01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
Entergy Corporation (NYSE: ETR) filed its combined 2022 Form 10-K on February 24, 2023, covering the parent and six registrant subsidiaries (Entergy Arkansas, Louisiana, Mississippi, New Orleans, Texas, and System Energy).
Entergy reported 2022 consolidated net income attributable to Entergy of $1,103 milliona (basic EPS $5.40, diluted $5.37), versus $1,118 million ($5.54 diluted) in 2021, with operating revenues rising to $13.8 billion from $11.7 billion, driven primarily by higher Utility electric prices, volume/weather, and fuel pass-through revenues. Results were held back by a $551 million pre-tax regulatory charge (about $413 million after tax) tied to System Energy's settlement with the Mississippi Public Service Commission and potential FERC refunds, plus a $224 million charge tied to the Louisiana storm securitization, partly offset by a $283 million income tax benefit from that securitization and a $166 million gain on the Palisades sale. The company completed its multi-year exit from merchant nuclear generation with the June 2022 sale of Palisades, and Entergy Wholesale Commodities ceases to be a reportable segment from January 1, 2023, leaving a regulated Utility-focused business.
Capital plans for 2023 through 2025 total roughly $15.9 billionb (about $3.9 billion in 2023, rising to $6.6 billion in 2025), concentrated in generation (including solar and the Orange County Advanced Power Station), transmission, and distribution. Debt to capital was 66.9% at year-end 2022 (66.6% excluding securitization bonds), down from 69.5%, aided by about $870 million of equity forward settlements. The filing also flags substantial open risks: a FERC-pending System Energy refund exposure that the City Council estimates at about $493 million beyond amounts already paid, and the possibility of CAMT tax exposure within two to three years.
02—Key points
Key Highlights
- Net income attributable to Entergy fell slightly to $1,103 million (diluted EPS $5.37) from $1,118 million, reflecting the $551 million System Energy regulatory charge offset by the Palisades gain and securitization tax benefit.
- Operating revenues rose 17% to $13.8 billion, led by Utility electric revenue growth from higher retail prices, a 4% increase in total electric sales, and fuel pass-through revenue.
- Entergy Wholesale Commodities completed its exit from merchant nuclear power with the June 2022 Palisades sale, which produced a $166 million pre-tax gain; the segment is no longer reportable from 2023.
- Louisiana storm securitization: $3.2 billion of bonds issued by LCDA in May 2022, with a further $1.49 billion Hurricane Ida securitization approved by LPSC staff in January 2023 but not yet final.
- Planned construction and capital investment of about $15.9 billion over 2023-2025, with generation, transmission and distribution as the main categories and annual spend rising to $6.6 billion in 2025.
- Debt to capital improved to 66.9% from 69.5%, helped by roughly $853 million of equity forward settlements in November 2022, though the company remains highly leveraged.
- System Energy faces a pending FERC refund exposure: retail regulators argue additional refunds of about $493 million, and the filing warns this could jeopardize System Energy's financial viability if ordered at that level.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 24, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $13.76B$11.74B | +17.2% |
| Operating Expenses | $11.71B$9.90B | +18.4% |
| Operating Income | $2.05B$1.85B | +11.1% |
| Interest Expense | $940.06M$863.71M | +8.8% |
| Net Income | $1.10B$1.12B | −1.9% |
| EPS (Basic) | $2.70$2.79 | −3.1% |
| EPS (Diluted) | $2.68$2.77 | −3.2% |
| Shares Outstanding (Basic) | 408.90M401.88M | +1.7% |
| Shares Outstanding (Diluted) | 411.10M403.75M | +1.8% |
05—Questions
Frequently Asked Questions
Why did Entergy's net income decline slightly in 2022 despite higher revenues?
The largest drag was a $551 million pre-tax ($413 million after-tax) regulatory charge at System Energy tied to its partial settlement with the Mississippi PSC and offers to other parties in pending FERC proceedings. This was partly offset by a $166 million Palisades sale gain and a $283 million income tax reduction from the Louisiana storm securitization, though the securitization also required a $224 million regulatory credit obligation to customers.
What is the status of Entergy's exit from merchant nuclear generation?
Entergy completed the multi-year exit with the June 2022 sale of Palisades to Holtec, after earlier sales of Indian Point (2021) and other plants. Effective January 1, 2023, Entergy Wholesale Commodities is no longer a reportable segment, so Entergy's earnings are now overwhelmingly from regulated Utility operations.
How large is Entergy's capital spending plan and what is it for?
Planned construction and capital investments total about $3.9 billion in 2023, $5.5 billion in 2024, and $6.6 billion in 2025. Generation (solar projects such as Walnut Bend, West Memphis, Driver, the St. Jacques facility, and the Orange County Advanced Power Station), transmission, distribution, and utility support are the main categories, with the company citing reliability, resilience, and renewables expansion as drivers.
What are the most significant unresolved risks for investors?
The biggest is the FERC proceedings involving System Energy, where refund claims substantially exceed its net book value and retail regulators seek about $493 million in additional decommissioning-tax refunds; the company says an adverse ruling could jeopardize System Energy's viability. Other risks include the uncertain outcome of Louisiana's Hurricane Ida securitization approval, possible exposure to the corporate alternative minimum tax from about 2024-2025, and rising capital needs alongside high leverage (debt to capital near 67%).
06—Continue