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Entergy expects drop in quarterly as-reported earnings compared to last year

power tower_rgbNEW ORLEANS — Entergy Corporation expects third quarter 2014 as-reported earnings of approximately $1.26 per share and operational earnings of approximately $1.67 per share.

Results for third quarter 2013 were $1.34 per share on an as-reported basis and $2.41 per share on an operational basis.

The Utility posted another quarter-over-quarter of industrial sales growth, led by the Gulf region of the service territory, and took steps to reduce uncertainty through a rate case settlement in Mississippi. EWC received added clarity on the decommissioning of the Vermont Yankee Nuclear Power Station, which, along with the rate case settlement, resulted in charges in third quarter 2014.

Entergy affirmed its 2014 operational earnings guidance range of $5.55 to $6.75 per share for the full year.

As-reported results are prepared in accordance with generally accepted accounting principles and comprise operational earnings and special items. Special items were recorded in third quarter 2013 for the transmission spin-merge transaction and human capital management program. Included in both third quarter 2013 and 2014 were special items for charges arising from the decision to close Vermont Yankee, including the effects of an updated decommissioning cost study completed in the current quarter.

As previously disclosed, the preparation of an updated decommissioning study was necessary to support filing of the post-shutdown decommissioning activities report planned for December and to obtain access to the bulk of the funds in the VY nuclear decommissioning trust to perform decommissioning work. With VY nearing shutdown, and as a result of the new cost estimate for decommissioning, Entergy increased the decommissioning cost liability and recorded a corresponding impairment charge of approximately $0.37 per share, which will be reflected as a special item in third quarter 2014 results. The increased decommissioning cost estimate was largely driven by near-term activities about which there is more certainty now that the plant is about to enter the decommissioning phase. Entergy expects to fund decommissioning and spent fuel management costs through a combination of the VY nuclear decommissioning trust and financing, with financing being repaid from litigation recoveries of spent fuel costs from the federal government.

As indicated below, income tax is cited as a quarter-over-quarter variance explanation in each of the disclosure segments. On an overall company basis, the effective income tax rate in third quarter 2014 was approximately 40 percent.

Utility net revenue increased over third quarter last year due to rate actions and growth in weather-adjusted sales volume, primarily to industrial customers. These volume increases were offset by milder-than-normal weather in the current quarter, which reduced earnings by approximately $0.11 per share. Overall, Utility operational earnings were down, driven by a higher effective income tax rate, higher non-fuel operation and maintenance expense and a charge due to the likely outcome of a regulatory proceeding.

The regulatory charge relates to a joint stipulation between Entergy Mississippi Inc. and the Mississippi Public Utilities Staff regarding Entergy Mississippi’s rate case filing. The proposed rate case settlement, subject to approval by the Mississippi Public Service Commission, includes:

  • an estimated $14 million net rate increase, reflecting a 10.07 percent allowed return on equity and a depreciation expense increase,
  • a formula rate plan with forward-looking features and
  • a transfer of System Agreement revenues to a rider to efficiently manage changes from Entergy Mississippi’s exit from the agreement next year.

Also included in the proposed settlement is Entergy Mississippi’s agreement, subject to approval by the Commission of the entire settlement agreement, not to pursue recovery of Entergy Mississippi’s regulatory asset for new nuclear generation development costs, which consequently resulted in an approximate $0.23 per share charge to operational earnings in third quarter 2014.

The quarter-over-quarter decrease in operational earnings for Entergy Wholesale Commodities was due to increased depreciation expense and a higher effective income tax rate on operational earnings. These items were partially offset by lower non-fuel operation and maintenance expense.

Parent & Other results decreased for the quarter due to higher income tax expense.

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