | (12 | ) |
| Total | | 7,782 |
| | 7,387 |
| | 395 |
| | 5 |
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreasedincreased $17.2 million primarily due to a lower effective income tax rate, higher net revenue, and higher other income, partially offset by higher other operation and maintenance expenses, higher taxes other than income taxes, and higher depreciation and amortization expenses, partially offset by higher other income.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 credits.charges (credits). Following is an analysis of the change in net revenue comparing the first quarter 20172018 to the first quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
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 |
|
| Volume/weather | 24.2 |
|
| Retail electric price | (20.1 | ) |
| Other | 8.5 |
|
| 2018 net revenue |
| $573.7 |
|
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 decreasean increase of 296824 GWh, or 2%7%, in billed electricity usage, including the effect of lessmore favorable weather on residential and commercial sales and a decrease in industrial usage. The decrease in industrial usage is primarily due to extended seasonal outages for an existing large refinery customer, partially offset by expansion projects 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.sales.
The retail electric price variance is primarily due to an increasea regulatory charge of $27 million recorded in the first quarter 2018 to reflect the effects of a provision in the settlement reached 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 purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016.extension proceeding. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan revenues.extension proceeding.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
an increase of $5.9$14 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals and a higher scope of work performed during plant outages in 2018 as compared to the same period in 2017; and
an increase of $7.1 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2018 as compared to the same period in 2017.
The increase was partially offset by a decrease of $5.4 million in loss provisions;provisions.
an increase of $4.7 million in compensation and benefits costsTaxes other than income taxes increased primarily due to a revisionincreases in ad valorem taxes, local franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to estimated incentive compensation expensehigher assessments. Local franchise taxes increased primarily due to higher revenues in the first quarter 2016;2018 as compared to the same period in 2017.
Depreciation and
amortization expenses increased primarily due to additions to plant in service.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $4.7 million in fossil-fueled generation expenses primarily due to 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 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 increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017,2018, which included the St. Charles Power Station project, and higher realized gainschanges in 2017 on the River Bend and Waterford 3 decommissioning trust fund investments.investment activity, including portfolio rebalancing of certain of the decommissioning trust funds.
Income Taxes
The effective income tax rate was 16.3% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, 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 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.
LouisianaIncome Tax Legislation
See the “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –LouisianaIncome Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the LouisianaTax Cuts and Jobs Act, the federal income tax legislation.legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 2 to the financial statements herein and in the Form 10-K contains discussions of proceedings commenced or other responses by Entergy’s regulators to the Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $213,850 |
| |
| $35,102 |
|
| $35,907 |
| |
| $213,850 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 339,704 |
| | 148,481 |
| 328,040 |
| | 339,704 |
|
| Investing activities | (472,011 | ) | | (872,761 | ) | (613,950 | ) | | (472,011 | ) |
| Financing activities | (14,250 | ) | | 801,126 |
| 812,289 |
| | (14,250 | ) |
| Net increase (decrease) in cash and cash equivalents | (146,557 | ) | | 76,846 |
| 526,379 |
| | (146,557 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $67,293 |
| |
| $111,948 |
|
| $562,286 |
| |
| $67,293 |
|
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities increased $191.2decreased $11.7 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to:
a decrease of $114 million in income tax refunds of $116.9 million in 2017the first quarter 2018 as compared to income tax payments of $22.7 million in 2016.the first quarter 2017. 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 resultedagreement resulting from the utilization of Entergy Louisiana’s net operating losses. The income tax payments in 2016 relatedlosses; and
a decrease due 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; and
the timing of collections from customersrecovery of fuel and payments to vendors.purchased power costs.
The increasedecrease was partially offset by:
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement and refund; and
a decrease due to the timing of recovery of fuel and purchased power costs in 2017; and
an increase of $10.6$22.7 million in spending on nuclear refueling outages in 2017.outages.
Investing Activities
Net cash flow used in investing activities decreased $400.8increased $141.9 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to:
money pool activity;
an increase of $60.9 million in transmission construction expenditures due to a higher scope of work performed in 2018 as compared to the purchasesame period in 2017; and
an increase of Power Blocks 3 and 4 of$53.7 million in fossil-fueled generation construction expenditures primarily due to higher spending on the UnionLake Charles Power Station for an aggregate purchase price of approximately $474 million in March 2016. See Note 14 toand the financial statements in the Form 10-K for discussion of the UnionSt. Charles Power Station purchase; andprojects in 2018.
the deposit in March 2016
The increase was partially offset by a decrease of $197$137 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.
The decrease 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;cycle.
Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana‘s receivable from the money pool increased by $170.2 million for the three months ended March 31, 2018 compared to increasing by $8 million for the three months ended March 31, 2017. The money pool is an increaseinter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Entergy Louisiana’s financing activities provided $812.3 million of $102cash for the three months ended March 31, 2018 compared to using $14.3 million in fossil-fueled generation construction expendituresof cash for the three months ended March 31, 2017 primarily due to higher spendingthe following activity:
the issuance of $750 million of 4.00% Series first mortgage bonds in March 2018;
equity distributions of $42.1 million in the first quarter 2017. There were no distributions in the first quarter 2018 in anticipation of the excess deferred income taxes to be returned to customers as a result of the enactment of the Tax Cuts and Jobs Act in December 2017. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory proceedings related to the enactment of the Tax Cuts and Jobs Act;
net borrowings of $100 million on the St. Charles Power Station projectEntergy Louisiana long-term credit facility in 2017;2018; and
an increasenet borrowings of $28.1$19.4 million on Entergy Louisiana’s nuclear fuel company variable interest entities’ credit facilities in transmission construction expenditures due to a higher scope of work performed in 2017 as2018 compared to the same period in 2016; and
an increasenet borrowings of $16.8$87.5 million due in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy Louisiana’s financing activities used $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 primarily due to the following activity:
the net retirement of $57.5 million of long-term debt in 2017 compared to the net issuance of $783.2 million in 2016;
common equity distributions of $42.1 million in first quarter 2017. There were no distributions in first quarter 2016 in anticipation of the purchase of Power Blocks 3 and 4 of the Union Power Station; and
an increase in net borrowings of $70.4 million on the nuclear fuel company variable interest entities’ credit facilities in 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 for Entergy Louisiana is primarily due to the issuance of long-term debt in 2018.
| | | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 53.3 | % | | 53.4 | % | 56.4 | % | | 53.8 | % |
| Effect of excluding securitization bonds | (0.5 | %) | | (0.5 | %) | (0.3 | %) | | (0.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 52.8 | % | | 52.9 | % | 56.1 | % | | 53.5 | % |
| Effect of subtracting cash | (0.3 | %) | | (0.9 | %) | (2.1 | %) | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 52.5 | % | | 52.0 | % | 54.0 | % | | 53.4 | % |
| |
| (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.
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, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $30,550 | | $22,503 | | $13,713 | | $6,154 |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $181,336 | | $11,173 | | $30,550 | | $22,503 |
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 2021.2022. The credit facility allows Entergy Louisiana to issueincludes fronting commitments for the issuance of letters of credit against 50%$15 million of the borrowing capacity of the facility. As of March 31, 2017,2018, there were no$100 million of cash borrowings and $3.4$9.1 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 to MISO. As of March 31, 2017,2018, a $15.8$23.8 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 $105 million and one in the amount of $85 million, both scheduled to expire in May 2019. As of March 31, 2017, $18.82018, $52.3 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
nuclear fuel company variable interest entity and $72.5entity. As of March 31, 2018, $62.9 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued bywere outstanding under the Entergy Louisiana Waterford 3 nuclear fuel company variable interest entity.entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
Lake Charles Power StationWashington Parish Energy Center
As discussed in the Form 10-K, in April 2017, Entergy Louisiana signed an agreement with a subsidiary of Calpine Corporation for the construction and purchase of a peaking plant. In November 2016,May 2017, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. Testimony was filed by LPSC staff and an intervenor. The LPSC staff testimony concludes that the construction of the project serves the public convenience and necessity. The intervenor contends that Entergy Louisiana has not established a need for Lake Charles Power Station in the proposed timeframe (2020 commercial operation date) and presents questions regarding the scope and timing of generation deactivations and capacity needs. The request for proposal independent monitor also filed testimony and a report affirming that the Lake Charles Power Station resource was selected through an objective and fair request for proposal that showed no undue preference to any proposal.plant. A procedural schedule has been issued,established, with the deadlines extended and the hearing continued from June 2018 to August 2018 in order to allow the parties an evidentiary hearing scheduledopportunity to reach settlement. In April 2018 the parties filed an unopposed joint motion for May 2017. Subject to timely approvalconsideration of proposed stipulation by the LPSC seeking approval of the signed settlement agreement at the May 16, 2018 LPSC Business and receiptExecutive Session. The settlement recommends certification and cost recovery through the additional capacity mechanism of other permitsthe formula rate plan, consistent with prior LPSC precedent with respect to the certification and approvals, commercial operation is estimated to occurrecovery of plants previously acquired by 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.Louisiana.
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
2015 Formula Rate Plan FilingExtension Request
As discussed in the Form 10-K, in May 2016,In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan evaluation report for three years (2017-2019) with limited modifications of its 2015 calendar year operations. The LPSC’s review is pending. Also, in November 2016,terms. Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. Several parties intervened in the proceeding and all parties participated in settlement discussions. In April 2018, the LPSC approved an unopposed joint motion filed by Entergy Louisiana and the LPSC staff that settles the matter. The settlement extends the formula rate plan for three years, providing for rates through at least August 2021. In addition to retaining the major features of the traditional formula rate plan, substantive features of the extended formula rate plan include:
a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year and for the St. Charles Power Station when it enters commercial operation;
a 9.8% target earned return on common equity for the 2018 and 2019 test years;
narrowing of the common equity bandwidth to plus or minus 60 basis points around the earned return on common equity;
a cap on potential revenue increase of $35 million for the 2018 evaluation period, and $70 million for the cumulative 2018 and 2019 evaluation periods, on formula rate plan cost of service rate increases (the cap excludes rate changes associated with the transmission recovery mechanism described below and rate changes associated with additional capacity);
a framework for the flow back of certain tax benefits created by the Tax Act to customers; and
a transmission recovery mechanism providing for the opportunity to recover certain transmission related expenditures in excess of $100 million annually for projects placed in service up to one month prior to rate change outside of sharing that is designed to operate in a manner similar to the additional capacity mechanism.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
filed 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 mechanismUnion Power Station and the intervenor in the proceeding does not oppose an extensionDeactivation or Retirement Decisions for this period of time.Entergy Louisiana Plants
Waterford 3 Replacement Steam Generator Project
See Note 2 to the financial statementsAs discussed in the Form 10-K, for 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 was made to customers in January 2017.
Union Power Station
As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power 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 January 2016, Entergy Louisiana made 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 these units; however, issues have been raised related to Entergy Louisiana’s decision to retiregive up its transmission service rights in MISO for Willow Glen 2 and 4 as opposedrather than placing the units into suspended status for the three-year term permitted by MISO. In March 2018 the LPSC adopted the ALJ’s recommended order finding that Entergy Louisiana did not demonstrate that its decision to temporarily suspendingpermanently surrender transmission rights for the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmless from increased transmission expenses should 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 future deactivationunits be reactivated. Because no party or the LPSC suggested that Willow Glen 2 and 4 should be reactivated and because the LPSC initiated a generic rulemakingcost to consider whetherreturn those units to service far exceeds the LPSC should review deactivation decisions priorrevenue the units were expected to implementation.generate in MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018.
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
20162017 Rate Stabilization Plan Filing
In January 2017,2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016.2017. The filing of the evaluation report for the test year 20162017 reflected an earned return on common equity of 6.37%9.06%. As part ofThis earned return is below the original filing, pursuant to the extraordinary cost provisionearnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million. Due to the enactment of the Tax Act in late-December 2017, Entergy Louisiana soughtdid not have adequate time to recover approximately $1.5 millionreflect the effects of this tax legislation in the rate stabilization plan. In April 2018 Entergy Louisiana filed a supplemental evaluation report for the test year ended September 2017, reflecting the effects of the Tax Act, including a proposal to use the unprotected excess accumulated deferred income taxes to offset storm restoration deferred operation and maintenance expensescosts incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016.by Entergy Louisiana requested to recoverin connection with the prudently incurred August 2016 storm restoration costs over ten years, outsideflooding disaster in its gas service area. The supplemental filing reflects an earned return on common equity of 10.79%. If the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’sas-filed rates from the supplemental filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery,are accepted by the LPSC, staff confirmed Entergy Louisiana’s filing was consistentcustomers will receive a cost reduction of approximately $0.7 million effective with the principlesbills rendered on 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 withafter the first billing cycle of May 2017.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Fuel and purchased power cost recovery
As discussed2018, as well as a $0.2 million prospective reduction in the Form 10-K, in June 2016gas infrastructure rider effective with bills rendered on and after the LPSC staff provided noticefirst billing cycle of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. Discovery commenced in March 2017.July 2018.
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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and 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 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, and other contingencies. The following is an update to that discussion.
