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    ENTERGY CORPORATION AND SUBSIDIARIES 2020 ANNUAL REPORT


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    Entergy Corporation and Subsidiaries 2020 Entergy Corporation (NYSE: ETR) is an integrated energy company engaged in electric power production, transmission and retail distribution operations. Entergy delivers electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy owns and operates one of the cleanest large-scale U.S. power generating fleets with approximately 30,000 megawatts of electric generating capacity, including 8,000 megawatts of nuclear power. Headquartered in New Orleans, Louisiana, Entergy has annual revenues of $10.1 billion and more than 13,000 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 2020 Integrated Report at integratedreport.entergy.com. Contents 1 Letter to Our Stakeholders 6 Forward-Looking Information and Regulation G Compliance 11 Selected Financial Data – Five-Year Comparison 12 Comparison of Five-Year Cumulative Return 13 Definitions 17 Management’s Financial Discussion and Analysis 53 Report of Management 54 Report of Independent Registered Public Accounting Firm 59 Consolidated Income Statements 60 Consolidated Statements of Comprehensive Income (Loss) 61 Consolidated Statements of Cash Flows 63 Consolidated Balance Sheets 65 Consolidated Statements of Changes in Equity 67 Notes to Financial Statements 196 Board of Directors 197 Executive Officers 198 Investor Information


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    To All Our Stakeholders While preparing to write this letter, I was acutely aware that 2020 would be one of the most analyzed and scrutinized years in modern history, the subject of countless books, essays, films, debates, dissertations, and conversations for decades to come. The task of describing a year like no other seemed a bit overwhelming at first. From a personal and professional standpoint, I had never seen anything like it in my more than six decades on the planet, and in many ways, I’m still processing the experience. Telling Entergy’s 2020 story is a responsibility I am humbled by, and thankful for, because I am speaking on behalf of a team of employees who managed to make extraordinary things happen. In my efforts to sum up the year, I find myself looking at it through two lenses: the first is how the year tried to divide us, and the second is how we chose to respond. As for division, beyond any measure it was a year defined by forces and events that threatened to pull us apart: • A frightening pandemic separated us from our families, friends, and co-workers; • Social and political unrest polarized our nation; and • Catastrophic storms disrupted lives and devastated communities. These challenges took a profound toll on our lives and introduced new fears and uncertainties about the future. At times, it seemed like the best way to protect our physical, emotional, and spiritual wellbeing was to stay apart, hunker down, and hope for the best. Thankfully, this mindset did not take hold at Entergy. For a company whose purpose is serving others, it became apparent early on that the only response to division was unity. Our ability to stay connected and united around a common purpose, grounded in our core values, helped us stay true to ourselves and our legacy of service. United by our vision to power the lives of those we serve, we focused relentlessly on our mission — creating sustainable value for customers, communities, employees, and owners. To those who say there was no way to prepare for 2020, all I can tell you is that the 13,400 women and men of Entergy were prepared. Whatever 2020 threw at us, we didn’t back down. Whenever we encountered obstacles, we stuck together and worked through each day as one team. By choosing unity over division and estrangement, we delivered on our strategic, operational, and financial commitments, despite the challenges. That’s what our stakeholders expect from us. And that’s what it takes to be the premier utility. Prepared for the COVID-19 Pandemic Preparing for the unexpected has long been a hallmark of Entergy’s success. Well before the novel coronavirus was an actuality, we had a detailed pandemic response plan in place. 1


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    In January of 2020, we activated our plan and mobilized teams with four primary objectives: (1) ensuring the safety and wellness of our employees; (2) maintaining safe, reliable service for our customers; (3) supporting our communities through volunteerism and financial resources; and (4) mitigating financial impacts to the company. Entergy’s extensive preparations allowed us to quickly adapt to new working arrangements, with much of our workforce telecommuting. For field employees and others for whom telecommuting was not an option, we made sure they were equipped with tools and resources to ensure their safety on and off the job while keeping the lights on and the gas flowing for our customers. During uncertain times, our unity and continuity mattered more than ever. The energy we supplied in 2020 was an essential, stabilizing necessity that made it possible for hospitals, nursing homes, healthcare clinics, and a broad range of medical providers to carry out their lifesaving mission in communities throughout our service area. Our energy kept the supply chain in motion, making it possible for grocery stores, pharmacies, relief agencies, emergency responders, and other critical entities to provide vital supplies and services to keep our communities moving forward. With many families homebound during the pandemic, our energy powered remote offices and classrooms while helping our customers stay connected to one another and the outside world. When the pandemic created economic hardships in our communities, our philanthropic support and employee volunteerism provided relief for families in crisis. Through grants to more than 80 nonprofits, we provided food, rent and mortgage assistance, utility assistance, emergency grants, and workforce training for those who were laid off as a result of the pandemic. Prepared for a Record-Breaking Storm Season In 2020, our employees also demonstrated once again why Entergy is best-in-class in storm response. During a storm season unlike any other in our history, their commitment to health, safety, and preparedness was one of our proudest achievements. When five named storms devastated portions of our service area — including Hurricane Laura, the strongest storm to hit Louisiana in over 160 years — our storm-response teams worked around the clock to safely restore service, rebuild infrastructure, and help our communities recover, all while following virus-prevention protocols. To ensure our communities had access to critical resources after hurricanes Laura, Delta, and Zeta, we deployed 82 generators — equal to more than 43 MW of power — across the region, including underserved areas. 2


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    When Hurricane Zeta struck the Gulf Coast in late October, we faced an additional challenge of ensuring that polling places had power by Election Day. Partnering with state and local governments, we deployed more than 200 power pods across six Louisiana parishes to ensure every polling place was operational. Widespread storm damage deepened the crisis for many communities already struggling from impacts of the pandemic. In addition to restoring power and rebuilding infrastructure, Entergy led economic recovery efforts through charitable donations and volunteer support that helped our communities build back. Leading on Environmental Stewardship Entergy’s environmental leadership is well-established, and 2020 was another milestone year in our efforts to combat climate change. After more than two decades of setting and achieving voluntary emission-reduction targets, we intensified our commitment to achieve net-zero carbon emissions by 2050. Our longstanding commitment to sustainability has led to measurable, undeniable results: • For the past two decades, our emission rate has been well below the sector average, • Our utility CO2 emission rate has decreased approximately 30% since 2000, and • Today we operate one of the cleanest large-scale power generating fleets in the nation. We know that creating a carbon-free future calls for more investments in renewables. Entergy is already the largest utility provider of renewable energy in Arkansas and Louisiana, and we’re building the largest utility-owned solar facility in Mississippi. We’re working with our regulators and stakeholders to responsibly expand access to renewable energy across our service area under a framework that balances reliability, affordability, and environmental stewardship. We’re also exploring emerging technologies and innovative partnerships to accelerate our net-zero carbon emissions actions, most recently through a partnership with Mitsubishi Power. We are focused on advancing technologies and expertise to co-fire our generation with hydrogen. We are working today to make this a reality. With the selection of the Orange County Power Station, a self-build project in Southeast Texas, we will develop a state-of-the-art generation facility with the option to be powered partially or fully with hydrogen. Additionally, we’re exploring the potential use of carbon capture and sequestration once that technology is economically available. Being a premier utility means doing our part to create a more sustainable future for our customers, communities, and the world — a goal we are continuously striving for in all aspects of our operations. Championing Diversity, Inclusion, and Belonging For Entergy, keeping the power on and gas flowing is just part of what we do. Our focus on diversity, inclusion, and belonging is also a critical business imperative, and our ability to deliver sustainable value to our stakeholders now and in the future depends on it. 3


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    We strategically elevated diversity, inclusion, and belonging as one of our corporate priorities in 2018. As part of our efforts, we’ve delivered training courses to better equip leaders at all levels to effectively engage in meaningful conversations about race and other sensitive issues and increase awareness of unconscious biases that may play out in the workplace. In June of 2020, my executive team held an employee town hall on race and equality with a goal to foster transparent, productive, and even raw conversations among employees and leaders at all levels. Since that time, teams have been hard at work laying a firm foundation on which to continue building and strengthening our culture of diversity, inclusion, and belonging. We also published a 2020 Inclusive Climate Report based on our organizational health survey results, which we made available to the entire workforce. In addition to a 90% survey participation rate, employees provided 25,000 comments on topics ranging from our COVID-19 response to our diversity, inclusion, and belonging efforts — valuable insights we are using to improve our performance and responsiveness. Delivering Financial Results Our stock performance in 2020 did not reflect the extraordinary accomplishments of our organization. And of course, we’re disappointed. But our strong financial results demonstrated otherwise: Entergy’s adjusted earnings per share of $5.66 was in the top half of our guidance range. We achieved this by exceeding our $100 million cost-savings target for the year, which we established to offset lower revenues resulting from COVID-19. Challenges and headwinds are a natural part of doing business. No company is immune, no utility is immune, and Entergy is no exception. However, the test of sustainability is less about challenges and headwinds and more about how we are equipped and prepared to successfully address them. The reality is that our achievements and strong financial results in 2020 proved our ability, in the face of adversity, to deliver on our commitments. Today, we’re positioned to accomplish even greater things in the future. I say that with confidence because of what I saw our employees do last year. All across our company, they rose to the challenge to power life while safeguarding others’ health and safety. Despite obstacles imposed by the pandemic, our employees found ways to connect, innovate, drive growth, and build toward the future. When storms caused unprecedented destruction in our service area, our workforce answered the call, again and again, with an unwavering commitment to safety, service, and professionalism. While it’s important to acknowledge our progress, we know there’s more work to be done in our mission to become the premier utility. We are taking a critical look at our performance in 2020 and building on our knowledge and experience to find better ways to serve our stakeholders. 4


