01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
Entergy Corporation (NYSE: ETR) reported 2021 consolidated net income attributable to Entergy of $1.118 billiona, or $5.54 diluted EPS, down from $1.388 billion ($6.90) in 2020, driven largely by a $340 million charge (about $268 million after tax) tied to the May 2021 sale of Indian Point, a lower-earning Entergy Wholesale Commodities segment, and the 2020 IRS audit resolution benefit that did not recur.
Operating revenues rose 16% to $11.74 billionb, led by the Utility segment (94% of revenue), which benefited from higher retail rates and volume. Utility fuel and purchased power costs rose sharply, including Winter Storm Uri, and Hurricane Ida restoration costs are estimated at about $2.7 billion for Entergy Louisiana and Entergy New Orleans, with roughly $1.1 billion booked as regulatory assets. Balance sheet leverage is elevated: the debt-to-capital ratio rose to 69.5% from 68.3%, and long-term debt grew to about $24.8 billion.
Management expects to issue roughly $700 millionc of equity through 2024 under an at-the-market program, and projects capital investment of $3.7 billion in 2022 rising to $4.3 billion in 2024, plus $885 million of Hurricane Ida spending in 2022. Cash flow from operations fell to $2.3 billion from $2.7 billion, while investing outflows reached $6.2 billion. Entergy is also winding down its merchant nuclear business, with the Palisades plant expected to shut down by May 2022 and be sold to Holtec in mid-2022.
For investors, the key questions are whether Entergy can recover storm costs through securitization and rate mechanisms, how quickly it can fund its large capital plan without further dilution or credit pressure, and whether pending FERC proceedings against System Energy (Grand Gulf) produce material refunds. The filing also flags a $712 milliond net unrecognized tax benefit and ongoing regulatory challenges to the Unit Power Sales Agreement.
02—Key points
Key Highlights
- 2021 net income attributable to Entergy fell 19% to $1.118 billion ($5.54 diluted EPS) from $1.388 billion ($6.90), reflecting a $340 million Indian Point sale charge and the non-recurrence of 2020 tax benefits.
- Operating revenues increased 16% to $11.74 billion, with the Utility segment generating 94% of revenue and benefiting from a $404 million retail price increase and 3% higher billed usage.
- Hurricane Ida restoration costs are estimated at $2.7 billion for Entergy Louisiana and Entergy New Orleans; about $1.1 billion is recorded as regulatory assets, with recovery subject to regulatory approval.
- Capital plan of $3.7 billion (2022) rising to $4.3 billion (2024), plus $885 million of Hurricane Ida spending in 2022, with the company expecting to issue about $700 million of equity through 2024.
- Debt-to-capital ratio rose to 69.5% from 68.3% as long-term debt increased to $24.8 billion, approaching the 65% covenant-style threshold referenced in the credit facility disclosures.
- Entergy Wholesale Commodities is exiting merchant nuclear: Palisades is expected to shut down by May 2022 and be sold to Holtec, with a planned sale price of $1,000 subject to adjustments.
- Pending FERC litigation against System Energy could produce refunds exceeding its net book value, including a $37 million provision already recorded for the return-on-equity and capital-structure proceeding.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $11.74B$10.11B | +16.1% |
| Operating Expenses | $9.90B$8.34B | +18.6% |
| Operating Income | $1.85B$1.77B | +4.3% |
| Interest Expense | $863.71M$837.98M | +3.1% |
| Net Income | $1.12B$1.41B | −20.5% |
| EPS (Basic) | $2.79$3.47 | −19.7% |
| EPS (Diluted) | $2.77$3.45 | −19.7% |
| Shares Outstanding (Basic) | 401.88M400.21M | +0.4% |
| Shares Outstanding (Diluted) | 403.75M402.20M | +0.4% |
05—Questions
Frequently Asked Questions
Why did Entergy's 2021 earnings decline despite higher revenues?
Net income attributable to Entergy fell to $1.118 billion from $1.388 billion. The main drivers were a $340 million pre-tax ($268 million after-tax) charge from the May 2021 Indian Point sale, lower results at Entergy Wholesale Commodities, and the absence of a 2020 IRS audit resolution that reduced deferred tax expense. Utility results improved, partly offsetting these items.
How will Entergy pay for its large capital program?
The company plans to use internally generated cash, debt issuances, bank facilities, and an at-the-market equity program, with about $700 million of new equity expected through 2024. Entergy also has a $3.5 billion revolving credit facility with $3.3 billion available at year-end, and it holds storm reserve escrow accounts. Leverage is rising, so financing costs and credit ratings bear watching.
Will Entergy recover its Hurricane Ida and other storm costs?
Entergy expects recovery through some regulatory mechanism, citing established precedent for prudently incurred storm costs, but the filing states that recovery amounts and timing are uncertain. Entergy Louisiana has sought securitization and a $1 billion escrow, and the LPSC approved a February 2022 settlement for about $2.1 billion of earlier storm and Winter Storm Uri costs. Ida recovery remains subject to future prudence review.
What is the financial exposure from the System Energy (Grand Gulf) litigation?
Several FERC complaints challenge System Energy's return on equity, capital structure, and rate base treatment of uncertain tax positions. The aggregate refunds claimed substantially exceed System Energy's net book value. An ALJ initial decision would imply roughly $60 million in refunds plus a $45 million annual rate reduction, and System Energy has recorded a $37 million provision. Final outcomes depend on FERC's review.
What happens to Entergy's nuclear business after Palisades?
After the planned May 2022 shutdown, Entergy expects to have no remaining merchant nuclear generation, having sold FitzPatrick, Vermont Yankee, Pilgrim, and Indian Point. The Palisades sale to Holtec is expected to close in mid-2022, and Entergy's adjusted net investment is about negative $50 million. Entergy will retain obligations tied to decommissioning until the sale closes, and it expects roughly $5 million of severance costs in 2022.
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