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Entergy utilities' energy volumes billed up 8.1% on year with stronger economy

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Entergy utilities' energy volumes billed up 8.1% on year with stronger economy

亮点

Indian Point sale impairment hits earnings

Proposed hydrogen plant has dual benefits

An economy rebounding from year-ago pandemic restrictions allowed Entergy utilities to increase their volume of power sales by 8.1% year on year in the second quarter, but the sale of the Indian Point Energy Center impaired as-reported earnings by $268 million, net of tax, the company reported Aug. 4.

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Entergy's utilities billed customers for 31.7 TWh in the second quarter, up from 29.4 TWh in the second quarter of 2020, with wholesale billing having the biggest percentage jump, rising 51.6% to 4.7 TWh from 3.1 TWh in Q2 2020.

Industrial sales were also strong in the second quarter with billing for 12.7 TWh, compared with 11.8 TWh in Q2 2020, a 7.1% increase.

"Entergy has a large industrial base with about 40% of our demand coming from industrial customers," said Leo Denault, Entergy chairman and CEO, in a conference call. "Some have viewed this as a risk, but we disagree. We see continued opportunity in this sector and here's why. Our industrial customers are efficient, diverse producers with infrastructure and labor competitive advantages."

Although much of that industrial base is in the petrochemical field, it is "not going away," as the need for their products remain, even as auto manufacturers turn "toward more sustainable options," Denault said, and through electrification of industrial processes, Entergy can help those industries reduce their emissions output.

Natural gas/hydrogen plant

The recent announcement of the proposed 1.2-GW Orange County Advanced Power Station in Bridge City, Texas, is an example, with its proposed dual-fuel capacity for natural gas and hydrogen. Roderick West, Entergy group president for utility operations, said the company plans to submit around Labor Day its application for a certificate of convenience and necessity for the plant at the Public Utility Commission of Texas.

"The hydrogen component as it's currently configured, represents approximately 5% of the overall cost," West said. "And we believe we have a compelling case for why having that flexibility benefits our customers and certainly would support the CCN."

Denault emphasized that the plant has the environmental advantage of hydrogen as a cleaner-burning fuel, plus the reliability benefit of being a dispatchable, dual-fuel generator, "which we've all seen is something that we need as we start to deal with [extreme] weather events."

The PUC may take six months or more to consider whether to grant the CCN, West said, but Entergy has announced hopes to start construction in early 2023 and have it in service by summer 2026.

Entergy is in the process of exiting the wholesale commodities business, which has traditionally relied heavily upon its nuclear fleet. Overall energy billed in the second quarter was down by 45.8% year on year to 2.7 TWh, of which 2.4 TWh was nuclear.

Nuclear operating costs were up by 41.4% year on year to $27.51/MWh, while the average energy and capacity revenue for Entergy's wholesale division was up 30.2% to $48.89/MWh.

Across the three Midcontinent Independent System Operator hubs where Entergy has operating units, day-ahead on-peak locational marginal prices were up almost 7% year on year to $33.40/MWh in the second quarter, compared with Q2 2020's $21.86/MWh.

Impairment charge

Entergy took a $340 million impairment charge in the most recent quarter for its sale of the Indian Point nuclear plant, which resulted in a $268 million charge, after taxes are taken into account.

Excluding this item and other adjustments, Entergy reported consolidated earnings of $269 million, $1.34/share, in the second quarter, down from $276 million, $1.37/share, in Q2 2020.

As reported, Entergy reported a loss of $ million, 3 cents a share, for the second quarter, down from a gain of $361 million, $1.79/share, in Q2 2020.

Entergy reaffirmed its 2021 earnings guidance of $5.80 to $6.10/share, "and the company expects results to be in the upper half of the range."

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