ETI- Entergy Texas Inc

This Information Statement is being made available on or about July 16, 2021 to the holders of record as of the close of business on July 6, 2021 (the “Record Date”) of the 1,400,0000 shares of the 5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share) (the “Preferred Stock”) of Entergy Texas, Inc., a Texas corporation (the “Company,” “us” or “we”), in connection with the action taken by Entergy Corporation (“Entergy”), the sole owner of all of the Company’s outstanding shares of common stock (46,525,000 shares) as of the Record Date (the “Common Shareholder”). On July 6, 2021, the Common Shareholder executed a written consent in lieu of the Company’s 2021 annual meeting of shareholders (the “Shareholder Consent”), approving the election of four (4) members to our Board of Directors (the “Board”). The action taken pursuant to the Shareholder Consent had previously been approved by the Board on June 25, 2021, and recommended to be presented to the Common Shareholder for its approval by the Board on the same date.

The action being taken in the Shareholder Consent without a meeting of shareholders is authorized by Section 6.202 of the Texas Business Organizations Code (the “Texas Law”) and the Company’s Amended and Restated Certificate of Formation (our “Certificate of Formation”). Both allow the taking of action without holding a meeting, providing notice, or taking a vote if shareholders having at least the minimum number of votes that would be necessary to take the action that is the subject of the consent at a meeting, in which each shareholder entitled to vote on the action is present and votes, signs a written consent or consents stating the action taken. According to Section 21.359 of the Texas Law, directors of every corporation must be elected at the annual meeting of shareholders by a plurality of the votes cast at the election. Under the Company’s Certificate of Formation and the resolution creating the Preferred Stock, the holders of the Company’s common stock and Preferred Stock vote together as one class, with the holder of the common stock (Entergy) possessing 79% of the voting power and the holders of the Preferred Stock possessing 21% of the voting power. In order to eliminate the costs and management time involved in holding an annual meeting, and in order to affect the actions described above, the Company’s Board voted to utilize the written consent of the Common Shareholder, and subsequently obtained the written consent of the Common Shareholder to approve the action described above.

This Information Statement is being distributed pursuant to the requirements of Section 14(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the holders of record of the Preferred Stock as of the Record Date (the “Preferred Shareholders”). The actions approved by the Common Shareholder will be effective on August 25, 2021, forty (40) days after July 16, 2021, the date this Information Statement is first made available to the Preferred Shareholders.

Pursuant to the Shareholder Consent, upon recommendation of the Board, all four (4) members of our Board were reelected to hold office until the next annual meeting of shareholders or until their successors have been duly elected and qualified. Below is biographical information about each of our directors, including their age as of July 16, 2021, period served as a director, position (if any) with the Company, business experience and qualifications, directorships of other publicly-owned corporations (if any) and other professional affiliations. Each Director’s information also provides a high level summary of the specific experience, qualifications and attributes of each director that the Board used to determine that the person should serve as a director.

Since Entergy possesses the voting power to elect all of our directors, we do not have any formal procedures by which our shareholders may recommend nominees to our Board.

Below is biographical information about each of our non-director executive officers, including their age as of July 16, 2021, business experience, directorships of other publicly-owned corporations (if any) and other professional affiliations. Our officers are appointed by our Board and hold office until either their successors have been duly elected or they are removed by the Board.

None of our directors are related by blood, marriage, or adoption to any other director, executive officer or other key employee.

To our knowledge, there is no arrangement or understanding between any of our directors or officers and any other person pursuant to which the director or officer was elected to serve. Other than Ms. Rainer, our directors and officers are selected from Entergy’s officers.

The New York Stock Exchange (“NYSE”) exempts companies whose only listed securities are preferred stock or debt from most of its corporate governance requirements, including the requirement to have a board composed of a majority of independent directors.

All of the Company’s directors are officers of the Company or its affiliates, and therefore, do not meet the independence standards of the NYSE rules. As discussed above, we are exempt from the NYSE corporate governance standard requiring a board composed of a majority of independent directors. We are relying on this exemption provided under the NYSE rules.

The Board is responsible for the control and direction of the Company. Our Chair of the Board is our Chief Executive Officer, Sallie Rainer. The Board believes that this leadership structure is appropriate given Ms. Rainer’s deep involvement with the Company and the utility industry. Entergy’s board of directors provides oversight for it and all of its affiliates, including the Company, with respect to the overall performance, strategic direction and key corporate policies. It approves major initiatives, advises on key financial and business objectives, and monitors progress with respect to these matters.