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    During a year marked by personal loss, crisis, and chaos, we proved that outside forces are no match for the ties that bind us. Through our decisions and actions, we proved that the values we hold in common are much more meaningful and powerful than our differences. By moving forward with unity, we will create a stronger foundation for continued success in 2021 and beyond. And as we focus on the journey ahead, there’s nowhere else I’d rather be than working alongside the employees of Entergy. Leo P. Denault Chairman of the Board and Chief Executive Officer March 26, 2021 5


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE Forward-Looking Information In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, projections, 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 each of these registrants 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 combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake 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 December 31, 2020, (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 December 31, 2020, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings): • resolution of pending and future rate cases and related litigation, 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, as well as delays in cost recovery resulting from these proceedings; • continuing 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; • 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, the MISO-wide base rate of return on equity allowed or any MISO-related charges and credits required by the FERC, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies; • 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 return on equity criteria, transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice; • changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or actual shutdown and sale of each of the 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; • 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 effect of public and political opposition on these applications, regulatory proceedings, and 6


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued) litigation; • the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities; • 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; • Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities; • 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 and sale of each of these nuclear plants; • 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; • 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; • 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; • 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; • changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations; • 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, domestic purchase requirements, or energy policies; • the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions; • 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; • variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes (including from Hurricane Laura, Hurricane Delta, and Hurricane Zeta), 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, as well as any related unplanned outages; • the risk that an incident at any nuclear generation facility in the U.S. could lead to the assessment of significant retrospective assessments and/or retrospective insurance premiums as a result of Entergy’s participation in a secondary financial protection system, a utility industry mutual insurance company, and industry self-insurance programs; 7


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued) • effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss; • changes in the quality and availability of water supplies and the related regulation of water use and diversion; • Entergy’s ability to manage its capital projects, including completion of projects timely and within budget and to obtain the anticipated performance or other benefits, and its operation and maintenance costs; • Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms; • 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; • changes to federal income tax laws and regulations, including continued impact of the Tax Cuts and Jobs Act and its intended and unintended consequences on financial results and future cash flows; • the effects of Entergy’s strategies to reduce tax payments; • 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; • 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; • changes in inflation and interest rates; • the effects of litigation and government investigations or proceedings; • 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 government policies incentivizing development of the foregoing, 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; • Entergy’s ability to effectively formulate and implement plans to reduce its carbon emission rate and aggregate carbon emissions, including its commitment to achieve net-zero carbon emissions by 2050, and the potential impact on its business of attempting to achieve such objectives; • 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; • the effects of a global event or pandemic, such as the COVID-19 global pandemic, including economic and societal disruptions; volatility in the capital markets (and any related increased cost of capital or any inability to access the capital markets or draw on available bank credit facilities); reduced demand for electricity, particularly from commercial and industrial customers; increased or unrecoverable costs; supply chain, vendor, and contractor disruptions; delays in completion of capital or other construction projects, maintenance, and other operations activities, including prolonged or delayed outages; impacts to Entergy’s workforce availability, health, or safety; increased cybersecurity risks as a result of many employees telecommuting; increased late or uncollectible customer payments; regulatory delays; executive orders affecting, or increased regulation of, Entergy’s business; changes in credit 8


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued) ratings or outlooks as a result of any of the foregoing; or other adverse impacts on Entergy’s ability to execute on its business strategies and initiatives or, more generally, on Entergy’s results of operations, financial condition, and liquidity; • Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills; • Entergy’s ability to attract, retain, and manage an appropriately qualified workforce; • changes in accounting standards and corporate governance; • 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; • future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets; • 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; • 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 and sales of Indian Point 2, Indian Point 3, and Palisades; • 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; • the potential for the factors listed herein to lead to the impairment of long-lived assets; and • Entergy and its subsidiaries’ ability to successfully execute on their business strategies, including their ability to complete strategic transactions that Entergy may undertake. 9


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    FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Concluded) Regulation G Compliance This report includes the non-GAAP financial measure of adjusted earnings per share. The reconciliation of this measure to the most directly comparable GAAP measure is below. GAAP to Non-GAAP Reconciliation - Adjusted Earnings and Earnings Per Share 2020 ($ in millions, except diluted average common shares outstanding) Net income attributable to ETR Corp 1,388 Less adjustments: Utility SERI regulatory liability for potential refund for rate base reduction (25) retroactive to 2015 Income tax effect on Utility adjustment above 6 2014 / 2015 IRS settlement – E-LA business combination 396 Total Utility 377 Parent & Other 2014 / 2015 IRS settlement – E-LA business combination (61) Total Parent & Other (61) EWC (65) Total adjustments 250 ETR Adjusted Earnings 1,138 Diluted average common shares outstanding (in millions) 201 (After-tax, $ per share)(a) Net income attributable to ETR Corp 6.90 Less adjustments: Utility SERI regulatory liability for potential refund for rate base reduction (0.09) retroactive to 2015 2014 / 2015 IRS settlement – E-LA business combination 1.96 Total Utility 1.87 Parent & Other 2014 / 2015 IRS settlement – E-LA business combination (0.31) Total Parent & Other (0.31) EWC (0.32) Total adjustments 1.24 ETR Adjusted Earnings 5.66 Calculations may differ due to rounding (a) Per share amounts are calculated by dividing the corresponding earnings (loss) by the diluted average number of common shares outstanding for the period. 10


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    ENTERGY CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2020 2019 2018 2017 2016 (In Thousands, Except Percentages and Per Share Amounts) Operating revenues $10,113,636 $10,878,673 $11,009,452 $11,074,481 $10,845,645 Net income (loss) $1,406,653 $1,258,244 $862,555 $425,353 ($564,503) Earnings (loss) per share: Basic $6.94 $6.36 $4.68 $2.29 ($3.26) Diluted $6.90 $6.30 $4.63 $2.28 ($3.26) Dividends declared per share $3.74 $3.66 $3.58 $3.50 $3.42 Return on common equity 13.13% 13.02% 10.08% 5.12% (6.73%) Book value per share, year-end $54.56 $51.34 $46.78 $44.28 $45.12 Total assets $58,239,212 $51,723,912 $48,275,066 $46,707,149 $45,904,434 Long-term obligations (a) $21,477,974 $17,351,449 $15,758,083 $14,535,077 $14,695,422 (a) Includes long-term debt (excluding currently maturing debt), non-current finance lease obligations, and subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet. 2020 2019 2018 2017 2016 (Dollars In Millions) Utility electric operating revenues: Residential $3,550 $3,532 $3,566 $3,355 $3,288 Commercial 2,293 2,476 2,426 2,480 2,362 Industrial 2,331 2,541 2,499 2,584 2,327 Governmental 212 228 226 231 217 Total billed retail 8,386 8,777 8,717 8,650 8,194 Sales for resale 296 286 300 253 236 Other 365 367 367 376 437 Total $9,047 $9,430 $9,384 $9,279 $8,867 Utility billed electric energy sales (GWh): Residential 35,173 36,094 37,107 33,834 35,112 Commercial 26,466 28,755 29,426 28,745 29,197 Industrial 47,117 48,483 48,384 47,769 45,739 Governmental 2,414 2,579 2,581 2,511 2,547 Total retail 111,170 115,911 117,498 112,859 112,595 Sales for resale 13,658 13,210 11,715 11,550 11,054 Total 124,828 129,121 129,213 124,409 123,649 Entergy Wholesale Commodities: Operating revenues $943 $1,295 $1,469 $1,657 $1,850 Billed electric energy sales (GWh) 20,581 28,088 29,875 30,501 35,881 11


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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. $225.00 $200.00 $175.00 Entergy Corporation $150.00 Philadelphia Utility Index $125.00 S&P 500 Index $100.00 $75.00 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Entergy Corporation $100.00 $112.52 $130.40 $144.22 $208.16 $179.62 Philadelphia Utility Index $100.00 $117.40 $132.45 $137.11 $173.87 $178.61 S&P 500 Index $100.00 $111.95 $136.38 $130.39 $171.44 $202.96 Assumes $100 invested at the closing price on Dec. 31, 2015, in Entergy Corporation common stock, the Philadelphia Utility Index and the S&P 500 Index, and reinvestment of all dividends. Source: Bloomberg 12


