_________________________________________________________________________
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
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-27031 ENTERGY GULF STATES, INC. 74-0662730
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 838-6631
1-8474 ENTERGY LOUISIANA, INC. 72-0245590
(a Louisiana corporation)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 840-2734
0-320 ENTERGY MISSISSIPPI, INC. 64-0205830
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040
(a Louisiana corporation)
1600 Perdido Street, Building 505
New Orleans, Louisiana 70112
Telephone (504) 670-3674
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_________________________________________________________________________
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.
Yes X No
Common Stock Outstanding Outstanding at October 31, 2000
Entergy Corporation ($0.01 par value) 219,596,299
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., 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, 1999, and the
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000 and
June 30, 2000, filed by the individual registrants with the SEC, and
should be read in conjunction therewith.
Forward-Looking Information
The following constitutes a "Safe Harbor" statement under the
Private Securities Litigation Reform Act of 1995: Investors are
cautioned that forward-looking statements contained herein with respect
to the revenues, earnings, performance, strategies, prospects and other
aspects of the business of Entergy Corporation, Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi,
Inc., Entergy New Orleans, Inc., System Energy Resources, Inc., and their
affiliated companies may involve risks and uncertainties. A number of
factors could cause actual results or outcomes to differ materially from
those indicated by such forward-looking statements. These factors
include, but are not limited to, risks and uncertainties relating to:
the effects of weather, the performance of generating units and
transmission systems, the possession of nuclear materials, fuel prices
and availability, the effects of regulatory decisions and changes in law,
litigation, capital spending requirements, the onset of competition,
advances in technology, changes in accounting standards, corporate
restructuring and changes in capital structure, consummation of the
business combination with FPL Group, Inc., movements in the markets for
electricity and other energy-related commodities, changes in interest
rates and in financial and foreign currency markets generally, changes in
corporate strategies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2000
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 3
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 10
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 18
Consolidated Statements of Income 25
Consolidated Statements of Cash Flows 26
Consolidated Balance Sheets 28
Consolidated Statements of Retained Earnings
and Comprehensive Income 30
Selected Operating Results 31
Entergy Arkansas, Inc.:
Results of Operations 32
Income Statements 36
Statements of Cash Flows 37
Balance Sheets 38
Selected Operating Results 40
Entergy Gulf States, Inc.:
Results of Operations 41
Income Statements 44
Statements of Cash Flows 45
Balance Sheets 46
Selected Operating Results 48
Entergy Louisiana, Inc.:
Results of Operations 49
Income Statements 52
Statements of Cash Flows 53
Balance Sheets 54
Selected Operating Results 56
Entergy Mississippi, Inc.:
Results of Operations 57
Income Statements 60
Statements of Cash Flows 61
Balance Sheets 62
Selected Operating Results 64
Entergy New Orleans, Inc.:
Results of Operations 65
Income Statements 67
Statements of Cash Flows 69
Balance Sheets 70
Selected Operating Results 72
System Energy Resources, Inc.:
Results of Operations 73
Income Statements 74
Statements of Cash Flows 75
Balance Sheets 76
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 78
Part II:
Item 1. Legal Proceedings 92
Item 4. Submission of Matters to a Vote of
Security Holders 93
Item 5. Other Information 94
Item 6. Exhibits and Reports on Form 8-K 94
Signature 97
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
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)
APSC Arkansas Public Service Commission
Board Board of Directors of Entergy Corporation
BPS British pounds sterling
Cajun Cajun Electric Power Cooperative, Inc.
Capital Funds Agreement Agreement, dated as of June 21, 1974, as
amended, between System Energy and Entergy
Corporation, and the assignments thereof
CitiPower CitiPower Pty., an electric distribution company
serving Melbourne, Australia and surrounding
suburbs, which was acquired by Entergy effective
January 5, 1996, and was sold by Entergy
effective December 31, 1998
Council Council of the City of New Orleans, Louisiana
domestic utility
companies Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New
Orleans, collectively
EPA United States Environmental Protection Agency
EWG Exempt wholesale generator under PUHCA
Entergy Entergy Corporation and its various direct and
indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc., an Arkansas corporation
Entergy Corporation Entergy Corporation, a Delaware corporation
Entergy Gulf States Entergy Gulf States, Inc., a Texas corporation
(including wholly owned subsidiaries - Varibus
Corporation, GSG&T, Inc., Prudential Oil & Gas,
Inc., and Southern Gulf Railway Company)
Entergy Louisiana Entergy Louisiana, Inc., a Louisiana corporation
Entergy Mississippi Entergy Mississippi, Inc., a Mississippi
corporation
Entergy New Orleans Entergy New Orleans, Inc., a Louisiana
corporation
FERC Federal Energy Regulatory Commission
FUCO Exempt foreign utility company under PUHCA
Form 10-K The combined Annual Report on Form 10-K for the
year ended December 31, 1999 of Entergy, Entergy
Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy
FPL Group FPL Group, Inc., a Florida corporation and
parent company of Florida Power & Light Company
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation
Plant
Independence Independence Steam Electric Station (coal),
owned 16% by Entergy Arkansas, 25% by Entergy
Mississippi, and 7% by Entergy Power
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy effective February 1, 1997,
and was sold by Entergy effective December 4,
1998
LPSC Louisiana Public Service Commission
Merger The business combination transaction pursuant to
which the outstanding shares of FPL Group and
the outstanding shares of Entergy Corporation
will be converted into the right to receive 1.00
and 0.585 shares, respectively, of a new company
Merger Agreement Agreement and Plan of Merger dated July 30, 2000
by and between FPL Group, Entergy Corporation,
WCB Holding Corporation, Ranger Acquisition
Corporation and Ring Acquisition Corporation
MPSC Mississippi Public Service Commission
MW Megawatt(s)
Abbreviation or Acronym Term
NRC Nuclear Regulatory Commission
Pilgrim Pilgrim Nuclear Station, 670 MW facility located
in Plymouth, Massachusetts purchased in July
1999 from Boston Edison by Entergy's non-utility
nuclear power business
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935, as
amended
River Bend River Bend Nuclear Generation Plant
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards as
promulgated by the Financial Accounting
Standards Board
System Agreement Agreement, effective January 1, 1983, as
modified, among the domestic utility companies
relating to the sharing of generating capacity
and other power resources
System Energy System Energy Resources, Inc., an Arkansas
corporation
UK The United Kingdom of Great Britain and Northern
Ireland
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 1
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
White Bluff White Bluff Steam Electric Generating Station,
57% owned by Entergy Arkansas
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
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
increasing competitive pressures facing Entergy and the electric utility
industry, as well as market risks and other significant issues affecting
Entergy. Set forth below are updates to the information contained
therein.
Business Combination with FPL Group
On July 30, 2000, Entergy Corporation and FPL Group entered into a
Merger Agreement providing for a business combination that results in the
creation of a new company. Each outstanding share of FPL Group common
stock will be converted into the right to receive one share of the new
company's common stock, and each outstanding share of Entergy Corporation
common stock will be converted into the right to receive 0.585 of a share
of the new company's common stock. It is expected that FPL Group's
shareholders will own approximately 57% of the common equity of the new
company and Entergy's shareholders will own approximately 43%. The
initial board of directors of the new company will consist of eight
directors designated by FPL Group and seven directors designated by
Entergy. The new company will be given a new name that will be agreed
upon between the Boards of Directors of FPL and Entergy prior to the
consummation of the Merger. The new company will maintain its principal
corporate offices and headquarters in Juno Beach, Florida, and will
maintain its utility headquarters in New Orleans, Louisiana. The Merger
Agreement generally allows Entergy to continue business in the ordinary
course consistent with past practice and contains certain restrictions on
Entergy's capital activities, including restrictions on the issuance of
securities, capital expenditures, dispositions, incurrence or guarantee of
indebtedness, and trading or marketing of energy. Entergy generally will
be permitted to take actions pursuant to restructuring legislation in the
domestic utility companies' jurisdictions of operation and to reorganize
its transmission business. Under certain circumstances, if the Merger
Agreement is terminated, a termination fee of $215 million may be payable
by one of the parties. Both the FPL Group and Entergy Boards of
Directors unanimously approved the Merger. The Merger is conditioned
upon, among other things, approvals of the shareholders of FPL Group and
Entergy and the receipt of required regulatory approvals of various
local, state, and federal regulatory agencies and commissions, including
the SEC and FERC. Entergy and FPL Group will seek to consummate the
Merger by late 2001.
The Joint Proxy/Prospectus of Entergy and FPL Group dated November 7,
2000 has been declared effective by the SEC and mailing to the respective
shareholders of FPL and Entergy commenced on November 9, 2000. FPL Group
and Entergy will each hold a special meeting of its shareholders on
December 15, 2000 to consider and vote upon the proposal to approve the
Merger.
In September 2000, Entergy and FPL Group announced plans to form a
joint venture between FPL Energy and Entergy Wholesale Operations (EWO),
to be named at a later date. Each company will have a 50% interest in
the joint venture and retain their respective ownership of current
operating plants and late-stage development projects, along with their
current operations personnel. The joint venture will preside over new
and early-stage development projects, pursue acquisitions for fossil and
nuclear assets, and provide business management, finance, accounting,
trading, engineering, and construction management services on assets
retained by FPL Energy and EWO and on any new assets jointly acquired or
developed by the joint venture. The joint venture is currently in the
planning stage. Upon completion of the merger of FPL Group and Entergy,
the operations of the joint venture are expected to be combined into one
wholly-owned subsidiary.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Domestic Transition to Competition
State Regulatory and Legislative Activity
Arkansas
In April 1999, the Arkansas legislature enacted a law providing for
competition in the electric utility industry through retail open access
on January 1, 2002. When retail open access is achieved, the generation
operations will become a competitive business, but transmission and
distribution operations will continue to be regulated. Under the law,
the APSC may delay implementation of retail open access, but not beyond
June 30, 2003. In October 2000, Entergy joined with the APSC Staff and
several other interested parties and recommended to the APSC that retail
open access be delayed so that it begins no sooner than October 2003 and
no later than October 2005. The recommendation was made in response to a
request from the APSC, which is concerned that the current timeline is no
longer feasible. The new proposal requires legislative approval because
it extends the timeline beyond the terms of the current law. The
Arkansas Legislature convenes its next session in January 2001.
The implementation of the Arkansas retail open access law through
rulemakings and company filings is ongoing. Rulemakings associated with
energy service provider licensing rules and affiliate rules have been
completed. In June 2000, the APSC declared that billing would become a
competitive service at the beginning of retail open access. Entergy
Arkansas filed a functional, but not corporate, unbundling plan with the
APSC on August 8, 2000. The functional unbundling plan initially
establishes separate business units for distribution, generation, and a
new retail energy service provider. The plan contemplates the transfer
of transmission assets to the Transco discussed in the Form 10-K and
herein in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS". The functional unbundling plan is tentative
because the regulatory requirements to implement the retail open access
law have not been finalized, and changes to the plan are possible.
Texas
In June 1999, the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open access.
The law provides for retail open access by most electric utilities,
including Entergy Gulf States, on January 1, 2002. When retail open
access is achieved, the generation business and a new retail electricity
provider function will become competitive businesses, but transmission
and distribution operations will continue to be regulated. The new
retail electricity provider function will be the primary point of contact
with customers for most services beyond initiation of electric service
and restoration of service following outages.
In January 2000, as required by the Texas restructuring legislation,
Entergy Gulf States filed a business separation plan with the PUCT, which
was amended in June 2000. The plan provides that, by January 2002,
Entergy Gulf States will be divided into a Texas distribution company, a
Texas transmission company, a Texas generation company, a Texas retail
electricity provider, and a Louisiana company that will encompass
distribution, generation, transmission, and retail operations. In July
2000, the PUCT issued an interim order to approve the amended business
separation plan. The plan provides that the Louisiana company would
retain the liability for all debt obligations of Entergy Gulf States and
that the property of the Texas companies would be released from the lien
of Entergy Gulf States' mortgage. Each of the Texas companies would
assume a portion of Entergy Gulf States' debt obligations, which
assumptions would not act to release the Louisiana company's obligations.
Each of the Texas companies would also grant a lien on their properties
in favor of the Louisiana company to secure its obligations to the
Louisiana company in respect of the assumed obligations. In addition,
under the plan Entergy Gulf States will refinance or retire the Texas
companies' portion of existing debt through 2004. Regulatory approvals
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
from FERC, the SEC, and the LPSC will be required before the business
separation plan can be implemented. Remaining business separation
issues in Texas will be addressed in the cost unbundling proceeding
before the PUCT. The LPSC has opened a docket to identify the changes in
corporate structure of Entergy Gulf States, and their potential impact
on Louisiana retail ratepayers, resulting from restructuring in Texas and
Arkansas. Entergy Gulf States filed testimony in that proceeding in
August 2000. The LPSC staff filed testimony in that proceeding in October
2000 criticizing Entergy Gulf States' proposal, particularly the part
related to the Texas portion of generation assets being transferred
to an unregulated entity. Hearings are scheduled for February 2001.
Pursuant to the Texas restructuring legislation, Entergy Gulf States
filed its separated business cost data and proposed transmission,
distribution, and competition tariffs with the PUCT on March 31, 2000.
This filing also included a proposal for a performance-based enhancement
to the authorized rate of return on equity. Management does not agree
with the arbitrary level of return on equity set by PUCT rules (200 basis
points over the cost of a distribution utility's debt) and is seeking a
higher return in its separated cost filing. A procedural schedule for
the case has been established, calling for a hearing in January 2001.
Management cannot predict the outcome of this proceeding. In connection
with unbundled cost filings made by all Texas investor owned utilities,
the PUCT opened a "generic docket" to determine issues that may be
resolved on an industry-wide basis, including incentive mechanisms to
enhance the authorized rate of return, before the individual utility
hearings begin. The PUCT has ruled against the generic use of incentive
returns, and has converted the incentive mechanism portion of the docket
into a proceeding on the generic use of capital structures and return on
equity. See Note 2 to the financial statements for further information
on the March 31, 2000 filing.
In October 2000, the Provider of Last Resort (POLR) rule was
approved by the PUCT, requiring that such a provider exist in every area
of the state and setting up the process by which such a provider will be
selected and its services priced. The PUCT will accept bids from parties
seeking to become the POLR in each area, with a preference that the POLR
not be the incumbent utility in the area. However, depending on the
outcome of the bidding process, Entergy Gulf States may be required to
provide POLR service in its service territory. This may have a material
financial impact on the Entergy Gulf States retail electric provider
depending on the terms and prices eventually approved by the PUCT for
POLR service.
Mississippi
In May 2000, after two years of studies and hearings, the MPSC
announced that it was suspending its docket studying the opening of the
state's retail electricity markets to competition. The MPSC based its
decision on its finding that competition could raise the electric rates
paid by residential and small commercial customers. The final decision
ultimately lies with the Mississippi Legislature, which convenes its 2001
session in January.
New Orleans
In October 1998, the Council established a procedural schedule to
determine if natural gas retail competition is in the public interest.
In April 1999, Entergy New Orleans filed a plan that would allow for gas
retail open access in New Orleans. The plan outlines the conditions
under which Entergy New Orleans could support gas retail open access
should the Council find it in the public interest. Hearings were held on
retail competition for gas service in November 1999. The advisors to the
Council have issued a final report that proposes various pilot programs
and finds that retail gas open access is not in the public interest at
this time. The Council accepted an offer of settlement from Entergy New
Orleans in this matter that allows for a voluntary pilot program for a
limited number of large industrial non-jurisdictional gas customers.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Federal Regulatory Activity
Proposed System Agreement Amendments
See "Part I, Item 1, Competition" in the Form 10-K for a discussion
of changes that may result from retail competition and unbundling.
In April 2000, the LPSC and the Council filed a complaint with FERC
seeking revisions to the System Agreement that they allege are necessary
to accommodate the introduction of retail competition in Texas and
Arkansas, where Entergy Gulf States and Entergy Arkansas provide utility
service, and to protect Entergy's Louisiana customers from any adverse
impact that may occur due to the introduction of such retail competition
in some jurisdictions but not others. The LPSC and the Council requested
that FERC immediately institute a proceeding to permit changes to be
adopted prior to January 1, 2002, and requested, among other things, that
FERC cap certain of the System Agreement obligations of Entergy Gulf
States, Entergy Louisiana, and Entergy New Orleans and fix these
companies' access to pool energy at the average level existing for the
three years prior to the date that retail access is initiated in Texas
and Arkansas. Alternatively, the LPSC and the Council requested that
FERC require Entergy to provide wholesale power contracts to these
companies to satisfy their energy requirements at costs no higher than
would have been incurred if retail competition were not implemented. The
LPSC and the Council requested that the relief be made available for at
least eight years after implementation of retail competition or the
withdrawal of Entergy Arkansas and Entergy Gulf States from the System
Agreement, or until retail access is implemented in Louisiana and New
Orleans. In addition, among other things, the LPSC and the Council
asserted in their complaint that:
o unless the requested relief is granted, the restructuring
legislation adopted in Texas and Arkansas, to the extent such
legislation requires, or has the effect of, altering the rights
of parties under the System Agreement, will result in violations
of the interstate commerce clause, the due process clause, and
the impairment of contracts clause in the U.S. Constitution; and
o the failure of the domestic utility companies to honor a right of
first refusal with respect to any sale of generating capacity and
associated energy under the System Agreement, and any attempt to
eliminate such a right of first refusal from the System Agreement,
would violate the Federal Power Act and constitute a breach of the
System Agreement.
In June 2000, Entergy's domestic utility companies filed proposed
amendments to the System Agreement with FERC to facilitate the
implementation of retail competition in Arkansas and Texas and to provide
for continued equalization of costs among the domestic utilities in
Louisiana and Mississippi. The amendments provide the following:
o cessation of participation in all aspects of the System Agreement,
other than those related to transmission equalization, for any
jurisdictional division of a domestic utility operating in a
jurisdiction that initiates retail open access;
o certain sections of the System Agreement will no longer apply to
the sales of generating capacity, whether through the sale of the
asset or the output thereof, by a domestic utility operating in a
jurisdiction that has established a date by which it will implement
retail access; and
o modification of the service schedule developed to track changes in
energy costs resulting from the Entergy-Gulf States Utilities merger
to include one final true-up of fuel costs upon cessation of one
company's participation in the System Agreement, after which the
service schedule will no longer be applicable for any purpose.
