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    ENTERGY CORPORATION AND SUBSIDIARIES 201 ANNUAL REPORT


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    Entergy Corporation and Subsidiaries 2018 Entergy Corporation (NYSE: ETR) is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 9,000 megawatts of nuclear power. Entergy delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of $11 billion and nearly 13,700 employees. In addition to our Annual Report to Shareholders, Entergy produces an Integrated Report, highlighting our economic, environmental and social performance. Producing an Integrated Report reinforces our belief that our stakeholders – customers, employees, communities and owners – are linked and that we must deliver sustainable value to all stakeholders in order to succeed. We encourage you to visit our 2018 Integrated Report at integratedreport.entergy.com. Contents 1 Letter To Our Stakeholders 5 Forward-Looking Information and Regulation G Compliance 9 Selected Financial Data – Five-Year Comparison 10 Comparison of Five-Year Cumulative Return 11 Definitions 15 Management’s Financial Discussion and Analysis 57 Report of Management 58 Report of Independent Registered Public Accounting Firm 60 Consolidated Statements of Operations 61 Consolidated Statements of Comprehensive Income (Loss) 62 Consolidated Statements of Cash Flows 64 Consolidated Balance Sheets 66 Consolidated Statements of Changes in Equity 67 Notes to Financial Statements 219 Board of Directors 220 Executive Officers 221 Investor Information


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    To Our Stakeholders When does 1 = more? One equals more when serving the needs of one stakeholder creates value for all. When embracing new technologies to provide innovative solutions to help customers save money and live greener also makes our communities more vibrant, expands opportunity for our employees and creates better returns for our owners… When investing in our employees to build their capabilities and skills also creates the products, services and personalized solutions customers expect, as well as the economic, environmental and social well- being communities need, which then grows the enterprise value owners seek… When supporting our communities to promote economic development also makes the cities and towns where our employees live more dynamic and resilient, fosters the strong economy our customers desire, and generates the capital investment that powers growth for our owners. STRONG PERFORMANCE DRIVES VALUE For Entergy, another year of strong operational and financial performance reinforces our philosophy that our stakeholders’ interests are increasingly aligned around sustainable value. As our journey to a world- class, pure-play utility comes to fruition, x we seek to help our customers achieve their most ambitious dreams using fewer resources by embracing new technologies; x we’re promoting the well-being of our communities by partnering to improve access to education, eradicate poverty, protect the environment and strengthen economic development; and x we’re preparing our employees to succeed in the workplace of the future through training and developmental opportunities. In 2018, we delivered solid financial returns to our owners while reducing our overall business risk- profile through continued execution on our strategy to exit our merchant operations. For our core Utility, Parent & Other business, 2018 adjusted earnings per share were in line with our guidance and growth expectations. And our consolidated operational earnings came in above our guidance range. On an adjusted basis, Utility, Parent & Other (non-GAAP) contributed $4.71 to 2018 consolidated earnings per share, compared to $4.57 in 2017. Our total shareholder return for 2018 was 10.6 percent, which ranked 6th out of the 20 companies in our peer group, just short of our first quartile goal. We are confident in our strategy and we remain committed to our goal of delivering top-quartile returns for our owners over the long term. The awards and recognition we received in 2018 for sustainable business practices, community support, economic development, workplace diversity, environmental stewardship and many other accomplishments outlined in this report reflect our successful efforts to create sustainable value for all our stakeholders. 1


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    LEADING ON ENVIRONMENTAL ISSUES Entergy is recognized as an industry leader for taking bold action to address climate issues. In 2001, we were the first U.S. electric utility to commit voluntarily to stabilizing greenhouse gas emissions. Since then, we’ve challenged ourselves even further and set stricter reduction targets, not once, but twice. In 2011, as part of our Environment 2020 strategy, we committed to maintaining our cumulative emissions cap for the period at 20 percent below year 2000 levels through the year 2020. Our commitments have yielded beneficial results not only for the environment, but also for our business and our stakeholders. Our carbon dioxide emissions continue to be some of the lowest among our peers. Nevertheless, the broad consensus of current scientific data on climate change indicates that, as an industry, we must do more to reduce our footprint and that of our customers and communities. Entergy sees this not as a choice but as a responsibility and an opportunity. I’m proud to announce that we are intensifying our efforts even further and setting a new climate commitment to reduce our CO2 emission rate to 50 percent below 2000 levels by 2030. Speaking plainly, this means that for every unit of electricity we generate in 2030, we will emit half the carbon dioxide we did in 2000. Entergy’s new power generation projects will help support this commitment and enhance our capabilities to provide clean, reliable and affordable energy to power life for our customers and enhance the vibrancy of our communities. Our nuclear power generation that serves our utility customers is a critical source of safe, large-scale and virtually emission-free baseload power that significantly contributes to our environmental sustainability goals and overall cleaner energy future. We’re ensuring their long-term value to our customers by investing in technology upgrades and other improvements for continued safe and reliable operations. Growth in renewables is also an important part of our journey toward a cleaner energy future. We currently have approximately 1,000 megawatts of renewable projects in various stages of development that will add clean, cost-effective and sustainable power to the grid. We’re excited about our plans to increase the use of these resources to meet our customers’ increasing desire for environmentally responsible energy. All of these actions illustrate our progress toward building a more sustainable future through purposeful planning and preparation, and they support our new climate report, which outlines our role in meeting the worldwide imperative to reduce risk posed by climate change. Our investment decisions are guided by an expectation to create value for all our stakeholders, including the basic premise to improve service and reliability for our customers at the lowest possible cost and in a sustainable manner. We strike a balance in these decisions by often taking a phased approach to deploying new technologies – one that allows us to gather crucial performance data and customer feedback through pilot programs and other test protocols. Our approach ensures that when we are ready to fully deploy a technology, we know it is mature, reliable and economical for our customers. EVOLVING FROM PROVIDER TO PARTNER The emergence of new technologies is enabling us to build more individualized relationships with our customers and partner with them on solutions that make their lives better. An example is our recent launch of advanced meters, which we are deploying to all our customers over the next three years. These meters will give us the tools to help our customers better manage their energy usage while also helping us leverage the power of information and data analytics to develop new products and services that will improve our customers’ lives. 2


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    We’re also exploring opportunities that go far beyond meters. Technology investments will give us the ability to create and personalize services in innovative ways. For example, consider a mobile device app that helps customers manage the impact of major storm events more effectively by giving them real-time updates on evacuation routes, road closures and the availability of local grocery stores, gas stations and shelters in their area. That’s the kind of partner we aspire to be: one that helps our customers save time and solve problems, especially at extraordinary times. We want to be a partner that makes their day, every day. BUILDING TOMORROW’S WORKFORCE Our employees will drive this transformative shift in our business by adopting new skill sets to effectively implement and manage new technologies. We’re also working to create more educational and training opportunities to prepare today’s students for future careers. One way we’re enhancing our workforce development strategy is by tapping into the power of community partnerships in our service area: x Entergy’s power generation training center at River Parishes Community College in Gonzales, Louisiana, prepares our employees to operate and maintain generating plants across our service area and master the latest technologies to enhance safety, efficiency and productivity. x Through our shareholder-funded support of Jobs for America’s Graduates, we are expanding workforce training and readiness programs and creating a competitive advantage for local communities with a $5 million, five-year workforce development initiative. x We’re positioning Entergy for the future by actively preparing and recruiting the next generation of engineering innovators. Entergy’s new Engineering Education Initiative with Southern University in Baton Rouge will develop talent to benefit our industry while creating internship and mentoring programs to strengthen the partnership. A LEGACY OF CORPORATE CITIZENSHIP While Entergy’s objectives are focused on the future, they are rooted in our past. Entergy’s leadership in sustainability and social responsibility was firmly established in 1998 when Wayne Leonard became chairman and CEO. He quickly emerged as a visionary with the courage to challenge the traditional utility role in society and position Entergy as a successful Fortune 500 company with a conscience. With Wayne’s passing in 2018, we are once again reminded of our responsibility to carry forth the example he set as a leader, mentor and friend. Our actions and commitments build on the foundation Wayne established and position us to effectively benefit our stakeholders today while securing a bright tomorrow. Our objectives are more than hopes. They are action plans. Entergy may be a large corporation, but we are made up of nearly 13,700 individuals who share a deep compassion for our customers and our communities. Each one of us has the opportunity to build meaningful partnerships with other stakeholders – not only by keeping the lights on and the gas flowing, but also through our daily personal interactions at the mailbox or the ball field or the coffee shop. These personal connections with our neighbors and communities make Entergy a unique place to work. They make us stronger. They fuel our drive to power life and create sustainable value for all. 3


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    Our mission continues to be to create sustainable value for all our stakeholders – our customers, our employees, the communities we have the privilege to serve and of course you, our owners. None of our stakeholders can succeed unless they all succeed. All of our actions are guided by this quest for sustainability. It is only then that, together, We Power Life. Leo P. Denault Chairman of the Board and Chief Executive Officer March 22, 2019 4