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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 COVID-19 The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020 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 Louisiana formally 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 13


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    DEFINITIONS (Continued) Abbreviation or Acronym Term 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 Indian Point 2 Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2020 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), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in May 2019 and was sold in August 2019 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 14


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    DEFINITIONS (Concluded) Abbreviation or Acronym Term 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 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, dated as of June 10, 1982, as amended and approved by the FERC, Agreement 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), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 and was disposed of 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 15


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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 and 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 2020 2019 2018 2020 2019 2018 Utility 91 88 87 96 96 93 Entergy Wholesale Commodities 9 12 13 7 8 11 Parent & Other (a) — — — (3) (4) (4) See Note 13 to the financial statements for further financial information regarding Entergy’s business segments. (a) Parent & Other includes eliminations, which are primarily intersegment activity. The COVID-19 Pandemic The COVID-19 pandemic and the measures to control it have adversely affected economic activity and conditions worldwide and have affected the demand for the products and services of many businesses in Entergy’s service area. Entergy experienced a decline in sales volume in 2020 compared to 2019 due to the COVID-19 pandemic, especially in the commercial and industrial sectors. In addition, Entergy experienced negative changes to its customers’ payment patterns and its operating cash flow activity in 2020 compared to 2019 due to the COVID-19 pandemic. These negative changes include an increase in uncollectible accounts. Entergy provides critical services to its customers and has implemented its comprehensive incident response plan, which contemplates major events such as storms or pandemics. Entergy’s focus during the COVID-19 pandemic has been on the safety and wellness of its employees; providing safe, reliable service for its customers; analyzing and addressing the financial effects of the COVID-19 pandemic; and continuing its plans for the future. Entergy implemented precautionary measures for safety on and off the job for employees and contractors working at plants and in the field and implemented telecommuting practices for employees who can work from home. Entergy temporarily suspended service disconnections for customers and is working with regulators to address routine and non-routine matters and allow continuation of capital spending plans. The Utility operating companies have received accounting orders to defer costs associated with COVID-19. To date, Entergy has not had material effects to its major projects or capital spending plans. Entergy is working with suppliers and contractors for continued availability of resources, equipment, and supplies to keep operations and major projects going forward and on schedule. Entergy implemented expense-related spending reductions in 2020, which did not affect safety or service reliability, in order to offset some of the financial effects of the COVID-19 pandemic. 17


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Although Entergy has taken these actions in response to the COVID-19 pandemic, uncertainty exists regarding the full depth and length of the effects of COVID-19 on Entergy’s sales volume, revenue, collections and cash flows, expenses, liquidity, and capital needs. Entergy will continue to monitor actively the COVID-19 pandemic and related developments affecting its workforce, customers, suppliers, operations, and financial condition. Hurricane Laura, Hurricane Delta, and Hurricane Zeta In August and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of the Utility’s service territories in Louisiana, including New Orleans, Texas, and to a lesser extent, in Arkansas and Mississippi. The storms resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. Total restoration costs for the repair and/or replacement of the electrical system damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta are currently estimated to be approximately $2.4 billion, including approximately $1.98 billion in capital costs and approximately $420 million in non-capital costs. The majority of the costs were incurred by Entergy Louisiana, with a substantial portion also incurred by Entergy Texas. The estimate includes all costs to restore power and repair or replace the damages from the hurricanes, except for the cost to repair or replace damage incurred to an Entergy Louisiana transmission line in southeast Louisiana, and the amount of that cost could be significant. The restoration plan for this transmission line and the related cost estimate is still being evaluated. Also, Utility revenues were adversely affected in 2020, primarily due to power outages resulting from the hurricanes. Entergy recorded accounts payable and corresponding construction work in progress and regulatory assets for the estimated costs incurred that were necessary to return customers to service. Entergy recorded the regulatory assets in accordance with its accounting policies and based on the historic treatment of such costs in its service area because management believes that recovery through some form of regulatory mechanism is probable. There are well-established mechanisms and precedent for addressing these catastrophic events and providing for recovery of prudently incurred storm costs in accordance with applicable regulatory and legal principles. Because Entergy has not gone through the regulatory process regarding these storm costs, there is an element of risk, and Entergy is unable to predict with certainty the degree of success it may have in its recovery initiatives, the amount of restoration costs that it may ultimately recover, or the timing of such recovery. The Utility operating companies are considering all available avenues to recover storm-related costs from Hurricane Laura, Hurricane Delta, and Hurricane Zeta, including accessing funded storm reserve escrows and securitization. In November 2020, Entergy Louisiana drew $257 million from its funded storm reserves. Each Utility operating company is responsible for its restoration cost obligations and for recovering or financing its storm-related costs. Storm cost recovery or financing will be subject to review by applicable regulatory authorities. In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments to facilitate issuance of shorter-term bonds to provide interim financing for restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta on an interim basis. In November 2020 the LPSC issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage bonds due November 2023. In December 2020, Entergy Louisiana provided the LPSC with notification that it intends to initiate a storm cost recovery proceeding in the near future, which will permit the LPSC to retain any outside consultants and counsel needed to review the storm cost recovery application. In February 2021 the LPSC voted to retain outside 18


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis counsel and consultants to assist in the review of Entergy Louisiana’s upcoming storm cost recovery application, which is expected to be filed in March 2021. February 2021 Winter Storms In February 2021, the United States experienced winter storms and extreme cold temperatures, including in Entergy’s service area. The impact of the storms and the extreme cold temperatures affected Entergy’s operational assets and the availability of generation across the area. In order to balance the system, MISO directed Entergy to conduct rolling power outages. Entergy’s system is now back to normal operations. The severe weather event also affected the market for natural gas due to the severe cold’s effects on the gas supply system and increased demand for gas to support electricity loads. Entergy’s preliminary estimate for the cost of mobilizing crews and restoring power is approximately $125 million to $140 million, primarily at Entergy Louisiana and Entergy Mississippi. Natural gas purchases for February 1st through 25th, 2021, for Entergy were approximately $510 million, including $105 million for Entergy Arkansas, $190 million for Entergy Louisiana, $45 million for Entergy Mississippi, $15 million for Entergy New Orleans, and $155 million for Entergy Texas. This compares to natural gas purchases for February 2020 for Entergy of $80 million, including $10 million for Entergy Arkansas, $39 million for Entergy Louisiana, $14 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $10 million for Entergy Texas. The Utility operating companies each have fuel recovery mechanisms in place to recover their natural gas costs. With the potential effect of the higher natural gas costs on customers, the Utility operating companies plan to work with their retail regulators to recover these costs in a manner that mitigates the effects on customer bills. The Utility operating companies also expect to work with their regulators as the regulators review other effects of the winter storm. 19


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Results of Operations 2020 Compared to 2019 Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2020 to 2019 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) 2019 Net Income (Loss) Attributable to Entergy Corporation $1,410,813 $146,682 ($316,269) $1,241,226 Operating revenues (413,271) (351,850) 84 (765,037) Fuel, fuel-related expenses, and gas purchased for resale (434,394) (30,900) 27 (465,267) Purchased power (297,505) 8,940 (27) (288,592) Other regulatory charges (credits) 40,829 — — 40,829 Other operation and maintenance (84,548) (177,945) (7,262) (269,755) Asset write-offs, impairments, and related charges — (263,404) — (263,404) Taxes other than income taxes 15,743 (6,987) 339 9,095 Depreciation and amortization 179,298 (46,119) (109) 133,070 Other income (23,947) (151,832) 37,047 (138,732) Interest expense 59,456 (7,018) (9,200) 43,238 Other expenses (4,863) (34,848) — (39,711) Income taxes (301,945) 266,232 84,032 48,319 Preferred dividend requirements of subsidiaries 1,301 — — 1,301 2020 Net Income (Loss) Attributable to Entergy Corporation $1,800,223 ($64,951) ($346,938) $1,388,334 (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 2020 include resolution of the 2014-2015 IRS audit, which resulted in a reduction in deferred income tax expense of $230 million that includes a $396 million reduction in deferred income tax expense at Utility related to the basis of assets contributed in the 2015 Entergy Louisiana and Entergy Gulf States Louisiana business combination, including the recognition of previously uncertain tax positions, and deferred income tax expense of $105 million at Entergy Wholesale Commodities and $61 million at Parent and Other resulting from the revaluation of net operating losses as a result of the release of the reserves. See Note 3 to the financial statements for further discussion of the IRS audit resolution. Results of operations for 2019 include: 1) a loss of $190 million ($156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019; 2) a $156 million reduction in income tax expense recognized by Entergy Wholesale Commodities as a result of an internal restructuring; and 3) impairment charges of $100 million ($79 million net-of-tax) 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 20


