UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |
X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
For the Quarterly Period Ended March 31, | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 | |
For the transition period from ____________ to ____________ |
| Registrant, State of Incorporation, Address of |
| Registrant, State of Incorporation, Address of | |
1-11299 | ENTERGY CORPORATION | 1-31508 | ENTERGY MISSISSIPPI, INC. | |
1-10764 | ENTERGY ARKANSAS, INC. | 0-5807 | ENTERGY NEW ORLEANS, INC. | |
| ENTERGY GULF STATES | 1-9067 | SYSTEM ENERGY RESOURCES, INC. | |
1-32718 | ENTERGY LOUISIANA, LLC | |||
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of "large accelerated filer," "accelerated filer," and large accelerated filer""smaller reporting company" in Rule 12b-2 of the Securities Exchange Act.Act of 1934.
Large |
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Entergy Corporation | Ö | ||||||
Entergy Arkansas, Inc. | Ö | ||||||
Entergy Gulf States | Ö | ||||||
Entergy Louisiana, LLC | Ö | ||||||
Entergy Mississippi, Inc. | Ö | ||||||
Entergy New Orleans, Inc. | Ö | ||||||
System Energy Resources, Inc. | Ö |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ
Outstanding at April 30, | ||
Entergy Corporation | ($0.01 par value) |
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Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Inc.Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2006,2007, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 20072008
Page Number | |||
Definitions | 1 | ||
Entergy Corporation and Subsidiaries | |||
Management's Financial Discussion and Analysis | |||
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Results of Operations | 6 | ||
Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Consolidated Statements of Income | 16 | ||
Consolidated Statements of Cash Flows | 18 | ||
Consolidated Balance Sheets | 20 | ||
Consolidated Statements of Retained Earnings, Comprehensive Income, and | 22 | ||
Selected Operating Results | 23 | ||
Notes to Financial Statements | 24 | ||
Part I. Item 4. Controls and Procedures |
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Entergy Arkansas, Inc. | |||
Management's Financial Discussion and Analysis | |||
Results of Operations |
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Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows | 47 | ||
Balance Sheets | 48 | ||
Selected Operating Results | 50 | ||
Entergy Gulf States | |||
Management's Financial Discussion and Analysis | |||
| 51 | ||
Results of Operations | 51 | ||
Liquidity and Capital Resources | 53 | ||
Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows |
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Balance Sheets |
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Statements of |
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Selected Operating Results |
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Entergy Louisiana, LLC | |||
Management's Financial Discussion and Analysis | |||
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Results of Operations |
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Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows |
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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 20072008
Page Number | |||
Balance Sheets | 72 | ||
Statements of Members' Equity and Comprehensive Income |
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Selected Operating Results |
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Entergy Mississippi, Inc. | |||
Management's Financial Discussion and Analysis | |||
Results of Operations |
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Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows |
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Balance Sheets |
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Selected Operating Results |
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Entergy New Orleans, Inc. | |||
Management's Financial Discussion and Analysis | |||
Hurricane Katrina |
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Results of Operations |
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Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows |
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Balance Sheets |
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Selected Operating Results |
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System Energy Resources, Inc. | |||
Management's Financial Discussion and Analysis | |||
Results of Operations |
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Liquidity and Capital Resources |
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Significant Factors and Known Trends |
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Critical Accounting Estimates |
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New Accounting Pronouncements |
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Income Statements |
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Statements of Cash Flows |
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Balance Sheets |
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Part II. Other Information | |||
Item 1. Legal Proceedings |
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Item 1A. Risk Factors |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 5. Other Information |
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Item 6. Exhibits |
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Signature |
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FORWARD-LOOKING INFORMATION
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "intends," "plans," "predicts" and "estimates""predicts," "estimates," and similar expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management's Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
FORWARD-LOOKING INFORMATION (Concluded)
FORWARD-LOOKING INFORMATION (Concluded)
DEFINITIONS
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym | Term |
AEEC | Arkansas Electric Energy Consumers |
AFUDC | Allowance for Funds Used During Construction |
ALJ | Administrative Law Judge |
ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas |
APSC | Arkansas Public Service Commission |
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Board | Board of Directors of Entergy Corporation |
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capacity factor | Actual plant output divided by maximum potential plant output for the period |
City Council or Council | Council of the City of New Orleans, Louisiana |
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Entergy | Entergy Corporation and its direct and indirect subsidiaries |
Entergy Corporation | Entergy Corporation, a Delaware corporation |
Entergy Gulf States, Inc. | Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas |
Entergy Gulf States Louisiana | Entergy Gulf States Louisiana, L.L.C., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. |
Entergy-Koch | Entergy-Koch, LP, a joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc. |
Entergy | Entergy |
EPA | United States Environmental Protection Agency |
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ERCOT | Electric Reliability Council of Texas |
FASB | Financial Accounting Standards Board |
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FERC | Federal Energy Regulatory Commission |
firm liquidated damages | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset); if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract |
Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, |
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Grand Gulf | Unit No. 1 of Grand Gulf Steam Electric Generating Station (nuclear), 90% owned or leased by System Energy |
GWh | Gigawatt-hour(s), which equals one million kilowatt-hours |
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Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power |
IRS | Internal Revenue Service |
ISO | Independent System Operator |
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kW | Kilowatt |
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DEFINITIONS(Continued)
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kWh | Kilowatt-hour(s) |
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LPSC | Louisiana Public Service Commission |
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MMBtu | One million British Thermal Units |
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DEFINITIONS (Continued)
MPSC | Mississippi Public Service Commission |
MW | Megawatt(s), which equals one thousand kilowatt(s) |
MWh | Megawatt-hour(s) |
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Net debt ratio | Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
Net MW in operation | Installed capacity owned |
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Non-Utility Nuclear | Entergy's business segment that owns and operates six nuclear power plants and sells electric power produced by those plants |
NRC | Nuclear Regulatory Commission |
NYPA | New York Power Authority |
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PPA | Purchased power agreement |
production cost | Cost in $/MMBtu associated with delivering gas, excluding the cost of the gas |
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PUCT | Public Utility Commission of Texas |
PUHCA 1935 | Public Utility Holding Company Act of 1935, as amended |
PUHCA 2005 | Public Utility Holding Company Act of 2005, which repealed PUHCA 1935, among other things |
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Registrant Subsidiaries | Entergy Arkansas, Inc., Entergy Gulf States |
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River Bend | River Bend Steam Electric Generating Station (nuclear), owned by Entergy Gulf States Louisiana |
SEC | Securities and Exchange Commission |
SFAS | Statement of Financial Accounting Standards as promulgated by the FASB |
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System Agreement | Agreement, effective January 1, 1983, as modified, among the |
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DEFINITIONS(Concluded)
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System Energy | System Energy Resources, Inc. |
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TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
unit-contingent | Transaction under which power is supplied from a specific generation asset; if the |
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Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf |
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Utility | Entergy's business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Utility operating companies | Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, |
Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana |
weather-adjusted usage | Electric usage excluding the |
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ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.
In addition to its two primary, reportable, operating segments, Entergy also operates the non-nuclear wholesale assets business. The non-nuclear wholesale assets business sells to wholesale customers the electric power produced by power plants that it owns while it focuses on improving performance and exploring sales or restructuring opportunities for its power plants.
Hurricane Katrina and Hurricane Rita
Plan to Pursue Separation of Non-Utility Nuclear
SeeIn November 2007, the Form 10-K forBoard approved a discussionplan to pursue a separation of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portionsNon-Utility Nuclear business from Entergy through a tax-free spin-off of the Utility's service territoryNon-Utility Nuclear business to Entergy shareholders. Enexus Energy Corporation, a wholly-owned subsidiary of Entergy and formerly referred to as SpinCo, will be a new, separate, and publicly-traded company. In addition, under the plan, Enexus and Entergy are expected to enter into a nuclear services business joint venture, EquaGen L.L.C., with 50% ownership by Enexus and 50% ownership by Entergy. The EquaGen board of members will be comprised of equal membership from both Entergy and Enexus.
Upon completion of the spin-off, Entergy Corporation's shareholders will own 100% of the common stock in Louisiana, Mississippi,both Enexus and Texas,Entergy. Entergy expects that Enexus' business will be substantially comprised of Non-Utility Nuclear's assets, including its six nuclear power plants, and Non-Utility Nuclear's power marketing operation. Entergy Corporation's remaining business will primarily be comprised of the effect of extensive flooding that resulted from levee breaks inUtility business. EquaGen is expected to operate the nuclear assets owned by Enexus. EquaGen is also expected to offer nuclear services to third parties, including decommissioning, plant relicensing, plant operations, and around the greater New Orleans area.ancillary services.
Entergy Nuclear Operations, Inc., the current NRC-licensed operator of the Non-Utility Nuclear plants, filed an application in July 2007 with the NRC seeking indirect transfer of control of the operating licenses for the six Non-Utility Nuclear power plants, and supplemented that application in December 2007 to incorporate the planned business separation. Entergy Nuclear Operations, Inc., which is expected to be wholly-owned by EquaGen, will remain the operator of the plants after the separation. Entergy Operations, Inc., the current NRC-licensed operator of Entergy's five Utility nuclear plants, will remain a wholly-owned subsidiary of Entergy and will continue to be the operator of the Utility nuclear plants. In the December 2007 supplement to the NRC application, Entergy Nuclear Operations, Inc. provided additional information regarding the spin-off transaction, organizational structure, technical and financial qualifications, and general corporate information. The NRC publish ed a notice in the Federal Register establishing a period for the public to submit a request for hearing or petition to intervene in a hearing proceeding. The NRC notice period expired on February 5, 2008 and two petitions to intervene in the hearing proceeding were filed before the deadline. Each of the petitions opposes the NRC's approval of the license transfer on various grounds, including contentions that the approval request is not adequately supported regarding the basis for the proposed structure, the adequacy of decommissioning funding, and the adequacy of financial qualifications. Entergy submitted answers to the petitions on March 31 and April 8, and the NRC or a presiding officer designated by the NRC will determine whether a hearing will be granted. If a hearing is granted, the NRC is expected to issue a procedural schedule providing for limited discovery, written testimony and a legislative-type hearing. Under the NRC's procedural rules for license transfer approvals, the NRC Staff will co ntinue to review the application, prepare a Safety Evaluation Report and issue an approval or denial without regard to whether a hearing request is pending or has reachedbeen granted. Thus, resolution of the hearing requests is not a prerequisite to obtaining the required NRC approval.
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On January 28, 2008, Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. requested approval from the Vermont Public Service Board for the indirect transfer of control, consent to pledge assets, issue guarantees and assign material contracts, amendment to certificate of public good, and replacement of guaranty and substitution of a credit support agreement for Vermont Yankee. Two Vermont utilities that buy power from Vermont Yankee, the regional planning commission for the area served by Vermont Yankee, a municipality in which the Vermont Yankee training center is located, the union that represents certain Vermont Yankee employees, and two unions that represent certain employees at the Pilgrim plant in Massachusetts petitioned to intervene. Entergy opposed intervention by the Pilgrim unions but did not object to the other intervention requests, and the Pilgrim unions' petition to intervene was denied. The Vermont Public Service Board adopted a procedural schedule that includes hearings in July 2008 and final briefing in August 2008.
On May 7, 2008, the Vermont governor vetoed legislation approved by the Vermont General Assembly in its 2008 session that would have required Entergy to fund, beyond current NRC requirements, the decommissioning trust fund for Vermont Yankee as a precondition to the Vermont Public Service Board's approval of the spin-off transaction. The legislation would have required a determination that Vermont Yankee's decommissioning trust fund and other funds and financial guarantees available solely for the purpose of decommissioning were adequate to pay for a complete and immediate decommissioning of Vermont Yankee as of the date of any acquisition of control, including Enexus Energy's acquisition of control of Vermont Yankee in connection with the spin-off transaction.
On January 28, 2008, Entergy Nuclear FitzPatrick, Entergy Nuclear Indian Point 2, Entergy Nuclear Indian Point 3, Entergy Nuclear Operations, Inc., and corporate affiliate NewCo (now named Enexus) filed a petition with the New York Public Service Commission (NYPSC) requesting a declaratory ruling regarding corporate reorganization or in the alternative an agreementorder approving the transaction and an order approving debt financing. Petitioners also requested confirmation that the corporate reorganization will not have an effect on Entergy Nuclear FitzPatrick's, Entergy Nuclear Indian Point 2's, Entergy Nuclear Indian Point 3's, and Entergy Nuclear Operations, Inc.'s status as lightly regulated entities in New York, given that they will continue to be competitive wholesale generators. The New York Attorney General has filed an objection to the separation of Enexus from Entergy and to the transfer of the FitzPatrick and the two Indian Point nuclear power plants, arguing that the debt ass ociated with one of its excess insurers underthe separation could threaten access to adequate financial resources for Enexus' nuclear power plants, that Entergy could potentially be able to terminate revenue sharing agreements with the New York Power Authority (NYPA), the entity from which Entergy will receive $69.5 million in settlementpurchased the FitzPatrick and Indian Point 3 nuclear power plants, and because the New York Attorney General believes Entergy must file an environmental impact statement assessing the proposed corporate restructuring. The Office of its Hurricane Katrina claim.the County Executive of Westchester County, New York and Riverkeeper, Inc. also filed comments on Entergy's petition. Entergy expects that $53.7 millionsubmitted a responsive filing to the NYPSC on April 29, 2008, responding to the comments filed by the New York Attorney General, the Office of this amountthe County Executive of Westchester County, New York, and Riverkeeper.
Pursuant to Federal Power Act Section 203, on February 21, 2008, an application was filed with the FERC requesting approval for the indirect disposition and transfer of control of jurisdictional facilities of a public utility. The review of the filing by the FERC will be focused on determining that the transaction will have no adverse effects on competition, wholesale or retail rates and on federal and state regulation. Also, the FERC will seek to determine that the transaction will not result in cross-subsidization by a regulated utility or the pledge or encumbrance of utility assets for the benefit of a non-utility associate company.Pursuant to the notice filed in the Federal Register, the LPSC filed comments raising an issue concerning cross-subsidization. On April 17, 2008, however, the LPSC withdrew its protest, which was the only one filed in the FERC proceeding, after a stipulation was entered between the LPSC, Enterg y Gulf States Louisiana, and Entergy Louisiana. In the stipulation, Entergy Gulf States Louisiana and Entergy Louisiana agree, among other things, that services to be provided by EquaGen to them will be provided at cost and the LPSC may subject Entergy Gulf States Louisiana and Entergy Louisiana to a disallowance to the extent the cost of such services exceed the market price at the time the services are rendered. Entergy Gulf States Louisiana and Entergy Louisiana also agree to provide to the LPSC annual reports related to services provided by EquaGen that are allocated to Entergy New Orleans.Louisiana and Entergy New Orleans submitted the agreementGulf States Louisiana.
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Subject to market terms and conditions and pursuant to the bankruptcy court, which approvedplan, Enexus is expected to incur up to $4.5 billion of debt in the agreement on April 25, 2007.form of publicly or privately issued debt securities. Entergy expects Enexus to transfer to Entergy up to approximately $4.0 billion in the form of either cash proceeds from the issuance of debt securities or a portion of such debt securities, or both, in partial consideration for Entergy's transfer to Enexus of the Non-Utility Nuclear business. Entergy expects to receive theuse Enexus debt securities to reduce or retire Entergy debt by exchanging Enexus debt with certain holders of Entergy debt, and also expects to use proceeds under the settlement agreement by the end of May 2007.
Community Development Block Grants (CDBG)
See the Form 10-Kfrom Enexus for a discussion of the Katrina Relief Bill, a hurricane aid package that includes $11.5 billion in Community Development Block Grants (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allows state and local leadersshare repurchases or other corporate purposes. The amount to fund individual recovery priorities.
In March 2007, the City Council certified that Entergy New Orleans has incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for the gas system rebuild. In April 2007, Entergy New Orleans executed an agreement with the Louisiana Office of Community Development under which $200 million of CDBG funds will be made available to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved it on April 25, 2007. Entergy New Orleans received $171.7 million of the funds on April 27, 2007, and the remainder will be paid to Entergy, New Orleans as it incursthe amount and submits additional eligible costs.term of the debt Enexus will incur, and the type of debt and entity that will incur the debt have not been finally determined, but will be determined prior to the separation. A number of factors could affect this final determination, and the amount of debt ultimately incurred could be different from the amount disclosed. Additionally, Entergy expects Enexus to enter into one or more credit facilities or other financing arrangements intended to support Enexus' working capital needs, collateral obligations, and other corporate needs arising from hedging and normal course of business requirements.
Entergy New Orleans Bankruptcygrants stock options to key employees under the Equity Ownership Plan, which is a shareholder-approved stock-based compensation plan. The Equity Ownership Plan includes provisions whereby the Personnel Committee of the Board can act, in the event of a corporate event such as a spin-off that potentially dilutes the value of the underlying stock of Entergy stock options held by employees, to preserve the current intrinsic value of stock option awards. Potential actions by the Personnel Committee could be to adjust the exercise price of the option and adjust the number of Entergy options held by employees or grant options in the stock of the subsidiary to be spun off (in this case Enexus Energy), or a combination of both, to prevent dilution in the total value of the options held by employees. If such action is taken and the Entergy Equity Ownership Plan is considered modified under the applicable accounting rules, Entergy may be required to recognize incremental compensation cost for the difference in the fair market value of the outstanding equity awards before and after any adjustment by the Board, which could be significant. The change in fair value would be recognized immediately for vested awards and over the remaining vesting period for unvested awards. The weighted average remaining vesting period for all unvested Entergy stock options is 1.8 years as of December 31, 2007. The amount of the incremental compensation cost, if it must be recognized, would be based upon a number of factors that are not yet known including, but not limited to, the number of shares that will be outstanding before and after any adjustment by the Board, the expected value of Entergy and Enexus Energy at or near the spin-off date, and the expected volatilities of Entergy stock, Enexus Energy stock, or both. Although the ultimate decision of the Personnel Committee, the factors noted above, and the required accounting are not yet known, the amount of expen se that Entergy could record in the future based upon outstanding equity awards and assumptions could be material to its financial results and financial position.
SeeEntergy is targeting around the Form 10-K for a discussionend of the Entergy New Orleans bankruptcy proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007.
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Following are significant terms in Entergy New Orleans' plan of reorganization:
Entergy New Orleans currently estimates that the prepetition claims that will be allowed and paid (either in cash or by notes) in the bankruptcy case will approximate the prepetition liabilities currently recorded by Entergy New Orleans, including interest.
With confirmationpursues completion of the planseparation and establishment of reorganization,EquaGen, Entergy expectswill continue to reconsolidate Entergy New Orleans inconsider possible modifications to and variations upon the second quarter 2007, retroactive to January 1, 2007. Because Entergy owns alltransaction structure, including a sponsored spin-off, a partial initial public offering preceding the spin-off, or the addition of the common stock of Entergy New Orleans, reconsolidation will not affect the amount of net income that Entergy records from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.a third-party joint venture partner.
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Results of Operations
Entergy New Orleans Bankruptcy
As a result of the effects of Hurricane Katrina and the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area, on September 23, 2005, Entergy New Orleans filed a voluntary petition in bankruptcy court seeking reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization, and the plan became effective on May 8, 2007. See the Form 10-K for a discussion of the significant terms of Entergy New Orleans' plan of reorganization.
With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans, retroactive to January 1, 2007. Because Entergy owns all of the common stock of Entergy New Orleans, reconsolidation does not affect the amount of net income that Entergy recorded from Entergy New Orleans' operations for the current or prior periods, but does result in Entergy New Orleans' financial results being included in each individual income statement line item in 2007, rather than only its net income being presented as "Equity in earnings of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.
Income Statement Variances
Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, and Entergy comparing the first quarter 20072008 to the first quarter 20062007 showing how much the line item increased or (decreased) in comparison to the prior period:
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| Non-Utility |
| Parent & Other (1) |
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2006 Consolidated Net Income |
| $119,752 |
| $81,530 |
| ($7,654) | $193,628 | |||||||||
2007 Consolidated Net Income |
| $104,450 |
| $128,170 |
| ($20,425) | $212,195 | |||||||||
Net revenue (operating revenue less fuel |
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Other operation and maintenance expenses |
| 26,208 | (3,459) | (11,210) | 11,539 |
| 11,975 | 34,637 | 279 | 46,891 | ||||||
Taxes other than income taxes |
| 6,680 | (1,270) | 4,161 | 9,571 |
| (14,498) | 5,087 | (4,701) | (14,112) | ||||||
Depreciation |
| 17,413 | 1,146 | 384 | 18,943 | |||||||||||
Depreciation and amortization |
| (975) | 13,459 | 91 | 12,575 | |||||||||||
Other income |
| 9,900 | (442) | 7,101 | 16,559 |
| (18,465) | 2,865 | (3,989) | (19,589) | ||||||
Interest charges |
| 5,848 | (5,163) | 10,080 | 10,765 |
| (5,472) | 4,504 | 5,526 | 4,558 | ||||||
Other expenses and discontinued operations |
| 1,058 | 2,112 | (2,238) | 932 | |||||||||||
Other expenses |
| 1,548 | 14,901 | - | 16,449 | |||||||||||
Income taxes |
| 2,207 | 31,819 | (8,303) | 25,723 |
| 3,551 | 40,238 | 3,149 | 46,938 | ||||||
2007 Consolidated Net Income |
| $104,450 |
| $128,170 |
| ($20,425) | $212,195 | |||||||||
2008 Consolidated Net Income |
| $117,147 |
| $221,697 |
| ($30,095) | $308,749 |
(1) | Parent & Other includes eliminations, which are primarily intersegment activity. |
Refer to "ENTERGY CORPORATION AND SUBSIDIARIES -SELECTED OPERATING RESULTS" for further information with respect to operating statistics.
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Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
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| |
|
| |
Fuel recovery |
|
|
Base revenues | 14.6 | |
Rider revenue | 9.4 | |
Purchased power capacity |
| |
Other |
|
|
|
| $ |
6
The volume/weather variance resulted primarily from increased electricity usage, including increased usage during the unbilled sales period and more favorable weather compared to the same period in 2006. Billed usage increased by a total of 1,015 GWh, an increase of 5%. See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.
The base revenues variance resulted from rate increases primarily at Entergy Louisiana effective September 2006 for the 2005 formula rate plan filing to recover LPSC-approved incremental deferred and ongoing purchased power capacity costs and for the interim recovery of storm costs. The formula rate plan filing is discussed in Note 2 to the financial statements in the Form 10-K.
The pass-through rider revenue variance is due to a change in 2006 in the accounting for city franchise tax revenues in Arkansas as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes, resulting in no effect on net income.
The net wholesale revenue variance is primarily due to decreased results from wholesale contracts and lower wholesale prices.
The base revenues variance is primarily due to the interim surcharge to collect $10 million in under-recovered incremental purchased capacity costs incurred through July 2007 in Texas. The surcharge was collected over a two-month period beginning February 2008. The incremental capacity recovery rider and PUCT approval is discussed in Note 2 to the financial statements in the Form 10-K. The variance is also due to a formula rate plan increase effective July 2007 at Entergy Mississippi.
The rider revenue variance is primarily due to an increase in the Attala power plant costs that are recovered through the power management rider at Entergy Mississippi. The net income effect of this recovery is limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes. The variance is also due to a storm damage rider that became effective in October 2007 at Entergy Mississippi. The establishment of this rider results in an increase in rider revenue and a corresponding increase in other operation and maintenance expense for the storm reserve with no impact on net income.
The purchased power capacity variance is due to higher capacity charges and new purchased power contracts that began in mid-2006. A portion of the variance is due to the amortization of deferred capacity costs and is offset in base revenues due to base rate increases implemented to recoverthe incremental deferred and ongoing purchased power capacity charges at Entergy Louisiana,costs recovered through the interim surcharge, as discussed above.
Non-Utility Nuclear
Net revenue increased for Non-Utility Nuclear from $422 million for the first quarter 2007 to $625 million for the first quarter 2008 primarily due to higher pricing in its contracts to sell power, partially offset by reducedadditional production as a resultresulting from the acquisition of a refuelingthe Palisades plant in April 2007, and fewer outage days. Palisades contributed $78 million of net revenue in the first quarter of 2007. There were no refueling outages2008. Included in the first quarterPalisades net revenue is $19 million of 2006.amortization of the Palisades purchased power agreement liability, which is discussed in Note 15 to the financial statements in the Form 10-K. Following are key performance measures for Non-Utility Nuclear for the first quarters of 2007quarter 2008 and 2006:2007:
| 2007 |
| 2006 | |
|
|
|
|
|
Net MW in operation at March 31 |
| 4,200 |
| 4,135 |
Average realized price per MWh |
| $55.11 |
| $44.28 |
GWh billed |
| 8,315 |
| 8,763 |
Capacity factor |
| 90.5% |
| 97.1% |
Parent & Other
Net revenue decreased for Parent & Other primarily due to lower production as a result of an additional plant outage in the first quarter 2007 compared to the same period in 2006.
7
| 2008 |
| 2007 | |
|
|
|
|
|
Net MW in operation at March 31 |
| 4,998 |
| 4,200 |
Average realized price per MWh |
| $61.47 |
| $55.11 |
GWh billed |
| 10,760 |
| 8,315 |
Capacity factor |
| 97% |
| 91% |
Refueling Outage Days: | ||||
Indian Point 2 | 7 | - | ||
Indian Point 3 | - | 24 |
Other Operation and Maintenance Expenses
Utility
Other operation and maintenance expenses increased from $359$408 million for the first quarter of 20062007 to $385$420 million for the first quarter of 20072008 primarily due to:
Parent & OtherNon-Utility Nuclear
Other operation and maintenance expenses decreasedincreased from $20$147 million for the first quarter of 20062007 to $9$182 million for the first quarter of 20072008 primarily due to restorationthe acquisition of the Palisades plant in April 2007. Other operation and maintenance expenses atassociated with the Harrison CountyPalisades plant incurredwere $29 million in the first quarter of 2006.2008.
Taxes Other than Income Taxes
UtilityTaxes other than income taxes decreased primarily due to the resolution in the first quarter 2008 of issues relating to tax exempt bonds in the Utility. Approximately half of the decrease related to resolution of this issue is at System Energy and has no effect on net income because System Energy also has a corresponding decrease in its net revenue.
Depreciation and Amortization
Depreciation and amortization expenses increased from $186 million for the first quarter of 2006 to $203 million for the first quarter of 2007 primarily due to an increase inthe acquisition by Non-Utility Nuclear of the Palisades plant in service.April 2007.
Other Expenses
Nuclear refueling outage expenses and decommissioning expense both increased primarily due to the acquisition by Non-Utility Nuclear of the Palisades plant in April 2007.
8
Other Income
Other income increased from $43 milliondecreased primarily due to a reduction in the allowance for equity funds used during construction in the Utility due to a revision in the first quarter of 20062007 related to $53 million forremoval costs. Also contributing to the first quarter of 2007 primarily due to carrying charges on storm costs.decrease were various other individually insignificant factors.
Income Taxes
The effective income tax rates for the first quarters of 2008 and 2007 were 38.1% and 2006 were 39.9% and 36.8%40.1%, respectively. The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2008 is primarily due to state income taxes and book and tax differences for utility plant items, partially offset by an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing New York state income taxes as required by that state's taxing authority. The difference in the effective income tax rate versus the statutory rate of 35% for the first quarter 2007 is primarily due to state income taxes and book and tax timing differences for utility plant items, and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction and the amortization of investment tax credits.
Liquidity and Capital Resources
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.
8
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage from 20062007 to 20072008 is primarily the result of additional borrowings under Entergy Corporation's revolving credit facilities, along with a decrease in shareholders' equity primarily due to an increase in accumulated other comprehensive loss and repurchases of common stock.stock, offset by an increase in retained earnings. The increase in accumulated other comprehensive loss is primarily due to derivative instrument fair value changes. See Note 1 (Derivative Financial Instruments and Commodity Derivatives)and Note 16 to the financial statements in the Form 10-K for additional discussion of the accounting treatment of derivative instruments. The increase in the debt to capital percentage is in line with Entergy's financial and risk management aspirations.
|
| March 31, |
| December 31, |
| March 31, |
| December 31, |
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 51.8% |
| 49.4% |
| 56.5% |
| 54.7% |
Effect of subtracting cash from debt |
| 2.9% |
| 2.9% |
| 2.1% |
| 2.9% |
Debt to capital |
| 54.7% |
| 52.3% |
| 58.6% |
| 57.6% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.
9
As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year$3.5 billion credit facility and a three-year credit facility. The five-year credit facilitythat expires in May 2010 and the three-year facility expires in December 2008.August 2012. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of both the three-year and the five-year credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities asfacility. As of March 31, 2007:2008, amounts outstanding under the credit facility are:
|
|
| Letters | Capacity | ||||
(In Millions) | ||||||||
5-Year Facility | $2,000 | $895 | $79 | $1,026 | ||||
3-Year Facility | $1,500 | $540 | $- | $960 |
|
| Letters | Capacity | |||
(In Millions) | ||||||
$3,500 | $2,476 | $71 | $953 |
See Note 4Entergy Corporation's credit facility requires it to the financial statements for additional discussionmaintain a consolidated debt ratio of Entergy's credit facilities, and see Part II, Item 5 for an update65% or less of its total capitalization. If Entergy fails to meet this ratio, or if Entergy or one of the borrowings outstanding asUtility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of May 8, 2007.the facility's maturity date may occur.
Capital Expenditure Plans and Other Uses of Capital
See the table and discussion in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," whichthat sets forth the amounts of planned construction and other capital investments by operating segment for 20072008 through 2009.2010. Following is an update to the discussion in the Form 10-K.
Little Gypsy Repowering Project
In April 2007, Entergy's Non-Utility Nuclear business purchasedThe preconstruction and operating air permits for the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a cash payment of $380 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds of approximately $250 million, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executed a unit contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. Also as part of the transaction, Consumers Energy paid Entergy's Non-Utility Nuclear business $30 million to assume responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan.
9
In April 2007, Entergy Louisiana announced that it plans to pursue the self-build solid fuel repowering of a 538MW unit at its Little Gypsy plant. Petroleum coke will berepowering project was issued by the unit's primary fuel source. Entergy Louisiana expects to spend $1.02 billion onDepartment of Environmental Quality (LDEQ) in November 2007 under then-effective federal and state air regulations, including the project,EPA's Clean Air Mercury Rule that had been issued in 2005 (CAMR 2005). As discussed in more detail in part I, Item 1, "Environmental Regulation, Clean Air Act and expects the project to be completed in 2011-2012.The planned capital investment estimateSubsequent Amendments, Hazardous Air Pollutants" in the Form 10-K, includedin February 2008 the capitalU.S. Court of Appeals for the D.C. Circuit struck down CAMR 2005. The D.C. Circuit decision may require utilities to undergo a case-by-case Maximum Achievable Control Technology (MACT) analysis for construction or reconstruction of emission units pursuant to the Clean Air Act before beginning construction. The Little Gypsy project as currently configured is expected to meet MACT standards. Because Little Gypsy received its construction permit before a formal MACT analysis was required, however, Enter gy Louisiana will likely need to provide additional technical analysis to the LDEQ to show that the plant meets the MACT standards. Entergy Louisiana is in discussions with state and federal environmental agencies to identify the additional analysis that needs to be submitted. Onsite construction of the project was scheduled to begin in July 2008, but the additional analysis could cause a delay in the start of construction for several months. The ALJ in Phase II of the Little Gypsy proceedings at the LPSC, which are discussed further in the Form 10-K, has temporarily suspended the procedural schedule, subject to the LPSC's review, which could occur at its May 14, 2008 meeting.
Sources of Capital
The short-term borrowings of the Registrant Subsidiaries and certain other Entergy subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2010, as established by a projectFERC order issued March 31, 2008 (except for Entergy Gulf States Louisiana and Entergy Texas, which are effective through November 8, 2009, as established by an earlier FERC order). See Note 4 to the financial statements for further discussion of this type.Entergy's short-term borrowing limits.
10
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses. Entergy has pursued a broad range of initiatives to recover storm restoration and business continuity costs, including obtaining reimbursement of certain costs covered by insurance and pursuing recovery through existing or new rate mechanisms regulated by the FERC and local regulatory bodies, including the issuance of securitization or bonds. See Note 2 to the financial statements herein for an update regarding Entergy Gulf States Louisiana's and Entergy Louisiana's storm cost financing efforts. Following is an update regarding Entergy's insurance claims.
Debtor-in-Possession Credit AgreementInsurance Claims
See Note 8 to the financial statements in the Form 10-K for a discussion of Entergy's conventional property insurance program and its Hurricane Katrina and Hurricane Rita claims. In April 2008, Entergy received from its primary insurer $53.6 million of additional insurance proceeds on its Hurricane Katrina claim, and all of the April 2008 proceeds were allocated to Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. As of March 31, 2007, Entergy New Orleans had $42 million of outstanding borrowings under the DIP credit agreement. During April 2007, at the same time that it made a scheduled pension plan contribution, Entergy New Orleans borrowed under the DIP credit agreement, and on May 8, 2007 had $67 million of outstanding borrowings under the DIP credit agreement.Orleans.
Cash Flow Activity
As shown in Entergy's Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Millions) |
|
| (In Millions) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $1,016 |
| $583 | Cash and cash equivalents at beginning of period |
| $1,254 |
| $1,016 |
|
|
|
|
|
|
|
|
|
|
|
Effect of reconsolidating Entergy New Orleans | Effect of reconsolidating Entergy New Orleans | - | 17 | |||||||
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 476 |
| 1,012 | Operating activities |
| 448 |
| 493 |
| Investing activities |
| (253) |
| (859) | Investing activities |
| (588) |
| (267) |
| Financing activities |
| (159) |
| 16 | Financing activities |
| (198) |
| (159) |
Net increase in cash and cash equivalents |
| 64 |
| 169 | ||||||
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents |
| (338) |
| 67 | |||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $1,080 |
| $752 | Cash and cash equivalents at end of period |
| $916 |
| $1,100 |
Operating Activities
Entergy's cash flow provided by operating activities decreased by $536$45 million for the three months ended March 31, 20072008 compared to the three months ended March 31, 2006.2007. Following are cash flows from operating activities by segment:
10
11
Investing Activities
Net cash used in investing activities decreasedincreased by $606$321 million for the three months ended March 31, 20072008 compared to the three months ended March 31, 20062007 primarily due to the following activity:
Financing Activities
FinancingNet cash used in financing activities used $159increased by $39 million of cash for the three months ended March 31, 20072008 compared to providing $16 million of cash for the three months ended March 31, 2006 primarily due to the2007. The following activity:
This activity was offset by Entergy Corporation increasingincreased the net borrowings under its credit facilities by $225 million in the first quarter 2008 and by $615 million in the first quarter 2007, compared to increasing the net borrowings under its credit facilities by $20 million in the first quarter 2006.2007. See Note 4 to the financial statements for a description of the Entergy Corporation credit facilities.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for discussions of rate regulation, federal regulation, and market and credit risk sensitive instruments. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
See the Form 10-K for a chart summarizing material rate proceedings. See Note 2 to the financial statements herein for updates to the proceedings discussed in that chart.
Federal Regulation
See the Form 10-K for a discussion of federal regulatory proceedings. Following are updates to that discussion.
System Agreement Proceedings
DuringProduction Cost Equalization Proceeding Commenced by the LPSC
See the Form 10-K for a discussion of the June 2005 FERC decision in the System Agreement litigation that had been commenced by the LPSC, which was essentially affirmed in the FERC's decision in a December 2005 order on rehearing. The LPSC, APSC, MPSC, and the
12
AEEC appealed the FERC's decision to the United States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC's decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the proceeding to offer a reasoned explanation regarding these issues.
Rough Production Cost Equalization Rates
See the Form 10-K for a discussion of the proceeding in which Entergy filed the rates to implement the FERC's orders in the production cost equalization proceeding. Intervenor cross-answering testimony was filed during March and April 2007,2008, in which the intervenors and FERC Staff advocate a number of positions on issues that affect the level of production costs the individual Utility operating companies made four separate filings with the FERC proposing modifications to the formula used to calculate the rough production cost equalization payments/receipts. The proposed modifications will (1) continueare permitted to reflect in the bandwidth calculation, including the resultslevel of depreciation and decommissioning expense for nuclear facilities. The effect of the Utility operating companies' gas hedging program for boiler fuel; (2) confirm the allocation of an individual Utility operating company's bandwidth payment/receiptvarious positions would be to its wholesale loads, if any, and establish the allocation between retail jurisdictions in the case of Entergy Louisiana and Entergy Gulf States that provide retail service to customers in two separate jurisdictions; (3) modify the basis for functionalizing certain categories ofreallocate costs among the Utility operating companiescompanies. Additionally, the APSC, while not taking a position on whether Entergy Arkansas was imprudent for not exercising its right of first refusal to repurchase a portion of the Independence plant in 1996 and 1997 as alleged by the LPSC, alleges that if the FERC finds Entergy Arkansas to be consistent withimprud ent for not exercising this option, the FERC should disallow recovery from customers by Entergy of approximately $43 million of increased costs. On April 28, 2008 the Utility operating companies filed rebuttal testimony refuting the allegations of imprudence concerning the decision not to acquire the portion of the Independence plant, explaining why the bandwidth payments are properly recoverable under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other service schedulesissues should be rejected. A hearing is scheduled to commence in this proceeding on June 17, 2008, however, on May 6, 2008 the LPSC filed a motion requesting the opportunity to present additional evidence at the hearing or, in the System Agreement;alternative, that the hearing be delayed until August 5, 2008 and (4) properly reflect in the calculation property under capital lease. LPSC be permitted to submit additional written testimony prior to the hearing..