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE Forward-Looking Information In this report and from time to time, Entergy Corporation makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward- looking statement is based on information current as of the date of this report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including (a) those factors discussed or incorporated by reference in Item 1A. Risk Factors contained in the Form 10-K for the year ended Dec. 31, 2018, (b) those factors discussed or incorporated by reference in Management’s Financial Discussion and Analysis contained in the Form 10-K for the year ended Dec. 31, 2018 and (c) the following factors (in addition to others described elsewhere in this report and in subsequent securities filings): x resolution of pending and future rate cases, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs; x long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators; x regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies; x changes in utility regulation, including with respect to retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice; x changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned, potential, or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel; x resolution of pending or future applications, and related regulatory proceedings and litigation, for license modifications or other authorizations required of nuclear generating facilities and the 5


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE effect of public and political opposition on these applications, regulatory proceedings, and litigation; x the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities; x increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating and industry issues, and the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities; x Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities; x prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown or sale of each of these nuclear plants; x the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts; x volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers; x changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation; x changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter and other regulated air emissions, heat and other regulated discharges to water, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with environmental laws and regulations; x changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations; x the effects of changes in federal, state, or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, trade/tariff, or energy policies; x the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions; x uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites; x variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance; x effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss; x changes in the quality and availability of water supplies and the related regulation of water use and diversion; x Entergy’s ability to manage its capital projects and operation and maintenance costs; x Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms; 6


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE x the economic climate, and particularly economic conditions in Entergy’s Utility service area and the northern United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize; x federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintended consequences on financial results and future cash flows; x the effects of Entergy’s strategies to reduce tax payments, especially in light of federal income tax reform; x changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions; x actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria; x changes in inflation and interest rates; x the effect of litigation and government investigations or proceedings; x changes in technology, including (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewable energy, energy efficiency, demand side management and other measures that reduce load, and (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies or alternative sources of generation; x the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion; x Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills; x changes in accounting standards and corporate governance; x declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans; x future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets; x changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown; x the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by mid-2022, including the implementation of the planned shutdowns of Pilgrim, Indian Point 2, Indian Point 3, and Palisades; x the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments; x factors that could lead to impairment of long-lived assets; and x the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures, or restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction. 7


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE Regulation G This report includes the non-GAAP financial measure of Utility, Parent & Other adjusted earnings per share. The reconciliation of this measure to the most directly comparable GAAP measures is below. GAAP to Non-GAAP Reconciliation - Utility, Parent & Other Adjusted Earnings and Earnings Per Share 2018 2017 (dollars in millions) Utility as-reported earnings (loss) 1,483 762 Parent & Other as-reported earnings (loss) (292) (175) Utility, Parent & Other earnings 1,191 586 Less: Special items 38 (129) Estimated weather (a) 90 (128) Tax effect of estimated weather (b) (23) 49 Portion of E-AR and E-MS weather reserved for customers (15) - Tax effect on E-AR and E-MS customer reserve (b) 4 - Estimated weather, net of customer reserve (after-tax) 56 (79) Difference between effective and statutory income tax rates (c) 233 (31) Utility, Parent & Other adjusted earnings 864 824 (After-tax, per share in dollars) (d) Utility as-reported earnings (loss) 8.09 4.22 Parent & Other as-reported earnings (loss) (1.59) (0.97) Utility, Parent & Other as-reported earnings 6.50 3.25 Less: Special items 0.21 (0.71) Estimated weather, net of customer reserve 0.31 (0.44) Difference between effective and statutory income tax rates (c) 1.27 (0.17) Utility, Parent & Other adjusted earnings 4.71 4.57 Calculations may differ due to rounding (a) The effects of weather were estimated using heating degree days and cooling degree days for the billing cycles from certain locations within each jurisdiction and comparing to “normal” weather based on 20-year historical data. The models used to estimate weather are updated periodically and are subject to change. (b) Income tax effect is calculated by multiplying the pre-tax amount by the estimated income tax rates that are expected to apply. (c) Other income tax items represent the adjustment made to income tax expense to reflect a statutory tax rate estimated to be 25.5% in 2018 and 38.5% in 2017. 2018 period excludes a reduction of $775 million for the return of unprotected excess ADIT (no earnings impact). (d) Per share amounts are calculated by multiplying the pre-tax amount by the estimated income tax rate that is expected to apply to each adjustment and then dividing by the diluted average number of common shares outstanding for the period. 8


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    ENTERGY CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands, Except Percentages and Per Share Amounts) Operating revenues $11,009,452 $11,074,481 $10,845,645 $11,513,251 $12,494,921 Net income (loss) $862,555 $425,353 ($564,503) ($156,734) $960,257 Earnings (loss) per share: Basic $4.68 $2.29 ($3.26) ($0.99) $5.24 Diluted $4.63 $2.28 ($3.26) ($0.99) $5.22 Dividends declared per share $3.58 $3.50 $3.42 $3.34 $3.32 Return on common equity 10.08% 5.12% (6.73%) (1.83%) 9.58% Book value per share, year-end $46.78 $44.28 $45.12 $51.89 $55.83 Total assets $48,275,066 $46,707,149 $45,904,434 $44,647,681 $46,414,455 Long-term obligations (a) $15,758,083 $14,535,077 $14,695,422 $13,456,742 $12,627,180 (a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet. 2018 2017 2016 2015 2014 (Dollars In Millions) Utility electric operating revenues: Residential $3,566 $3,355 $3,288 $3,518 $3,555 Commercial 2,426 2,480 2,362 2,516 2,553 Industrial 2,499 2,584 2,327 2,462 2,623 Governmental 226 231 217 223 227 Total retail 8,717 8,650 8,194 8,719 8,958 Sales for resale 300 253 236 249 330 Other 367 376 437 341 304 Total $9,384 $9,279 $8,867 $9,309 $9,592 Utility billed electric energy sales (GWh): Residential 37,107 33,834 35,112 36,068 35,932 Commercial 29,426 28,745 29,197 29,348 28,827 Industrial 48,384 47,769 45,739 44,382 43,723 Governmental 2,581 2,511 2,547 2,514 2,428 Total retail 117,498 112,859 112,595 112,312 110,910 Sales for resale 11,715 11,550 11,054 9,274 9,462 Total 129,213 124,409 123,649 121,586 120,372 Entergy Wholesale Commodities: Operating revenues $1,469 $1,657 $1,850 $2,062 $2,719 Billed electric energy sales (GWh) 29,875 30,501 35,881 39,745 44,424 9


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    COMPARISON OF FIVE-YEAR CUMULATIVE RETURN The following graph compares the performance of the common stock of Entergy Corporation with the Philadelphia Utility Index and the S&P 500 Index (each of which includes Entergy Corporation) for the last five years ended December 31. Assumes $100 invested at the closing price on Dec. 31, 2013, in Entergy Corporation common stock, the Philadelphia Utility Index and the S&P 500 Index, and reinvestment of all dividends. Source: Bloomberg 10


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    DEFINITIONS Certain abbreviations or acronyms used in the text and notes are defined below: Abbreviation or Acronym Term AFUDC Allowance for Funds Used During Construction ALJ Administrative Law Judge ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas APSC Arkansas Public Service Commission ASU Accounting Standards Update issued by the FASB Board Board of Directors of Entergy Corporation Cajun Cajun Electric Power Cooperative, Inc. capacity factor Actual plant output divided by maximum potential plant output for the period City Council Council of the City of New Orleans, Louisiana D.C. Circuit U.S. Court of Appeals for the District of Columbia Circuit DOE United States Department of Energy Entergy Entergy Corporation and its direct and indirect subsidiaries Entergy Corporation Entergy Corporation, a Delaware corporation Entergy Gulf States, Inc. Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas Entergy Gulf States Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally Louisiana created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana. Entergy Louisiana Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes. Entergy Texas Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. Entergy Wholesale Entergy’s non-utility business segment primarily comprised of the ownership, Commodities operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers EPA United States Environmental Protection Agency ERCOT Electric Reliability Council of Texas FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission FitzPatrick James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017 Grand Gulf Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy GWh Gigawatt-hour(s), which equals one million kilowatt-hours Independence Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC 11


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    DEFINITIONS (Continued) Abbreviation or Acronym Term Indian Point 2 Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment Indian Point 3 Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment IRS Internal Revenue Service ISO Independent System Operator kV Kilovolt kW Kilowatt, which equals one thousand watts kWh Kilowatt-hour(s) LDEQ Louisiana Department of Environmental Quality LPSC Louisiana Public Service Commission Mcf 1,000 cubic feet of gas MISO Midcontinent Independent System Operator, Inc., a regional transmission organization MMBtu One million British Thermal Units MPSC Mississippi Public Service Commission MW Megawatt(s), which equals one thousand kilowatts MWh Megawatt-hour(s) Nelson Unit 6 Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment Net debt to net capital ratio Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents Net MW in operation Installed capacity owned and operated NRC Nuclear Regulatory Commission NYPA New York Power Authority Palisades Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment Parent & Other The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation Pilgrim Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment PPA Purchased power agreement or power purchase agreement PRP Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination) PUCT Public Utility Commission of Texas Registrant Subsidiaries Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. River Bend River Bend Station (nuclear), owned by Entergy Louisiana RTO Regional transmission organization SEC Securities and Exchange Commission 12