The Company’s Board does not have any standing committees. However, the Entergy board committees described below review and consider matters affecting the Company as part of their oversight of Entergy and its subsidiaries. The chairs and members of those committees are appointed annually and are composed entirely of independent directors as defined by NYSE rules and Entergy’s Corporate Governance Guidelines. Each committee operates pursuant to a written charter. Entergy’s Corporate Governance Guidelines, the charters of its Audit, Corporate Governance and Personnel Committees, Code of Entegrity and the Code of Business Conduct and Ethics (the “Code of Conduct”), including any amendments or waivers, are available at http://www.entergy.com/investor_relations/corporate_governance.aspx and in print to any shareholder who requests a copy from Entergy’s Secretary.

The information below describes the current chairs, membership and key responsibilities of each of Entergy’s board committees.

Members: Patrick J. Condon (Chair), Philip L. Frederickson, M. Elise Hyland and Karen A. Puckett. The Audit Committee held 9 meetings in 2020. Each member of the Audit Committee satisfies the heightened independence standards and qualification criteria and is financially literate in accordance with the NYSE and Securities and Exchange Commission (“SEC”) rules. Mr. Condon and Mr. Frederickson have been determined to be Financial Experts as defined by the SEC.

Key Responsibilities:

Members: Blanche L. Lincoln (Chair), Brian W. Ellis, Alexis M. Herman and Stuart L. Levenick. The Corporate Governance Committee held 7 meetings in 2020.

Key Responsibilities:

Members: Philip L. Frederickson (Chair), John R. Burbank, Kirkland H. Donald and M. Elise Hyland. The Finance Committee held 9 meetings in 2020.

Key Responsibilities:

Members: Karen A. Puckett (Chair), John R. Burbank, Brian W. Ellis, Alexis M. Herman and Blanche L. Lincoln. The Personnel Committee held 10 meetings in 2020. Each member of the Personnel Committee satisfies the heightened independence standards and qualification criteria in the NYSE and SEC rules.

Key Responsibilities:

In 2020, our Board of Directors held 4 meetings. All of our incumbent directors attended all of the meetings held in 2020.

As the sole owner of all of the shares of our common stock, which possesses 79% of the voting power in the election of directors, Entergy has the ability to elect all of the Company’s directors. Accordingly, as permitted by our Certificate of Formation and bylaws, we do not hold an annual meeting of shareholders, and instead, annually, members of our Board are elected through a written consent executed by Entergy.

Our shareholders and other interested parties may communicate with members of the Board by submitting such communications in writing to our Corporate Secretary, c/o Entergy Corporation, 639 Loyola Avenue, New Orleans, Louisiana, 70113 or by email at etrbod@entergy.com, who, upon receipt of any communication will note the date the communication was received, open the communication, make a copy of it for our files, and promptly forward the communication to the director(s) to whom it is addressed. However, spam, junk mail, mass mailings, service complaints, service inquiries, new service suggestions, resumes and other forms of job inquiries, surveys, business solicitations and advertisements or requests for donations and sponsorships will not be forwarded.

All employees of an Entergy system company, including our Chief Executive Officer, Chief Financial Officer and other senior members of management, are required to abide by our Code of Entegrity, which sets forth the ethical responsibilities of our employees, officers and representatives. Our Code of Entegrity, along with other Entergy policies on business conduct, helps ensure that our business is conducted in a consistently legal and ethical manner. Entergy’s policies form the foundation of a comprehensive process that includes compliance with corporate policies and procedures, an open relationship among employees to foster good business conduct, and a high level of integrity. Entergy’s policies and procedures cover all major areas of professional conduct, including employment practices, conflicts of interest, intellectual property and the protection of confidential information, and require strict adherence to laws and regulations applicable to the conduct of our business. Annually, all employees with computer access are required to acknowledge that they are familiar with the Code of Entegrity and agree to uphold Entergy’s core values and follow Entergy’s policies.

Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of Entergy’s policies. Retaliation against any employee who in good faith seeks advice, raises a concern, reports misconduct, or provides information in an investigation is strictly prohibited. Entergy’s Internal Audit department has procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls, or auditing matters and to allow for confidential and anonymous submissions by employees with concerns regarding questionable accounting or auditing matters.

Our directors, officers and employees are required to comply with the Code of Conduct. The Code of Conduct is intended to focus individuals on areas of ethical risk, help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct, and foster a culture of honesty, accountability and mutual respect. It covers a wide range of professional conduct, including conflicts of interest, unfair or unethical use of corporate opportunities, protection of confidential information, compliance with applicable laws and regulations, and oversight of ethics and compliance by employees of the Company.

Entergy has adopted an anti-hedging policy that prohibits officers, directors and employees of Entergy and its affiliates, including the Company, from entering into hedging or monetization transactions involving Entergy’s common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to Entergy’s stock or transactions involving “short-sales” of Entergy’s stock. The Entergy board adopted this policy to require officers, directors and employees to continue to own Entergy stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with those of Entergy’s other shareholders.