The Utility operating comp anies have requestedintervenor AmerenUE has argued that all four
11
filings be allowedits current wholesale power contract with Entergy Arkansas, pursuant to become effective no later than May 29, 2007 so that they can be reflected in the calculationwhich Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas' bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the first payments/receipts.2007 Entergy Arkansas bandwidth payment. The APSC, LPSC, MPSC, City Council, and the AEEC have each intervened andAmerenUE contract is scheduled to expire in some instances protested one or more of these four filings. Separately, onAugust 2009. In April 3, 2007, the LPSC2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in which it seeks to havethe event the FERC order the following modifications to the rough production costs equalization calculation: (1) elimination of interruptible loads from the methodology used to allocate demand-related capacity costs; and (2) change of the method used to re-price energy from the Vidalia hydroelectric project for purposes of calculating production cost disparities. Entergy has filed an intervention and protest in this proceeding.
In conjunction with the recent application of Entergy Gulf States and Calcasieu Power, LLC seeking FERC approval of Entergy Gulf States' acquisition of the Calcasieu Generating Facility, the Utility operating companies filed a Petition for Declaratory Order requestingultimately determines that the FERC find either (1) that in those circumstances where a resource to be acquired or constructed has been determined by Entergy's Operating Committee to be a resource devoted to serving Entergy System load and has been approved by the applicable retail regulator, the cost of such resource shall be reflected in the production cost disparity calculation; or (2) that Entergy Gulf States' acquisition of the Calcasieu facility is prudent and the costsbandwidth payments are not properly reflected in the production cost disparity calculation. The APSC, LPSC, MPSC, City Council, NRG, Occidental, LEUG, AEEC, and EPSA have intervened in the proceeding, with the APSC, LPSC, and City Council filing protests.
On April 3, 2007, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC's appeal of the FERC's March 2004 and April 2005 orders related to the treatmentrecovered under the System Agreement of the Utility operating companies' interruptible loads. In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the matter to the FERC for a more considered determination on the issue of refunds.
On April 27, 2007, the FERC denied the requests for rehearing filed regarding the Utility operating companies' compliance filing to implement the System Agreement decision, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed in the previous paragraph.AmerenUE contract.
Independent Coordinator of Transmission (ICT)
As discussed in the Form 10-K, inIn the FERC's April 2006 order approvingthat approved Entergy's ICT proposal, the FERC stated that the weekly procurement process (WPP) must be operational within approximately 14 months of the FERC order, or June 24, 2007, or the FERC may reevaluate all approvals to proceed with the ICT. The Utility operating companies have been working with the ICT and a software vendor to develop the software and systems necessary to implement the WPP and currently expect that the WPP will commence operations on June 18, 2007. The software and systems are still being developed and tested, however. Entergy will notify the FERC as soon as practicable if it and the ICT determine that the June 24, 2007 deadline for implementing the WPP cannot be met.WPP. The Utility operating companies also filed with the FERC onin April 24, 2007 a request to make certain corrections and limited modifications to the current WPP tariff provisions and requested that the F ERC allow these proposed changes to go into effect no later than June 18, 2007. Additionally, Entergy Gulf States and Entergy Louisiana are required to fileprovisions. The Utility operating companies have filed status reports with the LPSC a compliance filing for reviewFERC notifying the FERC that, due to unexpected issues with the development of the model to be used inWPP software and testing, the WPP prioris still not operational. The Utility operating companies filed a revised tariff with the FERC on January 31, 2008 to receiving final approval for implementationaddress issues identified during the testing of the WPP. The Utility operating companies currently expect to submit the required compliance filing during May 2007.
Available Flowgate Capacity (AFC) Proceeding
In accordance with the provisions of the FERC order approving the ICT, during the first quarter 2007 the Utility operating companies notified the FERC, the ICT, and the stakeholders that certain instances had been identified in which software errors related to the AFC process had resulted in the reporting of inaccurate data. Following the reporting of the initial errors, certain market participants urgedco mpanies requested the FERC to move forward withrule on the proposed amendments by April 30, 2008 and allow them to go into effect May 11, 2008, following which the WPP would be expected to become operational. In May 2008, the FERC determined it would be premature to implement the WPP on May 11, 2008 as the WPP has not been shown to be just and reasonable. Accordingly, the FERC conditionally accepted and suspended Entergy's proposed tariff amendments for five months from the requested effective date, to become effective October 11, 2008, or on an earlier date, subject to refund and subject to a further order on proposed tariff revisions directed to be filed in the order.
1213
The FERC stated that it will consider allowing an effective date earlier than October 11, 2008, if the AFC hearing process in light of those errors. In April 2007,ICT agrees that the model is ready and Entergy files the required tariff revisions no later than 60 days before that date. The FERC issued an order terminatingalso denied the AFC hearing, now that Entergy's ICT has been installed. Requestsrequests for rehearing ofa technical conference at this time and indicated it will reassess the FERC order cancelingneed for such a technical conference after the AFC hearing are due in May 2007.WPP is functioning.
Market and Credit Risk Sensitive Instruments
Commodity Price Risk
Power Generation
As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business, unless otherwise contracted, is subject to the variabilityfluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward as of March 31, 20072008 under physical or financial contracts (2007(2008 represents the remaining three quarters of the year):
2008 | 2009 | 2010 | 2011 | 2012 | |||||||
Non-Utility Nuclear: | |||||||||||
Percent of planned generation sold forward: | |||||||||||
Unit-contingent | 49% | 48% | 31% | 29% | 16% | ||||||
Unit-contingent with availability guarantees (1) | 38% | 35% | 28% | 14% | 7% | ||||||
Firm liquidated damages | 5% | 0% | 0% | 0% | 0% | ||||||
Total | 92% | 83% | 59% | 43% | 23% | ||||||
Planned generation (TWh) | 31 | 41 | 40 | 41 | 41 | ||||||
Average contracted price per MWh (2) | $54 | $61 | $58 | $55 | $51 |
2007 | 2008 | 2009 | 2010 | 2011 | |||||||
Non-Utility Nuclear (including Palisades acquisition): | |||||||||||
Percent of planned generation sold forward: | |||||||||||
Unit-contingent | 44% | 48% | 38% | 25% | 23% | ||||||
Unit-contingent with availability guarantees (1) | 45% | 36% | 28% | 22% | 7% | ||||||
Firm liquidated damages | 6% | 4% | 0% | 0% | 0% | ||||||
Total | 95% | 88% | 66% | 47% | 30% | ||||||
Planned generation (TWh) | 30 | 41 | 41 | 41 | 42 | ||||||
Average contracted price per MWh | $48 | $54 | $57 | $53 | $47 |
(1) | A sale of power on a |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far and is not expected in the foreseeable future. |
The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy the power produced by the plant through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly if power market prices drop below PPA prices, which has not happened thus far and is not expected in the foreseeable future.
See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants. Non-Utility Nuclear calculated that nothing was owed to NYPA under the value sharing agreements for 2005. On November 1, 2006, NYPA filed a demand for arbitration claiming that $90.5 million was due to NYPA under these agreements for 2005. Non-Utility Nuclear filed a motion in New York state court to determine whether NYPA's claim should be decided by a court as opposed to an arbitrator. In February 2007, the court issued an order denying Non-Utility Nuclear's request, and NYPA's claim is now in binding arbitration. Non-Utility Nuclear has also calculated that nothing was owed to NYPA under the value sharing agreements for 2006. On April 24, 2007, NYPA filed an amended demand for arbitration claiming that an additional $54 million was due to NYPA under the value sharing agreements for 2006. With respect to bot h of these claims, Non-Utility Nuclear disagrees with NYPA's interpretation of the value sharing agreements, believes it has meritorious defenses to NYPA's claims, and intends to defend against those claims vigorously.
Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary form of
13
collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At March 31, 2007,2008, based on power prices at that time, Entergy had in place as collateral $797$899 million of Entergy Corporation guarantees for wholesale transactions, including $73$63 million of guarantees that support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount of up to $297$328 million if gas prices increase $1 per MMBtu in both the short-shor t- and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.
In addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business'
14
planned generation output and installed capacity that is currently sold forward as of March 31, 2007 (20072008 (2008 represents the remaining three quarters of the year):
2007 | 2008 | 2009 | 2010 | 2011 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||
Non-Utility Nuclear (including Palisades acquisition): | ||||||||||||||||||||||
Non-Utility Nuclear: | Non-Utility Nuclear: | |||||||||||||||||||||
Percent of capacity sold forward: | Percent of capacity sold forward: | Percent of capacity sold forward: | ||||||||||||||||||||
Bundled capacity and energy contracts | 23% | 27% | 27% | 27% | 26% | Bundled capacity and energy contracts | 26% | 27% | 26% | 27% | 19% | |||||||||||
Capacity contracts | 63% | 39% | 26% | 9% | 3% | Capacity contracts | 63% | 38% | 31% | 15% | 2% | |||||||||||
Total | 86% | 66% | 53% | 36% | 29% | Total | 89% | 65% | 57% | 42% | 21% | |||||||||||
Planned net MW in operation | Planned net MW in operation | 4,998 | 4,998 | 4,998 | 4,998 | 4,998 | Planned net MW in operation | 4,998 | 4,998 | 4,998 | 4,998 | 4,998 | ||||||||||
Average capacity contract price per kW per month | Average capacity contract price per kW per month | $1.7 | $1.4 | $1.3 | $1.7 | $2.0 | Average capacity contract price per kW per month | $2.0 | $2.0 | $3.4 | $3.7 | $3.5 | ||||||||||
Blended Capacity and Energy (based on revenues) | Blended Capacity and Energy (based on revenues) | Blended Capacity and Energy (based on revenues) | ||||||||||||||||||||
% of planned generation and capacity sold forward | % of planned generation and capacity sold forward | 92% | 83% | 60% | 39% | 22% | % of planned generation and capacity sold forward | 88% | 78% | 52% | 35% | 16% | ||||||||||
Average contract revenue per MWh | Average contract revenue per MWh | $49 | $54 | $58 | $54 | $47 | Average contract revenue per MWh | $56 | $62 | $61 | $57 | $52 |
As of March 31, 2007,2008, approximately 98%96% of Non-Utility Nuclear's counterparty exposure from energy and capacity contracts is with counterparties with public investment grade credit ratings.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
TheIn March 2008 the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option161 "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161), which requires enhanced disclosures about an entity's derivative and hedging activities. SFAS 161 requires qualitative disclosures about objectives and strategies for Financial Assets and Financial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an option for companies to select certain financial assets and liabilities to be accounted for atusing derivatives, quantitative disclosures about fair value with changesamounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in the fair value of those assets or liabilities being reported through earnings. The intent of the standardderivative agreements. SFAS 161 is to mitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies can select existing assets or liabilitieseffective for this fair value option concurrent with the effective date of January 1, 2008financial statements issued for companies with fiscal years ending December 31 or can select future assets or liabilities as they are acquired or entered into. Entergy is in the process of evaluating the potential effect of making this accounting election.and interim periods beginning after November 15, 2008.
In June 2006, the EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) basis is an15
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
For the Three Months Ended March 31, 2008 and 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands, Except Share Data) | ||||
OPERATING REVENUES | ||||
Electric | $2,046,227 | $2,111,460 | ||
Natural gas | 89,395 | 84,951 | ||
Competitive businesses | 729,112 | 497,649 | ||
TOTAL | 2,864,734 | 2,694,060 | ||
OPERATING EXPENSES | ||||
Operating and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 540,501 | 787,412 | ||
Purchased power | 620,642 | 444,239 | ||
Nuclear refueling outage expenses | 51,258 | 42,975 | ||
Other operation and maintenance | 611,268 | 564,377 | ||
Decommissioning | 45,996 | 37,830 | ||
Taxes other than income taxes | 108,571 | 122,683 | ||
Depreciation and amortization | 244,985 | 232,410 | ||
Other regulatory charges | 35,280 | 23,540 | ||
TOTAL | 2,258,501 | 2,255,466 | ||
OPERATING INCOME | 606,233 | 438,594 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 9,286 | 17,258 | ||
Interest and dividend income | 54,282 | 57,110 | ||
Equity in earnings (loss) of unconsolidated equity affiliates | (929) | 1,624 | ||
Miscellaneous - net | (11,556) | (5,320) | ||
TOTAL | 51,083 | 70,672 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 123,144 | 123,099 | ||
Other interest - net | 32,538 | 32,215 | ||
Allowance for borrowed funds used during construction | (5,116) | (10,529) | ||
Preferred dividend requirements and other | 4,998 | 6,221 | ||
TOTAL | 155,564 | 151,006 | ||
INCOME BEFORE INCOME TAXES | 501,752 | 358,260 | ||
Income taxes | 193,003 | 146,065 | ||
CONSOLIDATED NET INCOME | $308,749 | $212,195 | ||
Earnings per average common share: | ||||
Basic | $1.60 | $1.06 | ||
Diluted | $1.56 | $1.03 | ||
Dividends declared per common share | $0.75 | $0.54 | ||
Basic average number of common shares outstanding | 192,639,605 | 200,549,935 | ||
Diluted average number of common shares outstanding | 198,300,041 | 206,133,440 | ||
See Notes to Financial Statements. | ||||
1416
accounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of those taxes in interim and annual financial statements, for each period for which an income statement is presented, should be disclosed if those amounts are significant. Entergy's policy is to present such taxes on a net basis. EITF 06-3 did not affect Entergy's financial statements.
15
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
For the Three Months Ended March 31, 2007 and 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands, Except Share Data) | ||||
OPERATING REVENUES | ||||
Electric | $2,064,653 | $2,092,933 | ||
Natural gas | 37,928 | 37,415 | ||
Competitive businesses | 497,649 | 437,683 | ||
TOTAL | 2,600,230 | 2,568,031 | ||
OPERATING EXPENSES | ||||
Operating and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 709,981 | 840,171 | ||
Purchased power | 477,753 | 461,370 | ||
Nuclear refueling outage expenses | 42,975 | 41,993 | ||
Other operation and maintenance | 540,969 | 529,430 | ||
Decommissioning | 37,785 | 35,596 | ||
Taxes other than income taxes | 112,909 | 103,338 | ||
Depreciation and amortization | 224,331 | 205,388 | ||
Other regulatory charges (credits) - net | 22,507 | (44,018) | ||
TOTAL | 2,169,210 | 2,173,268 | ||
OPERATING INCOME | 431,020 | 394,763 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 16,067 | 15,459 | ||
Interest and dividend income | 57,768 | 43,831 | ||
Equity in earnings of unconsolidated equity affiliates | 4,534 | 3,586 | ||
Miscellaneous - net | (5,141) | (6,207) | ||
TOTAL | 73,228 | 56,669 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 119,854 | 120,481 | ||
Other interest - net | 31,297 | 17,261 | ||
Allowance for borrowed funds used during construction | (9,631) | (9,045) | ||
Preferred dividend requirements and other | 5,980 | 8,038 | ||
TOTAL | 147,500 | 136,735 | ||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 356,748 | 314,697 | ||
Income taxes | 144,553 | 118,830 | ||
INCOME FROM CONTINUING OPERATIONS | 212,195 | 195,867 | ||
LOSS FROM DISCONTINUED OPERATIONS (net of income tax | ||||
benefit of ($1,204)) | - | (2,239) | ||
CONSOLIDATED NET INCOME | $212,195 | $193,628 | ||
Basic earnings (loss) per average common share: | ||||
Continuing operations | $1.06 | $0.94 | ||
Discontinued operations | - | ($0.01) | ||
Basic earnings per average common share | $1.06 | $0.93 | ||
Diluted earnings (loss) per average common share: | ||||
Continuing operations | $1.03 | $0.93 | ||
Discontinued operations | - | ($0.01) | ||
Diluted earnings per average common share | $1.03 | $0.92 | ||
Dividends declared per common share | $0.54 | $0.54 | ||
Basic average number of common shares outstanding | 200,549,935 | 207,732,341 | ||
Diluted average number of common shares outstanding | 206,133,440 | 211,374,512 | ||
See Notes to Financial Statements. |
16
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17
ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING ACTIVITIES | ||||||||
Consolidated net income | $212,195 | $193,628 | $308,749 | $212,195 | ||||
Adjustments to reconcile consolidated net income to net cash flow | ||||||||
provided by operating activities: | ||||||||
Reserve for regulatory adjustments | 10,931 | 42,162 | (2,909) | 10,939 | ||||
Other regulatory charges (credits) - net | 22,507 | (44,018) | ||||||
Other regulatory charges | 35,280 | 23,540 | ||||||
Depreciation, amortization, and decommissioning | 262,117 | 241,807 | 290,981 | 270,240 | ||||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 368,709 | 370,774 | 97,984 | 384,324 | ||||
Equity in earnings of unconsolidated equity affiliates - net of dividends | (4,534) | (1,412) | 929 | (1,624) | ||||
Changes in working capital: | ||||||||
Receivables | 63,874 | 328,019 | (9,374) | 66,142 | ||||
Fuel inventory | (4,648) | (28,607) | (22,665) | 194 | ||||
Accounts payable | (288,421) | (256,420) | 9,522 | (282,247) | ||||
Taxes accrued | (187,324) | 35,968 | - | (189,411) | ||||
Interest accrued | (20,827) | (16,861) | (34,238) | (22,204) | ||||
Deferred fuel | 151,853 | 199,619 | (195,650) | 154,060 | ||||
Other working capital accounts | (110,493) | 140,795 | (181,401) | (107,080) | ||||
Provision for estimated losses and reserves | (15,918) | 15,029 | 4,034 | (16,602) | ||||
Changes in other regulatory assets | 68,790 | (75,674) | 40,569 | 68,720 | ||||
Other | (52,702) | (132,294) | 106,359 | (77,868) | ||||
Net cash flow provided by operating activities | 476,109 | 1,012,515 | 448,170 | 493,318 | ||||
INVESTING ACTIVITIES | ||||||||
Construction/capital expenditures | (284,731) | (664,178) | (373,317) | (302,567) | ||||
Allowance for equity funds used during construction | 16,067 | 15,459 | 9,286 | 17,258 | ||||
Nuclear fuel purchases | (184,806) | (91,027) | (170,381) | (184,806) | ||||
Proceeds from sale/leaseback of nuclear fuel | 114,486 | 8,827 | 112,700 | 114,486 | ||||
Proceeds from sale of assets and businesses | 2,617 | - | - | 12,663 | ||||
Payment for purchase of plant | - | (88,199) | (56,409) | - | ||||
Collections remitted to transition charge account | (8,352) | - | ||||||
NYPA value sharing payment | (72,000) | - | ||||||
Decrease in other investments | 113,027 | 12,340 | 7,974 | 105,923 | ||||
Proceeds from nuclear decommissioning trust fund sales | 160,007 | 283,874 | 257,718 | 160,007 | ||||
Investment in nuclear decommissioning trust funds | (189,536) | (312,417) | (294,840) | (189,536) | ||||
Other regulatory investments | - | (23,448) | ||||||
Net cash flow used in investing activities | (252,869) | (858,769) | (587,621) | (266,572) | ||||
See Notes to Financial Statements. | ||||||||
18 | 18 | 18 | ||||||
ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from the issuance of: | ||||||||
Long-term debt | 820,016 | 748,584 | 545,000 | 819,998 | ||||
Preferred stock | - | 73,354 | ||||||
Common stock and treasury stock | 30,889 | 11,805 | 4,670 | 30,889 | ||||
Retirement of long-term debt | (334,873) | (655,649) | (438,227) | (334,873) | ||||
Repurchase of common stock | (558,186) | - | (158,182) | (558,186) | ||||
Redemption of preferred stock | (2,250) | (2,250) | - | (2,250) | ||||
Changes in credit line borrowings - net | - | (40,000) | ||||||
Dividends paid: | ||||||||
Common stock | (108,967) | (112,190) | (144,579) | (108,967) | ||||
Preferred stock | (5,987) | (7,661) | (7,270) | (6,079) | ||||
Net cash flow provided by (used in) financing activities | (159,358) | 15,993 | ||||||
Net cash flow used in financing activities | (198,588) | (159,468) | ||||||
Effect of exchange rates on cash and cash equivalents | (11) | (173) | 17 | (11) | ||||
Net increase in cash and cash equivalents | 63,871 | 169,566 | ||||||
Net increase (decrease) in cash and cash equivalents | (338,022) | 67,267 | ||||||
Cash and cash equivalents at beginning of period | 1,016,152 | 582,820 | 1,253,728 | 1,016,152 | ||||
Effect of the reconsolidation of Entergy New Orleans on cash and cash equivalents | - | 17,093 | ||||||
Cash and cash equivalents at end of period | $1,080,023 | $752,386 | $915,706 | $1,100,512 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid/(received) during the period for: | ||||||||
Cash paid during the period for: | ||||||||
Interest - net of amount capitalized | $165,856 | $146,429 | $183,787 | $153,913 | ||||
Income taxes | $31,433 | ($345,366) | $2,157 | $31,433 | ||||
See Notes to Financial Statements. | ||||||||
19
ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | ||||||
ASSETS | ASSETS | ASSETS | ||||||
March 31, 2007 and December 31, 2006 | ||||||||
March 31, 2008 and December 31, 2007 | March 31, 2008 and December 31, 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents: | ||||||||
Cash | $113,975 | $117,379 | $170,711 | $126,652 | ||||
Temporary cash investments - at cost, | ||||||||
which approximates market | 966,048 | 898,773 | 744,995 | 1,127,076 | ||||
Total cash and cash equivalents | 1,080,023 | 1,016,152 | 915,706 | 1,253,728 | ||||
Note receivable - Entergy New Orleans DIP loan | 42,026 | 51,934 | ||||||
Securitization recovery trust account | 27,625 | 19,273 | ||||||
Notes receivable | 614 | 699 | - - | 161 | ||||
Accounts receivable: | ||||||||
Customer | 405,416 | 410,512 | 655,055 | 610,724 | ||||
Allowance for doubtful accounts | (19,386) | (19,348) | (21,329) | (25,789) | ||||
Other | 446,710 | 487,264 | 302,816 | 303,060 | ||||
Accrued unbilled revenues | 230,980 | 249,165 | 248,898 | 288,076 | ||||
Total receivables | 1,063,720 | 1,127,593 | ||||||
Total accounts receivable | 1,185,440 | 1,176,071 | ||||||
Deferred fuel costs | 140,702 | - | ||||||
Accumulated deferred income taxes | 19,533 | 11,680 | 12,976 | 38,117 | ||||
Fuel inventory - at average cost | 197,746 | 193,098 | 231,249 | 208,584 | ||||
Materials and supplies - at average cost | 616,893 | 604,998 | 704,406 | 692,376 | ||||
Deferred nuclear refueling outage costs | 144,176 | 147,521 | 188,281 | 172,936 | ||||
System agreement cost equalization | 268,000 | 268,000 | ||||||
Prepayments and other | 131,377 | 171,759 | 271,861 | 129,001 | ||||
TOTAL | 3,296,108 | 3,325,434 | 3,946,246 | 3,958,247 | ||||
OTHER PROPERTY AND INVESTMENTS | ||||||||
Investment in affiliates - at equity | 233,520 | 229,089 | 76,247 | 78,992 | ||||
Decommissioning trust funds | 2,905,580 | 2,858,523 | 3,219,238 | 3,307,636 | ||||
Non-utility property - at cost (less accumulated depreciation) | 210,285 | 212,726 | 225,021 | 220,204 | ||||
Other | 41,777 | 47,115 | 74,487 | 82,563 | ||||
TOTAL | 3,391,162 | 3,347,453 | 3,594,993 | 3,689,395 | ||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
Electric | 30,950,535 | 30,713,284 | 33,416,118 | 32,959,022 | ||||
Property under capital lease | 729,443 | 730,182 | 739,073 | 740,095 | ||||
Natural gas | 94,785 | 92,787 | 305,002 | 300,767 | ||||
Construction work in progress | 778,900 | 786,147 | 981,999 | 1,054,833 | ||||
Nuclear fuel under capital lease | 222,203 | 269,485 | 417,178 | 361,502 | ||||
Nuclear fuel | 646,191 | 561,291 | 641,506 | 665,620 | ||||
TOTAL PROPERTY, PLANT AND EQUIPMENT | 33,422,057 | 33,153,176 | 36,500,876 | 36,081,839 | ||||
Less - accumulated depreciation and amortization | 13,883,748 | 13,715,099 | 15,309,384 | 15,107,569 | ||||
PROPERTY, PLANT AND EQUIPMENT - NET | 19,538,309 | 19,438,077 | 21,191,492 | 20,974,270 | ||||
DEFERRED DEBITS AND OTHER ASSETS | ||||||||
Regulatory assets: | ||||||||
SFAS 109 regulatory asset - net | 744,424 | 740,110 | 606,741 | 595,743 | ||||
Other regulatory assets | 2,653,282 | 2,768,352 | 2,923,053 | 2,971,399 | ||||
Deferred fuel costs | 168,122 | 168,122 | 168,122 | 168,122 | ||||
Long-term receivables | 17,875 | 19,349 | 7,720 | 7,714 | ||||
Goodwill | 377,172 | 377,172 | 377,172 | 377,172 | ||||
Other | 960,388 | 898,662 | 949,228 | 900,940 | ||||
TOTAL | 4,921,263 | 4,971,767 | 5,032,036 | 5,021,090 | ||||
TOTAL ASSETS | $31,146,842 | $31,082,731 | $33,764,767 | $33,643,002 | ||||
See Notes to Financial Statements. | 20 | |||||||
ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | LIABILITIES AND SHAREHOLDERS' EQUITY | LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
March 31, 2007 and December 31, 2006 | ||||||||
March 31, 2008 and December 31, 2007 | March 31, 2008 and December 31, 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
CURRENT LIABILITIES | ||||||||
Currently maturing long-term debt | $271,942 | $181,576 | $911,496 | $996,757 | ||||
Notes payable | 25,039 | 25,039 | 25,037 | 25,037 | ||||
Accounts payable | 812,018 | 1,122,596 | 1,040,823 | 1,031,300 | ||||
Customer deposits | 256,753 | 248,031 | 294,767 | 291,171 | ||||
Taxes accrued | - | 187,324 | ||||||
Interest accrued | 140,004 | 160,831 | 153,724 | 187,968 | ||||
Deferred fuel costs | 224,883 | 73,031 | - - | 54,947 | ||||
Obligations under capital leases | 153,186 | 153,246 | 151,945 | 152,615 | ||||
Pension and other postretirement liabilities | 33,726 | 41,912 | 35,376 | 34,795 | ||||
System agreement cost equalization | 268,000 | 268,000 | ||||||
Other | 170,902 | 271,544 | 325,075 | 214,164 | ||||
TOTAL | 2,088,453 | 2,465,130 | 3,206,243 | 3,256,754 | ||||
NON-CURRENT LIABILITIES | ||||||||
Accumulated deferred income taxes and taxes accrued | 6,142,823 | 5,820,700 | 6,402,820 | 6,379,679 | ||||
Accumulated deferred investment tax credits | 354,102 | 358,550 | 339,045 | 343,539 | ||||
Obligations under capital leases | 218,118 | 188,033 | 275,808 | 220,438 | ||||
Other regulatory liabilities | 506,016 | 449,237 | 550,734 | 490,323 | ||||
Decommissioning and asset retirement cost liabilities | 2,058,544 | 2,023,846 | 2,533,424 | 2,489,061 | ||||
Transition to competition | 79,098 | 79,098 | ||||||
Accumulated provisions | 91,286 | 88,902 | 137,798 | 133,406 | ||||
Pension and other postretirement liabilities | 1,438,754 | 1,410,433 | 1,343,034 | 1,361,326 | ||||
Long-term debt | 9,197,328 | 8,798,087 | 9,927,555 | 9,728,135 | ||||
Preferred stock with sinking fund | 8,250 | 10,500 | ||||||
Other | 780,099 | 847,415 | 1,064,090 | 1,066,508 | ||||
TOTAL | 20,874,418 | 20,074,801 | 22,574,308 | 22,212,415 | ||||
Commitments and Contingencies | ||||||||
Preferred stock without sinking fund | 344,915 | 344,913 | 311,066 | 311,162 | ||||
SHAREHOLDERS' EQUITY | ||||||||
Common stock, $.01 par value, authorized 500,000,000 | ||||||||
shares; issued 248,174,087 shares in 2007 and in 2006 | 2,482 | 2,482 | ||||||
shares; issued 248,174,087 shares in 2008 and in 2007 | 2,482 | 2,482 | ||||||
Paid-in capital | 4,831,803 | 4,827,265 | 4,853,837 | 4,850,769 | ||||
Retained earnings | 6,211,617 | 6,113,042 | 6,900,345 | 6,735,965 | ||||
Accumulated other comprehensive loss | (54,560) | (100,512) | ||||||
Less - treasury stock, at cost (50,353,826 shares in 2007 and | ||||||||
45,506,311 shares in 2006) | 3,152,286 | 2,644,390 | ||||||
Accumulated other comprehensive income (loss) | (207,149) | 8,320 | ||||||
Less - treasury stock, at cost (56,276,698 shares in 2008 and | ||||||||
55,053,847 shares in 2007) | 3,876,365 | 3,734,865 | ||||||
TOTAL | 7,839,056 | 8,197,887 | 7,673,150 | 7,862,671 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $31,146,842 | $31,082,731 | $33,764,767 | $33,643,002 | ||||
See Notes to Financial Statements. | ||||||||
21
ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||||||
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL | CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL | CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL | ||||||||||||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||||||||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
2007 | 2006 | 2008 | 2007 | |||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||
RETAINED EARNINGS | ||||||||||||||||||||
Retained Earnings - Beginning of period | $6,113,042 | $5,433,931 | $6,735,965 | $6,113,042 | ||||||||||||||||
Add: | ||||||||||||||||||||
Consolidated net income | 212,195 | $212,195 | 193,628 | $193,628 | 308,749 | $308,749 | 212,195 | $212,195 | ||||||||||||
Adjustment related to FIN 48 implementation | (4,600) | - | - | (4,600) | ||||||||||||||||
Total | 207,595 | 193,628 | 308,749 | 207,595 | ||||||||||||||||
Deduct: | ||||||||||||||||||||
Dividends declared on common stock | 109,020 | 112,138 | 144,369 | 109,020 | ||||||||||||||||
Capital stock and other expenses | - | - | ||||||||||||||||||
Total | 109,020 | 112,138 | ||||||||||||||||||
Retained Earnings - End of period | $6,211,617 | $5,515,421 | $6,900,345 | $6,211,617 | ||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||||
Balance at beginning of period: | ||||||||||||||||||||
Accumulated derivative instrument fair value changes | ($105,578) | ($392,614) | ($12,540) | ($105,578) | ||||||||||||||||
Pension and other postretirement liabilities | (105,909) | - | (107,145) | (105,909) | ||||||||||||||||
Net unrealized investment gains | 104,551 | 67,923 | 121,611 | 104,551 | ||||||||||||||||
Foreign currency translation | 6,424 | 3,217 | 6,394 | 6,424 | ||||||||||||||||
Minimum pension liability | - | (22,345) | ||||||||||||||||||
Total | (100,512) | (343,819) | 8,320 | (100,512) | ||||||||||||||||
Net derivative instrument fair value changes | ||||||||||||||||||||
arising during the period (net of tax expense of $28,325 and $120,392) | 41,467 | 41,467 | 191,313 | 191,313 | ||||||||||||||||
arising during the period (net of tax expense (benefit) of ($99,400) and $28,325) | (178,766) | (178,766) | 41,467 | 41,467 | ||||||||||||||||
Pension and other postretirement liabilities (net of tax expense of $274) | 478 | 478 | - | - | ||||||||||||||||
Pension and other postretirement liabilities (net of tax expense of $3,977 and $274) | (4,136) | (4,136) | 478 | 478 | ||||||||||||||||
Net unrealized investment gains (net of tax expense of $2,790 and $2,314) | 3,996 | 3,996 | 3,327 | 3,327 | ||||||||||||||||
Net unrealized investment gains (losses) (net of tax expense (benefit) of ($26,630) and $2,790) | (32,550) | (32,550) | 3,996 | 3,996 | ||||||||||||||||
Foreign currency translation (net of tax expense of $6 and $93) | 11 | 11 | 173 | 173 | ||||||||||||||||
Foreign currency translation (net of tax expense (benefit) of ($9) and $6) | (17) | (17) | 11 | 11 | ||||||||||||||||
Balance at end of period: | ||||||||||||||||||||
Accumulated derivative instrument fair value changes | (64,111) | (201,301) | (191,306) | (64,111) | ||||||||||||||||
Pension and other postretirement liabilities | (105,431) | - | (111,281) | (105,431) | ||||||||||||||||
Net unrealized investment gains | 108,547 | 71,250 | 89,061 | 108,547 | ||||||||||||||||
Foreign currency translation | 6,435 | 3,390 | 6,377 | 6,435 | ||||||||||||||||
Minimum pension liability | - | (22,345) | ||||||||||||||||||
Total | ($54,560) | ($149,006) | ($207,149) | ($54,560) | ||||||||||||||||
Comprehensive Income | $258,147 | $388,441 | $93,280 | $258,147 | ||||||||||||||||
PAID-IN CAPITAL | ||||||||||||||||||||
Paid-in Capital - Beginning of period | $4,827,265 | $4,817,637 | $4,850,769 | $4,827,265 | ||||||||||||||||
Add (Deduct): | ||||||||||||||||||||
Common stock issuances related to stock plans | 4,538 | (1,600) | 3,068 | 4,538 | ||||||||||||||||
Paid-in Capital - End of period | $4,831,803 | $4,816,037 | $4,853,837 | $4,831,803 | ||||||||||||||||
See Notes to Financial Statements. | ||||||||||||||||||||
See Notes to Financial Statements. |
22
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2008 | 2007 | (Decrease) | % | ||||
(Dollars in Millions) | ||||||||
Utility Electric Operating Revenues: | ||||||||
Residential | $731 | $744 | ($13) | (2) | ||||
Commercial | 548 | 556 | (8) | (1) | ||||
Industrial | 606 | 633 | (27) | (4) | ||||
Governmental | 52 | 51 | 1 | 2 | ||||
Total retail | 1,937 | 1,984 | (47) | (2) | ||||
Sales for resale | 88 | 91 | (3) | (3) | ||||
Other | 21 | 36 | (15) | (42) | ||||
Total | $2,046 | $2,111 | ($65) | (3) | ||||
Utility Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 8,011 | 7,792 | 219 | 3 | ||||
Commercial | 6,238 | 6,116 | 122 | 2 | ||||
Industrial | 9,377 | 9,323 | 54 | 1 | ||||
Governmental | 569 | 549 | 20 | 4 | ||||
Total retail | 24,195 | 23,780 | 415 | 2 | ||||
Sales for resale | 1,290 | 1,638 | (348) | (21) | ||||
Total | 25,485 | 25,418 | 67 | - - | ||||
Non-Utility Nuclear: | ||||||||
Operating Revenues | $680 | $458 | $222 | 48 | ||||
Billed Electric Energy Sales (GWh) | 10,760 | 8,315 | 2,445 | 29 | ||||
23
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2007 | 2006 | (Decrease) | % | ||||
(Dollars in Millions) | ||||||||
Utility Electric Operating Revenues: | ||||||||
Residential | $719 | $697 | $22 | 3 | ||||
Commercial | 518 | 541 | (23) | (4) | ||||
Industrial | 623 | 667 | (44) | (7) | ||||
Governmental | 37 | 40 | (3) | (8) | ||||
Total retail | 1,897 | 1,945 | (48) | (2) | ||||
Sales for resale | 131 | 175 | (44) | (25) | ||||
Other | 37 | (27) | 64 | 237 | ||||
Total | $2,065 | $2,093 | ($28) | (1) | ||||
Utility Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 7,558 | 6,917 | 641 | 9 | ||||
Commercial | 5,721 | 5,499 | 222 | 4 | ||||
Industrial | 9,186 | 9,042 | 144 | 2 | ||||
Governmental | 385 | 377 | 8 | 2 | ||||
Total retail | 22,850 | 21,835 | 1,015 | 5 | ||||
Sales for resale | 2,536 | 2,761 | (225) | (8) | ||||
Total | 25,386 | 24,596 | 790 | 3 | ||||
23
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Entergy New Orleans Bankruptcy
Seeand the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy's results of operations, cash flows, or financial condition. Entergy discusses regulatory proceedings in Note 92 to the financial statements for information onin the Entergy New Orleans bankruptcy proceeding.Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and in Note 10 to the financial statements herein.
Nuclear Insurance
See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy's nuclear power plants. Following is an update to that information.
Property Insurance
In April 2007, the excess layer coverage for the Utility nuclear plants was increased to $750 million per occurrence per plant and the blanket layer coverage (shared among the plants) for the Utility nuclear plants was decreased to $350 million per occurrence.
Non-NuclearConventional Property Insurance
See Note 8 to the financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Following is an update to that information.
In April 2008, Entergy has reached an agreement with onereceived from its primary insurer $53.6 million of its excess insurers under which Entergy will receive $69.5 million in settlement ofadditional insurance proceeds on its Hurricane Katrina claim. Entergy expects that $53.7 millionclaim, and all of this amount will bethe April 2008 proceeds were allocated to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved the agreement on April 25, 2007. Entergy expects to receive the proceeds under the settlement agreement by the end of May 2007.
NYPA Value Sharing Agreements
See Note 8 to the financial statements in the Form 10-K for information on the NYPA Value Sharing Agreements. Non-Utility Nuclear calculated that nothing was owed to NYPA under the value sharing agreements for 2005. On November 1, 2006, NYPA filed a demand for arbitration claiming that $90.5 million was due to NYPA under these agreements for 2005. Non-Utility Nuclear filed a motion in New York state court to determine whether NYPA's claim should be decided by a court as opposed to an arbitrator. In February 2007, the court issued an order denying Non-Utility Nuclear's request, and NYPA's claim is now in binding arbitration. Non-Utility Nuclear has also calculated that nothing was owed to NYPA under the value sharing agreements for 2006. On April 24, 2007, NYPA filed an amended demand for arbitration claiming that an additional $54 million was due to NYPA under the value sharing agreements for 2006. With respect to both of these claims, Non-Utility Nuclear disagrees with NYPA's interpretation of the value sharing agreements, believes it has meritorious defenses to NYPA's claims, and intends to defend against those claims vigorously.
CashPoint Bankruptcy(Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the financial statements in the Form 10-K for information regarding the bankruptcy of CashPoint, which managed a network of payment agents for the Utility operating companies.
