DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Indian Point 1, Indian Point 2, Indian Point 3, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.

Entergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding those accounted for under the equity method or resulting in consolidation of the investee, to be measured at fair value with changes recognized in net income. Entergy implemented this ASU using a modified retrospective method, and Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by $633 million as of January 1, 2018, for the cumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that do not meet the criteria for regulatory accounting treatment. Beginning in 2018, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. In accordance with the regulatory treatment of the decommissioning trust funds of the

Registrant Subsidiaries, an offsetting amount of unrealized gains/(losses) will continue to be recorded in other regulatory liabilities/assets.

As discussed in Note 14 to the financial statements, in January 2019, Entergy completed the transfer of the Vermont Yankee plant to NorthStar. As part of the transaction, Entergy transferred the Vermont Yankee decommissioning trust fund to NorthStar. As of December 31, 2018, the fair value of the decommissioning trust fund was $532 million.

As discussed in Note 14 to the financial statements, in August 2019, Entergy completed the transfer of the Pilgrim plant to Holtec. As part of the transaction, Entergy transferred the Pilgrim decommissioning trust fund to Holtec. The disposition-date fair value of the decommissioning trust fund was approximately $1,030 million.

Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant. Decommissioning trust funds for the Entergy Wholesale Commodities nuclear plants do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The unrealized gains/(losses) recognized during the year ended December 31, 2019 on equity securities still held as of December 31, 2019 were $640 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.

The available-for-sale securities held as of December 31, 2019 and 2018 are summarized as follows:



	Fair Value		Total Unrealized Gains		Total Unrealized Losses
	(In Millions)
2019
Debt Securities (a)		$2,456		$96		$6

2018
Debt Securities (a)		$2,495		$19		$35


(a)	Debt securities presented herein do not include the $507 million and $389 million of debt securities held in the wholly-owned registered investment company as of December 31, 2019 and 2018, respectively, which are not accounted for as available-for-sale.

The unrealized gains/(losses) above are reported before deferred taxes of $13 million as of December 31, 2019 and ($1) million as of December 31, 2018 for debt securities. The amortized cost of available-for-sale debt securities was $2,366 million as of December 31, 2019 and $2,511 million as of December 31, 2018. As of December 31, 2019, available-for-sale debt securities have an average coupon rate of approximately 3.27%, an average duration of approximately 6.62 years, and an average maturity of approximately 10.42 years.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2019:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$404		$5
More than 12 months	38		1
Total		$442		$6

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$652		$9
More than 12 months	782		26
Total		$1,434		$35

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2019 and 2018 are as follows:



	2019		2018
	(In Millions)
Less than 1 year		$128		$199
1 year - 5 years	807		1,066
5 years - 10 years	666		544
10 years - 15 years	125		77
15 years - 20 years	126		78
20 years+	604		531
Total		$2,456		$2,495

During the years ended December 31, 2019, 2018, and 2017, proceeds from the dispositions of available-for-sale securities amounted to $1,427 million, $2,406 million, and $3,163 million, respectively. During the years ended December 31, 2019, 2018, and 2017, gross gains of $25 million, $7 million, and $149 million, respectively, and gross losses of $4 million, $47 million, and $13 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2019 are $556 million for Indian Point 1, $701 million for Indian Point 2, $930 million for Indian Point 3, and $498 million for Palisades. The fair values of the decommissioning trust funds related to the Entergy

Wholesale Commodities nuclear plants as of December 31, 2018 are $471 million for Indian Point 1, $598 million for Indian Point 2, $781 million for Indian Point 3, $444 million for Palisades, $1,028 million for Pilgrim, and $532 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

Entergy Arkansas

Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of December 31, 2019 and 2018 are summarized as follows:



	Fair Value		Total Unrealized Gains		Total Unrealized Losses
	(In Millions)
2019
Debt Securities		$412.8		$9.9		$2.6

2018
Debt Securities		$381.3		$0.6		$8.2

The amortized cost of available-for-sale debt securities was $405.4 million as of December 31, 2019 and $389 million as of December 31, 2018. As of December 31, 2019, the available-for-sale debt securities have an average coupon rate of approximately 2.79%, an average duration of approximately 6.83 years, and an average maturity of approximately 8.81 years.

