Federal tax reform legislation passed by the U.S. Congress in December impaired Entergy’s earnings for its latest quarter and full-year 2017.
For the fourth quarter, the utility company reported a $479 million loss ($2.66 per share) on an as-reported basis, compared to a gain of $138 million ($0.76 per share) on an operational, non-generally accepted accounting principles basis. Still, the numbers were up from the same period of 2016, when Entergy lost $1.8 billion ($9.88 per share) on an as-reported basis and brought in just $56 million ($.31 per share) on an operational basis.
For the year, earnings came in at $412 million ($2.28 per share) on an as-reported basis and $1.3 billion ($7.20 per share) on an operational basis. That is significantly better than the corresponding 2016 loss of $584 million ($3.26 per share) on an as-reported basis and slightly above earnings of $1.27 billion ($7.11 per share) on an operational basis.
“The as-reported results for the quarter and full year reflected the revaluation of net deferred tax assets as a result of tax reform, in addition to asset impairments and other expenses related to strategic decisions in the EWC [Entergy Wholesale Commodities] business,” according to an Entergy press release.
Specifically, the company said tax reform dropped fourth-quarter net income in its utility business by $180.7 million on an as-reported basis, but that was a special item not included in operational earnings. Tax reform, though, also produced a $52 million reduction in income tax expense for the year in as-reported numbers, also not included in operational earnings.
For Entergy Wholesale Commodities, tax reform produced a $397 million write-down of net deferred tax assets that contributed to the as-reported loss for the fourth quarter, but was not featured in operational earnings.
Entergy Wholesale Commodities owns three nuclear power reactors in Massachusetts, Michigan, and New York state, all of which is plans to close by 2022. That would leave the business with three non-nuclear power production facilities and the nuclear decommissioning company TLG Services.
The Wholesale Commodities business reported a $425 million ($2.36 per share) loss for the quarter on an as-reported basis, but was up by $63 million ($0.35 per share) on an operational basis. The full-year numbers were a $175 million ($0.97 per share) as-reported loss and $586 million ($3.24 per share) in operational earnings.
Entergy’s March 2017 sale of the James A. Fitzpatrick nuclear power plant in New York state to Exelon “affected period-over-period variances for multiple line items,” according to the earnings release.
“FitzPatrick contributed in $0.11 loss to fourth quarter 2016 results and the sale of that plant in 2017 affected variances from multiple line items. Excluding the effect of FitzPatrick, earnings increased $0.28, due largely to higher income from realized earnings on decommissioning [trusts], which we highlighted as an opportunity on our third quarter call,” Drew Marsh, Entergy chief financial officer, said during the company’s quarterly earnings conference call.” Strong market performance increased trust value to a level where we locked in gain by rebalancing some of the trust investments toward lower volatility fixed income instruments.”
For 2018, management expects company-wide earnings of $6.25 to $6.85 per share, with its Utility, Parent, and Other business taking in $4.50 to $4.90 per share. Entergy said those projections, though, are based on “balanced regulatory treatment for the recently enacted tax reform legislation.”