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business. See Note 3 to the financial statements for further discussion of the internal restructuring. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below for discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet and see Note 14 to the financial statements for further discussion of the impairment and related charges and the sale of the Pilgrim plant. Operating Revenues Utility Following is an analysis of the change in operating revenues comparing 2020 to 2019: Amount (In Millions) 2019 operating revenues $9,584 Fuel, rider, and other revenues that do not significantly affect net income (792) Volume/weather (164) System Energy provision for rate refund (25) Return of unprotected excess accumulated deferred income taxes to customers 194 Retail electric price 374 2020 operating revenues $9,171 The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items. The volume/weather variance is primarily due to decreased commercial and industrial usage as a result of the COVID-19 pandemic and the effects of Hurricane Laura, Hurricane Delta, and Hurricane Zeta, in addition to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. The decrease in industrial usage is partially offset by an increase in demand from expansion projects, primarily in the transportation and chemicals industries. See “The COVID-19 Pandemic” above for discussion of the COVID-19 pandemic. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of the storms. The System Energy provision for rate refund variance is due to a provision for rate refund recorded in 2020 to reflect a one-time credit of $25 million provided for in the Federal Power Act section 205 filing made by System Energy in December 2020. See Note 2 to the financial statements for further discussion of the proceedings involving System Energy at the FERC. The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In 2020, $68 million was returned to customers through reductions in operating revenues as compared to $262 million in 2019. There is no effect on net income as the reductions in operating revenues 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. 21


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis The retail electric price variance is primarily due to: • interim increases in Entergy Louisiana’s formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station and increases in formula rate plan revenues effective September 2019 and September 2020; • increases in Entergy Mississippi’s formula rate plan rates effective with the first billing cycles of July 2019 and April 2020 and an interim capacity rate adjustment to the formula rate plan effective January 2020 to recover non-fuel related costs of acquiring and operating the Choctaw Generating Station; • an increase in Entergy Arkansas’s formula rate plan rates effective with the first billing cycle of January 2020; • the implementation of a vegetation management rider at Entergy Mississippi effective with the April 2020 billing cycle; and • increases in Entergy Texas’s transmission cost recovery factor rider effective January 2020 and distribution cost recovery factor rider effective October 2020. The increase was partially offset by the effects of Entergy New Orleans’s rate reduction implemented with April 2020 bills that was effective August 2019 in accordance with the City Council resolution and related agreement in principle reached in the 2018 base rate case. See Note 2 to the financial statements for further discussion of the regulatory proceedings discussed above. Entergy Wholesale Commodities Operating revenues for Entergy Wholesale Commodities decreased from $1,295 million for 2019 to $943 million for 2020 primarily due to the shutdown of Indian Point 2 in April 2020 and the shutdown of Pilgrim in May 2019. Following are key performance measures for Entergy Wholesale Commodities for 2020 and 2019: 2020 2019 Owned capacity (MW) (a) 2,246 3,274 GWh billed 20,581 28,088 Entergy Wholesale Commodities Nuclear Fleet Capacity factor 93% 93% GWh billed 18,863 25,928 Average energy price ($/MWh) $40.33 $39.10 Average capacity price ($/kW-month) $1.92 $4.25 Refueling outage days: Indian Point 3 — 29 Palisades 52 — (a) The reduction in owned capacity is due to the shutdown of the 1,028 MW Indian Point 2 plant in April 2020. 22


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Other Income Statement Items Utility Other operation and maintenance expenses decreased from $2,563 million for 2019 to $2,478 million for 2020 primarily due to: • a decrease of $42 million in nuclear generation expenses primarily due to lower nuclear labor costs, including contract labor, and a lower scope of work performed in 2020 as compared to 2019, in part as a result of the COVID-19 pandemic; • a decrease of $25 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services; • a decrease of $20 million in non-nuclear generation expenses due to a lower scope of work performed during plant outages in 2020 as compared to prior year, including a delay in plant outages as a result of the COVID-19 pandemic, and lower long-term service agreement expenses, partially offset by higher expenses associated with plants placed in service, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station), which began commercial operation in May 2019, the Choctaw Generating Station, which was purchased in October 2019, and the Lake Charles Power Station, which began commercial operation in March 2020; • higher nuclear insurance refunds of $18 million; and • an $11 million write-off in 2019 of specific costs related to the potential construction of scrubbers at the White Bluff plant at Entergy Arkansas. See Note 2 to the financial statements for discussion of the write- off. The decrease was partially offset by: • an increase of $10 million in compensation and benefits costs primarily due to an increase in net periodic pension and other postretirement benefits costs as a result of a decrease in the discount rate used to value the benefit liabilities, partially offset by lower incentive-based compensation accruals in 2020 as compared to prior year. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs; • an increase of $5 million primarily due to the 2019 deferral by Entergy New Orleans of costs related to its 2018 rate case and a system conversion for Algiers customers as a result of the 2018 combined rate case resolution approved by the City Council. See Note 2 to the financial statements for further discussion of the rate case resolution; and • several individually insignificant items. Depreciation and amortization expenses increased primarily due to additions to plant in service, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station), the Lake Charles Power Station, and the Choctaw Generating Station, and new depreciation rates at Entergy Mississippi, as approved by the MPSC. Other regulatory charges (credits) - net for 2020 included a provision of $43.5 million to reflect the 2019 historical year netting adjustment included in the APSC’s December 2020 order in Entergy Arkansas’s 2020 formula rate plan proceeding. See Note 2 to the financial statements for discussion of Entergy Arkansas’s 2020 formula rate plan proceedings. Other income decreased primarily due to: • a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2019, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station) project and the Lake Charles Power Station project, partially offset by construction work in progress in 2020 related to the Montgomery County Power Station project; and 23


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis • an increase in net periodic pension and other postretirement benefits non-service pension costs as a result of a decrease in the discount rate used to value the benefits liabilities. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs. The decrease was partially offset by changes in decommissioning trust fund activity. Interest expense increased primarily due to: • the issuances by Entergy Texas of $300 million in September 2019 and $175 million in March 2020 of 3.55% Series mortgage bonds; • the issuances by Entergy Louisiana of $300 million of 4.20% Series mortgage bonds and $350 million of 2.90% Series mortgage bonds, each in March 2020, and $525 million of 4.20% Series mortgage bonds in March 2019; • the issuances by Entergy Arkansas of $350 million of 4.20% Series mortgage bonds in March 2019 and $100 million of 4.0% Series mortgage bonds in March 2020; and • the issuances by Entergy Mississippi of $135 million of 3.85% Series mortgage bonds in November 2019 and $170 million of 3.50% Series mortgage bonds in May 2020. See Note 5 to the financial statements for a discussion of long-term debt. Entergy Wholesale Commodities Other operation and maintenance expenses decreased from $678 million for 2019 to $500 million for 2020 primarily due to: • a decrease of $154 million resulting from the absence of expenses from the Pilgrim plant after it was shut down in May 2019 and the Indian Point 2 plant after it was shut down in April 2020; and • a decrease of $23 million in severance and retention expenses. Severance and retention expenses were incurred in 2020 and 2019 due to management’s strategy to exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 13 to the financial statements for further discussion of severance and retention expenses resulting from management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 14 to the financial statements for further discussion of the sale of the Pilgrim plant. Asset write-offs, impairments, and related charges for 2020 include impairment charges of $19 million ($15 million net-of-tax) primarily as a result of expenditures for capital assets. Asset write-offs, impairments, and related charges for 2019 include a loss of $190 million ($156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019 and impairment charges of $100 million ($79 million net-of-tax) primarily related to nuclear refueling outage spending and expenditures for capital assets. 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 exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 14 to the financial statements for a discussion of the impairment of long-lived assets and the sale of the Pilgrim plant. 24


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from the Indian Point 2 plant, after it was shut down in April 2020. Other income decreased primarily due to lower gains on decommissioning trust fund investments and a decrease in intercompany interest income resulting from repayment in second quarter 2020 of an intercompany loan to Entergy Corporation. See Notes 15 and 16 to the financial statements for a discussion of decommissioning trust fund investments. Other expenses decreased primarily due to the absence of decommissioning expense from the Pilgrim plant, after it was sold in August 2019. See Note 14 to the financial statements for a discussion of the sale of the Pilgrim plant. Parent and Other Other income increased primarily due to the absence of the elimination of other income at Entergy Wholesale Commodities after repayment of an intercompany loan in second quarter 2020 and a $15 million charitable donation made in 2019 to fund the Entergy Charitable Foundation for three years. Income Taxes See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 21% to the effective income tax rates, and for additional discussion regarding income taxes. The effective income tax rate for 2020 was (9.5%). The difference in the effective income tax rate versus the federal statutory rate of 21% was primarily due to completion of the 2014-2015 IRS audit effectively settling the tax positions for those years. See Note 3 to the financial statements for a discussion of the 2014-2015 IRS audit. The effective income tax rate for 2019 was (15.6%). The difference in the effective income tax rate versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, recognition of a deferred tax asset associated with a previously unrecognized net operating loss carryover, a charitable tax deduction, and the effects of restructuring transactions within Entergy Wholesale Commodities, partially offset by valuation allowances recorded against deferred tax assets associated with the disposition of Vermont Yankee and the carryover of business interest expense. 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 internal restructuring at Entergy Wholesale Commodities. See Note 14 to the financial statements for a discussion of the tax effects of the Vermont Yankee disposition. 2019 Compared to 2018 See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Results of Operations” in Item 7 of Entergy’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 21, 2020 for discussion of results of operations for 2019 compared to 2018. Entergy Wholesale Commodities Exit from the Merchant Power Business Entergy Wholesale Commodities includes the ownership of the following nuclear reactors as of December 31, 2020: Location Market Capacity Status Indian Point 2 Buchanan, NY NYISO 1,028 MW Shut down in April 2020 Indian Point 3 Buchanan, NY NYISO 1,041 MW Planned shutdown in April 2021 Palisades Covert, MI MISO 811 MW Planned shutdown in May 2022 25


