Business context and reporting period
Entergy Texas, Inc. (ETI) filed this report as part of Entergy Corporation’s combined Form 10-K. ETI is a regulated electric utility serving parts of eastern Texas. The reporting period is the fiscal year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter filing. Amounts below are ETI-specific unless stated otherwise.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | $1,902.5 million | $1,587.1 million | Up 19.9% |
| Operating income | $326.7 million | $246.8 million | Up $79.9 million |
| Net income | $228.8 million | $215.1 million | Up $13.8 million |
| Operating margin | 17.2% | 15.5% | Up 1.7 percentage points |
| Net income margin | 12.0% | 13.5% | Down 1.5 percentage points |
| Net cash from operating activities | $356.9 million | $375.3 million | Down $18.4 million |
| Construction expenditures | $702.8 million | $895.9 million | Down $193.1 million |
| Cash and cash equivalents, year-end | $0.03 million | $248.6 million | Down $248.6 million |
Revenue growth reflected higher retail rates and usage, plus increased fuel, rider and other pass-through revenues that generally do not affect net income. Retail billed electricity sales rose 5%; industrial sales rose 11%. Net income increased despite higher depreciation and operating costs. The effective income tax rate was 10.0%, compared with 1.4% in 2020.
At year-end, ETI reported total assets of $6.26 billion, net utility plant of $5.32 billion, and long-term debt of $2.35 billion. Its debt-to-capital ratio was 48.7% (48.2% excluding non-recourse securitization bonds), down from 53.7% (52.4% excluding securitization bonds) in 2020. Cash was nearly exhausted; the company also had a $150 million credit facility with no cash borrowings, and $79.6 million of letters of credit issued under an $80 million uncommitted facility supporting MISO obligations. ETI reported $38.8 million of preferred stock outstanding at year-end.
Material changes versus the prior year
- Operating income increased substantially, mainly alongside higher retail rates and electricity usage.
- Net income increased more modestly, while net margin declined because revenue growth included significant pass-through items.
- Operating cash flow fell as fuel costs and the timing of fuel-cost recovery weighed on cash generation. The cash balance fell sharply, while financing included $95 million of parent contributions and increased money-pool borrowing.
- ETI purchased the 147 MW Hardin County Peaking Facility for approximately $37 million and sold a 7.56% interest in the Montgomery County Power Station for approximately $68 million.
- ETI recorded a $2.5 million write-off after the PUCT denied its proposed Liberty County Solar Facility acquisition.
Outlook, management commentary, risks and unusual items
ETI planned construction and capital investments of $530 million in 2022, $825 million in 2023 and $1.055 billion in 2024. Separately, it expected to pay about $1.2 billion for construction of the proposed Orange County Advanced Power Station, a 1,215 MW gas-fired facility; regulatory approval was pending, with service targeted by May 2026. The proposed plant is designed to co-fire hydrogen and be upgradeable for higher hydrogen use.
The PUCT approved $243 million of restoration costs from Hurricanes Laura and Delta and Winter Storm Uri as eligible for securitization, along with a remaining $13 million Hurricane Harvey balance. A financing order followed in January 2022. Recovery and financing terms, including carrying costs, remain important to liquidity and customer bills.
Material risks include regulatory review of rates and cost recovery, fuel-price and purchased-power volatility, severe weather and storm restoration, MISO market and collateral requirements, project cost and schedule risk, and broader FERC proceedings concerning Grand Gulf costs allocated under the Unit Power Sales Agreement. ETI’s planned capital investment also depends on regulatory approvals and access to financing. The report identifies rate regulation as a critical audit matter because future recovery of costs and potential customer refunds require significant management judgment. Deloitte issued an unqualified opinion on ETI’s financial statements.
Important facts for investors to verify
- Whether the storm securitization financing proceeds as approved and how quickly ETI recovers eligible costs.
- Whether Orange County receives PUCT approval and stays within its proposed cost and schedule.
- How ETI will fund planned capital spending given the year-end cash decline and heavy use of available MISO letter-of-credit capacity.
- Whether rate riders and fuel-cost mechanisms continue to recover eligible costs without material delay or disallowance.
- How Grand Gulf-related FERC proceedings may affect costs passed through to ETI and its customers.
- Whether the Liberty County project write-off, solar project plans and other generation investments lead to further charges or schedule changes.