01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Entergy Corporation's FY2015 10-K (combined filing with its utility subsidiaries) reports a consolidated net loss of $156.7 milliona, or $(0.99) per share, versus net income of $960.3 million ($5.22 diluted EPS) in 2014.
The swing is driven almost entirely by $2.04 billionb ($1.32 billion after tax) of impairment and related charges at the Entergy Wholesale Commodities (EWC) nuclear fleet: FitzPatrick and Pilgrim, which Entergy decided in October 2015 to close, and Palisades. Consolidated operating revenues fell about 8% to $11.5 billion, while the Utility segment, which generates about 82% of revenue and 86% of assets, earned $1.11 billion. Management also cites a lower effective tax rate tied to the Louisiana business combination and a 2015 Louisiana regulatory charge.
The company's own figures show weaker wholesale power prices, with realized EWC nuclear revenue per MWh down to $51.49c from $60.35. The balance sheet and cash flow remain sizable but are under pressure. Operating cash flow was $3.29 billion (down from $3.89 billion), and capital spending is planned at $3.8 billion for 2016, $3.25 billion for 2017, and $3.26 billion for 2018, mainly for generation, transmission and distribution, plus the pending Union Power Station acquisition (about $948 million base price).
Debt to capital rose to 59.1% from 57.4%, and the common dividend is $0.85d per quarter ($3.40 annualized). Key forward risks include the EWC plant closures, Indian Point license renewal and state proceedings, the System Agreement termination effective August 31, 2016, ANO's elevated NRC oversight (Column 4, with about $50 million expected in 2016), and the tax and nuclear decommissioning matters.
For investors, the central question is whether the Utility franchise can carry the group while EWC is wound down. The Utility's earnings growth and rate-case outcomes are the main positives; the merchant nuclear exposure and litigation/regulatory uncertainty are the main negatives.
02—Key points
Key Highlights
- Consolidated net loss of $(156.7) million, or $(0.99) per share, in 2015 vs. net income of $960.3 million ($5.22 diluted EPS) in 2014, driven by $2.04 billion of impairment and related charges at EWC.
- Impairments of $1.64 billion (Q3) and $396 million (Q4) reflect the October 2015 decisions to close Pilgrim (no later than June 1, 2019) and FitzPatrick (end of fuel cycle, January 27, 2017), and a write-down of Palisades.
- Utility segment net income was $1.11 billion (up from $846 million), contributing about 82% of revenue and 86% of total assets; EWC net loss was $(1.07) billion.
- EWC realized nuclear revenue per MWh fell to $51.49 (from $60.35), and EWC has sold forward 86% of 2016 planned nuclear output at about $46/MWh.
- Operating cash flow of $3.29 billion; planned 2016 construction and capital investments of $3.81 billion, including St. Charles Power Station (980 MW) and the Union Power Station purchase.
- Debt to capital rose to 59.1% (from 57.4%); $1.35 billion cash on hand, $3.5 billion credit facility with $2.66 billion available; common dividend $0.85 per quarter.
- ANO was moved to NRC Column 4 (multiple/repetitive degraded cornerstone) in March 2015, with about $53 million incurred in 2015 and about $50 million expected in 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Operating Expenses | $11.97B$10.49B | +14.1% |
| Operating Income | -$299.17M$2.01B | −114.9% |
| Interest Expense | $670.10M$661.08M | +1.4% |
| Net Income | -$156.73M$960.26M | −116.3% |
| EPS (Basic) | $-0.49$2.62 | −118.9% |
| EPS (Diluted) | $-0.49$2.61 | −119.0% |
| Shares Outstanding (Basic) | 358.35M359.01M | −0.2% |
| Shares Outstanding (Diluted) | 358.35M360.59M | −0.6% |
05—Questions
Frequently Asked Questions
Why did Entergy report a net loss in 2015 after earning nearly $1 billion in 2014?
The loss is primarily due to $2.04 billion ($1.32 billion after tax) of impairment and related charges at Entergy Wholesale Commodities. These write down the FitzPatrick, Pilgrim, and Palisades nuclear plants to fair value after Entergy decided to close FitzPatrick and Pilgrim, citing poor market prices and market design. The Utility segment was profitable, at $1.11 billion in net income.
How significant is the Entergy Wholesale Commodities business to Entergy overall?
EWC accounts for about 18% of revenue and 18% of total assets, but it is now shrinking. Vermont Yankee shut in December 2014, and FitzPatrick and Pilgrim are slated to close in 2017 and 2019. Indian Point and Palisades remain as the core nuclear fleet. EWC's realized nuclear price fell to $51.49 per MWh in 2015 from $60.35 in 2014, and its 2016 output is largely hedged at about $46 per MWh.
What are the main regulatory risks ahead for Entergy's utilities?
Key items include the termination of the System Agreement effective August 31, 2016, which ends cost-sharing among the Utility operating companies; the Waterford 3 steam generator prudence proceeding, where an ALJ recommended a $67 million disallowance and Entergy recorded a $77 million charge; FERC proceedings on bandwidth remedy payments and the MISO transmission rate settlement; and the pending Arkansas rate case, which proposes a formula rate plan. Louisiana's St. Charles Power Station certification and Mississippi's general rate case are also pending.
What are the main nuclear licensing and operating risks?
Indian Point 2 and 3 continue to operate under timely renewal while their license renewals are contested at the NRC, and New York's Clean Water Act Section 401 and Coastal Zone Management Act proceedings remain open. ANO's Column 4 status requires additional NRC inspections and expenses. Pilgrim also moved to Column 4 in September 2015. Entergy has disclosed elevated tritium at Indian Point in early 2016 under investigation.
What are Entergy's capital spending and dividend plans?
Planned construction and capital investments total about $3.81 billion in 2016, $3.25 billion in 2017, and $3.26 billion in 2018, mostly in the Utility (generation, transmission, distribution). Entergy paid $599 million in common dividends in 2015 and declared $0.85 per share in January 2016. The board also has $350 million remaining under its $500 million share repurchase authority.
06—Continue