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    DEFINITIONS (Concluded) Abbreviation or Acronym Term System Agreement Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016. System Energy System Energy Resources, Inc. TWh Terawatt-hour(s), which equals one billion kilowatt-hours Unit Power Sales Agreement Agreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf Utility Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution Utility operating companies Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas Vermont Yankee Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 and was sold in January 2019 Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana weather-adjusted usage Electric usage excluding the effects of deviations from normal weather White Bluff White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas 13


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    ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities. The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business. The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants. Following are the percentages of Entergy’s consolidated revenues generated by its operating segments and the percentage of total assets held by them. Net income or loss generated by the operating segments is discussed in the sections that follow. % of Revenue % of Total Assets Segment 2018 2017 2016 2018 2017 2016 Utility 87 85 83 93 92 89 Entergy Wholesale Commodities 13 15 17 11 12 15 Parent & Other — — — (4) (4) (4) See Note 13 to the financial statements for further financial information regarding Entergy’s business segments. 15


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Results of Operations 2018 Compared to 2017 Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2018 to 2017 showing how much the line item increased or (decreased) in comparison to the prior period. Entergy Wholesale Parent & Utility Commodities Other (a) Entergy (In Thousands) 2017 Consolidated Net Income (Loss) $773,148 ($172,335) ($175,460) $425,353 Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/ credits) (692,557) (192,471) (4) (885,032) Other operation and maintenance 85,239 (55,736) 10,200 39,703 Asset write-offs, impairments, and related charges — (6,051) — (6,051) Taxes other than income taxes 25,578 (1,446) 264 24,396 Depreciation and amortization 23,141 (43,273) (404) (20,536) Other income 22,024 (221,550) (6,621) (206,147) Interest expense 5,618 9,980 29,407 45,005 Other expenses (4,858) (26,644) — (31,502) Income taxes (1,527,164) (122,545) 70,313 (1,579,396) 2018 Consolidated Net Income (Loss) $1,495,061 ($340,641) ($291,865) $862,555 (a) Parent & Other includes eliminations, which are primarily intersegment activity. Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics. Results of operations for 2018 include: 1) $532 million ($421 million net-of-tax) of impairment charges due to costs being charged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; 2) a $170 million reduction of income tax expense and a regulatory liability of $40 million ($30 million net-of-tax) as a result of customer credits recognized by Utility, as a result of internal restructuring; 3) a $107 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a restructuring of the investment holdings in one of its nuclear plant decommissioning trust funds; 4) a $52 million income tax benefit, recognized by Entergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated with the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing; and 5) a $23 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a state income tax audit. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 to the financial statements for further discussion of the impairment and related charges. See Notes 2 and 3 to the financial statements for further discussion of the internal restructuring and customer credits. See Note 3 to the financial statements for further discussion of the IRS audit settlement, the state income tax audit, and restructuring of the decommissioning trust fund investment holdings. 16


  • Page 19

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Results of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-tax reduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52 million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemaking process due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 to the financial statements for further discussion of the impairment and related charges. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in the tax classification. Net Revenue Utility Following is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue $6,318 Return of unprotected excess accumulated deferred income taxes to customers (770) Grand Gulf recovery (74) Regulatory credit in 2017 resulting from reduction of the federal corporate income tax rate (56) Formula rate plan regulatory provisions (44) Entergy Arkansas internal restructuring customer credits (40) Retail electric price 4 Net wholesale revenue 57 Volume/weather 210 Other 20 2018 net revenue $5,625 The return of unprotected excess accumulated deferred income taxes to customers resulted from activity in 2018 at the Utility operating companies and System Energy in response to the enactment of the Tax Cuts and Jobs Act. There is no effect on net income as the reductions in net revenue were offset by reductions in income tax expense. See Note 2 to the financial statements for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act. The Grand Gulf recovery variance is primarily due to a reduction in depreciation expense recognized in third quarter 2018 upon FERC approval of the settlement in the Unit Power Sales Agreement proceeding, a reduction in income tax expense associated with the reduction in the federal income tax rate in 2018, and a reduction in recoverable decommissioning costs primarily attributable to changes in decommissioning trust fund activity. The reductions were partially offset by increases in other capacity costs. See Note 2 to the financial statements for a discussion of the Unit 17


  • Page 20

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Power Sales Agreement settlement. See Note 3 to the financial statements for a discussion of the effects of the Tax Cut and Jobs Act. The regulatory credit in 2017 resulting from reduction of the federal corporate income tax rate variance is due to the reduction of the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction in 2017 of the Louisiana Act 55 financing savings obligation regulatory liabilities by $25 million, in each case, as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements. See Note 8 to the financial statements for further discussion of the Vidalia purchased power agreement. The formula rate plan regulatory provisions variance is due to provisions, recorded in the fourth quarter 2018 at Entergy Arkansas and Entergy Mississippi, for estimated reductions in future revenue expected to be reflected in upcoming formula rate plan filings based on actual results for 2018. See Note 2 to the financial statements for a discussion of the regulatory provisions related to these formula rate plan filings. The Entergy Arkansas internal restructuring customer credits variance is due to a regulatory liability recorded by Entergy in December 2018 as a result of the internal restructuring of Entergy Arkansas. Pursuant to a settlement agreement approved by the APSC, Entergy Arkansas will credit retail customers $39.6 million over six years, beginning in 2019. See Note 2 to the financial statements for further discussion of the internal restructuring and customer credits. The retail electric price variance is primarily due to: an increase in formula rate plan rates effective with the first billing cycle of January 2018 at Entergy Arkansas, as approved by the APSC; an increase in energy efficiency revenues primarily due to an increase in the Entergy Arkansas energy efficiency rider and a new Entergy Louisiana energy efficiency rider effective January 2018; a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT; an increase in formula rate plan revenues at Entergy Louisiana, implemented with the first billing cycle of September 2018; and higher storm damage rider revenues at Entergy Mississippi. The increases were substantially offset by regulatory charges recorded in 2018 to reflect the effects of regulatory agreements to return the benefits of the lower income tax rate in 2018 to Louisiana, New Orleans, and Texas customers. See Note 2 to the financial statements for further discussion of the regulatory proceedings discussed above. The net wholesale revenue variance is primarily because of the regulatory lag experienced by certain Utility operating companies as a result of the change in the federal income tax rate in 2018 and its effect on wholesale rates. See Note 2 to the financial statements for discussion of regulatory activity regarding the Tax Cuts and Jobs Act. The volume/weather variance is primarily due to an increase of 4,804 GWh, or 4%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales and an increase in industrial usage. The increase in industrial usage is primarily driven by small industrials sales, as well as continued growth from new customers and expansion projects, partially offset by decreased demand from existing customers. 18


  • Page 21

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Entergy Wholesale Commodities Following is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue $1,469 FitzPatrick reimbursement agreement (98) Nuclear realized price changes (42) Nuclear volume (23) Other (29) 2018 net revenue $1,277 As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $192 million in 2018 primarily due to: a decrease resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy in the first quarter 2017 for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon under the reimbursement agreement were offset by other operation and maintenance expenses and taxes other than income taxes and had no effect on net income. See Note 14 to the financial statements for discussion of the sale of FitzPatrick and the reimbursement agreement with Exelon; lower realized wholesale energy prices, partially offset by higher capacity prices; and lower volume in the Entergy Wholesale Commodities nuclear fleet primarily due to more non-refueling outage days in 2018 compared to 2017. Following are key performance measures for Entergy Wholesale Commodities for 2018 and 2017. 2018 2017 Owned capacity (MW) 3,962 3,962 GWh billed 29,875 30,501 Entergy Wholesale Commodities Nuclear Fleet Capacity factor 84% 83% GWh billed 27,617 28,178 Average energy price ($/MWh) $37.34 $41.60 Average capacity price ($/kW-month) $6.80 $6.16 Refueling outage days: FitzPatrick — 42 Indian Point 2 33 — Indian Point 3 — 66 Pilgrim — 43 Palisades 61 27 19