Entergy’s board of directors has adopted a written Related Party Transaction Approval Policy that applies to any transaction or series of transactions in which Entergy or a subsidiary is a participant:

The policy is administered by Entergy’s Corporate Governance Committee. The committee will consider relevant facts and circumstance in determining whether or not to approve or ratify such a transaction and will approve or ratify only those transactions that are, in the committee’s judgment, appropriate or desirable under the circumstances. The Corporate Governance Committee has determined that certain types of transactions do not create or involve a direct or indirect material interest, including (i) compensation and related party transactions involving a director or an executive officer solely resulting from service as a director or employment with the Company as long as the compensation is approved by Entergy’s board of directors (or an appropriate committee); (ii) transactions involving public utility services at rates or charges fixed in conformity with law or governmental authority; or (iii) all business relationships between Entergy and a Related Party made in the ordinary course of business on terms and conditions generally available in the marketplace an in accordance with applicable law. To Entergy’s knowledge, since January 1, 2020, neither the Company nor any of its affiliates has participated in any Related Party transaction.

To the best of our knowledge, none of our directors or officers has been involved in any of the following events during the past ten years:

The Audit Committee has adopted the following guidelines regarding the engagement of Entergy’s independent auditor to perform services for Entergy and its subsidiaries:

The information contained in the following Audit Committee Report shall not be deemed to be “soliciting material” or “filed” or “incorporated by reference” in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

The Personnel Committee oversees the executive compensation programs and policies with the advice of its independent compensation consultant and support from Entergy’s management team.

Annual Incentive Awards. Feedback from Entergy’s investors has indicated that environmental, social and governance (or ESG) issues are being viewed as increasingly vital to long-term performance. In addition, investors are expecting more transparency regarding corporate ESG commitments. This echoes Entergy’s own commitment to ESG and all of its critical stakeholders. Thus, Entergy conducted a comprehensive review of its incentive program in 2020 to identify and prioritize the optimal incentive metrics – including ESG goals – to use in the 2021 program. Historically, Entergy has used two financial measures to determine the Entergy Achievement Multiplier (“EAM”), which is the performance metric used to determine the maximum funding available for annual incentive awards. ESG and other performance metrics were considered in determining the allocation of incentive funds to certain workgroups and individual recipients. However, to demonstrate Entergy’s strong commitment to its ESG goals, and to more explicitly link compensation to the interests of its stakeholders, the EAM will be determined based on financial and non-financial measures beginning in 2021. Specifically, a financial measure will be weighted 60%, while quantitative and qualitative non-financial measures, including ESG metrics, will account for the remaining 40%.

Financial Measure: Keeping with the committee’s goal of aligning performance measures with financial results that link to externally communicated investor guidance, ETR Tax Adjusted Earnings per share or ETR Tax Adjusted EPS will continue to be used as the financial measure to determine 60% of the EAM. ETR Tax Adjusted EPS is based on Entergy’s Adjusted Earnings Per Share (“ETR Adjusted EPS”), which is the earnings measure that is used for external guidance. ETR Adjusted EPS adjusts Entergy’s as reported (GAAP) earnings per share results to eliminate the impact of its Entergy Wholesale Commodities (“EWC”) business, significant tax items and other non-routine items. To arrive at ETR Tax Adjusted EPS, ETR Adjusted EPS is adjusted to add back the effect of significant tax items, and to eliminate the effect of: (i) major storms, including the impact on total debt of pending securitizations, (ii) the resolution of certain unresolved regulatory litigation matters, (iii) unrealized gains or losses on equity securities, (iv) potential effects of federal income tax law changes, and (v) elective contributions to pension plans or trusts related to non-qualified post-retirement benefits that deviate from original plan assumptions.

Non-Financial Measures: The following non-financial metrics will be used to determine 40% of the EAM for 2021:

Targets for each of the non-financial measures will be clearly defined and will be designed to drive employee behaviors that support all four of Entergy’s stakeholders – customers, employees, communities and our owners.

Long-Term Performance Incentive Program (“LTIP”). In recent performance periods, Entergy has used two financial measures to determine awards under the LTIP – a cumulative earnings per share (“EPS”) measure (most recently cumulative ETR Adjusted EPS) and relative total shareholder return (“TSR”). To emphasize the importance of strong cash generation for the long-term health of its business, Entergy is replacing the EPS measure with a credit measure – adjusted FFO/Debt ratio for the 2021 – 2023 performance period. The adjusted FFO/Debt ratio is the ratio of: (i) adjusted funds from operations calculated as operating cash flow adjusted for allowance for funds used during construction, working capital and the effects of securitization revenue, and the pre-defined exclusions discussed above for the annual incentives; to (ii) total debt, excluding outstanding or pending securitization debt. The Personnel Committee decided to use this ratio because it emphasizes financial stability, noting that a financially healthy utility creates the capacity to make investments on behalf of customers, addresses the needs of communities, provides low-cost access to capital markets and promotes employee confidence. Relative TSR will continue to be used as the other performance measure for the 2021 – 2023 LTIP performance period, with relative TSR weighted 80% and the credit measure weighted 20%. Relative TSR measures Entergy’s total TSR relative to the TSR of the companies in the Philadelphia Utility Index as of December 31, 2020. Targets for the LTIP performance measures will include the same exclusions that will be used to determine the annual incentive financial measure targets.

