Executive Summary

Operational EPS was $1.35 and as-reported EPS was $1.28; management said operational EPS was above internal expectations, while consolidated weather headwinds and lower EWC power prices weighed on YoY comparisons. Guidance for FY2016 was affirmed.
Entergy Arkansas’ rate case was finalized with rate adjustments effective Feb 24; combined with recovery for the Union Power Station acquisition and deferred nuclear compliance costs, EAI contributed ~$0.15 to Q1 EPS. Moody’s upgraded EAI’s long-term rating.
Industrial sales growth exceeded 6% YoY, supporting utility earnings; however, the nuclear fleet average realized price fell more than $8/MWh (~13%), pressuring EWC.
IP2 extended refueling outage expected to reduce consolidated EPS by ~$0.20 in 2016; management highlighted potential tax items (as early as Q2) that could offset and keep results within guidance.

What Went Well and What Went Wrong

What Went Well

“We closed the acquisition of the Union Power Station and finalized our Arkansas rate case… we are reporting first quarter operational EPS of $1.35 above what we expected.” (Leo Denault)
Arkansas rate adjustments effective Feb 24, including Union recovery and deferred Fukushima/flood barrier regulatory asset collection over 10 years, contributed ~$0.15 to EPS in Q1.
Industrial sales growth exceeded 6% YoY, driven ~70% by new/expansion customers; existing refiners’ fewer outages also supported volumes.

What Went Wrong

Weather headwinds and prior-year tax items reduced YoY EPS; consolidated as-reported EPS fell to $1.28 from $1.65, operational to $1.35 from $1.68.
Nuclear fleet operations and commodity pressures: nuclear fleet average price down >$8/MWh (~13%); ongoing nuclear performance improvement plan could drive incremental spending.
A ~$0.05 charge at EAI tied to FERC orders in the opportunity sales proceedings; ultimate case outcome remains uncertain.

Financial Results

Consolidated EPS vs Prior Year

Metric	Q1 2015	Q1 2016
As-Reported EPS ($)	$1.65	$1.28
Operational EPS ($)	$1.68	$1.35
Weather Impact ($)	$0.08	$(0.14)

Segment EPS Contribution (Per Share) – As-Reported and Operational

Segment	Q1 2015 As-Reported ($)	Q1 2016 As-Reported ($)	Q1 2015 Operational ($)	Q1 2016 Operational ($)
Utility	$1.24	$1.09	$1.24	$1.09
Parent & Other	$(0.27)	$(0.25)	$(0.27)	$(0.25)
EWC	$0.68	$0.44	$0.71	$0.51
Consolidated	$1.65	$1.28	$1.68	$1.35

Operating Cash Flow by Business

Operating Cash Flow ($MM)	Q1 2015	Q1 2016
Utility	$454	$459
Parent & Other	$(51)	$(62)
EWC	$208	$136
Total	$611	$533

Special Items (EWC) – Impact

Special Items by Driver	Q1 2015 EPS Impact ($)	Q1 2016 EPS Impact ($)
Decisions to close VY, FitzPatrick, Pilgrim	$(0.03)	$(0.07)

Special Items by Line Item ($MM, pre-tax except Income taxes - other)	Q1 2015	Q1 2016
Non-fuel O&M (EWC)	$(7.5)	$(11.5)
Taxes other than income taxes (EWC)	$0.3	$(1.0)
Asset write-offs and impairments (EWC)	—	$(7.4)
Income taxes – other (EWC)	$2.5	$7.0
Total Special Items	$(4.6)	$(12.9)

KPIs

KPI	Q1 2016	Notes
Industrial Sales Growth YoY (%)	>6.0%	Driven ~70% by new/expansion customers; existing refinery uptime tailwind
Nuclear Fleet Avg Price Change	−$8/MWh, −13%	EWC pricing headwind
EAI Rate Case EPS Contribution	~$0.15	Rate adjustments + regulatory asset deferrals
EAI FERC-Related Charge	~$0.05	Opportunity sales proceedings
IP2 Outage EPS Impact (FY2016)	~$(0.20)	Lost revenue; ~$20MM outage costs amortized over shorter cycle

Note: Revenue and margin metrics were not disclosed in the Q1 2016 8-K exhibit or call materials we accessed; S&P Global fundamentals retrieval was unavailable due to rate-limit, so we cannot present revenue/margin comparisons for Q1 2016 vs prior periods.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated Operational EPS	FY2016	$4.95–$5.75	$4.95–$5.75 (affirmed)	Maintained
Adjusted Utility, Parent & Other EPS (normal weather/statutory taxes)	FY2016	$4.20–$4.50	$4.20–$4.50 (affirmed)	Maintained
EWC EBITDA Outlook	FY2017	~$510MM	~$510MM (unchanged)	Maintained
EWC EBITDA Outlook	FY2018	Prior outlook higher (not quantified)	Lowered due to weaker energy price curve	Lowered
IP2 Outage EPS Impact	FY2016	N/A	~$(0.20) EPS impact; ~$20MM higher outage costs amortized	New headwind