In the first quarter 2018, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in an $85.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | |
| | | Three Months Ended | | |
| | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $864,076 |
| |
| $936,431 |
| |
| $1,005,106 |
| |
| $864,076 |
|
| Natural gas | | 16,707 |
| | 18,714 |
| | 24,238 |
| | 16,707 |
|
| TOTAL | | 880,783 |
| | 955,145 |
| | 1,029,344 |
| | 880,783 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 154,044 |
| | 202,083 |
| | 180,781 |
| | 154,044 |
|
| Purchased power | | 239,827 |
| | 191,398 |
| | 251,772 |
| | 239,827 |
|
| Nuclear refueling outage expenses | | 12,185 |
| | 12,780 |
| | 13,099 |
| | 12,185 |
|
| Other operation and maintenance | | 223,230 |
| | 206,064 |
| | 234,380 |
| | 217,112 |
|
| Decommissioning | | 12,123 |
| | 11,508 |
| | 12,772 |
| | 12,123 |
|
| Taxes other than income taxes | | 45,283 |
| | 42,362 |
| | 51,280 |
| | 45,283 |
|
| Depreciation and amortization | | 115,630 |
| | 109,591 |
| | 120,822 |
| | 115,630 |
|
| Other regulatory credits - net | | (74,187 | ) | | (2,259 | ) | |
| Other regulatory charges (credits) - net | | | 23,119 |
| | (74,187 | ) |
| TOTAL | | 728,135 |
| | 773,527 |
| | 888,025 |
| | 722,017 |
|
| | | | | | | | | |
| OPERATING INCOME | | 152,648 |
| | 181,618 |
| | 141,319 |
| | 158,766 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 9,990 |
| | 7,238 |
| | 17,745 |
| | 9,990 |
|
| Interest and investment income | | 39,830 |
| | 37,416 |
| | 43,275 |
| | 39,830 |
|
| Miscellaneous - net | | (3,024 | ) | | (3,745 | ) | | (7,665 | ) | | (9,142 | ) |
| TOTAL | | 46,796 |
| | 40,909 |
| | 53,355 |
| | 40,678 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 67,315 |
| | 65,076 |
| | 70,096 |
| | 67,315 |
|
| Allowance for borrowed funds used during construction | | (5,174 | ) | | (3,897 | ) | | (8,763 | ) | | (5,174 | ) |
| TOTAL | | 62,141 |
| | 61,179 |
| | 61,333 |
| | 62,141 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 137,303 |
| | 161,348 |
| | 133,341 |
| | 137,303 |
|
| | | | | | | | | |
| Income taxes | | 42,925 |
| | 49,742 |
| | 21,748 |
| | 42,925 |
|
| | | | | | | | | |
| NET INCOME | |
| $94,378 |
| |
| $111,606 |
| |
| $111,593 |
| |
| $94,378 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | |
| | Three Months Ended | |
| | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| | | | | | | |
| Net Income |
| $94,378 |
| |
| $111,606 |
|
| $111,593 |
| |
| $94,378 |
|
| Other comprehensive loss | | | | | | |
| Pension and other postretirement liabilities (net of tax benefit of $232 and $115) | (370 | ) | | (263 | ) | |
| Pension and other postretirement liabilities (net of tax benefit of $176 and $232) | | (501 | ) | | (370 | ) |
| Other comprehensive loss | (370 | ) | | (263 | ) | (501 | ) | | (370 | ) |
| Comprehensive Income |
| $94,008 |
| |
| $111,343 |
|
| $111,092 |
| |
| $94,008 |
|
| | | | | | | |
| See Notes to Financial Statements. | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $94,378 |
| |
| $111,606 |
| |
| $111,593 |
| |
| $94,378 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 151,472 |
| | 146,870 |
| | 157,887 |
| | 151,472 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 163,299 |
| | 172,887 |
| | 86,443 |
| | 163,299 |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | 75,196 |
| | (25,879 | ) | | 53,786 |
| | 75,196 |
|
| Fuel inventory | | 3,066 |
| | (2,538 | ) | | (1,402 | ) | | 3,066 |
|
| Accounts payable | | (7,846 | ) | | (110,500 | ) | | (18,036 | ) | | (7,846 | ) |
| Prepaid taxes and taxes accrued | | 22,563 |
| | (104,444 | ) | | (24,705 | ) | | 22,563 |
|
| Interest accrued | | 5,983 |
| | (2,185 | ) | | 6,365 |
| | 5,983 |
|
| Deferred fuel costs | | (19,487 | ) | | 45,511 |
| | (52,090 | ) | | (19,487 | ) |
| Other working capital accounts | | (20,810 | ) | | 1,387 |
| | (55 | ) | | (20,810 | ) |
| Changes in provisions for estimated losses | | (4,059 | ) | | (2,695 | ) | | (481 | ) | | (4,059 | ) |
| Changes in other regulatory assets | | 28,922 |
| | 30,033 |
| | 28,579 |
| | 28,922 |
|
| Changes in other regulatory liabilities | | (59,969 | ) | | (998 | ) | | (6,088 | ) | | (59,969 | ) |
| Changes in pension and other postretirement liabilities | | (17,054 | ) | | (19,115 | ) | | (18,075 | ) | | (17,054 | ) |
| Other | | (75,950 | ) | | (91,459 | ) | | 4,319 |
| | (75,950 | ) |
| Net cash flow provided by operating activities | | 339,704 |
| | 148,481 |
| | 328,040 |
| | 339,704 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (360,693 | ) | | (206,572 | ) | | (469,398 | ) | | (360,693 | ) |
| Allowance for equity funds used during construction | | 9,990 |
| | 7,238 |
| | 17,745 |
| | 9,990 |
|
| Payment for purchase of plant | | — |
| | (473,888 | ) | |
| Nuclear fuel purchases | | (139,620 | ) | | (26,684 | ) | | (9,997 | ) | | (139,620 | ) |
| Proceeds from the sale of nuclear fuel | | 28,884 |
| | 47,565 |
| | 36,301 |
| | 28,884 |
|
| Receipts from storm reserve escrow account | | 8,836 |
| | — |
| | — |
| | 8,836 |
|
| Payments to storm reserve escrow account | | (332 | ) | | — |
| | (853 | ) | | (332 | ) |
| Changes to securitization account | | (5,527 | ) | | (5,506 | ) | | (7,523 | ) | | (5,527 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 40,586 |
| | 53,793 |
| | 125,453 |
| | 40,586 |
|
| Investment in nuclear decommissioning trust funds | | (51,393 | ) | | (64,337 | ) | | (137,097 | ) | | (51,393 | ) |
| Changes in money pool receivable - net | | (8,047 | ) | | (7,559 | ) | | (170,163 | ) | | (8,047 | ) |
| Funds held on deposit | | — |
| | (196,568 | ) | |
| Insurance proceeds | | 5,305 |
| | — |
| | 1,582 |
| | 5,305 |
|
| Other | | — |
| | (243 | ) | |
| Net cash flow used in investing activities | | (472,011 | ) | | (872,761 | ) | | (613,950 | ) | | (472,011 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 809,369 |
| | 947,038 |
| | — |
|
| Retirement of long-term debt | | (57,499 | ) | | (26,189 | ) | | (154,117 | ) | | (57,499 | ) |
| Changes in credit borrowings - net | | 87,504 |
| | 17,094 |
| |
| Changes in short-term borrowings - net | | | 19,382 |
| | 87,504 |
|
| Distributions paid: | | | | | | | | |
| Common equity | | (42,125 | ) | | — |
| | — |
| | (42,125 | ) |
| Other | | (2,130 | ) | | 852 |
| | (14 | ) | | (2,130 | ) |
| Net cash flow provided by (used in) financing activities | | (14,250 | ) | | 801,126 |
| | 812,289 |
| | (14,250 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (146,557 | ) | | 76,846 |
| | 526,379 |
| | (146,557 | ) |
| Cash and cash equivalents at beginning of period | | 213,850 |
| | 35,102 |
| | 35,907 |
| | 213,850 |
|
| Cash and cash equivalents at end of period | |
| $67,293 |
| |
| $111,948 |
| |
| $562,286 |
| |
| $67,293 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $59,261 |
| |
| $125,589 |
| |
| $61,613 |
| |
| $59,261 |
|
| Income taxes | |
| ($116,937 | ) | |
| $22,676 |
| |
| ($2,973 | ) | |
| ($116,937 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $2,639 |
| |
| $49,972 |
| |
| $385 |
| |
| $5,836 |
|
| Temporary cash investments | | 64,654 |
| | 163,878 |
| | 561,901 |
| | 30,071 |
|
| Total cash and cash equivalents | | 67,293 |
| | 213,850 |
| | 562,286 |
| | 35,907 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 173,598 |
| | 213,517 |
| | 219,522 |
| | 254,308 |
|
| Allowance for doubtful accounts | | (6,889 | ) | | (6,277 | ) | | (9,137 | ) | | (8,430 | ) |
| Associated companies | | 136,949 |
| | 155,794 |
| | 306,933 |
| | 143,524 |
|
| Other | | 48,471 |
| | 54,186 |
| | 64,776 |
| | 60,893 |
|
| Accrued unbilled revenues | | 152,848 |
| | 159,176 |
| | 137,696 |
| | 153,118 |
|
| Total accounts receivable | | 504,977 |
| | 576,396 |
| | 719,790 |
| | 603,413 |
|
| Fuel inventory | | 47,672 |
| | 50,738 |
| | 41,130 |
| | 39,728 |
|
| Materials and supplies - at average cost | | 286,906 |
| | 294,421 |
| | 309,433 |
| | 299,881 |
|
| Deferred nuclear refueling outage costs | | 58,207 |
| | 22,535 |
| | 52,723 |
| | 65,711 |
|
| Prepaid taxes | | 87,541 |
| | 110,104 |
| |
| Prepayments and other | | 35,109 |
| | 41,687 |
| | 41,147 |
| | 34,035 |
|
| TOTAL | | 1,087,705 |
| | 1,309,731 |
| | 1,726,509 |
| | 1,078,675 |
|
| | | | | | | | | |
| 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 | | 1,190,105 |
| | 1,140,707 |
| | 1,304,423 |
| | 1,312,073 |
|
| Storm reserve escrow account | | 282,981 |
| | 291,485 |
| | 285,612 |
| | 284,759 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 227,684 |
| | 217,494 |
| | 273,388 |
| | 245,255 |
|
| Other | | 24,261 |
| | 28,844 |
| | 14,407 |
| | 18,999 |
|
| TOTAL | | 3,115,618 |
| | 3,069,117 |
| | 3,268,417 |
| | 3,251,673 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 18,937,417 |
| | 18,827,532 |
| | 19,722,068 |
| | 19,678,536 |
|
| Natural gas | | 175,438 |
| | 172,816 |
| | 195,230 |
| | 191,899 |
|
| Construction work in progress | | 799,802 |
| | 670,201 |
| | 1,490,196 |
| | 1,281,452 |
|
| Nuclear fuel | | 361,069 |
| | 249,807 |
| | 275,750 |
| | 337,402 |
|
| TOTAL UTILITY PLANT | | 20,273,726 |
| | 19,920,356 |
| | 21,683,244 |
| | 21,489,289 |
|
| Less - accumulated depreciation and amortization | | 8,475,891 |
| | 8,420,596 |
| | 8,597,382 |
| | 8,703,047 |
|
| UTILITY PLANT - NET | | 11,797,835 |
| | 11,499,760 |
| | 13,085,862 |
| | 12,786,242 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 472,806 |
| | 470,480 |
| |
| 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 |
| |
| Other regulatory assets (includes securitization property of $66,296 as of March 31, 2018 and $71,367 as of December 31, 2017) | | | 1,117,263 |
| | 1,145,842 |
|
| Deferred fuel costs | | 168,122 |
| | 168,122 |
| | 168,122 |
| | 168,122 |
|
| Other | | 20,982 |
| | 16,003 |
| | 23,323 |
| | 18,310 |
|
| TOTAL | | 1,798,720 |
| | 1,822,663 |
| | 1,308,708 |
| | 1,332,274 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $17,799,878 |
| |
| $17,701,271 |
| |
| $19,389,496 |
| |
| $18,448,864 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $161,506 |
| |
| $200,198 |
| |
| $675,002 |
| |
| $675,002 |
|
| Short-term borrowings | | 72,497 |
| | 3,794 |
| | 62,922 |
| | 43,540 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 71,512 |
| | 82,106 |
| | 86,427 |
| | 126,685 |
|
| Other | | 308,209 |
| | 358,741 |
| | 375,783 |
| | 404,374 |
|
| Customer deposits | | 149,063 |
| | 148,601 |
| | 151,492 |
| | 150,623 |
|
| Taxes accrued | | | — |
| | 18,157 |
|
| Interest accrued | | 81,581 |
| | 75,598 |
| | 81,893 |
| | 75,528 |
|
| Deferred fuel costs | | 28,724 |
| | 48,211 |
| | 19,357 |
| | 71,447 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 217,850 |
| | — |
|
| Other | | 70,178 |
| | 80,013 |
| | 63,165 |
| | 79,037 |
|
| TOTAL | | 943,270 |
| | 997,262 |
| | 1,733,891 |
| | 1,644,393 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,849,713 |
| | 2,691,118 |
| | 2,144,037 |
| | 2,050,371 |
|
| Accumulated deferred investment tax credits | | 125,523 |
| | 126,741 |
| | 120,652 |
| | 121,870 |
|
| Regulatory liability for income taxes - net | | | 506,092 |
| | 725,368 |
|
| Other regulatory liabilities | | 821,005 |
| | 880,974 |
| | 756,397 |
| | 761,059 |
|
| Decommissioning | | 1,096,846 |
| | 1,082,685 |
| | 1,240,833 |
| | 1,140,461 |
|
| Accumulated provisions | | 306,713 |
| | 310,772 |
| | 301,967 |
| | 302,448 |
|
| Pension and other postretirement liabilities | | 763,093 |
| | 780,278 |
| | 730,116 |
| | 748,384 |
|
| 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 |
| |
| Long-term debt (includes securitization bonds of $77,801 as of March 31, 2018 and $77,736 as of December 31, 2017) | | | 6,263,437 |
| | 5,469,069 |
|
| Other | | 146,178 |
| | 137,039 |
| | 175,941 |
| | 176,637 |
|
| TOTAL | | 11,722,920 |
| | 11,622,200 |
| | 12,239,472 |
| | 11,495,667 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Member's equity | | 5,182,500 |
| | 5,130,251 |
| | 5,473,083 |
| | 5,355,204 |
|
| Accumulated other comprehensive loss | | (48,812 | ) | | (48,442 | ) | | (56,950 | ) | | (46,400 | ) |
| TOTAL | | 5,133,688 |
| | 5,081,809 |
| | 5,416,133 |
| | 5,308,804 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $17,799,878 |
| |
| $17,701,271 |
| |
| $19,389,496 |
| |
| $18,448,864 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total |
| | (In Thousands) | | | |
| | | | | | | |
| Balance at December 31, 2015 |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
| |
| | | | | | | |
| Net income | 111,606 |
| | — |
| | 111,606 |
| |
| Other comprehensive income | — |
| | (263 | ) | | (263 | ) | |
| Other | (7 | ) | | — |
| | (7 | ) | |
| | | | | | | |
| Balance at March 31, 2016 |
| $4,905,323 |
| |
| ($56,675 | ) | |
| $4,848,648 |
| |
| | | | | | | (In Thousands) |
| | | | | | | | | | | |
| Balance at December 31, 2016 |
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| | | | | | | | | | | |
| Net income | 94,378 |
| | — |
| | 94,378 |
| 94,378 |
| | — |
| | 94,378 |
|
| Other comprehensive loss | — |
| | (370 | ) | | (370 | ) | — |
| | (370 | ) | | (370 | ) |
| Distributions declared on common equity | (42,125 | ) | | — |
| | (42,125 | ) | (42,125 | ) | | — |
| | (42,125 | ) |
| Other | (4 | ) | | — |
| | (4 | ) | (4 | ) | | — |
| | (4 | ) |
| | | | | | | | | | | |
| Balance at March 31, 2017 |
| $5,182,500 |
| |
| ($48,812 | ) | |
| $5,133,688 |
|
| $5,182,500 |
| |
| ($48,812 | ) | |
| $5,133,688 |
|
| | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2017 | |
| $5,355,204 |
| |
| ($46,400 | ) | |
| $5,308,804 |
|
| | | | | | | |
| Net income | | 111,593 |
| | — |
| | 111,593 |
|
| Other comprehensive loss | | — |
| | (501 | ) | | (501 | ) |
| Reclassification pursuant to ASU 2018-02 | | 6,262 |
| | (10,049 | ) | | (3,787 | ) |
| Other | | 24 |
| | — |
| | 24 |
|
| | | | | | | |
| Balance at March 31, 2018 | |
| $5,473,083 |
| |
| ($56,950 | ) | |
| $5,416,133 |
|
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $221 |
| |
| $254 |
| |
| ($33 | ) | | (13 | ) | |
| $296 |
| |
| $221 |
| |
| $75 |
| | 34 |
|
| Commercial | | 195 |
| | 209 |
| | (14 | ) | | (7 | ) | | 225 |
| | 195 |
| | 30 |
| | 15 |
|
| Industrial | | 325 |
| | 326 |
| | (1 | ) | | — |
| | 352 |
| | 325 |
| | 27 |
| | 8 |
|
| Governmental | | 15 |
| | 16 |
| | (1 | ) | | (6 | ) | | 17 |
| | 15 |
| | 2 |
| | 13 |
|
| Total retail | | 756 |
| | 805 |
| | (49 | ) | | (6 | ) | |
| Total billed retail | | | 890 |
| | 756 |
| | 134 |
| | 18 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 62 |
| | 89 |
| | (27 | ) | | (30 | ) | | 74 |
| | 62 |
| | 12 |
| | 19 |
|
| Non-associated companies | | 14 |
| | 6 |
| | 8 |
| | 133 |
| | 15 |
| | 14 |
| | 1 |
| | 7 |
|
| Other | | 32 |
| | 36 |
| | (4 | ) | | — |
| | 26 |
| | 32 |
| | (6 | ) | | (19 | ) |
| Total | |
| $864 |
| |
| $936 |
| |
| ($72 | ) | | (8 | ) | |
| $1,005 |
| |
| $864 |
| |
| $141 |
| | 16 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 2,852 |
| | 3,054 |
| | (202 | ) | | (7 | ) | | 3,459 |
| | 2,852 |
| | 607 |
| | 21 |
|
| Commercial | | 2,540 |
| | 2,566 |
| | (26 | ) | | (1 | ) | | 2,661 |
| | 2,540 |
| | 121 |
| | 5 |
|
| Industrial | | 6,961 |
| | 7,023 |
| | (62 | ) | | (1 | ) | | 7,049 |
| | 6,961 |
| | 88 |
| | 1 |
|
| Governmental | | 193 |
| | 199 |
| | (6 | ) | | (3 | ) | | 201 |
| | 193 |
| | 8 |
| | 4 |
|
| Total retail | | 12,546 |
| | 12,842 |
| | (296 | ) | | (2 | ) | | 13,370 |
| | 12,546 |
| | 824 |
| | 7 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 994 |
| | 1,569 |
| | (575 | ) | | (37 | ) | | 1,014 |
| | 994 |
| | 20 |
| | 2 |
|
| Non-associated companies | | 295 |
| | 288 |
| | 7 |
| | 2 |
| | 513 |
| | 295 |
| | 218 |
| | 74 |
|
| Total | | 13,835 |
| | 14,699 |
| | (864 | ) | | (6 | ) | | 14,897 |
| | 13,835 |
| | 1,062 |
| | 8 |
|
| | | | | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income remained relatively unchanged for the first quarter 2017 comparedincreased $5.7 million primarily due to the first quarter 2016.higher net revenue and a lower effective income tax rate, partially offset by higher 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 credits.charges (credits). Following is an analysis of the change in net revenue comparing the first quarter 20172018 to the first quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $149.6154.1 |
|
| Retail electric price | 6.35.2 |
|
| Volume/weather | (2.34.8 | )
|
| Other | 0.50.4 |
|
20172018 net revenue |
| $154.1164.5 |
|
The retail electric price variance is primarily due to a $19.4 million net annual increase in revenues, as approved byhigher storm damage rider revenues. Entergy Mississippi resumed billing the MPSC,storm damage rider effective with the firstSeptember 2017 billing cycle of July 2016.cycle. See Note 2 to the financial statements herein and in the Form 10-K for further discussion ofon the formula rate plan.storm damage rider.
