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Rating Action:

Moody's Upgrades Entergy to Baa2; Stable Outlook

Global Credit Research - 05 Apr 2017

New York, April 05, 2017 -- Moody's Investors Service, ("Moody's") today upgraded the ratings of Entergy Corporation (long-term issuer rating to Baa2 from Baa3; senior unsecured to Baa2 from Baa3; commercial paper rating to Prime-2 from Prime-3) due to continued actions aimed at eliminating its merchant generation exposure. The rating action concludes the review for upgrade that began on January 9, 2017 following the company's announced intent to retire the Indian Point nuclear facility by 2021. Entergy's outlook is stable.

Upgrades:

..Issuer: Entergy Corporation

.... Issuer Rating, Upgraded to Baa2 from Baa3

....Senior Unsecured Commercial Paper, Upgraded to P-2 from P-3

....Senior Unsecured Regular Bond/Debenture, Upgraded to Baa2 from Baa3

....Senior Unsecured Shelf, Upgraded to (P)Baa2 from (P)Baa3

Outlook Actions:

..Issuer: Entergy Corporation

....Outlook, Changed To Stable From Rating Under Review

RATINGS RATIONALE

"Entergy continues to make progress in de-risking the company" said Ryan Wobbrock, Vice President -- Senior Analyst. "A waning merchant fleet, cash flow to debt in the mid-teen's percent range, and holding company debt under 25% of consolidated debt now position Entergy in-line with other Baa2 peer utility holding companies" added Wobbrock.

Entergy's upgrade reflects our expectations for a continued strategy by management to eventually exit the merchant generation business. The most recent examples of this trend include the 31 March sale of the James A. FitzPatrick nuclear plant to Exelon Corporation (Baa2 stable) and the settlement with New York State to shut down Indian Point. The latter provides Entergy a pathway toward closing the recently troubled plant and crystalizes decommissioning liabilities.

Entergy's stable utility subsidiary cash flow and its current level of holding company debt provide some financial cushion to absorb increasing costs across its nuclear generation fleet, which include both regulated and merchant plants. Moody's expects Entergy to produce cash flow to debt in the mid-teen's percent range on a sustainable basis, down from 19% at year-end.

With mid-teen's percent cash flow to debt and under 25% holding company debt to consolidated debt, Entergy will be in-line with, or slightly better than, most other Baa2 hybrid holding company financials, such as Exelon (16% and 25%, respectively), The Southern Company (Baa2 stable; 15% and 25%, respectively), and Dominion Resources, Inc. (15% and 50%, respectively).

Entergy's Baa2 rating and stable outlook is supported by a strong core of utility subsidiaries, consisting of five vertically integrated utility companies operating in four states. The three largest utilities in Louisiana, Arkansas and Mississippi operate under formula rate making frameworks, which provide predictable regulatory outcomes and stable cash flow.

Factors that Could Lead to an Upgrade

Entergy could be upgraded to Baa1 if it can produce cash flow to debt metrics around 18% for a sustained period; make material steps in executing a full exit of the merchant nuclear business; maintain holding company debt below 25%; and if one or more of its major utility subsidiaries is upgraded.

Factors that Could Lead to an Downgrade

Entergy could be downgraded to Baa3 if regulatory support for its utilities were to decline; if one or more of its key subsidiaries are downgraded; if any of its nuclear reactors were to experience a sharp increase in operating or decommissioning costs; if holding company debt were to grow above 25% of consolidated debt; or if cash flow to debt declined below 15% for an extended period of time.

The principal methodology used in these ratings was Regulated Electric and Gas Utilities published in December 2013. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Ryan Wobbrock
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Jim Hempstead
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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