  • Page 22

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Other Income Statement Items Utility Other operation and maintenance expenses increased from $2,416 million for 2017 to $2,501 million for 2018 primarily due to: an increase of $33 million in energy efficiency expenses due to the timing of recovery from customers; an increase of $23 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2018 as compared to the prior year and higher long-term service agreement costs; an increase of $15 million in transmission expenses primarily due to higher labor and contract costs to support industrial customers; an increase of $14 million in information technology costs primarily due to higher software maintenance costs and higher labor costs, including contract labor; an increase of $14 million in loss provisions, including an increase in asbestos loss provisions; an increase of $6 million in storm damage provisions, primarily at Entergy Mississippi. See Note 2 to the financial statements for discussion of storm cost recovery; a $6 million write-off of capitalized skylining tree hazard costs as a result of the settlement of the Entergy Texas rate case proceeding. See Note 2 to the financial statements for discussion of the rate case proceeding; and a $6 million loss in 2018 on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of the Tax Cuts and Jobs Act. There is no effect on net income as the loss on the sale of fuel oil inventory is offset by a reduction in income tax expense. See Note 2 to the financial statements for discussion of the agreement. The increase was partially offset by higher nuclear insurance refunds of $15 million and a $15 million gain on disposal from the sale of Entergy Louisiana’s Willow Glen Power Station. See Note 14 to the financial statements for discussion of the sale of Willow Glen. Taxes other than income taxes increased primarily due to increases in ad valorem taxes and payroll taxes. Ad valorem taxes increased primarily due to higher assessments and lower capitalized taxes. Depreciation and amortization expenses increased primarily due to additions to plant in service, partially offset by updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement as part of a settlement approved by the FERC in August 2018. See Note 2 to the financial statements for further discussion of the Unit Power Sales Agreement. Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2018, which included the St. Charles Power Station and Lake Charles Power Station projects. The increase was partially offset by changes in decommissioning trust fund activity, including portfolio rebalancing of certain of the decommissioning trust funds in 2018 and 2017. Entergy Wholesale Commodities Other operation and maintenance expenses decreased from $864 million for 2017 to $808 million for 2018 primarily due to the absence of other operation and maintenance expenses from the FitzPatrick plant. The decrease was partially offset by an increase of $26 million in severance and retention costs as a result of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and a gain on the sale of assets resulting from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, which included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale 20


  • Page 23

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 14 to the financial statements for discussion of the sale of FitzPatrick. The asset write-offs, impairments, and related charges variance is primarily due to impairment charges of $532 million ($421 million net-of-tax) in 2018 compared to impairment charges of $538 million ($350 million net-of-tax) in 2017. The impairment charges are primarily related to nuclear fuel spending, nuclear refueling outage spending, expenditures for capital assets, and asset retirement obligation revisions. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 9 to the financial statements for a discussion of asset retirement obligations. See Note 14 to the financial statements for a discussion of impairment of long-lived assets. Depreciation and amortization expenses decreased primarily due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of the planned shutdown of Palisades. Other income decreased primarily due to losses on decommissioning trust fund investments, including unrealized losses on equity investments, which, prior to 2018, were recorded to other comprehensive income. See Note 16 to the financial statements for discussion of the implementation of ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities effective January 1, 2018. Other expenses decreased primarily due to a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 2, Palisades, and Indian Point 3 plants and related assets and the absence of decommissioning expense from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick and impairments and related charges. Parent and Other Interest expense increased primarily due to an increase in commercial paper outstanding, combined with higher variable interest rates on commercial paper in 2018. See Note 4 to the financial statements for discussion of Entergy’s commercial paper program. Income Taxes See Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% for 2018 and 35% for 2017 and 2016 to the effective income tax rates, and for additional discussion regarding income taxes. The effective income tax rate for 2018 was 595%. The difference in the effective income tax rate versus the statutory rate of 21% for 2018 was primarily due to amortization of excess accumulated deferred income taxes, the tax effects of a restructuring within the Utility, and a restructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plant decommissioning trusts for which additional tax basis is now recoverable. See Notes 2 and 3 to the financial statements for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements for a discussion of the restructuring. The effective income tax rate for 2017 was 56.1%. The difference in the effective income tax rate versus the statutory rate of 35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President 21


  • Page 24

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Trump in December 2017, which changed the federal corporate income tax rate from 35% to 21% effective in 2018, partially offset by a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in tax classification. 2017 Compared to 2016 Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2017 to 2016 showing how much the line item increased or (decreased) in comparison to the prior period. Entergy Wholesale Parent & Utility Commodities Other (a) Entergy (In Thousands) 2016 Consolidated Net Income (Loss) $1,151,133 ($1,493,124) ($222,512) ($564,503) Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/ credits) 138,617 (73,433) (16) 65,168 Other operation and maintenance 103,302 (26,954) 4,869 81,217 Asset write-offs, impairments, and related charges — (2,297,265) — (2,297,265) Taxes other than income taxes 38,897 (14,657) 814 25,054 Depreciation and amortization 49,491 (6,731) 31 42,791 Other income 59,930 108,128 1,962 170,020 Interest expense (10,245) 856 5,362 (4,027) Other expenses 24,859 12,874 — 37,733 Income taxes 370,228 1,045,783 (56,182) 1,359,829 2017 Consolidated Net Income (Loss) $773,148 ($172,335) ($175,460) $425,353 (a) Parent & Other includes eliminations, which are primarily intersegment activity. Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics. Results of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-tax reduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52 million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemaking process due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 to the financial statements for further discussion of the 22


  • Page 25

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis impairment and related charges. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in the tax classification. Results of operations for 2016 include: 1) $2,836 million ($1,829 million net-of-tax) of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values; 2) a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants, income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement, and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and 3) a reduction in expenses of $100 million ($64 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 14 to the financial statements for further discussion of the impairment and related charges, see Note 3 to the financial statements for additional discussion of the income tax items, and see Note 8 to the financial statements for discussion of the spent nuclear fuel litigation. Net Revenue Utility Following is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue $6,179 Retail electric price 91 Regulatory credit resulting from reduction of the federal corporate income tax rate 56 Grand Gulf recovery 27 Louisiana Act 55 financing savings obligation 17 Volume/weather (61) Other 9 2017 net revenue $6,318 The retail electric price variance is primarily due to: the implementation of formula rate plan rates effective with the first billing cycle of January 2017 at Entergy Arkansas and an increase in base rates effective February 24, 2016, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016; a provision recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence review proceeding; the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016. 23


  • Page 26

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis See Note 2 to the financial statements for further discussion of the rate proceedings and the Waterford 3 replacement steam generator prudence review proceeding. See Note 14 to the financial statements for discussion of the Union Power Station purchase. The regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction of the Louisiana Act 55 financing savings obligation regulatory liabilities by $25 million as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements. The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs. The Louisiana Act 55 financing savings obligation variance results from a regulatory charge in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing. The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry and expansion projects and an increase in demand for existing customers in the chlor-alkali industry. Entergy Wholesale Commodities Following is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue $1,542 FitzPatrick sale (158) Nuclear volume (89) FitzPatrick reimbursement agreement 57 Nuclear fuel expenses 108 Other 9 2017 net revenue $1,469 As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by approximately $73 million in 2017 primarily due to the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017 and lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in 2017 as compared to 2016. The decrease was partially offset by an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017 and a decrease in nuclear fuel expenses primarily related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. Revenues received from Exelon in 2017 under the reimbursement agreement are offset by other operation and maintenance expenses and taxes other than income taxes and had no effect on net income. See Note 14 to the financial statements for discussion of the sale of FitzPatrick, the reimbursement agreement with Exelon, and the impairments and related charges. 24


  • Page 27

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Following are key performance measures for Entergy Wholesale Commodities for 2017 and 2016. 2017 2016 Owned capacity (MW) (a) 3,962 4,800 GWh billed 30,501 35,881 Entergy Wholesale Commodities Nuclear Fleet Capacity factor 83% 87% GWh billed 28,178 33,551 Average energy price ($/MWh) $41.60 $41.33 Average capacity price ($/kW-month) $6.16 $4.64 Refueling outage days: FitzPatrick 42 — Indian Point 2 — 102 Indian Point 3 66 — Pilgrim 43 — Palisades 27 — (a) The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick. Other Income Statement Items Utility Other operation and maintenance expenses increased from $2,313 million for 2016 to $2,416 million for 2017 primarily due to: an increase of $46 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals, including additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See Note 8 to the financial statements for a discussion of the ANO stator incident and subsequent NRC reviews; an increase of $24 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year; an increase of $20 million in transmission and distribution expenses due to higher vegetation maintenance costs; the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $19 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement. 25


  • Page 28

    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis The increase was partially offset by a decrease of $23 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs. Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise taxes, state franchise taxes, and employment taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to the prior year. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which became effective for 2017. Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase. Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioning trust fund investments, including portfolio rebalancing in 2017, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, including the St. Charles Power Station project. Other expenses increased primarily due to increases in deferred refueling outage amortization costs primarily associated with the most recent ANO plant outages compared to previous outages. Entergy Wholesale Commodities Other operation and maintenance expenses decreased from $890 million for 2016 to $864 million for 2017 primarily due to the absence of other operation and maintenance expenses from the FitzPatrick plant and a gain on the sale of assets resulting from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, which included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 14 to the financial statements for discussion of the sale of FitzPatrick. The decrease was partially offset by: FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the sale and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sale agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses are offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. See Note 14 to the financial statements for discussion of the sale and reimbursement agreements; the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $60 million. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and an increase of $37 million in severance and retention costs in 2017 as compared to the prior year due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The asset write-offs, impairments, and related charges variance is primarily due to $538 million ($350 million net-of-tax) of impairment charges in 2017 compared to $2,836 million ($1,829 million net-of-tax) of impairment and related charges in 2016. The impairment charges in 2017 are due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale 26