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Entergy sold its FitzPatrick plant to Exelon in March 2017 and, as discussed below, transferred its Vermont Yankee plant to NorthStar in January 2019 and sold its Pilgrim plant to Holtec in August 2019. The Palisades and Indian Point 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, including exiting the merchant power business. 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. Changes to current assumptions regarding the remaining 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. Big Rock Point is under contract to be sold with the Palisades plant and Indian Point 1 is under contract to be sold with the Indian Point 2 and Indian Point 3 plants. In addition, Entergy Wholesale Commodities provides operations and management services, including decommissioning-related services, to nuclear power plants owned by non-affiliated entities 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 Disposition 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 transfer 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 transaction 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, and it remains outstanding. 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 26


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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 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 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. Shutdown and Sale of Pilgrim In October 2015, Entergy determined that it would close the Pilgrim plant, and Pilgrim ceased operations in May 2019. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expected. On July 30, 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, LLC, the owner of Pilgrim, for $1,000 (subject to adjustments for net liabilities and other amounts). On August 22, 2019, the NRC approved the transfer of Pilgrim’s facility licenses to Holtec. At that time, hearing requests filed by the Commonwealth of Massachusetts and Pilgrim Watch challenging Holtec’s financial qualifications and the sufficiency of the NRC’s review of the associated environmental impacts of the license transfer were pending with the NRC commissioners. The NRC approval order included a condition acknowledging the NRC’s longstanding authority to modify, condition, or rescind the license transfer order as a result of any hearing that may be conducted. On August 26, 2019, as permitted by the August 22 order, Entergy and Holtec closed the transaction. On September 25, 2019, Massachusetts filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit, asking the court to vacate the NRC’s August 22 license transfer approval order and related approvals. On November 22, 2019, Entergy and Holtec filed a motion to dismiss Massachusetts’ petition; the NRC also filed a motion to dismiss on the same date. On January 22, 2020, Massachusetts filed a second petition with the D.C. Circuit asking the court to review the NRC’s December 17, 2019 order denying its stay motion. On June 16, 2020, Holtec and Massachusetts reached a settlement to resolve issues related to the Pilgrim transaction. Pursuant to the settlement agreement, Massachusetts withdrew its hearing request pending before the NRC and withdrew both of its petitions for review before the D.C. Circuit, thereby terminating Massachusetts’s pending legal challenges to the Pilgrim transfer. The NRC denied Pilgrim Watch’s hearing request in November 2020, and Pilgrim Watch did not file a judicial appeal of the NRC’s denial order. The sale of Entergy Nuclear Generation Company, LLC to Holtec included the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. The transaction resulted in a loss of $190 million ($156 million net-of-tax) in 2019. See Note 14 to the financial statements for discussion of the closing of the Pilgrim transaction. Planned Shutdown and Sale 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 would 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 could be extended up to four additional years for each unit by 27


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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. Pursuant to the January 2017 settlement agreement, Indian Point 2 ceased commercial operations on April 30, 2020, and Indian Point 3 is expected to cease commercial operations on April 30, 2021. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to shut down the Indian Point plants. 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 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. In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec subsidiary for decommissioning the plants. The sale will include the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units. The transaction is subject to closing conditions, including approval from the NRC. In November 2019, Entergy and Holtec submitted a license transfer application to the NRC. The NRC issued an order approving the application in November 2020, subject to the NRC’s authority to condition, revise, or rescind the approval order based on the resolution of four pending hearing requests. A substantially identical condition was imposed in the NRC’s August 2019 order approving the license transfer for Pilgrim. In January 2021 the NRC issued an order denying all four hearing requests challenging the license transfer application. In January 2021, New York State filed a petition for review with the D.C. Circuit asking the court to vacate the NRC’s January 2021 order denying the State’s hearing request, as well as the NRC’s November 2020 order approving the license transfers. In January 2021 the D.C. Circuit issued a scheduling order, setting deadlines for initial procedural filings in March 2021. Any other petitioners seeking judicial review of the January 2021 NRC order must file their petitions by March 16, 2021. Entergy and Holtec also submitted a petition to the New York State Public Service Commission in November 2019 seeking an order from the New York Public Service Commission disclaiming jurisdiction or abstaining from review of the transaction or, alternatively, approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. The transaction closing is targeted for May 2021, following the defueling of Indian Point 3. As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of December 31, 2020, Entergy’s adjusted net investment in the Indian Point units was $255 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing. The terms of the transaction include limitations on withdrawals from the nuclear decommissioning trusts to fund decommissioning activities and controls on how Entergy manages the investment of nuclear decommissioning trust assets between signing and closing; however, the agreement does not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing. 28


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Planned Shutdown and Sale of Palisades Almost all of the Palisades output is sold under a power purchase agreement 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. 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 continues to operate Palisades under the existing 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 no later than 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. On July 30, 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site. The sale will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. In February 2020 the parties signed an amendment to the purchase and sale agreement to remove the closing condition that the nuclear decommissioning trust fund must have a specified amount and Entergy agreed to contribute $20 million to the nuclear decommissioning trust fund at closing, among other amendments. At the closing of the sale transaction, the Holtec subsidiary will pay $1,000 (subject to adjustment for net liabilities and other amounts) for the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site. 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; and, the Pilgrim transaction having closed. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. The NRC has indicated that it expects to complete its review of the application by January 2022. In February 2021 the Michigan Attorney General; the Environmental Law & Policy Center; and Beyond Nuclear, Michigan Safe Energy Future, and Don’t Waste Michigan filed with the NRC petitions to intervene and requests for hearing challenging the license transfer application. Subject to the above conditions, the Palisades transaction is expected to close by the end of 2022. As of December 31, 2020, Entergy’s adjusted net investment in Palisades was $75 million. The primary variables in the ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing. Palisades completed its final refueling outage in October 2020. 29


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Costs Associated with Exit of the Entergy Wholesale Commodities Business Entergy incurred approximately $71 million in costs in 2020, $91 million in costs in 2019, and $139 million in costs in 2018 associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business, 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 $40 million in 2021 and $15 million in 2022 associated with the exit from the merchant power business. See Note 13 to the financial statements for further discussion of these costs. Entergy Wholesale Commodities incurred $19 million in 2020, $100 million in 2019, and $532 million in 2018 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 certain 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 exit the Entergy Wholesale Commodities merchant power business. Entergy expects to continue to charge Indian Point Energy Center capital asset costs to expense as incurred because Entergy expects its value to continue to be impaired. See Note 14 to the financial statements for further discussion of the 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. Capital Structure Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the net issuance of debt in 2020. See Note 5 to the financial statements for a discussion of long- term debt. December 31, December 31, 2020 2019 Debt to capital 68.3% 65.5% Effect of excluding securitization bonds (0.2%) (0.4%) Debt to capital, excluding securitization bonds (a) 68.1% 65.1% Effect of subtracting cash (1.7%) (0.5%) Net debt to net capital, excluding securitization bonds (a) 66.4% 64.6% (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. 21.4% of the debt outstanding at December 31, 2020 is at the parent company, Entergy Corporation, 78.0% is at the Utility, and 0.6% is at Entergy Wholesale Commodities. Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, finance 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. 30


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis The Utility operating companies and System Energy seek to optimize their capital structures in accordance with regulatory requirements and to control their cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that their operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend to their parent, or both, in appropriate amounts to maintain the capital structure. To the extent that their operating cash flows are insufficient to support planned investments, the Utility operating companies and System Energy may issue incremental debt or reduce dividends, or both, to maintain their capital structures. In addition, Entergy may make equity contributions to the Utility operating companies and System Energy to maintain their capital structures in certain circumstances such as financing of large transactions or payments that would materially alter the capital structure if financed entirely with debt and reduced dividends. 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, 2020. To estimate future interest payments for variable rate debt, Entergy used the rate as of December 31, 2020. 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 2021 2022 2023 2024-2025 after 2025 (In Millions) Utility $1,761 $1,166 $2,938 $2,800 $20,943 Entergy Wholesale Commodities 142 — — — — Parent and Other 99 737 73 1,102 2,589 Total $2,002 $1,903 $3,011 $3,902 $23,532 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 2024. 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, 2020 was 2.35% on the drawn portion of the facility. As of December 31, 2020, amounts outstanding and capacity available under the $3.5 billion credit facility are: Letters of Capacity Capacity Borrowings Credit Available (In Millions) $3,500 $165 $6 $3,329 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. 31


