Summary
Entergy Corporation (ETR) filed an 8-K on January 30, 2018, to disclose preliminary impacts of the Tax Cuts and Jobs Act (TCJA) signed into law in December 2017. The company expects a significant reduction in its net deferred tax liabilities, estimated at approximately $4 billion, due to the federal corporate income tax rate decrease from 35% to 21%. This re-measurement will result in a corresponding increase in net regulatory liabilities, with the majority amortized over approximately 30 years and the remainder over a shorter period. Additionally, Entergy anticipates a $0.6 billion reduction in net deferred tax assets not subject to ratemaking, which will be recorded as a charge to income tax expense in December 2017. Importantly, these re-measurements are not expected to impact Entergy's 2017 consolidated operational earnings or adjusted earnings. On a forward-looking basis, the TCJA is projected to benefit customers through lower rates and a return of deferred taxes, while potentially increasing rate base. Entergy also reaffirmed its adjusted earnings per share outlook for 2018-2020 and expects to maintain its investment-grade credit rating.
Key Highlights
- 1Preliminary estimated $4 billion reduction in net deferred tax liabilities due to TCJA's lower corporate tax rate.
- 2Corresponding increase in net regulatory liabilities, with amortization over ~30 years and a shorter period.
- 3Estimated $0.6 billion reduction in net deferred tax assets not subject to ratemaking, impacting income tax expense.
- 4TCJA re-measurements are considered special items and will not affect 2017 operational or adjusted earnings.
- 5Forward-looking benefits to customers include lower rates and return of deferred taxes.
- 6Affirmed 2018-2020 adjusted earnings per share outlook: $4.50-$4.90 (2018), $4.90-$5.30 (2019), $5.20-$5.60 (2020).
- 7Expects to maintain an investment-grade credit rating despite potential adverse effects on certain credit metrics.