Entergy believes that the proceedings relating to the proposed
amendments serve as a response to the complaint by the LPSC and the
Council and anticipates that the proceedings will be consolidated. In
response to Entergy's proposal, the LPSC and the Council have requested
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
that FERC dismiss the proposed amendments and proceed with the complaint
proceedings. Several other parties have also intervened in the
proceeding. In the event that the proceedings relating to the proposed
amendments proceed, the LPSC and the Council have asserted that the
charges to the domestic utility companies under the Unit Power Sales
Agreement need to be reconsidered. Entergy has requested an expedited
hearing on the proposed amendments and a final decision from FERC by
October 1, 2001. A procedural schedule has been established, with the
hearing beginning in February 2001 and an initial decision scheduled by
the end of May 2001. Neither the timing, nor the ultimate outcome of
these proceedings at FERC, can be predicted at this time.
See "Part I, Item 1, RATE MATTERS AND REGULATION" in the Form 10-K
for a discussion of the complaint filed by the LPSC seeking to exclude
curtailable load from the cost allocation determination under the System
Agreement. That proceeding has now been consolidated for hearing with
the System Agreement proceeding described above and will be heard by FERC
in February 2001.
For a discussion of FERC's July 2000 order in the System Energy
proposed rate increase proceeding, see Note 2 to the financial
statements.
Open Access Transmission and Entergy's Transco Proposal
See "Open Access Transmission and Entergy's Transco Proposal" in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND
KNOWN TRENDS" in the Form 10-K for a discussion of Entergy's proposed
Transco. In October 2000, in compliance with FERC Order 2000, Entergy
made a filing with FERC that requested:
o authorization to establish the Transco;
o authorization to transfer the domestic utility companies'
transmission assets to the Transco; and
o a determination that the partnership arrangement with the Southwest
Power Pool (SPP) that the Transco would operate in would qualify as
an independent regional transmission organization. The partnership
arrangement provides for operations under the oversight of, and
within, the SPP regional transmission organization.
In return for transferring their transmission assets to the Transco, the
domestic utility companies will receive passive ownership interests in
the Transco, which will be a limited liability company. The managing
member of the Transco will be a separate corporation with an independent
board of directors.
Entergy intends to file in December 2000 for FERC approval of the
transmission tariff for service across the Transco's facilities. Under
its planned timeline, Entergy expects to have the necessary regulatory
approvals for the Transco by the third quarter of 2001, with the
transmission asset transfers occurring before independent Transco
operations begin on December 15, 2001.
State and Local Rate Regulation
The domestic utility companies' retail and wholesale rate matters
and other regulatory proceedings are discussed more thoroughly in Note 2
to the financial statements herein and in the Form 10-K.
In June 2000, the LPSC approved a settlement between Entergy Gulf
States and the LPSC staff to refund $83 million resolving refund issues
in Entergy Gulf States' second, third, fourth, and fifth post-Merger
earnings reviews filed with the LPSC relating to the period January 1,
1994 through December 31, 1997. This refund, for which adequate reserves
had previously been recorded, was made over a three-month period
beginning July 2000. In May 2000, Entergy Gulf States filed its seventh
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
required post-Merger earnings analysis with the LPSC. This filing will
be subject to review by the LPSC and may result in a change in rates.
Entergy Gulf States also is proposing that the allowed return on common
equity be increased from 10.95% to 11.60%. A schedule for this proceeding
has been established by the LPSC and hearings will begin in March 2001.
In May 2000, the LPSC ordered Entergy Louisiana to refund an additional
$6.4 million based on its fourth annual performance-based rate plan
filed with the LPSC in April 1999 for the 1998 test year. The refund,
for which an adequate reserve had previously been recorded, occurred in
July 2000. In May 2000, Entergy Louisiana submitted its fifth annual
performance-based rate plan filing for the 1999 test year. As a result
of this filing, Entergy Louisiana implemented a $24.8 million base rate
reduction in August 2000. Entergy Louisiana is proposing to increase
prospectively the allowed return on common equity from 10.5% to 11.6%,
which, if approved, would reduce the amount of the rate reduction. This
filing will be subject to review by the LPSC. A procedural schedule has
not yet been established by the LPSC in this proceeding.
Continued Application of SFAS 71 and Stranded Cost Exposure
See "Continued Application of SFAS 71 and Stranded Cost Exposure" in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND
KNOWN TRENDS" in the Form 10-K for a discussion of the potential effects
of discontinuation of SFAS 71 for the generation portion of Entergy's
business as well as Entergy's exposure to stranded costs.
Because management believes that definitive outcomes have not yet
been determined regarding the transition to competition in any of
Entergy's jurisdictions, the regulated operations of the domestic utility
companies and System Energy continue to apply SFAS 71.
The restructuring laws enacted in Arkansas and Texas provide an
opportunity for the recovery of stranded costs following review and
approval by the APSC or the PUCT, respectively. Nearly all of Entergy's
exposure to stranded costs involves commitments that were approved by
regulators. The actual amount of costs and obligations that will be
identified as stranded will be determined in regulatory proceedings. The
outcome of the Texas and Arkansas stranded cost proceedings cannot be
predicted at this time and will depend upon a number of variables,
including the timing of stranded cost determination, the values
attributable to certain strandable assets, and the assumptions concerning
future market prices for electricity.
In June 2000, Entergy Arkansas filed an application to continue the
stranded cost mitigation efforts agreed upon in the 1997 settlement
agreement approved by the APSC. These mitigation efforts include the
funding of a transition cost account with excess earnings to offset
future stranded costs and the accelerated amortization of Entergy
Arkansas' share of the Grand Gulf purchased power obligation under the
Unit Power Sales Agreement. The filing included an updated stranded cost
estimate intended to support Entergy Arkansas' recommendation that the
mitigation efforts continue. The filing presents an estimated range of
stranded costs based upon the comparison of possible generation asset
market values to the generation assets' book values and contractual
obligations. The range of possible generation asset market values used
in the estimate was determined using generation asset sales from other
jurisdictions. In rebuttal testimony filed by Entergy Arkansas in
November 2000, the estimated stranded costs in Arkansas was updated to a
range of $227.8 million to $1.58 billion.
Entergy Gulf States included an estimate of its Texas stranded costs
in its March 31, 2000 separated costs filing with the PUCT. Using the
model established by the PUCT staff, Entergy Gulf States' estimate of
Texas stranded costs is $117.2 million. An updated estimate of $119.3
million was filed in August 2000 to reflect recent rulings regarding
stranded cost issues in the open "generic docket" at the PUCT. Entergy
Gulf States disagrees with certain of the assumptions and estimates
included in the PUCT model and believes that the model understates actual
stranded costs. The model offsets potential strandable costs against
mitigating factors, including the estimated fair value of existing
generation plants, to determine an estimated stranded cost figure. The
model, however, does not include estimated River Bend decommissioning
decommissioning costs, which remain obligations of the regulated utility.
The Texas cost filing is discussed more thoroughly in Note 2 to the
financial statements.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Market Risks Disclosure
In May 2000, to mitigate currency exchange rate risk, Entergy
entered into separate foreign currency forward contracts to hedge the
U.S. dollar equivalent amounts of its net equity investments to be made
in the Saltend and Damhead Creek projects located in the United Kingdom.
The forward contracts are in the notional amounts of BPS48 million and
BPS36.1 million for Saltend and Damhead Creek, respectively. The forward
contract for Saltend matured in July 2000 when the equity investment was
made and locked in an average spot rate of $1.48338 to BPS1. The forward
contract for Damhead Creek, which was rolled over in October 2000, locked
in an average spot rate of $1.45000 to BPS1, and matures in December
2000. The banks obligated on these forward contracts are rated by
Standard & Poor's Rating Services at A-1 or above on their short-term
obligations.
During 2000, Entergy's global power development business entered
into 10-year interest rate swap agreements with an average fixed rate of
6.539% for approximately 100% of the debt outstanding under the Damhead
Creek bridge and term loan portion of the senior credit facility. The
global power development business is exposed to market risks from
movements in interest rates for the hedged portion of the debt only in
the unlikely event that the counter-parties to the interest rate swap
agreements were to default on contractual payments. At September 30,
2000, Entergy's global power development business had interest rate swap
agreements outstanding totalling a notional amount of $415.2 million.
Under the senior credit facility and the subordinated credit facility,
the ability of the global power development business to make
distributions of dividends, loans, or advances to Entergy Corporation is
restricted by, among other things, the requirement to pay permitted
project costs, make debt repayments, and maintain cash reserves. See
Note 7 to the financial statements in the Form 10-K for further
discussion of the financing of the Damhead Creek project.
New Accounting Pronouncement
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which will be effective for Entergy
in 2001. See Note 8 to the financial statements for a discussion of the
expected effect of this pronouncement on Entergy.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operations
Net cash flow provided by (used in) operations for Entergy, the
domestic utility companies, and System Energy for the nine months ended
September 30, 2000 and 1999 was as follows:
Company 2000 1999
(In Millions)
Entergy $1,174.4 $1,008.7
Entergy Arkansas $202.3 $231.3
Entergy Gulf States $161.8 $215.0
Entergy Louisiana $214.5 $307.5
Entergy Mississippi ($4.2) $103.3
Entergy New Orleans $10.2 $47.3
System Energy $372.2 $126.2
Entergy's consolidated cash flow from operations increased primarily
due to its competitive businesses providing $164.7 million to
consolidated operating cash flow compared with providing $2.9 million for
the nine months ended September 30, 2000 and 1999, respectively. The
increase is attributable to the following:
o an increase in net income from the operations of Pilgrim resulting
in an increase of $36.2 million in operating cash flow;
o higher net income achieved by the power marketing and trading
business, which resulted in an additional $38.4 million of operating
cash flow compared to the same period in 1999; and
o net income generated by the global power development business in
2000 compared with a net loss in 1999 resulting in an increase in
operating cash flow of $72.0 million.
Pilgrim was purchased in July 1999 and provided operating cash flow only
for the three months ended September 30, 1999 compared with providing
operating cash flow for the nine months ended September 30, 2000. The
increase in net income from the global power development business is
mainly attributable to liquidated damages received by the Saltend
contractor, as discussed below in "RESULTS OF OPERATIONS, Competitive
Businesses".
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The operating cash flows of the domestic utility companies and
System Energy were affected by money pool activity for the nine months
ended September 30, 2000. The domestic utility companies' operating cash
flows decreased, in part, as a result of the use of a portion of the
proceeds from debt issuances in 2000 to pay down payables to the money
pool as follows:
Entergy Arkansas $30.5 million
Entergy Gulf States $36.1 million
Entergy Louisiana $91.5 million
Entergy Mississippi $43.2 million
Entergy New Orleans $ 6.7 million
System Energy's operating cash flow increased primarily due to payments
of $144.5 million received on its money pool receivable from affiliated
companies.
The money pool is an inter-company funding arrangement designed to
reduce the domestic utility companies' and System Energy's dependence on
external short-term borrowings. The money pool provides a means by
which, on a daily basis, the excess funds of Entergy Corporation, the
domestic utility companies, and System Energy may be used by the domestic
utility companies or System Energy to fulfill short-term cash
requirements. See "Capital Resources" below for a discussion of the
limitations on these borrowings.
Operating cash flows for the domestic utility companies also were
negatively affected by increased use of cash related to deferred fuel
costs.
Entergy Gulf States' operating cash flow also was negatively
affected by refunds of $83 million paid to Louisiana customers during the
three months ended September 30, 2000 as a result of earnings reviews
settled with the LPSC, as discussed further in "MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note
2 to the financial statements.
Investing Activities
Net cash used in investing activities increased for the nine months
ended September 30, 2000 due to increased construction expenditures,
decreased proceeds from sales of businesses, and decreased net proceeds
from maturities of other temporary investments.
The increased construction expenditures were primarily due to:
o spending on customer service and reliability improvements by the
domestic utility companies;
o costs incurred for replacement of the steam generators at ANO 2; and
o construction of the Saltend and Damhead Creek power plants by
Entergy's global power development business.
The following items also contributed to the overall increase in cash
used:
o the maturity of notes receivable in August 1999 when only a portion
of the proceeds were reinvested in other temporary investments; and
o payments made by Entergy's global power development business in 2000
for turbines.
Partially offsetting the overall increase in cash used is the
maturity of other temporary investments and proceeds from the sale of the
Freestone power project in 2000.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Financing Activities
Net cash used in financing activities decreased for the nine months
ended September 30, 2000 primarily due to:
o a lower amount of long-term debt retirements;
o the issuance of debt by the domestic utility companies;
o increased borrowings under the credit facilities for the
construction of the Saltend and Damhead Creek power projects by
Entergy's global power development business; and
o a lower amount of repayments on the Entergy Corporation credit
facility.
Partially offsetting the overall decrease in cash used was the increased
repurchase of Entergy Corporation common stock and the redemption of
Entergy Gulf States' preference stock in 2000.
Business Combination with FPL Group
Entergy Corporation and FPL Group entered into the Merger Agreement
on July 30, 2000. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" for a description of the Merger.
The Merger Agreement generally allows Entergy to continue business in the
ordinary course consistent with past practice and contains certain
restrictions on Entergy's activities, including restrictions on the
issuance of securities, capital expenditures, dispositions, incurrence or
guarantee of indebtedness, and trading or marketing of energy. Entergy
does not believe that these covenants will constrain its capital
investment plan. Under certain circumstances, if the Merger Agreement is
terminated, a termination fee of $215 million may be payable by one of
the parties. In addition, under the terms of the Merger Agreement,
Entergy will use its commercially reasonable efforts to purchase through
open market transactions $430 million of its common stock prior to the
closing of the Merger.
Capital Resources
Entergy's sources of funds to meet its capital requirements include:
o internally generated funds;
o cash on hand;
o debt or preferred stock issuances;
o bank financing under new or existing facilities;
o short-term borrowings; and
o sales of assets.
Entergy requires capital resources for:
o construction and other capital expenditures;
o debt and preferred stock maturities;
o common stock repurchases;
o capital investments;
o funding of subsidiaries; and
o dividend and interest payments.
Management provides more information on construction expenditures,
capital investments, and long-term debt and preferred stock maturities in
Notes 5, 6, 7, and 9 to the financial statements in the Form 10-K.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Sources of Capital
All of the domestic utility companies have issued debt in 2000. The
net proceeds of these issuances have been or will be used for general
corporate purposes including capital expenditures, the retirement of
short-term indebtedness, and, in the case of Entergy Gulf States, the
mandatory redemption of preference stock. The domestic utility companies
and System Energy expect to continue refinancing or redeeming higher cost
debt and preferred stock prior to maturity, to the extent market
conditions and interest and dividend rates are favorable. See Note 4 to
the financial statements for details regarding issuances of debt in 2000.
All debt and common and preferred stock issuances require prior
regulatory approval. Preferred stock and debt issuances are subject to
issuance tests set forth in corporate charters, bond indentures, and
other agreements. The domestic utility companies may also establish
special purpose trusts or limited partnerships as financing subsidiaries
for the purpose of issuing preferred securities.
Short-term borrowings by the domestic utility companies and System
Energy are limited to amounts authorized by the SEC. The current SEC-
authorized limit of $1.078 billion for these companies is effective
through November 30, 2001. Borrowings from the money pool and external
borrowings combined may not exceed the SEC-authorized limit. As of
September 30, 2000, only Entergy Arkansas, Entergy Mississippi, and
Entergy New Orleans had borrowings outstanding from the money pool, in
the amounts of $10.1 million, $6.8 million, and $2.9 million,
respectively.
Other Entergy subsidiaries have SEC authorization to borrow from
Entergy Corporation through the money pool, or from external sources, in
an aggregate principal amount up to $265 million. These companies had
$117.4 million of outstanding borrowings from the money pool as of
September 30, 2000. Some of these borrowings are restricted as to use
and are collateralized by certain assets.
In May 2000, Entergy Corporation amended its 364-day bank credit
facility, increasing the capacity from $250 million to $500 million.
Borrowings from this credit facility were used for general corporate
purposes, for working capital needs, and to repay the $120 million 364-
day term loan discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K. As of
September 30, 2000, Entergy had no borrowings outstanding under the
credit facility.
Uses of Capital
Global Power Development Business
Entergy's global power development business is currently
constructing two combined-cycle gas turbine merchant power plants,
Saltend and Damhead Creek, in the UK. These projects are discussed in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES" in the Form 10-K. The financing of the construction of these
two power plants is discussed in Note 7 to the financial statements in
the Form 10-K. Saltend was originally scheduled for commercial operation
in January 2000, but is now expected to be completed by the end of 2000.
The engineering, procurement, and construction contract with the
construction contractor and the turbine manufacturer provides for
liquidated damages to be paid to Entergy for lost operating margin and
incremental costs. For the nine months ended September 30, 2000, Entergy
recorded liquidated damages for lost operating margin of $55.1 million
($38.6 million net of tax).
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In October 1999, Entergy's global power development business
obtained an option to acquire twenty-four GE7FA advanced technology gas
turbines, four steam turbines, and eight GE7EA advanced technology gas
turbines. The financing of these turbines is discussed in "MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in
the Form 10-K. In the sale of the Freestone power project, Entergy sold
the rights to acquire four of the GE7FA turbines and two of the steam
turbines.
Entergy's global power development business has begun construction
of a 300 MW combined-cycle gas turbine merchant power plant in Vicksburg,
Mississippi, known as the Warren Power Project. The construction costs
are expected to be approximately $150 million. Management expects that
commercial operation of the plant will begin in the summer of 2001.
Non-Utility Nuclear Business
In March 2000, Entergy's non-utility nuclear business signed an
agreement, subject to regulatory approvals, to purchase the New York
Power Authority's (NYPA) 825 MW James A. FitzPatrick nuclear power plant
located near Oswego, New York and NYPA's 980 MW Indian Point 3 nuclear
power plant located in Westchester County, New York. In September 2000,
approval was obtained from FERC for the purchase of these two nuclear
power plants. The NRC is the only regulatory body whose approval of the
sale is still pending. Management expects to close the acquisition
during the fourth quarter of 2000. Entergy will pay NYPA $50 million in
cash at the closing of the purchase, plus seven annual installments of
approximately $108 million commencing one year from the date of the
closing, and eight annual installments of $20 million commencing eight
years from the date of the closing. Entergy currently projects that
these installments will be paid primarily from the proceeds of the sale
of power from the plants and that Entergy will provide an additional $100
million of funding. Pursuant to the terms of the agreement with NYPA,
the installment payments due by Entergy to NYPA must be secured by a
letter of credit from an eligible financial institution. This letter of
credit may be secured, in whole or in part, by an Entergy guarantee.