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of December 31, 2020, Entergy Corporation had $1.627 billion of commercial paper outstanding. The weighted-average interest rate for the year ended December 31, 2020 was 1.39%. Finance lease obligations are a minimal part of Entergy’s overall capital structure. Following are Entergy’s payment obligations under those leases. 2021 2022 2023 2024-2025 after 2025 (In Millions) Finance lease payments $14 $13 $12 $18 $17 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, 2020 as follows: Interest Amount Drawn Letters of Credit Expiration Amount of Rate as of Outstanding as of Company Date Facility (a) December 31, 2020 December 31, 2020 Entergy Arkansas April 2021 $25 million (b) 1.27% — — Entergy Arkansas September 2024 $150 million (c) 1.27% — — Entergy Louisiana September 2024 $350 million (c) 1.27% — — Entergy Mississippi April 2021 $10 million (d) 1.65% — — Entergy Mississippi April 2021 $35 million (d) 1.65% — — Entergy Mississippi April 2021 $37.5 million (d) 1.65% — — Entergy New Orleans November 2021 $25 million (c) 1.42% — $0.8 million Entergy Texas September 2024 $150 million (c) 1.65% — $1.3 million (a) The interest rate is the estimated interest rate as of December 31, 2020 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. (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. 32


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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, 2020: Amount of Letters of Credit Issued as Uncommitted Letter of of December 31, 2020 Company Facility Credit Fee (a) (b) Entergy Arkansas $25 million 0.78% $1 million Entergy Louisiana $125 million 0.78% $2.2 million Entergy Mississippi $65 million 0.78% $1 million Entergy New Orleans $15 million 1.00% $1 million Entergy Texas $50 million 0.70% $6.2 million (a) As of December 31, 2020, letters of credit posted with MISO covered financial transmission right exposure of $0.3 million for Entergy Louisiana, $0.2 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, and $0.5 million for Entergy Texas. See Note 15 to the financial statements for discussion of financial transmission rights. (b) As of December 31, 2020, in addition to the $1 million MISO letter of credit, Entergy Mississippi has $1 million of non-MISO letters of credit outstanding under this facility. 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, 2020 on non-cancelable operating leases with a term over one year: 2021 2022 2023 2024-2025 after 2025 (In Millions) Operating lease payments $66 $57 $47 $59 $21 Leases are discussed in Note 10 to the financial statements. Summary of Contractual Obligations of Consolidated Entities Contractual Obligations 2021 2022-2023 2024-2025 after 2025 Total (In Millions) Long-term debt (a) $2,002 $4,914 $3,902 $23,532 $34,350 Finance lease payments (b) $14 $25 $18 $17 $74 Operating leases (b) (c) $66 $104 $59 $21 $250 Purchase obligations (d) $1,182 $2,076 $1,651 $3,541 $8,450 (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. 33


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis In addition to the contractual obligations stated above, Entergy currently expects to contribute approximately $356 million to its pension plans and approximately $39.9 million to other postretirement plans in 2021, although the 2021 required pension contributions will be known with more certainty when the January 1, 2021 valuations are completed, which is expected by April 1, 2021. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and Note 11 for a discussion of qualified pension and other postretirement benefits funding. Also in addition to the contractual obligations, Entergy has $979 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 Expenditure Plans and Other Uses of Capital Following are the amounts of Entergy’s planned construction and other capital investments by operating segment for 2021 through 2023. Planned construction and capital investments 2021 2022 2023 (In Millions) Utility: Generation $1,080 $1,155 $2,030 Transmission 720 610 675 Distribution 1,180 1,350 1,560 Utility Support 495 440 335 Total 3,475 3,555 4,600 Entergy Wholesale Commodities and Other 10 5 5 Total $3,485 $3,560 $4,605 In addition to the planned spending in the table above, the Utility also expects to pay for $1,055 million of capital investments in 2021 related to Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration work that have been accrued as of December 31, 2020. 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. 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 in renewables and other generation, including the Sunflower Solar Facility, Searcy Solar Facility, Walnut Bend Solar Facility, West Memphis Solar Facility, Liberty County Solar Facility, and Hardin County Peaking Facility, and potential construction of additional generation. • Investments in Entergy’s Utility 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. • Entergy Wholesale Commodities investments such as component replacements, software and security, and dry cask storage. 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 34


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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. Renewables Sunflower Solar Facility In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW 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 is being built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, 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 with 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 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. In December 2019 the MPSC approved Entergy Mississippi’s proposed revisions to its formula rate plan to provide for an interim capacity rate adjustment mechanism. Recovery through the interim capacity rate adjustment requires MPSC approval for each new resource. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report expressing concerns regarding the project economics. In March 2020, Entergy Mississippi filed supplemental testimony addressing questions and observations raised by the consultants retained by the Mississippi Public Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. A hearing before the MPSC was held in March 2020. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar Facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain conditions including: (i) that Entergy Mississippi pursue a partnership structure through which the partnership would acquire and own the facility under the build-own-transfer agreement and (ii) that if Entergy Mississippi does not consummate the partnership structure under the terms of the order, there will be a cap of $136 million on the level of recoverable costs. Closing is targeted to occur by the end of 2021. Searcy Solar Facility In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas. The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies. The project is being constructed by a subsidiary of NextEra Energy Resources. Entergy Arkansas will purchase the facility upon mechanical completion and after the other purchase contingencies have been met. Closing is expected to occur by the end of 2021. In May 2019, Entergy Arkansas filed a petition with the APSC seeking a finding that the transaction is in the public interest and requesting all necessary approvals. In September 2019 other parties filed testimony largely supporting the resource acquisition but disputing Entergy Arkansas’s proposed method of cost recovery. Entergy Arkansas filed its rebuttal testimony in October 2019. In February 2020, Entergy Arkansas, the Attorney General, and the APSC general staff filed a partial settlement agreement asking the APSC to approve, based on the record in the proceeding, all issues except certain issues that are submitted to the APSC for determination. In April 2020 the APSC issued an order 35


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis approving Entergy Arkansas’s acquisition of the Searcy Solar facility as being in the public interest, but declined to approve Entergy Arkansas’s preferred cost recovery rider mechanism, finding instead, based on the particular facts and circumstances presented, that the formula rate plan rider was a sufficient recovery mechanism for this resource. Liberty County Solar Facility In September 2020, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to acquire the 100 MW Liberty County Solar Facility and a determination that Entergy Texas’s acquisition of the facility through a tax equity partnership is in the public interest. In its preliminary order, the PUCT determined that, in considering Entergy Texas’s application, it would not specifically address whether Entergy Texas’s use of a tax equity partnership is in the public interest. A procedural schedule was established with a hearing on the merits scheduled in April 2021. Closing is expected to occur in 2023. Walnut Bend Solar Facility In October 2020, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 100 MW Walnut Bend Solar Facility is in the public interest. Entergy Arkansas requested a decision by the APSC by June 15, 2021 and primarily requests cost recovery through the formula rate plan rider. A procedural schedule was established with a hearing scheduled in April 2021. Closing is expected to occur in 2022. West Memphis Solar Facility In January 2021, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 180 MW West Memphis Solar Facility is in the public interest. Entergy Arkansas requested a decision by the APSC by September 7, 2021 and primarily requests cost recovery through the formula rate plan rider. Closing is expected to occur in 2023. 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 2021 meeting, the Board declared a dividend of $0.95 per share. Entergy paid $748 million in 2020, $712 million in 2019, and $648 million in 2018 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, 2020, $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. 36


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis Sources of Capital Entergy’s sources to meet its capital requirements and to fund potential investments include: • internally generated funds; • cash on hand ($1,759 million as of December 31, 2020); • storm reserve escrow accounts; • debt and equity issuances in the capital markets, including debt issuances to refund or retire currently outstanding or maturing indebtedness; • bank financing under new or existing facilities or commercial paper; and • sales of assets. 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. In addition to the financings necessary to meet capital requirements and contractual obligations, the Registrant Subsidiaries expect to continue, when economically feasible, to retire higher-cost debt and replace it with lower-cost debt if market conditions permit. 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 financing authorization for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through July 2022. Entergy Arkansas has obtained first mortgage bond/secured financing authorization from the APSC that extends through December 2022. Entergy New Orleans also has obtained long-term financing authorization from the City Council that extends through July 2022. Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained long-term financing authorization from the FERC that extends through July 2022 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. Equity Issuances and Equity Distribution Program Entergy Corporation currently expects to issue approximately $2.5 billion of equity through 2024. Entergy is considering various methods, including, among others, at the market distributions, block trades, and preferred equity issuances. In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its 37