The unrealized gains/(losses) recognized during the year ended December 31, 2019 on equity securities still held as of December 31, 2019 were $147.7 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2019:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$104.8		$2.5
More than 12 months	7.7		0.1
Total		$112.5		$2.6

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$65.8		$0.5
More than 12 months	231.1		7.7
Total		$296.9		$8.2

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2019 and 2018 are as follows:



	2019		2018
	(In Millions)
Less than 1 year		$44.1		$32.5
1 year - 5 years	109.1		170.3
5 years - 10 years	156.0		114.0
10 years - 15 years	31.3		10.3
15 years - 20 years	23.8		8.1
20 years+	48.5		46.1
Total		$412.8		$381.3

During the years ended December 31, 2019, 2018, and 2017, proceeds from the dispositions of available-for-sale securities amounted to $110.6 million, $82.1 million, and $339.4 million, respectively. During the years ended December 31, 2019, 2018, and 2017, gross gains of $2.9 million, $0.1 million, and $17.7 million, respectively, and gross losses of $0.1 million, $2.9 million, and $0.6 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of December 31, 2019 and 2018 are summarized as follows:



	Fair Value		Total Unrealized Gains		Total Unrealized Losses
	(In Millions)
2019
Debt Securities		$601.5		$29.3		$0.8

2018
Debt Securities		$532.9		$4.1		$6.0

The amortized cost of available-for-sale debt securities was $573 million as of December 31, 2019 and $534.8 million as of December 31, 2018. As of December 31, 2019, the available-for-sale debt securities have an average coupon rate of approximately 3.82%, an average duration of approximately 6.80 years, and an average maturity of approximately 13.26 years.

The unrealized gains/(losses) recognized during the year ended December 31, 2019 on equity securities still held as of December 31, 2019 were $208.1 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2019:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$71.2		$0.8
More than 12 months	7.9		—
Total		$79.1		$0.8

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$170.1		$2.1
More than 12 months	145.8		3.9
Total		$315.9		$6.0

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2019 and 2018 are as follows:



	2019		2018
	(In Millions)
Less than 1 year		$40.7		$31.1
1 year - 5 years	142.0		130.5
5 years - 10 years	132.4		111.0
10 years - 15 years	39.8		29.0
15 years - 20 years	49.2		37.1
20 years+	197.4		194.2
Total		$601.5		$532.9

During the years ended December 31, 2019, 2018, and 2017, proceeds from the dispositions of available-for-sale securities amounted to $186 million, $401.7 million, and $231.3 million, respectively. During the years ended December 31, 2019, 2018, and 2017, gross gains of $4.8 million, $2.1 million, and $12 million, respectively, and gross losses of $0.3 million, $7.5 million, and $0.4 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

System Energy

System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of December 31, 2019 and 2018 are summarized as follows:



	Fair Value		Total Unrealized Gains		Total Unrealized Losses
	(In Millions)
2019
Debt Securities		$386.2		$15.1		$0.3

2018
Debt Securities		$364.2		$2.9		$5.8

The amortized cost of available-for-sale debt securities was $371.4 million as of December 31, 2019 and $367.1 million as of December 31, 2018. As of December 31, 2019, the available-for-sale debt securities have an average coupon rate of approximately 3.12%, an average duration of approximately 6.75 years, and an average maturity of approximately 10.41 years.

The unrealized gains/(losses) recognized during the year ended December 31, 2019 on equity securities still held as of December 31, 2019 were $140.5 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2019:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$56.9		$0.3
More than 12 months	0.3		—
Total		$57.2		$0.3

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:



	Fair Value		Gross Unrealized Losses
	(In Millions)
Less than 12 months		$89.7		$2.4
More than 12 months	79.8		3.4
Total		$169.5		$5.8

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2019 and 2018 are as follows:



	2019		2018
	(In Millions)
Less than 1 year		$8.5		$22.8
1 year - 5 years	154.6		188.0
5 years - 10 years	92.3		73.4
10 years - 15 years	13.4		5.2
15 years - 20 years	14.4		10.2
20 years+	103.0		64.6
Total		$386.2		$364.2

During the years ended December 31, 2019, 2018, and 2017, proceeds from the dispositions of available-for-sale securities amounted to $338.1 million, $361.9 million, and $565.4 million, respectively. During the years ended December 31, 2019, 2018, and 2017, gross gains of $5.4 million, $0.5 million, and $1.4 million, respectively, and gross losses of $0.7 million, $6.1 million, and $3.3 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Other-than-temporary impairments and unrealized gains and losses

Entergy evaluates the available-for-sale debt securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the years ended December 31, 2019, 2018, and 2017. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.

Decommissioning Trust Funds