The volume/weather variance is primarily due to a decreasean increase of 75309 GWh, or 2%11%, in billed electricity usage, including the effect of lessmore favorable weather on residential sales, partially offset by an increase in industrial usage.The increase in industrial usage is primarily due to an increase in usage by the mid to small industrial sector, expansion projects in the pulp and paper industry, and new customers in the wood products industry.sales.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
to an increase of $1.4$5.1 million in compensationstorm damage provisions. See Note 2 to the financial statements in the Form 10-K for a discussion of storm cost recovery.
Depreciation and benefits costsamortization expenses increased primarily due to a revisionadditions to estimated incentive compensation expenseplant in service.
Income Taxes
The effective income tax rate was 23.3% for the first quarter 2016;
an increase2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of $0.8 million in distribution expenses21% was primarily due to higher vegetation maintenance;state income taxes and
an increase a write-off of $0.6 million in energy efficiency costs.
Income Taxesa stock-based compensation deferred tax asset, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 41.0% 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 state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
The effectiveIncome Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax rate was 39.3%legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the first quarter 2016. The differenceTax Act, and Note 2 to the financial statements herein and in the effective income tax rate forForm 10-K contains discussion of proceedings commenced or other responses by Entergy’s regulators to 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.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $76,834 |
| |
| $145,605 |
|
| $6,096 |
| |
| $76,834 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | (9,132 | ) | | 30,276 |
| (8,841 | ) | | (9,132 | ) |
| Investing activities | (79,691 | ) | | (61,178 | ) | (76,268 | ) | | (79,691 | ) |
| Financing activities | 12,036 |
| | (757 | ) | 79,316 |
| | 12,036 |
|
| Net decrease in cash and cash equivalents | (76,787 | ) | | (31,659 | ) | (5,793 | ) | | (76,787 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $47 |
| |
| $113,946 |
|
| $303 |
| |
| $47 |
|
Operating Activities
Entergy Mississippi’sNet cash flow used in operating activities used $9.1decreased $0.3 million of cash for the three months ended March 31, 20172018 compared to providing $30.3 million of cash for the three months ended March 31, 20162017 primarily due to the timing of recovery of fuel and purchased power costs in 20172018 as compared to the same period in 2016 and the timing of collections from customers. The decrease was partially2017 substantially offset by an increase of $8.9 million in income tax refunds of $15.1 million in 2017 compared to the same period in 2016.2017. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 and $6.2 million in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resultedagreement resulting from the carryback of net operating losses.
Investing Activities
Net cash flow used in investing activities increased $18.5decreased $3.4 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to:
an increaseto a decrease of $13.5$14.8 million in transmission construction expenditures primarily due to a higherlower scope of work performed in 20172018 as compared to the same period in 2016;
an increase of $6.6 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; and
an increase of $5.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed during plant outages in 2017 compared to the same period in 2016.partially offset by money pool activity.
Financing Activities
Decreases in Entergy Mississippi’s financing activities provided $12 millionreceivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $1.6 million for the three months ended March 31, 20172018 compared to using $0.8decreasing by $10.6 million of cash for the three months ended March 31, 20162017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $67.3 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to money pool activity.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi’s payable to the money pool increased by $74.9 million for the three months ended March 31, 2018 compared to increasing by $12.3 million for the three months ended March 31, 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, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 49.8 | % | | 50.2 | % | 51.0 | % | | 51.5 | % |
| Effect of subtracting cash | — | % | | (1.8 | %) | — | % | | (0.2 | %) |
| Net debt to net capital | 49.8 | % | | 48.4 | % | 51.0 | % | | 51.3 | % |
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, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($12,324) | | $10,595 | | $15,549 | | $25,930 |
|
| | | | | | |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| ($74,892) | | $1,633 | | ($12,324) | | $10,595 |
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 2017.2018. Entergy Mississippi expects to renew its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of March 31, 2017.2018. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2017, a $7.12018, $16.6 million letterletters of credit waswere 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 2017,2018, Entergy Mississippi submitted its formula rate plan 20172018 test year filing and 20162017 look-back filing showing Entergy Mississippi’s earned return for the historical 20162017 calendar year and projected earned return for the 20172018 calendar year, in large part as a result of the lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resulting in no change in rates. The filing is currently subject to MPSC review. See Note 2 to the financial statements herein for additional discussion regarding the proposed treatment of the effects of the lower federal corporate income tax rate.
Advanced Metering Infrastructure (AMI) FilingInternal Restructuring
As discussed in the Form 10-K, in November 2016,In March 2018, Entergy Mississippi filed an application seeking a finding fromwith the MPSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Mississippi to a new entity, which would ultimately be held by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the MPSC, the FERC, and the NRC. If the MPSC approves the restructuring by August 2018 and the restructuring closes on or before December 1, 2018, Entergy Mississippi proposed in its application to credit retail customers $27 million over six years, beginning in 2019. If the MPSC, the FERC, and the NRC approvals are obtained, Entergy Mississippi expects the restructuring will be consummated on or before December 1, 2018.
It is currently contemplated that Entergy Mississippi’s deploymentMississippi would undertake a multi-step restructuring, which would include the following:
Entergy Mississippi would redeem its outstanding preferred stock, at the aggregate redemption price of advanced metering infrastructure is inapproximately $21.2 million, including call premiums, plus accumulated and unpaid dividends, if any.
Entergy Mississippi would convert from a Mississippi corporation to a Texas corporation.
Under the public interest. In May 2017 theTexas Business Organizations Code (TXBOC), Entergy Mississippi Public Utilities Staffwill allocate substantially all of its assets to a new subsidiary, Entergy Mississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power and Light), and Entergy Mississippi entered intoPower and filed a joint stipulation supporting Entergy Mississippi’s filing, andLight will assume substantially all of the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deploymentliabilities 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 continuein a transaction regarded as a merger under the TXBOC. Entergy Mississippi will remain in existence and hold the membership interests in Entergy Mississippi Power and Light.
Entergy Mississippi will contribute the membership interests in Entergy Mississippi Power and Light to include in rate basean affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the remaining book value of existing meters thatcontribution, Entergy Mississippi Power and Light will be retired as parta wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
Entergy Mississippi will change its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power and Light will then change its name to Entergy Mississippi, LLC.
Upon the completion of the AMI deploymentrestructuring, Entergy Mississippi, LLC will hold substantially all of the assets, and alsowill have assumed substantially all of the liabilities, of Entergy Mississippi. Entergy Mississippi may modify or supplement the steps to depreciate those assets using current depreciation rates.
Mississippi Attorney General Complaintbe taken to effectuate the restructuring.
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, Entergy Services, and Entergy Power. The defendants have denied the allegations. Discovery is currently in 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” in the Form 10-K for a discussion of nuclear matters.
Entergy Mississippi, Inc.
Management's Financial Discussion and 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 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, 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.discussion of new accounting pronouncements.
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | |
| | | |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $315,743 |
| |
| $258,443 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 63,528 |
| | 39,140 |
|
| Purchased power | | 87,456 |
| | 71,070 |
|
| Other operation and maintenance | | 59,458 |
| | 54,622 |
|
| Taxes other than income taxes | | 25,394 |
| | 23,972 |
|
| Depreciation and amortization | | 38,182 |
| | 35,317 |
|
| Other regulatory charges (credits) - net | | 293 |
| | (5,837 | ) |
| TOTAL | | 274,311 |
| | 218,284 |
|
| | | | | |
| OPERATING INCOME | | 41,432 |
| | 40,159 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,978 |
| | 1,843 |
|
| Interest and investment income | | 25 |
| | 26 |
|
| Miscellaneous - net | | (571 | ) | | (976 | ) |
| TOTAL | | 1,432 |
| | 893 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 13,905 |
| | 12,672 |
|
| Allowance for borrowed funds used during construction | | (828 | ) | | (720 | ) |
| TOTAL | | 13,077 |
| | 11,952 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 29,787 |
| | 29,100 |
|
| | | | | |
| Income taxes | | 6,944 |
| | 11,942 |
|
| | | | | |
| NET INCOME | | 22,843 |
| | 17,158 |
|
| | | | | |
| Preferred dividend requirements and other | | 238 |
| | 238 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $22,605 |
| |
| $16,920 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(Page left blank intentionally)
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $22,843 |
| |
| $17,158 |
|
| Adjustments to reconcile net income to net cash flow used in operating activities: | | | | |
| Depreciation and amortization | | 38,182 |
| | 35,317 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,787 |
| | 13,505 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 1,018 |
| | 17,890 |
|
| Fuel inventory | | (767 | ) | | 2,672 |
|
| Accounts payable | | (24,818 | ) | | (19,639 | ) |
| Taxes accrued | | (56,244 | ) | | (38,825 | ) |
| Interest accrued | | (5,548 | ) | | (2,953 | ) |
| Deferred fuel costs | | 13,817 |
| | (5,236 | ) |
| Other working capital accounts | | (4,856 | ) | | (578 | ) |
| Provisions for estimated losses | | 4,754 |
| | (1,772 | ) |
| Other regulatory assets | | 4,586 |
| | (10,918 | ) |
| Other regulatory liabilities | | 766 |
| | (3,341 | ) |
| Pension and other postretirement liabilities | | (4,604 | ) | | (4,613 | ) |
| Other assets and liabilities | | (5,757 | ) | | (7,799 | ) |
| Net cash flow used in operating activities | | (8,841 | ) | | (9,132 | ) |
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (79,141 | ) | | (92,087 | ) |
| Allowance for equity funds used during construction | | 1,978 |
| | 1,843 |
|
| Changes in money pool receivable - net | | 1,633 |
| | 10,595 |
|
| Other | | (738 | ) | | (42 | ) |
| Net cash flow used in investing activities | | (76,268 | ) | | (79,691 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Changes in money pool payable - net | | 74,892 |
| | 12,324 |
|
| Dividends paid: | | | | |
| Preferred stock | | (238 | ) | | (238 | ) |
| Other | | 4,662 |
| | (50 | ) |
| Net cash flow provided by financing activities | | 79,316 |
| | 12,036 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (5,793 | ) | | (76,787 | ) |
| Cash and cash equivalents at beginning of period | | 6,096 |
| | 76,834 |
|
| Cash and cash equivalents at end of period | |
| $303 |
| |
| $47 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $18,820 |
| |
| $15,036 |
|
| Income taxes | |
| $— |
| |
| ($15,087 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| 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. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $13 |
| |
| $1,607 |
|
| Temporary cash investments | | 290 |
| | 4,489 |
|
| Total cash and cash equivalents | | 303 |
| | 6,096 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 83,092 |
| | 72,039 |
|
| Allowance for doubtful accounts | | (635 | ) | | (574 | ) |
| Associated companies | | 39,490 |
| | 45,081 |
|
| Other | | 14,768 |
| | 9,738 |
|
| Accrued unbilled revenues | | 41,174 |
| | 54,256 |
|
| Total accounts receivable | | 177,889 |
| | 180,540 |
|
| Deferred fuel costs | | 18,627 |
| | 32,444 |
|
| Fuel inventory - at average cost | | 46,373 |
| | 45,606 |
|
| Materials and supplies - at average cost | | 42,957 |
| | 42,571 |
|
| Prepayments and other | | 8,120 |
| | 7,041 |
|
| TOTAL | | 294,269 |
| | 314,298 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,588 |
| | 4,592 |
|
| Storm reserve escrow account | | 32,061 |
| | 31,969 |
|
| TOTAL | | 36,649 |
| | 36,561 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,725,645 |
| | 4,660,297 |
|
| Property under capital lease | | — |
| | 125 |
|
| Construction work in progress | | 146,168 |
| | 149,367 |
|
| TOTAL UTILITY PLANT | | 4,871,813 |
| | 4,809,789 |
|
| Less - accumulated depreciation and amortization | | 1,711,157 |
| | 1,681,306 |
|
| UTILITY PLANT - NET | | 3,160,656 |
| | 3,128,483 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Other regulatory assets | | 393,323 |
| | 397,909 |
|
| Other | | 5,679 |
| | 2,124 |
|
| TOTAL | | 399,002 |
| | 400,033 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,890,576 |
| |
| $3,879,375 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $117,633 |
| |
| $55,689 |
|
| Other | | 55,887 |
| | 77,326 |
|
| Customer deposits | | 83,574 |
| | 83,654 |
|
| Taxes accrued | | 26,599 |
| | 82,843 |
|
| Interest accrued | | 17,353 |
| | 22,901 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 162,140 |
| | — |
|
| Other | | 8,708 |
| | 12,785 |
|
| TOTAL | | 471,894 |
| | 335,198 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 497,129 |
| | 488,806 |
|
| Accumulated deferred investment tax credits | | 8,827 |
| | 8,867 |
|
| Regulatory liability for income taxes - net | | 248,739 |
| | 411,011 |
|
| Asset retirement cost liabilities | | 9,348 |
| | 9,219 |
|
| Accumulated provisions | | 49,518 |
| | 44,764 |
|
| Pension and other postretirement liabilities | | 96,893 |
| | 101,498 |
|
| Long-term debt | | 1,270,399 |
| | 1,270,122 |
|
| Other | | 16,973 |
| | 11,639 |
|
| TOTAL | | 2,197,826 |
| | 2,345,926 |
|
| | | | | |
| Commitments and Contingencies | | |
| | |
|
| | | | | |
| Preferred stock without sinking fund | | 20,381 |
| | 20,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2018 and 2017 | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | 167 |
| | 167 |
|
| Retained earnings | | 1,000,982 |
| | 978,377 |
|
| TOTAL | | 1,200,475 |
| | 1,177,870 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,890,576 |
| |
| $3,879,375 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $17,158 |
| |
| $17,118 |
|
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
| Depreciation and amortization | | 35,317 |
