8-KRegulation FDOther EventsExhibits & Filings

ENTERGY CORP /DE/ 8-K Report, Regulation FD Disclosure (Jun 23, 2022)

Filed June 23, 2022For Securities:ETR

Summary

Entergy Corporation (ETR) announced a significant settlement through its subsidiary, System Energy Resources, Inc. ("System Energy"), with the Mississippi Public Service Commission. This "black box" settlement will result in a refund of $235 million to Entergy Mississippi, LLC, which is expected to be passed on to customers primarily as an offset to unrecovered fuel costs. The settlement resolves multiple FERC proceedings related to System Energy's past implementation of the Unit Power Sales Agreement for power and capacity from the Grand Gulf Nuclear Station. While the Mississippi portion of the settlement is finalized, other Entergy operating companies (Arkansas, Louisiana, and New Orleans) have the option to join. If all join, the total refund from System Energy could reach approximately $588 million. This settlement will result in a pre-tax regulatory charge of approximately $551 million ($413 million after tax) for System Energy in June 2022. Importantly, this charge is considered an adjustment to GAAP net income and will not impact Entergy's adjusted earnings per share (non-GAAP) guidance, which remains affirmed for 2022-2026. However, a full $588 million settlement would temporarily negatively affect Entergy's cash flow to debt credit metrics, though long-term impacts are not expected to move these metrics outside of targeted ranges.

Key Highlights

  • 1System Energy Resources, Inc. (System Energy) reaches a settlement with the Mississippi Public Service Commission.
  • 2Entergy Mississippi, LLC will receive a $235 million refund from System Energy, to be passed to customers for fuel cost offsets.
  • 3The settlement resolves various FERC proceedings concerning System Energy's Unit Power Sales Agreement for the Grand Gulf Nuclear Station.
  • 4A potential total settlement of $588 million is possible if Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans also join the agreement.
  • 5System Energy will record a pre-tax regulatory charge of approximately $551 million in June 2022 related to the settlement.
  • 6The regulatory charge is a GAAP adjustment and will not affect Entergy's adjusted earnings per share (non-GAAP) guidance, which remains affirmed.
  • 7A full $588 million settlement would temporarily negatively impact Entergy's cash flow to debt credit metrics but is not expected to cause long-term deviations from target ranges.

Frequently Asked Questions

The settlement involves a significant regulatory charge to System Energy Resources, Inc. (a subsidiary of Entergy), of approximately $551 million pre-tax. However, this charge is considered an adjustment to GAAP net income and will not affect Entergy's adjusted earnings per share (non-GAAP) guidance for 2022-2026, which has been affirmed. While Entergy Mississippi will receive a $235 million refund, the primary financial reporting impact is the charge taken by System Energy.

Entergy Mississippi will provide the benefit of this $235 million refund to its customers, primarily as an offset to unrecovered fuel costs incurred in the production of electricity.

If Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans elect to join the settlement, the total refund amount from System Energy would increase to an estimated $588 million. The $235 million for Entergy Mississippi is part of this total.

A full $588 million settlement would temporarily negatively affect Entergy's cash flow to debt credit metrics. However, the company states that the long-term impact of debt financing for such a settlement is not expected to move these metrics outside of targeted ranges.