By Tom Kleckner
Entergy reported a third-quarter loss of $723 million (-$4.40/share) Nov. 2, primarily as a result of the decision to close its Pilgrim and FitzPatrick nuclear plants. The New Orleans-based company’s quarterly earnings compared unfavorably with its profit of $230 million ($1.27/share) a year earlier.
Entergy has announced plans to close both nuclear plants. It says neither plant can compete in the wholesale markets due to low power prices.
Operational earnings per share rose to $1.90 from $1.68, excluding the impairment charges. However, that was still below analysts’ projected earnings of $2/share, according to Thomson Reuters. Revenue fell 2.5%, from $3.46 billion in the prior-year quarter to $3.37 billion this year.
“We realize these numbers, while temporary, are disappointing,” said CEO Leo Denault during a conference call. “We remain focused on the long-term issues … and the best interests of our shareholders. In the near term, these decisions to close nuclear plants are very difficult to make, knowing the effect they have on our key stakeholders.”
Entergy updated its 2015 operational earnings guidance to $5.50 to $6.10/share, up from $5.10 to $5.90/share and more than analyst predictions of $5.30. The revised guidance reflects warmer weather and positive tax-benefit expectations, and lower fuel, refueling outage and depreciation and amortization expenses resulting from the nuclear impairments.
Offsetting that rosy outlook is Entergy’s sluggish growth in residential and industrial sales, the latter up 1.8%, far below the company’s original guidance of 4.4%.
“We’ve seen some new expansions at plants, but the ramp-ups are lower than expected,” said Theo Bunting, group president of utility operations. “We’ve seen lower volumes with our existing customers and some comeback in the petroleum-refining area in the third quarter, but we do have an existing customer going through an outage.”
Entergy executives said continued investments and favorable regulatory rulings in Arkansas and Texas remain key drivers for future growth. The company expects to close its acquisition of the Union Power Station and its four 495-MW, combined-cycle combustion turbines in southern Arkansas by year’s end.
“We need to get the Union deal done and resolve those regulatory actions,” said Executive Vice President and CFO Drew Marsh. “It’s important to get those investments into the rate base. Sales growth has been helpful, but it is really a lag.”
“We want to provide a glide path to a more consistent, predictable dividend growth,” Denault said. “In the past, we’ve taken a lumpy approach to it, raising the dividend 29 cents one year, taking a year off and then raising it 10 cents the next. Looking into the future, we hope to provide a consistent growth.”
Entergy stock closed at $68.55 after the earnings announcement, up 39 cents. However, its stock has been pummeled in 2015, losing 21.6% of its value since opening the year at $87.48.