| | 33,298 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 13,505 |
| | (7,095 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | 17,890 |
| | (5,118 | ) |
| Fuel inventory | | 2,672 |
| | (3,244 | ) |
| Accounts payable | | (19,639 | ) | | (3,329 | ) |
| Taxes accrued | | (38,825 | ) | | (24,009 | ) |
| Interest accrued | | (2,953 | ) | | (2,033 | ) |
| Deferred fuel costs | | (5,236 | ) | | 40,350 |
|
| Other working capital accounts | | (578 | ) | | (979 | ) |
| Provisions for estimated losses | | (1,772 | ) | | (2,016 | ) |
| Other regulatory assets | | (10,918 | ) | | 751 |
|
| Pension and other postretirement liabilities | | (4,613 | ) | | (6,015 | ) |
| Other assets and liabilities | | (11,140 | ) | | (7,403 | ) |
| Net cash flow provided by (used in) operating activities | | (9,132 | ) | | 30,276 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (92,087 | ) | | (72,764 | ) |
| Allowance for equity funds used during construction | | 1,843 |
| | 1,286 |
|
| Changes in money pool receivable - net | | 10,595 |
| | 10,381 |
|
| Other | | (42 | ) | | (81 | ) |
| Net cash flow used in investing activities | | (79,691 | ) | | (61,178 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Change in money pool payable - net | | 12,324 |
| | — |
|
| Dividends paid: | | | | |
| Preferred stock | | (238 | ) | | (707 | ) |
| Other | | (50 | ) | | (50 | ) |
| Net cash flow provided by (used in) financing activities | | 12,036 |
| | (757 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (76,787 | ) | | (31,659 | ) |
| Cash and cash equivalents at beginning of period | | 76,834 |
| | 145,605 |
|
| Cash and cash equivalents at end of period | |
| $47 |
| |
| $113,946 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $15,036 |
| |
| $16,137 |
|
| Income taxes | |
| ($15,087 | ) | |
| ($6,175 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| 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 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2017 |
| $199,326 |
| |
| $167 |
| |
| $978,377 |
| |
| $1,177,870 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 22,843 |
| | 22,843 |
|
| Preferred stock dividends | — |
| | — |
| | (238 | ) | | (238 | ) |
| | | | | | | | |
| Balance at March 31, 2018 |
| $199,326 |
| |
| $167 |
| |
| $1,000,982 |
| |
| $1,200,475 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $40 |
| |
| $16 |
|
| Temporary cash investments | | 7 |
| | 76,818 |
|
| Total cash and cash equivalents | | 47 |
| | 76,834 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 52,724 |
| | 51,218 |
|
| Allowance for doubtful accounts | | (554 | ) | | (549 | ) |
| Associated companies | | 27,529 |
| | 45,973 |
|
| Other | | 6,112 |
| | 12,006 |
|
| Accrued unbilled revenues | | 45,679 |
| | 51,327 |
|
| Total accounts receivable | | 131,490 |
| | 159,975 |
|
| Deferred fuel costs | | 12,193 |
| | 6,957 |
|
| Fuel inventory - at average cost | | 48,200 |
| | 50,872 |
|
| Materials and supplies - at average cost | | 41,833 |
| | 41,146 |
|
| Prepayments and other | | 7,799 |
| | 8,873 |
|
| TOTAL | | 241,562 |
| | 344,657 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,604 |
| | 4,608 |
|
| Escrow accounts | | 31,826 |
| | 31,783 |
|
| TOTAL | | 36,430 |
| | 36,391 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,333,218 |
| | 4,321,214 |
|
| Property under capital lease | | 1,234 |
| | 1,590 |
|
| Construction work in progress | | 154,285 |
| | 118,182 |
|
| TOTAL UTILITY PLANT | | 4,488,737 |
| | 4,440,986 |
|
| Less - accumulated depreciation and amortization | | 1,601,042 |
| | 1,602,711 |
|
| UTILITY PLANT - NET | | 2,887,695 |
| | 2,838,275 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 38,694 |
| | 38,284 |
|
| Other regulatory assets | | 352,721 |
| | 342,213 |
|
| Other | | 5,732 |
| | 2,320 |
|
| TOTAL | | 397,147 |
| | 382,817 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,562,834 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $53,350 |
| |
| $43,647 |
|
| Other | | 54,982 |
| | 80,227 |
|
| Customer deposits | | 84,619 |
| | 84,112 |
|
| Taxes accrued | | 25,215 |
| | 64,040 |
|
| Interest accrued | | 18,700 |
| | 21,653 |
|
| Other | | 8,351 |
| | 9,554 |
|
| TOTAL | | 245,217 |
| | 303,233 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 873,335 |
| | 861,331 |
|
| Accumulated deferred investment tax credits | | 8,627 |
| | 8,667 |
|
| Asset retirement cost liabilities | | 8,844 |
| | 8,722 |
|
| Accumulated provisions | | 52,668 |
| | 54,440 |
|
| Pension and other postretirement liabilities | | 104,941 |
| | 109,551 |
|
| Long-term debt | | 1,121,139 |
| | 1,120,916 |
|
| Other | | 15,971 |
| | 20,108 |
|
| TOTAL | | 2,185,525 |
| | 2,183,735 |
|
| | | | | |
| Commitments and Contingencies | | |
| | |
|
| | | | | |
| Preferred stock without sinking fund | | 20,381 |
| | 20,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| 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 | | 167 |
| | 167 |
|
| Retained earnings | | 912,218 |
| | 895,298 |
|
| TOTAL | | 1,111,711 |
| | 1,094,791 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $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, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 17,118 |
| | 17,118 |
|
| Preferred stock dividends | — |
| | — |
| | (707 | ) | | (707 | ) |
| | | | | | | | |
| Balance at March 31, 2016 |
| $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, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
|
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | |
| $111 |
| |
| $116 |
| |
| ($5 | ) | | (4 | ) | |
| $148 |
| |
| $111 |
| |
| $37 |
| | 33 |
|
| Commercial | | 92 |
| | 92 |
| | — |
| | — |
| | 110 |
| | 92 |
| | 18 |
| | 20 |
|
| Industrial | | 36 |
| | 34 |
| | 2 |
| | 6 |
| | 43 |
| | 36 |
| | 7 |
| | 19 |
|
| Governmental | | 9 |
| | 10 |
| | (1 | ) | | (10 | ) | | 11 |
| | 9 |
| | 2 |
| | 22 |
|
| Total retail | | 248 |
| | 252 |
| | (4 | ) | | (2 | ) | |
| Total billed retail | | | 312 |
| | 248 |
| | 64 |
| | 26 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Non-associated companies | | 5 |
| | 5 |
| | — |
| | — |
| | 2 |
| | 5 |
| | (3 | ) | | (60 | ) |
| Other | | 5 |
| | 6 |
| | (1 | ) | | (17 | ) | | 2 |
| | 5 |
| | (3 | ) | | (60 | ) |
| Total | |
| $258 |
| |
| $263 |
| |
| ($5 | ) | | (2 | ) | |
| $316 |
| |
| $258 |
| |
| $58 |
| | 22 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,190 |
| | 1,285 |
| | (95 | ) | | (7 | ) | | 1,449 |
| | 1,190 |
| | 259 |
| | 22 |
|
| Commercial | | 1,062 |
| | 1,079 |
| | (17 | ) | | (2 | ) | | 1,100 |
| | 1,062 |
| | 38 |
| | 4 |
|
| Industrial | | 586 |
| | 549 |
| | 37 |
| | 7 |
| | 597 |
| | 586 |
| | 11 |
| | 2 |
|
| Governmental | | 98 |
| | 98 |
| | — |
| | — |
| | 99 |
| | 98 |
| | 1 |
| | 1 |
|
| Total retail | | 2,936 |
| | 3,011 |
| | (75 | ) | | (2 | ) | | 3,245 |
| | 2,936 |
| | 309 |
| | 11 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Non-associated companies | | 181 |
| | 132 |
| | 49 |
| | 37 |
| | 193 |
| | 181 |
| | 12 |
| | 7 |
|
| Total | | 3,117 |
| | 3,143 |
| | (26 | ) | | (1 | ) | | 3,438 |
| | 3,117 |
| | 321 |
| | 10 |
|
ENTERGY NEW ORLEANS, INC.LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income remained relatively unchanged, decreasing by $0.2$0.1 million, for the first quarter 2017 compared to the first quarter 2016 because higher net revenue was offset byother operation and maintenance expenses and higher taxes other than income taxes were offset by higher net revenue and higher depreciation and amortization expenses.a lower effective income tax rate.
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 changes in net revenue comparing the first quarter 20172018 to the first quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
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 |
|
| Volume/weather | 3.6 |
|
| Net gas revenue | 2.2 |
|
| Retail electric price | (2.6 | ) |
| Other | 1.6 |
|
| 2018 net revenue |
| $75.0 |
|
The retail electric pricevolume/weather variance is primarily due to an increase of 128 GWh, or 10%, in billed electricity usage, including the effect of more favorable weather primarily on residential and commercial sales and a 1% increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycleaverage number of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the purchased power and capacity acquisition cost recovery rider.electric customers.
The net gas revenue variance is primarily due to the effect of lessmore favorable weather primarily on residential and commercial sales.
The volume/weatherretail electric price variance is primarily due to to:
a decrease of 35 GWh, or 3%, in billed electricity usage, primarily in the residential sector.purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017; and
a regulatory charge of $1.6 million recorded in the first quarter 2018 as a result of a filing made with the City Council in March 2018 proposing to return to customers the benefits of the reduction in income tax expense resulting from the enactment of the Tax Cuts and Jobs Act. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the credits associated with Entergy New Orleans’s internal restructuring and regulatory proceedings related to the enactment of the Tax Cuts and Jobs Act.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
an increase of $2.2 million in distribution expenses primarily due to an overall higher scope of work performed in 2018 compared to the same period in 2017 and higher vegetation maintenance costs;
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $1.2 million in energy efficiency costs; and
an increase of $1 million in fossil-fueled generation expenses primarily due to higher plant expenses at Power Block 1 of the Union Power Station in 2018 as compared to 2017.
Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting fromprimarily due to higher electric and gas retail revenues in 2017first quarter 2018 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
first quarter 2017.
Income Taxes
The effective income tax rate was 19.5% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to flow-through tax accounting and certain book and tax differences related to utility plant items, partially offset by state income taxes, the provision for uncertain tax positions, and a write-off of a stock-based compensation deferred tax asset.
The 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 35% was primarily due to 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.
The effectiveIncome Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax rate was 37.2%legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the first quarter 2016. The differenceTax Act, and Note 2 to the financial statements herein and in the effective income tax rate forForm 10-K discusses proceedings commenced or other responses by Entergy’s regulators to 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.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $103,068 |
| |
| $88,876 |
|
| $32,741 |
| |
| $103,068 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 5,619 |
| | 4,453 |
| 7,049 |
| | 5,619 |
|
| Investing activities | (40,751 | ) | | (242,386 | ) | (31,573 | ) | | (40,751 | ) |
| Financing activities | (11,868 | ) | | 155,025 |
| (6,857 | ) | | (11,868 | ) |
| Net decrease in cash and cash equivalents | (47,000 | ) | | (82,908 | ) | (31,381 | ) | | (47,000 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $56,068 |
| |
| $5,968 |
|
| $1,360 |
| |
| $56,068 |
|
Operating Activities
Net cash flow provided by operating activities increased $1.2$1.4 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to income taxthe timing of collections from customers and the timing of payments to vendors, substantially offset by the timing of $2.5 million in 2016 primarily due to payments made for state tax liabilities.recovery of fuel and purchased power costs.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $201.6$9.2 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 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 and a decrease of $8.6 million in storm spending. The decrease was partially offset by an increase of $7$13.3 million in stormfossil-fueled generation construction expenditures primarily due to higher spending on the New Orleans Power Station project in 2017. See Note 142018 and an increase of $7.2 million in distribution construction expenditures primarily due to a higher scope of work performed in 2018 as compared to the financial statementssame period in 2017, including investment in the Form 10-K for discussionreliability and infrastructure of the Union Power Station purchase.Entergy New Orleans’s distribution system.
IncreasesDecreases in Entergy New Orleans’s receivable from the money pool are a usesource of cash flow, and Entergy New Orleans’s receivable from the money pool increaseddecreased $12.3 million in 2018 compared to increasing $12.1 million in 2017 compared to decreasing $15.1 million in 2016.2017. 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
Financing Activities
Entergy New Orleans’sNet cash flow used in financing activities used $11.9decreased $5 million of cash for the three months ended March 31, 20172018 compared to providing $155 million of cash for the three months ended March 31, 20162017 primarily due to:
the issuanceto a decrease of $110 million of 5.50% Series first mortgage bonds in March 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
$12.2$6 million in common stock dividends paidequity distributions in first quarter2018 as compared to 2017. ThereCommon equity distributions were no common stock dividends paidlower in first quarter 20162018 primarily as a result of the construction of the New Orleans Power Station, as discussed below, and in anticipation of the purchase of Power Block 1excess accumulated deferred income taxes to be returned to customers as a result of the Union Power Stationenactment of the Tax Cuts and Jobs Act in March 2016.
December 2017. See Note 42 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 regulatory proceedings related to the Union Power Station purchase.enactment of the Tax Cuts and Jobs Act.
Capital Structure
Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 50.2 | % | | 50.1 | % | 51.0 | % | | 51.3 | % |
| Effect of excluding securitization bonds | (5.2 | %) | | (5.2 | %) | (4.7 | %) | | (4.7 | %) |
| Debt to capital, excluding securitization bonds (a) | 45.0 | % | | 44.9 | % | 46.3 | % | | 46.6 | % |
| Effect of subtracting cash | (4.1 | %) | | (8.0 | %) | (0.1 | %) | | (2.4 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 40.9 | % | | 36.9 | % | 46.2 | % | | 44.2 | % |
| |
| (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 due to Entergy Louisiana.an associated company. 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.
Entergy New Orleans, 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 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, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $26,315 | | $14,215 | | $735 | | $15,794 |
|
| | | | | | |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $432 | | $12,723 | | $26,315 | | $14,215 |
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. The credit facility allows Entergy New Orleans to issueincludes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of March 31, 2017,2018, there were no cash borrowings and a $0.8 million letter of credit was outstanding under the 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 to MISO. As of March 31, 2017,2018, a $1$4.8 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
InAs discussed in the Form 10-K, 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 thefacility. In July 2017, Entergy New Orleans Power Station is $216 million. Subjectsubmitted a supplemental and amending application to timely approval by the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. In March 2018 the City Council adopted a resolution approving construction of the 128 MW unit. The targeted commercial operation date is January 2020, subject to receipt of other permits and approvals, commercial operation is estimated to occur by late-2019.all necessary permits. In January 2017 severalApril 2018 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 rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law.
