Other highlights during the quarter included Entergy being named 2003 Global Energy Company of the Year by the Platts/BusinessWeek Global Energy Awards panel, and the Federal Energy Regulatory Commission approving market protocols in connection with proposed retail open access in Texas.
Utility Operations
For fourth quarter 2003, the utility recorded an as-reported loss of $33.4 million, or 14 cents per share, compared to earnings of $42.4 million, or 19 cents per share, in fourth quarter 2002. The decrease resulted primarily from the impact of severance charges totaling $70.1 million, or 30 cents per share, recorded in 2003. On an operational basis, Utility earnings in fourth quarter 2003 were $36.7 million, or 16 cents per share, compared to $42.4 million, or 19 cents per share, for the period one year ago. The decrease was due primarily to the effects of milder-than-normal weather in fourth quarter 2003 compared to normal weather experienced in fourth quarter 2002, as well as increased income tax expense, the effects of which were partially offset by rate changes implemented during 2003.
Megawatt-hour sales in the residential sector in fourth quarter 2003, compared to fourth quarter 2002, were essentially flat after adjusting for milder-than-normal weather. Commercial and governmental sales were up nearly 3 percent, while industrial sales experienced a decline of more than 4 percent quarter over quarter. The decline in industrial sales reflects the loss of two industrial customers to cogeneration since fourth quarter 2002. Excluding the loss of these customers, overall retail sales increased slightly quarter to quarter.
For the year 2003, the Utility earned $469.1 million, or $2.03 per share, on an as-reported basis compared to $583.2 million, or $2.57 per share, in 2002. On an operational basis, utility earnings in 2003 were $626.0 million, or $2.71 per share, compared to 2002 results of $583.2 million, or $2.57 per share. The improvement in full-year operational earnings was due primarily to improved pricing as a result of rate changes implemented during the year, as well as lower interest expenses in 2003 compared to 2002 as a result of the company's refinancing program.
Competitive Non-Regulated Businesses
The competitive businesses, which are comprised of Entergy Nuclear and Energy Commodity Services, recorded as-reported earnings of $1.1 million in fourth quarter 2003, compared to $57.1 million, or 25 cents per share, in fourth quarter 2002. The decrease was due primarily to the impact of recording severance charges of $51.8 million, or 22 cents per share, at Entergy Nuclear. On an operational basis, the competitive businesses in fourth quarter 2003 recorded earnings of $58.8 million, or 25 cents per share, which were essentially equal to results in fourth quarter 2002.
For the year 2003, as-reported earnings from the competitive businesses were $481.3 million, or $2.08 cents per share, compared to $54.7 million, or 24 cents per share, in 2002. The increase is primarily due to a significantly higher earnings contribution from Entergy-Koch Trading in 2003 compared to 2002, as well as to the absence of special charges recorded in 2002 associated with the closing of Entergy's wholesale power development business. On an operational basis, the competitive businesses contributed earnings of $377.9 million, or $1.63 per share, in 2003, compared with $321.7 million, or $1.41 per share in 2002.
Entergy Nuclear recorded a loss of $0.7 million, or 1 cent per share, on an as-reported basis, compared to earnings of $33.8 million, or 15 cents per share, in fourth quarter 2002. The decrease in fourth quarter 2003 was due to severance charges noted earlier. Operational results at Entergy Nuclear in fourth quarter 2003 were $55.8 million, or 24 cents per share, compared to $33.8 million, or 15 cents per share, in 2002. The increase in operational earnings was due primarily to increased megawatt-hours produced as a result of no planned refueling outages during the fourth quarter 2003. In fourth quarter 2002 there were three such outages which reduced generation during that period.
For the year 2003, Entergy Nuclear contributed as-reported earnings of $300.8 million, or $1.30 per share, compared to $200.5 million, or 88 cents per share in 2002. The increase in 2003 was due primarily to the impact of a special item recorded in first quarter 2003 related to the implementation of a new accounting standard that changed the valuation of nuclear decommissioning assets and liabilities. On an operational basis, Entergy Nuclear's 2003 results were $196.9 million, or 85 cents per share, compared to $200.5 million, or 88 cents per share, in 2002.
Energy Commodity Services, which includes earnings contributions from Entergy-Koch, LP and Entergy's non-nuclear wholesale assets, recorded as-reported and operational earnings of $1.8 million, or 1 cent per share, in fourth quarter 2003. This compares to $23.3 million, or 10 cents per share, in as-reported earnings, and $24.9 million, or 11 cents per share, in operational earnings, in fourth quarter 2002. The decrease in 2003 was due primarily to a larger loss at the non-nuclear wholesale assets business, driven by the operating costs associated with two new plants, as well as decreased results at Gulf South Pipeline where lower revenues were realized and higher expenses were incurred.
As was the case in the first three quarters of 2003, the income-sharing mechanisms that are part of the Entergy-Koch partnership agreement allocated substantially all of the partnership's income to Entergy in the fourth quarter of this year. Beginning in 2004, Entergy's share of the partnership's income is expected to be 50 percent, consistent with its ownership interest.
For the year 2003, Energy Commodity Services reported earnings of $180.5 million, or 78 cents per share, compared to a loss of $145.8 million, or 64 cents per share, on an as-reported basis. The improved results in 2003 were due primarily to the absence of the 2002 charges in connection with the closing of Entergy's wholesale power development business as noted above. Operational earnings for the year 2003 were $181.0 million, or 78 cents per share, compared to $121.2 million, or 53 cents per share, in 2002.
Parent & Other
In fourth quarter 2003, Parent & Other recorded an as-reported loss of $7.2 million, or 3 cents per share, compared to a loss of $23.7 million, or 11 cents per share, in the same period in 2002. Operational results in each period equaled as-reported results. The improvement at Parent & Other in fourth quarter 2003 was due primarily to lower income tax expense.
For the full year, Parent & Other recorded an as-reported loss of $23.4 million, or 10 cents per share, and an operational loss of $22.4 million, or 9 cents per share. This compares to losses in 2002 of $38.6 million, or 17 cents per share, on both as-reported and operational bases. The improved results in 2003 were driven primarily by lower tax expense.
Outlook
"Fourth quarter 2003 completed another excellent year of financial performance for Entergy," saidC. John Wilder, Entergy's chief financial officer. "Our business fundamentals are solidly in place and we have a clear view of the challenging but achievable financial goals we've established for 2004 and beyond. The foundation we've built and the financial discipline we've established give us confidence in our ability to achieve as-reported and operational earnings guidance for 2004 in the range of $4.10 to $4.30 per share."
Entergy Corporation is an integrated energy company engaged primarily in electric power production, retail distribution operations, energy marketing and trading, and gas transportation. Entergy owns and operates power plants with about 30,000 megawatts of electric generating capacity, and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.6 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Through Entergy-Koch, LP, it is also a leading provider of wholesale energy marketing and trading services, as well as an operator of natural gas pipeline and storage facilities. Entergy has annual revenues of over $8 billion and approximately 14,000 employees.