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The impairment and related charges in 2016 were primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of the impairments and related charges. Taxes other than income taxes decreased primarily due to the absence of ad valorem taxes from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick. Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioning trust fund investments, including the result of portfolio rebalancing in 2017, and the increase in value realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financial statements for discussion of the trust transfer agreement with NYPA. Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. See Note 9 to the financial statements for discussion of the trust transfer agreement with NYPA and the revised decommissioning cost studies. See Note 14 to the financial statements for discussion of the impairments and related charges. Income Taxes See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% for 2017 and 2016 to the effective income tax rates, and for additional discussion regarding income taxes. The effective income tax rate for 2017 was 56.1%. The difference in the effective income tax rate versus the statutory rate of 35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President Trump in December 2017, which changed the federal corporate income tax rate from 35% to 21% effective in 2018, partially offset by a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in tax classification. The effective income tax rate for 2016 was 59.1%. The difference in the effective income tax rate versus the statutory rate of 35% for 2016 was primarily due to a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit, partially offset by state income taxes and certain book and tax differences related to utility plant items. See Note 3 to the financial statements for additional discussion of the change in the tax classification and the tax settlement. Income Tax Legislation On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the Act). As a result of the Act, Entergy and the Registrant Subsidiaries re-measured their deferred tax assets and liabilities in December 2017 to reflect the reduction in the federal corporate income tax rate from 35% to 21% that was effective January 1, 2018. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of 27


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses the regulatory proceedings that have considered the effects of the Act. Entergy’s operating cash flows have been and will be reduced in the near-term by the Act, most significantly over the time that the Registrant Subsidiaries will return unprotected excess deferred income taxes to customers. Rate base is expected to increase over time as a consequence of the Act as the excess deferred income taxes are returned to customers. Entergy is financing its incremental cash requirements as a consequence of the Act through a combination of Registrant Subsidiary debt and Entergy Corporation debt and equity. In June 2018, Entergy Corporation marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the time of the offering, Entergy entered into forward sale agreements with several counterparties. In December 2018, Entergy physically settled a portion of its obligations under the forward sale agreements by delivering 6.8 million shares of its common stock in exchange for cash proceeds of approximately $500 million. Entergy is required to settle its remaining obligations under the forward sale agreements with respect to the remaining 8.5 million shares of common stock on or prior to June 7, 2019. Entergy Wholesale Commodities Exit from the Merchant Power Business Entergy Wholesale Commodities includes the ownership of the following nuclear reactors as of December 31, 2018: Location Market Capacity Status Vermont Yankee Vernon, VT ISO-NE 605 MW Plant sold on January 11, 2019 Pilgrim Plymouth, MA ISO-NE 688 MW Planned shutdown in 2019 Indian Point 2 Buchanan, NY NYISO 1,028 MW Planned shutdown in 2020 Indian Point 3 Buchanan, NY NYISO 1,041 MW Planned shutdown in 2021 Palisades Covert, MI MISO 811 MW Planned shutdown in 2022 As discussed below, Entergy sold its FitzPatrick nuclear power plant to Exelon in March 2017 and the Vermont Yankee plant to NorthStar in January 2019. The Pilgrim and Palisades plants are under contract to be sold, subject to certain conditions, after they are shut down. Entergy also sold the Rhode Island State Energy Center, a natural gas-fired combined cycle generating plant, in December 2015. These plant sales and contracts to sell are the result of a strategy that Entergy has undertaken to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. Management evaluated the challenges for each of the plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs. Management continues to look for ways to mitigate the operational and decommissioning risks associated with the merchant power business. Changes to current assumptions regarding the operating life of a plant, the decommissioning timeline and process, or the length of time that Entergy will continue to own a plant could result in revisions to the asset retirement obligations and affect compliance with certain NRC minimum financial assurance requirements for meeting obligations to decommission the plants. Increases in the asset retirement obligations are likely to result in an increase in operating expense in the period of a revision. The possibility that a plant may have an operating life shorter than previously assumed could result in the need for additional contributions to decommissioning trust funds, or the posting of parent guarantees, letters of credit, or other surety mechanisms. Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants, respectively. These facilities are in various stages of the decommissioning process, and Big Rock Point is also under contract to be sold with the Palisades plant. In addition, Entergy Wholesale Commodities 28


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis provides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities in the United States. A relatively minor portion of the Entergy Wholesale Commodities business is the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. Shutdown and Sale of Vermont Yankee On December 29, 2014, the Vermont Yankee plant ceased power production and entered its decommissioning phase. In November 2016, Entergy entered into an agreement to sell 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee was the owner of the Vermont Yankee plant. The sale of Entergy Nuclear Vermont Yankee to NorthStar included the transfer of the nuclear decommissioning trust fund and the asset retirement obligation for the spent fuel management and decommissioning of the plant. In March 2018, Entergy and NorthStar entered into a settlement agreement and a Memorandum of Understanding with State of Vermont agencies and other interested parties that set forth the terms on which the agencies and parties supported the Vermont Public Utility Commission’s approval of the transaction. The agreements provided additional financial assurance for decommissioning, spent fuel management and site restoration, and detailed the site restoration standards. In October 2018 the NRC issued an order approving the application to transfer Vermont Yankee’s license to NorthStar for decommissioning. In December 2018 the Vermont Public Utility Commission issued an order approving the transaction consistent with the Memorandum of Understanding’s terms. On January 11, 2019, Entergy and NorthStar closed the transaction. Entergy Nuclear Vermont Yankee had an outstanding credit facility that was used to pay for dry fuel storage costs. This credit facility was guaranteed by Entergy Corporation. A subsidiary of Entergy assumed the obligations under the credit facility. At the closing of the sale transaction, NorthStar caused Entergy Nuclear Vermont Yankee, renamed NorthStar Vermont Yankee, to issue a $139 million promissory note to the Entergy subsidiary that assumed the credit facility obligations. The amount of the note includes the balance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection with the credit facility. With the receipt of the NRC and Vermont Public Utility Commission approvals and the resolution among the parties of the significant conditions of the sale, Entergy concluded that as of December 31, 2018 Vermont Yankee was in held for sale status. Entergy accordingly evaluated Vermont Yankee’s asset retirement obligation in light of the terms of the sale transaction and evaluated the remaining values of the Vermont Yankee assets. These evaluations resulted in an increase in the asset retirement obligation and $173 million of related asset impairment and other charges in the fourth quarter 2018. See Note 9 to the financial statements herein for additional discussion of the asset retirement obligation. See Note 14 to the financial statements for discussion of the closing of the Vermont Yankee transaction. Sale of Top Deer Investment In November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind- powered electric generation joint venture owned by Entergy in the Entergy Wholesale Commodities segment and accounted for as an equity method investment. Entergy sold its 50% membership interest in Top Deer for approximately $0.5 million and realized a pre-tax loss of $0.2 million on the sale. Sale of FitzPatrick In October 2015, Entergy determined that it would close the FitzPatrick plant. The original expectation was to shut down the FitzPatrick plant at the end of its fuel cycle in January 2017. In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. When Entergy 29


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis purchased Indian Point 3 and FitzPatrick in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. NYPA had the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigned the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. Under the original agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trust funds. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies. The asset was increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion was recorded as interest income. As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. The decommissioning trust funds for the Indian Point 3 and FitzPatrick plants were transferred to Entergy by NYPA in January 2017. In August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon. NRC approval of the sale was received in March 2017. The transaction closed in March 2017 for a purchase price of $110 million, which included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy. See Note 14 to the financial statements for further discussion of the sale of FitzPatrick. As discussed in Note 3 to the financial statements, as a result of the sale of FitzPatrick, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017. Planned Shutdown of Pilgrim In October 2015, Entergy determined that it would close the Pilgrim plant. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision in September 2015 to place the plant in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. In January 2019 the NRC found that the Pilgrim plant had completed the corrective actions required to address the concerns that led to the plant’s placement in Column 4 and had demonstrated sustained improvement. The Pilgrim plant is expected to cease operations on May 31, 2019, at the end of its current fuel cycle. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expected and see Note 8 for further discussion on the placement of Pilgrim in Column 4. Planned Shutdown of Indian Point 2 and Indian Point 3 In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian Point 2 and Indian Point 3 for an additional 20 years. In January 2017, Entergy reached a settlement with New York State, several State agencies, and Riverkeeper, Inc., under which Indian Point 2 and Indian Point 3 will cease commercial operation by April 30, 2020 and April 30, 2021, respectively, subject to certain conditions, including New York State’s withdrawal of opposition to Indian Point’s license renewals and issuance of contested permits and similar authorizations. Operations may be extended up to four additional years for each unit by mutual agreement of Entergy and New York State based on an exigent reliability need for Indian Point generation. In September 2018 the NRC issued renewed operating licenses for Indian Point 2 through April 2024 and for Indian Point 3 through April 2025. Other provisions of the settlement include termination of all then-existing investigations of Indian Point by the parties to the agreement, which include the New York State Department of Environmental Conservation, the New York State Department of State, the New York State Department of Public Service, the New York State Department of Health, and the New York State Attorney General. The settlement recognizes the right of New York State agencies 30