Subject to certain conditions, Entergy's non-utility nuclear business has
agreed to pay NYPA up to $10 million annually for up to 10 years,
beginning on the second anniversary date of such acquisition, if Entergy
acquires ownership of the Indian Point 2 nuclear power plant located in
Westchester County, New York. If Entergy acquires the Nine Mile Point
nuclear power plants (referred to in the following paragraph), it will
pay NYPA up to $2 million annually for up to 10 years, commencing on the
second anniversary date of such acquisition. Entergy will also pay NYPA
$2.5 million annually, for up to twenty years if the NRC grants an
extension of the current nuclear operating licenses for the acquired
plants. These payments would commence on the first anniversary of the
expiration of the respective current licenses and would continue
throughout the extension period.
In December 1999, Entergy's non-utility nuclear business signed an
agreement with Rochester Gas and Electric Corporation (RG&E) to lease and
operate the Nine Mile Point 1 and 2 nuclear power plants, totaling 1,754
MW, located in Scriba, New York. Nine Mile Point 1 is owned by Niagara
Mohawk Power Corporation (NiMo), and Nine Mile Point 2 is co-owned by
RG&E, NiMo, New York State Electric & Gas Corporation (NYSEG), Long
Island Lighting Company doing business as LIPA, and Central Hudson Gas &
Electric Corporation. The lease and operating agreement is subject to
RG&E's acquisition of NiMo and NYSEG's ownership interests in the plants
under RG&E's right of first refusal and is subject to approval by the New
York Public Service Commission (NYPSC). NiMo and NYSEG initiated a
proceeding before the NYPSC seeking authorization for the sale of their
ownership interests in Nine Mile Point 1 and 2 to a third party. Entergy
intervened in the proceedings, but on April 25, 2000, NiMo and NYSEG
moved to withdraw the request for authority to transfer their interests
in the Nine Mile plants on the grounds that there are multiple parties
who wish to acquire them. The NYPSC encouraged the owners of the Nine
Mile plants to determine the market value of the plants through an open
bid process, which will likely take place during the fourth quarter of
2000.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy expects to participate in the bidding to acquire the Nine Mile
plants, or will seek a contract to lease and operate them.
In November 2000, Entergy's non-utility nuclear business signed an
agreement with Consolidated Edison (Con Edison) for the acquisition of
Con Edison's 957 MW Indian Point 2 nuclear power plant (IP2) located in
Westchester County, New York. Entergy will pay $600 million in cash at
the closing of the purchase and will receive the plant, nuclear fuel, and
other assets, including a purchase power agreement (PPA). On the second
anniversary of the IP2 acquisition, Entergy's nuclear business will also
begin to pay the NYPA $10 million per year for up to 10 years in
accordance with the Indian Point 3 purchase agreement. Under the PPA,
Con Edison will purchase 100% of IP2's output for an average price of
$39/MWh through 2004. Con Edison will also transfer a $430 million
decommissioning trust fund, along with the liability to decommission IP2
and Indian Point 1, to Entergy's nuclear business. Management expects to
close the acquisition by mid-2001, pending the approvals of the Nuclear
Regulatory Commission, the New York Public Service Commission, and other
regulatory agencies.
Joint Ventures
In May 2000, Entergy and Koch Industries, Inc. agreed to form a new
joint venture company to be called Entergy-Koch L.P. Entergy will
contribute to the venture its power marketing and trading business in the
United States and the United Kingdom as well as approximately $350
million in cash. Koch Industries, Inc. will contribute to the venture
its 10,000-mile Koch Gateway Pipeline, gas storage facilities including
the Bistineau storage facility near Shreveport, Louisiana, and Koch
Energy Trading, which markets and trades electricity, gas, weather
derivatives and other energy-related commodities and services. The
parties will have equal ownership interests in Entergy-Koch L.P., which
will be governed by an eight-member board of directors. Entergy will have
the right to appoint four members of the board. The venture, which will
require prior approval from FERC and from the SEC under PUHCA, is
expected to become operational near the end of 2000 or early in 2001.
In September 2000, Entergy and The Shaw Group Inc. signed a
definitive agreement to form a joint venture that will be named
EntergyShaw, L.L.C. EntergyShaw will provide management, engineering,
procurement, construction, and commissioning services for electric power
plants. EntergyShaw plans to operate in the rapidly growing electric
power generation market, including providing services for Entergy's power
development plans in North America and Europe. EntergyShaw is developing
a market-driven reference plant design that is expected to reduce power
plant capital costs significantly, while also reducing construction,
commissioning, and operating risks. Entergy and Shaw will each own a 50%
interest in the joint venture. Entergy does not expect to make a
material capital contribution to this joint venture.
Restriction on Uses of Capital
Entergy's ability to invest in domestic and foreign generation
businesses is subject to the SEC's regulations under PUHCA. These
regulations limit the total amount that Entergy may invest in domestic
and foreign generation businesses to 50% of consolidated retained
earnings at the time an investment is made. In June 2000, the SEC issued
an order that allows Entergy's EWG and FUCO investments to increase from
50% to 100% of Entergy's consolidated retained earnings. Entergy's
ability to guarantee obligations of its non-utility subsidiaries is also
limited by SEC regulations under PUHCA. In August 2000, the SEC issued
an order, effective through December 31, 2005, that allows Entergy to
issue up to $2 billion of guarantees to its non-utility companies,
excluding guarantees outstanding as of that date that were issued under a
previous order.
Under PUHCA, the SEC imposes a limit equal to 15% of consolidated
capitalization on the amount that may be invested in "energy-related"
businesses without specific SEC approval. Entergy has made investments
in energy-related businesses, including power marketing and trading.
Entergy's available capacity to make additional investments at September
30, 2000 was approximately $1.7 billion. Management expects the
available capacity to be partially reduced by Entergy's anticipated
investment in Entergy-Koch L.P.
Other Uses of Capital
For the nine months ended September 30, 2000, Entergy Corporation
paid $204.7 million in cash dividends on its common stock and received
dividend payments and returns on capital totaling $879.0 million from
subsidiaries. Declarations of dividends on Entergy's common stock are
made at the discretion of the Board. The Board evaluates the level of
dividends based upon Entergy's earnings and financial strength. Dividend
restrictions are discussed in Note 8 to the financial statements in the
Form 10-K. Under the Merger Agreement, Entergy can continue to pay
dividends at existing levels with increases permitted up to 5% over the
amount of the previous twelve-month period. On October 27, 2000, the
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Board declared a quarterly dividend of $0.315 per share on Entergy's
common stock. This dividend represents an increase of 5% from the recent
level of Entergy's quarterly common stock dividends.
Under the terms of the Merger Agreement, Entergy will use its
commercially reasonable efforts to purchase in open market transactions
$430 million of its common stock prior to the close of the Merger. As of
September 30, 2000, Entergy has repurchased 3.0 million shares for an
aggregate amount of $100.2 million after the signing of the Merger
Agreement. Prior to the date of the Merger Agreement, Entergy had been
repurchasing shares under two Board authorizations. In October 1998, the
Board approved a plan for the repurchase of Entergy common stock through
December 31, 2001 to fulfill the requirements of various compensation and
benefit plans. This stock repurchase plan provides for open market
purchases of up to 5 million shares for an aggregate consideration of up
to $250 million. In July 1999, the Board approved the commitment of up
to an additional $750 million for the repurchase of Entergy common stock
through December 31, 2001. Shares were purchased on a discretionary
basis. Prior to the date of the Merger Agreement, Entergy had repurchased
25.3 million shares for an aggregate amount of $652.5 million under
these two Board authorizations.
Entergy may issue shares under its Dividend Reinvestment and Stock
Purchase Plan and other compensation and benefit plans. See Note 3 to
the financial statements for stock repurchases and issuances made during
the nine months ended September 30, 2000.
See Notes 4, 5, 6, 7, 9, and 10 to the financial statements in the
Form 10-K for further discussion of Entergy's capital and refinancing
requirements and available lines of credit.
Entergy Corporation and System Energy
Pursuant to the Capital Funds Agreement, Entergy Corporation has
agreed to supply System Energy with sufficient capital to:
o maintain System Energy's equity capital at a minimum of 35% of its
total capitalization (excluding short-term debt);
o permit the continued commercial operation of Grand Gulf 1;
o pay in full all System Energy indebtedness for borrowed money when
due; and
o enable System Energy to make payments on specific System Energy
debt, under supplements to the agreement assigning System Energy's
rights in the agreement as security for the specific debt.
The Capital Funds Agreement and other Grand Gulf 1-related
agreements are more thoroughly discussed in Note 9 to the financial
statements in the Form 10-K.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's results of operations are discussed in two business
categories, "Domestic Utility Companies and System Energy" and
"Competitive Businesses". Domestic Utility Companies and System Energy
is Entergy's predominant business segment, contributing 70% and 75% of
Entergy's operating revenue for the three and nine months ended September
30, 2000, respectively, and 95% and 85% of its net income for the three
and nine months ended September 30, 2000, respectively. Competitive
Businesses include the following segments discussed in Note 6 to the
financial statements, "Power Marketing and Trading" and "All Other".
"All Other" principally includes global power development, non-utility
nuclear power, and the parent holding company, Entergy Corporation. The
elimination of power marketing and trading mark-to-market profits on
intercompany power transactions is also included in "All Other".
Net Income
Entergy's consolidated net income increased $10.5 million and $82.1
million for the three and nine months ended September 30, 2000,
respectively, due to increases in net income from the following:
o the domestic utility companies and System Energy increased $15.2
million for the nine months ended September 30, 2000;
o the power marketing and trading business increased $24.3 million for
the nine months ended September 30, 2000; and
o the other competitive businesses and parent company increased $17.1
million and $42.5 million for the three and nine months ended
September 30, 2000, respectively.
The increase for the nine months ended for the domestic utility
companies and System Energy was primarily due to a decrease in reserves
recorded in 2000 for potential rate actions, a decrease in interest and
other charges at System Energy, and adjustments that decreased deferred
fuel expenses. The overall increase was partially offset by increases in
other operation and maintenance expenses and depreciation and
amortization.
The increase from the power marketing and trading business was
primarily due to improved trading performance in electricity, increased
long-term marketing of electricity, and trading gains in natural gas in
the current year compared to trading losses in the prior year due to
natural gas prices reaching record levels.
The increase in the other competitive businesses and parent company
was primarily attributable to the operation of Pilgrim and liquidated
damages received from the Saltend contractor as compensation for lost
operating margin from the Saltend plant due to construction delays.
These increases were partially offset by an increase in income taxes.
Pilgrim was purchased in July 1999, therefore, it only contributed to
Entergy's net income for three months during the nine months ended
September 30, 1999.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Domestic Utility Companies and System Energy
Revenues and Sales
The changes in electric operating revenues associated with the
domestic utility companies for the three and nine months ended September
30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($25.7) ($102.2)
Rate riders (2.1) (12.8)
Fuel cost recovery 305.4 504.1
Sales volume/weather 40.7 65.7
Other revenue (including unbilled) 83.6 100.7
Sales for resale (36.3) (24.1)
------ ------
Total $365.6 $531.4
====== ======
Base revenues
Base revenues decreased for the three and nine months ended
September 30, 2000 primarily due to:
o rate reductions at Entergy Louisiana; and
o provisions for potential rate refunds at Entergy Louisiana.
Base revenues also decreased for the nine months ended September 30, 2000
due to the reversal in 1999 of regulatory reserves associated with the
accelerated amortization of accounting order deferrals in conjunction
with the Texas rate settlement at Entergy Gulf States. The net income
effect of this reversal was largely offset by the amortization of rate
deferrals in 1999 as discussed below.
The decreases were partially offset by reserves recorded in 1999 for
actual and potential refunds to Louisiana and Texas retail customers at
Entergy Gulf States.
Fuel cost recovery
The domestic utility companies are allowed to recover certain fuel
and purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs is
recorded as deferred fuel costs on Entergy's financial statements such
that these costs generally have no net effect on earnings.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 primarily due to:
o a higher fuel factor implemented in September 1999 in Texas for
Entergy Gulf States resulting in an increase of $21.9 million and
$51.3 million for the three and nine months ended September 30, 2000,
respectively;
o higher fuel cost recovery revenues of $95.1 million and $148.9
million for the three and nine months ended September 30, 2000,
respectively, in the Louisiana jurisdiction at Entergy Gulf States
due to higher fuel and purchased power costs as a result of increased
market prices;
o a fuel surcharge of $33.4 million implemented in January 2000 in
Texas for Entergy Gulf States;
o an increase in the Entergy Arkansas energy cost recovery rate that
became effective in April 2000, in addition to an increased energy
cost recovery rate that became effective in April 1999;
o higher fuel and purchased power expenses at Entergy Louisiana and
Entergy New Orleans due to the increased market price of gas; and
o an increase in the energy cost recovery rider at Entergy Mississippi
that became effective in January 2000.
Sales volume/weather
Sales volume increased for the three and nine months ended September
30, 2000 primarily due to the effect of warmer than normal weather as
well as increased usage by customers in all jurisdictions, particularly
at Entergy Arkansas, Entergy Gulf States, and Entergy Louisiana.
Other revenue (including unbilled)
Other revenue increased for the three and nine months ended
September 30, 2000 primarily due to:
o higher fuel prices at Entergy Louisiana included in unbilled
revenues;
o the effect of a $13.4 million adjustment to third quarter 1999
unbilled revenues that excluded fuel recovery and rate rider revenues
from the unbilled balance in accordance with regulatory treatment.
This effect was partially offset by the effect of the change in
estimate on third quarter 1999 unbilled revenues in other
jurisdictions;
o the addition of unbilled revenue for wholesale customers to the
unbilled balance at Entergy Arkansas and Entergy Gulf States; and
o increased volume due to the effect of warmer weather.
Sales for resale
Sales for resale decreased for the three and nine months ended
September 30, 2000 primarily due to increased sales to retail customers
resulting in less electricity available for resale at Entergy Louisiana.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased $239.8 million and
$462.4 million for the three and nine months ended September 30, 2000,
respectively, primarily due to:
o an increase in the market prices of purchased power and gas in 2000;
o higher priced gas generation and purchased power at Entergy Arkansas
due to scheduled maintenance outages for coal plants during 2000; and
o increased oil and gas prices and an increase in generation
requirements at Entergy Mississippi.
Fuel and purchased power expenses also increased for the nine months
ended September 30, 2000 primarily due to an adjustment of Entergy Gulf
States' Texas jurisdiction deferred fuel balance of $11.5 million as a
result of the fuel reconciliation settlement with the PUCT in the first
quarter of 2000.
These increases were partially offset for the nine months ended
September 30, 2000 by a $23.5 million adjustment to the Entergy Arkansas
deferred fuel balance for deferred fuel costs that Entergy Arkansas
expects to recover in the future.
Other operation and maintenance
Other operation and maintenance expenses increased $63.6 million for
the three months ended September 30, 2000 primarily due to:
o increased property insurance expenses of $10.5 million primarily due
to changes in storm damage reserve amortization at Entergy Arkansas
and Entergy Mississippi in accordance with regulatory treatment;
o an increase of $16.9 million in maintenance expense primarily at
Entergy Arkansas and Entergy Louisiana;
o an increase of $6.9 million due to an increase in legal and contract
work for the transition to retail open access at Entergy Arkansas and
Entergy Gulf States;
o increased nuclear expenses of $16.6 million primarily from increased
maintenance outages and the replacement of steam generators at
ANO 2; and
o increased customer service expenses primarily related to spending on
vegetation management.
Other operation and maintenance expenses increased $84.0 million for
the nine months ended September 30, 2000 primarily due to:
o increased property insurance expenses of $19.1 million primarily due
to changes in storm damage reserve amortization at Entergy Arkansas,
Entergy Louisiana, and Entergy Mississippi in accordance with
regulatory treatment;
o increased customer service expenses of $18.5 million primarily
related to spending on vegetation management at Entergy Arkansas,
Entergy Gulf States and Entergy Louisiana;
o an increase of $23.6 million in maintenance expenses primarily at
Entergy Arkansas, Entergy Louisiana and Entergy Mississippi;
o increased nuclear expenses of $17.0 million primarily from increased
maintenance outages and the replacement of steam generators at
ANO 2; and
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
o an increase of $12.1 million due to an increase in legal and
contract work for the transition to retail open access at Entergy
Arkansas and Entergy Gulf States.
The increase for the nine months ended was partially offset by
the following:
o a $9.5 million larger nuclear insurance refund in 2000 compared to
1999; and
o a decrease in injury and damages claims of $8.6 million.
Depreciation and amortization
Depreciation and amortization increased $27.0 million and $24.6
million for the three and nine months ended September 30, 2000,
respectively, primarily due to:
o the review of plant-in-service dates for consistency with regulatory
treatment reducing depreciation expense by $17.7 million in August
1999;
o net capital additions primarily at Entergy Gulf States, Entergy
Arkansas, Entergy Louisiana and Entergy Mississippi; and
o higher depreciation associated with the sale and leaseback of Grand
Gulf 1.
Other regulatory charges - net
Other regulatory charges increased $18.8 million and $17.3 million
for the three and nine months ended September 30, 2000, respectively,
primarily due to a decrease in the deferral of Grand Gulf 1 expenses at
Entergy Mississippi associated with the System Energy rate increase.
Other regulatory charges also increased for the three months ended
September 30, 2000 due to the $17.5 million accrual of estimated excess
earnings for 2000 to the transition cost account at Entergy Arkansas.
Amortization of rate deferrals
Amortization of rate deferrals decreased $82.1 million for the nine
months ended September 30, 2000 primarily due to the large reduction in
the rate deferral balance in 1999 at Entergy Gulf States resulting from
the PUCT's approval in June 1999 of the Texas rate settlement.
Other
Interest charges
Interest charges decreased $21.0 million for the nine months ended
September 30, 2000 primarily due to an adjustment in 1999 at System
Energy to the interest recorded for the potential refund to customers of
its proposed rate increase pending at FERC. System Energy's proposed
rate increase is discussed in Note 2 to the financial statements.
Competitive Businesses
Revenues and Sales
Competitive business revenues decreased approximately $173.7 million
for the nine months ended September 30, 2000. The decrease was primarily
due to a decrease in revenue from the power marketing and trading
business resulting from decreased electricity and gas trading volumes.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Partially offsetting the decrease in 2000 was the increase in
revenues for the non-utility nuclear business. For the three and nine
months ended September 30, 2000, the non-utility nuclear business had
increased revenues of $11.3 million and $131.6 million, respectively,
primarily from the operation of Pilgrim, which was purchased in July
1999.