Entergy believes the 2020 incentive pay outcomes for the NEOs demonstrate the application of its pay for performance philosophy.

The Personnel Committee determined that the 2020 EAM would be based on two equally weighted performance metrics:

The 2020 annual incentive award targets and results determined by the Personnel Committee were:

In January 2021, the Personnel Committee determined that ETR Tax Adjusted EPS exceeded the maximum by $1.30, but fell short of achieving its ETR Adjusted OCF target of $3.45 billion by approximately $323 million, leading to a preliminary EAM of 118%. In recognition of management’s success in achieving positive outcomes in 2020 on certain strategic efforts deemed critical to Entergy’s long-term success, the committee exercised its discretion to increase the EAM by 2% to 120%. Based on each NEO’s individual accountabilities and accomplishments, the committee then determined individual annual incentive awards of 115% to 122% of the target opportunity for each of the NEOs.

In January 2018, the Personnel Committee chose relative TSR and Cumulative Adjusted Utility, Plant & Other Earnings Per Share (“Cumulative Adjusted UP&O EPS”), each weighted equally, as the performance measures for the 2018 – 2020 LTIP performance period. Cumulative Adjusted UP&O EPS adjusts Entergy’s cumulative operational Utility, Parent & Other results to eliminate the impact of tax items and weather. Similar to the way targets are established for the annual incentive awards, the relative TSR and Cumulative Adjusted UP&O EPS performance measures were established by the Personnel Committee after the Entergy board’s review of Entergy’s strategic plan.

The targets and results for the 2018 – 2020 LTIP performance period as determined by the Personnel Committee were:

Annually, the Personnel Committee reviews:

The Personnel Committee uses this survey data to develop compensation opportunities that are designed to deliver total direct compensation (“TDC”) within a targeted range of approximately the 50^th percentile of the surveyed companies in the aggregate. In most cases, the committee considers its

objectives to have been met if Entergy’s Chief Executive Officer and the eight other executive officers (including the applicable NEOs) who constitute the OCE each has a target compensation opportunity that falls within a targeted range of 85% - 115% of the 50^th percentile of the survey data. In general, compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, while seasoned executive officers whose experience and skill set are viewed as critical to retain would be positioned at the higher end of the competitive range. Generally, differences in the levels of TDC among the NEOs are primarily driven by the scope of their responsibilities, differences in the competitive market pay range for similar positions, performance and considerations of internal pay equity.

Although the survey data described above are the primary data used in benchmarking compensation, the committee uses compensation information from the companies included in the Philadelphia Utility Index to evaluate the overall reasonableness of Entergy’s compensation programs and to determine relative TSR for the 2020 – 2022 LTIP performance period. The companies included in the Philadelphia Utility Index at the time the Personnel Committee approved the 2020 compensation model and framework were:

When setting the base salaries of the NEOs who are members of the OCE, the Personnel Committee generally targets the range of compensation paid to similarly situated executive officers of the companies included in the market data previously discussed in this Compensation Discussion and Analysis under “Competitive Positioning.” For Ms. Rainer, her salary is established by her immediate supervisor using the same criteria. The base salaries of the NEOs are considered annually as part of the performance review process, and upon a NEO’s promotion or other change in job responsibilities. Based on this review in 2020, and after reviewing the market data above, all of the NEOs, other than Mr. Denault, received increases in their base salaries ranging from approximately 2.50% to 6.15%. In 2020, Mr. Denault did not receive an increase in his base salary. Instead, the Personnel Committee increased Mr. Denault’s TDC by increasing his long-term incentive target opportunities; thereby, increasing the portion of his compensation that is “at risk” and further aligning his interests with those of Entergy’s shareholders.

The following table sets forth the 2019 and 2020 base salaries for the NEOs. Changes in base salaries for 2020 were effective in April.

Annually, the Personnel Committee engages in a rigorous process to determine the performance measures that will be used to determine the EAM.