24
Employment Litigation
The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees and third parties not selected for open positions. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans. Entergy and the Registrant Subsidiaries are defendants in numerous lawsuits and other labor-related proceedings filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, and/or other protected characteristics. Entergy Corporation and these subsidiaries are vigorously defendingresponding to these suits and proceedings and deny any liability to the plaintiffs. Nevertheless, no assurance can be given as to the outcome of these cases.claimants.
Asbestos and Hazardous Material Litigation(Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos and hazardous material litigation at Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
24
NOTE 2. RATE AND REGULATORY MATTERS
Regulatory Assets
Other Regulatory Assets
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets in the Utility business reflected on the balance sheets of Entergy and the Registrant Subsidiaries.
Deferred Fuel Costsand purchased power cost recovery
See Note 2 to the financial statements in the Form 10-K for information regarding fuel proceedings involving the Utility operating companies. Following are updates to that information.
Entergy Arkansas
Production Cost Allocation Rider
In Marchits June 2007 decision on Entergy Arkansas' August 2006 rate filing, the APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, but set a termination date of December 31, 2008 for the rider. In December 2007, the APSC issued a subsequent order stating the production cost allocation rider will remain in ordereffect, and any future termination of the rider will be subject to allow further considerationeighteen months advance notice by the APSC, which would occur following notice and hearing. On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 APSC order. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the appeal.
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - Federal Regulation -System Agreement Proceedings" in the Form 10-K and herein for a discussion of the System Agreement proceedings.
Energy Cost Recovery Rider
Entergy Arkansas' retail rates include an energy cost recovery rider. In December 2007, the APSC grantedissued an order stating that Entergy Arkansas' petition for rehearingenergy cost recovery rider will remain in effect, and for stayany future termination of the APSC's Januaryrider will be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing. On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 orderAPSC order. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the proceeding investigating Entergy Arkansas' interim energy cost rate.appeal.
In March 2007,2008, Entergy Arkansas filed with the APSC its annual energy cost rate for the period April 20072008 through March 2008.2009. The filed energy cost rate decreasedincreased from $0.02827/$0.01179/kWh to $0.01179/$0.01869/kWh. The increase was caused by the following: 1) all three of the nuclear power plants from which Entergy Arkansas obtains power, ANO 1 and 2 and Grand Gulf, will have refueling outages in 2008, and the energy cost rate is adjusted to account for the replacement power costs that will be incurred while these units are down; 2) Entergy Arkansas has a deferred fuel cost balance from under-recovered fuel costs at December 31, 2007; and 3) fuel and purchased power prices have increased.
Entergy Texas
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 Rough Production Cost Equalization receipts were allocated between Entergy Gulf States, (Texas)Inc.'s Texas and Louisiana jurisdictions. Several parties have intervened but not yet stated a position on the allocation of such payments to PUCT-jurisdictional customers. A hearing is scheduled in July 2008.
25
In MarchOctober 2007, Entergy Gulf StatesTexas filed a request with the PUCT a request to refund $78.5$45.6 million, including interest, of fuel cost recovery over-collections forthrough September 2007. In January 2008, Entergy Texas filed with the periodPUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through January 2007. Entergy Gulf States requested thatNovember 2007 and establishes a refund amount, including interest, of $71 million. The PUCT approved the proposedagreement in February 2008. The refund bewas made over a six-monthtwo-month period beginning June 2007; however,February 2008. Amounts refunded through the interim fuel refund period isare subject to the PUCT's discretion.final reconciliation in a future fuel reconciliation proceeding.
25
Storm Cost Recovery Filings
See Note 2 to the financial statements in the Form 10-K for information regarding storm cost recovery filings involving the Utility operating companies. The following are updatesis an update to the Form 10-K.
Entergy Gulf States Louisiana and Entergy Louisiana - Texas
Act 55 Storm Cost Financings
In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits.March 2008, Entergy Gulf States expects by mid-2007Louisiana, Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to implement ratesAct 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to recover revenuesproduce additional customer benefits as compared to payAct 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the securitizationmechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which will be the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and expectsEntergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana's proposals under the Act 55 financings, including the commitment to pass on to customers a minimum of $40 million of customer benefits as compared to traditional Act 64 financing. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. On May 6, 2008, the State Bond Commission voted to approve the Act 55 financings. Entergy Gulf States Louisiana and Entergy Louisiana will invest the capital contributions that they receive securitization fundingfrom the Act 55 financings in affiliate securities. Entergy Gulf States Louisiana and Entergy Louisiana intend to complete the Act 55 fi nancings by the end of the thirdsecond quarter 2007.2008.
Entergy Gulf States - Louisiana and Entergy Louisiana
In February 2007, Entergy Louisiana and Entergy Gulf States filed rebuttal testimony and filed a second supplemental and amending application by which they seek authority from the LPSC to securitize their storm cost recovery and storm reserve amounts, together with certain debt retirement costs and upfront and ongoing costs of the securitized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. The filing updates actual storm-related costs through January 2007 and estimated future costs, declaring that Entergy Louisiana's costs are $561 million and Entergy Gulf States' costs are $219 million. The filing also updates the requested storm reserve amounts, requesting $141 million for Entergy Louisiana and $87 million for Entergy Gulf States. Hearings began in late-April 2007. At the start of the hearing, a stipulation among Entergy Gulf States, Entergy Louisiana, the LPSC staff, and most other parties in the proceeding was read into the record. The stipulation quantifies the balance of storm restoration costs for recovery as $545 million for Entergy Louisiana and $187 million for Entergy Gulf States, and sets the storm reserve amounts at $152 million for Entergy Louisiana and $87 million for Entergy Gulf States. The stipulation also calls for securitization of the storm restoration costs and storm reserves in those same amounts. The LPSC has not issued a decision in the proceeding.
Entergy New Orleans
In March 2007, the City Council certified that Entergy New Orleans has incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for the gas system rebuild. In April 2007, Entergy New Orleans executed an agreement with the Louisiana Office of Community Development under which $200 million of CDBG funds will be made available to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved it on April 25, 2007. Entergy New Orleans received $171.7 million of the funds on April 27, 2007, and the remainder will be paid to Entergy New Orleans as it incurs and submits additional eligible costs.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for information regarding retail rate proceedings involving the Utility operating companies. The following are updates to the Form 10-K.
Filings with the APSC (Entergy Arkansas)
In March 2007, Ouachita Acquisition
Entergy Arkansas filed rebuttal testimonywith the APSC in September 2007 for its approval of the Ouachita plant acquisition, including full cost recovery. The APSC Staff and the Arkansas attorney general have supported Entergy Arkansas' acquisition of the plant, but oppose the sale of one-third of the capacity and energy to Entergy Gulf States Louisiana. The industrial group AEEC has opposed Entergy Arkansas' purchase of the plant. The Arkansas attorney general has opposed recovery of the non-fuel costs of the plant through a separate rider, while the APSC Staff recommended revisions to the rider. In December 2007, the APSC issued an order approving recovery through a rider of the capacity costs associated with the interim tolling agreement, which will be in effect until APSC action on the acquisition of the plant. A hearing before the APSC was held in April 2008 to address Entergy Arkansas' request for acquisition of the plant and concurrent cost recovery, and a decision is pending.
26
On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 APSC order that approved recovery through a rider of the capacity costs associated with the interim tolling agreement. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the appeal.
Filings with the LPSC
Retail Rates - Electric
(Entergy Louisiana)
In May 2006, Entergy Louisiana made its formula rate case thatplan filing with the LPSC for the 2005 test year. Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity which is within the allowed bandwidth. The modified filing includes an increase of $24.2 million for interim recovery of storm costs from Hurricanes Katrina and Rita and a $119.2 million rate increase to recover LPSC-approved incremental deferred and ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed by the LPSC Staff with which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $118.7 million. The updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006. An uncontested stipulated settlement was filed in August 2006.February 2008 that will leave the current base rates in place, and the LPSC approved the settlement in March 2008. In the settlement Entergy Louisiana agreed to credit customers $7.2 million, plus $0.7 million of interest, for customer contributions to the Central States Compact in Nebraska that was never completed and agreed to a one-time $2.6 million deduction from the deferred capacity cost balance. The rebuttal testimony requests an annualcredit, for which Entergy Louisiana had previously recorded a provision, will be made in May 2008.
(Entergy Gulf States Louisiana)
In May 2007, Entergy Gulf States Louisiana made its formula rate increase of $106.5 million, and retainsplan filing with the LPSC for the 2006 test year. The filing reflected a 10.0% return on common equity, (ROE)which is within the allowed earnings bandwidth, and an anticipated formula rate plan decrease of 11.25%. A primary reason for$23 million annually attributable to adjustments outside of the declineformula rate plan sharing mechanism related to capacity costs and the anticipated securitization of storm costs related to Hurricane Katrina and Hurricane Rita and the securitization of a storm reserve. In September 2007, Entergy Gulf States Louisiana modified the formula rate plan filing to reflect a 10.07% return on common equity, which is still within the allowed bandwidth. The modified filing also reflected implementation of a $4.1 million rate increase, subject to refund, attributable to recovery of additional LPSC-approved incremental deferred and ongoing capacity costs. The rate decrease anticipated in the rate request from the original request of $150 million is the removalfiling d id not occur because of the revenue requirement foradditional capacity costs approved by the proposed acquisitionLPSC, and because securitization of a load-following, combined cycle gas-fired generation resource, because Entergy Arkansas was not able to complete negotiations with the owner within the time requirements of the rate case. Also, in March 2007 and April 2007, the APSC staff and intervenors filed additional testimony. The APSC staff's filings indicate that an annual rate increase of $2 million is warranted, with a proposed ROE of 9.9%. The APSC staff has also taken positions, which Entergy
26
Arkansas opposes, regarding costs accumulated in the storm reserve, FERC-allocated System Agreement cost allocation, and removal costs associated with Hurricane Katrina and Hurricane Rita and the terminationestablishment of a leasestorm reserve have not yet occurred. In October 2007, Entergy Gulf States Louisiana implemented a $16.4 million formula rate plan decrease that could haveis due to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an adverse effect on future financial results.LPSC order. The LPSC staff issued its final report in December 2007, indicating a $1.6 million decrease in formula rate plan revenues for which interim rates were already in effect. In addition, the LPSC staff recommended that the LPSC give a one-year extension of Entergy Gulf States Louisiana's formula rate plan to synchronize with the final year of Entergy Louisiana's formula rate plan, or alternatively, to extend the formula rate plan for a longer period. Entergy Gulf States Louisiana indicated it is amenable to a one-year extension . An evidentiary hearinguncontested stipulated settlement was filed in February 2008 that will leave the current base rates in place and extend the formula rate case proceeding endedplan for one year, and the LPSC approved the settlement in early-May 2007.March 2008.
Filings with the LPSC27
Retail Rates - Gas (Entergy Gulf States)States Louisiana)
In January 2007,2008, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2006.2007. The filing showed a revenue deficiency of $3.5$3.7 million based on an ROEa return on common equity mid-point of 10.5%. In March 2007, Entergy Gulf States filedLouisiana will implement a set of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $2.4$3.4 million base rate increase effectivepursuant to an uncontested agreement with the first billing cycle of April 2007 pursuant to the rate stabilization plan. LPSC staff.
Filings with the PUCT and Texas Cities
Entergy Texas made a rate filing in September 2007 with the PUCT requesting an annual rate increase totaling $107.5 million, including a base rate increase of $64.3 million and special riders totaling $43.2 million. The base rate increase includes $12.2 million for the storm damage reserve. Entergy Texas is requesting an 11% return on common equity. In December 2007 the PUCT issued an order setting September 26, 2008 as the effective date for the rate change from the rate filing. Testimony filed by the PUCT staff and intervenors generally asks for rates to be set lower than the rates now being charged by Entergy Texas. The hearing on the rate case is scheduled for May 2008.
Filings with the MPSC (Entergy Mississippi)
In March 2007,2008, Entergy Mississippi made its annual scheduled formula rate plan filing for the 20062007 test year with the MPSC. The filing showsshowed that ana $10.1 million increase of $12.9 million in annual electric revenues is warranted. The filing is currently being reviewed by the Mississippi Public Utilities StaffStaff.
Filings with the City Council
Retail Rates
In January 2008, Entergy New Orleans voluntarily implemented a 6.15% base rate credit for electric customers, which Entergy New Orleans estimates will return $10.6 million to electric customers in 2008. Entergy New Orleans was able to implement this credit because the recovery of New Orleans after Hurricane Katrina has been occurring faster than expected. In addition, Entergy New Orleans set aside $2.5 million for an Energy Efficiency Fund.
Fuel Adjustment Clause Litigation
See Note 2 to the financial statements in the Form 10-K for a discussion of the complaint filed in April 1999 by a group of ratepayers against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers and a corresponding complaint filed with the City Council. In February 2004, the City Council approved a resolution that resulted in a refund to customers of $11.3 million, including interest, during the months of June through September 2004. In May 2005 the Civil District Court for the Parish of Orleans affirmed the City Council resolution, finding no support for the plaintiffs' claim that the refund amount should be higher. In June 2005, the plaintiffs appealed the Civil District Court decision to the Louisiana Fourth Circuit Court of Appeal. On February 25, 2008, the Fourth Circuit Court of Appeal issued a decision affirming in part, and reversi ng in part, the Civil District Court's decision. Although the Fourth Circuit Court of Appeal did not reverse any of the substantive findings and conclusions of the City Council or the Civil District Court, the Fourth Circuit found that the amount of the refund was arbitrary and capricious and increased the amount of the refund to $34.3 million. Entergy New Orleans believes that the increase in the refund ordered by the Fourth Circuit is reviewingnot justified. Entergy New Orleans, the filing.City Council, and the plaintiffs requested rehearing, and in April 2008, the Fourth Circuit granted the plaintiffs' request for rehearing. In addition to changing the basis for the court's decision in the manner requested by the plaintiffs, the court also granted the plaintiffs' request that it provide for interest on the refund amount. The court denied the motions for rehearing filed by the City Council and Entergy New Orleans. In May 2008, Entergy New Orleans and the City Council filed petitions for appeal to the Louis iana Supreme Court, which has been opposed by the plaintiffs, and filed with the Louisiana Supreme Court applications for a writ of certiorari seeking, among other things, reversal of the Fourth Circuit decision.
28
System Energy Rate Proceeding
In March 2008, the LPSC filed a complaint at the FERC under Federal Power Act section 206 against System Energy and Entergy Services. The complaint requests that the FERC set System Energy's rate of return on common equity at no more than 9.75%. The LPSC's complaint further requests that System Energy base its decommissioning and depreciation expenses on a 60-year useful life for Grand Gulf as opposed to the 40-year life specified in the existing NRC operating license. The APSC, the City of New Orleans, the MPSC, and other parties have intervened in the proceeding. System Energy filed its answer to the complaint in April 2008, in which it denies the allegations of the LPSC and requests that the FERC dismiss the complaint without a hearing.
Electric Industry Restructuring in Texas
Texas (Entergy Gulf States)
Refer to Note 2 to the financial statements in the Form 10-K for the current Texas legislation anda discussion of electric industry restructuring activity that involves Entergy Gulf States' proposed transition to competition plan.Texas.
In December 2006, the PUCT asked for parties to brief the effects of the 2005 legislation on the competition dockets of Entergy Gulf States, most notably, the settlement that the parties entered with respect to the unbundling of Entergy Gulf States for retail open access. Finding that the 2005 legislation now provides the mechanism by which Entergy Gulf States will transition to competition, the PUCT, on February 1, 2007, dismissed Entergy Gulf States' unbundled cost of service proceeding. After analyzing the PUCT's decision, Entergy Gulf States recorded a provision for its estimated exposure related to certain past fuel cost recoveries that may be credited to customers.
27
Common Stock
Earnings per Share
The following tables present Entergy's basic and diluted earnings per share calculations included on the consolidated income statement:
|
|
| For the Three Months Ended March 31, |
|
| For the Three Months Ended March 31, | ||||||||||||
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 | ||||||||
|
|
| (In Millions, Except Per Share Data) |
|
| (In Millions, Except Per Share Data) | ||||||||||||
|
|
|
|
| $/share |
|
|
| $/share |
|
|
|
| $/share |
|
|
| $/share |
Earnings applicable to common stock | Earnings applicable to common stock |
| $212.2 |
|
|
| $193.6 |
|
| Earnings applicable to common stock |
| $308.7 |
|
|
| $212.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares | Average number of common shares |
|
|
|
|
|
|
|
| Average number of common shares |
|
|
|
|
|
|
|
|
Average dilutive effect of: | Average dilutive effect of: |
|
|
|
|
|
|
|
| Average dilutive effect of: |
|
|
|
|
|
|
|
|
| Stock Options |
| 4.8 |
| (0.025) |
| 3.5 |
| (0.015) | Stock Options |
| 4.6 |
| (0.037) |
| 4.8 |
| (0.025) |
Equity Units | 0.7 | (0.003) | - | - | Equity Units | 1.1 | (0.009) | 0.7 | (0.003) | |||||||||
| Deferred Units |
| 0.1 |
| (0.001) |
| 0.2 |
| (0.001) | Deferred Units |
| - |
| (0.000) |
| 0.1 |
| (0.001) |
Average number of common shares | Average number of common shares |
|
|
|
|
|
|
|
| Average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Entergy's stock option and other equity compensation plans are discussed in Note 12 to the consolidated financial statements in the Form 10-K.
Treasury Stock
During the first quarter of 2007,2008, Entergy Corporation issued 824,527245,349 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. During the first quarter of 2007,2008, Entergy Corporation purchased 5,672,0421,468,200 shares of common stock for a total purchase price of $558.2$158.2 million.
29
Retained Earnings
On April 4, 2007,8, 2008, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54$0.75 per share, payable on June 1, 20072, 2008 to holders of record as of May 10, 2007.9, 2008.
Accumulated Other Comprehensive Income (Loss)
CashBased on market prices as of March 31, 2008, cash flow hedges with net unrealized losses of approximately $67.8$108.9 million net-of-tax at March 31, 20072008 are expected to be reclassified into earningsfrom accumulated other comprehensive income to operating revenues during the next twelve months.
28
The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices. See Note 1 (Derivative Financial Instruments and Commodity Derivatives)and Note 16 to the financial statements in the Form 10-K for additional discussion of the accounting treatment of cash flow hedges.
NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, whichthat expires in May 2010,August 2012 and has a borrowing capacity of $2 billion and the three-year facility, which expires in December 2008, has a borrowing capacity of $1.5$3.5 billion. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of boththe credit facilities.facility. The commitmentfacility fee for these facilities is currently 0.13% per annum0.09% of the unusedcommitment amount. CommitmentFacility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate as of March 31, 2008 was 3.831% on the Utility operating companies.drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under these facilitiesthe facility as of March 31, 2007.2008.
|
|
| Letters | Capacity | ||||
(In Millions) | ||||||||
5-Year Facility | $2,000 | $895 | $79 | $1,026 | ||||
3-Year Facility | $1,500 | $540 | $- | $960 |
|
| Letters | Capacity | |||
(In Millions) | ||||||
$3,500 | $2,476 | $71 | $953 |
See Part II, Item 5 for an update of the borrowings outstanding as of May 8, 2007.
Entergy Corporation's facilities requirefacility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) and System Energy defaultdefaults on other indebtedness or areis in bankruptcy or insolvency proceedings, an acceleration of the facilities'facility maturity datesdate may occur.
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi each had credit facilities available as of March 31, 20072008 as follows:
|
|
|
| Amount of |
|
| Amount Drawn as of | |
|
|
|
|
|
| |||
Entergy Arkansas |
| April |
| $ |
| 4.75% | - | |
Entergy Gulf States Louisiana |
| $ | 3.13% | - | ||||
Entergy Louisiana | August 2012 | $200 million (d) | 3.06% | - | ||||
Entergy Mississippi |
| May |
| $30 million |
| 3.95% | - | |
Entergy Mississippi |
| May |
| $20 million |
| 3.95% | - |
(a) | The interest rate is the weighted average interest rate as of March 31, 2008 that would be applied to the outstanding borrowings under the facility. |
(b) | In April 2008, Entergy Arkansas renewed its credit facility through April 2009. The renewed credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization. |
30 | |
(c) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility. As of March 31, |
| The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility. As of March 31, 2008, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable. Prior to expiration on May 31, 2008, Entergy Mississippi expects to renew both of its credit facilities. |
In April 2007, Entergy Arkansas renewed itsThe facility fees on the credit facility through April 2008 and increased the amountfacilities range from 0.09% to 0.15% of the credit facility to $100 million. Prior to expiration on May 31, 2007, it is expected that Entergy Mississippi will renew both of its credit facilities.
The credit facilities have variable interest rates and the average commitment fee is 0.13%. The Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.amount.
The short-term borrowings of the Registrant Subsidiaries (other than Entergy New Orleans) and certain other Entergy subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008.2010 (except Entergy Gulf States Louisiana and Entergy Texas, which are effective through November 8, 2009). In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC authorized limits. As of March 31, 2007,2008, Entergy's subsidiaries' aggregate money pool and external short-term borrowings authorized limit was $2.0$2.1 billion, the aggregate outstanding borrowing from the money pool was $330.1$472 million, and Entergy's subsidiaries' had no outstanding short-term borrowing fromfro m external sources.
29
The following are the FERC-authorized limits for short-term borrowings effective February 8, 2006 and the outstanding short-term borrowings from the money pool for the Registrant Subsidiaries (other than Entergy New Orleans) as of March 31, 2007:2008:
|
| Authorized |
| Borrowings |
| Authorized |
| Borrowings |
|
| (In Millions) |
| (In Millions) | ||||
|
|
|
|
|
|
|
|
|
Entergy Arkansas |
| $250 |
| - |
| $250 |
| $91.4 |
Entergy Gulf States |
| $350 |
| - | ||||
Entergy Gulf States Louisiana |
| $200 |
| - | ||||
Entergy Louisiana |
| $250 |
| $67.1 |
| $250 |
| $47.5 |
Entergy Mississippi |
| $175 |
| - |
| $175 |
| - |
Entergy New Orleans | $100 | - | ||||||
System Energy |
| $200 |
| - |
| $200 |
| - |
UnderTax Exempt Bond Audit
The IRS completed an audit of certain Tax Exempt Bonds (Bonds) issued by St. Charles Parish, State of Louisiana (the Issuer). The Bonds were issued to finance previously unfinanced acquisition costs expended by Entergy Louisiana to acquire certain radioactive solid waste disposal facilities (the Facilities) at the Waterford Steam Electric Generating Station. In March and April 2005, the IRS issued proposed adverse determinations that the Issuer's 7.0% Series bonds due 2022, 7.5% Series bonds due 2021, and 7.05% Series bonds due 2022 were not tax exempt. The stated basis for these determinations was that radioactive waste did not constitute "solid waste" within the provisions of the Internal Revenue Code and therefore the Facilities did not qualify as solid waste disposal facilities. The three series of Bonds are the only series of bonds issued by the Issuer for the benefit of Entergy Louisiana that were the subject of audits by the IRS. Because the Issuer, Entergy Louisiana, and IRS O ffice of Appeals desired to settle the issue that was raised, Entergy Louisiana made a savings provision in PUHCA 2005, which repealed PUHCA 1935, Entergy New Orleans may continue to be a participant in the money pool$1.25 million payment to the extent authorized by its SEC PUHCA 1935 order. However, Entergy New Orleans has not made, and does not expect to make, any additional money pool borrowings while it is in bankruptcy proceedings. Entergy New Orleans had $37.2 million in borrowings outstanding fromIRS. The terms of the money pool as of its bankruptcy filing date, September 23, 2005.settlement have no effect on the Issuer or the bondholders.
In January 2007, Entergy Mississippi redeemed, prior to maturity, $100 million of 4.35% Series of First Mortgage Bonds due April 2008.
Entergy New Orleans Debtor-in-Possession Credit Facility
See Note 4 in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. As of March 31 2007, Entergy New Orleans had $42 million of outstanding borrowings under the DIP credit agreement. During April 2007, at the same time that it made a scheduled pension plan contribution, Entergy New Orleans borrowed under the DIP credit agreement, and on May 8, 2007 had $67 million of outstanding borrowings under the DIP credit agreement.
NOTE 5. ACQUISITIONS
In April 2007, Entergy's Non-Utility Nuclear business purchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a cash payment of $380 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds of approximately $250 million, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executed a unit contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. Also as part of the transaction, Consumers Energy paid Entergy's Non-Utility Nuclear business $30 million to assume responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan.
30
NOTE 6. STOCK-BASED COMPENSATION
Entergy grants stock options, which are described more fully in Note 12 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years.
The following table includes financial information for stock options for the first quarter for each of the years presented:
2007 | 2006 | ||
(In Millions) | |||
Compensation expense included in Entergy's Net Income for the first quarter | $3.3 | $2.8 | |
Tax benefit recognized in Entergy's Net Income for the first quarter | $1.3 | $1.1 | |
Compensation cost capitalized as part of fixed assets and inventory as of |
|
|
2008 | 2007 | ||
(In Millions) | |||
Compensation expense included in Entergy's Net Income | $4.4 | $3.3 | |
Tax benefit recognized in Entergy's Net Income | $1.7 | $1.3 | |
Compensation cost capitalized as part of fixed assets and inventory | $0.8 | $0.5 |
Entergy granted 1,854,9001,637,400 stock options during the first quarter of 20072008 with a weighted-average fair value of $14.15.$14.43. At March 31, 2007,2008, there were 11,834,93011,962,373 stock options outstanding with a weighted-average exercise price of $57.54.$65.39. The aggregate intrinsic value of the stock options outstanding was $561$523 million.
NOTE 7.6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
Entergy's qualified pension cost, including amounts capitalized, for the first quarters of 20072008 and 2006,2007, included the following components:
|
| 2007 |
| 2006 |
| 2008 |
| 2007 |
|
| (In Thousands) |
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
Service cost - benefits earned during the period |
| $23,428 |
| $23,176 |
| $22,598 |
| $23,897 |
Interest cost on projected benefit obligation |
| 44,602 |
| 41,814 |
| 51,647 |
| 45,862 |
Expected return on assets |
| (49,179) |
| (44,482) |
| (57,639) |
| (50,626) |
Amortization of prior service cost |
| 1,338 |
| 1,365 |
| 1,266 |
| 1,383 |
Amortization of loss |
| 11,075 |
| 10,931 |
| 6,934 |
| 11,444 |
Net pension costs |
| $31,264 |
| $32,804 |
| $24,806 |
| $31,960 |
3132
The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the first quarters of 20072008 and 2006,2007, included the following components:
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System | Entergy | |||||||||||
2007 |
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||||||||||||
|
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System | ||||||||||||
2008 |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||||||||||||
|
| (In Thousands) |
| (In Thousands) | ||||||||||||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
| $3,638 |
| $3,011 |
| $2,231 |
| $1,089 |
| $470 |
| $1,021 |
| $3,584 |
| $1,841 |
| $2,058 |
| $1,063 |
| $445 |
| $930 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
| 10,498 |
| 8,139 |
| 6,251 |
| 3,371 |
| 1,260 |
| 1,710 |
| 11,616 |
| 5,047 |
| 6,784 |
| 3,627 |
| 1,415 |
| 1,937 |
Expected return on assets |
| (11,009) |
| (10,750) |
| (7,808) |
| (3,837) |
| (1,446) |
| (2,136) |
| (11,765) |
| (7,165) |
| (8,134) |
| (4,075) |
| (1,839) |
| (2,452) |
Amortization of prior service cost |
| 412 |
| 304 |
| 160 |
| 114 |
| 44 |
| 12 |
| 223 |
| 110 |
| 119 |
| 90 |
| 52 |
| 9 |
Amortization of loss |
| 2,721 |
| 623 |
| 1,433 |
| 749 |
| 368 |
| 151 |
| 2,303 |
| 115 |
| 920 |
| 485 |
| 319 |
| 90 |
Net pension cost |
| $6,260 |
| $1,327 |
| $2,267 |
| $1,486 |
| $696 |
| $758 | ||||||||||||
Net pension cost/(income) |
| $5,961 |
| ($52) |
| $1,747 |
| $1,190 |
| $392 |
| $514 |
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System | Entergy | |||||||||||
2006 |
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||||||||||||
|
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System | ||||||||||||
2007 |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||||||||||||
|
| (In Thousands) |
| (In Thousands) | ||||||||||||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
| $3,626 |
| $2,993 |
| $2,182 |
| $1,077 |
| $501 |
| $1,031 |
| $3,638 |
| $3,011 |
| $2,231 |
| $1,089 |
| $470 |
| $1,021 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
| 9,915 |
| 7,914 |
| 6,052 |
| 3,252 |
| 1,282 |
| 1,604 |
| 10,498 |
| 8,139 |
| 6,251 |
| 3,371 |
| 1,260 |
| 1,710 |
Expected return on assets |
| (9,834) |
| (10,176) |
| (7,114) |
| (3,683) |
| (884) |
| (1,775) |
| (11,009) |
| (10,750) |
| (7,808) |
| (3,837) |
| (1,446) |
| (2,136) |
Amortization of prior service cost |
| 415 |
| 309 |
| 141 |
| 128 |
| 56 |
| 12 |
| 412 |
| 304 |
| 160 |
| 114 |
| 44 |
| 12 |
Amortization of loss |
| 2,438 |
| 640 |
| 1,509 |
| 725 |
| 509 |
| 167 |
| 2,721 |
| 623 |
| 1,433 |
| 749 |
| 368 |
| 151 |
Net pension cost |
| $6,560 |
| $1,680 |
| $2,770 |
| $1,499 |
| $1,464 |
| $1,039 |
| $6,260 |
| $1,327 |
| $2,267 |
| $1,486 |
| $696 |
| $758 |
Entergy recognized $4.0$4.3 million and $3.9$4.0 million in pension cost for its non-qualified pension plans in the first quarters of 20072008 and 2006,2007, respectively.
The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the first quarters of 20072008 and 2006:
2007:
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy | ||||||||||
|
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
|
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
|
|
| (In Thousands) |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| |||||||||
|
| (In Thousands) | ||||||||||||||||||||
Non-Qualified Pension Cost First |
| $133 |
| $78 |
| $7 |
| $54 |
| $12 |
| |||||||||||
Non-Qualified Pension Cost First |
| $123 |
| $317 |
| $6 |
| $44 |
| $57 |
|
| $123 |
| $317 |
| $6 |
| $44 |
| $57 |
|
Non-Qualified Pension Cost First |
| $113 |
| $220 |
| $5 |
| $36 |
| $54 |
|
3233
Components of Net Other Postretirement Benefit Cost
Entergy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 20072008 and 2006,2007, included the following components:
|
| 2007 |
| 2006 |
| 2008 |
| 2007 |
|
| (In Thousands) |
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
Service cost - benefits earned during the period |
| $10,638 |
| $10,370 |
| $11,800 |
| $10,893 |
Interest cost on APBO |
| 14,816 |
| 14,316 |
| 17,824 |
| 15,686 |
Expected return on assets |
| (5,577) |
| (4,756) |
| (7,027) |
| (6,260) |
Amortization of transition obligation |
| 542 |
| 542 |
| 957 |
| 958 |
Amortization of prior service cost |
| (4,049) |
| (3,688) |
| (4,104) |
| (3,959) |
Amortization of loss |
| 4,461 |
| 5,698 |
| 3,890 |
| 4,743 |
Net other postretirement benefit cost |
| $20,831 |
| $22,482 |
| $23,340 |
| $22,061 |
The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the first quarters of 20072008 and 2006,2007, included the following components:
Entergy | ||||||||||||
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System | |
2008 |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
|
| (In Thousands) | ||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
| $1,706 |
| $1,251 |
| $1,099 |
| $514 |
| $295 |
| $513 |
Interest cost on APBO |
| 3,443 |
| 1,917 |
| 2,187 |
| 1,141 |
| 953 |
| 531 |
Expected return on assets |
| (2,492) |
| - |
| - |
| (905) |
| (789) |
| (511) |
Amortization of transition obligation |
| 205 |
| 84 |
| 96 |
| 88 |
| 415 |
| 2 |
Amortization of prior service cost |
| (197) |
| 146 |
| 117 |
| (62) |
| 90 |
| (283) |
Amortization of loss |
| 1,440 |
| 494 |
| 677 |
| 534 |
| 291 |
| 177 |
Net other postretirement benefit cost |
| $4,105 |
| $3,892 |
| $4,176 |
| $1,310 |
| $1,255 |
| $429 |
Entergy | ||||||||||||||||||||||||
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System |
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System | |
2007 |
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
|
| (In Thousands) |
| (In Thousands) | ||||||||||||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
| $1,525 |
| $1,547 |
| $973 |
| $476 |
| $255 |
| $451 |
| $1,525 |
| $1,547 |
| $973 |
| $476 |
| $255 |
| $451 |
Interest cost on APBO |
| 3,037 |
| 2,876 |
| 1,941 |
| 1,049 |
| 870 |
| 433 |
| 3,037 |
| 2,876 |
| 1,941 |
| 1,049 |
| 870 |
| 433 |
Expected return on assets |
| (2,231) |
| (1,697) |
| - |
| (819) |
| (682) |
| (470) |
| (2,231) |
| (1,697) |
| - |
| (819) |
| (682) |
| (470) |
Amortization of transition obligation |
| 205 |
| 151 |
| 96 |
| 88 |
| 416 |
| 2 |
| 205 |
| 151 |
| 96 |
| 88 |
| 416 |
| 2 |
Amortization of prior service cost |
| (197) |
| 218 |
| 117 |
| (62) |
| 90 |
| (283) |
| (197) |
| 218 |
| 117 |
| (62) |
| 90 |
| (283) |
Amortization of loss |
| 1,500 |
| 793 |
| 764 |
| 613 |
| 282 |
| 149 |
| 1,500 |
| 793 |
| 764 |
| 613 |
| 282 |
| 149 |
Net other postretirement benefit cost |
| $3,839 |
| $3,888 |
| $3,891 |
| $1,345 |
| $1,231 |
| $282 |
| $3,839 |
| $3,888 |
| $3,891 |
| $1,345 |
| $1,231 |
| $282 |
34
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System |
2006 |
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
|
| (In Thousands) | ||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
| $1,337 |
| $1,254 |
| $854 |
| $419 |
| $232 |
| $414 |
Interest cost on APBO |
| 2,844 |
| 2,747 |
| 1,856 |
| 944 |
| 856 |
| 407 |
Expected return on assets |
| (1,797) |
| (1,489) |
| - |
| (709) |
| (611) |
| (421) |
Amortization of transition obligation |
| 205 |
| 151 |
| 96 |
| 88 |
| 416 |
| 2 |
Amortization of prior service cost |
| (408) |
| - |
| (24) |
| (137) |
| 10 |
| (301) |
Amortization of loss |
| 1,671 |
| 1,002 |
| 893 |
| 644 |
| 343 |
| 207 |
Net other postretirement benefit cost |
| $3,852 |
| $3,665 |
| $3,675 |
| $1,249 |
| $1,246 |
| $308 |
Employer Contributions
Based on current assumptions, Entergy expects to contribute $176$226 million to its qualified pension plans in 2007.2008. As of the end of April 2007,2008, Entergy had contributed $96$98 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $80$128 million to fund its qualified pension plans in 2007.2008.
33
TheBased on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans in 2007:2008:
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System | |
|
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
|
| (In Thousands) | ||||||||||
Expected 2007 pension contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Pension contributions made through |
| $ - |
| $16,550 |
|
|
| $ - |
| $28,459 |
| $3,538 |
Remaining estimated pension |
| $6,987 |
| $8,796 |
|
|
| $784 |
| $15,126 |
| $2,150 |
Entergy | ||||||||||||
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System | |
|
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
|
| (In Thousands) | ||||||||||
Expected 2008 pension contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Pension contributions made through |
| $10,710 |
| $13,763 |
|
|
| $2,899 |
|
|
|
|
Remaining estimated pension |
| $29,760 |
| $23,993 |
|
|
| $8,056 |
|
|
|
|
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 20062007 Accumulated Postretirement Benefit Obligation (APBO) by $183$182 million, and reduced the first quarter 20072008 and 20062007 other postretirement benefit cost by $6.3$6.2 million and $6.9$6.5 million, respectively. In the first quarter 2007, Entergy received $0.9 million in Medicare subsidies for prescription drug claims during the third quarter 2006.
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 20062007 APBO and the first quarters 20072008 and 20062007 other postretirement benefit cost for the Registrant Subsidiaries as follows:
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System | Entergy | |||||||||||
|
| Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy |
| Entergy |
| Gulf States |
| Entergy |
| Entergy |
| Entergy |
| System |
|
| (In Thousands) |
| Arkansas |
| Louisiana |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||||||||||
Reduction in 12/31/2006 APBO |
| ($40,636) |
| ($35,991) |
| ($22,486) |
| ($13,560) |
| ($10,110) |
| ($5,966) | ||||||||||||
|
| (In Thousands) | ||||||||||||||||||||||
Reduction in 12/31/2007 APBO |
| ($39,653) |
| ($19,662) |
| ($21,797) |
| ($13,223) |
| ($9,487) |
| ($6,185) | ||||||||||||
Reduction in first quarter 2008 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
other postretirement benefit cost |
| ($1,266) |
| ($876) |
| ($706) |
| ($406) |
| ($279) |
| ($236) | ||||||||||||
Reduction in first quarter 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other postretirement benefit cost |
| ($1,376) |
| ($1,222) |
| ($762) |
| ($438) |
| ($311) |
| ($246) |
| ($1,376) |
| ($1,222) |
| ($762) |
| ($438) |
| ($311) |
| ($246) |
Reduction in first quarter 2006 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
other postretirement benefit cost |
| ($1,562) |
| ($1,332) |
| ($865) |
| ($512) |
| ($376) |
| ($268) | ||||||||||||
Medicare subsidies received in |
|
|
|
|
|
|
|
|
|
|
|
For further information on the Medicare Act refer to Note 11 to the financial statements in the Form 10-K.
