ENTERGY CORP annual report, FY2023

Business context and reporting period

Entergy Corporation’s combined Form 10-K covers the fiscal year ended December 31, 2023, and was filed February 23, 2024. Entergy is primarily a regulated electric utility serving about 3 million customers in Arkansas, Louisiana, Mississippi, and Texas; its utility business also includes a small Louisiana gas distribution operation and nuclear generation. The merchant nuclear business exit was completed in 2022.

Key financial metrics

MetricFY 2023FY 2022
Operating revenue$12.15 billion$13.76 billion
Operating income$2.62 billion$2.05 billion
Operating margin21.6%14.9%
Net income attributable to Entergy$2.36 billion$1.10 billion
Diluted EPS$11.10$5.37
Cash from operating activities$4.29 billion$2.59 billion
Cash used in investing activities$4.63 billion$5.71 billion
Cash and cash equivalents at year-end$133 million$224 million
Debt-to-capital ratio63.8%66.9%

Construction and capital expenditures were $4.44 billion in 2023. Long-term debt, including the current portion, totaled $25.11 billion at year-end; commercial paper outstanding was $1.14 billion. Entergy had $3.50 billion of parent-company revolving credit capacity, with $3.497 billion available. The 2024 long-term debt maturity and estimated interest schedule shows $3.00 billion due.

Common dividends paid were $918 million in 2023, and the board declared a $1.13-per-share dividend in January 2024. Planned construction and capital investment is $5.92 billion in 2024, $6.50 billion in 2025, and $7.34 billion in 2026.

Material changes versus the prior comparable period

  • Revenue declined 11.7%, largely reflecting lower fuel, rider, and other pass-through revenues that generally have offsetting expenses, as well as the absence of Palisades-related revenue after its 2022 shutdown and sale. Retail electric sales were nearly flat; total retail volume was down about 0.2%.
  • Net income more than doubled, but results included unusually large tax benefits. Resolution of the 2016–2018 IRS audit reduced 2023 income tax expense by about $843 million. The reported effective tax rate was negative 41.3%, versus negative 3.7% in 2022.
  • Cash from operations rose $1.71 billion, reflecting lower fuel costs and timing of cost recovery, reduced storm spending, and lower pension contributions. Cash used in investing fell by $1.08 billion, mainly due to lower storm-related construction spending and changes in storm escrow activity.
  • The debt-to-capital ratio improved from 66.9% to 63.8%, primarily due to 2023 net income. Interest expense nevertheless increased, including from debt issuances at utility subsidiaries and higher parent-company commercial paper costs.

Outlook, management commentary, risks, and unusual items

  • Capital plans include generation, transmission, distribution, nuclear, resilience, and renewable investments. Management says generation is projected to meet MISO reserve requirements in the near term, while MISO resource-adequacy changes could affect capacity credits and future procurement needs.
  • Entergy Louisiana and Entergy New Orleans agreed to sell their regulated gas distribution businesses for base prices of $198 million and $285.5 million, respectively, subject to adjustments, regulatory approvals, and other closing conditions. Applications were pending at year-end; completion is not assured.
  • Entergy Louisiana completed a $1.491 billion Hurricane Ida storm-cost securitization in March 2023. The bonds are obligations of the issuing authority, not reported as Entergy debt; customer restoration charges are expected to continue for up to 15 years. The transaction and related tax accounting materially affected 2023 results.
  • Management identifies rate recovery and regulatory decisions, storm damage and recovery, MISO market rules, fuel and purchased-power costs, inflation and interest rates, capital-project execution, environmental rules, nuclear operations, and cybersecurity as significant risks.
  • System Energy faces continuing FERC disputes over Grand Gulf rates, sale-leaseback costs, tax positions, and plant prudence. An amended complaint alleges potentially more than $1 billion in damages; the APSC settlement remained subject to FERC approval. The filing states that aggregate refund claims, after specified settlements, exceed System Energy’s net book value.
  • River Bend was in NRC Action Matrix Column 2 at year-end; supplemental inspections were reported completed, with a formal report pending. Entergy’s climate commitments include net-zero carbon emissions by 2050 and 50% carbon-free generating capacity by 2030; achievement depends on investment, regulatory approvals, technology, and execution.
  • Deloitte issued unqualified opinions on Entergy’s consolidated financial statements and internal control over financial reporting. Management also concluded internal control over financial reporting was effective at year-end.

Important facts for investors to verify

  • How much of the 2023 earnings increase is repeatable after separating IRS-audit and storm-securitization tax effects from ongoing utility earnings.
  • The status and potential financial exposure of System Energy’s FERC proceedings, including the APSC settlement’s approval and the alleged additional refund claims.
  • Regulatory approval, timing, final proceeds, and customer or rate impacts of the proposed gas-business sales.
  • Whether planned capital spending, resilience programs, and generation projects remain on schedule and within budget, and how they will be funded alongside debt maturities and dividends.
  • Cash-flow and customer-bill effects of fuel-cost recovery, storm securitizations, and the low year-end cash balance.