In January, after Entergy’s strategic plan is updated to reflect any changes from that reviewed in December, the Personnel Committee establishes the specific targets that must be achieved for each performance measure. The Personnel Committee seeks to ensure that the targets:

In January of each year, the Personnel Committee establishes the target opportunities for the members of the OCE based on its review of the competitive analysis of job-specific market data prepared by Pay Governance as well as the officer’s role, individual performance and internal equity considerations. For the NEOs who are members of the OCE (Messrs. Brown, Denault, Marsh and West), target award opportunities are established based on these factors. For Ms. Rainer, her target award opportunity is determined based on her management level within the Entergy organization. Executive management levels at Entergy range from ML level 1 through ML level 4 (the “ML 1-4 Officers”). At December 31, 2020, Ms. Rainer held a Level 4 position. Accordingly, her incentive award opportunity was determined based on her management level and the external market data developed by the Committee’s independent compensation consultant. The 2020 target opportunities were increased for Mr. Brown, Mr. Marsh and Mr. West to align more closely with market data and internal pay equity. Mr. Denault’s 2020 target opportunity was unchanged from the level set in 2019 due to the Personnel Committee’s decision to increase his TDC by increasing his long-term incentive target opportunities. Ms. Rainer’s 2020 target opportunity was comparable to the level set for 2019.

In January, after the end of the fiscal year, the Finance and Personnel Committees jointly review Entergy’s financial results and the Personnel Committee determines the EAM, which represents the level of success in achieving the performance objectives established by the committee and determines the maximum funding level of the annual incentive program, as a percentage of the total target opportunity.

To determine individual executive officer awards under the annual incentive program, the Personnel Committee considers not only each executive’s role in executing on Entergy’s strategies and delivering the financial performance achieved, but also the individual’s accountability for any challenges and achievements Entergy experienced during the year.

Using the process described above, in December 2019, the Personnel Committee decided to use ETR Tax Adjusted EPS and ETR Adjusted OCF, with each measure weighted equally, as the performance measures for determining the 2020 EAM pool. ETR Tax Adjusted EPS is based on ETR Adjusted EPS, which

is the primary earnings measure used by Entergy externally and the measure on which it provides annual earnings guidance. To arrive at ETR Tax Adjusted EPS, ETR Adjusted EPS is adjusted to add back the effect of any significant tax items that were excluded to arrive at ETR Adjusted EPS and to eliminate the effects, if any, of the Pre-Determined Exclusions. ETR Adjusted OCF, is calculated based on Entergy’s as-reported (GAAP) operating cash flow, adjusted to eliminate the effect of any significant non-routine items not representative of the ongoing business, such as items associated with the decisions to sell or close the EWC nuclear plants, and any Pre-Determined Exclusions. The Personnel Committee determined that ETR Tax Adjusted EPS and ETR Adjusted OCF were the appropriate metrics to use for annual incentives in 2020 because:

The Personnel Committee considered it appropriate to use ETR Tax Adjusted EPS, which adds back the effect of significant tax items that may have been excluded from ETR Adjusted EPS, as the earnings measure because of the significant financial benefits to Entergy resulting from such tax items and the management effort required to achieve them. The committee also considered the appropriateness of excluding the effect of each of the specific Pre-Determined Exclusions it had identified from each of the financial measures. It viewed the exclusion of major storms as appropriate because although Entergy includes estimates for storm costs in its financial plan, it does not include estimates for a major storm event, such as a hurricane. The Personnel Committee considered the exclusion of any unanticipated effects of the tax reform legislation adopted at the end of 2017 to be appropriate because of the lingering uncertainty around those effects and the inability of management to impact those results. The Personnel Committee approved the other exclusions from reported results — for the impact of certain legacy unresolved regulatory litigation and unanticipated unrealized gains and losses on securities held by Entergy’s nuclear decommissioning trusts — primarily because of management’s inability to influence either of the related outcomes. The Personnel Committee further provided that in determining the 2020 EAM, the 2020 results would be subject to adjustment for other items the committee may consider appropriate in its review of 2020 performance, considering management accountability and business rationale, and the EAM as so calculated would be subject to further adjustment at the committee’s discretion based on business considerations.

In determining the targets to set for 2020, the Personnel Committee reviewed anticipated drivers and risks to Entergy’s expectations for its adjusted earnings and operating cash flow for 2020 as set forth in Entergy’s financial plan, as well as factors driving the strong financial performance achieved in 2019. The Personnel Committee confirmed that the proposed plan targets for ETR Tax Adjusted EPS and ETR Adjusted OCF reflected significant growth in the core earnings and consolidated operating cash flow measures underlying the annual incentive program targets. The committee also noted that while the 2020 ETR Tax Adjusted EPS target was less than the 2019 results, the 2020 target represented significant growth in the underlying ETR Adjusted EPS both from 2019 results and from the 2019 target, with the primary driver of the higher results in 2019 being certain one-time tax benefits that would not be recurring in 2020. The Personnel Committee also considered the potential impact of a wide range of identified risks and opportunities and confirmed that the related annual incentive program targets reflected a reasonable balancing of such risks and opportunities and an appropriate degree of challenge.