34
35
NOTE 8.7. BUSINESS SEGMENT INFORMATION
Entergy Corporation
Entergy's reportable segments as of March 31, 20072008 are Utility and Non-Utility Nuclear. Utility generates, transmits, distributes, and sells electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and provides natural gas utility service in portions of Louisiana. Non-Utility Nuclear owns and operates six nuclear power plants and is primarily focused on selling electric power produced by those plants to wholesale customers. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the non-nuclear wholesale assets business, the Competitive Retail Services business, and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005, and is reportingreported Entergy New Orleans results under the equity method of accounting in the Utility segment. As discussed more thoroughlysegment in Note 9 to2006 and 2005. On May 7, 200 7, the financial statements,bankruptcy judge entered an order confirming Entergy expects to reconsolidateNew Orleans' plan of reorganization. With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007.
Entergy's segment financial information for the first quarters of 20072008 and 20062007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(In Thousands) | (In Thousands) | ||||||||||||||||||
2007 |
|
|
|
|
|
|
|
|
| ||||||||||
2008 |
|
|
|
|
|
|
|
|
| ||||||||||
Operating Revenues | $2,103,269 |
| $458,251 |
| $45,048 |
| ($6,338) |
| $2,600,230 | $2,136,330 |
| $680,484 |
| $54,800 |
| ($6,880) |
| $2,864,734 | |
Equity in earnings of |
|
|
|
|
| ||||||||||||||
unconsolidated equity affiliates | $2,909 |
| $- |
| $1,625 |
| $- |
| $4,534 | ||||||||||
Equity in loss of unconsolidated |
|
|
|
|
| ||||||||||||||
equity affiliates | $- |
| $- |
| ($929) |
| $- |
| ($929) | ||||||||||
Income Taxes (Benefit) | $79,180 |
| $84,735 |
| ($19,362) |
| $- |
| $144,553 | $84,243 |
| $124,973 |
| ($16,213) |
| $- |
| $193,003 | |
Net Income (Loss) | $104,450 |
| $128,170 |
| ($20,425) |
| $- |
| $212,195 | $117,147 |
| $221,697 |
| ($30,095) |
| $- |
| $308,749 | |
Total Assets | $25,167,308 | $5,513,662 | $2,887,861 | ($2,421,989) | $31,146,842 | $26,201,946 | $7,175,012 | $1,938,323 | ($1,450,448) | $33,864,833 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
2006 |
|
|
|
|
|
|
|
|
| ||||||||||
2007 |
|
|
|
|
|
|
|
|
| ||||||||||
Operating Revenues | $2,131,020 |
| $388,010 |
| $66,688 |
| ($17,687) |
| $2,568,031 | $2,197,099 |
| $458,251 |
| $45,048 |
| ($6,338) |
| $2,694,060 | |
Equity in earnings (loss) of |
|
|
|
|
|
|
|
|
|
| |||||||||
unconsolidated equity affiliates | $5,643 |
| $- |
| ($2,057) |
| $- |
| $3,586 | ($1) |
| $- |
| $1,625 |
| $- |
| $1,624 | |
Income Taxes (Benefit) | $76,973 |
| $52,916 |
| ($11,059) |
| $- |
| $118,830 | $80,692 |
| $84,735 |
| ($19,362) |
| $- |
| $146,065 | |
Net Income (Loss) | $119,752 |
| $81,530 |
| ($7,622) |
| ($32) |
| $193,628 | $104,450 |
| $128,170 |
| ($20,425) |
| $- |
| $212,195 | |
Total Assets | $24,736,486 | $5,037,167 | $3,451,763 | ($2,709,370) | $30,516,046 | $25,695,295 | $5,518,895 | $2,882,628 | ($2,421,989) | $31,674,829 |
Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Almost all of Entergy's goodwill is related to the Utility segment.
Registrant Subsidiaries
The Registrant Subsidiaries' have one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business. The Registrant Subsidiaries' operations are managed on an integrated basis because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.
36
NOTE 8. ACQUISITION
Calcasieu (Entergy Gulf States Louisiana)
In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56.4 million from Dynegy, Inc. Entergy Gulf States Louisiana received the plant, materials and supplies, SO2 emission allowances, and related real estate in the transaction. The FERC and the LPSC approved the acquisition.
NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDINGRISK MANAGEMENT AND FAIR VALUE
See Note 1816 to the financial statements in the Form 10-K for a discussion of Entergy's and the Registrant Subsidiaries' exposure to market and commodity risks. See Note 17 to the financial statements in the Form 10-K for a discussion of Entergy's and the Registrant Subsidiaries' decommissioning trust funds.
Effective January 1, 2008 Entergy and the Registrant Subsidiaries adopted Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (SFAS 157), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 generally does not require any new fair value measurements. However, in some cases, the application of SFAS 157 in the future may change Entergy's and the Registrant Subsidiaries' practice for measuring and disclosing fair values under other accounting pronouncements that require or permit fair value measurements.
SFAS 157 defines fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
SFAS 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of fair value hierarchy defined in SFAS 157 are as follows:
Level 2 consists primarily of individually owned debt instruments or shares in common trusts.
37
Level 1 | Level 2 | Level 3 | Total | |||||
(In Millions) | ||||||||
Assets: | ||||||||
Decommissioning trust funds | $580 | $2,601 | $- | $3,181 | ||||
Gas hedge contracts | 86 | - | - | 86 | ||||
$666 | $2,601 | $- | $3,267 | |||||
Liabilities: | ||||||||
Derivatives | $- | $- | $288 | $288 |
Balance as of January 1, 2008 | $12 | |
Price changes | 196 | |
Originated | 74 | |
Settlements | 6 | |
Balance as of March 31, 2008 | $288 |
38
The following table sets forth, by level within the fair value hierarchy established by SFAS 157, the Registrant Subsidaries' assets that are accounted for at fair value on a recurring basis as of March 31, 2008. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Level 1 | Level 2 | Level 3 | Total | |||||
(In Millions) | ||||||||
Entergy Arkansas: | ||||||||
Assets: | ||||||||
Decommissioning trust funds | $49.8 | $396.6 | $- | $446.4 |
Entergy Gulf States Louisiana: | ||||||||
Assets: | ||||||||
Decommissioning trust funds | $15.9 | $332.9 | $- | $348.8 | ||||
Gas hedge contracts | 18.9 | - | - | 18.9 | ||||
$34.8 | $332.9 | $- | $367.7 |
Entergy Louisiana: | ||||||||
Assets: | ||||||||
Decommissioning trust funds | $42.4 | $166.6 | $- | $209.0 | ||||
Gas hedge contracts | 36.9 | - | - | 36.9 | ||||
$79.3 | $166.6 | $- | $245.9 |
Entergy Mississippi: | ||||||||
Assets: | ||||||||
Gas hedge contracts | $30.6 | $- | $- | $30.6 |
System Energy: | ||||||||
Assets: | ||||||||
Decommissioning trust funds | $69.7 | $235.0 | $- | $304.7 |
NOTE 10. INCOME TAXES
Income Tax Audits and Litigation
In the first quarter 2008, Entergy agreed to concede the issue relating to the simplified method of allocating the "mixed service costs" component of overhead. Entergy's concession will result in an increase to taxable income for income tax purposes of $361 million for 2005 and $240 million for 2006. Because Entergy has a consolidated net operating loss carryover into these years, this concession has the effect of reducing the consolidated net operating loss carryover. Entergy's concession will not have a material effect on the Registrant Subsidiaries' net income. Of the total increase to taxable income for income tax purposes of $601 million, the taxable income for income tax purposes of the Registrant Subsidiaries increased as follows: Entergy Arkansas, $173 million; Entergy Gulf States Louisiana, $199 million; Entergy Louisiana, $15 million; Entergy Mississippi, $89 million; Entergy New Orleans, bankruptcy proceeding. On May 7,$15 million; and System Energy, $20 million.
NOTE 11. ENTERGY GULF STATES LOUISIANA BASIS OF PRESENTATION
Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the bankruptcy judge entered an order confirmingsole retail jurisdiction of the PUCT, Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds,Texas, and the agreement on insurance recovery with oneother operating under the sole retail jurisdiction of its excess insurers,the LPSC, Entergy New Orleans waivedGulf States Louisiana. Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the conditions precedentgas-fired generating plants located in its planTexas, undivided 42.5% ownership shares of reorganization,Entergy Gulf States, Inc.'s 70% ownership
39
interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the plan became effective on May 8, 2007.extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
35
Following are significant terms in Entergy New Orleans' plan of reorganization:
Entergy New Orleans currently estimates that the prepetition claims that will be allowed and paid (either in cash or by notes) in the bankruptcy case will approximate the prepetition liabilities currently recorded by Entergy New Orleans, including interest.
(Entergy Corporation)
Entergy'sGulf States Louisiana's income statement and cash flow statement for the three months ended March 31, 2007 includes $41 million in operating revenues and $34 million in purchased power expenses from transactions withinclude the operations of Entergy New Orleans. Entergy's income statement for the three months ended March 31, 2006 includes $61 million in operating revenues and $7 million in purchased power expenses from transactions withTexas. Entergy New Orleans. Entergy'sGulf States Louisiana's balance sheet as of March 31, 2007 includes $98 million of accounts that are payable to Entergy affiliates by Entergy New Orleans. Entergy's balance sheetsheets as of December 31, 2006 includes $95 million of accounts that are payable to Entergy affiliates by Entergy New Orleans.
With confirmation2007 and March 31, 2008 reflect the effects of the plan of reorganization, Entergy expects to reconsolidate Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007. Because Entergy owns allseparation of the common stock of Entergy New Orleans, reconsolidation will not affect the amount of net income that Entergy records from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.
(Entergy New Orleans)
Reorganization items reported as operating expenses in the income statements for the three months ended March 31, 2007 and 2006 primarily consist of professional fees associated with the bankruptcy case.
36
Texas business.
NOTE 10. INCOME TAXES
Entergy or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, Entergy is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years before 2002. Entergy's U.S. income tax returns for 2002 and 2003 are currently under examination by the IRS, and the examination is anticipated to be completed by the end of 2007. As of March 31, 2007, the IRS has not proposed any significant adjustments resulting from the current examination.
On November 16, 2006, the IRS issued a Notice of Deficiency to Entergy for the tax years 1997 and 1998. The Notice asserts that Entergy owes additional tax of $17.3 million for 1997 and $61.7 million for 1998. Entergy and the IRS have settled all issues for 1997 and 1998 except for those raised in the Notice which are described as follows: 1) The IRS believes that U.K. Windfall Tax paid by London Electricity, a former subsidiary of Entergy, was not an eligible tax under the foreign tax credit provisions of the Internal Revenue Code. Entergy believes that it properly claimed a foreign tax credit for the tax year 1998 attributable to the Windfall Tax paid by London Electricity. This issue accounts for $59.7 million of the 1998 deficiency. 2) The IRS denied Entergy's change in method of accounting for street lighting assets and the related increase in depreciation deductions for 1997 and 1998. Entergy believes that street lighting assets are a separate line of business not subject to the same 20-year depreciable life as distribution assets, but rather are properly classified as having a 7-year depreciable life. This issue accounts for all of the 1997 deficiency of $17.3 million and $2 million of the 1998 deficiency. On December 6, 2006, Entergy filed a petition in the U.S. Tax Court requesting a redetermination of these issues and the resulting deficiencies.
Entergy expects the IRS to issue another Notice of Deficiency in 2007 for the years 1999 - 2001 related to the U.K. Windfall Tax credit and street lighting issues indicating deficiencies of approximately $29 million and $7 million, respectively. In addition, Entergy expects the IRS to include in the Notice an amount related to depreciation deductions that resulted from Entergy's purchase price allocations on its acquisitions of the Pilgrim and Indian Point 2 power plants. Entergy's allocation methodology results in nuclear plant depreciation deductions which have been disallowed by the IRS. Entergy estimates that the 1999 - 2001 deficiency related to nuclear plant depreciation will be approximately $11 million.
For years after 2001, the U.K. Windfall Tax, street lighting, and nuclear plant depreciation issues resulted in federal and state tax benefits of approximately $63 million, $6 million, and $52 million, respectively for each issue, for a total of $121 million.
In summary, these three issues have resulted in tax reductions of approximately $152 million for foreign tax credits, $32 million for street lighting, and $63 million for nuclear depreciation, for a total of $247 million for all years. The potential for accrued federal and state interest on these three issues for all years is estimated to be approximately $69 million, after-tax and net of deposit offsets. Entergy believes that the provisions recorded in its financial statements and as shown in the table below are sufficient to address these three issues as well as other liabilities that are reasonably estimable, including an estimate of probable interest expense, associated with all uncertain tax positions.
Entergy has $124 million in deposits on account with the IRS covering these three and all other uncertain tax positions.
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy and the Registrant Subsidiaries adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, Entergy recognized an increase in the
37
liability for unrecognized tax benefits of approximately $5 million, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.
As of January 1, 2007, Entergy had a total balance of unrecognized tax benefits of approximately $2 billion. Included in this balance of unrecognized tax benefits are $1.7 billion of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Entergy's January 1, 2007 balance of unrecognized tax benefits includes $244 million which could affect the effective income tax rate. Entergy accrues interest and penalties expenses related to unrecognized tax benefits in income tax expense. Entergy's January 1, 2007 balance of unrecognized tax benefits includes approximately $52 million accrued for the possible payment of interest and penalties.
As of January 1, 2007, Entergy and the Registrant Subsidiaries have total balances of unrecognized tax benefits, which did not change significantly during the three months ended March 31, 2007, reflected in their balance sheets as follows:
|
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| Entergy |
| System | ||
| Entergy | Arkansas |
| Gulf States |
| Louisiana |
| Mississippi |
| New Orleans |
| Energy | ||
(In Thousands) | ||||||||||||||
Taxes accrued |
| ($184,372) | ($43,445) |
| ($640) |
| $234 |
| $5,830 |
| $4,304 |
| ($35,506) | |
Accumulated deferred |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total unrecognized |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Registrant Subsidiaries' January 1, 2007 balances of unrecognized tax benefits include amounts which could affect the effective income tax rate as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Included in the January 1, 2007 balance of unrecognized tax benefits were accruals for the possible payment of interest and penalty as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
Entergy and the Registrant Subsidiaries do not expect that total unrecognized tax benefits will significantly change within the next twelve months.
38
NOTE 11.12. NEW ACCOUNTING PRONOUNCEMENTS
TheIn March 2008 the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option161 "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161), which requires enhanced disclosures about an entity's derivative and hedging activities. SFAS 161 requires qualitative disclosures about objectives and strategies for Financial Assets and Financial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an option for companies to select certain financial assets and liabilities to be accounted for atusing derivatives, quantitative disclosures about fair value with changesamounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in the fair value of those assets or liabilities being reported through earnings. The intent of the standardderivative agreements. SFAS 161 is to mitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies can select existing assets or liabilitieseffective for this fair value option concurrent with the effective date of January 1, 2008financial statements issued for companies with fiscal years ending December 31 or can select future assets or liabilities as they are acquired or entered into. Entergy is in the process of evaluating the potential effect of making this accounting election.
In June 2006, the EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of those taxes in interim and annual financial statements, for each period for which an income statement is presented, should be disclosed if those amounts are significant. Entergy's pol icy is to present such taxes on a net basis. EITF 06-3 did not affect Entergy's financial statements.periods beginning after November 15, 2008.
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Registrant Subsidiaries is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2007,2008, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (individually "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrant's or Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commi ssionExch ange Commission rules and forms; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.
3940
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income remained relatively unchangeddecreased $6.2 million for the first quarter of 20072008 compared to the first quarter of 2006 because higher net revenue was offset by higher taxes other than income taxes and2007 primarily due to higher other operation and maintenance expenses.expenses, lower net revenue, and lower other income partially offset by lower taxes other than income taxes.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.charges (credits). Following is an analysis of the change in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
|
| Amount |
|
| (In Millions) |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2007 net revenue |
| $253.3 |
Deferred fuel cost revisions | (5.8) | |
Volume/weather | (1.9) | |
Purchased power capacity | (1.8) | |
Net wholesale revenue | 3.2 | |
Other | 1.2 | |
2008 net revenue | $248.2 |
The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.
The volume/weather variance is primarily due to an increase in electricity usage, including the effect of more favorable weather compared to 2006. Billed retail electricity usage increased by a total of 113 GWh.
The deferred fuel cost revisions variance is primarily due to the 2006 energy cost recovery true-up, made in the first quarter of 2007, which increased net revenue by $6.6 million.
The volume/weather variance is primarily due to decreased usage during the unbilled sales period. See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.
The purchased power capacity variance is primarily due to higher purchased power capacity charges partially offset by lower reserve equalization expenses.
The net wholesale revenue variance is primarily due to decreasedimproved results from wholesale contracts and lowerhigher wholesale prices.
Gross operating revenues, and fuel and purchased power expenses, and other regulatory charges (credits)
GrossThe gross operating revenues increased primarily due to:variance includes the following:
41
The fuel and purchased power expenses variance includes the following:
40
The increase was partially offset by a decrease of $17.7 million in gross wholesale revenue due to lower wholesale prices and a decrease in volume.
Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense associated with higher energy cost recovery rates collected from customers.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
Partially offsetting the increase was a decrease of $1.6 million in payroll and benefits costs.expenses.
Taxes other than income taxes increaseddecreased primarily due to an increase in city franchise tax expense duea $3.5 million decrease related to a change in August 2006resolution in the accounting for city franchisefirst quarter 2008 of issues relating to tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.
Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 2006 of estimated depreciable lives involving certain intangible assets.exempt bonds.
Other income increaseddecreased primarily due to a revision in 2007 to the allowance for equity funds used during construction related to removal costs.costs and a decrease in interest earned on money pool investments.
Interest and other charges increaseddecreased primarily due to interest expense of $2.9 million recorded in the first quarter of 2007 on advances from independent power producers per a FERC order, partially offset by a revision to the allowance for borrowed funds used during construction related to removal costs.
Income Taxes
The effective income tax rates for the first quarters of 2008 and 2007 were 41.7% and 2006 were 45.4% and 44.1%, respectively. The difference in the effective income tax rate for the first quarter 2008 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and an adjustment of the federal tax reserve for prior tax years, partially offset by flow-through book and tax timing differences. The difference in the effective income tax rate for the first quarter 2007 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction. The difference in the effective income tax rate for the first quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by the amortization of investment tax credits.
41
42
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $34,815 |
| $9,393 | Cash and cash equivalents at beginning of period |
| $212 |
| $34,815 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 208,282 |
| 95,463 | Operating activities |
| 103,754 |
| 208,282 |
| Investing activities |
| (115,117) |
| (89,049) | Investing activities |
| (99,056) |
| (115,117) |
| Financing activities |
| (17,518) |
| 28,556 | Financing activities |
| 5,129 |
| (17,518) |
Net increase in cash and cash equivalents | Net increase in cash and cash equivalents |
| 75,647 |
| 34,970 | Net increase in cash and cash equivalents |
| 9,827 |
| 75,647 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $110,462 |
| $44,363 | Cash and cash equivalents at end of period |
| $10,039 |
| $110,462 |
Operating Activities
Cash flow from operations increased $112.8decreased $104.5 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due to the timing of payments to vendors, increaseddecreased recovery of deferred fuel costs and the timing of the collection of receivables from customers.payments to vendors.
Investing Activities
Net cash flow used in investing activities increased $26.1decreased $16.1 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due toan increase in the money pool activity.receivable in 2007. The decrease was partially offset by an increase in fossil construction expenditures related to a project that began in 2008.
Financing Activities
Financing activities used $17.5provided $5.1 million of cash for the first quarter of 20072008 compared to providing $28.6using $17.5 million of cash for the first quarter of 20062007 primarily due to the issuance of $75 million of preferred stock in March 2006, partially offset byEntergy Arkansas increasing its money pool activity.borrowings outstanding and a decrease in common stock dividends paid.
Capital Structure
Entergy Arkansas' capitalization is balanced between equity and debt, as shown in the following table.
|
| March 31, |
| December 31, |
| March 31, |
| December 31, |
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 45.9% |
| 47.5% |
| 48.6% |
| 49.0% |
Effect of subtracting cash from debt |
| 2.0% |
| 0.6% |
| 0.2% |
| 0.0% |
Debt to capital |
| 47.9% |
| 48.1% |
| 48.8% |
| 49.0% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas' financial condition.
4243
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
In April 2007,2008, Entergy Arkansas renewed its $100 million credit facility through April 2008 and increased the amount of the credit facility to $100 million.2009. There were no outstanding borrowings under the Entergy Arkansas credit facility as of March 31, 2007.2008.
Entergy Arkansas' receivables from or (payables to) the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$62,748 |
| $16,109 |
| $24,577 |
| ($27,346) |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
($91,448) |
| ($77,882) |
| $62,748 |
| $16,109 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, energy cost rate investigation, federal regulation, Energy Policy Act of 2005, utility restructuring, nuclear matters, and environmental risks. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
Ouachita Acquisition
Entergy Arkansas filed with the APSC in September 2007 for its approval of the Ouachita plant acquisition, including full cost recovery. The APSC Staff and the Arkansas attorney general have supported Entergy Arkansas' acquisition of the plant, but oppose the sale of one-third of the capacity and energy to Entergy Gulf States Louisiana. The industrial group AEEC has opposed Entergy Arkansas' purchase of the plant. The Arkansas attorney general has opposed recovery of the non-fuel costs of the plant through a separate rider, while the APSC Staff recommended revisions to the rider. In December 2007, the APSC issued an order approving recovery through a rider of the capacity costs associated with the interim tolling agreement, which will be in effect until APSC action on the acquisition of the plant. A hearing before the APSC was held in April 2008 to address Entergy Arkansas' request for acquisition of the plant and concurrent cost recovery, and a decision is pending.
On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 APSC order that approved recovery through a rider of the capacity costs associated with the interim tolling agreement. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the appeal.
Production Cost Allocation Rider
In its June 2007 decision on Entergy Arkansas' August 2006 rate filing, the APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, but set a termination date of December 31, 2008 for the rider. In December 2007, the APSC issued a subsequent order stating the production cost allocation rider will remain in effect, and any future termination of the rider will be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing. On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 APSC order. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the appeal.
44
Energy Cost Recovery Rider
Entergy Arkansas' retail rates include an energy cost recovery rider. In December 2007, the APSC issued an order stating that Entergy Arkansas' energy cost recovery rider will remain in effect, and any future termination of the rider will be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing. On March 18, 2008 the Arkansas attorney general and the AEEC filed a notice of appeal of the December 2007 APSC order. Entergy Arkansas will respond to the positions of the Arkansas attorney general and the AEEC in the appeal.
In March 2007,2008, Entergy Arkansas filed with the APSC its annual energy cost rate for the period April 20072008 through March 2008.2009. The filed energy cost rate decreasedincreased from $0.02827/$0.01179/kWh to $0.01179/$0.01869/kWh.
In March 2007, Entergy Arkansas filed rebuttal testimony in The increase was caused by the rate case that it filed in August 2006. The rebuttal testimony requests an annual rate increase of $106.5 million, and retains a return on common equity (ROE) of 11.25%. A primary reason for the decline in the rate request from the original request of $150 million is the removalfollowing: 1) all three of the revenue requirement for the proposed acquisition of a load-following, combined cycle gas-fired generation resource, because Entergy Arkansas was not able to complete negotiations with the owner within the time requirements of the rate case. Also, in March 2007 and April 2007, the APSC staff and intervenors filed additional testimony. The APSC staff's filings indicate that an annual rate increase of $2 million is warranted, with a proposed ROE of 9.9%. The APSC staff has also taken positions,nuclear power plants from which Entergy Arkansas opposes, regarding costs accumulatedobtains power, ANO 1 and 2 and Grand Gulf, will have refueling outages in the storm reserve, FERC-allocated System Agreement cost all ocation,2008, and removal costs associated with the termination of a lease that could have an adverse effect on future financial results. An evidentiary hearing in the rate case proceeding ended in early-May 2007.
Energy Cost Rate Investigation
In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas' petition for rehearing and for stay of the APSC's January 2007 order in the proceeding investigating Entergy Arkansas' interim energy cost rate.
43
rate is adjusted to account for the replacement power costs that will be incurred while these units are down; 2) Entergy Arkansas has a deferred fuel cost balance from under-recovered fuel costs at December 31, 2007; and 3) fuel and purchased power prices have increased.
Federal Regulation
See "System Agreement Proceedings", and "Independent Coordinator of Transmission", and "Available Flowgate Capacity Proceeding" in the "Significant Factors and Known Trends" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
4445
ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ||||||
INCOME STATEMENTS | INCOME STATEMENTS | INCOME STATEMENTS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Electric | $502,738 | $447,622 | $499,374 | $502,738 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 138,039 | 102,471 | 83,562 | 138,039 | ||||
Purchased power | 116,405 | 118,930 | 166,524 | 116,405 | ||||
Nuclear refueling outage expenses | 7,013 | 7,355 | 6,931 | 7,013 | ||||
Other operation and maintenance | 99,855 | 91,755 | 107,123 | 99,855 | ||||
Decommissioning | 8,000 | 7,483 | 8,552 | 8,000 | ||||
Taxes other than income taxes | 19,983 | 9,620 | 15,739 | 19,983 | ||||
Depreciation and amortization | 56,065 | 52,818 | 57,237 | 56,065 | ||||
Other regulatory credits - net | (5,028) | (5,527) | ||||||
Other regulatory charges (credits) - net | 1,045 | (5,028) | ||||||
TOTAL | 440,332 | 384,905 | 446,713 | 440,332 | ||||
OPERATING INCOME | 62,406 | 62,717 | 52,661 | 62,406 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 5,596 | 1,902 | 1,778 | 5,596 | ||||
Interest and dividend income | 7,583 | 7,675 | 5,257 | 7,583 | ||||
Miscellaneous - net | (1,206) | (885) | (1,014) | (1,206) | ||||
TOTAL | 11,973 | 8,692 | 6,021 | 11,973 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 19,354 | 18,978 | 18,628 | 19,354 | ||||
Other interest - net | 4,897 | 1,540 | 1,938 | 4,897 | ||||
Allowance for borrowed funds used during construction | (2,744) | (857) | (850) | (2,744) | ||||
TOTAL | 21,507 | 19,661 | 19,716 | 21,507 | ||||
INCOME BEFORE INCOME TAXES | 52,872 | 51,748 | 38,966 | 52,872 | ||||
Income taxes | 23,990 | 22,825 | 16,248 | 23,990 | ||||
NET INCOME | 28,882 | 28,923 | 22,718 | 28,882 | ||||
Preferred dividend requirements and other | 1,718 | 2,038 | 1,718 | 1,718 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $27,164 | $26,885 | $21,000 | $27,164 | ||||
See Notes to Financial Statements. | ||||||||
45
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46
ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ||||||
STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $28,882 | $28,923 | $22,718 | $28,882 | ||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||
Reserve for regulatory adjustments | (552) | 7,082 | (3,010) | (552) | ||||
Other regulatory credits - net | (5,028) | (5,527) | ||||||
Other regulatory charges (credits) - net | 1,045 | (5,028) | ||||||
Depreciation, amortization, and decommissioning | 64,065 | 60,301 | 65,789 | 64,065 | ||||
Deferred income taxes,investment tax credits, and non-current taxes accrued | 67,344 | 20,019 | ||||||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 21,837 | 67,346 | ||||||
Changes in working capital: | ||||||||
Receivables | 39,292 | 25,549 | 48,573 | 39,292 | ||||
Fuel inventory | (12,908) | (14,869) | (7,339) | (12,908) | ||||
Accounts payable | (27,956) | (69,957) | (71,886) | (27,956) | ||||
Taxes accrued | (30,513) | 9,570 | - - | (30,513) | ||||
Interest accrued | 596 | 3,666 | 2,771 | 596 | ||||
Deferred fuel costs | 84,739 | 47,312 | 27,179 | 84,739 | ||||
Other working capital accounts | 3,845 | 5,649 | (7,711) | 3,845 | ||||
Provision for estimated losses and reserves | 134 | (1,214) | 285 | 134 | ||||
Changes in other regulatory assets | 8,441 | 2,037 | 8,132 | 8,441 | ||||
Other | (12,099) | (23,078) | (4,629) | (12,101) | ||||
Net cash flow provided by operating activities | 208,282 | 95,463 | 103,754 | 208,282 | ||||
INVESTING ACTIVITIES | ||||||||
Construction expenditures | (72,495) | (63,547) | (97,961) | (72,495) | ||||
Allowance for equity funds used during construction | 5,596 | 1,902 | 1,778 | 5,596 | ||||
Nuclear fuel purchases | (30,530) | - - | (58,998) | (30,530) | ||||
Proceeds from sale/leaseback of nuclear fuel | 32,601 | - - | 60,184 | 32,601 | ||||
Proceeds from nuclear decommissioning trust fund sales | 7,008 | 48,526 | 23,449 | 7,008 | ||||
Investment in nuclear decommissioning trust funds | (10,658) | (51,353) | (27,508) | (10,658) | ||||
Change in money pool receivable - net | (46,639) | (24,577) | - - | (46,639) | ||||
Net cash flow used in investing activities | (115,117) | (89,049) | (99,056) | (115,117) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from the issuance of preferred stock | - - | 73,446 | ||||||
Change in money pool payable - net | - - | (27,346) | 13,566 | - - | ||||
Dividends paid: | ||||||||
Common stock | (15,800) | (15,600) | (5,000) | (15,800) | ||||
Preferred stock | (1,718) | (1,944) | (3,437) | (1,718) | ||||
Net cash flow provided by (used in) financing activities | (17,518) | 28,556 | 5,129 | (17,518) | ||||
Net increase in cash and cash equivalents | 75,647 | 34,970 | 9,827 | 75,647 | ||||
Cash and cash equivalents at beginning of period | 34,815 | 9,393 | 212 | 34,815 | ||||
Cash and cash equivalents at end of period | $110,462 | $44,363 | $10,039 | $110,462 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Cash paid/(received) during the period for: | ||||||||
Interest - net of amount capitalized | $20,361 | $14,049 | $15,227 | $20,361 | ||||
Income taxes | ($3,554) | $- | ||||||
See Notes to Financial Statements. | ||||||||
47
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | $10,039 | $212 | ||
Accounts receivable: | ||||
Customer | 97,384 | 85,414 | ||
Allowance for doubtful accounts | (16,573) | (16,649) | ||
Associated companies | 79,458 | 75,756 | ||
Other | 73,173 | 124,111 | ||
Accrued unbilled revenues | 54,857 | 68,240 | ||
Total accounts receivable | 288,299 | 336,872 | ||
Deferred fuel costs | 87,584 | 114,763 | ||
Fuel inventory - at average cost | 27,844 | 20,505 | ||
Materials and supplies - at average cost | 108,969 | 106,165 | ||
Deferred nuclear refueling outage costs | 23,418 | 17,623 | ||
System agreement cost equalization | 268,000 | 268,000 | ||
Prepayments and other | 10,687 | 16,511 | ||
TOTAL | 824,840 | 880,651 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 11,203 | 11,203 | ||
Decommissioning trust funds | 451,337 | 466,348 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,442 | 1,442 | ||
Other | 5,391 | 5,391 | ||
TOTAL | 469,373 | 484,384 | ||
UTILITY PLANT | ||||
Electric | 6,880,975 | 6,792,825 | ||
Property under capital lease | 1,734 | 2,436 | ||
Construction work in progress | 152,503 | 146,651 | ||
Nuclear fuel under capital lease | 125,727 | 124,585 | ||
Nuclear fuel | 17,655 | 19,548 | ||
TOTAL UTILITY PLANT | 7,178,594 | 7,086,045 | ||
Less - accumulated depreciation and amortization | 3,159,458 | 3,112,896 | ||
UTILITY PLANT - NET | 4,019,136 | 3,973,149 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 99,487 | 93,557 | ||
Other regulatory assets | 522,146 | 534,937 | ||
Other | 36,028 | 33,128 | ||
TOTAL | 657,661 | 661,622 | ||
TOTAL ASSETS | $5,971,010 | $5,999,806 | ||
See Notes to Financial Statements. | ||||
48 | ||||
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $440,219 | $486,201 | ||
Other | 87,908 | 100,246 | ||
Customer deposits | 59,188 | 57,751 | ||
Accumulated deferred income taxes | 16,338 | 26,964 | ||
Interest accrued | 20,218 | 17,447 | ||
Obligations under capital leases | 49,048 | 49,738 | ||
Other | 11,681 | 10,890 | ||
TOTAL | 684,600 | 749,237 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,365,218 | 1,330,324 | ||
Accumulated deferred investment tax credits | 54,861 | 55,854 | ||
Obligations under capital leases | 78,412 | 77,283 | ||
Other regulatory liabilities | 98,440 | 117,510 | ||
Decommissioning | 514,178 | 505,626 | ||
Accumulated provisions | 14,699 | 14,414 | ||
Pension and other postretirement liabilities | 261,579 | 260,381 | ||
Long-term debt | 1,316,061 | 1,314,525 | ||
Other | 66,050 | 73,739 | ||
TOTAL | 3,769,498 | 3,749,656 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 116,350 | 116,350 | ||
Common stock, $0.01 par value, authorized 325,000,000 | ||||
shares; issued and outstanding 46,980,196 shares in 2008 | ||||
and 2007 | 470 | 470 | ||
Paid-in capital | 588,527 | 588,527 | ||
Retained earnings | 811,565 | 795,566 | ||
TOTAL | 1,516,912 | 1,500,913 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $5,971,010 | $5,999,806 | ||
See Notes to Financial Statements. |
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $2,684 | $2,849 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 107,778 | 31,966 | ||
Total cash and cash equivalents | 110,462 | 34,815 | ||
Accounts receivable: | ||||
Customer | 106,874 | 105,347 | ||
Allowance for doubtful accounts | (15,031) | (15,257) | ||
Associated companies | 101,243 | 57,554 | ||
Other | 84,748 | 114,108 | ||
Accrued unbilled revenues | 58,141 | 66,876 | ||
Total accounts receivable | 335,975 | 328,628 | ||
Deferred fuel costs | - - | 2,157 | ||
Accumulated deferred income taxes | 22,086 | 19,232 | ||
Fuel inventory - at average cost | 35,881 | 22,973 | ||
Materials and supplies - at average cost | 102,660 | 100,061 | ||
Deferred nuclear refueling outage costs | 17,892 | 23,678 | ||
Prepayments and other | 9,073 | 6,368 | ||
TOTAL | 634,029 | 537,912 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 11,205 | 11,206 | ||
Decommissioning trust funds | 444,162 | 439,408 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,445 | 1,446 | ||
Other | 2,976 | 2,976 | ||
TOTAL | 459,788 | 455,036 | ||
UTILITY PLANT | ||||
Electric | 6,643,784 | 6,599,348 | ||
Property under capital lease | 4,534 | 5,260 | ||
Construction work in progress | 128,018 | 113,069 | ||
Nuclear fuel under capital lease | 121,397 | 124,850 | ||
Nuclear fuel | 19,253 | 21,044 | ||
TOTAL UTILITY PLANT | 6,916,986 | 6,863,571 | ||
Less - accumulated depreciation and amortization | 3,019,804 | 2,986,576 | ||
UTILITY PLANT - NET | 3,897,182 | 3,876,995 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 86,312 | 93,682 | ||
Other regulatory assets | 529,742 | 542,052 | ||
Other | 40,812 | 35,359 | ||
TOTAL | 656,866 | 671,093 | ||
TOTAL ASSETS | $5,647,865 | $5,541,036 | ||
See Notes to Financial Statements. | ||||
48 | ||||
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $36,553 | $64,546 | ||
Other | 116,478 | 117,655 | ||
Customer deposits | 52,896 | 49,978 | ||
Taxes accrued | 6,648 | 37,161 | ||
Interest accrued | 20,175 | 19,579 | ||
Deferred fuel costs | 82,582 | - - | ||
Obligations under capital leases | 56,203 | 56,265 | ||
Other | 14,648 | 15,372 | ||
TOTAL | 386,183 | 360,556 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,306,294 | 1,243,855 | ||
Accumulated deferred investment tax credits | 58,839 | 59,834 | ||
Obligations under capital leases | 69,728 | 73,845 | ||
Other regulatory liabilities | 104,454 | 103,350 | ||
Decommissioning | 480,810 | 472,810 | ||
Accumulated provisions | 14,673 | 14,539 | ||
Pension and other postretirement liabilities | 258,407 | 259,147 | ||
Long-term debt | 1,308,400 | 1,306,201 | ||
Other | 98,438 | 96,623 | ||
TOTAL | 3,700,043 | 3,630,204 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 116,350 | 116,350 | ||
Common stock, $0.01 par value, authorized 325,000,000 | ||||
shares; issued and outstanding 46,980,196 shares in 2007 | ||||
and 2006 | 470 | 470 | ||
Paid-in capital | 588,527 | 588,528 | ||
Retained earnings | 856,292 | 844,928 | ||
TOTAL | 1,561,639 | 1,550,276 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $5,647,865 | $5,541,036 | ||
See Notes to Financial Statements. | ||||
49
ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ENTERGY ARKANSAS, INC. | ||||||||||||||
SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | ||||||||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Increase/ | Increase/ | |||||||||||||||
Description | 2007 | 2006 | (Decrease) | % | 2008 | 2007 | (Decrease) | % | ||||||||
(Dollars In Millions) | (Dollars In Millions) | |||||||||||||||
Electric Operating Revenues: | ||||||||||||||||
Residential | $ 181 | $ 151 | $ 30 | 20 | $ 179 | $ 181 | ($ 2) | (1) | ||||||||
Commercial | 99 | 80 | 19 | 24 | 94 | 99 | (5) | (5) | ||||||||
Industrial | 102 | 89 | 13 | 15 | 92 | 102 | (10) | (10) | ||||||||
Governmental | 5 | 4 | 1 | 25 | 4 | 5 | (1) | (20) | ||||||||
Total retail | 387 | 324 | 63 | 19 | 369 | 387 | (18) | (5) | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 78 | 78 | - - | - - | 96 | 78 | 18 | 23 | ||||||||
Non-associated companies | 33 | 51 | (18) | (35) | 33 | 33 | - | - - | ||||||||
Other | 5 | (5) | 10 | 200 | 1 | 5 | (4) | (80) | ||||||||
Total | $ 503 | $ 448 | $ 55 | 12 | $ 499 | $ 503 | ($ 4) | (1) | ||||||||
Billed Electric Energy | ||||||||||||||||
Sales (GWh): | ||||||||||||||||
Residential | 2,032 | 1,910 | 122 | 6 | 2,143 | 2,032 | 111 | 5 | ||||||||
Commercial | 1,327 | 1,279 | 48 | 4 | 1,347 | 1,327 | 20 | 2 | ||||||||
Industrial | 1,721 | 1,778 | (57) | (3) | 1,713 | 1,721 | (8) | - - | ||||||||
Governmental | 65 | 65 | - | - - | 65 | 65 | - | - - | ||||||||
Total retail | 5,145 | 5,032 | 113 | 2 | 5,268 | 5,145 | 123 | 2 | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 1,993 | 1,865 | 128 | 7 | 1,954 | 1,993 | (39) | (2) | ||||||||
Non-associated companies | 669 | 856 | (187) | (22) | 540 | 669 | (129) | (19) | ||||||||
Total | 7,807 | 7,753 | 54 | 1 | 7,762 | 7,807 | (45) | (1) | ||||||||
50
ENTERGY GULF STATES INC.LOUISIANA, L.L.C.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Rita and Hurricane Katrina
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas
See Part I, Item 1 in the Form 10-K and Entergy Gulf States Louisiana's Management's Financial Discussion and Analysis in the Form 10-K for a discussion of the effectsjurisdictional separation of Hurricanes Katrina and Rita, which hit Entergy Gulf States' service territory in the Texas and Louisiana jurisdictions in August and September 2005, which resulted in power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations, and Entergy Gulf States' efforts to recover storm restoration costs. Following is an update to that discussion.