Earnings Call Themes & Trends

Topic	Q3 2015 (Prior-2)	Q4 2015 (Prior-1)	Q1 2016 (Current)	Trend
Arkansas regulatory framework & rate case	Staff testimony constructive; FRP legislation platform; Union acquisition part of case	Settlement: net $133MM base increase; 9.75% ROE; FRP with future test year	Final order effective Feb 24; first FRP filing in July; Moody’s upgrade to EAI LT rating	Framework improved; execution progressing
Union Power Station acquisition	Planned purchase; LA PSC supported; on track by YE	FERC approval pending; strategic modernization	Closed Mar 3; recovery began across EAI/ELL/ENO; EPS driver	Completed; contributing to earnings
Industrial sales growth	Emphasis on sales aiding ROE (qualitative)	2016 industrial growth expected ~2.9% (plan)	>6% YoY growth in Q1; mix from new/expansion and refiners	Strong H1 ramp, expected to normalize later
Nuclear operations & fleet actions	Announced FitzPatrick/Pilgrim decisions; EWC footprint reduction	ANO Column 4 expenses projected ~$50MM in 2016	Performance improvement plan; new CNO; IP2 bolt replacement and extended outage	Remediation underway; near-term spend risks
Grid modernization/AMIs & renewables	Strategy context (qualitative)	Launch of Lake Charles transmission project; modernization narrative	Solar pilots in MS/NO/AR; RFPs (LA up to 200MW; AR 100MW; NO 20MW); advanced meters plan preview for Analyst Day	Expanding pilots; planning deployments
EWC pricing & EBITDA outlook	Portfolio shrink; commodity price exposure	EWC operational earnings down; lower prices primary driver	Nuclear fleet avg price −$8/MWh (−13%); 2018 EBITDA outlook reduced; 2017 capacity uplift offsets energy	Persistent commodity headwinds, mixed capacity tailwinds
Tax items & consolidated guidance	Indicated potential significant tax items in 2016	Initiated 2016 ranges with caveat on taxes	Tax items as early as Q2 could offset IP2/weather to keep within guidance; guidance affirmed	Taxes likely to bridge to guidance ranges

Management Commentary

“We accomplished what we set out to do… closed the acquisition of the Union Power Station and finalized our Arkansas rate case… reporting first quarter operational EPS of $1.35 above what we expected.” – Leo Denault, Chairman & CEO
“Rate adjustments were effective starting February 24 and included recovery for the Union Power Station… the final order allowed for deferral… which we collect over 10 years. Combined, these items contributed about $0.15 in this quarter’s earnings.” – Andrew Marsh, CFO
“We have made it a top priority in 2016 to strengthen the culture of operational excellence… This could result in incremental nuclear spending and we are working hard to mitigate any financial implications.” – Leo Denault

Q&A Highlights

IP2 extended outage impact: ~$(0.20) consolidated EPS; most effect in Q2 via lost revenue; ~$20MM outage costs amortized across the shorter fuel cycle. Guidance still includes IP2 effects at consolidated level, with offsets expected.
Arkansas rate case and timing: ~$0.05 benefit from accrual between order date (Feb 24) and April 1; ~$0.06 regulatory asset related to Fukushima/flood barriers recognized; not expected to repeat beyond timing normalization.
Tax items and guidance: Potential tax items as early as Q2 are a “big piece” of maintaining consolidated guidance amid IP2/weather/EWC pricing headwinds.
Strategy/M&A: Focus on organic utility growth; any M&A must be consistent, executable, and non-distracting to the plan.
EWC outlook: 2018 EBITDA reduced primarily by energy curve; overhead being reduced commensurate with fleet downsizing; underlying gas price “a little below $3.”

Estimates Context

Wall Street consensus estimates (S&P Global) for Q1 2016 EPS and revenue were unavailable due to access limits at the time of query; as such, we cannot assess beat/miss versus consensus for EAI/ETR this quarter. Management did note operational EPS of $1.35 was above internal expectations.

Key Takeaways for Investors

Arkansas regulatory inflection: The finalized rate case and FRP framework materially strengthens EAI’s earnings visibility and cash recovery; Q1 EPS contribution (~$0.15) illustrates the uplift, with longer-term ROE alignment expected.
Utility growth intact: Strong industrial sales (>6% YoY) and timely recovery on Union Power Station support the utility earnings trajectory; expect H1 weighting with potential moderation later in the year.
Manage near-term nuclear risks: IP2 outage (~$(0.20) EPS), nuclear performance initiatives, and commodity price headwinds at EWC are key drags; watch for tax items and spending offsets to preserve guidance.
Guidance affirmed despite headwinds: Consolidated operational EPS ($4.95–$5.75) and adjusted Utility, Parent & Other EPS ($4.20–$4.50) were maintained; execution on offsets (tax, O&M, capacity uplift) is critical.
Strategic utility pivot: Continued fleet modernization, transmission projects, and AMI/renewables pilots (including AR 81MW solar PPA) underscore a utility-focused capital allocation with regulatory support.
EWC de-risking continues: Fleet downsizing and commodity exposure management remain central; 2017 EBITDA aided by capacity prices, while 2018 outlook trimmed on energy prices.
Monitor regulatory and legal developments: FERC proceedings (EAI opportunity sales charge ~$0.05), LPSC generic dockets (tax/corporate structures), and NRC inspections (ANO, Pilgrim) may impact expense cadence and outlook.

ENTERGY ARKANSAS, LLC (EAI)·Q1 2016 Earnings Summary