In January 2021, the Finance and Personnel Committees jointly reviewed Entergy’s financial results against the performance objectives reflected in the table above. Management discussed with the committees Entergy’s ETR Tax Adjusted EPS and the ETR Adjusted OCF results for 2020, including primary factors explaining how those results compared to the 2020 business plan and annual incentive program targets set in January 2020. ETR Tax Adjusted EPS exceeded the ETR Tax Adjusted EPS target of $5.60 per share by $1.30, but management fell short of achieving its ETR Adjusted OCF target of $3.45 billion by approximately $323 million, leading to a preliminary EAM of 118%. These results reflected a positive adjustment of $0.10 to ETR Tax Adjusted EPS and a positive adjustment of $274 million to ETR Adjusted OCF for the effects on earnings and operational cash flow of major storms impacting Entergy’s service area during 2020, consistent with the Pre-Determined Exclusions approved when the targets were set at the beginning of the year. The results also reflected a positive adjustment of $100 million to ETR Adjusted OCF for the effect on operational cash flow of additional voluntary contributions made to Entergy’s pension plan in 2020 over and above the required level of contributions, which adjustment was made because the committee did not consider it appropriate for management to be penalized in the incentive compensation process for choosing to make such elective contributions, consistent with the Pre-Determined Exclusion for items the committee determined should be excluded based on management accountability and business rationale.

The Personnel Committee considered whether 2020 ETR Tax Adjusted EPS or ETR Adjusted OCF should be adjusted for any other factors that had impacted 2020 results. The committee noted that 2020 revenues and cash flow had been adversely impacted by reduced sales resulting from unfavorable weather, the COVID-19 pandemic and, to a lesser extent, major storms, which collectively reduced ETR Adjusted EPS by approximately $0.71 per share, and ETR Adjusted OCF by approximately $663 million as compared to plan. In addition, the committee noted that ETR Adjusted OCF had been further reduced by approximately $178 million due to increased customer arrearages as a result of regulatory moratoria on customer disconnects following the onset of the pandemic. As noted, both ETR Tax Adjusted EPS and ETR Adjusted OCF were adjusted to reflect the impact of major storms as a Pre-Determined Exclusion. However, the committee decided not to adjust the results to reflect the impact of the COVID-19 pandemic, the disconnect moratoria or the unfavorable weather experienced in 2020.

In addition to the foregoing financial results, the Personnel Committee considered management’s degree of success in achieving various operational and regulatory goals set out at the beginning of the year and in overcoming certain challenges that arose in the business during the course of the year. The committee took note of not only the many ways management had created value for all of Entergy’s key stakeholders during 2020, but also the major challenges that were overcome in the process, including the COVID-19 pandemic and the challenges of responding to three hurricanes in a record-breaking storm season for the Gulf Coast. The committee also noted that despite these challenges, management had remained focused on achieving strong financial results for the benefit of all of its stakeholders while at the same time driving positive outcomes in certain areas that would contribute to the long term sustainability of Entergy, including particularly the achievement of its 2020 CO₂ emissions goal, development and announcement of its goal to achieve net zero carbon emissions by 2050, and significant enhancements to its sustainability disclosure and

reporting, and substantial progress in other important ESG and sustainability efforts. In recognition of these accomplishments, which the committee considers to be critical to Entergy’s long-term success, the committee exercised its discretion to increase the EAM by 2% to 120%.

To determine individual NEO annual incentive awards for the NEOs who are members of the OCE, the Personnel Committee considered individual performance in executing on Entergy’s strategies and delivering the strong financial performance achieved in 2020. In addition, the Personnel Committee considered the individual’s key accountabilities and accomplishments in relation to certain operational and regulatory challenges Entergy experienced during the year. With these considerations in mind, the Personnel Committee approved payouts ranging from 115% to 120% of target for each of the NEOs who are members of the OCE.

After the EAM was established to determine overall funding for the annual incentive awards, Entergy’s Chief Executive Officer allocated incentive award funding to individual business units based on business unit results. Ms. Rainer’s award was determined based on her key accountabilities, accomplishments, and performance resulting in a payout of 122% of target.

Based on the foregoing evaluation of management performance, the NEOs received the following annual incentive payouts for 2020:

Long-term incentive compensation, consisting solely of equity awards in 2020, represents the largest portion of executive officer compensation, and as noted earlier, the increase in Mr. Denault’s TDC opportunity was delivered in the form of long-term incentive compensation. Entergy believes the combination of long-term incentives it employs provides a compelling performance-based compensation opportunity, acts in retaining the senior management team, and aligns the interests of Entergy’s executive officers with the interests of its shareholders and customers by enhancing executives focus on Entergy’s long-term goals. In general, Entergy seeks to allocate the total value of long-term incentive compensation 60% to performance units and 40% to a combination of stock options and restricted stock, equally divided in value, based on the value the compensation model seeks to deliver.