Storm Cost Recovery Filings with Retail Regulators
In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. Entergy Gulf States, expects by mid-2007 to implement rates to recover revenues to payInc. into two vertically integrated utility companies, one operating under the securitization bonds, and expects to receive securitization funding by the endsole retail jurisdiction of the third quarter 2007.
In February 2007,PUCT, Entergy LouisianaTexas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States filed rebuttal testimony and filed a second supplemental and amending application by which they seek authority from the LPSC to securitize their storm cost recovery and storm reserve amounts, together with certain debt retirement costs and upfront and ongoing costs of the securitized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. The filing updates actual storm-related costs through January 2007 and estimated future costs, declaring that Entergy Louisiana's costs are $561 million and Entergy Gulf States' costs are $219 million. The filing also updates the requested storm reserve amounts, requesting $141 million for Entergy Louisiana and $87 million for Entergy Gulf States. Hearings began in late-April 2007. At the start of the hearing, a stipulation among Louisiana.
Entergy Gulf States Louisiana is the successor for financial reporting purposes to Entergy Louisiana,Gulf States, Inc. Entergy Gulf States Louisiana's Income Statement and Cash Flow Statement for the three months ended March 31, 2008 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's Income Statement and Cash Flow Statement for the three months ended March 31, 2007 include the operations of Entergy Texas. Entergy Gulf States Louisiana's balance sheets as of March 31, 2008 and December 31, 2007 reflect the effects of the separation of the Texas business.
On March 31, 2008, pursuant to the LPSC staff, and most other parties inorder approving the proceeding was read intojurisdictional separation plan, Entergy Gulf States Louisiana made its jurisdictional separation plan balance sheet compliance filing with the record. The stipulation quantifies the balanceLPSC.
Results of storm restoration costs for recovery as $545 million for Entergy Louisiana and $187 millionOperations
Following are income statement variances for Entergy Gulf States and setsLouisiana comparing the storm reserve amounts at $152 million for Entergy Louisiana and $87 million for Entergy Gulf States. The stipulation also calls for securitization offirst quarter 2008 to the storm restoration costs and storm reservesfirst quarter 2007 showing how much the line item increased or (decreased) in those same amounts. The LPSC has not issued a decision incomparison to the proceeding.
Results of Operationsprior period:
|
|
| Variance caused by the jurisdictional separation |
| Variance caused by other factors |
| ||
(In Thousands) | ||||||||
Net revenue (operating revenue less fuel expense, |
|
|
|
|
| |||
Other operation and maintenance expenses |
| 125,854 | (41,951) | (4,426) | 79,477 | |||
Taxes other than income taxes |
| 31,311 | (13,133) | (896) | 17,282 | |||
Depreciation |
| 52,415 | (17,134) | (2,155) | 33,126 | |||
Other expenses | 6,500 | (42) | 280 | 6,738 | ||||
Other income |
| 20,807 | 4,009 | (1,243) | 23,573 | |||
Interest charges |
| 37,349 | (4,974) | (864) | 31,511 | |||
Income taxes |
| 18,233 | 2,273 | (403) | 20,103 | |||
Net Income (Loss) |
| $27,597 |
| $3,396 |
| ($167) | $30,826 |
Net Income
Net income decreased $17.5increased by $3.2 million primarily due to lowerthe jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007. For the first quarter 2007, Entergy Texas reported a net revenue and a higher effective income tax rate partially offset by higher other income.loss of $3.4 million.
51
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
|
| Amount |
|
| (In Millions) |
|
|
|
|
| |
|
| |
|
| |
|
| |
2007 net revenue |
| $278.5 |
Jurisdictional separation | (75.6) | |
Other | (7.4) | |
2008 net revenue | $195.5 |
51
The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in the first quarter of 2006 in Entergy Gulf States' Louisiana jurisdiction and a reserve for potential rate refunds in the first quarter of 2007 in Entergy Gulf States' Texas jurisdiction as a result of a PUCT ruling related to the application of past PUCT rulings addressing transition to competition in Texas.
The volume/weather variance isNet revenue decreased primarily due to increased electricity usage, including increased usage during the unbilled sales periodjurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and the effect of more favorable weather compared to the same period in 2006. Billed usage increased a total of 185 GWh. See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.Entergy Texas, effective December 31, 2007. The remaining variance was caused by various individually insignificant factors.
Gross operating revenues and fuel and purchased power expenses and other regulatory charges
Gross operating revenues and fuel and purchased power expenses both decreased primarily due to a decrease in fuel cost recovery revenuesthe jurisdictional separation of $97 million due to lower fuel rates. The decrease was partially offset by more favorable volume/weather as discussed above.
FuelEntergy Gulf States, Inc. into Entergy Gulf States Louisiana and purchased power expenses decreased primarily due to decreased recovery of fuel and purchased power costs as a result of lower fuel rates.
Other regulatory charges increased primarily due to higher purchased power capacity charges.
Entergy Texas, effective December 31, 2007.
Other Income Statement Variances
Other operation and maintenance decreased primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007. The remaining variance was caused by various individually insignificant factors.
Taxes other than income taxes decreased primarily due to lowerthe jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana franchise taxes resulting from lower fuel recovery revenues as discussed above.and Entergy Texas, effective December 31, 2007.
Other income increasedDepreciation and amortization decreased primarily due to carrying charges on storm restoration costs approved by the PUCT,jurisdictional separation ofEntergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007.
Interest and other charges increaseddecreased primarily due to interest recorded on advances from independent power producers per a FERC orderthe jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and interest recorded on deferred fuel costs.Entergy Texas, effective December 31, 2007.
Income Taxes
The effective income tax rate was 39.5% for the first quarter 2008 and 39.8% for the first quarter of 2007 and 27.6% for the first quarter of 2006.2007. The difference in the effective income tax rate for the first quarter of 20072008 versus the federal statutory rate of 35% is due to book and tax differences related to utility plant items and state income taxes, partially offset by flow-through book and tax timing differences and the amortization of investment tax credits. The difference in the effective income tax rate for the first quarter 2007 is primarily due tobook and tax differences related to the utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction. The difference in the effective income tax rate for the first quarter of 2006 is primarily due tobook and tax differences related to the allowance for equity funds used during construction and utility plant items, the amortization of investment tax credits, and flow-through book and tax timing differences.
52
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $180,381 |
| $25,373 | Cash and cash equivalents at beginning of period |
| $108,036 |
| $180,381 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 141,210 |
| 138,424 | Operating activities |
| 64,214 |
| 141,210 |
| Investing activities |
| (88,201) |
| (153,109) | Investing activities |
| (121,392) |
| (88,201) |
| Financing activities |
| (36,818) |
| 1,845 | Financing activities |
| (30,641) |
| (36,818) |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents |
| 16,191 |
| (12,840) | Net increase (decrease) in cash and cash equivalents |
| (87,819) |
| 16,191 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $196,572 |
| $12,533 | Cash and cash equivalents at end of period |
| $20,217 |
| $196,572 |
Operating Activities
Net cash flow provided in operating activities decreased $77 million for the first quarter 2008 compared to the first quarter 2007 primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007, and decreased recovery of deferred fuel costs.
Investing Activities
Net cash flow used in investing activities decreased $64.9increased $33.2 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due toto:
The increase was partially offset by the effect of the jurisdictional separation on construction expenditures and cash received from money pool activity.receivables.
Financing Activities
FinancingNet cash flow used in financing activities used cash of $36.8decreased $6.2 million for the first quarter of 20072008 compared to providing cash of $1.8 million for the first quarter of 20062007 primarily due to a decrease of $3.2 million in common equity distributions and the redemption of $2.3 million preferred stock dividends paid in 2007 and money pool activity.March 2007.
53
Capital Structure
Entergy Gulf States'States Louisiana's capitalization is balanced between equity and debt, as shown in the following table.The calculation below does not reduce the debt by the $1.079 billion of debt assumed by Entergy Texas because Entergy Gulf States Louisiana remains primarily liable on the debt.
|
| March 31, |
| December 31, |
| March 31, |
| December 31, | |
|
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 49.9% |
| 50.1% |
|
| 65.4% |
| 64.4% |
Effect of subtracting cash from debt |
| 2.1% |
| 1.9% |
|
| 0.2% |
| 1.0% |
Debt to capital |
| 52.0% |
| 52.0% |
|
| 65.6% |
| 65.4% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders'members' equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States'States Louisiana's financial condition.
53
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Gulf States'States Louisiana's uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Gulf States'States Louisiana's receivables from or (payables to) the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$107,555 |
| $75,048 |
| ($5,124) |
| $64,011 |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$40,372 |
| $55,509 |
| $107,555 |
| $75,048 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
As discussed in the Form 10-K, Entergy Gulf States Louisiana has a $50credit facility in the amount of $100 million linescheduled to expire in August 2012. No borrowings were outstanding under the facility as of credit. The lineMarch 31, 2008.
Hurricane Rita and Hurricane Katrina
See the Form 10-K for a discussion of credit allowsthe effects of Hurricanes Katrina and Rita, which hit Entergy Gulf States Inc.'s jurisdictions in Louisiana and Texas in August and September 2005, which resulted in power outages, significant damage to borrow moneyelectric distribution, transmission, and generation infrastructure, the temporary loss of sales and customers due to issue lettersmandatory evacuations, and Entergy Gulf States Inc.'s initiatives to recover storm restoration and business continuity costs and incremental losses.
Act 55 Storm Cost Financings
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of credit. $1.4 million in lettersthe State of credit were issuedLouisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary
54
issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which will be the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana's proposals under the facility at March 31, 2007,Act 55 financings, including the commitment to pass on to customers a minimum of $40 million of customer benefits as compared to traditional Act 64 financing. On April 16, 2008, the LPSC approved the settlement and no borrowings were outstanding. The lineissued two financing orders and one ratemaking order intended to facilitate implementation of credit terminatesthe Act 55 financings. On May 6, 200 8, the State Bond Commission voted to approve the Act 55 financings. Entergy Gulf States Louisiana and Entergy Louisiana will invest the capital contributions that they receive from the Act 55 financings in February 2011.affiliate securities. Entergy Gulf States Louisiana and Entergy Louisiana intend to complete the Act 55 financings by the end of the second quarter 2008.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of transition to retail competition; state and local rate regulation; transition to retail competition; federal regulation; the Energy Policy Act of 2005; industrial commercial, and wholesalecommercial customers; nuclear matters; environmental risks; and litigationenvironmental risks. Following are updates to the information disclosed in the Form 10-K.
Jurisdictional Separation Plan
In March 2007, Entergy Gulf States filed an application with the FERC requesting authorization to implement its jurisdictional separation plan that will result in the restructuring of Entergy Gulf States into two separate utilities, one subject solely to the retail jurisdiction of the LPSC (EGS-LA) and the other subject solely to the retail jurisdiction of the PUCT (ETI). Interventions and protests are due by May 14, 2007.
In addition to the terms of the plan described in the Form 10-K, additional terms of the plan include that EGS-LA will retain the entirety of Entergy Gulf States' outstanding long-term debt. Under one or more debt assumption agreements with EGS-LA, ETI would assume a portion of this long-term debt allocable to the portion of Entergy Gulf States' assets allocated to ETI. EGS-LA will record an assumption asset to reflect the long-term debt assumed by ETI. ETI would grant EGS-LA a first lien on its assets to secure its debt obligations under the debt assumption agreement or agreements. ETI would have three years from the date of separation to pay off the assumed debt. In addition, under the proposal, the currently outstanding preferred stock of Entergy Gulf States would be redeemed as part of the jurisdictional separation.
Entergy Gulf States has also filed with the FERC an application, on behalf of ETI, for authority from the end of 2007 through March 31, 2010 to issue up to $200 million of short-term debt, up to $300 million of tax-exempt bonds, and up to $1.4 billion of other long-term securities, including common and preferred stock and long-term debt. Entergy Gulf States, on behalf of EGS-LA, has filed a similar FERC application for authority over the same time period to issue up to $200 million of short-term debt, up to $500 million of tax-exempt bonds and up to $750 million of other long-term securities, including common and preferred membership units and long-term debt.
Additional FERC filings and a filing with the NRC will be made before the separation can occur. In addition, under the LPSC order approving the jurisdictional separation plan, jurisdictional separation will not occur if Entergy Gulf States cannot obtain reasonable assurances from the rating agencies that upon the separation there will not be a downgrade in ETI's or EGS-LA's credit ratings from Entergy Gulf States' credit ratings. Entergy Gulf States' current target for completing the jurisdictional separation is projected to be the end of 2007.
54
State and Local Rate Regulation
In JanuaryMay 2007, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2006 test year. The filing reflected a 10.0% return on common equity, which is within the allowed earnings bandwidth, and an anticipated formula rate plan decrease of $23 million annually attributable to adjustments outside of the formula rate plan sharing mechanism related to capacity costs and the anticipated securitization of storm costs related to Hurricane Katrina and Hurricane Rita and the securitization of a storm reserve. In September 2007, Entergy Gulf States Louisiana modified the formula rate plan filing to reflect a 10.07% return on common equity, which is still within the allowed bandwidth. The modified filing also reflected implementation of a $4.1 million rate increase, subject to refund, attributable to recovery of additional LPSC-approved incremental deferred and ongoing capacity costs. The rate decrease anticipated in the original filing did not occur because of the addi tional capacity costs approved by the LPSC, and because securitization of storm costs associated with Hurricane Katrina and Hurricane Rita and the establishment of a storm reserve have not yet occurred. In October 2007, Entergy Gulf States Louisiana implemented a $16.4 million formula rate plan decrease that is due to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an LPSC order. The LPSC staff issued its final report in December 2007, indicating a $1.6 million decrease in formula rate plan revenues for which interim rates were already in effect. In addition, the LPSC staff recommended that the LPSC give a one-year extension of Entergy Gulf States Louisiana's formula rate plan to synchronize with the final year of Entergy Louisiana's formula rate plan, or alternatively, to extend the formula rate plan for a longer period. Entergy Gulf States Louisiana indicated it is amenable to a one-year extension. An uncontested stipulated set tlement was filed in February 2008 that will leave the current base rates in place and extend the formula rate plan for one year, and the LPSC approved the settlement in March 2008.
In January 2008, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2006.2007. The filing showed a revenue deficiency of $3.5$3.7 million based on an ROEa return on common equity mid-point of 10.5%. In March 2007, Entergy Gulf States filedLouisiana will implement a set of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $2.4$3.4 million base rate increase effectivepursuant to an uncontested agreement with the first billing cycle of April 2007 pursuant to the rate stabilization plan. LPSC staff.
In March 2007, Entergy Gulf States filed with the PUCT a request to refund $78.5 million, including interest, of fuel cost recovery over-collections for the period through January 2007. Entergy Gulf States requested that the proposed refund be made over a six-month period beginning June 2007; however, the refund period is subject to the PUCT's discretion.55
Federal Regulation
See "System Agreement Proceedings", and "Independent Coordinator of Transmission", and "Available Flowgate Capacity Proceeding" in the "Significant Factors and Known Trends" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States'States Louisiana's accounting for nuclear decommissioning costs, the application of SFAS 71, unbilled revenue, and qualified pension and other postretirement benefits.
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
5556
ENTERGY GULF STATES LOUISIANA, L.L.C. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2008 and 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Electric | $520,296 | $795,254 | ||
Natural gas | 38,268 | 37,928 | ||
TOTAL | 558,564 | 833,182 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 25,722 | 239,568 | ||
Purchased power | 331,806 | 306,804 | ||
Nuclear refueling outage expenses | 3,699 | 3,656 | ||
Other operation and maintenance | 79,477 | 125,854 | ||
Decommissioning | 3,039 | 2,844 | ||
Taxes other than income taxes | 17,282 | 31,311 | ||
Depreciation and amortization | 33,126 | 52,415 | ||
Other regulatory charges - net | 5,546 | 8,358 | ||
499,697 | 770,810 | |||
OPERATING INCOME | 58,867 | 62,372 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 1,693 | 4,432 | ||
Interest and dividend income | 22,808 | 16,375 | ||
Miscellaneous - net | (928) | - - | ||
TOTAL | 23,573 | 20,807 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 31,766 | 34,893 | ||
Other interest - net | 824 | 5,344 | ||
Allowance for borrowed funds used during construction | (1,079) | (2,888) | ||
TOTAL | 31,511 | 37,349 | ||
INCOME BEFORE INCOME TAXES | 50,929 | 45,830 | ||
Income taxes | 20,103 | 18,233 | ||
NET INCOME | 30,826 | 27,597 | ||
Preferred distribution requirements and other | 206 | 962 | ||
EARNINGS APPLICABLE TO | ||||
COMMON EQUITY | $30,620 | $26,635 | ||
See Notes to Financial Statements. |
57
ENTERGY GULF STATES, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2007 and 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Electric | $795,254 | $855,790 | ||
Natural gas | 37,928 | 37,415 | ||
TOTAL | 833,182 | 893,205 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 239,568 | 284,876 | ||
Purchased power | 306,804 | 313,092 | ||
Nuclear refueling outage expenses | 3,656 | 4,674 | ||
Other operation and maintenance | 125,854 | 121,557 | ||
Decommissioning | 2,844 | 2,622 | ||
Taxes other than income taxes | 31,311 | 36,025 | ||
Depreciation and amortization | 52,415 | 48,695 | ||
Other regulatory charges - net | 8,358 | 269 | ||
TOTAL | 770,810 | 811,810 | ||
OPERATING INCOME | 62,372 | 81,395 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 4,432 | 6,046 | ||
Interest and dividend income | 16,375 | 8,103 | ||
Miscellaneous - net | - - | (910) | ||
TOTAL | 20,807 | 13,239 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 34,893 | 33,653 | ||
Other interest - net | 5,344 | 2,096 | ||
Allowance for borrowed funds used during construction | (2,888) | (3,309) | ||
TOTAL | 37,349 | 32,440 | ||
INCOME BEFORE INCOME TAXES | 45,830 | 62,194 | ||
Income taxes | 18,233 | 17,145 | ||
NET INCOME | 27,597 | 45,049 | ||
Preferred dividend requirements and other | 962 | 1,022 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $26,635 | $44,027 | ||
See Notes to Financial Statements. |
56
ENTERGY GULF STATES, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2007 and 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $27,597 | $45,049 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 11,816 | 6,087 | ||
Other regulatory charges - net | 8,358 | 269 | ||
Depreciation, amortization, and decommissioning | 55,259 | 51,317 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 13,128 | 32,760 | ||
Changes in working capital: | ||||
Receivables | 17,530 | 120,195 | ||
Fuel inventory | (6,595) | (9,143) | ||
Accounts payable | (6,063) | (17,833) | ||
Taxes accrued | (384) | - | ||
Interest accrued | 579 | (102) | ||
Deferred fuel costs | 34,127 | 27,723 | ||
Other working capital accounts | (18,560) | (660) | ||
Provision for estimated losses and reserves | 693 | (769) | ||
Changes in other regulatory assets | 7,971 | (106,199) | ||
Other | (4,246) | (10,270) | ||
Net cash flow provided by operating activities | 141,210 | 138,424 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (69,249) | (206,217) | ||
Allowance for equity funds used during construction | 4,432 | 6,046 | ||
Insurance proceeds | 8,134 | - | ||
Nuclear fuel purchases | (7,461) | (6,102) | ||
Proceeds from sale/leaseback of nuclear fuel | 9,923 | 5,391 | ||
Proceeds from nuclear decommissioning trust fund sales | 12,093 | 20,360 | ||
Investment in nuclear decommissioning trust funds | (15,947) | (23,891) | ||
Change in money pool receivable - net | (32,507) | 64,011 | ||
Changes in other investments - net | 2,381 | 915 | ||
Other regulatory investments | - | (13,622) | ||
Net cash flow used in investing activities | (88,201) | (153,109) | ||
FINANCING ACTIVITIES | ||||
Change in money pool payable - net | - | 5,124 | ||
Redemption of preferred stock | (2,250) | (2,250) | ||
Dividends paid: | ||||
Common stock | (33,600) | - | ||
Preferred stock | (968) | (1,029) | ||
Net cash flow provided by (used in) financing activities | (36,818) | 1,845 | ||
Net increase (decrease) in cash and cash equivalents | 16,191 | (12,840) | ||
Cash and cash equivalents at beginning of period | 180,381 | 25,373 | ||
Cash and cash equivalents at end of period | $196,572 | $12,533 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $37,457 | $33,485 | ||
See Notes to Financial Statements. |
57
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58
ENTERGY GULF STATES, INC. | |||||
BALANCE SHEETS | |||||
ASSETS | |||||
March 31, 2007 and December 31, 2006 | |||||
(Unaudited) | |||||
2007 | 2006 | ||||
(In Thousands) | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents: | |||||
Cash | $2,608 | $2,923 | |||
Temporary cash investments - at cost, | |||||
which approximates market | 193,964 | 177,458 | |||
Total cash and cash equivalents | 196,572 | 180,381 | |||
Accounts receivable: | |||||
Customer | 139,578 | 146,144 | |||
Allowance for doubtful accounts | (1,522) | (1,618) | |||
Associated companies | 133,836 | 106,990 | |||
Other | 46,838 | 50,811 | |||
Accrued unbilled revenues | 78,112 | 79,538 | |||
Total accounts receivable | 396,842 | 381,865 | |||
Accumulated deferred income taxes | 17,934 | 20,352 | |||
Fuel inventory - at average cost | 75,806 | 69,211 | |||
Materials and supplies - at average cost | 122,329 | 120,245 | |||
Deferred nuclear refueling outage costs | 9,517 | 12,971 | |||
Prepayments and other | 19,071 | 16,725 | |||
TOTAL | 838,071 | 801,750 | |||
OTHER PROPERTY AND INVESTMENTS | |||||
Decommissioning trust funds | 348,388 | 344,911 | |||
Non-utility property - at cost (less accumulated depreciation) | 94,263 | 94,776 | |||
Other | 23,585 | 25,218 | |||
TOTAL | 466,236 | 464,905 | |||
UTILITY PLANT | |||||
Electric | 8,905,494 | 8,857,166 | |||
Natural gas | 94,366 | 92,368 | |||
Construction work in progress | 145,111 | 149,392 | |||
Nuclear fuel under capital lease | 65,604 | 73,422 | |||
Nuclear fuel | 9,715 | 10,821 | |||
TOTAL UTILITY PLANT | 9,220,290 | 9,183,169 | |||
Less - accumulated depreciation and amortization | 4,299,104 | 4,263,307 | |||
UTILITY PLANT - NET | 4,921,186 | 4,919,862 | |||
DEFERRED DEBITS AND OTHER ASSETS | |||||
Regulatory assets: | |||||
SFAS 109 regulatory asset - net | 478,795 | 465,259 | |||
Other regulatory assets | 967,100 | 1,001,016 | |||
Deferred fuel costs | 100,124 | 100,124 | |||
Long-term receivables | 8,359 | 9,833 | |||
Other | 29,854 | 23,928 | |||
TOTAL | 1,584,232 | 1,600,160 | |||
TOTAL ASSETS | $7,809,725 | $7,786,677 | |||
See Notes to Financial Statements. | |||||
58 | |||||
ENTERGY GULF STATES, INC. | |||||
BALANCE SHEETS | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
March 31, 2007 and December 31, 2006 | |||||
(Unaudited) | |||||
2007 | 2006 | ||||
(In Thousands) | |||||
CURRENT LIABILITIES | |||||
Accounts payable: | |||||
Associated companies | $103,101 | $79,584 | |||
Other | 161,479 | 200,746 | |||
Customer deposits | 71,355 | 68,844 | |||
Taxes accrued | 27,397 | 27,781 | |||
Interest accrued | 35,062 | 34,483 | |||
Deferred fuel costs | 60,389 | 26,262 | |||
Obligations under capital leases | 24,769 | 24,769 | |||
Pension and other postretirement liabilities | 7,735 | 7,662 | |||
Other | 11,833 | 31,933 | |||
TOTAL | 503,120 | 502,064 | |||
NON-CURRENT LIABILITIES | |||||
Accumulated deferred income taxes and taxes accrued | 1,827,120 | 1,803,461 | |||
Accumulated deferred investment tax credits | 125,775 | 127,202 | |||
Obligations under capital leases | 40,835 | 48,653 | |||
Other regulatory liabilities | 60,434 | 53,648 | |||
Decommissioning and asset retirement cost liabilities | 195,124 | 191,036 | |||
Transition to competition | 79,098 | 79,098 | |||
Accumulated provisions | 23,151 | 21,245 | |||
Pension and other postretirement liabilities | 142,805 | 141,834 | |||
Long-term debt | 2,358,939 | 2,358,327 | |||
Preferred stock with sinking fund | 8,250 | 10,500 | |||
Other | 198,827 | 196,731 | |||
TOTAL | 5,060,358 | 5,031,735 | |||
Commitments and Contingencies | |||||
SHAREHOLDERS' EQUITY | |||||
Preferred stock without sinking fund | 47,327 | 47,327 | |||
Common stock, no par value, authorized 200,000,000 | |||||
shares; issued and outstanding 100 shares in 2007 and 2006 | 114,055 | 114,055 | |||
Paid-in capital | 1,457,486 | 1,457,486 | |||
Retained earnings | 646,959 | 653,924 | |||
Accumulated other comprehensive loss | (19,580) | (19,914) | |||
TOTAL | 2,246,247 | 2,252,878 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $7,809,725 | $7,786,677 | |||
See Notes to Financial Statements. |
ENTERGY GULF STATES LOUISIANA, L.L.C. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2008 and 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $30,826 | $27,597 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | - | 11,816 | ||
Other regulatory charges - net | 5,546 | 8,358 | ||
Depreciation, amortization, and decommissioning | 36,165 | 55,259 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 45,885 | 13,128 | ||
Changes in working capital: | ||||
Receivables | (69,806) | 17,530 | ||
Fuel inventory | (10,278) | (6,595) | ||
Accounts payable | 111,852 | (6,063) | ||
Taxes accrued | - | (384) | ||
Interest accrued | (995) | 579 | ||
Deferred fuel costs | (45,841) | 34,127 | ||
Other working capital accounts | (67,801) | (18,560) | ||
Provision for estimated losses and reserves | 439 | 693 | ||
Changes in other regulatory assets | 5,891 | 7,971 | ||
Other | 22,331 | (4,246) | ||
Net cash flow provided by operating activities | 64,214 | 141,210 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (60,204) | (69,249) | ||
Allowance for equity funds used during construction | 1,693 | 4,432 | ||
Insurance proceeds | - | 8,134 | ||
Nuclear fuel purchases | (21,713) | (7,461) | ||
Proceeds from sale/leaseback of nuclear fuel | - | 9,923 | ||
Payment for purchase of plant | (56,409) | - | ||
Proceeds from nuclear decommissioning trust fund sales | 11,049 | 12,093 | ||
Investment in nuclear decommissioning trust funds | (14,879) | (15,947) | ||
Change in money pool receivable - net | 15,137 | (32,507) | ||
Changes in other investments - net | 3,934 | 2,381 | ||
Net cash flow used in investing activities | (121,392) | (88,201) | ||
FINANCING ACTIVITIES | ||||
Redemption of preferred stock | - | (2,250) | ||
Dividends/distributions paid: | ||||
Common equity | (30,400) | (33,600) | ||
Preferred membership interests | (241) | (968) | ||
Net cash flow used in financing activities | (30,641) | (36,818) | ||
Net increase (decrease) in cash and cash equivalents | (87,819) | 16,191 | ||
Cash and cash equivalents at beginning of period | 108,036 | 180,381 | ||
Cash and cash equivalents at end of period | $20,217 | $196,572 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $32,824 | $37,457 | ||
Income taxes | ($621) | $- | ||
See Notes to Financial Statements. | ||||
59
ENTERGY GULF STATES, INC. | |||||||||
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME | |||||||||
For the Three Months Ended March 31, 2007 and 2006 | |||||||||
(Unaudited) | |||||||||
2007 | 2006 | ||||||||
(In Thousands) | |||||||||
RETAINED EARNINGS | |||||||||
Retained Earnings - Beginning of period | $653,924 | $659,102 | |||||||
Add: Net Income | 27,597 | $27,597 | 45,049 | $45,049 | |||||
Deduct: | |||||||||
Dividends declared on common stock | 33,600 | - - | |||||||
Preferred dividend requirements and other | 962 | 962 | 1,022 | 1,022 | |||||
34,562 | 1,022 | ||||||||
Retained Earnings - End of period | $646,959 | $703,129 | |||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS (Net of Taxes): | |||||||||
Balance at beginning of period: | |||||||||
Pension and other postretirement liabilities | ($19,914) | $ - | |||||||
Other accumulated comprehensive income items | - | (1,409) | |||||||
Pension and other postretirement liabilities (net of tax expense of $326) | $334 | $334 | - | ||||||
Net unrealized investment gains | - | - | 55 | 55 | |||||
Balance at end of period: | |||||||||
Pension and other postretirement liabilities | (19,580) | - - | |||||||
Other accumulated comprehensive income items | - | (1,354) | |||||||
Total | ($19,580) | ($1,354) | |||||||
Comprehensive Income | $26,969 | $44,082 | |||||||
See Notes to Financial Statements. | |||||||||
ENTERGY GULF STATES LOUISIANA, L.L.C. | |||||
BALANCE SHEETS | |||||
ASSETS | |||||
March 31, 2008 and December 31, 2007 | |||||
(Unaudited) | |||||
2008 | 2007 | ||||
(In Thousands) | |||||
CURRENT ASSETS | |||||
Cash and cash equivalents: | |||||
Cash | $8,612 | $233 | |||
Temporary cash investments - at cost, | |||||
which approximates market | 11,605 | 107,803 | |||
Total cash and cash equivalents | 20,217 | 108,036 | |||
Accounts receivable: | |||||
Customer | 74,144 | 62,408 | |||
Allowance for doubtful accounts | (1,193) | (979) | |||
Associated companies | 233,513 | 218,891 | |||
Other | 94,026 | 59,059 | |||
Accrued unbilled revenues | 47,571 | 54,021 | |||
Total accounts receivable | 448,061 | 393,400 | |||
Deferred fuel costs | 51,485 | 5,644 | |||
Accumulated deferred income taxes | - - | 21,938 | |||
Fuel inventory - at average cost | 42,088 | 31,810 | |||
Materials and supplies - at average cost | 100,575 | 100,161 | |||
Deferred nuclear refueling outage costs | 38,224 | 5,155 | |||
Debt assumption by Entergy Texas | 309,123 | 309,123 | |||
Prepayments and other | 55,330 | 23,533 | |||
TOTAL | 1,065,103 | 998,800 | |||
OTHER PROPERTY AND INVESTMENTS | |||||
Decommissioning trust funds | 350,568 | 366,062 | |||
Non-utility property - at cost (less accumulated depreciation) | 111,856 | 109,517 | |||
Other | 12,889 | 17,350 | |||
TOTAL | 475,313 | 492,929 | |||
UTILITY PLANT | |||||
Electric | 6,249,836 | 6,132,362 | |||
Natural gas | 99,451 | 98,484 | |||
Construction work in progress | 117,767 | 141,528 | |||
Nuclear fuel under capital lease | 131,099 | 110,769 | |||
Nuclear fuel | 10,414 | 11,256 | |||
TOTAL UTILITY PLANT | 6,608,567 | 6,494,399 | |||
Less - accumulated depreciation and amortization | 3,445,869 | 3,433,131 | |||
UTILITY PLANT - NET | 3,162,698 | 3,061,268 | |||
DEFERRED DEBITS AND OTHER ASSETS | |||||
Regulatory assets: | |||||
SFAS 109 regulatory asset - net | 301,238 | 299,023 | |||
Other regulatory assets | 329,469 | 335,897 | |||
Deferred fuel costs | 100,124 | 100,124 | |||
Long-term receivables | 1,879 | 1,872 | |||
Debt assumption by Entergy Texas | 769,971 | 769,971 | |||
Other | 16,007 | 12,807 | |||
TOTAL | 1,518,688 | 1,519,694 | |||
TOTAL ASSETS | $6,221,802 | $6,072,691 | |||
See Notes to Financial Statements. | |||||
60 | |||||
ENTERGY GULF STATES LOUISIANA, L.L.C. | |||||
BALANCE SHEETS | |||||
LIABILITIES AND MEMBERS' EQUITY | |||||
March 31, 2008 and December 31, 2007 | |||||
(Unaudited) | |||||
2008 | 2007 | ||||
(In Thousands) | |||||
CURRENT LIABILITIES | |||||
Currently maturing long-term debt | $675,000 | $675,000 | |||
Accounts payable: | |||||
Associated companies | 292,027 | 201,217 | |||
Other | 132,621 | 111,579 | |||
Customer deposits | 39,062 | 38,061 | |||
Accumulated deferred income taxes | 7,347 | - - | |||
Interest accrued | 28,403 | 29,398 | |||
Obligations under capital leases | 28,795 | 28,795 | |||
Pension and other postretirement liabilities | 7,160 | 7,064 | |||
System agreement cost equalization | 124,775 | 124,775 | |||
Other | 5,399 | 9,052 | |||
TOTAL | 1,340,589 | 1,224,941 | |||
NON-CURRENT LIABILITIES | |||||
Accumulated deferred income taxes and taxes accrued | 1,233,985 | 1,219,568 | |||
Accumulated deferred investment tax credits | 94,717 | 95,745 | |||
Obligations under capital leases | 102,304 | 81,974 | |||
Other regulatory liabilities | 83,722 | 69,890 | |||
Decommissioning and asset retirement cost liabilities | 209,213 | 204,828 | |||
Accumulated provisions | 12,326 | 11,887 | |||
Pension and other postretirement liabilities | 97,167 | 102,510 | |||
Long-term debt | 1,673,785 | 1,674,113 | |||
Other | 73,666 | 87,468 | |||
TOTAL | 3,580,885 | 3,547,983 | |||
Commitments and Contingencies | |||||
MEMBERS' EQUITY | |||||
Preferred membership interests without sinking fund | 10,000 | 10,000 | |||
Members' equity | 1,312,933 | 1,312,701 | |||
Accumulated other comprehensive loss | (22,605) | (22,934) | |||
TOTAL | 1,300,328 | 1,299,767 | |||
TOTAL LIABILITIES AND MEMBERS' EQUITY | $6,221,802 | $6,072,691 | |||
See Notes to Financial Statements. |
60
ENTERGY GULF STATES, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2007 | 2006 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $242 | $240 | $2 | 1 | ||||
Commercial | 193 | 210 | (17) | (8) | ||||
Industrial | 255 | 317 | (62) | (20) | ||||
Governmental | 12 | 13 | (1) | (8) | ||||
Total retail | 702 | 780 | (78) | (10) | ||||
Sales for resale | ||||||||
Associated companies | 28 | 27 | 1 | 4 | ||||
Non-associated companies | 50 | 52 | (2) | (4) | ||||
Other | 15 | (3) | 18 | 600 | ||||
Total | $795 | $856 | ($61) | (7) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 2,322 | 2,096 | 226 | 11 | ||||
Commercial | 2,024 | 1,970 | 54 | 3 | ||||
Industrial | 3,584 | 3,679 | (95) | (3) | ||||
Governmental | 112 | 112 | - - | - | ||||
Total retail | 8,042 | 7,857 | 185 | 2 | ||||
Sales for resale | ||||||||
Associated companies | 754 | 585 | 169 | 29 | ||||
Non-associated companies | 851 | 617 | 234 | 38 | ||||
Total | 9,647 | 9,059 | 588 | 6 | ||||
61
ENTERGY GULF STATES LOUISIANA, L.L.C. | |||||||||
STATEMENTS OF MEMBERS' EQUITY AND COMPREHENSIVE INCOME | |||||||||
For the Three Months Ended March 31, 2008 and 2007 | |||||||||
(Unaudited) | |||||||||
2008 | 2007 | ||||||||
(In Thousands) | |||||||||
MEMBERS' EQUITY | |||||||||
Members' Equity - Beginning of period | $1,312,701 | $2,225,465 | |||||||
Add: | |||||||||
Net Income | 30,826 | $30,826 | 27,597 | $27,597 | |||||
Other | 12 | - | |||||||
30,838 | 27,597 | ||||||||
Deduct: | |||||||||
Dividends/distributions declared on common equity | 30,400 | 33,600 | |||||||
Preferred membership interests | 206 | 206 | 962 | 962 | |||||
30,606 | 34,562 | ||||||||
Members' Equity - End of period | $1,312,933 | $2,218,500 | |||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS (Net of Taxes): | |||||||||
Balance at beginning of period: | |||||||||
Pension and other postretirement liabilities | ($22,934) | $ (19,914) | |||||||
Pension and other postretirement liabilities (net of tax expense of $428 and $326) | 329 | 329 | 334 | 334 | |||||
Balance at end of period: | |||||||||
Pension and other postretirement liabilities | ($22,605) | ($19,580) | |||||||
Comprehensive Income | $30,949 | $26,969 | |||||||
See Notes to Financial Statements. | |||||||||
62
ENTERGY GULF STATES LOUISIANA, L.L.C. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2008 | 2007 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues (1): | ||||||||
Residential | $115 | $242 | ($127) | (52) | ||||
Commercial | 111 | 193 | (82) | (42) | ||||
Industrial | 153 | 255 | (102) | (40) | ||||
Governmental | 6 | 12 | (6) | (50) | ||||
Total retail | 385 | 702 | (317) | (45) | ||||
Sales for resale | ||||||||
Associated companies | 86 | 28 | 58 | 207 | ||||
Non-associated companies | 45 | 50 | (5) | (10) | ||||
Other | 4 | 15 | (11) | (73) | ||||
Total | $520 | $795 | ($275) | (35) | ||||
Billed Electric Energy | ||||||||
Sales (GWh) (1): | ||||||||
Residential | 1,091 | 2,322 | (1,231) | (53) | ||||
Commercial | 1,135 | 2,024 | (889) | (44) | ||||
Industrial | 2,137 | 3,584 | (1,447) | (40) | ||||
Governmental | 53 | 112 | (59) | (53) | ||||
Total retail | 4,416 | 8,042 | (3,626) | (45) | ||||
Sales for resale | ||||||||
Associated companies | 746 | 754 | (8) | (1) | ||||
Non-associated companies | 664 | 851 | (187) | (22) | ||||
Total | 5,826 | 9,647 | (3,821) | (40) | ||||
(1) Amounts for the three months ended March 31, 2008 reflect the effects of the separation of the Texas business. Amounts for the three months ended March 31, 2007 include the operations of Entergy Texas. | ||||||||
63
ENTERGY LOUISIANA, LLC
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Rita and Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which caused catastrophic damage to Entergy Louisiana's service territory in August and September 2005, including the effect of extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory, and Entergy Louisiana's efforts to recover storm restoration costs.