Advanced Metering Infrastructure (AMI) Filings
As discussed in the Form 10-K, in February 2018 the City Council approved Entergy New Orleans’s application seeking a finding that Entergy New Orleans’s deployment of eitheradvanced electric and gas metering infrastructure is in the originalpublic interest. Deployment of the information technology infrastructure began in 2017 and deployment of the communications network is expected to begin later in 2018. In April 2018 the City Council adopted a resolution directing Entergy New Orleans Power Station combustion turbine or an alternative proposalto explore the options for an approximately 126 MW unit, as well as a commitmentaccelerating the deployment of AMI. Entergy New Orleans is required to pursue upreport its findings to 100 MW of renewable resources to serve New Orleans.the City Council by June 2018.
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 are updates to that discussion.
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 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
Entergy New Orleans, Inc.LLC and Subsidiaries
Management's Financial Discussion and Analysis
recovery mechanism forReliability Investigation
In August 2017 the program for both legacy and Algiers customers. The City Council will not permitestablished a docket to investigate the reliability of the Entergy New Orleans distribution system and to recover lost contribution to fixed costsconsider implementing certain reliability standards and possible financial penalties 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.not meeting any such standards. In May 2017April 2018 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,directing Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 millionto demonstrate within 30 days that it has been prudent in the first quartermanagement and maintenance of the year afterreliability of its distribution system. The resolution also called for Entergy New Orleans to file a revised reliability plan addressing the transaction closes,current state of its distribution system 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,proposing remedial measures for increasing reliability. On April 30, 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 discussedfiled a motion to extend all deadlines 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.proceeding by 30 days.
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” in the Form 10-K for further discussion.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 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, 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.discussion of new accounting pronouncements.
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $142,345 |
| |
| $122,441 |
| |
| $155,818 |
| |
| $142,345 |
|
| Natural gas | | 26,644 |
| | 26,899 |
| | 32,457 |
| | 26,644 |
|
| TOTAL | | 168,989 |
| | 149,340 |
| | 188,275 |
| | 168,989 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 30,075 |
| | 10,921 |
| | 23,739 |
| | 30,075 |
|
| Purchased power | | 68,359 |
| | 68,525 |
| | 83,156 |
| | 68,359 |
|
| Other operation and maintenance | | 22,512 |
| | 22,842 |
| | 28,299 |
| | 22,291 |
|
| Taxes other than income taxes | | 12,846 |
| | 11,512 |
| | 15,132 |
| | 12,846 |
|
| Depreciation and amortization | | 13,050 |
| | 11,764 |
| | 13,747 |
| | 13,050 |
|
| Other regulatory charges - net | | 385 |
| | 1,896 |
| | 6,333 |
| | 385 |
|
| TOTAL | | 147,227 |
| | 127,460 |
| | 170,406 |
| | 147,006 |
|
| | | | | | | | | |
| OPERATING INCOME | | 21,762 |
| | 21,880 |
| | 17,869 |
| | 21,983 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 450 |
| | 313 |
| | 851 |
| | 450 |
|
| Interest and investment income | | 135 |
| | 69 |
| | 93 |
| | 135 |
|
| Miscellaneous - net | | 98 |
| | (245 | ) | | (337 | ) | | (123 | ) |
| TOTAL | | 683 |
| | 137 |
| | 607 |
| | 462 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 5,343 |
| | 4,373 |
| | 5,279 |
| | 5,343 |
|
| Allowance for borrowed funds used during construction | | (158 | ) | | (126 | ) | | (314 | ) | | (158 | ) |
| TOTAL | | 5,185 |
| | 4,247 |
| | 4,965 |
| | 5,185 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 17,260 |
| | 17,770 |
| | 13,511 |
| | 17,260 |
|
| | | | | | | | | |
| Income taxes | | 6,282 |
| | 6,603 |
| | 2,629 |
| | 6,282 |
|
| | | | | | | | | |
| NET INCOME | | 10,978 |
| | 11,167 |
| | 10,882 |
| | 10,978 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 241 |
| | 241 |
| | — |
| | 241 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $10,737 |
| |
| $10,926 |
| |
| EARNINGS APPLICABLE TO COMMON EQUITY | | |
| $10,882 |
| |
| $10,737 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(page left blank intentionally)
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $10,978 |
| |
| $11,167 |
| |
| $10,882 |
| |
| $10,978 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | 13,050 |
| | 11,764 |
| | 13,747 |
| | 13,050 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,102 |
| | (9,742 | ) | | 17,909 |
| | 7,102 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (2,659 | ) | | (5,346 | ) | | 3,378 |
| | (2,659 | ) |
| Fuel inventory | | 1,798 |
| | 1,518 |
| | 951 |
| | 1,798 |
|
| Accounts payable | | (11,920 | ) | | (101 | ) | | (7,973 | ) | | (11,920 | ) |
Prepaid taxes and taxes accrued
| | (1,992 | ) | | 14,187 |
| |
Prepaid taxes
| | | (13,351 | ) | | (1,992 | ) |
| Interest accrued | | 34 |
| | (579 | ) | | (81 | ) | | 34 |
|
| Deferred fuel costs | | 6,096 |
| | (5,288 | ) | | (11,309 | ) | | 6,096 |
|
| Other working capital accounts | | (13,106 | ) | | (11,382 | ) | | (12,082 | ) | | (13,106 | ) |
| Provisions for estimated losses | | (655 | ) | | (532 | ) | | 196 |
| | (655 | ) |
| Other regulatory assets | | 300 |
| | 6,270 |
| | 7,226 |
| | 300 |
|
| Other regulatory liabilities | | | 1,331 |
| | (934 | ) |
| Pension and other postretirement liabilities | | (3,915 | ) | | (4,102 | ) | | (3,686 | ) | | (3,915 | ) |
| Other assets and liabilities | | 508 |
| | (3,381 | ) | | (89 | ) | | 1,442 |
|
| Net cash flow provided by operating activities | | 5,619 |
| | 4,453 |
| | 7,049 |
| | 5,619 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (26,079 | ) | | (17,931 | ) | | (41,105 | ) | | (26,079 | ) |
| Allowance for equity funds used during construction | | 450 |
| | 313 |
| | 851 |
| | 450 |
|
| Payment for purchase of plant | | — |
| | (236,944 | ) | |
| Investment in affiliates | | — |
| | (38 | ) | |
| Changes in money pool receivable - net | | (12,100 | ) | | 15,059 |
| | 12,291 |
| | (12,100 | ) |
| Receipts from storm reserve escrow account | | — |
| | 3 |
| | 3 |
| | — |
|
| Payments to storm reserve escrow account | | (110 | ) | | (102 | ) | | (232 | ) | | (110 | ) |
| Changes in securitization account | | (2,912 | ) | | (2,746 | ) | | (3,381 | ) | | (2,912 | ) |
| Net cash flow used in investing activities | | (40,751 | ) | | (242,386 | ) | | (31,573 | ) | | (40,751 | ) |
| | | | | | | | | |
| 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 | ) | | — |
| | (6,250 | ) | | (12,200 | ) |
| Preferred stock | | (241 | ) | | (241 | ) | | — |
| | (241 | ) |
| Other | | 583 |
| | 730 |
| | (607 | ) | | 573 |
|
| Net cash flow provided by (used in) financing activities | | (11,868 | ) | | 155,025 |
| |
| Net cash flow used in financing activities | | | (6,857 | ) | | (11,868 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | (47,000 | ) | | (82,908 | ) | | (31,381 | ) | | (47,000 | ) |
| Cash and cash equivalents at beginning of period | | 103,068 |
| | 88,876 |
| | 32,741 |
| | 103,068 |
|
| Cash and cash equivalents at end of period | |
| $56,068 |
| |
| $5,968 |
| |
| $1,360 |
| |
| $56,068 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $5,043 |
| |
| $4,654 |
| |
| $5,098 |
| |
| $5,043 |
|
| Income taxes | |
| $— |
| |
| $2,500 |
| |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | ASSETS | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents | | | | | | | | |
| Cash | |
| $1,026 |
| |
| $28 |
| |
| $26 |
| |
| $30 |
|
| Temporary cash investments | | 55,042 |
| | 103,040 |
| | 1,334 |
| | 32,711 |
|
| Total cash and cash equivalents | | 56,068 |
| | 103,068 |
| | 1,360 |
| | 32,741 |
|
Securitization recovery trust account
| | 4,650 |
| | 1,738 |
| | 4,836 |
| | 1,455 |
|
| Accounts receivable: | | | | | | | | |
|
| Customer | | 45,409 |
| | 43,536 |
| | 51,744 |
| | 51,006 |
|
| Allowance for doubtful accounts | | (3,090 | ) | | (3,059 | ) | | (3,072 | ) | | (3,057 | ) |
| Associated companies | | 28,835 |
| | 16,811 |
| | 9,576 |
| | 22,976 |
|
| Other | | 10,688 |
| | 5,926 |
| | 10,051 |
| | 6,471 |
|
| Accrued unbilled revenues | | 14,385 |
| | 18,254 |
| | 14,066 |
| | 20,638 |
|
| Total accounts receivable | | 96,227 |
| | 81,468 |
| | 82,365 |
| | 98,034 |
|
| Deferred fuel costs | | — |
| | 4,818 |
| | 3,535 |
| | — |
|
| Fuel inventory - at average cost | | 43 |
| | 1,841 |
| | 939 |
| | 1,890 |
|
| Materials and supplies - at average cost | | 9,588 |
| | 8,416 |
| | 11,562 |
| | 10,381 |
|
| Prepaid taxes | | 6,371 |
| | 4,379 |
| | 39,830 |
| | 26,479 |
|
| Prepayments and other | | 18,610 |
| | 6,587 |
| | 18,794 |
| | 8,030 |
|
| TOTAL | | 191,557 |
| | 212,315 |
| | 163,221 |
| | 179,010 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
| | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,547 |
| | 81,437 |
| | 79,775 |
| | 79,546 |
|
| Other | | 4,787 |
| | 7,160 |
| | — |
| | 2,373 |
|
| TOTAL | | 87,350 |
| | 89,613 |
| | 80,791 |
| | 82,935 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 1,251,117 |
| | 1,258,934 |
| | 1,314,262 |
| | 1,302,235 |
|
| Natural gas | | 243,424 |
| | 240,408 |
| | 267,527 |
| | 261,263 |
|
| Construction work in progress | | 34,337 |
| | 24,975 |
| | 71,845 |
| | 46,993 |
|
| TOTAL UTILITY PLANT | | 1,528,878 |
| | 1,524,317 |
| | 1,653,634 |
| | 1,610,491 |
|
| Less - accumulated depreciation and amortization | | 600,391 |
| | 604,825 |
| | 643,737 |
| | 631,178 |
|
| UTILITY PLANT - NET | | 928,487 |
| | 919,492 |
| | 1,009,897 |
| | 979,313 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
| | 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 regulatory assets (includes securitization property of $69,199 as of March 31, 2018 and $72,095 as of December 31, 2017) | | | 244,207 |
| | 251,433 |
|
| Other | | 1,597 |
| | 963 |
| | 1,843 |
| | 1,065 |
|
| TOTAL | | 273,483 |
| | 273,149 |
| | 250,130 |
| | 256,578 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $1,480,877 |
| |
| $1,494,569 |
| |
| $1,504,039 |
| |
| $1,497,836 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Payable due to Entergy Louisiana | |
| $2,104 |
| |
| $2,104 |
| |
| Payable due to associated company | | |
| $2,077 |
| |
| $2,077 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 40,414 |
| | 39,260 |
| | 43,119 |
| | 47,472 |
|
| Other | | 21,095 |
| | 35,920 |
| | 29,267 |
| | 29,777 |
|
| Customer deposits | | 28,714 |
| | 28,667 |
| | 28,727 |
| | 28,442 |
|
| Interest accrued | | 5,477 |
| | 5,443 |
| | 5,406 |
| | 5,487 |
|
| Deferred fuel costs | | 1,278 |
| | — |
| | — |
| | 7,774 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 27,857 |
| | — |
|
| Other | | 9,084 |
| | 11,415 |
| | 4,564 |
| | 7,351 |
|
| TOTAL CURRENT LIABILITIES | | 108,166 |
| | 122,809 |
| | 141,017 |
| | 128,380 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 342,757 |
| | 334,953 |
| | 302,461 |
| | 283,302 |
|
| Accumulated deferred investment tax credits | | 590 |
| | 622 |
| | 2,296 |
| | 2,323 |
|
| Regulatory liability for income taxes - net | | 7,491 |
| | 9,074 |
| | 90,359 |
| | 119,259 |
|
| Asset retirement cost liabilities | | 2,924 |
| | 2,875 |
| | 3,128 |
| | 3,076 |
|
| Accumulated provisions | | 87,858 |
| | 88,513 |
| | 85,279 |
| | 85,083 |
|
| Pension and other postretirement liabilities | | 32,835 |
| | 36,750 |
| | 17,061 |
| | 20,755 |
|
| 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 |
| |
| Long-term debt (includes securitization bonds of $74,480 as of March 31, 2018 and $74,419 as of December 31, 2017) | | | 418,572 |
| | 418,447 |
|
| Long-term payable due to associated company | | | 16,346 |
| | 16,346 |
|
| Other | | 5,963 |
| | 4,910 |
| | 7,340 |
| | 5,317 |
|
| TOTAL NON-CURRENT LIABILITIES | | 927,448 |
| | 925,034 |
| | 942,842 |
| | 953,908 |
|
| | | | | | | | | |
| 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 |
| |
| EQUITY | | | | | |
| Member's equity | | | 420,180 |
| | 415,548 |
|
| TOTAL | | 425,483 |
| | 426,946 |
| | 420,180 |
| | 415,548 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,480,877 |
| |
| $1,494,569 |
| |
| $1,504,039 |
| |
| $1,497,836 |
|
| | | | | | | | | |
| 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, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| |
| |
| Member’s Equity |
| (In Thousands) |
| |
| Balance at December 31, 2016 |
| $426,946 |
|
| |
| Net income | 10,978 |
|
| Common equity distributions | (12,200 | ) |
| Preferred stock dividends | (241 | ) |
| |
| Balance at March 31, 2017 |
| $425,483 |
|
| |
| |
| Balance at December 31, 2017 |
| $415,548 |
|
| |
| Net income | 10,882 |
|
| Common equity distributions | (6,250 | ) |
| |
| Balance at March 31, 2018 |
| $420,180 |
|
| |
| See Notes to Financial Statements. | |
|
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
|
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | | | | | | | | | | | |
| | |
| | |
|
| Residential | |
| $53 |
| |
| $47 |
| |
| $6 |
| | 13 |
| |
| $65 |
| |
| $53 |
| |
| $12 |
| | 23 |
|
| Commercial | | 54 |
| | 44 |
| | 10 |
| | 23 |
| | 54 |
| | 54 |
| | — |
| | — |
|
| Industrial | | 8 |
| | 7 |
| | 1 |
| | 14 |
| | 8 |
| | 8 |
| | — |
| | — |
|
| Governmental | | 18 |
| | 15 |
| | 3 |
| | 20 |
| | 18 |
| | 18 |
| | — |
| | — |
|
| Total retail | | 133 |
| | 113 |
| | 20 |
| | 18 |
| |
| Total billed retail | | | 145 |
| | 133 |
| | 12 |
| | 9 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 7 |
| | (7 | ) | | (100 | ) | |
| Non-associated companies | | 9 |
| | — |
| | 9 |
| | — |
| |
| Non associated companies | | | 13 |
| | 9 |
| | 4 |
| | 44 |
|
| Other | | — |
| | 2 |
| | (2 | ) | | (100 | ) | | (2 | ) | | — |
| | (2 | ) | | — |
|
| Total | |
| $142 |
| |
| $122 |
| |
| $20 |
| | 16 |
| |
| $156 |
| |
| $142 |
| |
| $14 |
| | 10 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 456 |
| | 499 |
| | (43 | ) | | (9 | ) | | 577 |
| | 456 |
| | 121 |
| | 27 |
|
| Commercial | | 515 |
| | 510 |
| | 5 |
| | 1 |
| | 524 |
| | 515 |
| | 9 |
| | 2 |
|
| Industrial | | 98 |
| | 101 |
| | (3 | ) | | (3 | ) | | 99 |
| | 98 |
| | 1 |
| | 1 |
|
| Governmental | | 184 |
| | 178 |
| | 6 |
| | 3 |
| | 181 |
| | 184 |
| | (3 | ) | | (2 | ) |
| Total retail | | 1,253 |
| | 1,288 |
| | (35 | ) | | (3 | ) | | 1,381 |
| | 1,253 |
| | 128 |
| | 10 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 242 |
| | (242 | ) | | (100 | ) | |
| Non-associated companies | | 507 |
| | 14 |
| | 493 |
| | 3,521 |
| | 627 |
| | 507 |
| | 120 |
| | 24 |
|
| Total | | 1,760 |
| | 1,544 |
| | 216 |
| | 14 |
| | 2,008 |
| | 1,760 |
| | 248 |
| | 14 |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $3.7increased $6.5 million primarily due to higher depreciationnet revenue and amortization expense and higher taxes other thana lower effective income taxes,tax rate, partially offset by higher net revenue.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. Following is an analysis of the change in net revenue comparing the first quarter 20172018 to the first quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
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 |
|
| Retail electric price | 6.0 |
|
| Volume/weather | 5.0 |
|
| Net wholesale revenue | (6.0 | ) |
| Other | (0.4 | ) |
| 2018 net revenue |
| $144.9 |
|
The volume/weather variance is primarily due to an increase in usage during the unbilled sales period, partially offset by a decrease of 97 GWh, or 2%, in billed electricity usage, primarily in the residential and commercial sectors.