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis to pursue new investigations and enforcement actions with respect to new circumstances or existing conditions that become materially exacerbated. Another provision of the settlement obligates Entergy to establish a $15 million fund for environmental projects and community support. Apportionment and allocation of funds to beneficiaries are to be determined by mutual agreement of New York State and Entergy. The settlement recognizes New York State’s right to perform an annual inspection of Indian Point, with scope and timing to be determined by mutual agreement. See Note 14 to the financial statements for further discussion of the impairment charges associated with management’s decision to shut down the Indian Point plants. Planned Shutdown of Palisades Most of the Palisades output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when the plant was acquired in 2007, that is scheduled to expire in 2022. The PPA prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022. As a result of the increase in the expected operating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, but recorded as assets and depreciated or amortized, subject to the typical periodic impairment reviews prescribed in the accounting rules. See Note 9 to the financial statements for discussion of the associated asset retirement obligation revision. See Note 14 to the financial statements for discussion of the updated calculation of the PPA liability amortization and discussion of the impairment charges associated with the decision to cease operations at Palisades. Planned Sales of Pilgrim and Palisades On July 30, 2018, Entergy entered into purchase and sale agreements with Holtec International to sell to a Holtec subsidiary (i) 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, and (ii) 100% of the equity interests in Entergy Nuclear Palisades, LLC, the owner of Palisades and the Big Rock Point Site. The sales of Entergy Nuclear Generation Company and Entergy Nuclear Palisades will include the transfer of each entity’s nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. At the closing of each sale transaction, the Holtec subsidiary will pay $1,000 each (subject to adjustment for net liabilities and other amounts) for the equity interests in Entergy Nuclear Generation Company and Entergy Nuclear Palisades. The Pilgrim transaction is subject to certain closing conditions, including: the permanent shutdown of Pilgrim and the transfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC approval for the transfer of the operating and the independent spent fuel storage installation licenses; FERC approval for the change in control of the switchyard; receipt of a favorable private letter ruling from the IRS; the market value of the nuclear decommissioning trust for Pilgrim, less the hypothetical income tax on the aggregate unrealized gain of such fund 31


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis assets at closing, equaling or exceeding a specified minimum amount; and, the Palisades purchase and sale agreement having not been terminated due to a breach by Holtec or its subsidiary. The Palisades transaction is subject to certain closing conditions, including: the permanent shutdown of Palisades and the transfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC regulatory approval for the transfer of the Palisades and Big Rock Point operating and independent spent fuel storage installation licenses; receipt of a favorable private letter ruling from the IRS; the market value of the nuclear decommissioning trust for Palisades, less the hypothetical income tax on the aggregate unrealized gain of such fund assets at closing, equaling or exceeding a specified minimum amount; and, the Pilgrim transaction having closed. Subject to the above conditions, the Pilgrim transaction is expected to close by the end of 2019 and the Palisades transaction is expected to close by the end of 2022. The Pilgrim transaction is expected currently to result in an approximate $120 million loss and the Palisades transaction is expected currently to result in an approximate $80 million gain based on the difference between Entergy’s net investment in each subsidiary and the sale price plus any agreed adjustments. The primary variables in the ultimate loss or gain that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, financial results from plant operations until the closing, and the level of any deferred tax balances at closing. Costs Associated with Entergy Wholesale Commodities Strategic Transactions Entergy incurred approximately $139 million in costs in 2018, $113 million in costs in 2017, and $95 million in costs in 2016 associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet, primarily employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions. Entergy expects to incur employee retention and severance expenses of approximately $120 million in 2019, and a total of approximately $110 million from 2020 through 2022 associated with these strategic transactions. See Note 13 to the financial statements for further discussion of these costs. In 2018, Entergy Wholesale Commodities incurred $532 million, and in 2017 it incurred $538 million, of impairment charges related to nuclear fuel spending, nuclear refueling outage spending, expenditures for capital assets, and asset retirement obligation revisions. These costs were charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired. In 2016, Entergy Wholesale Commodities incurred impairment charges of $2.8 billion primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of these impairment charges. Liquidity and Capital Resources This section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement. 32


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Capital Structure Entergy’s debt to capital ratio is balanced between equity and debt, as shown in the following table. December 31, December 31, 2018 2017 Debt to capital 66.7% 67.1% Effect of excluding securitization bonds (0.5%) (0.8%) Debt to capital, excluding securitization bonds (a) 66.2% 66.3% Effect of subtracting cash (0.6%) (1.1%) Net debt to net capital, excluding securitization bonds (a) 65.6% 65.2% (a) Calculation excludes the Arkansas, Louisiana, New Orleans, and Texas securitization bonds, which are non- recourse to Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas, respectively. Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand. Long-term debt, including the currently maturing portion, makes up most of Entergy’s total debt outstanding. Following are Entergy’s long-term debt principal maturities and estimated interest payments as of December 31, 2018. To estimate future interest payments for variable rate debt, Entergy used the rate as of December 31, 2018. The amounts below include payments on System Energy’s Grand Gulf sale-leaseback transaction, which are included in long-term debt on the balance sheet. Long-term debt maturities and estimated interest payments 2019 2020 2021 2022-2023 after 2023 (In Millions) Utility $1,336 $1,012 $1,908 $2,554 $16,282 Entergy Wholesale Commodities 4 142 — — — Parent and Other 79 522 56 933 810 Total $1,419 $1,676 $1,964 $3,487 $17,092 Note 5 to the financial statements provides more detail concerning long-term debt outstanding. Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2023. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended December 31, 2018 was 3.60% on the drawn portion of the facility. 33


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis As of December 31, 2018, amounts outstanding and capacity available under the $3.5 billion credit facility are: Letters of Capacity Capacity Borrowings Credit Available (In Millions) $3,500 $220 $6 $3,274 A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility’s maturity date may occur. Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of December 31, 2018, Entergy Corporation had $1.942 billion of commercial paper outstanding. The weighted- average interest rate for the year ended December 31, 2018 was 2.50%. Capital lease obligations are a minimal part of Entergy’s overall capital structure. Following are Entergy’s payment obligations under those leases. 2019 2020 2021 2022-2023 after 2023 (In Millions) Capital lease payments $3 $3 $3 $6 $16 The capital leases are discussed in Note 10 to the financial statements. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of December 31, 2018 as follows: Interest Amount Drawn Letters of Credit Expiration Amount of Rate as of Outstanding as of Company Date Facility (a) December 31, 2018 December 31, 2018 Entergy Arkansas April 2019 $20 million (b) 3.77% — — Entergy Arkansas September 2023 $150 million (c) 3.77% — — Entergy Louisiana September 2023 $350 million (c) 3.77% — — Entergy Mississippi May 2019 $10 million (d) 4.02% — — Entergy Mississippi May 2019 $35 million (d) 4.02% — — Entergy Mississippi May 2019 $37.5 million (d) 4.02% — — Entergy New Orleans November 2021 $25 million (c) 3.80% — $0.8 million Entergy Texas September 2023 $150 million (c) 4.02% — $1.3 million (a) The interest rate is the estimated interest rate as of December 31, 2018 that would have been applied to outstanding borrowings under the facility. (b) Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option. 34


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis (c) The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas. (d) Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant. In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2018: Amount of Uncommitted Letter of Letters of Credit Issued as Company Facility Credit Fee of December 31, 2018 (a) Entergy Arkansas $25 million 0.70% $1 million Entergy Louisiana $125 million 0.70% $25.9 million Entergy Mississippi $40 million 0.70% $16.7 million Entergy New Orleans $15 million 1.00% $2 million Entergy Texas $50 million 0.70% $20.9 million (a) As of December 31, 2018, letters of credit posted with MISO covered financial transmission right exposure of $0.2 million for Entergy Mississippi and $4.1 million for Entergy Texas. See Note 15 to the financial statements for discussion of financial transmission rights. As of December 31, 2018, Entergy Nuclear Vermont Yankee had a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $145 million that expires in November 2020. As of December 31, 2018, $139 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the year ended December 31, 2018 was 3.50% on the drawn portion of the facility. In anticipation of the transfer of Entergy Nuclear Vermont Yankee to NorthStar, the credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer, in January 2019 and the borrowing capacity was reduced to $139 million. See Note 4 to the financial statements for additional discussion of the Vermont Yankee credit facility. See Note 14 to the financial statements for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar. Operating Lease Obligations and Guarantees of Unconsolidated Obligations Entergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated obligations. Entergy’s guarantees in support of unconsolidated obligations are not likely to have a material effect on Entergy’s financial condition, results of operations, or cash flows. Following are Entergy’s payment obligations as of December 31, 2018 on non-cancelable operating leases with a term over one year: 2019 2020 2021 2022-2023 after 2023 (In Millions) Operating lease payments $94 $82 $75 $108 $88 Operating leases are discussed in Note 10 to the financial statements. 35