In February 2007, Entergy Louisiana and Entergy Gulf States filed rebuttal testimony and filed a second supplemental and amending application by which they seek authority from the LPSC to securitize their storm cost recovery and storm reserve amounts, together with certain debt retirement costs and upfront and ongoing costs of the securitized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. The filing updates actual storm-related costs through January 2007 and estimated future costs, declaring that Entergy Louisiana's costs are $561 million and Entergy Gulf States' costs are $219 million. The filing also updates the requested storm reserve amounts, requesting $141 million for Entergy Louisiana and $87 million for Entergy Gulf States. Hearings began in late-April 2007. At the start of the hearing, a stipulation among Entergy Gulf States, Entergy Louisiana, the LPSC staff, and most other parties in the proceeding was read into the record. The stipulation quantifies the balance of storm restoration costs for recovery as $545 million for Entergy Louisiana and $187 million for Entergy Gulf States, and sets the storm reserve amounts at $152 million for Entergy Louisiana and $87 million for Entergy Gulf States. The stipulation also calls for securitization of the storm restoration costs and storm reserves in those same amounts. The LPSC has not issued a decision in the proceeding.
Results of Operations
Net Income
Net income increased $6.4decreased $4.2 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due to higher net revenue, partially offset by higher other operation and maintenance expenses and a higher depreciation and amortization expenses, and lower other income.effective income tax rate, partially offset by higher net revenue.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).charges. Following is an analysis of the change in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
|
| Amount |
|
| (In Millions) |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2007 net revenue |
| $214.4 |
Base revenues | 2.9 | |
Other | 1.9 | |
2008 net revenue | $219.2 |
The volume/weather variance is due to increased electricity usage primarily in the industrial class, including electricity sales during the unbilled service period and the effect of more favorable weather in the service territory compared to 2006. Billed retail electricity usage increased a total of 573 GWh in all sectors. See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.
62
The base revenues variance is primarily due to increases effective September 2006 for the 2005a formula rate plan filing to recover LPSC-approved incremental deferred and ongoing capacity costs and for the interim recovery of storm costs.increase effective October 2007. See Note 2 to the financial statements in the Form 10-K for a discussion of the formula rate plan filing.
The purchased power capacity variance is primarily due to higher purchased power capacity charges and the amortization of capacity charges effective September 2006 as a result of the formula rate plan filing in May 2006. A portion of the purchased power capacity costs is offset in base revenues due to a base rate increase implemented to recover incremental deferred and ongoing purchased power capacity charges, as mentioned above. See Note 2 to the financial statements in the Form 10-K for a discussion of the formula rate plan filing.
Gross operating revenues and fuel and purchased power expenses and other regulatory charges (credits)
Gross operating revenues increaseddecreased primarily due to:
The increase was partially offset by a decrease of $42.9 million in gross wholesale revenue due to decreased sales to affiliated systems.
rates.
Fuel and purchased power expenses increaseddecreased primarily due to an increasea decrease in deferred fuel expense as a result of lower fuel rates, as discussed above, partially offset by increases in the average market priceprices of natural gas and purchased power and an increase in net area demand, partially offset by a decrease in the recovery from customers of deferred fuel costs.
Other regulatory credits decreased primarily due to the deferral of capacity charges in 2006 in addition to the amortization of these capacity charges in 2007 as a result of the May 2006 formula rate plan filing (for the 2005 test year) with the LPSC to recover such costs through base rates effective September 2006.
power.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
2008.
The increase was partially offset by the following:
Depreciation and amortization expenses increased primarily due to a revision made in the first quarter of 2006 of estimated depreciable lives involving certain intangible assets and an increase in plant in service.
63
Other income decreased primarily due to:
Income Taxes
The effective income tax rates for the first quarters of 2008 and 2007 were 44.5% and 2006 were 35.6% and 39.9%, respectively. The difference in the effective income tax rate for the first quarter of 20062008 versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items, state income taxes, and a federal tax reserve adjustment, partially offset by book and tax differences related to the allowance for equity funds used during construction and the amortization of investment tax credits.
64
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $2,743 |
| $105,285 | Cash and cash equivalents at beginning of period |
| $300 |
| $2,743 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 29,837 |
| 192,210 | Operating activities |
| 29,049 |
| 29,837 |
| Investing activities |
| (41,487) |
| (218,567) | Investing activities |
| (72,029) |
| (41,487) |
| Financing activities |
| 11,325 |
| (71,254) | Financing activities |
| 43,210 |
| 11,325 |
Net decrease in cash and cash equivalents |
| (325) |
| (97,611) | ||||||
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents |
| 230 |
| (325) | |||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $2,418 |
| $7,674 | Cash and cash equivalents at end of period |
| $530 |
| $2,418 |
Operating Activities
Cash flow from operations decreased $162.4 million for the first quarter of 2007 compared to the first quarter of 2006 primarily due to timing of collections of receivables from customers and payments to vendors, partially offset by increased recovery of deferred fuel costs.
Investing Activities
The decreaseincrease of $177.1$30.5 million in net cash used by investing activities for the first quarter of 20072008 compared to the first quarter 2007 is primarily due to:
Financing Activities
The increase of 2006$31.9 million in net cash provided by financing activities for the first quarter 2008 compared to the first quarter 2007 is primarily due to higher distribution and transmission construction expendituresan increase in 2006 due to Hurricanes Katrina and Rita.
Financing Activities
Entergy Louisiana's financing activities provided $11.3 million forborrowings from the first quarter of 2007 compared to using $71.3 million for the first quarter of 2006 primarily due to money pool activity and the payment of $40 million on a credit facility in 2006.
64
pool.
Capital Structure
Entergy Louisiana's capitalization is balanced between equity and debt, as shown in the following table.
|
| March 31, | December 31, |
| March 31, | December 31, | ||
|
|
| ||||||
Net debt to net capital |
| 45.8% | 46.4% |
| 44.0% | 43.4% | ||
Effect of subtracting cash from debt |
| 0.1% | - |
| - | - | ||
Debt to capital |
| 45.9% | 46.4% |
| 44.0% | 43.4% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and members' equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana's financial condition.
65
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Louisiana's uses and sources of capital.
In April 2007, Entergy Louisiana announced that it plans Following are updates to pursue the self-build solid fuel repowering of a 538MW unit at its Little Gypsy plant. Petroleum coke will be the unit's primary fuel source. Entergy Louisiana expects to spend $1.02 billion on the project, and expects the project to be completed in 2011-2012. The planned capital investment estimatediscussion in the Form 10-K included the capital required for a project of this type.10-K.
Entergy Louisiana's payables to the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
($47,460) |
| ($2,791) |
| ($67,103) |
| ($54,041) |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
($67,103) |
| ($54,041) |
| ($38,871) |
| ($68,677) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
As discussed in the Form 10-K, Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in August 2012. No borrowings were outstanding under the facility as of March 31, 2008.
Hurricane Rita and Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricane Katrina and Hurricane Rita and Entergy's initiatives to recover storm restoration and business continuity costs and incremental losses, which includes obtaining reimbursement of certain costs covered by insurance and pursuing recovery through existing or new rate mechanisms regulated by the FERC and local regulatory bodies, in combination with securitization. In August and September 2005, Hurricane Katrina and Hurricane Rita, along with extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory, caused catastrophic damage.
Act 55 Storm Cost Financings
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which will be the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana's proposals under the Act 55 financings, including the commitment to pass on to customers a minimum of $40 million of customer benefits as compared to traditional Act 64 financing. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. On May 6, 2008, the State Bond Commission voted to approve the Act 55 financings. Entergy Gulf States Louisiana and Entergy Louisiana will invest the capital contributions that they receive from the Act 55 financings in affiliate securities. Entergy Gulf States Louisiana and Entergy Louisiana intend to complete the Act 55 fi nancings by the end of the second quarter 2008.
Little Gypsy Repowering Project
The preconstruction and operating air permits for the Little Gypsy repowering project was issued by the Louisiana Department of Environmental Quality (LDEQ) in November 2007 under then-effective federal and state air regulations, including the EPA's Clean Air Mercury
66
Rule that had been issued in 2005 (CAMR 2005). As discussed in more detail in part I, Item 1, "Environmental Regulation, Clean Air Act and Subsequent Amendments, Hazardous Air Pollutants" in the Form 10-K, in February 2008 the U.S. Court of Appeals for the D.C. Circuit struck down CAMR 2005. The D.C. Circuit decision may require utilities to undergo a case-by-case Maximum Achievable Control Technology (MACT) analysis for construction or reconstruction of emission units pursuant to the Clean Air Act before beginning construction. The Little Gypsy project as currently configured is expected to meet MACT standards. Because Little Gypsy received its construction permit before a formal MACT analysis was required, however, Entergy Louisiana will likely need to provide additional technical analysis to the LDEQ to show that the plant meets the MACT standards. Entergy Louisiana is in discussions with state and federal environmental agencies to identify the additional analysis that needs to be submitted. Onsite construction of the project was scheduled to begin in July 2008, but the additional analysis could cause a delay in the start of construction for several months. The ALJ in Phase II of the Little Gypsy proceedings at the LPSC, which are discussed further in the Form 10-K, has temporarily suspended the procedural schedule, subject to the LPSC's review, which could occur at its May 14, 2008 meeting.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation, the Energy Policy Act of 2005, utility restructuring, nuclear matters, environmental risks, and litigationenvironmental risks. Following are updates to the information provided in the Form 10-K.
Retail Rates
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity which is within the allowed bandwidth. The modified filing includes an increase of $24.2 million for interim recovery of storm costs from Hurricanes Katrina and Rita and a $119.2 million rate increase to recover LPSC-approved incremental deferred and ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed by the LPSC Staff with which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwid th. Ongoing and deferred incremental capacity costs were reduced to $118.7 million. The updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006. An uncontested stipulated settlement was filed in February 2008 that will leave the current base rates in place, and the LPSC approved the settlement in March 2008. In the settlement Entergy Louisiana agreed to credit customers $7.2 million, plus $0.7 million of interest, for customer contributions to the Central States Compact in Nebraska that was never completed and agreed to a one-time $2.6 million deduction from the deferred capacity cost balance. The credit, for which Entergy Louisiana had previously recorded a provision, will be made in May 2008.
Federal Regulation
See "System Agreement Proceedings", and "Independent Coordinator of Transmission", and "Available Flowgate Capacity Proceeding" in the "Significant Factors and Known Trends" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.
65
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.
67
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
66
68
ENTERGY LOUISIANA, LLC | ENTERGY LOUISIANA, LLC | ENTERGY LOUISIANA, LLC | ||||||
INCOME STATEMENTS | INCOME STATEMENTS | INCOME STATEMENTS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Electric | $617,479 | $552,057 | $564,744 | $617,479 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 193,956 | 204,004 | 112,995 | 193,956 | ||||
Purchased power | 197,763 | 176,614 | 222,527 | 197,763 | ||||
Nuclear refueling outage expenses | 4,197 | 4,234 | 4,503 | 4,197 | ||||
Other operation and maintenance | 91,467 | 84,102 | 100,872 | 91,467 | ||||
Decommissioning | 4,508 | 4,196 | 4,844 | 4,508 | ||||
Taxes other than income taxes | 13,814 | 16,006 | 14,741 | 13,814 | ||||
Depreciation and amortization | 48,978 | 42,085 | 47,060 | 48,978 | ||||
Other regulatory charges (credits) - net | 11,343 | (16,138) | ||||||
Other regulatory charges - net | 9,983 | 11,343 | ||||||
TOTAL | 566,026 | 515,103 | 517,525 | 566,026 | ||||
OPERATING INCOME | 51,453 | 36,954 | 47,219 | 51,453 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 3,948 | 5,587 | 3,257 | 3,948 | ||||
Interest and dividend income | 3,594 | 5,442 | 4,749 | 3,594 | ||||
Miscellaneous - net | (1,232) | (798) | (1,213) | (1,232) | ||||
TOTAL | 6,310 | 10,231 | 6,793 | 6,310 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 20,233 | 20,378 | 19,555 | 20,233 | ||||
Other interest - net | 3,360 | 1,708 | 1,155 | 3,360 | ||||
Allowance for borrowed funds used during construction | (2,746) | (3,851) | (1,997) | (2,746) | ||||
TOTAL | 20,847 | 18,235 | 18,713 | 20,847 | ||||
INCOME BEFORE INCOME TAXES | 36,916 | 28,950 | 35,299 | 36,916 | ||||
Income taxes | 13,148 | 11,554 | 15,703 | 13,148 | ||||
NET INCOME | 23,768 | 17,396 | 19,596 | 23,768 | ||||
Preferred dividend requirements and other | 1,738 | 1,738 | 1,738 | 1,738 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON EQUITY | $22,030 | $15,658 | $17,858 | $22,030 | ||||
See Notes to Financial Statements. | ||||||||
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68
70
ENTERGY LOUISIANA, LLC | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2007 and 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $23,768 | $17,396 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 104 | (185) | ||
Other regulatory charges (credits) - net | 11,343 | (16,138) | ||
Depreciation, amortization, and decommissioning | 53,486 | 46,281 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 17,108 | (149,174) | ||
Changes in working capital: | ||||
Receivables | (19,852) | 143,629 | ||
Accounts payable | (100,435) | (42,366) | ||
Taxes accrued | 15,123 | 35,756 | ||
Interest accrued | (1,764) | (2,397) | ||
Deferred fuel costs | 52,789 | 1,507 | ||
Other working capital accounts | (22,023) | 153,597 | ||
Provision for estimated losses and reserves | (2,209) | 1,067 | ||
Changes in other regulatory assets | 7,084 | 23,903 | ||
Other | (4,685) | (20,666) | ||
Net cash flow provided by operating activities | 29,837 | 192,210 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (56,974) | (211,398) | ||
Allowance for equity funds used during construction | 3,948 | 5,587 | ||
Insurance proceeds | 2,765 | - - | ||
Nuclear fuel purchases | (3,103) | - - | ||
Proceeds from the sale/leaseback of nuclear fuel | 14,279 | - - | ||
Proceeds from nuclear decommissioning trust fund sales | 3,693 | 7,187 | ||
Investment in nuclear decommissioning trust funds | (6,095) | (10,117) | ||
Other regulatory investments | - - | (9,826) | ||
Net cash flow used in investing activities | (41,487) | (218,567) | ||
FINANCING ACTIVITIES | ||||
Additional equity from parent | 1,119 | - | ||
Change in money pool payable - net | 13,062 | (29,806) | ||
Changes in short-term borrowings | - - | (40,000) | ||
Distributions paid: | ||||
Preferred membership interests | (2,856) | (1,448) | ||
Net cash flow provided by (used in) financing activities | 11,325 | (71,254) | ||
Net decrease in cash and cash equivalents | (325) | (97,611) | ||
Cash and cash equivalents at beginning of period | 2,743 | 105,285 | ||
Cash and cash equivalents at end of period | $2,418 | $7,674 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $24,402 | $23,521 | ||
See Notes to Financial Statements. |
69
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | $2,418 | $2,743 | ||
Accounts receivable: | ||||
Customer | 105,071 | 97,207 | ||
Allowance for doubtful accounts | (2,192) | (1,856) | ||
Associated companies | 48,235 | 28,621 | ||
Other | 19,380 | 22,652 | ||
Accrued unbilled revenues | 65,610 | 69,628 | ||
Total accounts receivable | 236,104 | 216,252 | ||
Deferred fuel costs | - - | 46,310 | ||
Materials and supplies - at average cost | 101,689 | 98,284 | ||
Deferred nuclear refueling outage costs | 20,292 | 23,639 | ||
Prepayments and other | 14,212 | 5,769 | ||
TOTAL | 374,715 | 392,997 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Decommissioning trust funds | 220,158 | 208,926 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,624 | 1,670 | ||
Other | 4 | 4 | ||
TOTAL | 221,786 | 210,600 | ||
UTILITY PLANT | ||||
Electric | 6,755,036 | 6,693,633 | ||
Property under capital lease | 252,972 | 252,972 | ||
Construction work in progress | 177,219 | 190,454 | ||
Nuclear fuel under capital lease | 75,120 | 82,464 | ||
TOTAL UTILITY PLANT | 7,260,347 | 7,219,523 | ||
Less - accumulated depreciation and amortization | 3,002,111 | 2,959,422 | ||
UTILITY PLANT - NET | 4,258,236 | 4,260,101 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 156,720 | 157,789 | ||
Other regulatory assets | 501,323 | 539,309 | ||
Deferred fuel costs | 67,998 | 67,998 | ||
Long-term receivables | 5,986 | 5,986 | ||
Other | 25,795 | 20,062 | ||
TOTAL | 757,822 | 791,144 | ||
TOTAL ASSETS | $5,612,559 | $5,654,842 | ||
See Notes to Financial Statements. | ||||
70 | ||||
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
LIABILITIES AND MEMBERS' EQUITY | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $139,778 | $160,555 | ||
Other | 127,109 | 203,076 | ||
Customer deposits | 74,361 | 72,579 | ||
Taxes accrued | 21,360 | 6,237 | ||
Accumulated deferred income taxes | 15,974 | 32,026 | ||
Interest accrued | 28,725 | 30,489 | ||
Deferred fuel cost | 6,479 | - - | ||
Obligations under capital leases | 39,067 | 39,067 | ||
Pension and other postretirement liabilities | 8,368 | 8,276 | ||
Other | 14,014 | 30,425 | ||
TOTAL | 475,235 | 582,730 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,852,511 | 1,827,900 | ||
Accumulated deferred investment tax credits | 88,443 | 89,242 | ||
Obligations under capital leases | 36,052 | 43,397 | ||
Other regulatory liabilities | 69,005 | 50,210 | ||
Decommissioning | 243,045 | 238,536 | ||
Accumulated provisions | 21,589 | 23,798 | ||
Pension and other postretirement liabilities | 148,184 | 146,646 | ||
Long-term debt | 1,147,650 | 1,147,647 | ||
Other | 88,877 | 86,428 | ||
TOTAL | 3,695,356 | 3,653,804 | ||
Commitments and Contingencies | ||||
MEMBERS' EQUITY | ||||
Preferred membership interests without sinking fund | 100,000 | 100,000 | ||
Members' equity | 1,367,152 | 1,344,003 | ||
Accumulated other comprehensive loss | (25,184) | (25,695) | ||
TOTAL | 1,441,968 | 1,418,308 | ||
TOTAL LIABILITIES AND MEMBERS' EQUITY | $5,612,559 | $5,654,842 | ||
See Notes to Financial Statements. |
ENTERGY LOUISIANA, LLC | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2008 and 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $19,596 | $23,768 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | - - | 104 | ||
Other regulatory charges - net | 9,983 | 11,343 | ||
Depreciation, amortization, and decommissioning | 51,904 | 53,486 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 7,407 | 17,108 | ||
Changes in working capital: | ||||
Receivables | 23,570 | (19,852) | ||
Accounts payable | (25,241) | (100,435) | ||
Taxes accrued | 26,052 | 15,123 | ||
Interest accrued | (8,215) | (1,764) | ||
Deferred fuel costs | (65,003) | 52,789 | ||
Other working capital accounts | (38,510) | (22,023) | ||
Provision for estimated losses and reserves | (3) | (2,209) | ||
Changes in other regulatory assets | 6,272 | 7,084 | ||
Other | 21,237 | (4,685) | ||
Net cash flow provided by operating activities | 29,049 | 29,837 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (75,244) | (56,974) | ||
Allowance for equity funds used during construction | 3,257 | 3,948 | ||
Insurance proceeds | - - | 2,765 | ||
Nuclear fuel purchases | (50,096) | (3,103) | ||
Proceeds from the sale/leaseback of nuclear fuel | 52,482 | 14,279 | ||
Proceeds from nuclear decommissioning trust fund sales | 5,169 | 3,693 | ||
Investment in nuclear decommissioning trust funds | (7,597) | (6,095) | ||
Net cash flow used in investing activities | (72,029) | (41,487) | ||
FINANCING ACTIVITIES | ||||
Additional equity from parent | - - | 1,119 | ||
Change in money pool payable - net | 44,669 | 13,062 | ||
Distributions paid: | ||||
Preferred membership interests | (1,459) | (2,856) | ||
Net cash flow provided by financing activities | 43,210 | 11,325 | ||
Net increase (decrease) in cash and cash equivalents | 230 | (325) | ||
Cash and cash equivalents at beginning of period | 300 | 2,743 | ||
Cash and cash equivalents at end of period | $530 | $2,418 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $28,041 | $24,402 | ||
Income taxes | $1,250 | $- | ||
See Notes to Financial Statements. |
71
ENTERGY LOUISIANA, LLC | ||||||||
STATEMENTS OF MEMBERS' EQUITY AND COMPREHENSIVE INCOME | ||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
(Unaudited) | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
MEMBERS' EQUITY | ||||||||
Members' Equity - Beginning of period | $1,344,003 | $1,105,172 | ||||||
Add: | ||||||||
Net income | 23,768 | $23,768 | 17,396 | $17,396 | ||||
Additional equity from parent | 1,119 | 65,703 | ||||||
24,887 | 83,099 | |||||||
Deduct: | ||||||||
Distributions declared: | ||||||||
Preferred membership interests | 1,738 | 1,738 | 1,738 | 1,738 | ||||
Other | - | 97 | ||||||
1,738 | 1,835 | |||||||
Members' Equity - End of period | $1,367,152 | $1,186,436 | ||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||
INCOME (Net of Taxes): | ||||||||
Balance at beginning of period: | ||||||||
Pension and other postretirement liabilities | ($25,695) | $- | ||||||
Pension and other postretirement liabilities (net of tax expense of $466) | 511 | 511 | - | |||||
Balance at end of period: | ||||||||
Pension and other postretirement liabilities | ($25,184) | $- | ||||||
Comprehensive Income | $22,541 | $15,658 | ||||||
See Notes to Financial Statements. | ||||||||
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | $530 | $300 | ||
Accounts receivable: | ||||
Customer | 109,734 | 96,679 | ||
Allowance for doubtful accounts | (1,277) | (1,988) | ||
Associated companies | 64,397 | 91,873 | ||
Other | 12,878 | 14,186 | ||
Accrued unbilled revenues | 67,308 | 75,860 | ||
Total accounts receivable | 253,040 | 276,610 | ||
Deferred fuel costs | 16,932 | - - | ||
Accumulated deferred income taxes | 9,765 | 15,229 | ||
Materials and supplies - at average cost | 111,611 | 108,959 | ||
Deferred nuclear refueling outage costs | 3,930 | 7,080 | ||
Gas hedge contracts | 36,856 | - - | ||
Prepayments and other | 7,885 | 7,820 | ||
TOTAL | 440,549 | 415,998 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Decommissioning trust funds | 212,831 | 221,971 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,442 | 1,488 | ||
Note receivable - Entergy New Orleans | 9,353 | 9,353 | ||
Other | 4 | 4 | ||
TOTAL | 223,630 | 232,816 | ||
UTILITY PLANT | ||||
Electric | 6,622,716 | 6,550,597 | ||
Property under capital lease | 253,387 | 253,387 | ||
Construction work in progress | 266,707 | 276,974 | ||
Nuclear fuel under capital lease | 86,521 | 44,532 | ||
TOTAL UTILITY PLANT | 7,229,331 | 7,125,490 | ||
Less - accumulated depreciation and amortization | 3,134,424 | 3,095,473 | ||
UTILITY PLANT - NET | 4,094,907 | 4,030,017 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 117,250 | 117,322 | ||
Other regulatory assets | 825,621 | 832,449 | ||
Deferred fuel costs | 67,998 | 67,998 | ||
Long-term receivables | 2,982 | 2,982 | ||
Other | 26,379 | 23,539 | ||
TOTAL | 1,040,230 | 1,044,290 | ||
TOTAL ASSETS | $5,799,316 | $5,723,121 | ||
See Notes to Financial Statements. | ||||
72 | ||||
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
LIABILITIES AND MEMBERS' EQUITY | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $97,340 | $65,930 | ||
Other | 136,669 | 148,651 | ||
Customer deposits | 77,503 | 79,013 | ||
Taxes accrued | 33,808 | 7,756 | ||
Interest accrued | 21,524 | 29,739 | ||
Deferred fuel costs | 713 | 48,784 | ||
Obligations under capital leases | 42,714 | 42,714 | ||
Pension and other postretirement liabilities | 8,854 | 8,772 | ||
System agreement cost equalization | 46,000 | 46,000 | ||
Other | 18,302 | 18,961 | ||
TOTAL | 483,427 | 496,320 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,798,763 | 1,803,430 | ||
Accumulated deferred investment tax credits | 85,245 | 86,045 | ||
Obligations under capital leases | 43,807 | 1,818 | ||
Other regulatory liabilities | 153,191 | 127,836 | ||
Decommissioning | 261,910 | 257,066 | ||
Accumulated provisions | 18,402 | 18,405 | ||
Pension and other postretirement liabilities | 147,706 | 145,786 | ||
Long-term debt | 1,147,663 | 1,147,660 | ||
Other | 87,321 | 85,214 | ||
TOTAL | 3,744,008 | 3,673,260 | ||
Commitments and Contingencies | ||||
MEMBERS' EQUITY | ||||
Preferred membership interests without sinking fund | 100,000 | 100,000 | ||
Members' equity | 1,499,367 | 1,481,509 | ||
Accumulated other comprehensive loss | (27,486) | (27,968) | ||
TOTAL | 1,571,881 | 1,553,541 | ||
TOTAL LIABILITIES AND MEMBERS' EQUITY | $5,799,316 | $5,723,121 | ||
See Notes to Financial Statements. | ||||
73
ENTERGY LOUISIANA, LLC | ||||||||
STATEMENTS OF MEMBERS' EQUITY AND COMPREHENSIVE INCOME | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | ||||||||
(Unaudited) | ||||||||
2008 | 2007 | |||||||
(In Thousands) | ||||||||
MEMBERS' EQUITY | ||||||||
Members' Equity - Beginning of period | $1,481,509 | $1,344,003 | ||||||
Add: | ||||||||
Net income | 19,596 | $19,596 | 23,768 | $23,768 | ||||
Additional equity from parent | - | 1,119 | ||||||
19,596 | 24,887 | |||||||
Deduct: | ||||||||
Distributions declared: | ||||||||
Preferred membership interests | 1,738 | 1,738 | 1,738 | 1,738 | ||||
1,738 | 1,738 | |||||||
Members' Equity - End of period | $1,499,367 | $1,367,152 | ||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||
LOSS (Net of Taxes): | ||||||||
Balance at beginning of period: | ||||||||
Pension and other postretirement liabilities | ($27,968) | ($25,695) | ||||||
Pension and other postretirement liabilities (net of tax expense of $409 and $466) | 482 | 482 | 511 | 511 | ||||
Balance at end of period: | ||||||||
Pension and other postretirement liabilities | ($27,486) | ($25,184) | ||||||
Comprehensive Income | $18,340 | $22,541 | ||||||
See Notes to Financial Statements. | ||||||||
72
74
ENTERGY LOUISIANA, LLC | ENTERGY LOUISIANA, LLC | ENTERGY LOUISIANA, LLC | ||||||||||||||
SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | ||||||||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Increase/ | Increase/ | |||||||||||||||
Description | 2007 | 2006 | (Decrease) | % | 2008 | 2007 | (Decrease) | % | ||||||||
(Dollars In Millions) | (Dollars In Millions) | |||||||||||||||
Electric Operating Revenues: | ||||||||||||||||
Residential | $196 | $161 | $35 | 22 | $182 | $196 | ($14) | (7) | ||||||||
Commercial | 136 | 119 | 17 | 14 | 128 | 136 | (8) | (6) | ||||||||
Industrial | 225 | 193 | 32 | 17 | 205 | 225 | (20) | (9) | ||||||||
Governmental | 12 | 11 | 1 | 9 | 11 | 12 | (1) | (8) | ||||||||
Total retail | 569 | 484 | 85 | 18 | 526 | 569 | (43) | (8) | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 38 | 80 | (42) | (53) | 31 | 38 | (7) | (18) | ||||||||
Non-associated companies | 2 | 2 | - | - - | 2 | 2 | - | - - | ||||||||
Other | 8 | (14) | 22 | 157 | 6 | 8 | (2) | (25) | ||||||||
Total | $617 | $552 | $65 | 12 | $565 | $617 | ($52) | (8) | ||||||||
Billed Electric Energy | ||||||||||||||||
Sales (GWh): | ||||||||||||||||
Residential | 1,952 | 1,771 | 181 | 10 | 1,970 | 1,952 | 18 | 1 | ||||||||
Commercial | 1,300 | 1,246 | 54 | 4 | 1,308 | 1,300 | 8 | 1 | ||||||||
Industrial | 3,228 | 2,894 | 334 | 12 | 3,230 | 3,228 | 2 | - - | ||||||||
Governmental | 115 | 111 | 4 | 4 | 117 | 115 | 2 | 2 | ||||||||
Total retail (1) | 6,595 | 6,022 | 573 | 10 | 6,625 | 6,595 | 30 | - - | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 342 | 723 | (381) | (53) | 480 | 342 | 138 | 40 | ||||||||
Non-associated companies | 32 | 14 | 18 | 129 | 23 | 32 | (9) | (28) | ||||||||
Total | 6,969 | 6,759 | 210 | 3 | 7,128 | 6,969 | 159 | 2 | ||||||||
(1) 2006 billed electric energy sales includes 96 GWh of billings related to 2005 deliveries that were billed in | ||||||||||||||||
75 | 75 |
73
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased $2.1 millionremained relatively unchanged for the first quarter of 20072008 compared to the first quarter of 2006 primarily due to higher other income and2007 as higher net revenue partiallywas substantially offset by higher other operation and maintenance expenses higher depreciation and amortization expense, and a higher effective income tax rate.lower other income.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).charges. Following is an analysis of the change in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
Amount | ||
(In Millions) | ||
| $ | |
|
| |
Attala costs |
| |
Base revenue | 2.8 | |
Rider revenue | 1.9 | |
Other |
| |
| $ |
The volume/weather variance is primarily due to increased usage primarily during the unbilled sales period and more favorable weather on billed sales compared to the same period in 2006. 9; See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.
The Attala costs variance is primarily due to the deferral of Attala costs during the first quarter of 2006 that was recoveredan increase in the second quarter of 2006.Attala power plant costs that are recovered through the power management rider. The net income effect of this cost deferral was partiallyrecovery is limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operation and maintenance expenses, depreciation expense,expenses, and taxes other than income taxes. The recovery of Attala power plant costs is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources - - Use of Capital" in the Form 10-K.
The base revenue variance is primarily due to a formula rate plan increase effective July 2007. The formula rate plan is discussed in Note 2 to the financial statements in the Form 10-K.
The rider revenue variance is the result of a storm damage rider that became effective in October 2007. The establishment of this rider results in an increase in rider revenue and a corresponding increase in other operation and maintenance expense for the storm reserve with no impact on net income.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues decreasedincreased primarily due to a decreaseto:
76
Fuel and purchased power expenses decreasedincreased primarily due to a decreasean increase in deferred fuel expense due to a decreasethe cost of natural gas combined with an increase in fuel rates.the proportion of power generated using that fuel.
Other regulatory charges increased primarily due to increased recovery through the refundingGrand Gulf Rider of Grand Gulf capacity costs due to higher rates and increased usage. The increase in 2006, throughother regulatory charges was partially offset by decreased recovery of costs associated with the power management recovery rider, of gains recorded on gas hedging contracts in addition to the over-recovery in 2007, through the Grand Gulf rider, of Grand Gulf capacity charges. The increase was partially offset by the deferral of Attala costs in 2006, discussed above.rider. There is no material effect on net income due to quarterly adjustments to the power management recovery rider.
74
Other Income Statement Variances
Other operation and maintenance expense increased primarily due to:
The increase was partially offset by a decrease of $1.7 million in loss reserves in 2007. increased materials and supplies expenses.
Depreciation and amortization expenses increased primarily due to an increase in plant in service. The increase is also due to an adjustment made in February 2006 as a result of a revision in estimated depreciable lives involving certain intangible assets.
Taxes other thanOther income taxes decreased primarily due to lower franchise taxesa gain recorded in 2007.
Other income increased primarily due to the gain recorded2007 on the sale of non-utility property and higherlower interest earned on money pool investments.
Interest expense decreased primarily due to a decrease in long-term debt outstanding as a result of the redemption of $100 million of first mortgage bonds in January 2007. Interest expense also decreased due to money pool activity.
Income Taxes
The effective income tax rates for the first quarters of2008 and 2007 were 31.1% and 2006 were 35.6% and 0.4%, respectively. The difference inbetween the effective tax rate for the first quarter of 2006 versus2008 and the federal statutory rate of 35.0% is primarily due to book and tax differences related to the allowance for equity funds used during construction and the amortization of investment tax credits, and book and tax differences related to utility plant items.partially offset by state income taxes.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $73,417 |
| $4,523 | Cash and cash equivalents at beginning of period |
| $40,582 |
| $73,417 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| (18,033) |
| 60,292 | Operating activities |
| (9,123) |
| (18,033) |
| Investing activities |
| 84,504 |
| (135,611) | Investing activities |
| (18,299) |
| 84,504 |
| Financing activities |
| (102,707) |
| 80,199 | Financing activities |
| (9,407) |
| (102,707) |
Net increase (decrease) in cash and cash equivalents |
| (36,236) |
| 4,880 | ||||||
Net decrease in cash and cash equivalents | Net decrease in cash and cash equivalents |
| (36,829) |
| (36,236) | |||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $37,181 |
| $9,403 | Cash and cash equivalents at end of period |
| $3,753 |
| $37,181 |
75
Operating Activities
Entergy Mississippi'sCash flow used in operating activities used $18.0decreased $8.9 million for the first quarter of 20072008 compared to providing $60.3 million for the first quarter of 20062007 primarily due to decreased collection of deferred fuel and purchased power costs, partially offset by the timing of payments to vendors.vendors partially offset by decreased recovery of deferred fuel costs.
Investing Activities
InvestingEntergy Mississippi's investing activities provided $84.5used $18.3 million in cash flow for the first quarter of 20072008 compared to using $135.6providing $84.5 million for the first quarter 20062007 primarily due to:
77
Financing Activities
Entergy's Mississippi'sNet cash flow used in financing activities used $102.7decreased $93.3 million for the first quarter of 20072008 compared to providing $80.2 million for the first quarter of 20062007 primarily due to the redemption, prior to maturity, of $100 million of first mortgage bonds4.35% Series First Mortgage Bonds in January 2007, and the issuance of $100 million of long-term debt during 2006, partially offset by money pool activity.2007.
Capital Structure
Entergy Mississippi's capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital percentage as of March 31, 2007 is primarily due to the redemption of $100 million of First Mortgage Bonds in January 2007.
|
| March 31, |
| December 31, |
| March 31, |
| December 31, |
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 49.5% |
| 51.9% |
| 49.8% |
| 48.4% |
Effect of subtracting cash from debt |
| 1.4% |
| 2.4% |
| 0.2% |
| 1.5% |
Debt to capital |
| 50.9% |
| 54.3% |
| 50.0% |
| 49.9% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi's financial condition.
76
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of Entergy Mississippi's uses and sources of capital. Following are updates to the information presented in the Form 10-K.