For each NEO who is a member of the OCE, a dollar value is established to determine that NEO’s long-term incentive awards target. The targeted award value for each NEO is determined based on market median compensation data for the officer’s role, adjusted to reflect individual performance and internal equity. In January 2020, the Personnel Committee approved the 2020 long-term incentive award target amounts for each NEO with each NEO’s target amount increasing in recognition of the contributions made to Entergy in 2019. This target amount was then converted into the number of performance units, stock options and shares of restricted stock granted to each NEO based on the allocation described above.

In consultation with Entergy’s Chief Executive Officer, the Personnel Committee reviewed Ms. Rainer’s performance, role and responsibilities, strengths, developmental opportunities and internal equity and allocated awards of restricted stock and stock options to her based on these factors. The long-term performance units granted to Ms. Rainer were determined based on the average of the market data for officers within her management level, without regard to her specific job function. Ms. Rainer’s equity awards were then allocated as described above.

The NEOs are issued performance unit awards under the LTIP.

The LTIP specifies a minimum, target and maximum achievement level, the achievement of which will determine the number of performance units that may be earned by each participant. For the 2020 – 2022 LTIP performance period, the Personnel Committee chose the performance measures and targets set forth below.

Entergy grants stock options and shares of restricted stock because they align the interests of the executive officers with long-term shareholder value, provide competitive compensation, and increase the executives’ ownership in Entergy common stock. Generally, stock options are granted with a maximum term of ten years, and vest one-third on each of the first three anniversaries of the date of grant. The exercise price for each option granted in 2020 was $131.72, which was the closing price of Entergy’s common stock on the date of grant. Shares of restricted stock vest one-third on each of the first three anniversaries of the date of grant, are paid dividends which are reinvested in shares of Entergy common stock and have full voting rights. The dividend reinvestment shares are subject to forfeiture similar to the terms of the original grant.

All of the performance units, shares of restricted stock and stock options granted to the NEOs in 2020 were granted pursuant to the 2019 Omnibus Incentive Plan or 2019 OIP. The 2019 OIP requires both a change in control and an involuntary job loss without cause or a resignation by the NEO for good reason within 24 months following a change in control (a “double trigger”) for the acceleration of these awards upon a change in control.

Payout for the 2018 – 2020 LTIP Performance Period. In January 2018, the Personnel Committee chose relative TSR and Cumulative Adjusted UP&O EPS as the performance measures, each weighted equally, for the 2018 – 2020 LTIP performance period. Cumulative Adjusted UP&O EPS, which adjusted Entergy’s operational Utility, Parent & Other results to eliminate the impact of tax items and weather (the “UP&O Adjustments”), was added as a performance measure because it aligned with Entergy’s externally communicated earnings measure on its core utility business and was the primary measure on which Entergy communicated its long term earnings outlooks in 2018. Similar to the way targets are established for the annual incentive program, targets for the Cumulative Adjusted UP&O EPS performance measure were

established by the Personnel Committee after the Entergy board’s review of Entergy’s strategic plan. These targets also exclude the Pre-Determined Exclusions discussed previously with respect to the annual incentive measures, as well as the UP&O Adjustments. The payout was determined based on the achievement of the following performance goals established for both performance measures by the committee at the beginning of the performance period:

In January 2021, the Personnel Committee reviewed Entergy’s TSR and the Cumulative Adjusted UP&O EPS for the 2018 – 2020 LTIP performance period in order to determine the payout to participants based upon the performance measures and range of potential payouts for the 2018 – 2020 LTIP performance period as provided above. The committee compared Entergy’s TSR against the TSR of the companies that were included in the Philadelphia Utility Index throughout the three year performance period, which were:

As recommended by the Finance Committee, the Personnel Committee concluded that Entergy’s relative TSR for the 2018 – 2020 performance period was in the second quartile, and that Cumulative Adjusted UP&O EPS was $15.25, yielding a payout of 126% of target for the NEOs.

Entergy provides these benefits to the NEOs as part of its effort to provide a competitive executive compensation program and because it believes that these benefits are important retention and recruitment tools since many of the companies with which it competes for executive talent provide similar arrangements to their senior executive officers.

The Personnel Committee believes that retention and transitional compensation arrangements are an important part of overall compensation as they help to secure the continued employment and dedication of the NEOs, notwithstanding any concern that they might have at the time of a change in control regarding their own continued employment. In addition, the Personnel Committee believes that these arrangements are important as recruitment and retention devices, as many of the companies with which Entergy competes for executive talent have similar arrangements in place for their senior employees.