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Summary of Contractual Obligations of Consolidated Entities Contractual Obligations 2019 2020-2021 2022-2023 after 2023 Total (In Millions) Long-term debt (a) $1,419 $3,640 $3,487 $17,092 $25,638 Capital lease payments (b) $3 $6 $6 $16 $31 Operating leases (b) (c) $94 $157 $108 $88 $447 Purchase obligations (d) $1,331 $2,301 $2,743 $3,340 $9,715 (a) Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. (b) Lease obligations are discussed in Note 10 to the financial statements. (c) Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations. (d) Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. Almost all of the total are fuel and purchased power obligations. In addition to the contractual obligations stated above, Entergy currently expects to contribute approximately $176.9 million to its pension plans and approximately $47.6 million to other postretirement plans in 2019, although the 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations are completed, which is expected by April 1, 2019. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding. Also in addition to the contractual obligations, Entergy has $1,213 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits. Capital Funds Agreement Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to: maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); permit the continued commercial operation of Grand Gulf; pay in full all System Energy indebtedness for borrowed money when due; and enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt. 36


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Capital Expenditure Plans and Other Uses of Capital Following are the amounts of Entergy’s planned construction and other capital investments by operating segment for 2019 through 2021. Planned construction and capital investments 2019 2020 2021 (In Millions) Utility: Generation $1,915 $1,090 $1,515 Transmission 1,060 845 570 Distribution 1,040 1,095 1,325 Utility Support 515 405 325 Total 4,530 3,435 3,735 Entergy Wholesale Commodities 110 40 20 Total $4,640 $3,475 $3,755 Planned construction and capital investments refer to amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth, and includes spending for the nuclear and non-nuclear plants at Entergy Wholesale Commodities. In addition to routine capital projects, they also refer to amounts Entergy plans to spend on non-routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise expects to make to satisfy regulatory or legal requirements. Amounts include the following types of construction and capital investments: Investments, including the St. Charles Power Station, Lake Charles Power Station, Washington Parish Energy Center, Choctaw Generating Station, Sunflower Solar Facility, New Orleans Power Station, and Montgomery County Power Station, each discussed below, and potential construction of additional generation. Entergy Wholesale Commodities investments such as component replacements, software and security, and dry cask storage. Investments in Entergy’s nuclear fleet. Transmission spending to enhance reliability, reduce congestion, and enable economic growth. Distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering. For the next several years, the Utility’s owned generating capacity is projected to be adequate to meet MISO reserve requirements; however, in the longer-term additional supply resources will be needed, and its supply plan initiative will continue to seek to transform its generation portfolio with new generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. Estimated capital expenditures are also subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital. St. Charles Power Station In August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generating unit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million to construct, including transmission interconnection and other related costs. The LPSC issued an order approving certification of St. Charles Power Station in December 2016. Construction is in progress and commercial operation is expected to occur by mid-2019. 37


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Lake Charles Power Station In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 megawatt combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation and approved certification of the unit. Construction is in progress and commercial operation is expected to occur by mid-2020. Washington Parish Energy Center In April 2017, Entergy Louisiana signed an agreement with a subsidiary of Calpine Corporation for the construction and purchase of a peaking plant. Calpine will construct the plant, which will consist of two natural gas- fired combustion turbine units with a total nominal capacity of approximately 361 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed by 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. In April 2018 the parties reached a settlement recommending certification and cost recovery through the additional capacity mechanism of the formula rate plan, consistent with prior LPSC precedent with respect to the certification and recovery of plants previously acquired by Entergy Louisiana. The LPSC issued an order approving the settlement in May 2018. Choctaw Generating Station In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi. The purchase price is expected to be approximately $314 million. Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred. In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. Closing is expected to occur by the end of 2019. Sunflower Solar Facility In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi. The estimated base purchase price is approximately $138.4 million. The estimated total investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies. The project will be built by Sunflower County Solar Project, LLC, a sub-subsidiary of Recurrent Energy, 38


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met. In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility. Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non- fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. Closing is expected to occur by the end of 2021. New Orleans Power Station In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which was retired effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted a resolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of all necessary permits. In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council a request for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in paying certain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the City Council. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation. The City Council issued a request for qualifications for an investigator and in June 2018 selected two investigators. In October 2018 the investigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of the New Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonably might occur.” The City Council held a special meeting on October 31, 2018 to allow the investigators to present the report and for the City Council to consider next steps. At that meeting, the City Council issued a resolution requiring Entergy New Orleans to show cause why it should not be fined $5 million as a result of the findings in the report. In November 2018, Entergy New Orleans submitted its response to the show cause resolution, disagreeing with certain characterizations and omissions of fact in the report and asserting that the City Council could not legally impose the proposed fine. Simultaneous with the filing of its response to the show cause resolution, Entergy New Orleans sent a letter to the City Council re-asserting that the City Council’s imposition of the proposed fine would be unlawful, but acknowledging that the actions of a subcontractor, which was retained by an Entergy New Orleans contractor without the knowledge or contractually-required consent of Entergy New Orleans, were contrary to Entergy’s values. In that letter, Entergy New Orleans offered to donate $5 million to the City Council to resolve the show cause proceeding. In January 2019, Entergy New Orleans submitted a new settlement proposal to the City Council. The proposal retains the components of the first offer but adds to it a commitment to make reasonable efforts to limit the costs of the project to the $210 million cost estimate with advanced notification of anticipated cost overruns, additional reporting requirements for cost and environmental items, and a commitment regarding reliability investment and to work with the New Orleans Sewerage and Water Board to provide a reliable source of power. In February 2019 the City Council approved a resolution approving the settlement proposal and allowing the construction of the New Orleans Power Station to commence. Montgomery County Power Station In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 39


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including approximately $111 million of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017 parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Transmission interconnection and network upgrades and other related costs are not subject to the $831 million cap. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021. Advanced Metering Infrastructure (AMI) See Note 2 to the financial statements for discussion of filings made by the Utility operating companies regarding the deployment of AMI. The filings included estimates of implementation costs for AMI of $208 million for Entergy Arkansas, $330 million for Entergy Louisiana, $132 million for Entergy Mississippi, $75 million for Entergy New Orleans, and $132 million for Entergy Texas. Dividends and Stock Repurchases Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its January 2019 meeting, the Board declared a dividend of $0.91 per share. Entergy paid $648 million in 2018, $629 million in 2017, and $612 million in 2016 in cash dividends on its common stock. In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to the authority to fund grant exercises, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. As of December 31, 2018, $350 million of authority remains under the $500 million share repurchase program. The amount of repurchases may vary as a result of material changes in business results or capital spending or new investment opportunities, or if limitations in the credit markets continue for a prolonged period. Sources of Capital Entergy’s sources to meet its capital requirements and to fund potential investments include: internally generated funds; cash on hand ($481 million as of December 31, 2018); securities issuances; bank financing under new or existing facilities or commercial paper; and sales of assets. 40


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future. Provisions within the organizational documents relating to preferred stock or membership interests of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred equity. All debt and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their debt issuances are also subject to issuance tests set forth in bond indentures and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs. The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy. The City Council has concurrent jurisdiction over Entergy New Orleans’s securities issuances with maturities longer than one year. The APSC has concurrent jurisdiction over Entergy Arkansas’s issuances of securities secured by Arkansas property, including first mortgage bond issuances. No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits and long-term borrowing limits for Entergy New Orleans are effective through October 2019. The current FERC-authorized short-term borrowing limits and long-term financing authorization for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy are effective through November 2020. Entergy Arkansas has obtained first mortgage bond/ secured financing authorization from the APSC that extends through December 2020. Entergy New Orleans also has obtained long-term financing authorization from the City Council that extends through October 2019. Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained long-term financing authorization from the FERC that extends through November 2020 for issuances by the nuclear fuel company variable interest entities. In addition to borrowings from commercial banks, the Registrant Subsidiaries may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements. The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowing limits, authorizations, and amounts outstanding. Cash Flow Activity As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Millions) Cash and cash equivalents at beginning of period $781 $1,188 $1,351 Net cash provided by (used in): Operating activities 2,385 2,624 2,999 Investing activities (4,106) (3,841) (3,850) Financing activities 1,421 810 688 Net decrease in cash and cash equivalents (300) (407) (163) Cash and cash equivalents at end of period $481 $781 $1,188 41


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Operating Activities 2018 Compared to 2017 Net cash flow provided by operating activities decreased by $239 million in 2018 primarily due to: the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act; lower Entergy Wholesale Commodities net revenue in 2018 as compared to the same period in 2017 (except for revenues resulting from the FitzPatrick reimbursement agreement with Exelon). See Note 14 to the financial statements for discussion of the reimbursement agreement; a decrease due to the timing of recovery of fuel and purchased power costs in 2018 as compared to the prior year. See Note 2 to the financial statements for a discussion of fuel and purchased power cost recovery; an increase of $56 million in interest paid in 2018 as compared to the prior year resulting from an increase in interest expense; income tax payments of $20 million in 2018 compared to income tax refunds of $13 million in 2017. Entergy made income tax payments in 2018 for estimated federal income taxes. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses; and proceeds of $2 million received in 2018 compared to proceeds of $23 million received in 2017 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation. The decrease was partially offset by: the effect of favorable weather on billed Utility sales in 2018; the timing of collection of receivables from Utility customers; a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlement and refund; a decrease of $58 million in spending on nuclear refueling outages in 2018 as compared to the prior year; and a decrease of $57 million in severance and retention payments in 2018 as compared to the prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. 2017 Compared to 2016 Net cash flow provided by operating activities decreased by $375 million in 2017 primarily due to: lower Entergy Wholesale Commodities net revenue (except for revenues resulting from the FitzPatrick reimbursement agreement with Exelon) in 2017 as compared to prior year, as discussed above. See Note 14 to the financial statements for discussion of the reimbursement agreement; an increase of $141 million in spending on nuclear refueling outages in 2017 as compared to the prior year; an increase of $94 million in severance and retention payments in 2017 as compared to the prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlement and refund; 42