Although revenues for the power marketing and trading business
decreased, the power marketing and trading business had an increase in
net income of $24.3 million for the nine months ended September 30, 2000
primarily due to:
o decreased purchased power expenses as discussed below;
o improved trading performance in electricity
o increased long-term marketing of electricity; and
o trading gains in natural gas in the current year compared to trading
losses in the prior year due to natural gas prices reaching record
levels.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses decreased $7.4 million and $327.4
million for the three and nine months ended September 30, 2000,
respectively. The decrease is primarily attributable to decreased
electricity and gas trading volumes from the power marketing and trading
business resulting in decreases in fuel and purchased power expenses of
$30.4 million and $374.8 million for the three and nine months ended
September 30, 2000, respectively. The following partially offset the
decreases from the power marketing and trading business:
o increased purchases by the global power development business to meet
contractual demands; and
o increased purchases by the non-utility nuclear business primarily
due to the ownership of Pilgrim for all of 2000 compared with only
three months during the comparable period in 1999.
Other operation and maintenance
Other operation and maintenance expenses increased $23.4 million and
$51.8 million for the three and nine months ended September 30, 2000,
respectively, primarily due to the operation of Pilgrim, partially offset
by a decrease in the elimination of mark-to-market profits on
intercompany power transactions.
Other
Other income
Other income increased $25.7 million and $42.9 million for the three
and nine months ended September 30, 2000, respectively, primarily due to
the following:
o liquidated damages received from the Saltend contractor as compensation
for lost operating margin from the Saltend plant due to construction
delays of $22.2 million ($15.6 million net of tax) and $55.1 million
($38.6 million net of tax) for the three and nine months ended,
respectively;
o an increase of $17.1 million in interest and dividend income for the
nine months ended September 30, 2000; and
o a $20.5 million ($13.3 million net of tax) gain in June 2000 on the
sale of the global power development business' investment in the
Freestone project located in Fairfield, Texas.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Partially offsetting these increases were the following 1999
transactions:
o a $26.7 million ($17 million net of tax) gain on the sale of Entergy
Power Edesur Holdings in June 1999;
o a $12.9 million ($8 million net of tax) gain on sale of the Entergy
Hyperion Telecommunications in June 1999;
o a $12.5 million ($.6 million net of tax) gain on the sale of Entergy
Security, Inc. in January 1999; and
o a $7.6 million ($4.9 million net of tax) favorable adjustment to the
final sale price of CitiPower in January 1999.
Interest charges
Other interest charges increased $9.8 million and $26.3 million for
the three and nine months ended September 30, 2000, respectively,
primarily due to:
o the accretion of the decommissioning liability associated with
Pilgrim of $15 million; and
o increased interest expense of $11.8 million related to borrowings on
Entergy Corporation's short-term credit facility during the nine
months ended September 30, 2000.
Income Taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 40.4% and 41.6%, respectively. The effective
income tax rates for the nine months ended September 30, 2000 and 1999
were 40.0% and 37.2%, respectively. The increase for the nine months
ended was primarily due to the recognition in 1999 of deferred tax
benefits related to the expected utilization of foreign tax credits
resulting in lower income taxes.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $2,385,087 $2,019,513 $5,402,657 $4,871,232
Natural gas 21,815 18,441 96,107 78,321
Steam products - - - 15,550
Competitive businesses 1,024,653 1,026,581 1,882,071 2,055,758
---------- ---------- ---------- ----------
TOTAL 3,431,555 3,064,535 7,380,835 7,020,861
---------- ---------- ---------- ----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 794,782 584,211 1,756,972 1,478,055
Purchased power 1,158,145 1,139,855 2,030,210 2,190,481
Nuclear refueling outage expenses 18,439 19,594 53,625 56,414
Other operation and maintenance 504,379 417,339 1,332,012 1,195,677
Decommissioning 11,505 11,572 28,611 35,004
Taxes other than income taxes 103,188 93,028 266,346 259,149
Depreciation and amortization 188,967 161,616 545,991 523,165
Other regulatory charges - net 47,816 29,003 27,311 10,033
Amortization of rate deferrals 10,497 10,722 25,776 107,902
---------- ---------- ---------- ----------
TOTAL 2,837,718 2,466,940 6,066,854 5,855,880
---------- ---------- ---------- ----------
OPERATING INCOME 593,837 597,595 1,313,981 1,164,981
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 9,163 7,877 24,898 20,636
Gain (loss) on sale of assets (284) 587 21,291 61,888
Miscellaneous - net 53,873 29,077 156,505 89,093
---------- ---------- ---------- ----------
TOTAL 62,752 37,541 202,694 171,617
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 121,464 116,615 353,585 359,310
Other interest - net 22,576 12,921 66,227 58,404
Distributions on preferred securities of subsidiary 4,709 4,709 14,128 14,128
Allowance for borrowed funds used during construction (6,776) (6,064) (18,753) (16,469)
---------- ---------- ---------- ----------
TOTAL 141,973 128,181 415,187 415,373
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 514,616 506,955 1,101,488 921,225
Income taxes 207,927 210,797 440,616 342,403
---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME 306,689 296,158 660,872 578,822
Preferred dividend requirements and other 6,755 9,939 24,886 30,645
---------- ---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $299,934 $286,219 $635,986 $548,177
========== ========== ========== ==========
Earnings per average common share:
Basic $1.35 $1.16 $2.78 $2.22
Diluted $1.34 $1.16 $2.77 $2.22
Dividends declared per common share $0.30 $0.30 $0.90 $0.90
Average number of common shares outstanding:
Basic 222,159,091 246,253,929 228,930,171 246,541,754
Diluted 224,352,165 246,389,119 230,034,859 246,770,002
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $660,872 $578,822
Noncash items included in net income:
Amortization of rate deferrals 25,776 107,902
Reserve for regulatory adjustments (36,756) (13,156)
Other regulatory charges - net 27,311 10,033
Depreciation, amortization, and decommissioning 574,602 558,169
Deferred income taxes and investment tax credits (8,074) (180,764)
Allowance for equity funds used during construction (24,898) (20,636)
Gain on sale of assets - net (21,291) (61,888)
Changes in working capital:
Receivables (538,840) (383,339)
Fuel inventory (26,660) (28,551)
Accounts payable 270,152 244,784
Taxes accrued 331,509 391,609
Interest accrued 24,319 (39,348)
Deferred fuel (298,340) (169,347)
Other working capital accounts 85,145 1,121
Provision for estimated losses and reserves (8,844) (31,995)
Changes in other regulatory assets (131) (33,766)
Other 138,580 79,082
---------- ----------
Net cash flow provided by operating activities 1,174,432 1,008,732
---------- ----------
INVESTING ACTIVITIES
Construction/capital expenditures (1,112,075) (792,348)
Allowance for equity funds used during construction 24,898 20,636
Nuclear fuel purchases (100,367) (114,764)
Proceeds from sale/leaseback of nuclear fuel 96,412 108,938
Proceeds from sale of businesses 61,519 351,082
Investment in other non-regulated/non-utility properties (184,339) (80,864)
Proceeds from other temporary investments 299,455 956,356
Purchase of other temporary investments - (468,653)
Decommissioning trust contributions and realized change in trust assets (44,799) (45,847)
Other 5,149 7,908
---------- ----------
Net cash flow used in investing activities (954,147) (57,556)
---------- ----------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 934,479 783,922
Common stock 14,810 13,390
Retirement of long-term debt (145,011) (847,925)
Repurchase of common stock (500,644) (129,160)
Redemption of preferred and preference stock (156,260) (77,958)
Changes in short-term borrowings - net (120,000) (285,500)
Dividends paid:
Common stock (204,660) (218,042)
Preferred stock (23,487) (31,340)
---------- ----------
Net cash flow used in financing activities (200,773) (792,613)
---------- ----------
Effect of exchange rates on cash and cash equivalents (142) 1,340
---------- ----------
Net increase in cash and cash equivalents 19,370 159,903
Cash and cash equivalents at beginning of period 1,213,719 1,184,495
---------- ----------
Cash and cash equivalents at end of period $1,233,089 $1,344,398
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $382,313 $447,054
Income taxes $146,664 $155,426
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $38,837 $22,916
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $111,255 $108,198
Temporary cash investments - at cost,
which approximates market 1,120,292 1,105,521
Special deposits 1,542 -
----------- -----------
Total cash and cash equivalents 1,233,089 1,213,719
----------- -----------
Other temporary investments - at cost,
which approximates market 21,897 321,351
Notes Receivable 4,166 2,161
Accounts receivable:
Customer 543,708 290,331
Allowance for doubtful accounts (9,007) (9,507)
Other 373,228 207,898
Accrued unbilled revenues 433,784 298,616
----------- -----------
Total receivables 1,341,713 787,338
----------- -----------
Deferred fuel costs 539,000 240,661
Fuel inventory - at average cost 121,079 94,419
Materials and supplies - at average cost 362,807 392,403
Rate deferrals 19,797 30,394
Deferred nuclear refueling outage costs 28,621 58,119
Prepayments and other 77,285 78,567
----------- -----------
TOTAL 3,749,454 3,219,132
----------- -----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 214 214
Decommissioning trust funds 1,354,785 1,246,023
Non-utility property - at cost (less accumulated depreciation) 330,699 317,165
Non-regulated investments 300,691 198,003
Other - at cost (less accumulated depreciation) 22,368 16,714
----------- -----------
TOTAL 2,008,757 1,778,119
----------- -----------
UTILITY PLANT
Electric 23,672,355 23,163,161
Plant acquisition adjustment 394,731 406,929
Property under capital lease 768,135 768,500
Natural gas 190,895 186,041
Construction work in progress 1,938,654 1,500,617
Nuclear fuel under capital lease 271,021 286,476
Nuclear fuel 81,662 87,693
----------- -----------
TOTAL UTILITY PLANT 27,317,453 26,399,417
Less - accumulated depreciation and amortization 11,403,267 10,898,661
----------- -----------
UTILITY PLANT - NET 15,914,186 15,500,756
----------- -----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 1,402 16,581
SFAS 109 regulatory asset - net 1,002,350 1,068,006
Unamortized loss on reacquired debt 188,025 198,631
Other regulatory assets 703,639 637,870
Long-term receivables 30,281 32,260
Other 429,009 533,732
----------- -----------
TOTAL 2,354,706 2,487,080
----------- -----------
TOTAL ASSETS $24,027,103 $22,985,087
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $406,858 $194,555
Notes payable 1,036 120,715
Accounts payable 866,587 707,678
Customer deposits 168,163 161,909
Taxes accrued 773,641 445,677
Accumulated deferred income taxes 159,730 72,640
Nuclear refueling outage costs 6,854 11,216
Interest accrued 155,748 129,028
Co-owner advances 5,121 7,018
Obligations under capital leases 176,224 178,247
Other 213,668 125,749
----------- -----------
TOTAL 2,933,630 2,154,432
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,188,681 3,310,340
Accumulated deferred investment tax credits 500,229 519,910
Obligations under capital leases 181,825 205,464
FERC settlement - refund obligation 32,471 37,337
Other regulatory liabilities 252,173 199,139
Decommissioning 737,269 703,453
Transition to competition 201,797 157,034
Regulatory reserves 341,551 378,307
Accumulated provisions 292,294 279,425
Other 566,489 535,156
----------- -----------
TOTAL 6,294,779 6,325,565
----------- -----------
Long-term debt 7,106,769 6,612,583
Preferred stock with sinking fund 69,650 69,650
Preference stock - 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 331,240 338,455
Common stock, $.01 par value, authorized 500,000,000
shares; issued 247,172,239 shares in 2000 and
247,082,345 shares in 1999 2,472 2,471
Paid-in capital 4,636,811 4,636,163
Retained earnings 3,216,395 2,786,467
Accumulated other comprehensive income:
Cumulative foreign currency translation adjustment (71,081) (68,782)
Net unrealized investment gains (losses) 6,588 (5,023)
Less - treasury stock, at cost (27,040,581 shares in 2000 and
8,045,434 shares in 1999) 715,150 231,894
----------- -----------
TOTAL 7,407,275 7,457,857
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,027,103 $22,985,087
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended
2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,982,495 $2,640,373
Add - Earnings applicable to common stock 299,934 $299,934 286,219 $286,219
Deduct:
Dividends declared on common stock 66,835 74,057
Capital stock and other expenses (801) (183)
---------- ----------
Total 66,034 73,874
---------- ----------
Retained Earnings - End of period $3,216,395 $2,852,718
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of period ($76,086) ($47,697)
Foreign currency translation adjustments (1,270) (1,270) (16,994) (16,994)
Net unrealized investment gains 12,863 12,863 - -
---------- ----------
Balance at end of period ($64,493) ($64,691)
========== -------- ========== --------
Comprehensive Income $311,527 $269,225
======== ========
Nine Months Ended
2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $2,786,467 $2,526,888
Add - Earnings applicable to common stock 635,986 $635,986 548,177 $548,177
Deduct:
Dividends declared on common stock 206,886 222,077
Capital stock and other expenses (828) 270
---------- ----------
Total 206,058 222,347
---------- ----------
Retained Earnings - End of period $3,216,395 $2,852,718
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance at beginning of period ($73,805) ($46,739)
Foreign currency translation adjustments (2,299) (2,299) (17,952) (17,952)
Net unrealized investment gains 11,611 11,611 - -
---------- ----------
Balance at end of period ($64,493) ($64,691)
========== -------- ========== --------
Comprehensive Income $645,298 $530,225
======== ========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $940.6 $815.3 $125.3 15
Commercial 518.0 450.8 67.2 15
Industrial 598.9 513.9 85.0 17
Governmental 54.4 46.6 7.8 17
-------- -------- ------
Total retail 2,111.9 1,826.6 285.3 16
Sales for resale 115.4 151.7 (36.3) (24)
Other 157.8 41.2 116.6 283
-------- -------- ------
Total $2,385.1 $2,019.5 $365.6 18
======== ======== ======
Billed Electric Energy
Sales (GWH):
Residential 11,573 11,007 566 5
Commercial 7,578 7,227 351 5
Industrial 11,248 11,297 (49) -
Governmental 744 720 24 3
-------- -------- ------
Total retail 31,143 30,251 892 3
Sales for resale 2,290 3,087 (797) (26)
-------- -------- ------
Total 33,433 33,338 95 -
======== ======== ======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $1,933.7 $1,745.2 $188.5 11
Commercial 1,252.5 1,125.9 126.6 11
Industrial 1,549.4 1,370.1 179.3 13
Governmental 134.5 120.9 13.6 11
-------- -------- ------
Total retail 4,870.1 4,362.1 508.0 12
Sales for resale 291.5 315.6 (24.1) (8)
Other 241.0 193.5 47.5 25
-------- -------- ------
Total $5,402.6 $4,871.2 $531.4 11
======== ======== ======
Billed Electric Energy
Sales (GWH):
Residential 24,943 24,274 669 3
Commercial 18,738 18,137 601 3
Industrial 32,886 32,340 546 2
Governmental 1,966 1,932 34 2
-------- -------- ------
Total retail 78,533 76,683 1,850 2
Sales for resale 6,880 7,391 (511) (7)
-------- -------- ------
Total 85,413 84,074 1,339 2
======== ======== ======
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30, 2000
compared to the three months ended September 30, 1999 primarily due to
increased operations and maintenance expenses and an accrual to the
transition cost account, partially offset by increased electric operating
revenues.
Net income increased for the nine months ended September 30, 2000
compared to the nine months ended September 30, 1999 primarily due to
increased electric operating revenues, partially offset by increased
operation and maintenance expenses and an accrual to the transition cost
account.
Revenues and Sales
The changes in electric operating revenues for the three and nine
months ended September 30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($3.7) ($1.4)
Rate riders (6.8) (18.9)
Fuel cost recovery 22.5 44.2
Sales volume/weather 12.2 15.4
Other revenue (including unbilled) 19.3 46.3
Sales for resale 15.9 69.3
----- ------
Total $59.4 $154.9
===== ======
Rate riders
Rate rider revenues have no material effect on net income because
specific incurred expenses offset them.
Rate rider revenues decreased for the three and nine months ended
September 30, 2000 as a result of the decreased ANO Decommissioning and
Grand Gulf rate riders, both of which became effective in January 2000.
The ANO Decommissioning rider allows Entergy Arkansas to recover the
decommissioning costs associated with ANO 1 and 2. The Grand Gulf rate
rider allows Entergy Arkansas to recover its recoverable share of
operating costs for Grand Gulf 1.
Fuel cost recovery
Entergy Arkansas is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates that are
recorded as fuel cost recovery revenues. The difference between revenues
collected and current fuel and purchased power costs is recorded as
deferred fuel costs on Entergy Arkansas' financial statements such that
these costs generally have no net effect on earnings.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 primarily due to an increase in the energy cost
recovery rider (ECR) in April 2000. The increase in the ECR allows
Entergy Arkansas to recover previously deferred fuel expenses. The
increase for the nine months ended was also affected by an increase in
the ECR in April 1999 that affected first quarter 2000 revenues.
Sales volume/weather
Sales volume increased for the three and nine months ended
September 30, 2000 primarily due to increased usage by industrial,
commercial, and residential customers, as well as the effect of more
favorable weather on the residential and commercial sectors.
Other revenue (including unbilled)
Other revenue increased for the three and nine months ended
September 30, 2000 primarily due to the effect of a $13.4 million
adjustment to third quarter 1999 unbilled revenues that excluded fuel
recovery and rate rider revenues from the unbilled balance in accordance
with regulatory treatment. Unbilled revenues also increased due to
greater unbilled volume and the addition of unbilled revenue for
wholesale customers to the unbilled balance.
Sales for resale
Sales for resale revenue increased for the three and nine months
ended September 30, 2000 primarily due to an increase in sales revenue
from associated companies combined with an increase in the market price
of electricity.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three and nine
months ended September 30, 2000 primarily due to higher market prices for
natural gas as well as an increase in the market price of purchased power
and increased purchased power volume. The increased purchased power
volume was primarily due to increased demand for electricity and was an
offset to decreased nuclear generation due to maintenance, inspection,
and refueling outages during the year.