The purchased power capacity variance is primarily due to decreased expenses due to the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.
The retail electric price variance is primarily due to the implementation ofincreases in the transmission cost recovery factor rider rate in March 2017 and the distribution cost recovery factor rider in September 2017, each as approved by the PUCT and implemented in September 2016.PUCT. See Note 2 to the financial statements in the Form 10-K for further discussion of the transmission cost recovery factor rider filing.and the distribution cost recovery factor rider filings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales, an increase in residential and commercial usage resulting from a 1% increase in the average number of residential customers and a 3% increase in the average number of commercial customers, and an increase in industrial usage. The increase was partially offset by decreased usage during the unbilled sales period. The increase in industrial usage is primarily due to an increase in demand for mid-size to small customers.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of theincreased purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.capacity costs.
Other Income Statement Variances
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Income 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.
OtherThe effective income decreasedtax rate was 22.2% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to a decreasewrite-off of a stock-based compensation deferred tax asset in 2018 and state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction resulting from decreased transmission spending in 2017.construction.
Entergy Texas, Inc. and 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 in 2017 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 effectiveIncome Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax rate was 37.9%legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the first quarter 2016. The differenceTax Act, and Note 2 to the financial statements herein and in the effective income tax rate for the first quarter 2016 versus the federal statutory rateForm 10-K contains discussions of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offsetproceedings commenced or other responses by book and tax differences relatedEntergy’s regulators to the allowance for equity funds used during construction.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $6,181 |
| |
| $2,182 |
|
| $115,513 |
| |
| $6,181 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 59,580 |
| | 75,735 |
| 1,048 |
| | 59,580 |
|
| Investing activities | (69,587 | ) | | (88,057 | ) | (52,129 | ) | | (69,587 | ) |
| Financing activities | 3,914 |
| | 76,473 |
| (25,456 | ) | | 3,914 |
|
| Net increase (decrease) in cash and cash equivalents | (6,093 | ) | | 64,151 |
| |
| Net decrease in cash and cash equivalents | | (76,537 | ) | | (6,093 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $88 |
| |
| $66,333 |
|
| $38,976 |
| |
| $88 |
|
Operating Activities
Net cash flow provided by operating activities decreased $16.2$58.5 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to the timing of recovery of fuel and purchased power costs. 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 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 decreased $18.5$17.5 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 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 byactivity and cash collateral of $14 million posted in March 2017 to support Entergy Texas’s obligations to MISOMISO. The decrease was partially offset by:
an increase of $17.5 million in fossil-fueled generation construction expenditures primarily due to increased spending on the Lewis Creek Dam restoration project; and
an increase of $6.6 million in distributiontransmission construction expenditures primarily due to a higher scope of work performed in 20172018 as compared to the same period in 2016.2017.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased by $32.3 million for the three months ended March 31, 2018 compared to
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
decreasing 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, 2016.2017. 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
Net cash flow provided byEntergy Texas’s financing activities decreased $72.6used $25.5 million of cash for the three months ended March 31, 2018 compared to providing $3.9 million of cash for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 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.
Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased 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, 2016.2017.
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 57.9 | % | | 58.5 | % | 55.0 | % | | 55.7 | % |
| Effect of excluding the securitization bonds | (7.9 | %) | | (8.3 | %) | (6.0 | %) | | (6.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 50.0 | % | | 50.2 | % | 49.0 | % | | 49.4 | % |
| Effect of subtracting cash | — | % | | (0.1 | %) | (0.8 | %) | | (2.5 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 50.0 | % | | 50.1 | % | 48.2 | % | | 46.9 | % |
| |
| (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 information provided in the Form 10-K.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
March 31,
2017 | | December 31, 2016 | | March 31,
2016 | | December 31, 2015 |
| (In Thousands) |
| ($28,941) | | $681 | | $8,938 | | ($22,068) |
|
| | | | | | |
March 31,
2018 | | December 31, 2017 | | March 31,
2017 | | December 31, 2016 |
| (In Thousands) |
| $12,590 | | $44,903 | | ($28,941) | | $681 |
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 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
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2022. The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of March 31, 2017,2018, there were no cash borrowings and $4.7$24.4 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 to MISO. As of March 31, 2017,2018, a $27.6$25.6 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 filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal 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.
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.
Fuel and purchased power cost recovery
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in an open PUCT 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 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 Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. The pending appeals did not stay the PUCT’s decision, and Entergy Texas refunded to customers the $10.9 million over a four-month period beginning with the first billing cycle of July 2016. The federal appeal of the PUCT’s January 2016 decision was heard in December 2016, and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018. In April 2018 the U.S. Court of Appeals for the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. Entergy Texas is considering its legal options. The State District Court appeal of the PUCT’s January 2016 decision remains pending.
In December 2017, Entergy Texas filed an application to reconcile itsfor a fuel and purchased power costsrefund of approximately $30.5 million for the period April 1, 2013months of May 2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills beginning January 2018 and continued through March 31, 2016. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017.2018. The fuel reconciliation settlementrefund was approved by the PUCT in March 2017.2018.
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” in the Form 10-K for further discussion.discussion of nuclear matters.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and 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 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 “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $363,927 |
| |
| $378,304 |
| |
| $348,940 |
| |
| $363,927 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 58,013 |
| | 92,404 |
| | 18,706 |
| | 58,013 |
|
| Purchased power | | 150,384 |
| | 130,412 |
| | 159,692 |
| | 150,384 |
|
| Other operation and maintenance | | 53,906 |
| | 53,035 |
| | 52,674 |
| | 54,128 |
|
| Taxes other than income taxes | | 19,444 |
| | 18,310 |
| | 20,403 |
| | 19,444 |
|
| Depreciation and amortization | | 28,111 |
| | 25,619 |
| | 30,766 |
| | 28,111 |
|
| Other regulatory charges - net | | 15,227 |
| | 17,255 |
| | 25,617 |
| | 15,227 |
|
| TOTAL | | 325,085 |
| | 337,035 |
| | 307,858 |
| | 325,307 |
|
| | | | | | | | | |
| OPERATING INCOME | | 38,842 |
| | 41,269 |
| | 41,082 |
| | 38,620 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,281 |
| | 2,432 |
| | 1,661 |
| | 1,281 |
|
| Interest and investment income | | 201 |
| | 200 |
| | 555 |
| | 201 |
|
| Miscellaneous - net | | (182 | ) | | (416 | ) | | 113 |
| | 40 |
|
| TOTAL | | 1,300 |
| | 2,216 |
| | 2,329 |
| | 1,522 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 21,808 |
| | 21,601 |
| | 22,051 |
| | 21,808 |
|
| Allowance for borrowed funds used during construction | | (761 | ) | | (1,581 | ) | | (938 | ) | | (761 | ) |
| TOTAL | | 21,047 |
| | 20,020 |
| | 21,113 |
| | 21,047 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 19,095 |
| | 23,465 |
| | 22,298 |
| | 19,095 |
|
| | | | | | | | | |
| Income taxes | | 8,241 |
| | 8,903 |
| | 4,948 |
| | 8,241 |
|
| | | | | | | | | |
| NET INCOME | |
| $10,854 |
| |
| $14,562 |
| |
| $17,350 |
| |
| $10,854 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(pagePage left blank intentionally)
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $10,854 |
| |
| $14,562 |
| |
| $17,350 |
| |
| $10,854 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | 28,111 |
| | 25,619 |
| | 30,766 |
| | 28,111 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (25,678 | ) | | (26,970 | ) | | (21,607 | ) | | (25,678 | ) |
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (683 | ) | | 2,118 |
| | 9,190 |
| | (683 | ) |
| Fuel inventory | | 4,581 |
| | 2,860 |
| | (134 | ) | | 4,581 |
|
| Accounts payable | | (1,150 | ) | | (17,346 | ) | | (24,653 | ) | | (1,150 | ) |
| Prepaid taxes and taxes accrued | | 16,110 |
| | 18,871 |
| |
| Taxes accrued | | | 3,981 |
| | 16,110 |
|
| Interest accrued | | (6,816 | ) | | (9,978 | ) | | (5,575 | ) | | (6,816 | ) |
| Deferred fuel costs | | 20,375 |
| | 54,192 |
| | (28,626 | ) | | 20,375 |
|
| Other working capital accounts | | 1,422 |
| | 1,957 |
| | 4,788 |
| | 1,422 |
|
| Provisions for estimated losses | | 663 |
| | 662 |
| | (208 | ) | | 663 |
|
| Other regulatory assets | | 23,762 |
| | 24,310 |
| | 20,497 |
| | 23,762 |
|
| Other regulatory liabilities | | | 5,145 |
| | (2,498 | ) |
| Pension and other postretirement liabilities | | (5,814 | ) | | (6,505 | ) | | (6,851 | ) | | (5,814 | ) |
| Other assets and liabilities | | (6,157 | ) | | (8,617 | ) | | (3,015 | ) | | (3,659 | ) |
| Net cash flow provided by operating activities | | 59,580 |
| | 75,735 |
| | 1,048 |
| | 59,580 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (68,765 | ) | | (91,843 | ) | | (94,123 | ) | | (68,765 | ) |
| Allowance for equity funds used during construction | | 1,320 |
| | 2,460 |
| | 1,696 |
| | 1,320 |
|
| Increase in other investments | | (14,000 | ) | | — |
| | — |
| | (14,000 | ) |
| Changes in money pool receivable - net | | 681 |
| | (8,938 | ) | | 32,313 |
| | 681 |
|
| Changes in securitization account | | 11,177 |
| | 10,264 |
| | 7,985 |
| | 11,177 |
|
| Net cash flow used in investing activities | | (69,587 | ) | | (88,057 | ) | | (52,129 | ) | | (69,587 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 123,786 |
| |
| Retirement of long-term debt | | (24,188 | ) | | (23,458 | ) | | (24,977 | ) | | (24,188 | ) |
| Change in money pool payable - net | | 28,941 |
| | (22,068 | ) | | — |
| | 28,941 |
|
| Other | | (839 | ) | | (1,787 | ) | | (479 | ) | | (839 | ) |
| Net cash flow provided by financing activities | | 3,914 |
| | 76,473 |
| |
| Net cash flow provided by (used in) financing activities | | | (25,456 | ) | | 3,914 |
|
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (6,093 | ) | | 64,151 |
| |
| Net decrease in cash and cash equivalents | | | (76,537 | ) | | (6,093 | ) |
| Cash and cash equivalents at beginning of period | | 6,181 |
| | 2,182 |
| | 115,513 |
| | 6,181 |
|
| Cash and cash equivalents at end of period | |
| $88 |
| |
| $66,333 |
| |
| $38,976 |
| |
| $88 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $27,986 |
| |
| $30,969 |
| |
| $26,939 |
| |
| $27,986 |
|
| Income taxes | |
| ($3,446 | ) | |
| ($756 | ) | |
| ($1,624 | ) | |
| ($3,446 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $59 |
| |
| $1,216 |
| |
| $26 |
| |
| $32 |
|
| Temporary cash investments | | 29 |
| | 4,965 |
| | 38,950 |
| | 115,481 |
|
| Total cash and cash equivalents | | 88 |
| | 6,181 |
| | 38,976 |
| | 115,513 |
|
| Securitization recovery trust account | | 26,274 |
| | 37,451 |
| | 29,698 |
| | 37,683 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 64,907 |
| | 71,803 |
| | 63,979 |
| | 74,382 |
|
| Allowance for doubtful accounts | | (794 | ) | | (828 | ) | | (422 | ) | | (463 | ) |
| Associated companies | | 38,832 |
| | 39,447 |
| | 68,569 |
| | 90,629 |
|
| Other | | 15,901 |
| | 14,756 |
| | 7,450 |
| | 9,831 |
|
| Accrued unbilled revenues | | 46,061 |
| | 39,727 |
| | 43,982 |
| | 50,682 |
|
| Total accounts receivable | | 164,907 |
| | 164,905 |
| | 183,558 |
| | 225,061 |
|
| Fuel inventory - at average cost | | 32,596 |
| | 37,177 |
| | 42,865 |
| | 42,731 |
|
| Materials and supplies - at average cost | | 37,456 |
| | 36,631 |
| | 39,294 |
| | 38,605 |
|
| Prepayments and other | | 26,857 |
| | 18,599 |
| | 13,502 |
| | 19,710 |
|
| TOTAL | | 288,178 |
| | 300,944 |
| | 347,893 |
| | 479,303 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investments in affiliates - at equity | | 595 |
| | 600 |
| | 481 |
| | 457 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
| | 376 |
| | 376 |
|
| Other | | 18,909 |
| | 18,801 |
| | 19,454 |
| | 19,235 |
|
| TOTAL | | 19,880 |
| | 19,777 |
| | 20,311 |
| | 20,068 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 4,334,548 |
| | 4,274,069 |
| | 4,614,489 |
| | 4,569,295 |
|
| Construction work in progress | | 96,598 |
| | 111,227 |
| | 122,764 |
| | 102,088 |
|
| TOTAL UTILITY PLANT | | 4,431,146 |
| | 4,385,296 |
| | 4,737,253 |
| | 4,671,383 |
|
| Less - accumulated depreciation and amortization | | 1,528,921 |
| | 1,526,057 |
| | 1,603,585 |
| | 1,579,387 |
|
| UTILITY PLANT - NET | | 2,902,225 |
| | 2,859,239 |
| | 3,133,668 |
| | 3,091,996 |
|
| | | | | | | | | |
| 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 regulatory assets (includes securitization property of $295,062 as of March 31, 2018 and $313,123 as of December 31, 2017) | | | 640,901 |
| | 661,398 |
|
| Other | | 9,269 |
| | 7,149 |
| | 28,731 |
| | 26,973 |
|
| TOTAL | | 831,479 |
| | 853,121 |
| | 669,632 |
| | 688,371 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $4,041,762 |
| |
| $4,033,081 |
| |
| $4,171,504 |
| |
| $4,279,738 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
|
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | | |
| $500,000 |
| |
| $— |
|
| Accounts payable: | | | | | | | | |
| Associated companies | |
| $76,272 |
| |
| $47,867 |
| | 51,454 |
| | 59,347 |
|
| Other | | 81,186 |
| | 77,342 |
| | 87,369 |
| | 126,095 |
|
| Customer deposits | | 43,630 |
| | 44,419 |
| | 41,395 |
| | 40,925 |
|
| Taxes accrued | | 31,461 |
| | 15,351 |
