Entergy Corporation — Q3 2023 Form 10-Q
Business context and period. Entergy is a regulated Gulf South electric utility, with a small natural gas distribution business. This combined, unaudited filing covers the quarter and nine months ended September 30, 2023, compared with the same periods in 2022. The figures below are consolidated Entergy Corporation results unless noted.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $3.596B | $4.219B | $9.423B | $10.492B |
| Operating income | $1.143B | $955M | $2.361B | $1.602B |
| Net income attributable to Entergy | $667M | $561M | $1.369B | $997M |
| Diluted EPS | $3.14 | $2.74 | $6.45 | $4.88 |
| Operating margin | 31.8% | 22.6% | 25.1% | 15.3% |
| Net margin | 18.5% | 13.3% | 14.5% | 9.5% |
Revenue fell 15% in Q3 and 10% year to date, while earnings and EPS increased. Much of the revenue decline reflected lower fuel, rider and other pass-through revenues, which generally have offsetting expenses; the nine-month comparison also reflects lower sales for resale and the prior-year Palisades business. Q3 retail electricity sales volume rose 5%; nine-month retail sales were essentially flat.
- Cash flow: Nine-month operating cash flow was $3.231B, versus $1.809B. Construction and capital expenditures were $3.374B; investing cash outflow was $3.579B. Cash and cash equivalents ended at $1.520B, up from $224M at year-end 2022.
- Debt and liquidity: Debt to capital was 66.3% at September 30, versus 66.9% at year-end; net debt to net capital excluding securitization bonds was 64.8%, versus 66.5%. Long-term debt including current maturities was about $26.2B. Entergy had $1.351B of commercial paper outstanding under its $2B program and $3.497B available under its $3.5B parent credit facility. It reported compliance with the facility’s debt covenant.
- Capital and dividends: Entergy preliminarily expects Utility capital investment of approximately $19.6B in 2024–2026. In October, the Board declared a quarterly common dividend of $1.13 per share, up from $1.07.
Material changes, unusual items and outlook
- The nine-month 2023 results include a $129M net reduction in income tax expense from Entergy Louisiana’s March 2023 storm-cost securitization, partly offset by a $103M regulatory charge ($76M after tax) for customer credits. The 2022 comparison included a $551M System Energy regulatory charge and storm-securitization tax and regulatory effects. These items make year-over-year earnings comparisons less representative of underlying trends.
- Q3 2023 includes $78M of Entergy Arkansas write-offs ($59M after tax) after its October commitment to seek approval to forgo recovery of specified costs from the 2013 Arkansas Nuclear One stator incident. The quarter also included a $40M benefit from DOE spent-fuel litigation proceeds recognized by Entergy.
- On October 28, Entergy Louisiana and Entergy New Orleans agreed to sell their regulated gas distribution businesses for base prices of $198M and $285.5M, respectively, subject to adjustments, regulatory approvals and other closing conditions. The transactions are not completed.
- Management’s preliminary Utility investment plan emphasizes generation modernization and decarbonization, nuclear, transmission, distribution reliability and customer growth. Entergy Louisiana’s proposed first phase of its Future Ready resilience plan involves approximately $5B over five years; cost recovery and plan terms remain under regulatory review. No consolidated earnings guidance is stated in the provided filing text.
- System Energy faces multiple FERC proceedings concerning Grand Gulf rates, refunds and operations. An October settlement in principle with the Arkansas regulator provides for a $142M black-box refund to Entergy Arkansas, inclusive of $50M already received, and specified prospective rate terms; FERC approval is required. A separate amended complaint alleges potentially more than $1B in damages. System Energy reported a remaining regulatory liability of approximately $270M for pending complaints.
- River Bend remained in NRC oversight Column 2 pending supplemental inspections related to wiring and radiation-monitor calibration findings; Waterford 3 returned to Column 1. Environmental regulation, extreme weather, cost recovery, interest rates and capital-project execution are among the disclosed risks.
Most important facts for investors to verify
- How much of the earnings increase persists after adjusting for securitization-related tax and regulatory effects, litigation proceeds and the ANO write-off.
- Whether FERC approves the APSC-System Energy settlement, and the eventual refund, rate and damages outcomes in the remaining Grand Gulf proceedings.
- Regulatory approval, timing and final proceeds for the proposed gas business sales.
- Approval and customer cost recovery for planned resilience and capital investments, alongside the company’s ability to fund its investment program and manage higher-cost debt.
- River Bend’s supplemental inspection results and any resulting operational or financial consequences.