Entergy Corporation — Q3 2021 Form 10-Q
Business context and reporting period
Entergy is an electric utility serving parts of Arkansas, Louisiana, Mississippi and Texas, with a smaller wholesale power business. This combined filing covers the quarter and nine months ended September 30, 2021; comparisons are to 2020. The wholesale segment was being wound down, with Palisades the remaining merchant nuclear plant at quarter-end.
Key financial results and liquidity
- Revenue: Q3 operating revenue was $3.354 billion, up 15.5%; nine-month revenue was $9.020 billion, up 16.5%. Much of the increase reflects fuel and other rider revenues that generally have offsetting expenses and do not materially affect earnings.
- Profit and margins: Q3 net income attributable to Entergy was $531 million, or $2.63 diluted EPS, versus $521 million and $2.59. Nine-month attributable net income was $860 million, or $4.26 diluted EPS, versus $1.000 billion and $4.98. Calculated operating margins were approximately 24.7% for Q3 versus 26.8%, and 16.7% for the nine months versus 20.9%.
- Cash flow: Nine-month operating cash flow was $2.011 billion, down from $2.370 billion. Investing cash outflow was $3.862 billion, primarily reflecting construction and storm-related spending; financing cash inflow was $1.092 billion. Cash declined to $1.000 billion from $1.759 billion at year-end 2020.
- Debt and liquidity: Long-term debt, including current maturities, was $24.617 billion; commercial paper and notes payable were $1.006 billion. Debt-to-capital was 69.1%, or 69.0% excluding non-recourse securitization bonds; net debt-to-net-capital excluding those bonds was 68.1%. Current assets of $4.233 billion were below current liabilities of $6.645 billion. The $3.5 billion parent revolver had $3.169 billion available; Entergy reported compliance with its credit-facility covenant.
Material changes versus the prior comparable period
- Nine-month attributable earnings declined 14.1%, principally reflecting a $340 million pretax ($268 million after-tax) charge on the May 2021 sale of Indian Point, alongside other expense and tax movements. Q3 attributable earnings increased modestly.
- Utility billed retail electricity sales rose 2% in Q3 and 3% year to date. Industrial usage was higher, while Hurricane Ida-related outages reduced some residential and commercial usage.
- Wholesale revenue fell to $162 million in Q3 from $214 million, and to $559 million year to date from $747 million, mainly following shutdowns of Indian Point 2 and 3. Wholesale owned capacity declined to 1,205 MW from 2,246 MW.
- Hurricane Ida and other restoration activity increased spending and pressured cash generation. Entergy’s estimate for Ida restoration costs was $2.1 billion to $2.5 billion.
Outlook, commentary, risks and unusual items
- Management provided no specific consolidated earnings guidance in the supplied filing text. It anticipated approximately $11.7 billion of Utility capital investment in 2022–2024, excluding Ida-related capital spending, and approximately $5 million for Wholesale Commodities. Entergy also expected to issue about $1.5 billion of equity from 2021 through 2024.
- The Board declared a quarterly common dividend of $1.01 per share in October 2021, up from $0.95. Entergy’s stated long-term objective includes net-zero carbon emissions by 2050.
- Ida costs remain subject to regulatory review and recovery is uncertain in amount and timing. Entergy Louisiana sought financing and recovery mechanisms, including approximately $1 billion of interim bonds issued in October 2021; Entergy New Orleans faced a City Council investigation of its storm response and potential scrutiny of cost recovery.
- Material regulatory contingencies include System Energy FERC proceedings concerning Grand Gulf rates, lease payments and uncertain tax positions. An ALJ decision, if upheld, could entail an estimated $422 million refund plus approximately $123 million interest on one issue, as well as other potential refunds; these are contested interim findings, not final obligations. A separate complaint seeks at least $360 million related to alleged imprudent Grand Gulf operations. System Energy had recorded a $37 million provision for the separate return-on-equity and capital-structure proceeding.
- Other notable risks include Grand Gulf’s NRC Column 3 status after five unplanned scrams in 2020 (the NRC reported supplemental inspection objectives met in October 2021), storm and extreme-weather exposure, fuel-cost recovery reviews, and uncertainty around regulatory approvals and wholesale fleet exit plans. The planned Palisades shutdown was no later than May 31, 2022, with sale expected by the end of 2022, subject to approvals.
Important facts for investors to verify
- Progress and final regulatory treatment of Ida restoration costs, financing, and recovery timing.
- Final FERC rulings and potential refund exposure in System Energy and Grand Gulf proceedings.
- Whether operating cash flow and liquidity can support storm restoration, planned capital spending, debt service and the equity issuance plan.
- Execution, regulatory approval and financial consequences of the Palisades exit and remaining wholesale business wind-down.
- Utility earnings quality and trends excluding pass-through fuel revenues, the Indian Point sale charge, and other material one-time or regulatory items.