Entergy Mississippi's receivables from or (payables to) the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$29,999 |
| $39,573 |
| ($65,732) |
| ($84,066) |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$11,256 |
| $20,997 |
| $29,999 |
| $39,573 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
As discussed in the Form 10-K, Entergy Mississippi has two separate credit facilities in the aggregate amount of $50 million that expire in May 2007.2008. Borrowings under the credit facilities may be secured by a security interest in Entergy Mississippi's accounts receivable. Entergy Mississippi expects to renew both of its credit facilities prior to expiration. No borrowings were outstanding under either facility as of March 31, 2007.2008.
In January 2007, Entergy Mississippi redeemed, prior to maturity, $100 million of 4.35% Series of First Mortgage Bonds due April 2008.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation, the Energy Policy Act of 2005, and utility restructuring. The followingFollowing is an update to the information provided in the Form 10-K.that discussion.
78
State and Local Rate Regulation
In March 2007,2008, Entergy Mississippi made its annual scheduled formula rate plan filing for the 20062007 test year with the MPSC. The filing showsshowed that ana $10.1 million increase of $12.9 million in annual electric revenues is warranted. The filing is currently being reviewed by the Mississippi Public Utilities Staff is reviewing the filing.
Staff.
Federal Regulation
See "System Agreement Proceedings", and "Independent Coordinator of Transmission", and "Available Flowgate Capacity Proceeding" in the "Significant Factors and Known Trends" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi's accounting for unbilled revenue and qualified pension and other postretirement benefits.
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
7779
ENTERGY MISSISSIPPI, INC. | ENTERGY MISSISSIPPI, INC. | ENTERGY MISSISSIPPI, INC. | ||||||
INCOME STATEMENTS | INCOME STATEMENTS | INCOME STATEMENTS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Electric | $270,525 | $373,234 | $294,850 | $270,525 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 70,974 | 179,157 | 78,764 | 70,974 | ||||
Purchased power | 95,835 | 124,426 | 96,099 | 95,835 | ||||
Other operation and maintenance | 45,115 | 40,965 | 51,106 | 45,115 | ||||
Taxes other than income taxes | 15,015 | 17,516 | 14,812 | 15,015 | ||||
Depreciation and amortization | 20,269 | 16,996 | 20,415 | 20,269 | ||||
Other regulatory charges (credits) - net | 9,795 | (20,642) | ||||||
Other regulatory charges - net | 14,485 | 9,795 | ||||||
TOTAL | 257,003 | 358,418 | 275,681 | 257,003 | ||||
OPERATING INCOME | 13,522 | 14,816 | 19,169 | 13,522 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | Allowance for equity funds used during construction | 1,676 | 1,241 | Allowance for equity funds used during construction | 776 | 1,676 | ||
Interest and dividend income | 1,448 | 229 | 210 | 1,448 | ||||
Miscellaneous - net | 2,252 | (562) | (661) | 2,252 | ||||
TOTAL | 5,376 | 908 | 325 | 5,376 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 10,382 | 11,115 | 10,550 | 10,382 | ||||
Other interest - net | 1,235 | 2,112 | 1,136 | 1,235 | ||||
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | (1,119) | (814) | Allowance for borrowed funds used during construction | (435) | (1,119) | ||
TOTAL | 10,498 | 12,413 | 11,251 | 10,498 | ||||
INCOME BEFORE INCOME TAXES | 8,400 | 3,311 | 8,243 | 8,400 | ||||
Income taxes | 2,991 | 14 | 2,564 | 2,991 | ||||
NET INCOME | 5,409 | 3,297 | 5,679 | 5,409 | ||||
Preferred dividend requirements and other | 707 | 707 | 707 | 707 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $4,702 | $2,590 | $4,972 | $4,702 | ||||
See Notes to Financial Statements. |
7880
ENTERGY MISSISSIPPI, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2007 and 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $5,409 | $3,297 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory charges (credits) - net | 9,795 | (20,642) | ||
Depreciation and amortization | 20,269 | 16,996 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | (2,936) | 62,760 | ||
Changes in working capital: | ||||
Receivables | 11,621 | 14,211 | ||
Fuel inventory | (44) | (3,103) | ||
Accounts payable | (10,893) | (53,206) | ||
Taxes accrued | (23,943) | (33,121) | ||
Interest accrued | 1,697 | 1,323 | ||
Deferred fuel costs | (19,802) | 123,076 | ||
Other working capital accounts | (15,662) | (38,085) | ||
Provision for estimated losses and reserves | 292 | (23) | ||
Changes in other regulatory assets | 18,322 | (14,621) | ||
Other | (12,158) | 1,430 | ||
Net cash flow provided by (used in) operating activities | (18,033) | 60,292 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (29,362) | (48,653) | ||
Payment for purchase of plant | - | (88,199) | ||
Allowance for equity funds used during construction | 1,676 | 1,241 | ||
Change in money pool receivable - net | 9,574 | - | ||
Change in other temporary investments - net | 100,000 | - | ||
Proceeds from sale of assets | 2,616 | - | ||
Net cash flow provided by (used in) investing activities | 84,504 | (135,611) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - | 99,240 | ||
Retirement of long-term debt | (100,000) | - | ||
Change in money pool payable - net | - | (18,334) | ||
Dividends paid: | ||||
Common stock | (2,000) | - | ||
Preferred stock | (707) | (707) | ||
Net cash flow provided by (used in) financing activities | (102,707) | 80,199 | ||
Net increase (decrease) in cash and cash equivalents | (36,236) | 4,880 | ||
Cash and cash equivalents at beginning of period | 73,417 | 4,523 | ||
Cash and cash equivalents at end of period | $37,181 | $9,403 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $9,401 | $11,390 | ||
See Notes to Financial Statements. |
79
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $1,703 | $2,128 | ||
Temporary cash investment - at cost, | ||||
which approximates market | 35,478 | 71,289 | ||
Total cash and cash equivalents | 37,181 | 73,417 | ||
Accounts receivable: | ||||
Customer | 53,439 | 61,216 | ||
Allowance for doubtful accounts | (642) | (616) | ||
Associated companies | 36,367 | 45,040 | ||
Other | 7,966 | 9,032 | ||
Accrued unbilled revenues | 28,897 | 32,550 | ||
Total accounts receivable | 126,027 | 147,222 | ||
Accumulated deferred income taxes | 432 | - | ||
Fuel inventory - at average cost | 7,689 | 7,645 | ||
Materials and supplies - at average cost | 29,886 | 28,607 | ||
Other special deposits | - | 100,000 | ||
Prepayments and other | 13,674 | 7,398 | ||
TOTAL | 214,889 | 364,289 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 5,531 | 5,531 | ||
Non-utility property - at cost (less accumulated depreciation) | 5,243 | 6,061 | ||
TOTAL | 10,774 | 11,592 | ||
UTILITY PLANT | ||||
Electric | 2,736,499 | 2,692,971 | ||
Property under capital lease | 4 | 17 | ||
Construction work in progress | 65,331 | 79,950 | ||
TOTAL UTILITY PLANT | 2,801,834 | 2,772,938 | ||
Less - accumulated depreciation and amortization | 959,553 | 945,548 | ||
UTILITY PLANT - NET | 1,842,281 | 1,827,390 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 28,579 | 26,378 | ||
Other regulatory assets | 160,980 | 186,986 | ||
Long-term receivables | 2,288 | 2,288 | ||
Other | 24,653 | 21,968 | ||
TOTAL | 216,500 | 237,620 | ||
TOTAL ASSETS | $2,284,444 | $2,440,891 | ||
See Notes to Financial Statements. | ||||
80 | ||||
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $58,171 | $59,696 | ||
Other | 26,843 | 38,097 | ||
Customer deposits | 53,296 | 51,568 | ||
Taxes accrued | 21,744 | 45,687 | ||
Accumulated deferred income taxes | - | 3,963 | ||
Interest accrued | 14,760 | 13,063 | ||
Deferred fuel costs | 75,434 | 95,236 | ||
Obligations under capital leases | 4 | 2 | ||
Other | 7,787 | 17,622 | ||
TOTAL | 258,039 | 324,934 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 519,452 | 516,558 | ||
Accumulated deferred investment tax credits | 10,722 | 11,047 | ||
Other regulatory liabilities | 5,965 | - | ||
Asset retirement cost liabilities | 4,315 | 4,254 | ||
Accumulated provisions | 10,328 | 10,036 | ||
Pension and other postretirement liabilities | 64,368 | 64,604 | ||
Long-term debt | 695,218 | 795,187 | ||
Other | 45,317 | 46,253 | ||
TOTAL | 1,355,685 | 1,447,939 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 50,381 | 50,381 | ||
Common stock, no par value, authorized 15,000,000 | ||||
shares; issued and outstanding 8,666,357 shares in 2007 and 2006 | 199,326 | 199,326 | ||
Capital stock expense and other | (690) | (690) | ||
Retained earnings | 421,703 | 419,001 | ||
TOTAL | 670,720 | 668,018 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,284,444 | $2,440,891 | ||
See Notes to Financial Statements. | ||||
ENTERGY MISSISSIPPI, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2008 and 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $5,679 | $5,409 | ||
Adjustments to reconcile net income to net cash flow used in operating activities: | ||||
Other regulatory charges - net | 14,485 | 9,795 | ||
Depreciation and amortization | 20,415 | 20,269 | ||
Deferred income taxes, investment tax credits, and non-current taxes accrued | (13,210) | (2,936) | ||
Changes in working capital: | ||||
Receivables | 7,259 | 11,621 | ||
Fuel inventory | 474 | (44) | ||
Accounts payable | (894) | (10,893) | ||
Taxes accrued | (9,851) | (23,943) | ||
Interest accrued | 1,741 | 1,697 | ||
Deferred fuel costs | (29,538) | (19,802) | ||
Other working capital accounts | (28,170) | (15,662) | ||
Provision for estimated losses and reserves | 805 | 292�� | ||
Changes in other regulatory assets | 11,551 | 18,322 | ||
Other | 10,131 | (12,158) | ||
Net cash flow used in operating activities | (9,123) | (18,033) | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (28,474) | (29,362) | ||
Allowance for equity funds used during construction | 776 | 1,676 | ||
Change in money pool receivable - net | 9,741 | 9,574 | ||
Change in other temporary investments - net | - | 100,000 | ||
Proceeds from sale of assets | - | 2,616 | ||
Payment to storm reserve escrow account | (342) | - | ||
Net cash flow provided by (used in) investing activities | (18,299) | 84,504 | ||
FINANCING ACTIVITIES | ||||
Retirement of long-term debt | - | (100,000) | ||
Dividends paid: | ||||
Common stock | (8,700) | (2,000) | ||
Preferred stock | (707) | (707) | ||
Net cash flow used in financing activities | (9,407) | (102,707) | ||
Net decrease in cash and cash equivalents | (36,829) | (36,236) | ||
Cash and cash equivalents at beginning of period | 40,582 | 73,417 | ||
Cash and cash equivalents at end of period | $3,753 | $37,181 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $9,419 | $9,401 | ||
Income taxes | ($1,025) | $- | ||
See Notes to Financial Statements. |
81
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $857 | $117 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 2,896 | 40,465 | ||
Total cash and cash equivalents | 3,753 | 40,582 | ||
Accounts receivable: | ||||
Customer | 64,123 | 62,052 | ||
Allowance for doubtful accounts | (679) | (615) | ||
Associated companies | 11,100 | 23,534 | ||
Other | 6,471 | 8,234 | ||
Accrued unbilled revenues | 28,725 | 33,535 | ||
Total accounts receivable | 109,740 | 126,740 | ||
Accumulated deferred income taxes | 11,399 | 7,686 | ||
Fuel inventory - at average cost | 9,892 | 10,366 | ||
Materials and supplies - at average cost | 30,567 | 30,167 | ||
Gas hedge contracts | 30,636 | - - | ||
Prepayments and other | 10,473 | 13,701 | ||
TOTAL | 206,460 | 229,242 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 5,531 | 5,531 | ||
Non-utility property - at cost (less accumulated depreciation) | 5,105 | 5,140 | ||
Storm reserve escrow account | 31,089 | 30,748 | ||
Note receivable - Entergy New Orleans | 7,610 | 7,610 | ||
TOTAL | 49,335 | 49,029 | ||
UTILITY PLANT | ||||
Electric | 2,866,634 | 2,829,065 | ||
Property under capital lease | 8,795 | 9,116 | ||
Construction work in progress | 61,337 | 72,753 | ||
TOTAL UTILITY PLANT | 2,936,766 | 2,910,934 | ||
Less - accumulated depreciation and amortization | 1,013,928 | 995,902 | ||
UTILITY PLANT - NET | 1,922,838 | 1,915,032 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 33,717 | 29,868 | ||
Other regulatory assets | 126,819 | 141,717 | ||
Long-term receivables | 819 | 819 | ||
Other | 24,273 | 20,562 | ||
TOTAL | 185,628 | 192,966 | ||
TOTAL ASSETS | $2,364,261 | $2,386,269 | ||
See Notes to Financial Statements. | ||||
82 | ||||
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $41,403 | $46,424 | ||
Other | 40,231 | 36,104 | ||
Customer deposits | 56,512 | 55,719 | ||
Taxes accrued | 26,187 | 36,038 | ||
Interest accrued | 16,935 | 15,194 | ||
Deferred fuel costs | 47,044 | 76,582 | ||
Other | 7,750 | 8,905 | ||
TOTAL | 236,062 | 274,966 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 526,533 | 535,469 | ||
Accumulated deferred investment tax credits | 9,462 | 9,748 | ||
Obligations under capital lease | 7,466 | 7,806 | ||
Other regulatory liabilities | 30,822 | - - | ||
Asset retirement cost liabilities | 4,579 | 4,505 | ||
Accumulated provisions | 51,069 | 50,264 | ||
Pension and other postretirement liabilities | 57,010 | 56,946 | ||
Long-term debt | 695,282 | 695,266 | ||
Other | 42,648 | 44,243 | ||
TOTAL | 1,424,871 | 1,404,247 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 50,381 | 50,381 | ||
Common stock, no par value, authorized 15,000,000 | ||||
shares; issued and outstanding 8,666,357 shares in 2008 and 2007 | 199,326 | 199,326 | ||
Capital stock expense and other | (690) | (690) | ||
Retained earnings | 454,311 | 458,039 | ||
TOTAL | 703,328 | 707,056 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,364,261 | $2,386,269 | ||
See Notes to Financial Statements. | ||||
83
ENTERGY MISSISSIPPI, INC. | ENTERGY MISSISSIPPI, INC. | ENTERGY MISSISSIPPI, INC. | ||||||||||||||
SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | SELECTED OPERATING RESULTS | ||||||||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Increase/ | Increase/ | |||||||||||||||
Description | 2007 | 2006 | (Decrease) | % | 2008 | 2007 | (Decrease) | % | ||||||||
(Dollars In Millions) | (Dollars In Millions) | |||||||||||||||
Electric Operating Revenues: | ||||||||||||||||
Residential | $ 101 | $ 146 | ($45) | (31) | $ 111 | $ 101 | $10 | 10 | ||||||||
Commercial | 90 | 130 | (40) | (31) | 99 | 90 | 9 | 10 | ||||||||
Industrial | 41 | 68 | (27) | (40) | 42 | 41 | 1 | 2 | ||||||||
Governmental | 9 | 13 | (4) | (31) | 10 | 9 | 1 | 11 | ||||||||
Total retail | 241 | 357 | (116) | (32) | 262 | 241 | 21 | 9 | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 16 | 8 | 8 | 100 | 20 | 16 | 4 | 25 | ||||||||
Non-associated companies | 6 | 8 | (2) | (25) | 6 | 6 | - | - | ||||||||
Other | 7 | - | 7 | - | 7 | 7 | - | - - | ||||||||
Total | $ 270 | $ 373 | ($103) | (28) | $ 295 | $ 270 | $25 | 9 | ||||||||
Billed Electric Energy | ||||||||||||||||
Sales (GWh): | ||||||||||||||||
Residential | 1,251 | 1,185 | 66 | 6 | 1,289 | 1,251 | 38 | 3 | ||||||||
Commercial | 1,070 | 1,040 | 30 | 3 | 1,097 | 1,070 | 27 | 3 | ||||||||
Industrial | 653 | 701 | (48) | (7) | 622 | 653 | (31) | (5) | ||||||||
Governmental | 95 | 93 | 2 | 2 | 95 | 95 | - | - | ||||||||
Total retail | 3,069 | 3,019 | 50 | 2 | 3,103 | 3,069 | 34 | 1 | ||||||||
Sales for resale | ||||||||||||||||
Associated companies | 146 | 71 | 75 | 106 | 181 | 146 | 35 | 24 | ||||||||
Non-associated companies | 84 | 68 | 16 | 24 | 36 | 84 | (48) | (57) | ||||||||
Total | 3,299 | 3,158 | 141 | 4 | 3,320 | 3,299 | 21 | 1 | ||||||||
84
82
ENTERGY NEW ORLEANS, INC. (Debtor-in-possession)
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricane Katrina, which in August 2005 caused catastrophic damage to Entergy New Orleans' service territory, including the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area, and Entergy New Orleans' effortsEntergy's initiatives to seek recovery ofrecover storm restoration and business continuity costs.
In March 2007, the City Council certified that Entergy New Orleans has incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for the gas system rebuild. In April 2007, Entergy New Orleans executed an agreement with the Louisiana Office of Community Development under which $200 million of CDBG funds will be made available to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved it on April 25, 2007. Entergy New Orleans received $171.7 million of the funds on April 27, 2007, and the remainder will be paid to Entergy New Orleans as it incurs and submits additional eligible costs.
Entergy has reached an agreement with one of its excess insurers under which Entergy will receive $69.5 million in settlement of its Hurricane Katrina claim. Entergy expects that $53.7 million of this amount will be allocated to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved the agreement on April 25, 2007. Entergy expects to receive the proceeds under the settlement agreement by the end of May 2007.
Bankruptcy Proceedings
See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007. Following are significant terms in Entergy New Orleans' plan of reorganization:reorganization that became effective in May 2007.
Insurance Claim
In April 2008, Entergy New Orleans will pay in full, in cash, within 15 days of the effective date, the allowed third-party prepetition accounts payable (estimated at $29.5 million).
83
Entergy New Orleans currently estimates that the prepetition claims that will be allowed and paid (either in cash or by notes) in the bankruptcy case will approximate the prepetition liabilities currently recorded by Entergy New Orleans, including interest.
With confirmation of the plan of reorganization, Entergy expects to reconsolidate Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007. Because Entergy owns all of the common stock ofApril 2008 proceeds were allocated to Entergy New Orleans, reconsolidation will not affect the amount of net income that Entergy records from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.Orleans.
Results of Operations
Net Income
Net income decreased $2.5increased $4.8 million in the first quarter 20072008 compared to the first quarter 20062007 primarily due to higher other operation and maintenance expenses and higher interest charges,net revenue partially offset by a higher net revenue.effective income tax rate.
Net Revenue
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the first quarter of 20072008 to the first quarter of 2006.2007.
Amount | ||
(In Millions) | ||
|
| |
|
| |
|
| |
|
| |
|
| |
2007 net revenue | $50.0 | |
Net gas revenue | 4.6 | |
Volume/weather | 3.4 | |
Price applied to unbilled electric sales | 2.5 | |
Other | 1.9 | |
2008 net revenue | $62.4 |
The fuel recoverynet gas revenue variance is primarily due to the inclusion of Grand Gulf costs in fuel recoveries effective July 1, 2006. In June 2006, the City Council approved the recovery of Grand Gulf costs through the fuel adjustment clause, without a corresponding changean increase in base rates (a significant portionand increased usage. Refer to Note 2 to the financial statements in the Form 10-K for a discussion of Grand Gulf costs was previously recovered throughthe base rates).rate increase.
The volume/weather variance is due to an increase in electricity usage primarily in the service territoryresidential sector in 20072008 compared to the same period in 2006. The first quarter of 2006 was affected by customer losses following Hurricane Katrina. Billed retail electricity usage2007, which increased a total of 22472 GWh, compared to the first quarter of 2006, an increase of 32%.31%, as customers have returned to service following the losses from Hurricane Katrina.
85
The net wholesale revenueprice applied to unbilled electric sales variance is due to higher energy available for resale salesan increase in 2006 duethe fuel cost component of the price applied to unbilled sales. See Note 1 to the decreasefinancial statements in retail usage caused by customer losses following Hurricane Katrina. In addition, 2006 revenue includes the sales into the wholesale market of Entergy New Orleans' shareForm 10-K for further discussion of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in
84
Entergy New Orleans' retail customer demand caused by Hurricane Katrina and to provide revenue supportaccounting for the costs of Entergy New Orleans' share of Grand Gulf.unbilled revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to storm restoration work capitalizedconsultant fees and the accrual of an Energy Efficiency Fund effective in 2006 as a resultthe first quarter 2008.
Reorganization items in 2007 consist primarily of Hurricane Katrina compared to normal operations and maintenance work in 2007.professional fees associated with the bankruptcy case.
Other income increased due to carrying costs of $2 million related to the Hurricane Katrina storm costs regulatory asset.
Interest and other charges increaseddecreased primarily due to interest accruals on first mortgage bonds. On September 23, 2006, when the one-year interest moratorium agreed to by the bondholders expired, Entergy New Orleans resumed interest accruals on its outstanding first mortgage bonds. In addition, Entergy New Orleans began accruing interest on affiliate accounts payable as a result of its plan of reorganization filed with the bankruptcy court in February 2007. The plan of reorganization is discussed in Note 18 to the financial statementsreduction in the Form 10-K and updatedallowance for equity funds used during construction related to a decrease in Note 9 to the financial statements herein.storm-related construction.
Income Taxes
The effective income tax rate was 48.8% for the first quarter 2008 and 32.4% for the first quarter of 2007 and 37.5% for the first quarter of 2006.2007. The effective income tax rate for the first quarter 2008 was higher than the federal statutory rate of 35% primarily due to book and tax differences related to utility plant items and state income taxes. The effective income tax rate for the first quarter 2007 was lower than the federal statutory rate of 35% primarily due to book and tax differences related to the allowance of equity funds used during construction and the amortization of deferred income taxes and investment tax credits, partially offset by book and tax differences related to utility plant items and state income taxes.
Preferred Dividends
No preferred dividends were declared during the first quarter of 2006. Due to its bankruptcy, Entergy New Orleans did not pay the preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006.
Because its plan of reorganization proposes to pay the accumulated, unpaid dividends on all three series of its preferred stock, Entergy New Orleans began accruing for those dividends in the fourth quarter 2006. The plan of reorganization is discussed in Note 9 to the financial statements.
Liquidity and Capital Resources
Debtor-in-Possession Credit Facility
See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. As of March 31, 2007, Entergy New Orleans had $42 million of outstanding borrowings under the DIP credit agreement. During April 2007, at the same time as it made a scheduled pension plan contribution, Entergy New Orleans borrowed under the DIP credit agreement, and on May 8, 2007 had $67 million of outstanding borrowings under the DIP credit agreement.
85
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $17,093 |
| $48,056 | Cash and cash equivalents at beginning of period |
| $92,010 |
| $17,093 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 17,191 |
| 30,729 | Operating activities |
| 5,212 |
| 17,191 |
| Investing activities |
| (3,795) |
| (43,240) | Investing activities |
| (71,413) |
| (3,795) |
| Financing activities |
| (10,000) |
| (10,000) | Financing activities |
| (482) |
| (10,000) |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents |
| 3,396 |
| (22,511) | Net increase (decrease) in cash and cash equivalents |
| (66,683) |
| 3,396 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $20,489 |
| $25,545 | Cash and cash equivalents at end of period |
| $25,327 |
| $20,489 |
Operating Activities
Net cash provided by operating activities decreased $13.5$12.0 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due to the timing of collections of receivables from customers and decreased recovery of deferred fuel costs, partially offset by an increase in interest paid of $6.9 million. Entergy New Orleans' operating cash flow for the first quarter of 2007 is also affected by increased operating activity in 2007 compared to the first quarter of 2006 following Hurricane Katrina.net income.
Investing Activities
Net cash used in investing activities decreased $39.4increased $67.6 million for the first quarter of 20072008 compared to the first quarter of 20062007 primarily due to capital expenditure activityan increase in 2006 related to Hurricane Katrina. Entergy New Orleans also receivedOrleans' receivable from the money pool and proceeds of $10 million received in 2007 related to the sale in the first quarter of 2007 of a power plant that had been out of service since 1984.
86
Financing Activities
Net cash used in financing activities decreased $9.5 million for the first quarter 2008 compared to the first quarter 2007 primarily due to a partial repayment of Entergy New Orleans' borrowings under the debtor in possession credit facility in 2007.
Capital Structure
Entergy New Orleans' capitalization is shown in the following table. The increase in net debt to net capital ratio is primarily due to the decrease in cash and cash equivalents as a result of n increase in Entergy New Orleans' money pool receivable.
|
| March 31, |
| December 31, |
|
| March 31, |
| December 31, |
|
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 58.7% |
| 60.4% |
|
| 57.6% |
| 51.8% |
Effect of subtracting cash from debt | 1.9% | 1.5% | 2.1% | 8.8% | |||||
Debt to capital |
| 60.6% |
| 61.9% |
|
| 59.7% |
| 60.6% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans' financial condition.
86
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of Entergy New Orleans' uses and sources of capital. The following are updates to the Form 10-K.
Entergy New Orleans' payables toreceivables from or (payables to) the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
($37,166) |
| ($37,166) |
| ($37,166) |
| ($37,166) |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$94,689 |
| $47,705 |
| ($37,166) |
| ($37,166) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool. As discussed in the Form 10-K, in May 2007, Entergy New Orleans remains a participantissued notes in the money pool, but Entergy New Orleans has not made, and does not expect to make, any additional borrowings from the money pool while it is in bankruptcy proceedings. SeeBankruptcy Proceedings above for a discussionsatisfaction of the treatment in Entergy New Orleans' plan of reorganization of theits affiliate prepetition accounts payable, including its indebtedness to the Entergy System money pool.
87
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation, the Energy Policy Act of 2005, and environmental risks, and litigation risks. FollowingThe following are updates to the Form 10-K.
State and Local Rate Regulation
In January 2008, Entergy New Orleans voluntarily implemented a 6.15% base rate credit for electric customers, which Entergy New Orleans estimates will return $10.6 million to electric customers in 2008. Entergy New Orleans was able to implement this credit because the recovery of New Orleans after Hurricane Katrina has been occurring faster than expected. In addition, Entergy New Orleans also set aside $2.5 million for an Energy Efficiency Fund.
Fuel Adjustment Clause Litigation
See the Form 10-K for a discussion of the complaint filed in April 1999 by a group of ratepayers against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers and a corresponding complaint filed with the City Council. In February 2004, the City Council approved a resolution that resulted in a refund to customers of $11.3 million, including interest, during the months of June through September 2004. In May 2005 the Civil District Court for the Parish of Orleans affirmed the City Council resolution, finding no support for the plaintiffs' claim that the refund amount should be higher. In June 2005, the plaintiffs appealed the Civil District Court decision to the Louisiana Fourth Circuit Court of Appeal. On February 25, 2008, the Fourth Circuit Court of Appeal issued a decision affirming in part, and reversing in part, the Civil District Court's decision. Although the Fourth Circuit Court of Appeal did not reverse any of the substantive findings and conclusions of the City Council or the Civil District Court, the Fourth Circuit found that the amount of the refund was arbitrary and capricious and increased the amount of the refund to $34.3 million. Entergy New Orleans believes that the increase in the Form 10-K.refund ordered by the Fourth Circuit is not justified. Entergy New Orleans, the City Council, and the plaintiffs requested rehearing, and in April 2008, the Fourth Circuit granted the plaintiffs' request for rehearing. In addition to changing the basis for the court's decision in the manner requested by the plaintiffs, the court also granted the plaintiffs' request that it provide for interest on the refund amount. The court denied the motions for rehearing filed by the City Council and Entergy New Orleans. In May 2008, Entergy New Orleans and the City Council filed petitions for appeal to the Louisiana Supreme Court, which has been opp osed by the plaintiffs, and filed with the Louisiana Supreme Court applications for a writ of certiorari seeking, among other things, reversal of the Fourth Circuit decision.
Federal Regulation
See "System Agreement Proceedings", and "Independent Coordinator of Transmission", and "Available Flowgate Capacity Proceeding" in the "Significant Factors and Known Trends" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for updates to the discussion in the Form 10-K.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans' accounting for unbilled revenue and qualified pension and other postretirement benefits.
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
8788
ENTERGY NEW ORLEANS, INC. | ENTERGY NEW ORLEANS, INC. | ENTERGY NEW ORLEANS, INC. | ||||||
(DEBTOR-IN-POSSESSION) | ||||||||
INCOME STATEMENTS | INCOME STATEMENTS | INCOME STATEMENTS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Electric | $121,619 | $99,249 | $140,228 | $121,619 | ||||
Natural gas | 47,023 | 37,012 | 51,127 | 47,023 | ||||
TOTAL | 168,642 | 136,261 | 191,355 | 168,642 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 77,431 | 34,668 | 79,898 | 77,431 | ||||
Purchased power | 40,159 | 60,237 | 48,011 | 40,159 | ||||
Other operation and maintenance | 22,205 | 13,810 | 24,820 | 22,205 | ||||
Taxes other than income taxes | 9,774 | 8,600 | 10,134 | 9,774 | ||||
Depreciation and amortization | 8,123 | 7,464 | 8,094 | 8,123 | ||||
Reorganization items | 2,343 | 1,678 | - - | 2,343 | ||||
Other regulatory charges - net | 1,033 | 1,043 | 1,030 | 1,033 | ||||
TOTAL | 161,068 | 127,500 | 171,987 | 161,068 | ||||
OPERATING INCOME | 7,574 | 8,761 | 19,368 | 7,574 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 1,191 | 1,079 | 78 | 1,191 | ||||
Interest and dividend income | 2,733 | 803 | 2,354 | 2,733 | ||||
Miscellaneous - net | (179) | (152) | (762) | (179) | ||||
TOTAL | 3,745 | 1,730 | 1,670 | 3,745 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 3,245 | 184 | 3,242 | 3,245 | ||||
Other interest - net | 4,309 | 2,141 | 2,332 | 4,309 | ||||
Allowance for borrowed funds used during construction | (898) | (863) | (50) | (898) | ||||
TOTAL | 6,656 | 1,462 | 5,524 | 6,656 | ||||
INCOME BEFORE INCOME TAXES | 4,663 | 9,029 | 15,514 | 4,663 | ||||
Income taxes | 1,513 | 3,386 | 7,567 | 1,513 | ||||
NET INCOME | 3,150 | 5,643 | 7,947 | 3,150 | ||||
Preferred dividend requirements and other | 241 | - - | 241 | 241 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $2,909 | $5,643 | $7,706 | $2,909 | ||||
See Notes to Financial Statements. | ||||||||
8889
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90
ENTERGY NEW ORLEANS, INC. | ENTERGY NEW ORLEANS, INC. | ENTERGY NEW ORLEANS, INC. | ||||||
(DEBTOR-IN-POSSESSION) | ||||||||
STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $3,150 | $5,643 | $7,947 | $3,150 | ||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||
Other regulatory charges - net | 1,033 | 1,043 | 1,030 | 1,033 | ||||
Depreciation and amortization | 8,123 | 7,464 | 8,094 | 8,123 | ||||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 15,615 | 70,879 | 11,702 | 15,615 | ||||
Changes in working capital: | ||||||||
Receivables | (6,626) | 14,565 | (13,306) | (6,626) | ||||
Fuel inventory | 4,843 | 6,820 | 3,727 | 4,843 | ||||
Accounts payable | 15,069 | (6,995) | 2,010 | 15,069 | ||||
Taxes accrued | 7,123 | - | (2,212) | 7,123 | ||||
Interest accrued | (1,377) | 282 | (2,165) | (1,377) | ||||
Deferred fuel costs | 2,207 | 4,581 | (8,509) | 2,207 | ||||
Other working capital accounts | (5,790) | (66,694) | (5,734) | (5,790) | ||||
Provision for estimated losses and reserves | 421 | - | 867 | 421 | ||||
Changes in other regulatory assets | (1,175) | 7,308 | 3,128 | (1,175) | ||||
Other | (25,425) | (14,167) | (1,367) | (25,425) | ||||
Net cash flow provided by operating activities | 17,191 | 30,729 | 5,212 | 17,191 | ||||
INVESTING ACTIVITIES | ||||||||
Construction expenditures | (17,836) | (44,319) | (22,760) | (17,836) | ||||
Allowance for equity funds used during construction | 1,191 | 1,079 | 78 | 1,191 | ||||
Insurance proceeds | 2,804 | - | - - | 2,804 | ||||
Proceeds from the sale of assets | 10,046 | - | - - | 10,046 | ||||
Change in money pool receivable - net | (46,984) | - - | ||||||
Changes in other investments - net | (1,747) | - - | ||||||
Net cash flow used in investing activities | (3,795) | (43,240) | (71,413) | (3,795) | ||||
FINANCING ACTIVITIES | ||||||||
Repayment of DIP credit facility | (9,908) | (10,000) | - - | (9,908) | ||||
Dividends paid: | ||||||||
Preferred stock | (92) | - | (482) | (92) | ||||
Net cash flow used in financing activities | (10,000) | (10,000) | (482) | (10,000) | ||||
Net increase (decrease) in cash and cash equivalents | 3,396 | (22,511) | (66,683) | 3,396 | ||||
Cash and cash equivalents at beginning of period | 17,093 | 48,056 | 92,010 | 17,093 | ||||
Cash and cash equivalents at end of period | $20,489 | $25,545 | $25,327 | $20,489 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest - net of amount capitalized | $8,745 | $1,859 | $7,552 | $8,745 | ||||
Income taxes | $716 | $- | ||||||
See Notes to Financial Statements. | ||||||||
89
ENTERGY NEW ORLEANS, INC. | ||||
(DEBTOR-IN-POSSESSION) | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | ||||
Cash | $661 | $3,886 | ||
Temporary cash investments - at cost | ||||
which approximates market | 19,828 | 13,207 | ||
Total cash and cash equivalents | 20,489 | 17,093 | ||
Accounts receivable: | ||||
Customer | 60,758 | 58,999 | ||
Allowance for doubtful accounts | (10,389) | (10,563) | ||
Associated companies | 23,607 | 17,797 | ||
Other | 9,589 | 8,428 | ||
Accrued unbilled revenues | 21,480 | 23,758 | ||
Total accounts receivable | 105,045 | 98,419 | ||
Deferred fuel costs | 16,789 | 18,996 | ||
Fuel inventory - at average cost | 198 | 5,041 | ||
Materials and supplies - at average cost | 7,612 | 7,825 | ||
Prepayments and other | 10,904 | 5,641 | ||
TOTAL | 161,037 | 153,015 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 3,259 | 3,259 | ||
Non-utility property at cost (less accumulated depreciation) | 1,016 | 1,107 | ||
TOTAL | 4,275 | 4,366 | ||
UTILITY PLANT | ||||
Electric | 700,959 | 698,081 | ||
Natural gas | 190,483 | 186,932 | ||
Construction work in progress | 12,858 | 21,824 | ||
TOTAL UTILITY PLANT | 904,300 | 906,837 | ||
Less - accumulated depreciation and amortization | 455,464 | 446,673 | ||
UTILITY PLANT - NET | 448,836 | 460,164 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
Other regulatory assets | 300,824 | 295,440 | ||
Long term receivables | 936 | 936 | ||
Other | 9,464 | 7,230 | ||
TOTAL | 311,224 | 303,606 | ||
TOTAL ASSETS | $925,372 | $921,151 | ||
See Notes to Financial Statements. | ||||
90 | ||||
ENTERGY NEW ORLEANS, INC. | ||||
(DEBTOR-IN-POSSESSION) | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2007 and December 31, 2006 | ||||
(Unaudited) | ||||
2007 | 2006 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
DIP credit facility | $42,026 | $51,934 | ||
Accounts payable: | ||||
Associated companies | 97,771 | 94,686 | ||
Other | 76,245 | 76,831 | ||
Customer deposits | 16,139 | 14,808 | ||
Taxes accrued | 9,209 | 2,086 | ||
Accumulated deferred income taxes | 2,005 | 2,924 | ||
Interest accrued | 16,627 | 18,004 | ||
Other | 4,232 | 6,154 | ||
TOTAL CURRENT LIABILITIES | 264,254 | 267,427 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 95,003 | 98,884 | ||
Accumulated deferred investment tax credits | 3,067 | 3,157 | ||
SFAS 109 regulatory liability - net | 71,740 | 71,870 | ||
Other regulatory liabilities | 9,522 | - - | ||
Retirement cost liability | 2,635 | 2,591 | ||
Accumulated provisions | 8,806 | 8,385 | ||
Pension and other postretirement liabilities | 59,125 | 60,033 | ||
Long-term debt | 229,879 | 229,875 | ||
Other | 4,664 | 5,161 | ||
TOTAL NON-CURRENT LIABILITIES | 484,441 | 479,956 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 19,780 | 19,780 | ||
Common stock, $4 par value, authorized 10,000,000 | ||||
shares; issued and outstanding 8,435,900 shares in 2007 | ||||
and 2006 | 33,744 | 33,744 | ||
Paid-in capital | 36,294 | 36,294 | ||
Retained earnings | 86,859 | 83,950 | ||
TOTAL | 176,677 | 173,768 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $925,372 | $921,151 | ||
See Notes to Financial Statements. |
91
ENTERGY NEW ORLEANS, INC. | ||||||||
(DEBTOR-IN-POSSESSION) | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2007 | 2006 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $25 | $17 | $8 | 47 | ||||
Commercial | 38 | 35 | 3 | 9 | ||||
Industrial | 10 | 8 | 2 | 25 | ||||
Governmental | 15 | 10 | 5 | 50 | ||||
Total retail | 88 | 70 | 18 | 26 | ||||
Sales for resale | ||||||||
Associated companies | 34 | 7 | 27 | 386 | ||||
Non-associated companies | - | 27 | (27) | (100) | ||||
Other | - | (5) | 5 | 100 | ||||
Total | $122 | $99 | $23 | 23 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 234 | 138 | 96 | 70 | ||||
Commercial | 395 | 360 | 35 | 10 | ||||
Industrial | 137 | 102 | 35 | 34 | ||||
Governmental | 164 | 106 | 58 | 55 | ||||
Total retail | 930 | 706 | 224 | 32 | ||||
Sales for resale | ||||||||
Associated companies | 350 | 120 | 230 | 192 | ||||
Non-associated companies | 2 | 407 | (405) | (100) | ||||
Total | 1,282 | 1,233 | 49 | 4 | ||||
ENTERGY NEW ORLEANS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | ||||
Cash | $969 | $119 | ||
Temporary cash investments - at cost | ||||
which approximates market | 24,358 | 91,891 | ||
Total cash and cash equivalents | 25,327 | 92,010 | ||
Accounts receivable: | ||||
Customer | 52,027 | 45,478 | ||
Allowance for doubtful accounts | (1,023) | (4,639) | ||
Associated companies | 114,820 | 58,952 | ||
Other | 5,385 | 9,928 | ||
Accrued unbilled revenues | 23,642 | 24,842 | ||
Total accounts receivable | 194,851 | 134,561 | ||
Deferred fuel costs | 25,790 | 17,281 | ||
Fuel inventory - at average cost | 773 | 4,500 | ||
Materials and supplies - at average cost | 9,093 | 9,007 | ||
Prepayments and other | 7,487 | 2,539 | ||
TOTAL | 263,321 | 259,898 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 3,259 | 3,259 | ||
Non-utility property at cost (less accumulated depreciation) | 1,016 | 1,016 | ||
Other property and investments | 7,019 | 5,272 | ||
TOTAL | 11,294 | 9,547 | ||
UTILITY PLANT | ||||
Electric | 755,888 | 745,426 | ||
Natural gas | 205,139 | 201,870 | ||
Construction work in progress | 7,524 | 14,144 | ||
TOTAL UTILITY PLANT | 968,551 | 961,440 | ||
Less - accumulated depreciation and amortization | 515,616 | 507,537 | ||
UTILITY PLANT - NET | 452,935 | 453,903 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
Other regulatory assets | 146,437 | 143,726 | ||
Long term receivables | 126 | 126 | ||
Other | 9,687 | 8,995 | ||
TOTAL | 156,250 | 152,847 | ||
TOTAL ASSETS | $883,800 | $876,195 | ||
See Notes to Financial Statements. | ||||
92 | ||||
ENTERGY NEW ORLEANS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2008 and December 31, 2007 | ||||
(Unaudited) | ||||
2008 | 2007 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $30,000 | $30,000 | ||
Accounts payable: | ||||
Associated companies | 19,142 | 27,138 | ||
Other | 33,372 | 23,366 | ||
Customer deposits | 18,519 | 17,803 | ||
Taxes accrued | 2,769 | 4,981 | ||
Accumulated deferred income taxes | 6,088 | 1,754 | ||
Interest accrued | 3,052 | 5,217 | ||
Other | 8,287 | 9,944 | ||
TOTAL CURRENT LIABILITIES | 121,229 | 120,203 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 118,426 | 114,729 | ||
Accumulated deferred investment tax credits | 2,723 | 2,809 | ||
SFAS 109 regulatory liability - net | 75,657 | 73,613 | ||
Other regulatory liabilities | 9,522 | 9,522 | ||
Retirement cost liability | 2,819 | 2,772 | ||
Accumulated provisions | 15,196 | 14,329 | ||
Pension and other postretirement liabilities | 14,521 | 15,484 | ||
Long-term debt | 273,704 | 273,912 | ||
Gas system rebuild insurance proceeds | 30,708 | 36,958 | ||
Other | 14,365 | 14,640 | ||
TOTAL NON-CURRENT LIABILITIES | 557,641 | 558,768 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 19,780 | 19,780 | ||
Common stock, $4 par value, authorized 10,000,000 | ||||
shares; issued and outstanding 8,435,900 shares in 2008 | ||||
and 2007 | 33,744 | 33,744 | ||
Paid-in capital | 36,294 | 36,294 | ||
Retained earnings | 115,112 | 107,406 | ||
TOTAL | 204,930 | 197,224 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $883,800 | $876,195 | ||
See Notes to Financial Statements. | ||||
93
92
ENTERGY NEW ORLEANS, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2008 | 2007 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $33 | $25 | $8 | 32 | ||||
Commercial | 40 | 38 | 2 | 5 | ||||
Industrial | 10 | 10 | - | - - | ||||
Governmental | 16 | 15 | 1 | 7 | ||||
Total retail | 99 | 88 | 11 | 13 | ||||
Sales for resale | ||||||||
Associated companies | 36 | 34 | 2 | 6 | ||||
Other | 5 | - | 5 | - - | ||||
Total | $140 | $122 | $18 | 15 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 306 | 234 | 72 | 31 | ||||
Commercial | 408 | 395 | 13 | 3 | ||||
Industrial | 131 | 137 | (6) | (4) | ||||
Governmental | 178 | 164 | 14 | 9 | ||||
Total retail | 1,023 | 930 | 93 | 10 | ||||
Sales for resale | ||||||||
Associated companies | 326 | 350 | (24) | (7) | ||||
Non-associated companies | 3 | 2 | 1 | 50 | ||||
Total | 1,352 | 1,282 | 70 | 5 | ||||
94
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy's principal asset consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy's only source of operating revenues.
