Entergy posts quarterly profit of $245 million, sells off aging East Coast nuclear plants

Wall Street cheered second quarter earnings results for New Orleans-based Entergy Corp. as the parent of Entergy Arkansas continued its transition to a pure-play power utility by selling off two shuttered nuclear plants and producing strong profits in its regulated utility business.

In addition, Entergy officials said Wednesday (Aug. 1) that the company’s Nuclear One and Two reactors near Russellville were returned to normal operating status by the Nuclear Regulatory Commission. Those reactors were cited by NRC in late 2016 for a negative “Column 4” performance review, which is one level away from a mandatory shutdown. In Wednesday’s second quarter financial report, Entergy said it has returned those reactors to “Column 1” status.

For the period ended June 30, Entergy reported earnings of $245 million, or $1.34 per share, compared to quarterly earnings of $410 million, or $2.27 per share, in the same period a year ago. Second quarter 2017 results included a $373 million, or $2.07 per share income tax charge in the company’s wholesale commodities business that owns and operates six nuclear facilities, including the two nuclear reactors in Arkansas.

On an operational basis, which excludes one-time items, Entergy reported second quarter earnings of $1.79 or $327 million on revenue of $2.67 billion. Analysts surveyed by Thomson Reuters expected the four-state southern utility to report second quarter earnings of $1.34 per share on quarterly revenue of $2.72 billion.

“Our results this quarter keep us on track to meet the strategic, operational and financial objectives that we reinforced … in June,” said Entergy Chairman and CEO Leo Denault. “We continue to make significant progress toward transitioning to a pure play utility, as evidenced by our announcement to sell EWC’s Pilgrim and Palisades nuclear plants after their scheduled shutdowns.”

Entergy shares (NASDAQ: ETR) opened Wednesday at $81.03 and were more than 1% higher in mid-day trading. During the past 52 weeks the share price has ranged between $71.95 and $87.95.

‘PURE-PLAY’ STRATEGY
In an interview with Talk Business & Politics a year ago, Denault said the utility operator was in “a great position” to transition from a hybrid power generator to a “pure-play” utility model with subsidiaries in Arkansas, Texas, Louisiana and Mississippi.

“A pure play model is something that we’ve tried to do for a long time, but the market dynamics have just changed the execution,” Denault said at the company’s 68th annual shareholder meeting held last May in Little Rock.

At the time, Denault said the evolving strategy to focus on the utility business will evolve around investment in new-build power projects that come online on time and on budget.

“Those are going to provide the opportunity to get some certainty around our ability to execute,” he said. “So that capital program is going to drive the growth of our company. And it is also going to drive the reduction of costs to our customers.”

The decision to exit the merchant power business led to Entergy’s aggressive efforts to sell most of its financially-strapped nuclear power fleet, which Denault said have been hampered by increased regulatory scrutiny and lower margins. Over the past three years, Entergy has announced the shutdown and decommissioning of the Buchanan, N.Y.-based Indian Point and (Vernon) Vermont Yankee nuclear plants, as well as the March 2017 sale of the James A. FitzPatrick Nuclear power plant to Exelon Generation in upstate New York State.

Entergy also announced the sale of the Rhode Island State Energy Center natural gas-fired power plant, and the planned shutdowns of the Pilgrim nuclear plant in Massachusetts and the Palisades nuclear plant in Michigan as part of the company’s departure from the merchant power business to focus on its utility operations.

In the second quarter, Entergy also promoted Laura Landreaux to lead Entergy Arkansas, making the Little Rock native the first woman to head Arkansas’ largest electric utility. At the same time, former Entergy Arkansas CEO Rick Riley was promoted to a new position as senior VP of distribution operations and asset management within the parent company in New Orleans.