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):

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 secondthird quarter 2019 to the secondthird quarter 2018 showing how much the line item increased or (decreased) in comparison to the prior period:

Following is an analysis of the change in operating revenues comparing the secondthird quarter 2019 to the secondthird quarter 2018:

The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In secondthird quarter 2019, $60$91 million was returned to customers through reductions in operating revenues as compared to $151$277 million in secondthird quarter 2018. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

The retail electric price variance is primarily due to:

The volume/weather variance is primarily due to a decrease of 439 GWh, or 2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales and a decrease in industrial usage. Also contributing to the decrease was decreasedincreased usage during the unbilled sales period. The decrease in industrial usage is primarily driven by decreased demand from cogeneration customers and decreased small industrial sales.

Depreciation and amortization expenses increased primarily due to to:

Other regulatory charges (credits) include the following significant activity:

Other income increaseddecreased primarily due to changes in decommissioning trust fund activity, and an increaseincluding portfolio rebalancing of certain of the decommissioning trust funds in the allowance for equity funds used during constructionthird quarter 2018.

Interest expense increased primarily due to higher construction workthe issuance in progressMarch 2019 of $525 million of 4.20% Series mortgage bonds by Entergy Louisiana and the issuance in March 2019 which included the Lake Charles Power Station, Montgomery County Power Station, and New Orleans Power Station projects.of $350 million of 4.20% Series mortgage bonds by Entergy Arkansas.

Other income increaseddecreased primarily due to higherlower gains on decommissioning trust fund investments in the secondthird quarter 2019 compared to the secondthird quarter 2018, including the effect of portfolio rebalancing in the third quarter 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization in 2019 of costs associated with a refueling outage at Palisades.

The effective income tax rate was 0.6%7.3% for the secondthird quarter 2019. The difference in the effective income tax rate for the secondthird quarter 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 884.2%(110.2%) for the secondthird quarter 2018. The difference in the effective income tax rate for the secondthird quarter 2018 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, a restructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plant decommissioning trusts for which additional tax basis is now recoverable, and an IRSthe conclusion of a state income tax audit settlement for the 2012-2013 tax returns.involving Entergy Wholesale Commodities. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a discussion of the IRS audit settlement.restructuring and the conclusion of the state income tax audit.

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the sixnine months ended JuneSeptember 30, 2019 to the sixnine months ended JuneSeptember 30, 2018 showing how much the line item increased or (decreased) in comparison to the prior period:

Following is an analysis of the change in operating revenues comparing the sixnine months ended JuneSeptember 30, 2019 to the sixnine months ended JuneSeptember 30, 2018:

The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The volume/weather variance is primarily due to a decrease of 1,293 GWh, or 2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales. Also contributing to the decrease was decreased usage during the unbilled sales period.

The retail electric price variance is primarily due to:

Operating revenues for Entergy Wholesale Commodities decreased from $728$1,108 million for the sixnine months ended JuneSeptember 30, 2018 to $723$1,024 million for the sixnine months ended JuneSeptember 30, 2019 primarily due to the shutdown of Pilgrim in May 2019 and lower capacity prices, partially offset by higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer non-refueling outage days.

Other operation and maintenance expenses increased from $1,217$1,852 million for the sixnine months ended JuneSeptember 30, 2018 to $1,236$1,894 million for the sixnine months ended JuneSeptember 30, 2019 primarily due to:

Other regulatory charges (credits) include the following significant activity:

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 2019, which included the Lake Charles Power Station, Montgomery County Power Station, and New Orleans Power Station projects andprojects. The increase was substantially offset by changes in decommissioning trust fund activity.activity, including portfolio rebalancing of certain decommissioning trust funds in 2018.

Interest expense increased primarily due to:

Other operation and maintenance expenses decreased from $600 million for the nine months ended September 30, 2018 to $513 million for the nine months ended September 30, 2019 primarily due to to:

Other income increased primarily due to higher gains on decommissioning trust fund investments in the sixnine months ended JuneSeptember 30, 2019 compared to the sixnine months ended JuneSeptember 30, 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization in 2019 of costs associated with a refueling outage at Palisades.

The effective income tax rate was 8.1%7.8% for the sixnine months ended JuneSeptember 30, 2019. The difference in the effective income tax rate for the sixnine months ended JuneSeptember 30, 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes and the tax effects of the disposition of Vermont Yankee. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the tax effects of the Vermont Yankee disposition.