To achieve these objectives, Entergy has established a System Executive Continuity Plan under which ML 1-4 Officers are entitled to receive “change in control” payments and benefits if such officer’s employment is involuntarily terminated without cause or if the officer resigns for good reason, in each case, in connection with a change in control of Entergy and its subsidiaries. Entergy strives to ensure that the benefits and

payment levels under the System Executive Continuity Plan are consistent with market practices. Entergy’s executive officers, including the NEOs, are not entitled to any tax gross up payments on any severance benefits received under this plan. For more information regarding the System Executive Continuity Plan, see “2020 Potential Payments Upon Termination or Change in Control.”

Entergy strives to ensure that its compensation philosophy and practices are in line with the best practices of companies in its industry as well as other companies in the S&P 500. Some of these practices include the following:

Entergy has adopted a clawback policy that covers all individuals subject to Section 16 of the Exchange Act, including all of the NEOs. Under the policy, which goes beyond the requirements of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), incentives paid to covered executive officers are required to be reimbursed where:

The amount required to be reimbursed is equal to the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or correct calculation. In addition, Entergy will seek to recover any compensation received by its Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Sarbanes-Oxley following a material restatement of Entergy’s financial statements.

For many years, Entergy has had stock ownership guidelines for executives, including the NEOs. These guidelines are designed to align the executives’ long-term financial interests with the interests of Entergy’s shareholders. Annually, the Personnel Committee monitors the executive officers’ compliance with these guidelines with all of the NEOs satisfying the applicable ownership guidelines at that time. The ownership guidelines are as follows:

The ownership guidelines are as follows:

Further, to facilitate compliance with the guidelines, until an executive officer satisfies the stock ownership guidelines, the officer must retain:

Executive officers, including the NEOs, are required to receive permission from Entergy’s General Counsel or his designee prior to entering into any transaction involving Entergy securities, including gifts, other than the exercise of employee stock options. Trading is generally permitted only during specified open trading windows beginning shortly after the release of earnings. Employees, who are subject to trading restrictions, including the NEOs, may enter into trading plans under Rule 10b5-1 of the Exchange Act, but these trading plans may be entered into only during an open trading window and must be approved by Entergy. An NEO bears full responsibility if he or she violates Entergy’s policy by buying or selling shares of Entergy stock without pre-approval or when trading is restricted.

Entergy also prohibits directors and executive officers, including the NEOs, from pledging any Entergy securities or entering into margin accounts involving Entergy securities. Entergy prohibits these transactions because of the potential that sales of Entergy securities could occur outside trading periods and without the required approval of the General Counsel.

Entergy also has adopted an anti-hedging policy that prohibits officers, directors, and employees from entering into hedging or monetization transactions involving Entergy’s common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to Entergy’s stock or transactions involving “short-sales” of its common stock.

Annually, the Personnel Committee reviews the relationship with its compensation consultant to determine whether any conflicts of interest exist that would prevent Pay Governance from independently advising the Personnel Committee. Factors considered by the committee when assessing the independence of its compensation consultant included, among others:

Based on these factors, the Personnel Committee concluded that Pay Governance is independent in accordance with SEC and NYSE rules and that no conflicts of interest exist that would prevent Pay Governance from independently advising the committee.

In addition, Pay Governance has agreed that it will not accept any engagement with management without prior approval from the Personnel Committee, and Entergy’s board has adopted a policy that prohibits a compensation consultant from providing other services to it if the aggregate amount for those services would exceed $120,000 in any year. During 2020, Pay Governance did not provide any services to Entergy other than the services it performed on behalf of the Personnel and Corporate Governance Committees, and it worked with Entergy’s management only as directed by the committees.

The Personnel Committee Report included in the Entergy Proxy Statement is incorporated by reference, but will not be deemed to be “filed” in this Information Statement. The Company does not have a compensation committee or other board committee performing equivalent functions. The Company’s Board is comprised of individuals who are officers or employees of Entergy or the Company. The Board does not make any determination regarding the compensation paid to Entergy’s or the Company’s executive officers.

For security and business reasons, Entergy’s Chief Executive Officer is permitted to use its corporate aircraft for personal use at Entergy’s expense. The other NEOs may use the corporate aircraft for personal travel subject to the approval of Entergy’s Chief Executive Officer. The Personnel Committee reviews the level of usage throughout the year. Entergy believes that its officers’ ability to use its plane for limited personal use saves time and provides additional security for them, thereby benefiting Entergy. The amounts included in column (i) for the personal use of corporate aircraft reflect the incremental cost to Entergy for use of the corporate aircraft, determined on the basis of the variable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications, and fees, including flight planning, ground handling, and landing permits. The aggregate incremental aircraft usage cost associated with Mr. Denault’s personal use of the corporate aircraft was $86,618 for fiscal year 2020. In addition, Entergy offers its executives comprehensive annual physical exams at Entergy’s expense. None of the other perquisites referenced above exceeded $25,000 for any of the other NEOs.

The following table summarizes award grants during 2020 to the NEOs.