The increased fuel and purchased power expenses for the nine months
ended September 30, 2000 were partially offset by a $23.5 million
adjustment to the deferred fuel balance as a result of the 1999 and 2000
ECR filings. This adjustment reflects deferred fuel costs that Entergy
Arkansas expects to recover in the future.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended September 30, 2000 primarily due to:
o increased reserves of $4.7 million for property damage and $1.9
million for environmental expenses;
o increased nuclear expenses totaling $11.3 million related to
maintenance and inspection outages and the steam generator
replacement at ANO 2; and
o an increase in spending of $4.0 million on vegetation management.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2000 primarily due to:
o an increase in spending of $8.5. million for vegetation management;
o an increase in spending of $7.9 million for outside services
employed related to legal and contract services for transition work;
o increased reserves of $4.6 million for property damage and $2.9
million for environmental expenses;
o increased nuclear expenses totaling $13.8. million related to
maintenance and inspection outages and the steam generator
replacement at ANO 2; and
o the capitalization of $1.9 million associated with return-to-service
projects for certain fossil plants in June 1999.
The increase for the nine months ended was partially offset by a $4.1
million larger nuclear insurance refund in 2000 compared to 1999.
Decommissioning
Decommissioning expense decreased for the nine months ended
September 30, 2000 primarily due to a true-up of the decommissioning
liability in June 2000 for previous over-accruals.
Depreciation and amortization
Depreciation and amortization expenses increased for the three and
nine months ended September 30, 2000 primarily due to a review of plant-
in-service dates for consistency with regulatory treatment reducing
depreciation expense by $3.4 million in August 1999, as well as net
capital additions.
Other regulatory charges (credits)
Other regulatory charges increased for the three months ended
September 30, 2000 primarily due to the $17.5 million accrual of
estimated excess earnings into the transition cost account for 2000.
This increase was partially offset by a smaller over-recovery of Grand
Gulf 1 costs in the third quarter of 2000 compared to that in the third
quarter of 1999 and by the recording of a regulatory asset for certain
transition costs expected to be recovered in a customer transition
tariff. The transition cost account is discussed in Note 2 to the
financial statements.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory credits increased slightly for the nine months
ended September 30, 2000 primarily due to an increased under-recovery of
Grand Gulf 1 costs as a result of the decreased rate rider that became
effective in January 2000 as ordered by the APSC. Other regulatory
credits also increased due to the recording of a regulatory asset for
certain transition costs expected to be recovered in a customer
transition tariff. This increase was largely offset by the accrual of
estimated excess earnings into the transition cost account for 2000.
Other
Income taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 43.2% and 41.1%, respectively. The increase in
the effective tax rates was due to a decreased tax benefit from flow-
though items in September 2000 primarily due to changes in reserve
accounts. This increase was partially offset by lower pre-tax income for
the quarter.
The effective income tax rates for the nine months ended September
30, 2000 and 1999 were 41.0% and 36.8%, respectively. The increases in
the effective tax rates were due to increased pre-tax income for the nine
months ended September 30, 2000 combined with decreased flow-through tax
benefits during those periods. These flow-through items include a tax
liability on nuclear fuel purchases for 2000 compared with a tax credit
on nuclear fuel purchases for 1999.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $548,156 $488,801 $1,342,856 $1,187,961
-------- -------- ---------- ----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 74,804 52,965 224,660 186,612
Purchased power 179,587 164,295 398,547 362,039
Nuclear refueling outage expenses 6,439 7,599 19,317 23,129
Other operation and maintenance 119,822 91,685 295,330 257,150
Decommissioning 2,595 3,277 1,882 8,054
Taxes other than income taxes 10,664 8,841 28,359 27,355
Depreciation and amortization 42,539 38,190 125,535 120,788
Other regulatory charges (credits) - net 17,789 8,379 (4,381) (3,108)
-------- -------- ---------- ----------
TOTAL 454,239 375,231 1,089,249 982,019
-------- -------- ---------- ----------
OPERATING INCOME 93,917 113,570 253,607 205,942
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 4,416 3,614 11,836 9,458
Miscellaneous - net 963 1,712 3,201 2,455
-------- -------- ---------- ----------
TOTAL 5,379 5,326 15,037 11,913
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 21,611 20,042 65,745 60,741
Other interest - net 1,915 1,569 6,323 4,658
Distributions on preferred securities of subsidiary 1,275 1,275 3,825 3,825
Allowance for borrowed funds used during construction (2,888) (2,412) (7,704) (6,290)
-------- -------- ---------- ----------
TOTAL 21,913 20,474 68,189 62,934
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 77,383 98,422 200,455 154,921
Income taxes 33,461 40,401 82,242 56,960
-------- -------- ---------- ----------
NET INCOME 43,922 58,021 118,213 97,961
Preferred dividend requirements and other 1,944 2,370 5,832 7,194
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $41,978 $55,651 $112,381 $90,767
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $118,213 $97,961
Noncash items included in net income:
Other regulatory credits - net (4,381) (3,108)
Depreciation, amortization, and decommissioning 127,417 128,842
Deferred income taxes and investment tax credits (3,908) (1,414)
Allowance for equity funds used during construction (11,836) (9,458)
Changes in working capital:
Receivables (65,411) (22,706)
Fuel inventory (1,140) (21,843)
Accounts payable (25,791) 24,874
Taxes accrued 32,794 36,285
Interest accrued 3,592 (270)
Deferred fuel costs (31,672) (7,738)
Other working capital accounts 23,207 13,941
Provision for estimated losses and reserves (396) (12,029)
Changes in other regulatory assets (4,760) (22,355)
Other 46,416 30,324
-------- --------
Net cash flow provided by operating activities 202,344 231,306
-------- --------
INVESTING ACTIVITIES
Construction expenditures (250,643) (173,416)
Allowance for equity funds used during construction 11,836 9,458
Nuclear fuel purchases (32,938) (32,497)
Proceeds from sale/leaseback of nuclear fuel 32,938 32,473
Decommissioning trust contributions and realized
change in trust assets (10,367) (12,889)
-------- --------
Net cash flow used in investing activities (249,174) (176,871)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 99,389 -
Retirement of:
Long-term debt - (39,267)
Redemption of preferred stock - (2,027)
Dividends paid:
Common stock (44,600) (78,800)
Preferred stock (3,803) (7,212)
-------- --------
Net cash flow provided by (used in) financing activities 50,986 (127,306)
-------- --------
Net increase (decrease) in cash and cash equivalents 4,156 (72,871)
Cash and cash equivalents at beginning of period 6,862 93,105
-------- --------
Cash and cash equivalents at end of period $11,018 $20,234
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $63,290 $61,143
Income taxes $46,455 $16,927
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $13,953 $13,401
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $11,018 $6,862
Accounts receivable:
Customer 128,320 73,357
Allowance for doubtful accounts (1,768) (1,768)
Associated companies 22,854 27,073
Other 3,728 5,583
Accrued unbilled revenues 70,122 53,600
---------- ----------
Total receivables 223,256 157,845
---------- ----------
Deferred fuel costs 73,292 41,620
Fuel inventory - at average cost 25,624 24,485
Materials and supplies - at average cost 79,496 85,612
Deferred nuclear refueling outage costs 16,996 28,119
Prepayments and other 7,714 6,480
---------- ----------
TOTAL 437,396 351,023
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 11,215 11,215
Decommissioning trust funds 368,331 344,011
Non-utility property - at cost (less accumulated depreciation 1,460 1,463
Other - at cost (less accumulated depreciation) 3,033 3,033
---------- ----------
TOTAL 384,039 359,722
---------- ----------
UTILITY PLANT
Electric 5,003,927 4,854,433
Property under capital lease 42,965 44,471
Construction work in progress 359,852 267,091
Nuclear fuel under capital lease 89,663 85,725
Nuclear fuel 7,403 9,449
---------- ----------
TOTAL UTILITY PLANT 5,503,810 5,261,169
Less - accumulated depreciation and amortization 2,624,996 2,489,584
---------- ----------
UTILITY PLANT - NET 2,878,814 2,771,585
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 174,224 192,344
Unamortized loss on reacquired debt 45,358 48,193
Other regulatory assets 129,839 106,959
Other 8,167 14,125
---------- ----------
TOTAL 357,588 361,621
---------- ----------
TOTAL ASSETS $4,057,837 $3,843,951
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $220 $220
Notes payable 667 667
Accounts payable:
Associated companies 49,536 81,958
Other 109,590 102,959
Customer deposits 28,737 26,320
Taxes accrued 71,326 38,532
Accumulated deferred income taxes 53,897 38,649
Interest accrued 25,969 22,378
Co-owner advances 13,944 15,338
Obligations under capital leases 55,325 55,150
Other 21,082 11,598
---------- ----------
TOTAL 430,293 393,769
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 683,630 713,622
Accumulated deferred investment tax credits 89,543 94,852
Obligations under capital leases 77,303 75,045
Transition to competition 135,736 109,933
Accumulated provisions 42,892 43,288
Other 61,704 51,080
---------- ----------
TOTAL 1,090,808 1,087,820
---------- ----------
Long-term debt 1,237,394 1,130,801
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
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 2000
and 1999 470 470
Paid-in capital 591,127 591,127
Retained earnings 531,395 463,614
---------- ----------
TOTAL 1,239,342 1,171,561
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,057,837 $3,843,951
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 209.6 $ 198.2 $ 11.4 6
Commercial 99.1 92.3 6.8 7
Industrial 106.4 100.5 5.9 6
Governmental 4.4 4.3 0.1 2
------- ------- ------
Total retail 419.5 395.3 24.2 6
Sales for resale
Associated companies 59.1 42.3 16.8 40
Non-associated companies 65.7 66.6 (0.9) (1)
Other 3.9 (15.4) 19.3 125
------- ------- ------
Total $ 548.2 $ 488.8 $ 59.4 12
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 2,424 2,317 107 5
Commercial 1,615 1,545 70 5
Industrial 2,020 1,944 76 4
Governmental 70 69 1 1
------- ------- ------
Total retail 6,129 5,875 254 4
Sales for resale
Associated companies 1,216 1,304 (88) (7)
Non-associated companies 1,341 1,607 (266) (17)
------- ------- ------
Total 8,686 8,786 (100) (1)
======= ======= ======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 439.7 $ 425.8 $ 13.9 3
Commercial 233.5 220.4 13.1 6
Industrial 264.0 251.9 12.1 5
Governmental 11.4 11.2 0.2 2
-------- -------- -------
Total retail 948.6 909.3 39.3 4
Sales for resale
Associated companies 197.6 132.6 65.0 49
Non-associated companies 156.6 152.3 4.3 3
Other 40.1 (6.2) 46.3 747
-------- -------- -------
Total $1,342.9 $1,188.0 $ 154.9 13
======== ======== =======
Billed Electric Energy
Sales (GWH):
Residential 5,276 5,182 94 2
Commercial 3,851 3,732 119 3
Industrial 5,386 5,244 142 3
Governmental 182 181 1 1
------- ------- ------
Total retail 14,695 14,339 356 2
Sales for resale
Associated companies 5,481 5,575 (94) (2)
Non-associated companies 3,832 3,723 109 3
------- ------- ------
Total 24,008 23,637 371 2
======= ======= ======
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and nine months ended September
30, 2000 compared to the three and nine months ended September 30, 1999
due to increased sales volume, other revenues, and sales for resale,
partially offset by increased other operation and maintenance expenses.
The increase for the three months ended was also partially offset by
increased depreciation and amortization expenses.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and nine
months ended September 30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($5.1) ($51.0)
Fuel cost recovery 100.4 217.0
Sales volume/weather 10.7 25.5
Other revenue (including unbilled) 16.0 21.0
Sales for resale 17.8 40.4
------ ------
Total $139.8 $252.9
====== ======
Base revenues
Base revenues decreased for the nine months ended September 30, 2000
primarily due to the reversal in 1999 of regulatory reserves associated
with the accelerated amortization of accounting order deferrals in
conjunction with the Texas rate settlement. The net income effect in
1999 was largely offset by the amortization of rate deferrals discussed
below.
These decreases were partially offset by reserves recorded in 1999
for actual and potential refunds to Louisiana and Texas retail customers.
Fuel cost recovery
Entergy Gulf States is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates that are
recorded as fuel cost recovery revenues. The difference between revenues
collected and current fuel and purchased power costs is recorded as
deferred fuel costs on Entergy Gulf States' financial statements such
that these costs generally have no net effect on earnings.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 by $21.9 million and $51.3 million,
respectively, primarily due to a higher fuel factor that became effective
in September 1999 as well as higher fuel cost recovery revenues of $95.1
million and $148.9 million, respectively, in the Louisiana jurisdiction
due to higher fuel and purchased power costs as a result of increased
market prices.
Fuel cost recovery revenues also increased for the nine months ended
September 30, 2000 primarily due to a fuel surcharge of $33.4 million
implemented in January 2000 in the Texas jurisdiction.
Sales volume/weather
Sales volume increased for the three and nine months ended September
30, 2000 primarily due to more favorable weather as well as increased
usage in both Louisiana and Texas.
Other revenue (including unbilled)
Other revenue increased for the three and nine months ended
September 30, 2000 primarily due to increased unbilled revenues as a
result of warmer weather and increased volume in 2000.
Other revenue also increased for the nine months ended September 30,
2000 due to the addition of unbilled revenue for wholesale customers to
the unbilled balance and due to the effect of a change in estimate on the
third quarter 1999 unbilled revenues. The changed estimate more closely
aligned the fuel component of unbilled revenues with regulatory
treatment.
Sales for resale
Sales for resale increased for the three and nine months ended
September 30, 2000 primarily due to increased sales from River Bend to
affiliated companies in 2000 as a result of increased nuclear generation.
Nuclear generation was down in 1999 as a result of a nuclear refueling
outage in the second quarter of 1999.
Steam operating revenues
Steam operating revenues decreased for the nine months ended
September 30, 2000 primarily due to a new lease arrangement that began in
June 1999 for the Louisiana Station generating facility. Under the terms
of this new lease, revenues and expenses are now classified as other
income rather than steam operating revenues and other operation and
maintenance expenses, respectively, which were the previous
classifications.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three months
ended September 30, 2000 primarily due to higher market prices for gas
and purchased power.
Fuel and purchased power expenses increased for the nine months
ended September 30, 2000 primarily due to:
o higher market prices for gas and purchased power; and
o an adjustment in March 2000 of $11.5 million to the Texas
jurisdiction deferred fuel balance as a result of the fuel
reconciliation settlement with the PUCT.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended September 30, 2000 primarily due to increased spending on
outside services employed related to legal and contract services for
transition work of $2.9 million, a reserve for miscellaneous accounts
receivable of $2.3 million, and increased spending of $1.0 million on
vegetation management.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2000 primarily due to increased spending on
vegetation management of $3.5 million and outside services employed
related to legal and contract services for transition work of $6.5
million.
Depreciation and amortization
Depreciation and amortization expenses increased for the three
months ended September 30, 2000 primarily due to a review of plant-in-
service dates for consistency with regulatory treatment reducing
depreciation expense by $6.7 million in August 1999, as well as
depreciation expense related to net capital additions in 2000.
Amortization of rate deferrals
Amortization of rate deferrals decreased for the nine months ended
September 30, 2000 primarily due to the large reduction in the rate
deferral balance upon the PUCT's approval in June 1999 of the Texas rate
settlement. This settlement increased amortization expense in 1999 but
was offset by increased revenues as discussed above.