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis proceeds of $23 million received in 2017 compared to proceeds of $102 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and an increase of $20 million in pension contributions in 2017. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” below and Note 11 to the financial statements for discussion of qualified pension and other postretirement benefits funding. The decrease was partially offset by: income tax refunds of $13 million in 2017 compared to income tax payments of $95 million in 2016. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited; a decrease of $68 million in interest paid in 2017 as compared to the prior year primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to the financial statements for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets; and an increase due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the prior year. See Note 2 to the financial statements for a discussion of fuel and purchased power cost recovery. Investing Activities 2018 Compared to 2017 Net cash flow used in investing activities increased by $265 million in 2018 primarily due to: an increase of $334 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $205 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2018 on self-build projects in the Utility business and an increase of $88 million in nuclear construction expenditures primarily due to a higher scope of work performed during the Grand Gulf outage in 2018; proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements for a discussion of the sale of FitzPatrick; and collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants. The increase was partially offset by: changes in the decommissioning trust funds, including portfolio rebalancing of certain decommissioning trust funds in 2018; a decrease of $75 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and an increase of $34 million in proceeds received from the DOE in 2018 as compared to the prior year resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation. 43


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 2017 Compared to 2016 Net cash flow used in investing activities decreased by $9 million in 2017 primarily due to the purchase of the Union Power Station for approximately $949 million in March 2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements for discussion of the Union Power Station purchase and the sale of FitzPatrick. The decrease was partially offset by: an increase of $827 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $452 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2017 on the St. Charles Power Station project and the Lake Charles Power Station project and a higher scope of work performed on various other fossil projects in 2017 as compared to 2016; an increase of $133 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to 2016 and higher storm restoration spending in 2017; an increase of $102 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017 as compared to 2016; an increase of $101 million in transmission construction expenditures primarily due to a higher scope of work performed on transmission projects in 2017 as compared to 2016; and an increase of $51 million due to increased spending on advanced metering infrastructure in 2017; a decrease of $144 million in proceeds received from the DOE in 2017 as compared to the prior year resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and a decrease of $63 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle. Financing Activities 2018 Compared to 2017 Net cash flow provided by financing activities increased by $611 million in 2018 primarily due to: long-term debt activity providing approximately $1,070 million of cash in 2018 compared to $224 million in 2017. Borrowings and repayments of borrowings on Entergy’s long-term credit facility are included in long- term debt activity; and proceeds from the issuance of common stock of $499 million as a result of the settlement of equity forwards in 2018. See Note 7 to the financial statements for discussion of the equity forward sale agreements. The increase was partially offset by a decrease of $647 million in net issuances of commercial paper in 2018 compared to 2017 and a net decrease of $152 million in 2018 in short-term borrowings by the nuclear fuel company variable interest entities. 2017 Compared to 2016 Net cash flow provided by financing activities increased by $122 million in 2017 primarily due to: Entergy’s net issuances of $1,123 million of commercial paper in 2017 compared to net repayments of $78 million of commercial paper in 2016; an increase of $95 million resulting from lower redemptions of preferred stock. In 2017, Entergy New Orleans redeemed its $7.8 million of 4.75% Series preferred stock, its $6 million of 5.56% Series preferred stock, and its $6 million of 4.36% Series preferred stock. In 2016, Entergy Arkansas redeemed its $75 million of 6.45% Series preferred stock and its $10 million of 6.08% Series preferred stock and Entergy Mississippi redeemed its $30 million of 6.25% Series preferred stock; 44


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis an increase of $48 million in treasury stock issuances in 2017 primarily due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2017 to satisfy stock option exercises; and net borrowings of $41 million by the nuclear fuel company variable interest entities in 2017 compared to net repayments of $1 million in 2016. The increase was partially offset by long-term debt activity providing approximately $224 million of cash in 2017 compared to providing approximately $1,489 million of cash in 2016. Borrowings and repayments of borrowings on Entergy’s long-term credit facility are included in long-term debt activity. For the details of Entergy’s commercial paper program and the nuclear fuel company variable interest entities’ short- term borrowings, see Note 4 to the financial statements. See Note 5 to the financial statements for details of long-term debt. Rate, Cost-recovery, and Other Regulation State and Local Rate Regulation and Fuel-Cost Recovery The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the LPSC, the MPSC, the City Council, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies’ authorized returns on common equity: Company Authorized Return on Common Equity Entergy Arkansas 9.25% - 10.25% Entergy Louisiana 9.95% Electric (a); 9.45% - 10.45% Gas Entergy Mississippi 9.28% - 11.36% Entergy New Orleans 10.7% - 11.5% Electric; 10.25% - 11.25% Gas Entergy Texas 9.65% (a) Based on 2017 test year. Authorized return on common equity for 2018 and 2019 test years will be 9.2% - 10.4%. The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements. Federal Regulation The FERC regulates wholesale sales of electricity rates and interstate transmission of electricity, including rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The current return on equity and capital structure of System Energy are currently the subject of complaints filed by certain of the operating companies’ retail regulators. The current return on equity under the Unit Power Sales Agreement is 10.94%. Prior to each operating company’s termination of participation in the System Agreement (Entergy Arkansas in December 2013, Entergy Mississippi in November 2015, and Entergy Louisiana, Entergy New Orleans, and Entergy Texas each in August 2016), the Utility operating companies engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which was a rate schedule approved by the FERC. Certain of the Utility operating companies’ retail regulators are pursuing litigation involving the System Agreement at the FERC and in federal courts. See Note 2 to the financial statements for discussion of the 45


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis System Agreement proceedings, the complaints filed with the FERC challenging System Energy’s return on equity, and the amendments to the Unit Power Sales Agreement approved by the FERC in 2018. Market and Credit Risk Sensitive Instruments Market risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks. The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business. The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business. See Note 16 to the financial statements for details regarding Entergy’s decommissioning trust funds. The interest rate risk associated with changes in interest rates as a result of Entergy’s outstanding indebtedness. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding. The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use commodity and financial instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers. Entergy’s commodity and financial instruments are also exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements. Commodity Price Risk Power Generation As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets. Entergy Wholesale Commodities also sells unforced capacity, which allows load- serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of December 31, 2018. 46


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Entergy Wholesale Commodities Nuclear Portfolio 2019 2020 2021 2022 Energy Percent of planned generation under contract (a): Unit-contingent (b) 98% 94% 91% 66% Planned generation (TWh) (c) (d) 25.6 17.7 9.6 2.8 Average revenue per MWh on contracted volumes: Expected based on market prices as of December 31, 2018 $39.7 $42.1 $56.8 $58.8 Capacity Percent of capacity sold forward (e): Bundled capacity and energy contracts (f) 26% 37% 68% 97% Capacity contracts (g) 32% 5% —% —% Total 58% 42% 68% 97% Planned net MW in operation (average) (d) 3,167 2,195 1,158 338 Average revenue under contract per kW per month (applies to $5.9 $2.3 $— $— capacity contracts only) Total Energy and Capacity Revenues (h) Expected sold and market total revenue per MWh $44.4 $45.1 $54.9 $47.3 Sensitivity: -/+ $10 per MWh market price change $44.2 - $44.9 - $54.0 - $43.9 - $44.6 $45.3 $55.8 $50.8 (a) Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the planned generation under contract. (b) Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. (c) Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch. (d) Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31, 2022. For a discussion regarding the planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” above. (e) Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions. (f) A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold. (g) A contract for the sale of an installed capacity product in a regional market. (h) Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues. Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on the respective year-end market 47


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $6 million in 2019 and would have had a corresponding effect on pre-tax income of $3 million in 2018. A negative $10 per MWh change in the annual average energy price in the markets based on the respective year-end market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($6) million in 2019 and would have had a corresponding effect on pre-tax income of ($3) million in 2018. Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. Cash and letters of credit are also acceptable forms of credit support. At December 31, 2018, based on power prices at that time, Entergy had liquidity exposure of $126 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $52 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2018, Entergy would have been required to provide approximately $69 million of additional cash or letters of credit under some of the agreements. As of December 31, 2018, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $310 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets. As of December 31, 2018, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings. Nuclear Matters Entergy’s Utility and Entergy Wholesale Commodities businesses include the ownership and operation of nuclear generating plants and are, therefore, subject to the risks related to such ownership and operation. These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; the implementation of plans to cease merchant generation at all Entergy Wholesale Commodities nuclear plants by 2022 and the post-shutdown decommissioning of these plants; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident. NRC Reactor Oversight Process The NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and “multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. 48

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