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis common stock. The aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement may not exceed an aggregate gross sales price of $1 billion. Cash Flow Activity As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the years ended December 31, 2020, 2019, and 2018 were as follows: 2020 2019 2018 (In Millions) Cash and cash equivalents at beginning of period $426 $481 $781 Net cash provided by (used in): Operating activities 2,690 2,817 2,385 Investing activities (4,772) (4,510) (4,106) Financing activities 3,415 1,638 1,421 Net increase (decrease) in cash and cash equivalents 1,333 (55) (300) Cash and cash equivalents at end of period $1,759 $426 $481 2020 Compared to 2019 Operating Activities Net cash flow provided by operating activities decreased by $127 million in 2020 primarily due to: • an increase of $224 million in storm spending in 2020 as compared to 2019 primarily due to spending in 2020 on Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of storm restoration efforts; • the timing of recovery of fuel and purchased power costs in 2020 as compared to the prior year. See Note 2 to the financial statements for a discussion of fuel and purchased power cost recovery; • lower collections of receivables from customers, in part due to the COVID-19 pandemic; • the effect of less favorable weather on billed Utility sales in 2020; and • an increase of $32 million in incentive-based compensation payments in 2020. The decrease was partially offset by: • the decrease in 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; • a decrease of $86 million in severance and retention payments in 2020 as compared to 2019. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business; • a decrease of $83 million in pension contributions in 2020 as compared to 2019. See “Critical Accounting Estimates” below and Note 11 to the financial statements for discussion of qualified pension and other postretirement benefits funding; • an increase of $71 million in proceeds received 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 timing of payments to vendors; • a decrease of $34 million in spending on nuclear refueling outages; and 38


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis • an increase of $25 million of nuclear insurance refunds. Investing Activities Net cash flow used in investing activities increased by $262 million in 2020 primarily due to: • an increase of $942 million in storm spending in 2020, primarily on Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of storm restoration efforts; • the purchase of Washington Parish Energy Center by Entergy Louisiana in November 2020 for approximately $222 million. See Note 14 to the financial statements for further discussion of the Washington Parish Energy Center purchase; • an increase of $140 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of the distribution system, including increased spending on advanced metering infrastructure; • an increase of $87 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle; • an increase of $43 million primarily due to changes in collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants; and • $25 million in plant upgrades for the Choctaw Generating Station in March 2020. See Note 14 to the financial statements for discussion of the Choctaw Generating Station purchase. The increase was partially offset by: • a decrease of $309 million of non-nuclear generation construction expenditures primarily due to higher spending in 2019 on the Montgomery County Power Station, Lake Charles Power Station, and J. Wayne Leonard Power Station (formerly St. Charles Power Station) projects; • the purchase of the Choctaw Generating Station in October 2019 for approximately $305 million; • an increase of $303 million in net receipts from storm reserve escrow accounts; • a decrease of $141 million in transmission construction expenditures primarily due to the timing of work performed in 2020 as compared to 2019; • an increase of $70 million in proceeds received from the DOE in 2020 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; • a decrease of $44 million in information technology construction expenditures primarily due to decreased spending on various technology projects; and • a decrease of $23 million in nuclear construction expenditures primarily due to a lower scope of work performed on various nuclear projects in 2020 as compared to 2019. Financing Activities Net cash flow provided by financing activities increased by $1,777 million in 2020 primarily due to: • long-term debt activity providing approximately $4,467 million of cash in 2020 compared to providing approximately $1,685 million in 2019; and • the repurchase in first quarter 2019 of $50 million of Class A mandatorily redeemable preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, that were held by a third party. 39


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis The increase was partially offset by: • proceeds of $608 million from the issuance of common stock in May 2019 as a result of the settlement of equity forwards. See Note 7 to the financial statements for discussion of the equity forward sale agreements; • an increase of $324 million in net repayments of commercial paper in 2020 compared to 2019; • a decrease of $52 million in treasury stock issuances in 2020 due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2019 to satisfy stock option exercises; • an increase of $37 million in common stock dividends paid as a result of an increase in the number of shares outstanding and an increase in the dividend paid per share in 2020 compared to 2019; and • the issuance of $35 million aggregate liquidation value 5.375% Series A preferred stock in September 2019 by Entergy Texas. For the details of Entergy’s commercial paper program, see Note 4 to the financial statements. See Note 5 to the financial statements for details of long-term debt. 2019 Compared to 2018 See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Cash Flow Activity” in Item 7 of Entergy’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 21, 2020 for discussion of operating, investing, and financing cash flow activities for 2019 compared to 2018. Rate, Cost-recovery, and Other Regulation State and Local Rate Regulation and Fuel-Cost Recovery The rates that the Utility operating companies 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, and the PUCT, 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 9.2% - 10.4% Electric; 9.3% - 10.3% Gas Entergy Mississippi 8.89% - 10.93% Entergy New Orleans 8.85% - 9.85% Entergy Texas 9.65% 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 40


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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 complaints filed with the FERC challenging System Energy’s return on equity and capital structure, System Energy’s treatment of uncertain tax positions and the Grand Gulf sale leaseback arrangement, and a separate request for the FERC to initiate a broader investigation of rates under the Unit Power Sales Agreement. 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, 41


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis 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, 2020. Entergy Wholesale Commodities Nuclear Portfolio 2021 2022 Energy Percent of planned generation under contract (a): Unit-contingent (b) 98% 99% Planned generation (TWh) (c) (d) 9.6 2.8 Average revenue per MWh on contracted volumes: Expected based on market prices as of December 31, 2020 $54.5 $47.1 Capacity Percent of capacity sold forward (e): Bundled capacity and energy contracts (f) 68% 97% Capacity contracts (g) 29% —% Total 97% 97% Planned net MW in operation (average) (d) 1,158 338 Average revenue under contract per kW per month (applies to $0.1 $— capacity contracts only) Total Energy and Capacity Revenues (h) Expected sold and market total revenue per MWh $54.0 $46.8 Sensitivity: -/+ $10 per MWh market price change $53.8 - $54.2 $46.7 - $47.0 (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 and outage schedules. (d) Assumes the 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 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. 42


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis (h) Includes assumptions on converting a portion of the portfolio to contracted with fixed price and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to- market activity, and service revenues. 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, 2020, based on power prices at that time, Entergy had liquidity exposure of $62 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $6 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, 2020, Entergy would have been required to provide approximately $30 million of additional cash or letters of credit under some of the agreements. As of December 31, 2020, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $22 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets. As of December 31, 2020, substantially all 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, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems to position Entergy’s nuclear fleet to meet its operational goals; the performance and capacity factors of these nuclear plants; the risk of an adverse outcome to an expected challenge to the prudence of operations at Grand Gulf; the implementation of plans to exit the Entergy Wholesale Commodities merchant power business 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 amendments, and decommissioning; 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. Nuclear generating 43


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis plants owned and operated by Entergy’s Utility and Entergy Wholesale Commodities businesses are currently in Column 1, except for Grand Gulf, which is in Column 2. In November 2020 the NRC placed Grand Gulf in Column 2 based on the incidence of three unplanned plant scrams during the second and third quarters of 2020. Two of the scram events related to new turbine control system components that failed, and a third related to a feedwater valve positioner that failed, all of which had been replaced in a refueling outage that ended in May 2020. The NRC plans to conduct a supplemental inspection of Grand Gulf in accordance with its inspection procedures for nuclear plants in Column 2. As a consequence of two additional Grand Gulf scrams during the fourth quarter 2020, System Energy expects Grand Gulf to be placed into Column 3 based on plant performance indicators for the four quarters ended December 31, 2020. This will involve an additional supplemental NRC inspection of Grand Gulf in accordance with its inspection procedures for nuclear plants in Column 3. Critical Accounting Estimates The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in these assumptions and measurements could produce estimates that would have a material effect on the presentation of Entergy’s financial position, results of operations, or cash flows. Nuclear Decommissioning Costs Entergy subsidiaries own nuclear generation facilities in both the Utility and Entergy Wholesale Commodities operating segments. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and cash is deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates. • Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated for those plants that do not have an announced shutdown date. The estimate may include assumptions regarding the possibility that the plant may have an operating life shorter than the operating license expiration. Second, an assumption must be made regarding whether all decommissioning activity will proceed immediately upon plant retirement, or whether the plant will be placed in SAFSTOR status. SAFSTOR is decommissioning a facility by placing it in a safe, stable condition that is maintained until it is subsequently decontaminated and dismantled to levels that permit license termination, normally within 60 years from permanent cessation of operations. A change of assumption regarding either the period of continued operation, the use of a SAFSTOR period, or whether Entergy will continue to hold the plant or the plant is held for sale can change the present value of the asset retirement obligation. • Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by factors ranging from approximately 2% to 3% annually. A 50-basis point change in this assumption could change the estimated present value of the decommissioning liabilities by approximately 6% to 18%. The timing assumption influences the significance of the effect of a change in the estimated inflation or cost escalation rate because the effect increases with the length of time assumed before decommissioning activity ends. • Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. The DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE 44


