LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359

Leases

LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2016, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions, all of which are discussed elsewhere):



Year	Operating Leases		Capital Leases
	(In Thousands)
2017		$76,663		$4,694
2018	69,620		3,255
2019	67,218		3,124
2020	51,127		3,065
2021	41,531		2,887
Years thereafter	90,787		21,891
Minimum lease payments	396,946		38,916
Less: Amount representing interest	—		11,934
Present value of net minimum lease payments		$396,946		$26,982

Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $44.4 million in 2016, $63.9 million in 2015, and $59 million in 2014.

As of December 31, 2016 the Registrant Subsidiaries had a capital lease and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 lease obligations, all of which are discussed elsewhere):

Capital Leases



Year	Entergy Mississippi
	(In Thousands)
2017		$1,570
2018	131
2019	—
2020	—
2021	—
Years thereafter	—
Minimum lease payments	1,701
Less: Amount representing interest	111
Present value of net minimum lease payments		$1,590

Operating Leases



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas
	(In Thousands)
2017		$17,648		$23,947		$8,014		$2,324		$5,361
2018	14,667		22,053		7,171		2,065		4,882
2019	15,419		22,461		6,830		1,882		3,841
2020	8,871		16,700		5,878		1,627		2,335
2021	6,697		12,097		4,200		1,218		1,546
Years thereafter	25,818		22,966		5,865		1,864		2,009
Minimum lease payments		$89,120		$120,224		$37,958		$10,980		$19,974

Rental Expenses



Year	Entergy Arkansas		Entergy Louisiana		Entergy Mississippi		Entergy New Orleans		Entergy Texas		System Energy
	(In Millions)
2016		$8.0		$17.8		$4.0		$0.9		$2.8		$1.6
2015		$13.6		$21.8		$5.4		$1.6		$4.0		$2.9
2014		$12.0		$20.7		$4.3		$1.2		$3.8		$2.0

In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $3.4 million in 2016, $4.7 million in 2015, and $4.8 million in 2014 for Entergy Arkansas and $0.3 million in 2016, $1.1 million in 2015, and $1.7 million in 2014 for Entergy Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2016, $1.6 million in 2015, and $1.6 million in 2014.

Power Purchase Agreements

As of December 31, 2016, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:



Year	Entergy Texas (a)		Entergy
	(In Thousands)
2017		$29,772		$29,772
2018	30,458		30,458
2019	31,159		31,159
2020	31,876		31,876
2021	32,609		32,609
Years thereafter	10,180		10,180
Minimum lease payments		$166,054		$166,054


(a)	Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $26.1 million in 2016, $29.9 million in 2015, and $29.2 million in 2014.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The leases expire in July 2017. Entergy Louisiana is required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt is equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that is recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6 million and $55.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%) that are recorded as long-term debt, as follows:



	Amount
	(In Thousands)

2017		$17,188
2018	17,188
2019	17,188
2020	17,188
2021	17,188
Years thereafter	257,812
Total	343,752
Less: Amount representing interest	309,393
Present value of net minimum lease payments		$34,359