Other
Income taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 38.2% and 39.1%, respectively. The effective
income tax rates for the nine months ended September 30, 2000 and 1999
were 37.0% and 42.1%, respectively. The decrease in the effective income
tax rate for the nine months ended September 30, 2000 is primarily due to
an increase in flow-through and permanent items partially offset by tax
adjustments in June 1999 for River Bend abeyed plant.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $811,265 $671,457 $1,862,171 $1,609,285
Natural gas 5,887 4,619 24,584 21,603
Steam products - - - 15,550
-------- -------- ---------- ----------
TOTAL 817,152 676,076 1,886,755 1,646,438
-------- -------- ---------- ----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 279,411 180,037 639,950 451,301
Purchased power 141,226 163,546 328,506 296,075
Nuclear refueling outage expenses 4,990 5,010 13,573 10,366
Other operation and maintenance 116,480 96,661 313,720 302,718
Decommissioning 1,568 1,362 4,705 6,152
Taxes other than income taxes 35,295 30,611 90,053 86,421
Depreciation and amortization 47,599 40,053 140,977 139,885
Other regulatory credits - net (955) (3,390) (12,746) (15,677)
Amortization of rate deferrals 1,402 1,402 4,205 85,795
-------- -------- ---------- ----------
TOTAL 627,016 515,292 1,522,943 1,363,036
-------- -------- ---------- ----------
OPERATING INCOME 190,136 160,784 363,812 283,402
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 2,189 2,424 5,675 4,741
Gain on sale of assets 549 602 1,595 1,512
Miscellaneous - net 4,910 5,909 8,320 12,462
-------- -------- ---------- ----------
TOTAL 7,648 8,935 15,590 18,715
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 39,036 34,117 106,225 103,645
Other interest - net 1,415 3,112 4,524 4,683
Distributions on preferred securities of subsidiary 1,859 1,859 5,578 5,578
Allowance for borrowed funds used during construction (1,973) (2,170) (5,185) (4,305)
-------- -------- ---------- ----------
TOTAL 40,337 36,918 111,142 109,601
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 157,447 132,801 268,260 192,516
Income taxes 60,122 51,880 99,363 81,136
-------- -------- ---------- ----------
NET INCOME 97,325 80,921 168,897 111,380
Preferred dividend requirements and other 1,349 4,108 8,668 12,774
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $95,976 $76,813 $160,229 $98,606
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $168,897 $111,380
Noncash items included in net income:
Amortization of rate deferrals 4,205 85,795
Reserve for regulatory adjustments (82,637) (107,901)
Other regulatory credits - net (12,746) (15,677)
Depreciation, amortization, and decommissioning 145,682 146,037
Deferred income taxes and investment tax credits 19,866 18,482
Allowance for equity funds used during construction (5,675) (4,741)
Gain on sale of assets (1,595) (1,512)
Changes in working capital:
Receivables (129,735) (72,852)
Fuel inventory (2,515) (12,196)
Accounts payable 4,179 16,240
Taxes accrued 95,878 81,302
Interest accrued 20,172 7,396
Deferred fuel costs (81,756) (40,647)
Other working capital accounts 12,769 (13,133)
Provision for estimated losses and reserves (3,195) 5,529
Changes in other regulatory assets (27,392) 1,217
Other 37,427 10,286
-------- --------
Net cash flow provided by operating activities 161,829 215,005
-------- --------
INVESTING ACTIVITIES
Construction expenditures (195,304) (122,538)
Allowance for equity funds used during construction 5,675 4,741
Nuclear fuel purchases (34,707) (51,980)
Proceeds from sale/leaseback of nuclear fuel 34,150 43,009
Decommissioning trust contributions and realized
change in trust assets (8,364) (8,162)
-------- --------
Net cash flow used in investing activities (198,550) (134,930)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 298,855 122,999
Retirement of:
Long-term debt - (47,920)
Redemption of preferred and preference stock (156,260) (25,931)
Dividends paid:
Common stock (73,400) (88,000)
Preferred stock (9,540) (12,873)
-------- --------
Net cash flow provided by (used in) financing activities 59,655 (51,725)
-------- --------
Net increase in cash and cash equivalents 22,934 28,350
Cash and cash equivalents at beginning of period 32,312 115,736
-------- --------
Cash and cash equivalents at end of period $55,246 $144,086
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $91,865 $101,963
Income taxes $7,659 $3,114
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $15,500 $8,540
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $10,932 $8,607
Temporary cash investments - at cost,
which approximates market 44,314 23,705
---------- ----------
Total cash and cash equivalents 55,246 32,312
---------- ----------
Accounts receivable:
Customer 131,755 73,215
Allowance for doubtful accounts (1,828) (1,828)
Associated companies 10,382 1,706
Other 24,885 15,030
Accrued unbilled revenues 143,061 90,396
---------- ----------
Total receivables 308,255 178,519
---------- ----------
Deferred fuel costs 216,214 134,458
Fuel inventory - at average cost 40,786 38,271
Materials and supplies - at average cost 101,696 112,585
Rate deferrals 5,606 5,606
Prepayments and other 26,249 21,750
---------- ----------
TOTAL 754,052 523,501
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 258,541 234,677
Non-utility property - at cost (less accumulated depreciation) 193,322 187,759
Other - at cost (less accumulated depreciation) 14,895 13,681
---------- ----------
TOTAL 466,758 436,117
---------- ----------
UTILITY PLANT
Electric 7,490,461 7,365,407
Property under capital lease 40,872 46,210
Natural gas 54,886 52,473
Construction work in progress 195,221 145,492
Nuclear fuel under capital lease 65,292 70,801
---------- ----------
TOTAL UTILITY PLANT 7,846,732 7,680,383
Less - accumulated depreciation and amortization 3,686,284 3,551,595
---------- ----------
UTILITY PLANT - NET 4,160,448 4,128,788
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals 1,402 5,606
SFAS 109 regulatory asset - net 391,750 385,405
Unamortized loss on reacquired debt 38,798 40,576
Other regulatory assets 161,205 140,157
Long-term receivables 30,281 32,260
Other 17,959 23,490
---------- ----------
TOTAL 641,395 627,494
---------- ----------
TOTAL ASSETS $6,022,653 $5,715,900
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $122,750 $ -
Accounts payable:
Associated companies 44,226 79,962
Other 154,358 114,444
Customer deposits 36,846 33,360
Taxes accrued 197,676 101,798
Accumulated deferred income taxes 59,770 27,960
Nuclear refueling outage costs 6,854 11,216
Interest accrued 48,743 28,570
Obligations under capital leases 52,131 51,973
Other 22,735 14,557
---------- ----------
TOTAL 746,089 463,840
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,101,255 1,098,882
Accumulated deferred investment tax credits 172,875 178,500
Obligations under capital leases 54,033 65,038
Other regulatory liabilities 1,070 2,967
Decommissioning 141,301 139,194
Transition to competition 66,061 47,101
Regulatory reserves 27,900 110,536
Accumulated provisions 66,200 69,395
Other 116,123 117,804
---------- ----------
TOTAL 1,746,818 1,829,417
---------- ----------
Long-term debt 1,809,006 1,631,581
Preferred stock with sinking fund 34,650 34,650
Preference stock - 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 85,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 44,229 51,444
Common stock, no par value, authorized 200,000,000
shares; issued and outstanding 100 shares in 2000 and in 1999 114,055 114,055
Paid-in capital 1,153,195 1,153,131
Retained earnings 289,611 202,782
---------- ----------
TOTAL 1,601,090 1,521,412
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,022,653 $5,715,900
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 237.8 $ 209.9 $ 27.9 13
Commercial 133.1 121.8 11.3 9
Industrial 221.8 197.8 24.0 12
Governmental 7.7 7.2 0.5 7
------- ------- -------
Total retail 600.4 536.7 63.7 12
Sales for resale
Associated companies 63.5 27.0 36.5 135
Non-associated companies 31.7 50.4 (18.7) (37)
Other 115.7 57.4 58.3 102
------- ------- -------
Total $ 811.3 $ 671.5 $ 139.8 21
======= ======= =======
Billed Electric Energy
Sales (GWH):
Residential 3,340 3,182 158 5
Commercial 2,290 2,175 115 5
Industrial 4,481 4,555 (74) (2)
Governmental 122 112 10 9
------- ------- -------
Total retail 10,233 10,024 209 2
Sales for resale
Associated companies 769 306 463 151
Non-associated companies 698 1,104 (406) (37)
------- ------- -------
Total 11,700 11,434 266 2
======= ======= =======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 534.7 $ 463.3 $ 71.4 15
Commercial 362.3 316.3 46.0 15
Industrial 614.5 524.3 90.2 17
Governmental 23.4 20.5 2.9 14
--------- --------- -------
Total retail 1,534.9 1,324.4 210.5 16
Sales for resale
Associated companies 81.9 31.6 50.3 159
Non-associated companies 76.5 86.4 (9.9) (11)
Other 168.9 166.9 2.0 1
--------- --------- -------
Total $ 1,862.2 $ 1,609.3 $ 252.9 16
========= ========= =======
Billed Electric Energy
Sales (GWH):
Residential 7,274 7,024 250 4
Commercial 5,795 5,558 237 4
Industrial 13,396 13,111 285 2
Governmental 336 314 22 7
--------- --------- -------
Total retail 26,801 26,007 794 3
Sales for resale
Associated companies 1,205 476 729 153
Non-associated companies 2,266 2,517 (251) (10)
--------- --------- -------
Total 30,272 29,000 1,272 4
========= ========= =======
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30, 2000
compared to the three months ended September 30, 1999 primarily due to an
increase in sales volume, partially offset by increases in provisions for
potential rate refunds, other operation and maintenance expenses, and
depreciation and amortization expenses.
Net income decreased for the nine months ended September 30, 2000
compared to the nine months ended September 30, 1999 primarily due to a
decrease in unbilled revenues and increases in provisions for potential
rate refunds, other operation and maintenance expenses, and depreciation
and amortization expenses. These decreases were partially offset by an
increase in sales volume and lower interest expense on long-term debt.
Revenues and Sales
The changes in electric operating revenues for the three and nine
months ended September 30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues ($17.5) ($46.4)
Fuel cost recovery 137.0 163.3
Sales volume/weather 10.7 17.5
Other revenue (including unbilled) 28.7 (28.3)
Sales for resale (13.7) (23.7)
------ -----
Total $145.2 $82.4
====== =====
Base revenues
Base revenues decreased for the three and nine months ended
September 30, 2000 primarily due to accruals for potential rate refunds.
The decrease also is attributable to formula rate plan reductions in the
residential, commercial, and industrial sectors.
Fuel cost recovery
Entergy Louisiana is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates that are
recorded as fuel cost recovery revenues. The difference between revenues
collected and current fuel and purchased power costs is recorded as
deferred fuel costs on Entergy Louisiana's financial statements such that
these costs generally have no net effect on earnings.
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 as a result of higher fuel and purchased power
expenses primarily due to the increased market price of natural gas.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Sales volume increased for the three and nine months ended September
30, 2000 primarily due to increased usage by residential, commercial, and
industrial customers, as well as more favorable weather in the
residential and commercial sectors.
Other revenue (including unbilled)
Other revenue increased for the three months ended September 30,
2000 primarily due to higher fuel prices and increased volume in unbilled
revenues.
Other revenue decreased for the nine months ended September 30, 2000
primarily due to the effect of a change in estimate on the third quarter
1999 unbilled revenues. The changed estimate more closely aligned the
fuel component of unbilled revenues with regulatory treatment.
Sales for resale
Sales for resale decreased for the three and nine months ended
September 30, 2000 primarily due to increased sales to retail customers
resulting in less electricity available for resale.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three and nine
months ended September 30, 2000 primarily due to an increase in the
market price of gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the three
months ended September 30, 2000 primarily due to an increase of $4.5
million in maintenance expense at certain fossil plants, and an
incentive compensation accrual of $1.7 million.
Other operation and maintenance expenses increased for the nine
months ended September 30, 2000 primarily due to:
o an increase in expenses from maintenance and planned maintenance
outages at Waterford 3 and certain fossil plants of $15 million;
o an increase in property insurance expenses of $5 million primarily
due to changes in storm damage reserves effective August 1999;
o an increase in vegetation management costs of $2.7 million;
o an increase of $1.6 million in contract work for plant protection
services at Waterford 3; and
o an increase in environmental reserves of $1.7 million.
The overall increase in other operation and maintenance expenses for the
nine months ended was partially offset by a decrease in injury and
damages claims of $3.6 million and higher nuclear insurance refunds of
$1.8 million.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Depreciation and amortization expenses
Depreciation and amortization expenses increased for the three and
nine months ended September 30, 2000 primarily due to a review of plant-
in-service dates for consistency with regulatory treatment reducing
depreciation expense by $3.4 million in August 1999, as well as
depreciation expense related to net capital additions in 2000.
Interest charges
Interest on long-term debt decreased for the nine months ended
September 30, 2000 primarily due to the refinancing and net redemption of
$77 million of long-term debt in 1999, partially offset by the issuance
of $150 million of long-term debt in May 2000.
Income taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 39.5% and 39.4%, respectively. The effective
income tax rates for the nine months ended September 30, 2000 and 1999
were 40.2% and 39.8%, respectively.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $722,175 $576,956 $1,517,063 $1,434,692
-------- -------- ---------- ----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 235,362 112,908 367,301 275,531
Purchased power 160,360 156,391 394,479 340,973
Nuclear refueling outage expenses 3,410 3,481 10,230 12,403
Other operation and maintenance 77,435 72,181 225,608 205,497
Decommissioning 2,606 2,197 7,817 6,590
Taxes other than income taxes 21,173 19,145 55,889 55,815
Depreciation and amortization 42,700 38,601 127,029 120,564
Other regulatory charges - net 240 - 720 -
-------- -------- ---------- ----------
TOTAL 543,286 404,904 1,189,073 1,017,373
-------- -------- ---------- ----------
OPERATING INCOME 178,889 172,052 327,990 417,319
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 1,373 790 3,252 3,282
Miscellaneous - net 2,641 862 3,184 1,442
-------- -------- ---------- ----------
TOTAL 4,014 1,652 6,436 4,724
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 25,418 24,728 73,360 78,472
Other interest - net 1,212 1,609 5,158 3,821
Distributions on preferred securities of subsidiary 1,575 1,575 4,725 4,725
Allowance for borrowed funds used during construction (1,046) (631) (2,914) (2,998)
-------- -------- ---------- ----------
TOTAL 27,159 27,281 80,329 84,020
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 155,744 146,423 254,097 338,023
Income taxes 61,577 57,744 102,051 134,485
-------- -------- ---------- ----------
NET INCOME 94,167 88,679 152,046 203,538
Preferred dividend requirements and other 2,378 2,378 7,135 7,427
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $91,789 $86,301 $144,911 $196,111
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $152,046 $203,538
Noncash items included in net income:
Other regulatory charges - net 720 -
Depreciation, amortization, and decommissioning 134,846 127,154
Deferred income taxes and investment tax credits (1,395) 25,141
Allowance for equity funds used during (3,252) (3,282)
construction
Changes in working capital:
Receivables (141,381) (107,103)
Accounts payable (65,280) 96,470
Taxes accrued 130,070 63,173
Interest accrued 9,015 (28,789)
Deferred fuel costs (69,348) (64,836)
Other working capital accounts 45,542 (2,438)
Provision for estimated losses and reserves 3,378 2,290
Changes in other regulatory assets 16,732 20,033
Other 2,834 (23,864)
-------- --------
Net cash flow provided by operating activities 214,527 307,487
-------- --------
INVESTING ACTIVITIES
Construction expenditures (135,442) (86,163)
Allowance for equity funds used during construction 3,252 3,282
Nuclear fuel purchases (29,317) (11,308)
Proceeds from sale/leaseback of nuclear fuel 29,317 11,308
Decommissioning trust contributions and realized
change in trust assets (8,700) (8,510)
-------- --------
Net cash flow used in investing activities (140,890) (91,391)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 148,754 188,097
Retirement of:
Long-term debt (100,000) (252,310)
Redemption of preferred stock - (50,000)
Dividends paid:
Common stock (57,800) (165,400)
Preferred stock (7,135) (8,010)
-------- --------
Net cash flow used in financing activities (16,181) (287,623)
-------- --------
Net increase (decrease) in cash and cash equivalents 57,456 (71,527)
Cash and cash equivalents at beginning of period 7,734 83,030
-------- --------
Cash and cash equivalents at end of period $65,190 $11,503
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $ 68,913 $ 111,675
Income taxes $ 9,156 $ 82,454
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $ 4,396 $ 1,987
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $12,658 $7,734
Temporary cash investments - at cost,
which approximates market 52,532 -
---------- ----------
Total cash and cash equivalents 65,190 7,734
---------- ----------
Notes Receivable 1,506 3
Accounts receivable:
Customer 152,226 79,335
Allowance for doubtful accounts (1,615) (1,615)
Associated companies 26,499 14,601
Other 17,455 10,762
Accrued unbilled revenues 156,100 106,200
---------- ----------
Total receivables 350,665 209,283
---------- ----------
Deferred fuel costs 71,510 2,161
Accumulated deferred income taxes - 12,520
Materials and supplies - at average cost 79,839 84,027
Deferred nuclear refueling outage costs 1,128 11,336
Prepayments and other 10,225 6,011
---------- ----------
TOTAL 580,063 333,075
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 14,230 14,230
Decommissioning trust funds 114,039 100,943
Non-utility property - at cost (less accumulated depreciation) 21,779 21,433
---------- ----------
TOTAL 150,048 136,606
---------- ----------
UTILITY PLANT
Electric 5,280,994 5,178,808
Property under capital lease 236,272 236,271
Construction work in progress 133,815 108,106
Nuclear fuel under capital lease 59,600 51,930
---------- ----------
TOTAL UTILITY PLANT 5,710,681 5,575,115
Less - accumulated depreciation and amortization 2,440,407 2,309,815
---------- ----------
UTILITY PLANT - NET 3,270,274 3,265,300
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 212,583 230,899
Unamortized loss on reacquired debt 34,476 35,856
Other regulatory assets 51,776 50,191
Other 12,918 17,302
---------- ----------
TOTAL 311,753 334,248
---------- ----------
TOTAL ASSETS $4,312,138 $4,069,229
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $35,088 $116,388
Accounts payable:
Associated companies 43,795 137,869
Other 119,562 90,768
Customer deposits 58,718 61,096
Taxes accrued 155,933 25,863
Accumulated deferred income taxes 5,486 -
Interest accrued 29,251 20,236
Obligations under capital leases 28,387 28,387
Other 100,556 59,737
---------- ----------
TOTAL 576,776 540,344
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 761,035 792,290
Accumulated deferred investment tax credits 118,773 123,155
Obligations under capital leases 31,213 23,543
Accumulated provisions 61,465 58,087
Other 47,350 34,564
---------- ----------
TOTAL 1,019,836 1,031,639
---------- ----------
Long-term debt 1,276,632 1,145,463
Preferred stock with sinking fund 35,000 35,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized 250,000,000
shares; issued and outstanding 165,173,180 shares in 2000
and 1999 1,088,900 1,088,900
Capital stock expense and other (2,171) (2,171)
Retained earnings 146,665 59,554
---------- ----------
TOTAL 1,333,894 1,246,783
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,312,138 $4,069,229
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 284.1 $ 228.2 $ 55.9 24
Commercial 145.9 116.3 29.6 25
Industrial 219.7 168.4 51.3 30
Governmental 11.6 9.1 2.5 27
------- ------- -------
Total retail 661.3 522.0 139.3 27
Sales for resale
Associated companies 15.0 18.4 (3.4) (18)
Non-associated companies 9.3 19.6 (10.3) (53)
Other 36.6 17.0 19.6 115
------- ------- -------
Total $ 722.2 $ 577.0 $ 145.2 25
======= ======= =======
Billed Electric Energy
Sales (GWH):
Residential 3,103 2,955 148 5
Commercial 1,650 1,568 82 5
Industrial 3,789 3,802 (13) -
Governmental 131 123 8 7
--------- --------- ------
Total retail 8,673 8,448 225 3
Sales for resale
Associated companies 152 150 2 1
Non-associated companies 122 195 (73) (37)
--------- --------- ------
Total 8,947 8,793 154 2
========= ========= ======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 546.4 $ 485.6 $ 60.8 13
Commercial 324.1 289.4 34.7 12
Industrial 533.2 463.1 70.1 15
Governmental 27.9 25.0 2.9 12
--------- --------- ------
Total retail 1,431.6 1,263.1 168.5 13
Sales for resale
Associated companies 15.7 26.3 (10.6) (40)
Non-associated companies 30.8 43.9 (13.1) (30)
Other 39.0 101.4 (62.4) (62)
--------- --------- ------
Total $ 1,517.1 $ 1,434.7 $ 82.4 6
========= ========= ======
Billed Electric Energy
Sales (GWH):
Residential 6,775 6,615 160 2
Commercial 4,094 3,986 108 3
Industrial 11,431 11,205 226 2
Governmental 362 354 8 2
--------- --------- ------
Total retail 22,662 22,160 502 2
Sales for resale
Associated companies 168 390 (222) (57)
Non-associated companies 435 672 (237) (35)
--------- --------- ------
Total 23,265 23,222 43 -
========= ========= ======
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended September 30, 2000
compared to the three months ended September 30, 1999 primarily due to
increased other operation and maintenance expenses and increased interest
and other charges.