Net income decreased by $3.5$5.7 million for the first quarter of 20072008 compared to the first quarter of 2006.2007. The decrease is primarily due to a decrease in rate base in the first quarter of 20072008 compared to the same period in 20062007 resulting in lower operating income. Lower interest income earned on money pool investments also contributed to the decrease in net income.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 20072008 and 20062007 were as follows:
|
|
| 2007 |
| 2006 |
|
| 2008 |
| 2007 |
|
|
| (In Thousands) |
|
| (In Thousands) | ||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period |
| $135,012 |
| $75,704 | Cash and cash equivalents at beginning of period |
| $105,005 |
| $135,012 |
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): | Cash flow provided by (used in): |
|
|
|
| Cash flow provided by (used in): |
|
|
|
|
| Operating activities |
| 59,420 |
| 59,065 | Operating activities |
| 52,852 |
| 59,420 |
| Investing activities |
| (31,754) |
| 107,623 | Investing activities |
| (77,502) |
| (31,754) |
| Financing activities |
| (45,835) |
| (57,089) | Financing activities |
| (49,301) |
| (45,835) |
Net increase (decrease) in cash and cash equivalents |
| (18,169) |
| 109,599 | ||||||
Net decrease in cash and cash equivalents | Net decrease in cash and cash equivalents |
| (73,951) |
| (18,169) | |||||
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period |
| $116,843 |
| $185,303 | Cash and cash equivalents at end of period |
| $31,054 |
| $116,843 |
Investing Activities
Investing activities used $31.8 million in cash flow for the first quarterThe increase of 2007 compared to providing $107.6 million for the first quarter of 2006 primarily due to money pool activity.
Financing Activities
The decrease of $11.3$45.7 million in net cash used in financingby investing activities forin the first quarter of 20072008 compared to the first quarter of 2006 was2007 is primarily due to a decrease of $11.6 millionan increase in common stock dividends.
93
System Energy's receivable from the money pool.
Capital Structure
System Energy's capitalization is balanced between equity and debt, as shown in the following table.
|
| March 31, |
| December 31, |
| March 31, |
| December 31, |
|
|
|
|
|
|
|
|
|
Net debt to net capital |
| 47.7% |
| 46.4% |
| 48.7% |
| 47.4% |
Effect of subtracting cash from debt |
| 3.5% |
| 4.2% |
| 0.9% |
| 3.2% |
Debt to capital |
| 51.2% |
| 50.6% |
| 49.6% |
| 50.6% |
95
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder's equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy's financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of System Energy's uses and sources of capital. The following is an update to the Form 10-K.
System Energy's receivables from the money pool were as follows:
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$99,031 |
| $88,231 |
| $155,495 |
| $277,287 |
March 31, |
| December 31, |
| March 31, |
| December 31, |
(In Thousands) | ||||||
|
|
|
|
|
|
|
$111,245 |
| $53,620 |
| $99,031 |
| $88,231 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of the Energy Policy Act of 2005, nuclear matters, litigation risks, and environmental risks. The following is an update to the Form 10-K.
System Energy Rate Proceeding
In March 2008, the LPSC filed a complaint at the FERC under Federal Power Act section 206 against System Energy and Entergy Services. The complaint requests that the FERC set System Energy's rate of return on common equity at no more than 9.75%. The LPSC's complaint further requests that System Energy base its decommissioning and depreciation expenses on a 60-year useful life for Grand Gulf as opposed to the 40-year life specified in the existing NRC operating license. The APSC, the City of New Orleans, the MPSC, and other parties have intervened in the proceeding. System Energy filed its answer to the complaint in April 2008, in which it denies the allegations of the LPSC and requests that the FERC dismiss the complaint without a hearing.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy's accounting for nuclear decommissioning costs and qualified pension and other postretirement benefits.
New Accounting Pronouncements
See "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for a discussion of new accounting pronouncements.
9496
SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | ||||||
INCOME STATEMENTS | INCOME STATEMENTS | INCOME STATEMENTS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Electric | $126,157 | $131,654 | $114,372 | $126,157 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 8,388 | 11,213 | 10,616 | 8,388 | ||||
Nuclear refueling outage expenses | 4,535 | 3,573 | 4,204 | 4,535 | ||||
Other operation and maintenance | 24,237 | 23,252 | 24,989 | 24,237 | ||||
Decommissioning | 6,255 | 5,819 | 6,724 | 6,255 | ||||
Taxes other than income taxes | 8,411 | 6,189 | (2,072) | 8,411 | ||||
Depreciation and amortization | 25,962 | 25,677 | 26,555 | 25,962 | ||||
Other regulatory credits - net | (1,960) | (1,980) | (1,986) | (1,960) | ||||
TOTAL | 75,828 | 73,743 | 69,030 | 75,828 | ||||
OPERATING INCOME | 50,329 | 57,911 | 45,342 | 50,329 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 416 | 683 | 1,129 | 416 | ||||
Interest and dividend income | 5,815 | 5,629 | 2,547 | 5,815 | ||||
Miscellaneous - net | (79) | (107) | (167) | (79) | ||||
TOTAL | 6,152 | 6,205 | 3,509 | 6,152 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 12,353 | 12,533 | 11,962 | 12,353 | ||||
Other interest - net | 16 | 28 | 43 | 16 | ||||
Allowance for borrowed funds used during construction | (135) | (215) | (378) | (135) | ||||
TOTAL | 12,234 | 12,346 | 11,627 | 12,234 | ||||
INCOME BEFORE INCOME TAXES | 44,247 | 51,770 | 37,224 | 44,247 | ||||
Income taxes | 16,950 | 21,022 | 15,623 | 16,950 | ||||
NET INCOME | $27,297 | $30,748 | $21,601 | $27,297 | ||||
See Notes to Financial Statements. | ||||||||
9597
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96
98
SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | ||||||
STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | ||||||
For the Three Months Ended March 31, 2007 and 2006 | ||||||||
For the Three Months Ended March 31, 2008 and 2007 | For the Three Months Ended March 31, 2008 and 2007 | |||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
2007 | 2006 | 2008 | 2007 | |||||
(In Thousands) | (In Thousands) | |||||||
�� | ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | $27,297 | $30,748 | $21,601 | $27,297 | ||||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||
Other regulatory credits - net | (1,960) | (1,980) | (1,986) | (1,960) | ||||
Depreciation, amortization, and decommissioning | 32,217 | 31,496 | 33,279 | 32,217 | ||||
Deferred income taxes, investment tax credits and non-current taxes accrued | 57,248 | 25,174 | ||||||
Deferred income taxes, investment tax credits, and non-current taxes accrued | 24,917 | 57,248 | ||||||
Changes in working capital: | ||||||||
Receivables | 969 | 8,979 | 29,425 | 969 | ||||
Accounts payable | 17,411 | 1,039 | (10,550) | 17,411 | ||||
Taxes accrued | (47,988) | (18,964) | - - | (47,988) | ||||
Interest accrued | (31,678) | (30,412) | (32,863) | (31,678) | ||||
Other working capital accounts | (17,321) | (2,097) | (34,307) | (17,321) | ||||
Changes in other regulatory assets | 721 | (4,392) | (536) | 721 | ||||
Other | 22,504 | 19,474 | 23,872 | 22,504 | ||||
Net cash flow provided by operating activities | 59,420 | 59,065 | 52,852 | 59,420 | ||||
INVESTING ACTIVITIES | ||||||||
Construction expenditures | (14,275) | (8,122) | (13,376) | (14,275) | ||||
Allowance for equity funds used during construction | 416 | 683 | 1,129 | 416 | ||||
Nuclear fuel purchases | (56,279) | (370) | - - | (56,279) | ||||
Proceeds from sale/leaseback of nuclear fuel | 56,370 | 370 | - - | 56,370 | ||||
Proceeds from nuclear decommissioning trust fund sales | 27,337 | 27,489 | 35,097 | 27,337 | ||||
Investment in nuclear decommissioning trust funds | (34,523) | (34,219) | (42,727) | (34,523) | ||||
Change in money pool receivable - net | (10,800) | 121,792 | (57,625) | (10,800) | ||||
Net cash flow provided by (used in) investing activities | (31,754) | 107,623 | ||||||
Net cash flow used in investing activities | (77,502) | (31,754) | ||||||
FINANCING ACTIVITIES | ||||||||
Retirement of long-term debt | (23,335) | (22,989) | (26,701) | (23,335) | ||||
Dividends paid: | ||||||||
Common stock | (22,500) | (34,100) | (22,600) | (22,500) | ||||
Net cash flow used in financing activities | (45,835) | (57,089) | (49,301) | (45,835) | ||||
Net increase (decrease) in cash and cash equivalents | (18,169) | 109,599 | ||||||
Net decrease in cash and cash equivalents | (73,951) | (18,169) | ||||||
Cash and cash equivalents at beginning of period | 135,012 | 75,704 | 105,005 | 135,012 | ||||
Cash and cash equivalents at end of period | $116,843 | $185,303 | $31,054 | $116,843 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest - net of amount capitalized | $42,592 | $41,520 | $43,584 | $42,592 | ||||
Income taxes | $36 | $- | ||||||
See Notes to Financial Statements. | ||||||||
9799
SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | ||||||||||
BALANCE SHEETS | BALANCE SHEETS | BALANCE SHEETS | ||||||||||
ASSETS | ASSETS | ASSETS | ||||||||||
March 31, 2007 and December 31, 2006 | ||||||||||||
March 31, 2008 and December 31, 2007 | March 31, 2008 and December 31, 2007 | |||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
2007 | 2006 | 2008 | 2007 | |||||||||
(In Thousands) | (In Thousands) | |||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents: | ||||||||||||
Cash | $143 | $56 | $582 | $406 | ||||||||
Temporary cash investments - at cost, | ||||||||||||
which approximates market | 116,700 | 134,956 | 30,472 | 104,599 | ||||||||
Total cash and cash equivalents | 116,843 | 135,012 | 31,054 | 105,005 | ||||||||
Accounts receivable: | ||||||||||||
Associated companies | 142,349 | 142,121 | 142,088 | 112,598 | ||||||||
Other | 12,904 | 3,301 | 2,631 | 3,921 | ||||||||
Total accounts receivable | 155,253 | 145,422 | 144,719 | 116,519 | ||||||||
Materials and supplies - at average cost | 60,846 | 61,097 | 71,555 | 68,613 | ||||||||
Deferred nuclear refueling outage costs | 13,166 | 5,060 | 10,170 | 13,640 | ||||||||
Prepayments and other | 10,946 | 1,480 | 44,060 | 9,225 | ||||||||
TOTAL | 357,054 | 348,071 | 301,558 | 313,002 | ||||||||
OTHER PROPERTY AND INVESTMENTS | ||||||||||||
Decommissioning trust funds | 289,801 | 281,430 | 306,906 | 315,654 | ||||||||
Note receivable - Entergy New Orleans | 25,560 | 25,560 | ||||||||||
TOTAL | 332,466 | 341,214 | ||||||||||
UTILITY PLANT | ||||||||||||
Electric | 3,245,500 | 3,248,582 | 3,282,575 | 3,273,390 | ||||||||
Property under capital lease | 471,933 | 471,933 | 475,157 | 475,157 | ||||||||
Construction work in progress | 49,481 | 38,088 | 92,462 | 88,296 | ||||||||
Nuclear fuel under capital lease | 104,645 | 55,280 | 73,832 | 81,616 | ||||||||
Nuclear fuel | 10,222 | 10,222 | 6,785 | 7,656 | ||||||||
TOTAL UTILITY PLANT | 3,881,781 | 3,824,105 | 3,930,811 | 3,926,115 | ||||||||
Less - accumulated depreciation and amortization | 2,021,979 | 2,000,320 | 2,129,214 | 2,101,484 | ||||||||
UTILITY PLANT - NET | 1,859,802 | 1,823,785 | 1,801,597 | 1,824,631 | ||||||||
DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||
Regulatory assets: | ||||||||||||
SFAS 109 regulatory asset - net | 88,288 | 92,600 | 91,071 | 93,083 | ||||||||
Other regulatory assets | 295,030 | 293,292 | 275,884 | 274,202 | ||||||||
Other | 13,396 | 14,062 | 12,291 | 12,628 | ||||||||
TOTAL | 396,714 | 399,954 | 379,246 | 379,913 | ||||||||
TOTAL ASSETS | $2,903,371 | $2,853,240 | $2,814,867 | $2,858,760 | ||||||||
See Notes to Financial Statements. | ||||||||||||
98 | ||||||||||||
100 | 100 | |||||||||||
SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | ||||||||||
BALANCE SHEETS | BALANCE SHEETS | BALANCE SHEETS | ||||||||||
LIABILITIES AND SHAREHOLDER'S EQUITY | LIABILITIES AND SHAREHOLDER'S EQUITY | LIABILITIES AND SHAREHOLDER'S EQUITY | ||||||||||
March 31, 2007 and December 31, 2006 | ||||||||||||
March 31, 2008 and December 31, 2007 | March 31, 2008 and December 31, 2007 | |||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
2007 | 2006 | 2008 | 2007 | |||||||||
(In Thousands) | (In Thousands) | |||||||||||
CURRENT LIABILITIES | ||||||||||||
Currently maturing long-term debt | $96,701 | $93,335 | $28,440 | $26,701 | ||||||||
Accounts payable: | ||||||||||||
Associated companies | 4,966 | 1,634 | 3,292 | 8,902 | ||||||||
Other | 40,715 | 26,636 | 24,242 | 29,182 | ||||||||
Taxes accrued | - | 47,988 | ||||||||||
Accumulated deferred income taxes | 4,945 | 1,828 | 3,171 | 4,494 | ||||||||
Interest accrued | 14,457 | 46,135 | 14,540 | 47,403 | ||||||||
Obligations under capital leases | 33,142 | 33,142 | 30,058 | 30,058 | ||||||||
TOTAL | 194,926 | 250,698 | 103,743 | 146,740 | ||||||||
NON-CURRENT LIABILITIES | ||||||||||||
Accumulated deferred income taxes and taxes accrued | 353,318 | 304,691 | 335,773 | 314,991 | ||||||||
Accumulated deferred investment tax credits | 67,791 | 68,660 | 64,315 | 65,184 | ||||||||
Obligations under capital leases | 71,503 | 22,138 | 43,819 | 51,558 | ||||||||
Other regulatory liabilities | 266,158 | 242,029 | 253,026 | 243,450 | ||||||||
Decommissioning | 349,101 | 342,846 | 375,284 | 368,559 | ||||||||
Accumulated provisions | 2,422 | 2,422 | 2,469 | 2,469 | ||||||||
Pension and other postretirement liabilities | 32,735 | 32,060 | 30,226 | 30,031 | ||||||||
Long-term debt | 703,234 | 729,914 | 744,844 | 773,266 | ||||||||
Other | - | 396 | - | 145 | ||||||||
TOTAL | 1,846,262 | 1,745,156 | 1,849,756 | 1,849,653 | ||||||||
Commitments and Contingencies | ||||||||||||
SHAREHOLDER'S EQUITY | ||||||||||||
Common stock, no par value, authorized 1,000,000 shares; | ||||||||||||
issued and outstanding 789,350 shares in 2007 and 2006 | 789,350 | 789,350 | ||||||||||
issued and outstanding 789,350 shares in 2008 and 2007 | 789,350 | 789,350 | ||||||||||
Retained earnings | 72,833 | 68,036 | 72,018 | 73,017 | ||||||||
TOTAL | 862,183 | 857,386 | 861,368 | 862,367 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $2,903,371 | $2,853,240 | $2,814,867 | $2,858,760 | ||||||||
See Notes to Financial Statements. | ||||||||||||
99101
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1,Litigation" in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in "PART I, Item 1A,Risk Factors" in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
Period |
| Total Number of |
| Average Price Paid |
| Total Number of |
| Maximum $ |
|
|
|
|
|
|
|
|
|
1/01/2007-1/31/2007 |
| 55,000 |
| $92.07 |
| 55,000 |
| $1,500,000,000 |
2/01/2007-2/28/2007 |
| 4,907,042 |
| $98.39 |
| 4,907,042 |
| $1,027,316,661 |
3/01/2007-3/31/2007 |
| 710,000 |
| $98.92 |
| 710,000 |
| $999,999,949 |
Total |
| 5,672,042 |
| $98.39 |
| 5,672,042 |
|
|
Period |
| Total Number of |
| Average Price Paid |
| Total Number of |
| Maximum $ |
|
|
|
|
|
|
|
|
|
1/01/2008-1/31/2008 |
| 151,100 |
| $118.95 |
| 151,100 |
| $1,002,605,862 |
2/01/2008-2/29/2008 |
| 785,000 |
| $106.68 |
| 785,000 |
| $921,455,080 |
3/01/2008-3/31/2008 |
| 532,100 |
| $106.11 |
| 532,100 |
| $867,033,426 |
Total |
| 1,468,200 |
| $107.74 |
| 1,468,200 |
|
|
(1) | In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy's management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, on January 29, 2007, the Board approved a repurchase program under which Entergy is authorized to repurchase up to $1.5 billion of its common stock. The program does not have an expiration date, but Entergy expects to complete it |
(2) | Maximum amount of shares that may yet be repurchased relates only to the $1.5 billion |
The amount of share repurchases may vary as a result of material changes in business results or capital spending or new investment opportunities.
102
Item 5. Other Information
Other Generation ResourcesAffiliate Purchased Power Agreements
On April 5, 2007See the FERC issued an Opinion and Order on Rehearing and Clarification (Opinion) in the proceeding involving Entergy Louisiana and Entergy New Orleans' three long-term contracts to procure power from affiliates that are discussed in Part 1,I, Item 1 of the Form 10-K. In its Opinion,10-K for a discussion of the FERC rejectsproceeding involving the Utility operating companies and the LPSC's request to allow Entergy New Orleans and Entergy Louisiana to purchase the Independence plant capacity and energy for a term extending for the life-of-the-unit, as originally proposed, as opposed to the ten-year term ordered by the FERC in its initial opinion. The Opinion also clarifies that while the Utility operating companies' use of bid information obtained from the 2002 request for proposal to develop the Entergy Arkansas base load purchasepurchased power agreements was improper, the record does not establish that the communications constituted a violation of the Utility operating companies' code of conduct. The Opinio n further
100
clarified that the retained share of Grand Gulf that is purchasedentered by Entergy Louisiana and Entergy New Orleans to procure electric power from Entergy Arkansas should be priced at cost, and not ataffiliates, the below-cost price of $46/MWh specifiedFERC's decision in the original opinion. Additionally, the Opinion rejects: (1)proceeding, and the LPSC's argumentappeal of that one-monthdecision. On April 10, 2008, the LPSC filed its initial brief with the D.C. Circuit. In its initial brief, the LPSC argues the FERC erred: (1) in concluding that Entergy Arkansas' short term sale of capacity sales by Entergy Arkansasand energy to third parties triggereddid not trigger the obligation to offer a right-of-firstright of first refusal on behalf ofwith respect to this capacity to the other Utility operating companies relatedpursuant to Entergy Arkansas' base load capacity;the provisions of the System Agreement; and (2) the LPSC's argumentby approving an allocation of baseload generating resources that unduly preferred Entergy New Orleans and unduly discriminated against Entergy Gulf States was entitled to a portionLouisiana. The joint brief of the River Bend purchased power agreement (rather than just Entergy Louisiana and Entergy New Orleans)Utility operating companies, the APSC, the MPSC, and the LPSC's jurisdictional arguments related thereto.City Council is due June 24, 2008 .
Environmental RegulationFranchises and ProceedingsCertificates
Clean Air Act and Subsequent Amendments
New Source Review (NSR)
In April 2007 the U.S. Supreme Court ruled that the applicability of Clean Air Act NSR requirements are not limited only to modifications that create an increase in hourly emission rates, but also can apply to modifications that create an increase in annual emission rates (Environmental Defense v. Duke Energy). This holding reversed a Fourth Circuit Court of Appeals decision limiting the applicability of NSR. This Supreme Court decision may result in a renewed effort by the EPA to bring enforcement actions against electric generating units for major non-permitted facility modifications. As discussed in the Form 10-K, on December 28, 2007, the Texas Industrial Energy Consumers (TIEC) filed a petition asking the PUCT to declare that Entergy has an established process for identifying modifications requiring additional Clean Air Act permittingGulf States, Inc. was required to obtain prior PUCT approval in connection with Entergy Texas' acquisition of its certificate of convenience and hasnecessity as part of the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Texas and Entergy Gulf States Louisiana. The TIEC further requested that the PUCT declare Entergy Texas' acquisition of the certificate of convenience and necessity null and void if it occurred without prior PUCT approval. Entergy Texas filed responses challenging the TIEC's petition and requesting dismissal of the petition. The PUCT staff in a pleading in the proceeding stated its view that no approval by the PUCT of the jurisdictional separation was necessary. The administrative law judge declined to dismiss TIEC's petition, and the PUCT did not beenvote to hear Entergy Texas' appeal of the subject of EPA or state enforcement action regarding NSR.
administrative law judge's order.
Future Legislative
To resolve expeditiously any outstanding related issues, on March 31, 2008, Entergy Texas filed a request with the PUCT for approval of the allocation to Entergy Texas of the certificate of convenience and Regulatory Developmentsnecessity to the extent the PUCT finds such an approval is necessary. The PUCT staff recommended, and the administrative law judge ordered, that this proceeding be abated pending a decision on the TIEC petition. Entergy Texas has appealed the abatement order to the PUCT. On May 1, 2008, the administrative law judge issued an order unabating the proceeding initiated by Entergy Texas in order to facilitate expedient processing of the proceeding. The administrative law judge has requested comments on whether the proceeding initiated by TIEC should be consolidated with Entergy Texas' request for approval of the allocation of the certificate of convenience and necessity.
Entergy Texas continues to believe that no regulatory approval by the PUCT of the jurisdictional separation was necessary and that the ultimate resolution of this matter will not affect the jurisdictional separation of Entergy Gulf States, Inc.
Environmental Regulation
Ozone Non-attainment
Entergy Texas and Entergy Gulf States Louisiana each operate fossil-fueled generating units in geographic areas that are not in attainment of the currently-enforced national ambient air quality standards for ozone. Texas non-attainment areas that affect Entergy are the Houston-Galveston and the Beaumont-Port Arthur areas. In Louisiana, Entergy is affected by the non-attainment status of the Baton Rouge area. Areas in non-attainment are classified as "marginal", "moderate," "serious," or "severe." When an area fails to meet the ambient air standard, the EPA requires state regulatory authorities to prepare state implementation plans meant to cause progress toward bringing the area into attainment with applicable standards.
In April 2004, the EPA issued a final rule, effective June 2005, revoking the 1-hour ozone standard, including designations and classifications. In a separate action over the same period, the EPA enacted 8-hour ozone non-attainment classifications and stated that areas designated as
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non-attainment under a new 8-hour ozone standard shall have one year to adjust to the new requirements with submittal of a new attainment plan. For Louisiana, the Baton Rouge area is currently classified as a ''marginal" (rather than "severe") non-attainment area under the new standard with an attainment date of June 15, 2007. On March 21, 2008 the EPA published a notice that the Baton Rouge area had failed to meet the standard by the attainment date and was proceeding with a "bump-up" of the area to the next higher non-attainment level. The Baton Rouge area is now classified as "moderate" non-attainment under the new standard with an attainment date of June 15, 2010.
For Texas, the Beaumont-Port Arthur area is currently classified as a "marginal" (rather than "serious") non-attainment area under the new standard with an attainment date of June 15, 2007. On March 18, 2008 the EPA published a notice that the Beaumont-Port Arthur area had failed to meet the standard by the attainment date and was proceeding with a "bump-up" of the area to the next higher non-attainment level. The Houston-Galveston area is now classified as "moderate" non-attainment under the new standard with an attainment date of June 15, 2010. On June 15, 2007, the U.S. Supreme Court held thatTexas governor petitioned the EPA to reclassify the Houston-Galveston area from "moderate" to "severe" with an attainment date of June 15, 2019. EPA consideration of the petition is authorizedstill pending.
In December 2006, the EPA's revocation of the 1-hour ozone standard was rejected by the current provisionscourts. As a result, numerous requirements can return for areas that fail to meet 1-hour ozone levels by dates set by the law. These requirements include the potential to increase fees significantly for plants operating in these areas. In addition, it is possible that new emission controls may be required. Specific costs of compliance cannot be estimated at this time, but Entergy is monitoring development of the Clean Air Act to regulate emissions of CO2respective state implementation plans and other "greenhouse gases"will develop specific compliance strategies as "pollutants" (Massachusetts v. EPA) and thatthe plans move through the adoption process.
On March 12, 2008 the EPA reduced the National Ambient Air Quality Standard for ozone, which will in turn place additional counties and parishes in which Entergy operates in nonattainment status. States will develop State Implementation Plans that outline control requirements to enable these counties and parishes to reach attainment status. Entergy facilities in these areas will be subject to installation of NOx controls, but the degree of control will not be known until the State Implementation Plans are developed. Entergy will monitor and be involved in the State Implementation Plans development process in states where Entergy has facilities.
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In March 2008, the NYDEC issued a draft water quality certification and a draft discharge permit for FitzPatrick, opening a 30-day public comment period on these documents. The certification, or a waiver or exemption of the same, is required by section 401 of the federal Clean Water Act as a supporting document to the NRC's license renewal decision. The discharge permit action is not related to the license renewal decision. The NYDEC received comments on the draft documents from Entergy and from the public, and New York law requires that a hearing now be held on these public comments prior to the issuance of a final discharge permit or water quality certification. In response, the NYDEC issued a draft denial without prejudice of the certification because the NYDEC asks for more information before making a final decision. The NYDEC is required to regulate these emissions from motor vehicles if the emissions are anticipated to endanger public health or welfare. The Supreme Court directed the EPA to make further findings in this regard. The decision is expected to affect a similar case pendingbegin hearings on both draft documents in the U.S. Court of Appealsnear term. FitzPatrick, having filed a timely and complete application for the D.C. Circuit (Coke Oven Environmental Task Force v. EPA) considering the same questionpermit renewal, continues to operate under a similar Clean Air Act provision in the context of CO2 emissions from electric generating units. Although Entergy cannot predict how the D.C. Circuit or the EPA will react to the Supreme Court decision, one outcome could be a decision to regulate, under the Clean Air Act, emissions of CO2 and other "greenhouse gases" from motor vehicles or from power plants. Entergy is participating as a friend of the court in both of these cases in support of reasonable market-based regulation of CO2 as a pollutant under the Clean Air Act.
Bankruptcy of Entergy New Orleans - Order Confirming Plan of Reorganizationits former discharge permit.
On May 7, 2007, Judge Jerry Brown of the United States Bankruptcy Court for the Eastern District of Louisiana entered an order confirming Entergy New Orleans' plan of reorganization under the provisions of Chapter 11 of the United States Bankruptcy Code (Case No. 05-17697). For a summary of the material features of the plan of reorganization, see "Bankruptcy Proceedings" in Entergy New Orleans' Management's Financial Discussion and Analysis in this report on Form 10-Q. No shares or other units of Entergy Corporation or Entergy New Orleans are reserved for future issuance in respect of claims and interests filed and allowed under the plan. Information regarding the assets and liabilities of Entergy New Orleans can be found in its financial statements and the notes thereto contained in the report on Form 10-Q. A copy of the plan of reorganization as confirmed is included as Exhibit 2(a) to this report on Form 10-Q.
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Entergy Corporation Revolving Credit Facilities
As more fully-described in its report on Form 8-K filed on June 1, 2005 and in Note 4 to the financial statements in this report, Entergy Corporation has two revolving credit facilities available to it. Entergy Corporation from time to time has borrowed under the facilities and has also from time to time issued letters of credit against the borrowing capacity of the facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of May 8, 2007:
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5-Year Facility | $2,000 | $895 | $79 | $1,026 | ||||
3-Year Facility | $1,500 | $1,030 | $- | $470 |
Amendment to Entergy New Orleans Articles of Incorporation and By-Laws
Effective May 8, 2007, pursuant to the terms of its plan of reorganization, Entergy New Orleans amended its articles of incorporation and its by-laws. The amendments:
The Amended and Restated Articles of Incorporation of Entergy New Orleans, Inc. are included as Exhibit 3(a) and the Amended By-Laws of Entergy New Orleans, Inc. are included as Exhibit 3(b) to this report on Form 10-Q.
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Earnings Ratios (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges | Ratios of Earnings to Fixed Charges | |||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||
Entergy Arkansas | 2.79 | 3.17 | 3.37 | 3.75 | 3.37 | 3.30 | 3.17 | 3.37 | 3.75 | 3.37 | 3.19 | 3.14 | ||||||||||
Entergy Gulf States | 2.49 | 1.51 | 3.04 | 3.34 | 3.01 | 2.85 | ||||||||||||||||
Entergy Gulf States Louisiana | 1.51 | 3.04 | 3.34 | 3.01 | 2.84 | 2.96 | ||||||||||||||||
Entergy Louisiana | 3.14 | 3.93 | 3.60 | 3.50 | 3.23 | 3.26 | 3.93 | 3.60 | 3.50 | 3.23 | 3.44 | 3.53 | ||||||||||
Entergy Mississippi | 2.48 | 3.06 | 3.41 | 3.16 | 2.54 | 2.68 | 3.06 | 3.41 | 3.16 | 2.54 | 3.22 | 3.22 | ||||||||||
Entergy New Orleans | (a) | 1.73 | 3.60 | 1.22 | 1.52 | 1.24 | 1.73 | 3.60 | 1.22 | 1.52 | 2.74 | 3.46 | ||||||||||
System Energy | 3.25 | 3.66 | 3.95 | 3.85 | 4.05 | 3.94 | 3.66 | 3.95 | 3.85 | 4.05 | 3.95 | 3.84 |
Ratios of Earnings to Combined Fixed Charges | Ratios of Earnings to Combined Fixed Charges | |||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | |||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||
Entergy Arkansas | 2.53 | 2.79 | 2.98 | 3.34 | 3.06 | 3.01 | 2.79 | 2.98 | 3.34 | 3.06 | 2.88 | 2.83 | ||||||||||
Entergy Gulf States | 2.40 | 1.45 | 2.90 | 3.18 | 2.90 | 2.74 | ||||||||||||||||
Entergy Gulf States Louisiana | 1.45 | 2.90 | 3.18 | 2.90 | 2.73 | 2.87 | ||||||||||||||||
Entergy Louisiana | - | - | - | - | 2.90 | 2.94 | - | - | - | 2.90 | 3.08 | 3.13 | ||||||||||
Entergy Mississippi | 2.27 | 2.77 | 3.07 | 2.83 | 2.34 | 2.45 | 2.77 | 3.07 | 2.83 | 2.34 | 2.97 | 2.97 | ||||||||||
Entergy New Orleans | (a) | 1.59 | 3.31 | 1.12 | 1.35 | 1.11 | 1.59 | 3.31 | 1.12 | 1.35 | 2.54 | 3.16 |
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Item 6. Exhibits *
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10(a) | Restricted Unit Agreement between Leo P. Denault and Entergy Corporation. | |||
12(a) - | Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. | |||
12(b) - | Entergy Gulf | |||
12(c) - | Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined. | |||
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12(d) - | Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. | |||
12(e) - | Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. | |||
12(f) - | System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined. | |||
31(a) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. | |||
31(b) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. | |||
31(c) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. | |||
31(d) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. | |||
31(e) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf | |||
31(f) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf | |||
31(g) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy | |||
31(h) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. | |||
31(i) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy | |||
31(j) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. | |||
31(k) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy | |||
31(l) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. | |||
31(m) - | Rule 13a-14(a)/15d-14(a) Certification for | |||
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| Rule 13a-14(a)/15d-14(a) Certification for System Energy. | |||
32(a) - | Section 1350 Certification for Entergy Corporation. | |||
32(b) - | Section 1350 Certification for Entergy Corporation. | |||
32(c) - | Section 1350 Certification for Entergy Arkansas. | |||
32(d) - | Section 1350 Certification for Entergy Arkansas. | |||
32(e) - | Section 1350 Certification for Entergy Gulf | |||
32(f) - | Section 1350 Certification for Entergy Gulf | |||
32(g) - | Section 1350 Certification for Entergy | |||
32(h) - | Section 1350 Certification for Entergy Louisiana. | |||
32(i) - | Section 1350 Certification for Entergy | |||
32(j) - | Section 1350 Certification for Entergy Mississippi. | |||
32(k) - | Section 1350 Certification for Entergy | |||
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32(l) - | Section 1350 Certification for Entergy New Orleans. | |||
32(m) - | Section 1350 Certification for | |||
32(n) - | Section 1350 Certification for System Energy. | |||
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___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
* | Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended March 31, |
** | Incorporated herein by reference as indicated. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION |
/s/ |
Date: May 9, 20072008
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