Entergy 1Q profits fall 23%, Arkansas rate hike and sale of Union Power Station noted in report

Entergy Corp. posted first quarter earnings well below year ago results even as the company’s Arkansas subsidiary received regulatory approval for a $167 million rate hike and closed on its $948 million purchase of the Union Power Stations in El Dorado, the New Orleans-based utility giant reported before the opening bell on Tuesday.

For the period ended March 31, the parent company of Entergy Arkansas Inc. reported earnings of $230 million, or $1.28 per share, down 23% when compared to profits of $298.1 million, or $1.65 per share, a year ago. The energy giant, which has operating utilities in Texas, Arkansas, Louisiana and Mississippi, posted revenues of $2.61 billion.

Earnings adjusted for non-recurring items came in at $1.35 per share. Wall Street analysts expected the utility operator to report first quarter earnings of $1.18 per share on revenue of $2.61 billion, according to the most recent survey by Thomson Reuters.

“This quarter was a good start to another important year for Entergy. Given the challenges and opportunities ahead, we are confident that we can deliver on our 2016 earnings commitments as well as our Adjusted Utility, Parent & Other long-term outlook,” Entergy Chairman and CEO Leo Denault said. “We accomplished what we set out to do, including the acquisition of the Union Power Station and the finalization of Entergy Arkansas’ rate case. In the quarter we also had industrial sales growth of over six percent. Our results are the outcome of the strategy we have been pursuing for some time to create sustainable value for all our stakeholders in 2016 and beyond.”

Longtime Entergy Arkansas CEO and President Hugh McDonald, who will step down from his post on May 1, said in a recent interview with Talk Business & Politics that he had hoped to close on the sale of the Union Power Station before he turned over the reins to incoming EAI chief executive Rick Riley.

“It’s great news for our customers, and I am glad we could get it done and appreciate the (Arkansas Public Service Commission) approving it last year,” McDonald said in an interview with Talk Business & Politics. “The (Union Power Station) is a great addition to our portfolio and will be about one-third of power generation for our Arkansas customers.”

State utility regulators approved Entergy Arkansas’s rate request in March to recover $167 million in new revenue that it said is largely driven by costs to upgrade the power grid and purchase the utility-scale Union Power Station power plant.

In the company’s overall utility and parent company operations, Entergy’s earnings were 84 cents compared to 97 cents in the same period a year ago. The quarter’s results reflected growth in the utility business, including effects of Arkansas rate hike before the state Public Service Commission and the long-awaited rate, company officials. However, the impacts from milder weather this winter and tax items recorded in the first quarter of last year led to the overall decline in results.

Entergy also reported that industrial sales increased on continued growth for new and expansion customers as well as higher sales to existing customers.

“New and expansion customers across several sectors continued to ramp and come online. Within our existing industrial customers, usage within the petroleum refining sector continued to be robust and comprised the majority of that increase,” the company said.

In the company’s wholesale commodity business, the utility operating giant reported that earnings before interest, taxes, depreciation and amortization were $219 million in first quarter 2016, compared to $254 million in the same period a year ago. The quarter-over-quarter decrease was driven largely by lower energy and capacity prices for Entergy’s nuclear assets, officials said.

Entergy affirmed its yearly operational earnings guidance of $4.95 to $5.75 per share, while forecasting its utility and parent company’s profits to fall in range of $4.20 to $4.50 per share.

Following are other business highlights for the first quarter.
• Entergy’s Louisiana subsidiary began construction on the Lake Charles Transmission Project, a $159 million project that will support continued reliable service to a rapidly growing area in our service territory.

• Entergy Mississippi filed its annual formula rate plan with forward-looking features.

• Entergy announced it intends to refuel Pilgrim Nuclear Power Station in spring of 2017, then cease operations on May 31, 2019.

In trading on Monday, Entergy shares (NYSE: ETR) closed down six cents at $74.29. Over the past 52 weeks, the utility operator’s stock has traded in the range of $61.27 on the low end and a high of $80.06.