Revenues and Sales
The changes in electric operating revenues for the three and nine
months ended September 30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base revenues $0.1 ($3.9)
Grand Gulf rate rider 4.7 6.1
Fuel cost recovery 19.0 41.3
Sales volume/weather 5.0 6.2
Other revenue (including unbilled) 2.2 19.6
Sales for resale (0.2) (17.2)
----- -----
Total $30.8 $52.1
===== =====
Rate riders
Rate rider revenues have no material effect on net income because
specific incurred expenses offset them.
Grand Gulf rate rider revenue increased for the three and nine
months ended September 30, 2000 as a result of increased recovery of
Grand Gulf capacity costs, primarily due to an increase in the amount
recovered under the Grand Gulf Accelerated Recovery Tariff (GGART). The
GGART is discussed in more detail in Note 2 to the financial statements
in the Form 10-K.
Fuel cost recovery
Entergy Mississippi is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates, recorded
as fuel cost recovery revenues. The difference between revenues
collected and current fuel and purchased power costs is recorded as
deferred fuel costs on Entergy Mississippi's financial statements such
that these costs generally have no net effect on earnings.
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 primarily due to an increase in the energy cost
recovery rider (ECR) effective January 2000. The increase in the ECR
allows Entergy Mississippi to recover previously deferred fuel expenses.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Sales volume increased for the three and nine months ended September
30, 2000 primarily due to increased usage by residential and commercial
customers, as well as more favorable weather.
Other revenue (including unbilled)
Other revenue increased for the nine months ended September 30, 2000
primarily due to the effect of favorable weather in 2000 and the effect
of a change in estimate on third quarter 1999 unbilled revenues. The
changed estimate more closely aligned the fuel component of unbilled
revenues with regulatory treatment.
Sales for resale
Sales for resale decreased for the nine months ended September 30,
2000 primarily due to a decrease in sales to associated companies as a
result of decreased oil generation due to plant outages in early 2000.
Expenses
Fuel and purchased power expenses
Fuel and purchased power expenses increased for the three months
ended September 30, 2000 primarily due to increased oil and gas prices
and an increase in generation requirements.
Fuel and purchased power expenses increased for the nine months
ended September 30, 2000 primarily due to increased oil and gas prices,
partially offset by a decrease in the price of purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the three and
nine months ended September 30, 2000 primarily due to increased plant
maintenance of $1.8 million and $5.9 million, respectively, and an
increase in property damage expenses of $4.4 million and $10.3 million,
respectively, primarily due to a change in storm damage reserve
amortization in the third quarter of 1999 in accordance with regulatory
treatment.
Depreciation and amortization
Depreciation and amortization expenses increased for the three and
nine months ended September 30, 2000 primarily due to a review of plant-
in-service dates for consistency with regulatory treatment reducing
depreciation expense by $2.4 million in August 1999, as well as net
capital additions.
Other regulatory charges (credits) - net
Other regulatory charges increased for the three months ended
September 30, 2000 primarily due to a decrease in the deferral of Grand
Gulf 1 expenses associated with the System Energy rate increase.
Other regulatory credits decreased for the nine months ended
September 30, 2000 primarily due to a decrease in the deferral of Grand
Gulf 1 expenses associated with the System Energy rate increase.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income
Other income increased for the nine months ended September 30, 2000
primarily due to an increase in AFUDC as a result of higher construction
expenditures and an increase in interest income from the deferral of
Grand Gulf 1 expenses.
Interest charges
Interest on long-term debt increased for the three and nine months
ended September 30, 2000 primarily due to the refinancing of $125 million
of long-term debt in June 1999 and $30 million of long-term debt in July
1999, reducing 1999 interest expense, combined with the issuance of $120
million of long-term debt in February 2000.
Income taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 37.2% and 35.4%, respectively. The effective
income tax rates for the nine months ended September 30, 2000 and 1999
were 35.6% and 34.8%, respectively.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $297,966 $267,159 $696,346 $644,239
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 65,656 44,842 140,986 141,617
Purchased power 111,677 111,236 283,544 259,505
Other operation and maintenance 42,390 35,355 121,093 108,268
Taxes other than income taxes 12,906 11,752 34,174 33,496
Depreciation and amortization 12,292 9,166 35,994 31,665
Other regulatory charges (credits) - net 16,750 12,290 2,262 (5,681)
-------- -------- -------- --------
TOTAL 261,671 224,641 618,053 568,870
-------- -------- -------- --------
OPERATING INCOME 36,295 42,518 78,293 75,369
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 662 325 1,912 693
Miscellaneous - net 2,246 1,724 6,656 5,215
-------- -------- -------- --------
TOTAL 2,908 2,049 8,568 5,908
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 11,012 8,113 31,026 27,135
Other interest - net 673 849 2,370 2,294
Allowance for borrowed funds used during construction (518) (330) (1,502) (1,026)
-------- -------- -------- --------
TOTAL 11,167 8,632 31,894 28,403
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 28,036 35,935 54,967 52,874
Income taxes 10,425 12,724 19,556 18,425
-------- -------- -------- --------
NET INCOME 17,611 23,211 35,411 34,449
Preferred dividend requirements and other 842 842 2,527 2,527
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $16,769 $22,369 $32,884 $31,922
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $35,411 $34,449
Noncash items included in net income:
Other regulatory charges (credits) - net 2,262 (5,681)
Depreciation and amortization 35,994 31,665
Deferred income taxes and investment tax credits 23,697 15,432
Allowance for equity funds used during construction (1,912) (693)
Loss on sale of assets 2 -
Changes in working capital:
Receivables (30,932) 10,702
Fuel inventory 705 (1,942)
Accounts payable (9,520) 31,504
Taxes accrued 18,406 51,337
Interest accrued 3,609 (1,351)
Deferred fuel costs (88,172) (37,805)
Other working capital accounts 4,021 10,428
Provision for estimated losses and reserves (699) 2,033
Changes in other regulatory assets (17,643) (39,284)
Other 20,612 2,526
-------- --------
Net cash flow provided by (used in) operating activities (4,159) 103,320
-------- --------
INVESTING ACTIVITIES
Construction expenditures (91,895) (59,151)
Allowance for equity funds used during construction 1,912 693
-------- --------
Net cash flow used in investing activities (89,983) (58,458)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 119,057 153,683
Retirement of:
Long-term debt - (163,278)
Dividends paid:
Common stock (18,000) (28,700)
Preferred stock (2,527) (2,521)
-------- --------
Net cash flow provided by (used in) financing activities 98,530 (40,816)
-------- --------
Net increase in cash and cash equivalents 4,388 4,046
Cash and cash equivalents at beginning of period 4,787 2,640
-------- --------
Cash and cash equivalents at end of period $9,175 $6,686
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $28,060 $29,386
Income taxes ($28,748) ($53,785)
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $9,175 $4,787
Accounts receivable:
Customer 62,044 35,675
Allowance for doubtful accounts (886) (886)
Associated companies 4,090 1,370
Other 134 2,391
Accrued unbilled revenues 32,700 28,600
---------- ----------
Total receivables 98,082 67,150
---------- ----------
Deferred fuel costs 136,111 47,939
Fuel inventory - at average cost 3,069 3,774
Materials and supplies - at average cost 17,805 17,068
Prepayments and other 4,981 7,114
---------- ----------
TOTAL 269,223 147,832
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,883 6,965
---------- ----------
TOTAL 12,414 12,496
---------- ----------
UTILITY PLANT
Electric 1,835,150 1,763,636
Property under capital lease 314 384
Construction work in progress 81,588 66,789
---------- ----------
TOTAL UTILITY PLANT 1,917,052 1,830,809
Less - accumulated depreciation and amortization 738,064 709,543
---------- ----------
UTILITY PLANT - NET 1,178,988 1,121,266
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 25,064 24,051
Unamortized loss on reacquired debt 15,421 16,345
Other regulatory assets 148,874 132,243
Other 5,934 5,784
---------- ----------
TOTAL 195,293 178,423
---------- ----------
TOTAL ASSETS $1,655,918 $1,460,017
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies $53,033 $84,382
Other 54,298 32,470
Customer deposits 25,857 23,303
Taxes accrued 54,373 35,968
Accumulated deferred income taxes 18,659 526
Interest accrued 13,647 10,038
Obligations under capital leases 95 95
Other 2,209 2,137
---------- ----------
TOTAL 222,171 188,919
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 307,121 298,477
Accumulated deferred investment tax credits 19,783 20,908
Obligations under capital leases 219 290
Accumulated provisions 6,675 7,374
Other 24,464 3,368
---------- ----------
TOTAL 358,262 330,417
---------- ----------
Long-term debt 584,386 464,466
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 2000 199,326 199,326
and 1999
Capital stock expense and other (59) (59)
Retained earnings 241,451 226,567
---------- ----------
TOTAL 491,099 476,215
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,655,918 $1,460,017
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 128.8 $ 114.1 $ 14.7 13
Commercial 84.4 75.3 9.1 12
Industrial 43.4 39.4 4.0 10
Governmental 7.3 6.3 1.0 16
------- ------- ------
Total retail 263.9 235.1 28.8 12
Sales for resale
Associated companies 27.9 23.3 4.6 20
Non-associated companies 7.1 11.9 (4.8) (40)
Other (0.9) (3.1) 2.2 71
------- ------- ------
Total $ 298.0 $ 267.2 $ 30.8 12
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,855 1,745 110 6
Commercial 1,349 1,290 59 5
Industrial 855 853 2 -
Governmental 112 103 9 9
------- ------- ------
Total retail 4,171 3,991 180 5
Sales for resale
Associated companies 355 362 (7) (2)
Non-associated companies 105 140 (35) (25)
------- ------- ------
Total 4,631 4,493 138 3
======= ======= ======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 268.4 $ 246.6 $ 21.8 9
Commercial 209.1 190.4 18.7 10
Industrial 120.0 112.3 7.7 7
Governmental 19.4 17.9 1.5 8
------- ------- ------
Total retail 616.9 567.2 49.7 9
Sales for resale
Associated companies 40.8 53.6 (12.8) (24)
Non-associated companies 20.8 25.2 (4.4) (18)
Other 17.8 (1.8) 19.6 1,089
------- ------- ------
Total $ 696.3 $ 644.2 $ 52.1 8
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 3,890 3,777 113 3
Commercial 3,275 3,165 110 3
Industrial 2,384 2,394 (10) -
Governmental 281 274 7 3
------- ------- ------
Total retail 9,830 9,610 220 2
Sales for resale
Associated companies 561 1,527 (966) (63)
Non-associated companies 244 342 (98) (29)
------- ------- ------
Total 10,635 11,479 (844) (7)
======= ======= ======
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30, 2000
compared to the three months ended September 30, 1999 primarily due to an
increase in sales volume.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and nine
months ended September 30, 2000 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase
(In Millions)
Base revenues $0.5 $0.5
Fuel cost recovery 26.5 38.3
Sales volume/weather 2.1 1.1
Other revenue (including unbilled) 10.1 8.9
Sales for resale (3.6) 3.2
----- -----
Total $35.6 $52.0
===== =====
Fuel cost recovery revenues
Entergy New Orleans is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates, recorded
as fuel cost recovery revenues. The difference between revenues
collected and current fuel and purchased power costs is recorded as
deferred fuel costs on Entergy New Orleans' financial statements such
that these costs generally have no net effect on earnings.
Fuel cost recovery revenues increased for the three and nine months
ended September 30, 2000 due to the increased market price of natural
gas.
Other revenue (including unbilled)
Other revenue increased for the three and nine months ended
September 30, 2000 primarily due to the effect of favorable weather and
higher fuel and purchased power costs on unbilled revenues.
Sales for resale
Sales for resale decreased for the three months ended September 30,
2000 primarily due to a decrease in volume combined with a decrease in
the average price of energy supplied for resale.
Sales for resale increased for the nine months ended September 30,
2000 primarily due to an increase in the average price of electricity
supplied for resale, partially offset by a decrease in sales volume.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas operating revenues
Gas operating revenues increased for the three and nine months ended
September 30, 2000 primarily due to the increased market price of natural
gas.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three and nine
months ended September 30, 2000 primarily due to the increased market
price of natural gas.
Taxes other than income taxes
Taxes other than income taxes increased for the three and nine
months ended September 30, 2000 primarily due to increased local
franchise taxes as a result of higher revenue due to warmer weather.
Other regulatory credits
Other regulatory credits decreased for the nine months ended
September 30, 2000 primarily due to an over-recovery of Grand Gulf 1
related costs in 2000 compared to an under-recovery in 1999 and the
amortization of Y2K cost deferrals in 2000.
Other
Income taxes
For the three months ended September 30, 2000 and 1999, the
effective income tax rates were 40.7% and 39.1%, respectively. For the
nine months ended September 30, 2000 and 1999, the effective income tax
rates were 42.2% and 39.9%, respectively.
ENTERGY NEW ORLEANS, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $184,933 $149,320 $385,730 $333,765
Natural gas 15,928 13,821 71,523 56,718
-------- -------- -------- --------
TOTAL 200,861 163,141 457,253 390,483
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 60,389 36,179 142,421 87,255
Purchased power 61,197 54,877 135,091 132,793
Other operation and maintenance 20,277 19,956 59,934 60,227
Taxes other than income taxes 14,133 11,540 32,829 29,677
Depreciation and amortization 5,796 4,867 17,306 15,795
Other regulatory credits - net (2,163) (2,221) (5,497) (8,831)
Amortization of rate deferrals 9,096 9,321 21,573 22,107
-------- -------- -------- --------
TOTAL 168,725 134,519 403,657 339,023
-------- -------- -------- --------
OPERATING INCOME 32,136 28,622 53,596 51,460
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 312 236 907 659
Miscellaneous - net 1,145 213 2,562 1,185
-------- -------- -------- --------
TOTAL 1,457 449 3,469 1,844
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 3,840 3,319 10,479 9,958
Other interest - net 349 334 1,175 988
Allowance for borrowed funds used during construction (239) (170) (684) (481)
-------- -------- -------- --------
TOTAL 3,950 3,483 10,970 10,465
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 29,643 25,588 46,095 42,839
Income taxes 12,050 10,006 19,468 17,098
-------- -------- -------- --------
NET INCOME 17,593 15,582 26,627 25,741
Preferred dividend requirements and other 241 241 724 724
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $17,352 $15,341 $25,903 $25,017
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $26,627 $25,741
Noncash items included in net income:
Amortization of rate deferrals 21,573 22,107
Other regulatory credits - net (5,497) (8,831)
Depreciation and amortization 17,306 15,795
Deferred income taxes and investment tax credits 4,390 2,094
Allowance for equity funds used during construction (907) (659)
Changes in working capital:
Receivables (56,406) (22,069)
Fuel inventory 1,895 1,194
Accounts payable 13,473 15,739
Taxes accrued 19,588 19,112
Interest accrued (2,377) (2,894)
Deferred fuel costs (27,391) (17,573)
Other working capital accounts 104 1,586
Provision for estimated losses and reserves (900) (1,678)
Changes in other regulatory assets (7,777) (9,679)
Other 6,544 7,265
-------- --------
Net cash flow provided by operating activities 10,245 47,250
-------- --------
INVESTING ACTIVITIES
Construction expenditures (29,602) (34,823)
Allowance for equity funds used during construction 907 659
-------- --------
Net cash flow used in investing activities (28,695) (34,164)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt 29,607 -
Dividends paid:
Common stock (9,500) (24,400)
Preferred stock (482) (724)
-------- --------
Net cash flow provided by (used in) financing activities 19,625 (25,124)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,175 (12,038)
Cash and cash equivalents at beginning of period 4,454 17,153
-------- --------
Cash and cash equivalents at end of period $5,629 $5,115
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $13,747 $13,569
Income taxes ($2,368) ($6,301)
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $5,629 $4,454
Accounts receivable:
Customer 69,263 28,658
Allowance for doubtful accounts (846) (846)
Associated companies 3,763 404
Other 6,685 6,225
Accrued unbilled revenues 31,802 19,820
-------- --------
Total receivables 110,667 54,261
-------- --------
Deferred fuel costs 41,874 14,483
Fuel inventory - at average cost 1,398 3,293
Materials and supplies - at average cost 9,514 10,127
Rate deferrals 14,191 24,788
Prepayments and other 4,420 2,528
-------- --------
TOTAL 187,693 113,934
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 558,094 541,525
Natural gas 136,009 133,568
Construction work in progress 39,017 29,780
-------- --------
TOTAL UTILITY PLANT 733,120 704,873
Less - accumulated depreciation and amortization 397,638 382,797
-------- --------
UTILITY PLANT - NET 335,482 322,076
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Rate deferrals - 10,974
Unamortized loss on reacquired debt 1,027 1,187
Other regulatory assets 40,816 33,039
Other 744 1,277
-------- --------
TOTAL 42,587 46,477
-------- --------
TOTAL ASSETS $569,021 $485,746
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies $29,157 $24,350
Other 36,926 28,261
Customer deposits 18,005 17,830
Taxes accrued 20,017 429
Accumulated deferred income taxes 17,939 10,863
Interest accrued 2,578 4,956
Other 6,973 5,524
-------- --------
TOTAL 131,595 92,213
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 38,888 43,878
Accumulated deferred investment tax credits 5,995 6,378
SFAS 109 regulatory liability - net 10,900 7,528
Other regulatory liabilities 695 1,753
Accumulated provisions 7,937 8,836
Other 9,255 7,733
-------- --------
TOTAL 73,670 76,106
-------- --------
Long-term debt 199,008 169,083
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 2000 and 1999 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings 74,930 58,526
-------- --------
TOTAL 164,748 148,344
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $569,021 $485,746
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 80.4 $ 65.0 $ 15.4 24
Commercial 55.4 45.2 10.2 23
Industrial 7.6 7.8 (0.2) (3)
Governmental 23.4 19.7 3.7 19
------- ------- ------
Total retail 166.8 137.7 29.1 21
Sales for resale
Associated companies 3.9 5.3 (1.4) (26)
Non-associated companies 1.7 3.9 (2.2) (56)
Other 12.5 2.4 10.1 421
------- ------- ------
Total $ 184.9 $ 149.3 $ 35.6 24
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 851 809 42 5
Commercial 676 649 27 4
Industrial 103 144 (41) (28)
Governmental 308 312 (4) (1)
------- ------- ------
Total retail 1,938 1,914 24 1
Sales for resale
Associated companies 50 83 (33) (40)
Non-associated companies 25 41 (16) (39)
------- ------- ------
Total 2,013 2,038 (25) (1)
======= ======= ======
Nine Months Ended Increase/
Description 2000 1999 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 144.6 $ 124.0 $ 20.6 17
Commercial 123.5 109.3 14.2 13
Industrial 17.7 18.6 (0.9) (5)
Governmental 52.3 46.3 6.0 13
------- ------- ------
Total retail 338.1 298.2 39.9 13
Sales for resale
Associated companies 17.5 12.0 5.5 46
Non-associated companies 6.1 8.4 (2.3) (27)
Other 24.0 15.2 8.8 58
------- ------- ------
Total $ 385.7 $ 333.8 $ 51.9 16
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,727 1,675 52 3
Commercial 1,723 1,695 28 2
Industrial 289 386 (97) (25)
Governmental 805 811 (6) (1)
------- ------- ------
Total retail 4,544 4,567 (23) (1)
Sales for resale
Associated companies 351 371 (20) (5)
Non-associated companies 104 137 (33) (24)
------- ------- ------
Total 4,999 5,075 (76) (1)
======= ======= ======
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the nine months ended September 30, 2000
compared to the nine months ended September 30, 1999 primarily due to
increased operating revenues and decreased interest charges, partially
offset by increases in the effective tax rate and depreciation expense.