| | 49,640 |
| | 45,659 |
|
| Interest accrued | | 19,161 |
| | 25,977 |
| | 19,981 |
| | 25,556 |
|
| Deferred fuel costs | | 74,918 |
| | 54,543 |
| | 38,675 |
| | 67,301 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 41,325 |
| | — |
|
| Other | | 6,671 |
| | 9,388 |
| | 6,926 |
| | 8,132 |
|
| TOTAL | | 333,299 |
| | 274,887 |
| | 836,765 |
| | 373,015 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 999,737 |
| | 1,027,647 |
| | 522,688 |
| | 544,642 |
|
| Accumulated deferred investment tax credits | | 12,696 |
| | 12,934 |
| | 11,790 |
| | 11,983 |
|
| Regulatory liability for income taxes - net | | | 372,230 |
| | 412,620 |
|
| Other regulatory liabilities | | 6,004 |
| | 8,502 |
| | 11,060 |
| | 6,850 |
|
| Asset retirement cost liabilities | | 6,559 |
| | 6,470 |
| | 6,930 |
| | 6,835 |
|
| Accumulated provisions | | 8,247 |
| | 7,584 |
| | 9,907 |
| | 10,115 |
|
| Pension and other postretirement liabilities | | 61,507 |
| | 67,313 |
| | 11,008 |
| | 17,853 |
|
| 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 |
| |
| Long-term debt (includes securitization bonds of $333,233 as of March 31, 2018 and $358,104 as of December 31, 2017) | | | 1,062,555 |
| | 1,587,150 |
|
| Other | | 49,282 |
| | 50,343 |
| | 49,054 |
| | 48,508 |
|
| TOTAL | | 2,628,615 |
| | 2,689,200 |
| | 2,057,222 |
| | 2,646,556 |
|
| | | | | | | | | |
| 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 |
| |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2018 and 2017 | | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
| | 596,994 |
| | 596,994 |
|
| Retained earnings | | 548,402 |
| | 537,548 |
| | 631,071 |
| | 613,721 |
|
| TOTAL | | 1,079,848 |
| | 1,068,994 |
| | 1,277,517 |
| | 1,260,167 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,041,762 |
| |
| $4,033,081 |
| |
| $4,171,504 |
| |
| $4,279,738 |
|
| | | | | | | | | |
| 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 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total | 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 |
| |
| | | | | | | | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| | | | | | | | | | | | | | | |
| Net income | — |
| | — |
| | 10,854 |
| | 10,854 |
| — |
| | — |
| | 10,854 |
| | 10,854 |
|
| | | | | | | | | | | | | | | |
| Balance at March 31, 2017 |
| $49,452 |
| |
| $481,994 |
| |
| $548,402 |
| |
| $1,079,848 |
|
| $49,452 |
| |
| $481,994 |
| |
| $548,402 |
| |
| $1,079,848 |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2017 | |
| $49,452 |
| |
| $596,994 |
| |
| $613,721 |
| |
| $1,260,167 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 17,350 |
| | 17,350 |
|
| | | | | | | | | |
| Balance at March 31, 2018 | |
| $49,452 |
| |
| $596,994 |
| |
| $631,071 |
| |
| $1,277,517 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | | | Increase/ | | | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $137 |
| |
| $135 |
| |
| $2 |
| | 1 |
| |
| $148 |
| |
| $137 |
| |
| $11 |
| | 8 |
|
| Commercial | | 90 |
| | 84 |
| | 6 |
| | 7 |
| | 85 |
| | 90 |
| | (5 | ) | | (6 | ) |
| Industrial | | 100 |
| | 94 |
| | 6 |
| | 6 |
| | 83 |
| | 100 |
| | (17 | ) | | (17 | ) |
| Governmental | | 6 |
| | 6 |
| | — |
| | — |
| | 6 |
| | 6 |
| | — |
| | — |
|
| Total retail | | 333 |
| | 319 |
| | 14 |
| | 4 |
| |
| Total billed retail | | | 322 |
| | 333 |
| | (11 | ) | | (3 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 13 |
| | 53 |
| | (40 | ) | | (75 | ) | | 13 |
| | 13 |
| | — |
| | — |
|
| Non-associated companies | | 5 |
| | 6 |
| | (1 | ) | | (17 | ) | | 10 |
| | 5 |
| | 5 |
| | 100 |
|
| Other | | 13 |
| | — |
| | 13 |
| | — |
| | 4 |
| | 13 |
| | (9 | ) | | (69 | ) |
| Total | |
| $364 |
| |
| $378 |
| |
| ($14 | ) | | (4 | ) | |
| $349 |
| |
| $364 |
| |
| ($15 | ) | | (4 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,213 |
| | 1,275 |
| | (62 | ) | | (5 | ) | | 1,474 |
| | 1,213 |
| | 261 |
| | 22 |
|
| Commercial | | 1,006 |
| | 1,017 |
| | (11 | ) | | (1 | ) | | 1,083 |
| | 1,006 |
| | 77 |
| | 8 |
|
| Industrial | | 1,790 |
| | 1,807 |
| | (17 | ) | | (1 | ) | | 1,832 |
| | 1,790 |
| | 42 |
| | 2 |
|
| Governmental | | 63 |
| | 70 |
| | (7 | ) | | (10 | ) | | 70 |
| | 63 |
| | 7 |
| | 11 |
|
| Total retail | | 4,072 |
| | 4,169 |
| | (97 | ) | | (2 | ) | | 4,459 |
| | 4,072 |
| | 387 |
| | 10 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 338 |
| | 1,422 |
| | (1,084 | ) | | (76 | ) | | 366 |
| | 338 |
| | 28 |
| | 8 |
|
| Non-associated companies | | 77 |
| | 149 |
| | (72 | ) | | (48 | ) | | 194 |
| | 77 |
| | 117 |
| | 152 |
|
| Total | | 4,487 |
| | 5,740 |
| | (1,253 | ) | | (22 | ) | | 5,019 |
| | 4,487 |
| | 532 |
| | 12 |
|
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 decreased $5.6increased $2 million primarily due to a higherlower effective income tax rate, partially offset by lower operating revenue resulting from lower rate base as compared to the prior year.
Income Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions against revenue being recorded in 2017 in connectionof the Tax Act, and the uncertainties associated with accounting for the complaint against System Energy’s return on equity. SeeTax Act, and Note 2 to the financial statements herein and “Federal Regulation - Complaint Against System Energy” below for further discussionin the Form 10-K contains discussions of proceedings commenced or other responses by Entergy’s regulators to the complaint against System Energy.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20172018 and 20162017 were as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $245,863 |
| |
| $230,661 |
|
| $287,187 |
| |
| $245,863 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 65,776 |
| | 73,156 |
| 65,371 |
| | 65,776 |
|
| Investing activities | (65,068 | ) | | (159,100 | ) | (85,956 | ) | | (65,068 | ) |
| Financing activities | (6,163 | ) | | 110,985 |
| 12,097 |
| | (6,163 | ) |
| Net increase (decrease) in cash and cash equivalents | (5,455 | ) | | 25,041 |
| |
| Net decrease in cash and cash equivalents | | (8,488 | ) | | (5,455 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $240,408 |
| |
| $255,702 |
|
| $278,699 |
| |
| $240,408 |
|
Operating Activities
Net cash flow provided by operating activities decreased $7.4remained relatively unchanged, decreasing by $0.4 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 2016 primarily due to timing of payments to vendors and income tax refunds of $6.6 million in 2016 in accordance with an intercompany income tax allocation agreement. The decrease was partially offset by a decrease in spending of $19.8 million on nuclear refueling outages in 2017 as compared to the same period in 2016.2017.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $94increased $20.9 million for the three months ended March 31, 20172018 compared to the three months ended March 31, 20162017 primarily due to:
to an increase of $112.7 million as a result of 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;cycle and
a decrease an increase of $21.3$17.6 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 20162018 on Grand Gulf outage projects and lower spending in 2017 on compliance with NRC post-Fukushima requirements.
projects. The decreaseincrease was partially offset by money pool activity.
IncreasesDecreases in System Energy’s receivable from the money pool are a usesource of cash flow and System Energy’s receivable from the money pool increaseddecreased by $21.5 million for the three months ended March 31, 2018 compared to increasing 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, 2016.2017. 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 usedprovided $12.1 million of cash for the three months ended March 31, 2018 compared to using $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 primarily due to a decreasethe following activity:
the issuance in net borrowingsMarch 2018 of $67.2$100 million onof 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity’s credit facility in 2017 compared to the same period in 2016 and entity;
the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s 4.02% Series H notes.notes;
common stock dividends and distributions of $63.2 million in first quarter 2018 in order to maintain the targeted capital structure;
net repayments of long-term borrowings of $50 million in 2018 on the nuclear fuel company variable interest entity’s credit facility; and
net short-term borrowings of $25.3 million in the three months ended March 31, 2018 compared to net short-term borrowings of $43.9 million in the three months ended March 31, 2017 on the nuclear fuel company variable interest entity’s credit facility.
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 is primarily due to the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity.
| | | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 44.6 | % | | 45.5 | % | 49.0 | % | | 44.5 | % |
| Effect of subtracting cash | (11.7 | %) | | (12.0 | %) | (13.7 | %) | | (16.0 | %) |
| Net debt to net capital | 32.9 | % | | 33.5 | % | 35.3 | % | | 28.5 | % |
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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 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, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $114,553 | | $33,809 | | $35,198 | | $39,926 |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $90,136 | | $111,667 | | $114,553 | | $33,809 |
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 $120 million scheduled to expire in May 2019. As of March 31, 2017, $110.72018, $43.2 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued bywere outstanding under the System Energy nuclear fuel company variable interest entity.entity credit facility. 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.
System Energy Resources, Inc.
Management's Financial Discussion and 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, and other contingencies.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.
| | SYSTEM ENERGY RESOURCES, INC. | INCOME STATEMENTS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $154,787 |
| |
| $137,693 |
| |
| $148,443 |
| |
| $154,787 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 15,334 |
| | 13,428 |
| | 28,425 |
| | 15,334 |
|
| Nuclear refueling outage expenses | | 4,773 |
| | 4,584 |
| | 3,972 |
| | 4,773 |
|
| Other operation and maintenance | | 48,401 |
| | 32,160 |
| | 45,339 |
| | 47,463 |
|
| Decommissioning | | 13,232 |
| | 12,387 |
| | 8,457 |
| | 13,232 |
|
| Taxes other than income taxes | | 6,424 |
| | 6,252 |
| | 7,097 |
| | 6,424 |
|
| Depreciation and amortization | | 35,441 |
| | 34,707 |
| | 33,321 |
| | 35,441 |
|
| Other regulatory credits - net | | (10,362 | ) | | (13,291 | ) | | (9,109 | ) | | (10,362 | ) |
| TOTAL | | 113,243 |
| | 90,227 |
| | 117,502 |
| | 112,305 |
|
| | | | | | | | | |
| OPERATING INCOME | | 41,544 |
| | 47,466 |
| | 30,941 |
| | 42,482 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,094 |
| | 2,729 |
| | 2,100 |
| | 1,094 |
|
| Interest and investment income | | 4,674 |
| | 3,274 |
| | 6,886 |
| | 4,674 |
|
| Miscellaneous - net | | (128 | ) | | (92 | ) | | (1,176 | ) | | (1,066 | ) |
| TOTAL | | 5,640 |
| | 5,911 |
| | 7,810 |
| | 4,702 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 9,119 |
| | 9,552 |
| | 9,325 |
| | 9,119 |
|
| Allowance for borrowed funds used during construction | | (267 | ) | | (696 | ) | | (532 | ) | | (267 | ) |
| TOTAL | | 8,852 |
| | 8,856 |
| | 8,793 |
| | 8,852 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 38,332 |
| | 44,521 |
| | 29,958 |
| | 38,332 |
|
| | | | | | | | | |
| Income taxes | | 17,985 |
| | 18,563 |
| | 7,650 |
| | 17,985 |
|
| | | | | | | | | |
| NET INCOME | |
| $20,347 |
| |
| $25,958 |
| |
| $22,308 |
| |
| $20,347 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CASH FLOWS | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $20,347 |
| |
| $25,958 |
| |
| $22,308 |
| |
| $20,347 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 61,562 |
| | 58,717 |
| | 66,323 |
| | 61,562 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 18,293 |
| | 49,894 |
| | 7,929 |
| | 18,293 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | 13,953 |
| | 9,121 |
| | 5,883 |
| | 13,953 |
|
| Accounts payable | | (3,008 | ) | | 16,257 |
| | (9,632 | ) | | (3,008 | ) |
| Prepaid taxes and taxes accrued | | (15,032 | ) | | (38,617 | ) | | (15,033 | ) | | (15,032 | ) |
| Interest accrued | | 295 |
| | 837 |
| | 736 |
| | 295 |
|
| Other working capital accounts | | (1,111 | ) | | (30,111 | ) | | (5,874 | ) | | (1,111 | ) |
| Other regulatory assets | | (1,571 | ) | | (8,319 | ) | | (1,960 | ) | | (1,571 | ) |
| Other regulatory liabilities | | | (18,988 | ) | | 23,401 |
|
| Pension and other postretirement liabilities | | (4,187 | ) | | (4,576 | ) | | (3,537 | ) | | (4,187 | ) |
| Other assets and liabilities | | (23,765 | ) | | (6,005 | ) | | 17,216 |
| | (47,166 | ) |
| Net cash flow provided by operating activities | | 65,776 |
| | 73,156 |
| | 65,371 |
| | 65,776 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (14,096 | ) | | (34,747 | ) | | (30,707 | ) | | (14,096 | ) |
| Allowance for equity funds used during construction | | 1,094 |
| | 2,729 |
| | 2,100 |
| | 1,094 |
|
| Nuclear fuel purchases | | (21,765 | ) | | (122,320 | ) | | (74,257 | ) | | (21,765 | ) |
| Proceeds from the sale of nuclear fuel | | 60,188 |
| | — |
| | — |
| | 60,188 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 75,787 |
| | 188,506 |
| | 54,210 |
| | 75,787 |
|
| Investment in nuclear decommissioning trust funds | | (85,532 | ) | | (197,996 | ) | | (58,833 | ) | | (85,532 | ) |
| Changes in money pool receivable - net | | (80,744 | ) | | 4,728 |
| | 21,531 |
| | (80,744 | ) |
| Net cash flow used in investing activities | | (65,068 | ) | | (159,100 | ) | | (85,956 | ) | | (65,068 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | 100,000 |
| | — |
|
| Retirement of long-term debt | | (50,001 | ) | | (1 | ) | | (50,002 | ) | | (50,001 | ) |
| Changes in credit borrowings - net | | 43,851 |
| | 111,012 |
| |
| Changes in short-term borrowings - net | | | 25,339 |
| | 43,851 |
|
| Common stock dividends and distributions | | | (63,240 | ) | | — |
|
| Other | | (13 | ) | | (26 | ) | | — |
| | (13 | ) |
| Net cash flow provided by (used in) financing activities | | (6,163 | ) | | 110,985 |
| | 12,097 |
| | (6,163 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (5,455 | ) | | 25,041 |
| |
| Net decrease in cash and cash equivalents | | | (8,488 | ) | | (5,455 | ) |
| Cash and cash equivalents at beginning of period | | 245,863 |
| | 230,661 |
| | 287,187 |
| | 245,863 |
|
| Cash and cash equivalents at end of period | |
| $240,408 |
| |
| $255,702 |
| |
| $278,699 |
| |
| $240,408 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | |
| Cash paid during the period for: | | | | | |
| Interest - net of amount capitalized | |
| $8,593 |
| |
| $8,593 |
| |
| $8,592 |
| |
| $8,593 |
|
| Income taxes | |
| $— |
| |
| ($6,598 | ) | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | ASSETS | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $797 |
| |
| $786 |
| |
| $47 |
| |
| $78 |
|
| Temporary cash investments | | 239,611 |
| | 245,077 |
| | 278,652 |
| | 287,109 |
|
| Total cash and cash equivalents | | 240,408 |
| | 245,863 |
| | 278,699 |
| | 287,187 |
|
| Accounts receivable: | | | | | | | | |
| Associated companies | | 170,154 |
| | 104,390 |
| | 142,321 |
| | 170,149 |
|
| Other | | 4,664 |
| | 3,637 |
| | 6,940 |
| | 6,526 |
|