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis continues to delay meeting its obligation and Entergy’s nuclear plant owners are continuing to pursue damage claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and maintaining these facilities during the decommissioning period can have a significant effect (as much as an average of 20% to 30% of total estimated decommissioning costs). Entergy’s decommissioning studies include cost estimates for spent fuel storage. These estimates could change in the future, however, based on the expected timing of when the DOE begins to fulfill its obligation to receive and store spent nuclear fuel. See Note 8 to the financial statements for further discussion of Entergy’s spent nuclear fuel litigation. • Technology and Regulation - Over the past several years, more practical experience with the actual decommissioning of nuclear facilities has been gained and that experience has been incorporated into Entergy’s current decommissioning cost estimates. Given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could be gained and affect current cost estimates. In addition, if regulations regarding nuclear decommissioning were to change, this could affect cost estimates. • Interest Rates - The estimated decommissioning costs that are the basis for the recorded decommissioning liability are discounted to present value using a credit-adjusted risk-free rate. When the decommissioning liability is revised, increases in cash flows are discounted using the current credit-adjusted risk-free rate. Decreases in estimated cash flows are discounted using the credit-adjusted risk-free rate used previously in estimating the decommissioning liability that is being revised. Therefore, to the extent that a revised cost study results in an increase in estimated cash flows, a change in interest rates from the time of the previous cost estimate will affect the calculation of the present value of the revised decommissioning liability. Revisions of estimated decommissioning costs that decrease the liability also result in a decrease in the asset retirement cost asset. For the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, these reductions will immediately reduce operating expenses in the period of the revision if the reduction of the liability exceeds the amount of the undepreciated plant asset at the date of the revision. Revisions of estimated decommissioning costs that increase the liability result in an increase in the asset retirement cost asset, which is then depreciated over the asset’s remaining economic life. For a plant in the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, however, including a plant that is shutdown, or is nearing its shutdown date, the increase in the liability is likely to immediately increase operating expense in the period of the revision and not increase the asset retirement cost asset. See Note 14 to the financial statements for further discussion of impairment of long-lived assets and Note 9 to the financial statements for further discussion of asset retirement obligations. Utility Regulatory Accounting Entergy’s Utility operating companies and System Energy are subject to retail regulation by their respective state and local regulators and to wholesale regulation by the FERC. Because these regulatory agencies set the rates the Utility operating companies and System Energy are allowed to charge customers based on allowable costs, including a reasonable return on equity, the Utility operating companies and System Energy apply accounting standards that require the financial statements to reflect the effects of rate regulation, including the recording of regulatory assets and liabilities. Regulatory assets represent incurred costs that have been deferred because they are probable of future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. See Note 2 to the financial statements for a discussion of rate and regulatory matters, including details of Entergy’s and the Registrant Subsidiaries’ regulatory assets and regulatory liabilities. For each regulatory jurisdiction in which they conduct business, the Utility operating companies and System Energy assess whether the regulatory assets and regulatory liabilities continue to meet the criteria for probable future recovery or settlement at each balance sheet date and when regulatory events occur. This 45


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis assessment includes consideration of recent rate orders, historical regulatory treatment for similar costs, and factors such as changes in applicable regulatory and political environments. If the assessments made by the Utility operating companies and System Energy are ultimately different than actual regulatory outcomes, it could materially affect the results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries. Impairment of Long-lived Assets Entergy has significant investments in long-lived assets in both of its operating segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment when there are indications that an impairment may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant generation assets are subject to impairment if adverse market or regulatory conditions arise, particularly if it leads to a decision or an expectation that Entergy will operate or own a plant for a shorter period than previously expected; if there is a significant adverse change in the physical condition of a plant; or, if capital investment in a plant significantly exceeds previously-expected amounts. If an asset is considered held for use, and Entergy concludes that events and circumstances are present indicating that an impairment analysis should be performed under the accounting standards, the sum of the expected undiscounted future cash flows from the asset are compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the decommissioning liability; therefore, changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded. If the expected undiscounted future cash flows are less than the carrying value and the carrying value exceeds the fair value, Entergy is required to record an impairment charge to write the asset down to its fair value. If an asset is considered held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value. The expected future cash flows are based on a number of key assumptions, including: • Future power and fuel prices - Electricity and gas prices can be very volatile. This volatility increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. • Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, these transactions are relatively infrequent, the market for such assets is volatile, and the value of individual assets is affected by factors unique to those assets. • Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant effect on operations could cause a significant change in these assumptions. • Timing and the life of the asset - Entergy assumes an expected life of the asset. A change in the timing assumption, whether due to management decisions regarding operation of the plant, the regulatory process, or operational or other factors, could have a significant effect on the expected future cash flows and result in a significant effect on operations. See Note 14 to the financial statements for a discussion of impairment conclusions related to the Entergy Wholesale Commodities nuclear plants. Taxation and Uncertain Tax Positions Management exercises significant judgment in evaluating the potential tax effects of Entergy’s operations, transactions, and other events. Entergy accounts for uncertain income tax positions using a recognition model under 46


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis a two-step approach with a more likely-than-not recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Management evaluates each tax position based on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. Significant judgment is required to determine whether available information supports the assertion that the recognition threshold has been met. Additionally, measurement of unrecognized tax benefits to be recorded in the consolidated financial statements is based on the probability of different potential outcomes. Income tax expense and tax positions recorded could be significantly affected by events such as additional transactions contemplated or consummated by Entergy as well as audits by taxing authorities of the tax positions taken in transactions. Management believes that the financial statement tax balances are accounted for and adjusted appropriately each quarter as necessary in accordance with applicable authoritative guidance; however, the ultimate outcome of tax matters could result in favorable or unfavorable effects on the consolidated financial statements. Entergy’s income taxes, including unrecognized tax benefits, open audits, and other significant tax matters are discussed in Note 3 to the financial statements. Included in the IRS examination of Entergy’s 2015 tax returns is the tax effect of the October 2015 combination of two Entergy utility companies, Entergy Gulf States Louisiana and Entergy Louisiana. Entergy Louisiana maintained a carryover tax basis in the assets received and the tax consequences provided for an increase in tax basis as well. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction. As discussed in Note 3 to the financial statements, the IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 Revenue Agent Report in November 2020. Entergy Louisiana reversed the provision for uncertain tax positions with respect to the business combination. See additional discussion of the 2014 and 2015 IRS audit in Note 3 to the financial statements. In addition, as discussed in Note 3 to the financial statements, in 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which nuclear decommissioning liabilities are treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana in 2015. In the third quarter 2020 the IRS issued Notices of Proposed Adjustment concerning this uncertain tax position allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold and Entergy Louisiana to include $221 million of its decommissioning liability in cost of goods sold. The Notices of Proposed Adjustment will not be appealed. As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded federal and state taxes payable of $402 million; on a consolidated basis, however, Entergy utilized tax loss carryovers to offset the federal taxable income adjustment and accordingly did not record federal taxes payable as a result of the outcome of this uncertain tax position. As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record taxes payable as a result of the outcome of this uncertain tax position. The partial disallowance of the uncertain tax position to include the decommissioning liability in cost of goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively. The tax treatment of Entergy Louisiana’s accrued regulatory liabilities associated with the Vidalia purchased power agreement and business combination guaranteed customer credits, which are discussed in Note 2 47


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    Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis to the financial statements, has been resolved in a manner that results in a $190 million increase to previously reported taxable income. Entergy Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment, however, which allowed both Entergy Louisiana and Entergy to reduce their balances of federal and state unrecognized tax benefits by $74 million. See Note 3 to the financial statements for discussion of the effects of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Qualified Pension and Other Postretirement Benefits Entergy sponsors qualified, defined benefit pension plans that cover substantially all employees, including cash balance plans and final average pay plans. Additionally, Entergy currently provides other postretirement health care and life insurance benefits for substantially all full-time employees whose most recent date of hire or rehire is before July 1, 2014 and who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are affected by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and Entergy Wholesale Commodities segments. Assumptions Key actuarial assumptions utilized in determining qualified pension and other postretirement health care and life insurance costs include discount rates, projected healthcare cost rates, expected long-term rate of return on plan assets, rate of increase in future compensation levels, retirement rates, expected timing and form of payments, and mortality rates. Annually, Entergy reviews and, when necessary, adjusts the assumptions for the pension and other postretirement plans. Every three-to-five years, a formal actuarial assumption experience study that compares assumptions to the actual experience of the pension and other postretirement health care and life insurance plans is conducted. The interest rate environment over the past few years and volatility in the financial equity markets have affected Entergy’s funding and reported costs for these benefits. Discount rates In selecting an assumed discount rate to calculate benefit obligations, Entergy uses a yield curve based on high-quality corporate debt with cash flows matching the expected plan benefit payments. In estimating the service cost and interest cost components of net periodic benefit cost, Entergy discounts the expected cash flows by the applicable spot rates. Projected health care cost trend rates Entergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs under the plan, the effects of general inflation. Entergy reviews actual recent cost trends and projected future trends in establishing its health care cost trend rates. Expected long-term rate of return on plan assets In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviews past performance, current and expected future asset allocations, and capital market 48

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