The effective income tax rate was (160%(128.4%) for the sixnine months ended JuneSeptember 30, 2018. The difference in the effective income tax rate for the sixnine months ended JuneSeptember 30, 2018 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, a restructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plant decommissioning trusts for which additional tax basis is now recoverable, and an IRS audit settlement for the 2012-2013 tax returns. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a discussion of the IRS audit settlement.settlement and the restructuring.

 

As discussed in more detail in Note 16 to the financial statements herein, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.

The transaction is subject to closing conditions, including approval from the NRC. Entergy and Holtec also plan to seek an order from the New York State Public Service Commission disclaiming jurisdiction, or alternatively approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. The transaction closing is targeted for third quarterMay 2021, following the defueling of Indian Point 3.

As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of JuneSeptember 30, 2019, Entergy’s adjusted net investment in the Indian Point units was $265$240 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing. The terms of the transaction include limitations on withdrawals from the nuclear decommissioning trusts to fund decommissioning activities and controls on how Entergy manages the investment of nuclear decommissioning trust assets between signing and closing; however, the agreement does not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing.

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business of approximately $120$100 million in 2019, of which $56$70 million has been incurred as of JuneSeptember 30, 2019, and a total of approximately $120$135 million from 2020 through 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $16$8 million for the three months ended JuneSeptember 30, 2019 and $90$98 million for the sixnine months ended JuneSeptember 30, 2019. These costs were charged 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

Entergy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy as of JuneSeptember 30, 2019 is primarily due to the settlement of the remaining equity forwards in 2019. See Note 3 to the financial statements herein for a discussion of the equity forward sale agreements.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2023.2024.  The facility includes fronting commitments for the issuance of letters of credit against $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 sixnine months ended JuneSeptember 30, 2019 was 4.05%3.94% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of JuneSeptember 30, 2019:

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of JuneSeptember 30, 2019, Entergy Corporation had approximately $1,635$1,918 million of commercial paper outstanding. The weighted-average interest rate for the sixnine months ended JuneSeptember 30, 2019 was 2.97%2.88%.

In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in November 2020. As of JuneSeptember 30, 2019, $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the sixnine months ended JuneSeptember 30, 2019 was 4.19%4.07% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.

Entergy is developing its capital investment plan for 2020 through 2022 and currently anticipates that the current annual amounts of Entergy’s planned construction and otherUtility will make approximately $11.4 billion in capital investments by operating segment for 2019 through 2021.

As discussed in the Form 10-K, the LPSC issued an order in December 2016 approving certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station. Commercial operation commenced in May 2019.

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 was retired effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted a resolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of all necessary permits.

In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council 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. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in paying certain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the City Council. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation. In October 2018 investigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of the New Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonably might occur.”  The City Council issued a resolution requiring Entergy New Orleans to show cause why

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 JulyOctober 2019 meeting, the Board declared a dividend of $0.91$0.93 per share, which isan increase from the sameprevious $0.91 quarterly dividend per share that Entergy has paid since the third quarter 2018.

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the sixnine months ended JuneSeptember 30, 2019 and 2018 were as follows:

Net cash flow provided by operating activities decreased $27increased $258 million for the sixnine months ended JuneSeptember 30, 2019 compared to the sixnine months ended JuneSeptember 30, 2018 primarily due to:

Net cash flow used in investing activities increased $96$25 million for the sixnine months ended JuneSeptember 30, 2019 compared to the sixnine months ended JuneSeptember 30, 2018 primarily due to an increase of $210$197 million in construction expenditures, primarily in the Utility business, as discussed below, partially offset by:

Net cash flow provided by financing activities increased $246$35 million for the sixnine months ended JuneSeptember 30, 2019 compared to the sixnine months ended JuneSeptember 30, 2018 primarily due to:

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.  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 may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. 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 JuneSeptember 30, 2019 (2019 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 guarantee.  Cash and letters of credit are also acceptable forms of credit support. At JuneSeptember 30, 2019, based on power prices at that time, Entergy had liquidity exposure of $75$85 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $21 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 JuneSeptember 30, 2019, Entergy would have been required to provide approximately $30 million of additional cash or letters of credit under some of the agreements. As of JuneSeptember 30, 2019, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $169$140 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

As of JuneSeptember 30, 2019, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings.

See Note 1 to the financial statements in the Form 10-K for discussion of new accounting pronouncements.