| Total accounts receivable | | 174,818 |
| | 108,027 |
| | 149,261 |
| | 176,675 |
|
| Materials and supplies - at average cost | | 84,032 |
| | 82,469 |
| | 89,431 |
| | 88,424 |
|
| Deferred nuclear refueling outage costs | | 20,100 |
| | 24,729 |
| | 9,668 |
| | 7,908 |
|
| Prepaid taxes | | 30,914 |
| | 15,882 |
| |
| Prepayments and other | | 8,408 |
| | 4,229 |
| | 5,596 |
| | 2,489 |
|
| TOTAL | | 558,680 |
| | 481,199 |
| | 532,655 |
| | 562,683 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | 815,975 |
| | 780,496 |
| | 896,219 |
| | 905,686 |
|
| TOTAL | | 815,975 |
| | 780,496 |
| | 896,219 |
| | 905,686 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 4,341,221 |
| | 4,331,668 |
| | 4,331,713 |
| | 4,327,849 |
|
| Property under capital lease | | 585,084 |
| | 585,084 |
| | 588,281 |
| | 588,281 |
|
| Construction work in progress | | 44,636 |
| | 43,888 |
| | 100,467 |
| | 69,937 |
|
| Nuclear fuel | | 220,030 |
| | 259,635 |
| | 248,372 |
| | 207,513 |
|
| TOTAL UTILITY PLANT | | 5,190,971 |
| | 5,220,275 |
| | 5,268,833 |
| | 5,193,580 |
|
| Less - accumulated depreciation and amortization | | 3,094,345 |
| | 3,063,249 |
| | 3,203,002 |
| | 3,175,018 |
|
| UTILITY PLANT - NET | | 2,096,626 |
| | 2,157,026 |
| | 2,065,831 |
| | 2,018,562 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 90,931 |
| | 93,127 |
| |
| Other regulatory assets | | 414,979 |
| | 411,212 |
| | 446,287 |
| | 444,327 |
|
| Other | | 4,591 |
| | 4,652 |
| | 11,363 |
| | 7,629 |
|
| TOTAL | | 510,501 |
| | 508,991 |
| | 457,650 |
| | 451,956 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $3,981,782 |
| |
| $3,927,712 |
| |
| $3,952,355 |
| |
| $3,938,887 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | LIABILITIES AND EQUITY | | March 31, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $3 |
| |
| $50,003 |
| |
| $85,005 |
| |
| $85,004 |
|
| Short-term borrowings | | 110,744 |
| | 66,893 |
| | 43,170 |
| | 17,830 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 4,124 |
| | 5,843 |
| | 6,189 |
| | 16,878 |
|
| Other | | 43,094 |
| | 50,558 |
| | 65,448 |
| | 62,868 |
|
| Taxes accrued | | | 31,551 |
| | 46,584 |
|
| Interest accrued | | 14,344 |
| | 14,049 |
| | 14,125 |
| | 13,389 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 76,442 |
| | — |
|
| Other | | 2,959 |
| | 2,957 |
| | 2,437 |
| | 2,434 |
|
| TOTAL | | 175,268 |
| | 190,303 |
| | 324,367 |
| | 244,987 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,127,742 |
| | 1,112,865 |
| | 785,726 |
| | 776,420 |
|
| Accumulated deferred investment tax credits | | 40,714 |
| | 41,663 |
| | 39,087 |
| | 39,406 |
|
| Regulatory liability for income taxes - net | | | 167,518 |
| | 246,122 |
|
| Other regulatory liabilities | | 394,263 |
| | 370,862 |
| | 439,165 |
| | 455,991 |
|
| Decommissioning | | 867,434 |
| | 854,202 |
| | 870,120 |
| | 861,664 |
|
| Pension and other postretirement liabilities | | 113,663 |
| | 117,850 |
| | 118,337 |
| | 121,874 |
|
| Long-term debt | | 501,212 |
| | 501,129 |
| | 516,577 |
| | 466,484 |
|
| Other | | 2,316 |
| | 15 |
| | 21,581 |
| | 15,130 |
|
| TOTAL | | 3,047,344 |
| | 2,998,586 |
| | 2,958,111 |
| | 2,983,091 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016 | | 679,350 |
| | 679,350 |
| |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2018 and 2017 | | | 601,850 |
| | 658,350 |
|
| Retained earnings | | 79,820 |
| | 59,473 |
| | 68,027 |
| | 52,459 |
|
| TOTAL | | 759,170 |
| | 738,823 |
| | 669,877 |
| | 710,809 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,981,782 |
| |
| $3,927,712 |
| |
| $3,952,355 |
| |
| $3,938,887 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Three Months Ended March 31, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) | |
| | | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
| |
| | | | | | | |
| Net income | — |
| | 25,958 |
| | 25,958 |
| |
| | | | | | | |
| Balance at March 31, 2016 |
| $719,350 |
| |
| $87,687 |
| |
| $807,037 |
| |
| | | | | | | (In Thousands) |
| | | | | | | | | | | |
| Balance at December 31, 2016 |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | | | | | | |
| Net income | — |
| | 20,347 |
| | 20,347 |
| — |
| | 20,347 |
| | 20,347 |
|
| | | | | | | | | | | |
| Balance at March 31, 2017 |
| $679,350 |
| |
| $79,820 |
| |
| $759,170 |
|
| $679,350 |
| |
| $79,820 |
| |
| $759,170 |
|
| | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2017 | |
| $658,350 |
| |
| $52,459 |
| |
| $710,809 |
|
| | | | | | | |
| Net income | | — |
| | 22,308 |
| | 22,308 |
|
| Common stock dividends and distributions | | (56,500 | ) | | (6,740 | ) | | (63,240 | ) |
| | | | | | | |
| Balance at March 31, 2018 | |
| $601,850 |
| |
| $68,027 |
| |
| $669,877 |
|
| | | | | | | |
| 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) |
| | | | | | | | | |
1/01/2017-1/2018-1/31/20172018 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
2/01/2017-2/2018-2/28/20172018 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
3/01/2017-3/2018-3/31/20172018 | | — |
| |
| $— |
| | — |
| |
| $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 2017,2018, Entergy withheld 1,05471,229 shares of its common stock at $70.58$76.83 per share, 122,14843,698 shares of its common stock at $70.61$78.29 per share, and 31,24316,691 shares of its common stock at $71.89$78.51 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
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 are updatesis an update to that discussion.
In March 20172018 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.
In March 2017, Entergy closed on the sale of the FitzPatrick plant to Exelon, and as part of the 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 the 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
Regional HazeOzone Nonattainment
In June 2005As discussed in the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a requirement to install SO2 and NOx pollution control technologyForm 10-K, the Houston-Galveston-Brazoria area was originally classified as Best Available Retrofit Control Technology (BART) to continue operating certain of Entergy’s fossil generation units. The rule leaves certain CAVR determinations to the states.
In Arkansas, the Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations“moderate” nonattainment under the CAVR. In April 2012 the EPA finalized a decision addressing the Arkansas Regional Haze SIP, in which it disapproved a large portion1997 8-hour ozone standard with an attainment date of the Arkansas Regional Haze SIP, including the emission limits for NOx and SO2 at White Bluff. By Court order, the EPA had to issue a final federal implementation plan (FIP) for Arkansas Regional Haze by no later than August 31, 2016.June 15, 2010. In April 2015 the EPA publishedrevoked the 1997 ozone national ambient air quality standards (NAAQS), and in May 2016 the EPA issued a proposed FIPrule approving a substitute for Arkansas, taking comment on requiring installation of scrubbersthe Houston-Galveston-Brazoria area. This redesignation indicates that the area has attained the revoked 1997 8-hour ozone NAAQS due to permanent and low NOx burners to continue operating both units atenforceable emission reductions and that it will maintain that NAAQS for 10 years from 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 the deadline 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 and NOx limits at both White Bluff and Independence within three years of the effective date of the final FIP andapproval. Final approval, which was effective in December 2016, resulted in the area no longer being subject to ceaseany remaining anti-backsliding or non-attainment new source review requirements associated with the use of coal at the White Bluff units in 2027 and 2028.
revoked 1997 NAAQS. In September 2016 the EPA published the final Arkansas 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 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 November 2016, Entergy and other interested parties such as the State of Arkansas filed
petitions for administrative reconsideration and stay at the EPA as well as petitions for judicial review toFebruary 2018 the U.S. Court of Appeals for the Eighth Circuit. In February 2016, Entergy, the State of Arkansas, and other parties requested the Court to judicially stay the FIP. In March 2017D.C. Circuit opined that the EPA granted in partviolated the petitions for reconsiderationClean Air Act by revoking the 1997 standard and by creating the process that allowed states to avoid certain “anti-backsliding” provisions of the Act. The EPA has not stated its intentwhether it will request additional review of this decision or what actions it will take to stayreview further the FIP compliance deadlines by at least 90 days. Subsequently, the Eighth Circuit granted the government’s motion to hold the appeal litigation in abeyance for 90 days.1997 designations.
In Louisiana, Entergy is working withCoal Combustion Residuals
As discussed in the Louisiana Department of Environmental Quality (LDEQ) and the 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 finalizationForm 10-K, in December 2017. At this time, it is premature2016 the Water Infrastructure Improvements for the Nation Act (WIIN Act) was signed into law, which authorizes states to predict what controls, if any, might be required for compliance. Entergy continuesregulate coal ash rather than leaving primary enforcement 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 statescitizen suit actions. States may submit to the EPA proposals for a permit program. In September 2017 the implementation plans required under Section 111(d)EPA agreed to reconsider certain provisions of the Clean Air Act and its implementing regulations by no later than June 30, 2016.CCR (coal combustion residuals) rule in light of the WIIN Act. In January 2014March 2018 the EPA issued thepublished its 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 commentsrevisions to the EPA CCR rule with comments due at the end of April 2018.
Amendments to Articles of Incorporation
Entergy Arkansas
On May 1, 2018, Entergy Arkansas adopted the Third Amended and Restated Articles of Incorporation to amend its Second Amended and Restated Articles of Incorporation to correct certain typographical errors contained
in December 2014.such Second Amended and Restated Articles of Incorporation. The EPA issuedArticles of Amendment and Restatement for the final rules for both newThird Amended and existing sourcesRestated Articles of Incorporation of Entergy Arkansas are included in August 2015,this filing as Exhibit 3(a).
Entergy Mississippi
On May 1, 2018, Entergy Mississippi adopted the Third Amended and they were publishedRestated Articles of Incorporation to amend its Second Amended and Restated Articles of Incorporation (i) to correct certain typographical errors contained in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires statessuch Second Amended and Restated Articles of Incorporation and (ii) 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 U.S. Supreme Court, if review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and Economic Growth” instructing the EPA to review, suspend, revise, or rescind the Clean Power Plan if appropriate. The EPA subsequently asked the D.C. Circuit to hold the challengesdelete all provisions relating to the Clean Power Plan6.25% Preferred Stock, Cumulative, $25 Par Value, as it has redeemed all shares of such series of preferred stock. Such Third Amended and the greenhouse gas new source performance standards in abeyance and signed a noticeRestated Articles 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 the affected governors explaining that statesIncorporation 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 water 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 rule. After litigation, in May 2014 the EPA issued a new 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 be 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. Entergy will continue to monitor this rulemaking and ensure compliance with existing permitting processes. In response to the stay, the EPA and the U.S. Army Corps resumed nationwide use of the agencies’ regulationsfiling as they existed prior to August 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 revise or rescind, as appropriate.Exhibit 3(b).
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 | | Three Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | March 31, | | December 31, | | March 31, |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 |
| Entergy Arkansas | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 1.92 | | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 2.87 |
| | 2.50 |
| Entergy Louisiana | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.01 | | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.85 |
| | 2.86 |
| Entergy Mississippi | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 3.23 | | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 4.49 |
| | 3.08 |
| Entergy New Orleans | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 4.09 | | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 4.50 |
| | 3.44 |
| Entergy Texas | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 1.86 | | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 2.41 |
| | 2.00 |
| System Energy | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 5.11 | | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 4.91 |
| | 4.14 |
| | | | | 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 | | Three Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | March 31, | | December 31, | | March 31, |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 |
| Entergy Arkansas | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 1.88 | | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 2.81 |
| | 2.46 |
| Entergy Louisiana | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.01 | | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.85 |
| | 2.86 |
| Entergy Mississippi | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 3.14 | | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 4.36 |
| | 3.01 |
| Entergy New Orleans | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 3.83 | | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 4.24 |
| | 3.44 |
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
|
| | |
| | *3(a) - | |
| | |
| *3(b) - | |
| | |
| 4(a) - | |
| | |
| 4(b) - | |
| | |
| 4(c) - | |
| | |
| 4(d) - | |
| | |
| *12(a) - | |
| | | |
| | *12(b) - | |
| | | |
| | *12(c) - | |
| | | |
| | *12(d) - | |
| | | |
| | *12(e) - | |
| | | |
| | *12(f) - | |
| | | |
| | *31(a) - | |
| | | |
| | *31(b) - | |
| | | |
| | *31(c) - | |
| | | |
| | *31(d) - | |
| | | |
| | *31(e) - | |
| | | |
| | *31(f) - | |
| | | |
| | *31(g) - | |
| | | |
| | *31(h) - | |
| | | |
| | *31(i) - | |
| | | |
| | *31(j) - | |
| | | |
| | *31(k) - | |
| | | |
| | *31(l) - | |
| | | |
| | *31(m) - | |
| | | |
| | *31(n) - | |
| | | |
| | *32(a) - | |
| | | |
| | *32(b) - | |
| | |
| *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(c) - | |
| | |
| *32(d) - | |
| | |
| *32(e) - | |
| | |
| *32(f) - | |
| | |
| *32(g) - | |
| | |
| *32(h) - | |
| | |
| *32(i) - | |
| | |
| *32(j) - | |
| | |
| *32(k) - | |
| | |
| *32(l) - | |
| | |
| *32(m) - | |
| | | |
| | *32(n) - | |
| | | |
| | *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.
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.LLC 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 5, 20174, 2018