Entergy's senior management will be available on Nov. 5-6, 2007 at the Edison Electric Institute's Financial Conference to discuss quarterly results and other Entergy business matters with investors. Chairman and Chief Executive Officer J. Wayne Leonard will also provide a presentation on Nov. 6, 2007 expected to start at approximately 11:15 a.m. EST. A live audio webcast of the presentation and presentation slides can be accessed via the Investor Relations section of Entergy's corporate Web site at www.entergy.com. A replay of the webcast will be available later that day and for 30 days thereafter via Entergy's corporate Web site.
Utility, Parent & Other
In third quarter 2007, Utility, Parent & Other reported earnings of $305.7 million, or $1.52 per share, on as-reported and operational bases, compared to $285.9 million, or $1.35 per share, in as-reported earnings and $279.6 million, or $1.32 per share, in operational earnings for third quarter 2006. Entergy New Orleans, Inc. emerged from Chapter 11 bankruptcy during second quarter 2007, and consistent with applicable consolidation accounting and reporting standards, Entergy re-consolidated Entergy New Orleans, Inc. for financial reporting purposes effective for second quarter 2007 and retroactive to Jan. 1, 2007.
Earnings for Utility, Parent & Other in third quarter 2007 reflect the net positive effect of recent regulatory actions and higher wholesale revenue, as well as the positive effect of accretion associated with Entergy's share repurchase program. Partially offsetting these factors was higher interest expense associated with debt incurred to fund common stock repurchases and the Palisades acquisition, as well as interest on securitization bonds and the resumption of interest payments in September 2007 at Entergy New Orleans. Weather in the current period was comparable to the warmer-than-normal weather experienced in third quarter 2006.
Megawatt-hour sales in the residential sector in third quarter 2007, on a weather-adjusted basis, were up less than one percent compared to third quarter 2006. Commercial and governmental sales, after adjusting for weather, were up two percent. Industrial sales experienced a decrease of two percent in third quarter 2007, compared to the same period a year ago.
The residential sales segment increased less than one percent quarter to quarter; however, the latter part of third quarter 2007 reflected stronger sales and an improving regional economy. The quarter-over-quarter increase in the commercial and governmental sectors reflects continued recovery and ongoing growth in these sectors, while the decline in the industrial sector for the quarter reflects the loss of a customer to cogeneration, which was anticipated earlier in the year, and lower spot sales to cogeneration customers. Partially offsetting these factors was higher than expected utilization in the refining segment as well as a rebound in the chemical segment which benefited from strong export markets.
Entergy Nuclear
Entergy Nuclear earned $160.9 million, or 80 cents per share, on as-reported and operational bases in third quarter 2007, compared to $106.9 million, or 50 cents per share, in third quarter 2006 for as-reported and operational earnings. The improved results in third quarter 2007 came from increased revenues from pricing and the production available from Palisades, acquired in the second quarter of this year, and the positive effect of a lower tax rate in the current period. Partially offsetting this increase was reduced production as a result of additional unplanned outage time at Vermont Yankee. In addition, Palisades entered a planned refueling outage on Sept. 9, 2007. There were no refueling outages in third quarter 2006.
Non-Nuclear Wholesale Assets
Entergy's Non-Nuclear Wholesale Assets business recorded a loss of $5.5 million, or two cents per share, on both as-reported and operational bases in third quarter 2007 compared to a loss of $3.9 million, or two cents per share, on both as-reported and operational bases in third quarter 2006.
Outlook
Entergy is reaffirming as-reported and operational earnings guidance for 2007 in the range of $5.40 to $5.70 per share. Entergy is initiating 2008 earnings guidance in the range of $6.50 to $6.90 per share on both as-reported and operational bases on a business-as-usual basis. Guidance for 2008 does not include a special item for expenses anticipated in connection with the plan to pursue separation of Entergy's non-utility nuclear business and to enter into a nuclear services joint venture, both discussed below.
Business Separation
On Nov. 3, 2007, Entergy's Board of Directors approved a plan to pursue a separation of the non-utility nuclear business from Entergy's regulated utility business through a tax-free spin-off of the non-utility nuclear business. SpinCo, the term used to identify the new company yet to be named, will be a new independent publicly-traded company. In addition, SpinCo and Entergy Corporation intend to enter into a nuclear services joint venture, with equal ownership.
New Business Structure
Once the transaction is complete, Entergy Corporation's shareholders will own 100 percent of the common equity in both SpinCo and Entergy. SpinCo's business is expected to consist of the non-utility nuclear assets, including the Pilgrim Nuclear Station in Plymouth, MassachusettsMass., the James A. FitzPatrick and Indian Point Energy Center plants in Oswego and Buchanan, New N.Y.York, respectively, the Palisades plant in Covert, Mich., and the Vermont Yankee plant in Vernon, Vermont., and a power marketing operation. Entergy Corporation's business will consist of the current five regulated utility operating subsidiaries, System Energy Resources, Inc., the related services subsidiaries System Fuels, Inc., Entergy Operations, Inc. and Entergy Services, Inc., and the remaining Entergy subsidiaries. The newly-created joint venture is expected to operate the nuclear assets owned by SpinCo. The joint venture is also expected to offer nuclear services to third parties, including decommissioning, plant relicen sing and plant operations for the Cooper Nuclear Station and others.
The joint venture operating structure for SpinCo ensures that the core nuclear operations expertise currently in place at each of the non-utility nuclear plants will remain after the spin-off. Entergy Nuclear Operations, Inc. will supplement its application filed July 30, 2007 with the Nuclear Regulatory Commission, seeking indirect transfer of control of the operating licenses for the non-utility nuclear fleet, to incorporate the planned business separation. Entergy Nuclear Operations, Inc., the current NRC-licensed operator of the non-utility nuclear plants, would remain the operator of the plants after the separation. Entergy Operations, Inc., the current NRC-licensed operator of Entergy's utility nuclear plants, will also remain in place as a wholly-owned subsidiary of Entergy and will continue to be the operator of the utility nuclear plants. The decision to retain the existing operators for the nuclear stations reflects Entergy's commitment to maintaining safety, security and operational excellence.
Leadership Team
The Entergy Board of Directors has approved certain elements of the leadership structure and designated individuals who will fill key board and management roles. The Joint Venture Board of Directors will be comprised of equal membership from both Entergy and SpinCo. Additional details on the structure and leadership will be made available in the coming months. Those assuming new roles or additional responsibilities include:
Entergy Corporation:
Executive Vice President and Chief Operating Officer Mark Savoff