Revenues
Operating revenues recover operating expenses, depreciation, and
capital costs attributable to Grand Gulf 1. Capital costs are computed
by allowing a return on System Energy's common equity funds allocable to
its net investment in Grand Gulf 1 and adding to such amount System
Energy's effective interest cost for its debt. Operating revenues
increased for the nine months ended September 30, 2000 compared to the
same period in 1999 due to additional reserves recorded in the first
quarter of 1999 for the potential refund of tariffs collected in System
Energy's pending rate case before FERC. System Energy's proposed rate
increase, which is subject to refund, is discussed in Note 2 to the
financial statements.
Expenses
Depreciation and amortization
Depreciation expense increased for the three and nine months ended
September 30, 2000 due to higher depreciation associated with the sale
and leaseback of a portion of Grand Gulf 1.
Other
Interest charges
Interest on long-term debt decreased for the three and nine months
ended September 30, 2000 as a result of the refinancing and redemption of
pollution control revenue bonds and the redemption of first mortgage
bonds in 1999 and 2000.
Other interest - net decreased for the nine months ended September
30, 2000 due to an adjustment in the first quarter of 1999 to record
interest on the potential refund of System Energy's proposed rate
increase.
Income taxes
The effective income tax rates for the three months ended September
30, 2000 and 1999 were 47.3% and 45.5%, respectively. The effective
income tax rates for the nine months ended September 30, 2000 and 1999
were 47.7% and 42.0%, respectively. The increase was primarily due to
higher income and investment tax credits used in 1999 related to Grand
Gulf Unit 2.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Three Months Ended Nine Months Ended
2000 1999 2000 1999
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $169,114 $163,801 $485,592 $463,923
-------- -------- -------- --------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel related expenses, and
gas purchased for resale 9,941 11,659 31,482 32,453
Nuclear refueling outage expenses 3,600 3,505 10,504 10,516
Other operation and maintenance 24,892 23,822 63,222 64,814
Decommissioning 4,736 4,736 14,208 14,208
Taxes other than income taxes 7,094 6,721 19,262 20,240
Depreciation and amortization 35,115 28,212 91,046 84,631
Other regulatory charges - net 16,156 13,945 46,952 43,330
-------- -------- -------- --------
TOTAL 101,534 92,600 276,676 270,192
-------- -------- -------- --------
OPERATING INCOME 67,580 71,201 208,916 193,731
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 211 489 1,317 1,802
Miscellaneous - net 5,590 4,244 14,781 12,448
-------- -------- -------- --------
TOTAL 5,801 4,733 16,098 14,250
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 20,420 26,028 67,183 77,127
Other interest - net 8,098 6,139 22,238 38,781
Allowance for borrowed funds used during construction (113) (352) (766) (1,369)
-------- -------- -------- --------
TOTAL 28,405 31,815 88,655 114,539
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 44,976 44,119 136,359 93,442
Income taxes 21,267 20,076 65,078 39,217
-------- -------- -------- --------
NET INCOME $23,709 $24,043 $71,281 $54,225
======== ======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $71,281 $54,225
Noncash items included in net income:
Reserve for regulatory adjustments 45,881 94,745
Other regulatory charges - net 46,952 43,330
Depreciation, amortization, and decommissioning 105,254 98,839
Deferred income taxes and investment tax credits (56,861) (78,247)
Allowance for equity funds used during construction (1,317) (1,802)
Changes in working capital:
Receivables 154,032 (100,766)
Accounts payable (12,045) 14,489
Taxes accrued 11,721 (14,181)
Interest accrued (9,899) (13,355)
Other working capital accounts 16,486 7,377
Provision for estimated losses and reserves (203) (268)
Changes in other regulatory assets 37,386 22,419
Other (36,423) (592)
-------- --------
Net cash flow provided by operating activities 372,245 126,213
-------- --------
INVESTING ACTIVITIES
Construction expenditures (28,148) (16,441)
Allowance for equity funds used during construction 1,317 1,802
Nuclear fuel purchases - (22,148)
Proceeds from sale/leaseback of nuclear fuel - 22,148
Decommissioning trust contributions and realized
change in trust assets (17,368) (16,286)
-------- --------
Net cash flow used in investing activities (44,199) (30,925)
-------- --------
FINANCING ACTIVITIES
Proceeds from issuance of:
Long-term debt - 101,856
Retirement of:
Long-term debt (47,947) (282,885)
Dividends paid:
Common stock (71,700) (46,200)
-------- --------
Net cash flow used in financing activities (119,647) (227,229)
-------- --------
Net increase (decrease) in cash and cash equivalents 208,399 (131,941)
Cash and cash equivalents at beginning of period 35,152 236,841
-------- --------
Cash and cash equivalents at end of period $243,551 $104,900
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $72,049 $123,049
Income taxes $104,042 $118,471
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets $4,988 ($1,012)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $191 $136
Temporary cash investments - at cost,
which approximates market 243,360 35,016
---------- ----------
Total cash and cash equivalents 243,551 35,152
---------- ----------
Accounts receivable:
Associated companies 145,556 301,287
Other 2,369 670
---------- ----------
Total receivables 147,925 301,957
---------- ----------
Materials and supplies - at average cost 51,408 61,264
Deferred nuclear refueling outage costs 10,497 18,665
Prepayments and other 3,753 2,251
---------- ----------
TOTAL 457,134 419,289
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 157,740 135,384
---------- ----------
UTILITY PLANT
Electric 3,094,367 3,060,324
Property under capital lease 444,850 434,993
Construction work in progress 20,469 58,510
Nuclear fuel under capital lease 56,466 78,020
---------- ----------
TOTAL UTILITY PLANT 3,616,152 3,631,847
Less - accumulated depreciation and amortization 1,378,970 1,312,559
---------- ----------
UTILITY PLANT - NET 2,237,182 2,319,288
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 209,630 242,834
Unamortized loss on reacquired debt 52,945 56,474
Other regulatory assets 181,728 185,910
Other 8,647 9,869
---------- ----------
TOTAL 452,950 495,087
---------- ----------
TOTAL ASSETS $3,305,006 $3,369,048
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
September 30, 2000 and December 31, 1999
(Unaudited)
2000 1999
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $181,800 $77,947
Accounts payable:
Associated companies 1,577 15,237
Other 20,085 18,470
Taxes accrued 67,104 55,383
Accumulated deferred income taxes 3,959 7,162
Interest accrued 30,100 40,000
Obligations under capital leases 38,421 38,421
Other 1,615 1,651
---------- ----------
TOTAL 344,661 254,271
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 412,591 481,945
Accumulated deferred investment tax credits 90,385 93,219
Obligations under capital leases 18,045 39,599
FERC settlement - refund obligation 32,471 37,337
Other regulatory liabilities 106,055 73,313
Decommissioning 146,871 129,503
Regulatory reserves 313,651 267,771
Accumulated provisions 1,813 2,016
Other 16,565 16,014
---------- ----------
TOTAL 1,138,447 1,140,717
---------- ----------
Long-term debt 930,835 1,082,579
SHAREHOLDER'S EQUITY
Common stock, no par value, authorized 1,000,000
shares; issued and outstanding 789,350 shares in 2000
and 1999 789,350 789,350
Retained earnings 101,713 102,131
---------- ----------
TOTAL 891,063 891,481
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,305,006 $3,369,048
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on Entergy's estimated construction expenditures (excluding
nuclear fuel), long-term debt and preferred stock maturities, and cash
sinking fund requirements.
Sales Warranties and Indemnities (Entergy Corporation)
See Note 9 to the financial statements in the Form 10-K for
information on certain warranties made by Entergy or its subsidiaries in
the Entergy London and CitiPower sales transactions.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the financial statements in the Form 10-K for
information on nuclear liability, property and replacement power
insurance, related NRC regulations, the disposal of spent nuclear fuel,
other high-level radioactive waste, and decommissioning costs associated
with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1, and Pilgrim.
System Energy was previously recovering in rates amounts sufficient
to fund $198 million (in 1989 dollars) of its Grand Gulf 1
decommissioning costs. System Energy included updated decommissioning
costs (based on a 1994 study) in its 1995 rate increase filing with FERC.
Rates requested in this proceeding were placed into effect in December
1995, subject to refund. In July 2000, FERC issued an order approving a
lower decommissioning cost than requested by System Energy. Pending
consideration of System Energy's motion for rehearing, System Energy
continues to collect decommissioning revenue at the requested level. See
Note 2 to the financial statements for more information on System
Energy's proposed rate increase proceeding at FERC.
A decommissioning cost update was prepared for Waterford 3 in 1999
and produced a revised decommissioning cost update of $481.5 million.
This cost update was filed with the LPSC in the third quarter of 2000.
Entergy Arkansas filed a request with the NRC for a 20-year life
extension for ANO 1 in February 2000. In October 2000, the APSC ordered
Entergy Arkansas to reflect 20-year license extensions in its
determination of the ANO 1 and ANO 2 decommissioning revenue requirements
for rates to be effective January 1, 2001. Entergy Arkansas will not
recover decommissioning costs in 2001 for ANO 1 and 2 based on the
assumption that the licenses will be extended and that the existing
decommissioning trust funds, together with the expected future earnings
on such funds, will meet the estimated decommissioning costs.
ANO Matters (Entergy Corporation and Entergy Arkansas)
See Note 9 to the financial statements in the Form 10-K for
information on cracks in a number of steam generator tubes at ANO 2 that
were discovered and repaired during an outage in March 1992, and the
replacement of the steam generators. ANO 2 went offline as scheduled on
September 15, 2000 to replace its two steam generators. This scheduled
outage is expected to last until mid-November 2000.
Environmental Issues
See "PART I, Item 1, Environmental Regulation, Other Environmental
Matters" in the Form 10-K for additional discussion of environmental
clean-up activity and related litigation for Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, and Entergy New Orleans.
(Entergy Arkansas)
Entergy Arkansas has received notices from the EPA and the Arkansas
Department of Environmental Quality (ADEQ) alleging that Entergy
Arkansas, along with others, may be a potentially responsible party (PRP)
for clean-up costs associated with various sites in Arkansas. As of
September 30, 2000, a remaining recorded liability of approximately $7.1
million existed related to the cleanup of the remaining sites at which
Entergy Arkansas has been designated a PRP.
(Entergy Gulf States)
Entergy Gulf States has been designated as a PRP for the cleanup of
certain hazardous waste disposal sites. Entergy Gulf States is in
periodic negotiations with the EPA and state authorities regarding the
cleanup of certain of these sites. As of September 30, 2000, a remaining
recorded liability of approximately $17.0 million existed related to the
cleanup of the remaining sites at which Entergy Gulf States has been
designated a PRP.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the Louisiana Department of Environmental Quality
(LDEQ) issued new rules for solid waste regulation, including regulation
of wastewater impoundments. Entergy Louisiana and Entergy New Orleans
have determined that certain of their power plant wastewater impoundments
were affected by these regulations and chose to upgrade or close them.
Completion of this work is awaiting LDEQ approval. LDEQ has issued
notices of deficiencies for certain of these sites, and additional
notices of deficiencies are expected. Recorded liabilities in the amounts
of $5.8 million and $0.5 million existed at September 30, 2000 for
wastewater upgrades and closures for Entergy Louisiana and Entergy New
Orleans, respectively. Management of Entergy Louisiana and Entergy New
Orleans believe these reserves are adequate based on current estimates.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the City of
New Orleans pursuant to franchise ordinances. These ordinances contain a
continuing option for the City to purchase Entergy New Orleans' electric
and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three separate
but substantially identical transactions for the sale and leaseback of
undivided interests (aggregating approximately 9.3%) in Waterford 3,
which were refinanced in 1997. Entergy Louisiana is obligated under
certain circumstances to pay amounts sufficient to permit the Owner
Participants to withdraw from these lease transactions. Additionally,
Entergy Louisiana may be required to assume the outstanding bonds issued
by the Owner Trustee under these leases to finance, in part, its
acquisition of the undivided interests in Waterford 3. See Note 10 to
the financial statements in the Form 10-K for further information.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, and Entergy Mississippi)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy Mississippi are defendants in numerous lawsuits
filed by former employees asserting that they were wrongfully terminated
and/or discriminated against on the basis of age, race, and/or sex. The
defendant companies are vigorously defending these suits and deny any
liability to the plaintiffs. However, no assurance can be given as to
the outcome of these cases.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement, System
Energy has agreed to a number of covenants relating to the maintenance of
certain capitalization and fixed charge coverage ratios. System Energy
agreed, during the term of the agreement, to maintain its equity at not
less than 33% of its adjusted capitalization (defined in the agreement to
include certain amounts not included in capitalization for financial
statement purposes). In addition, System Energy must maintain, with
respect to each fiscal quarter during the term of the agreement, a ratio
of adjusted net income to interest expense (calculated, in each case, as
specified in the agreement) of at least 1.60 times earnings. System
Energy was in compliance with the above covenants at September 30, 2000.
See Note 9 to the financial statements in the Form 10-K for further
information.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
In addition to those proceedings discussed elsewhere herein and in
the Form 10-K, Entergy and the domestic utility companies are involved in
a number of other legal proceedings and claims in the ordinary course of
their businesses. While management is unable to predict the outcome of
these other legal proceedings and claims, it is not expected that their
ultimate resolution individually or collectively will have a material
adverse effect on the results of operations, cash flows, or financial
condition of these entities.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring
Previous developments and information related to electric industry
restructuring are presented in Note 2 to the financial statements in the
Form 10-K.
Arkansas
(Entergy Corporation and Entergy Arkansas)
As discussed in Note 2 to the financial statements in the Form 10-K,
in April 1999 the Arkansas legislature enacted a law providing for
competition in the electric utility industry through retail open access
on January 1, 2002. When retail open access is achieved, the generation
operations will become a competitive business, but transmission and
distribution operations will continue to be regulated. Under the law,
the APSC may delay implementation of retail open access, but not beyond
June 30, 2003. In October 2000, Entergy joined with the APSC Staff and
several other interested parties and recommended to the APSC that retail
open access be delayed so that it begins no sooner than October 2003, and
no later than October 2005. The recommendation was made in response to a
request from the APSC, which is concerned that the current timeline is no
longer feasible. The new proposal requires legislative approval because
it extends the timeline beyond the terms of the current law. The
Arkansas Legislature convenes its next session in January 2001.
The implementation of the Arkansas retail open access law through
rulemakings and company filings is ongoing. Rulemakings associated with
energy service provider licensing rules and affiliate rules have been
completed. In June 2000, the APSC declared that billing would become a
competitive service at the beginning of retail open access. Entergy
Arkansas filed a functional, but not corporate, unbundling plan with the
APSC on August 8, 2000. The functional unbundling plan initially
establishes separate business units for distribution, generation, and a
new retail energy service provider. The plan contemplates the transfer
of transmission assets to the Transco discussed herein and in the Form 10-
K in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS." The functional unbundling plan is tentative
because the regulatory requirements to implement the retail open access
law have not been finalized, and changes to the details of the plan are
possible.
In June 2000, Entergy Arkansas filed an application to continue the
stranded cost mitigation efforts agreed upon in the 1997 settlement
agreement approved by the APSC. These mitigation efforts include the
funding of a transition cost account with excess earnings to offset
future stranded costs and the accelerated amortization of Entergy
Arkansas' share of the Grand Gulf purchased power obligation under the
Unit Power Sales Agreement. The filing included an updated stranded cost
estimate intended to support Entergy Arkansas' recommendation that the
mitigation efforts continue. The filing presents an estimated range of
stranded costs based upon the comparison of possible generation asset
market values to the generation assets' book values and contractual
obligations. The range of possible generation asset market values used
in the estimate was determined using generation asset sales in other
jurisdictions. In rebuttal testimony filed by Entergy Arkansas in
November 2000, Entergy Arkansas' stranded costs estimate was updated to a
range of $227.8 million to $1.58 billion.
Texas
(Entergy Corporation and Entergy Gulf States)
As discussed in Note 2 to the financial statements in the Form 10-K,
in June 1999 the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open access.
The law provides for retail open access by most electric utilities,
including Entergy Gulf States, on January 1, 2002. When retail open
access is achieved, the generation business and a new retail electricity
provider function will become competitive businesses, but transmission
and distribution operations will continue to be regulated. The new
retail provider function will be the primary point of contact with the
customers for most services beyond initiation of electric service and
restoration of service following outages.
In January 2000, as required by the Texas restructuring legislation,
Entergy Gulf States filed a business separation plan with the PUCT, which
was amended in June 2000. The plan provided that, by January 2002,
Entergy Gulf States would ultimately be divided into a Texas distribution
company, a Texas transmission company, a Texas generation company, a
Texas retail electricity provider, and a Louisiana company that will
encompass distribution, generation, transmission, and retail operations.
In July 2000, the PUCT issued an interim order to approve the amended
business separation plan. The plan provides that the Louisiana company
would retain the liability for all debt obligations of Entergy Gulf
States and that the property of the Texas companies would be released
from the lien of Entergy Gulf States' mortgage. Each of the Texas
companies would assume a pro-rata portion of Entergy Gulf States' debt
obligations, which assumptions would not act to release the Louisiana
company's obligations. Each of the Texas companies would also grant a
lien on properties in favor of the Louisiana company to secure its
obligations to the Louisiana company in respect of the assumed
obligations. In addition, under the plan Entergy Gulf States will
refinance or retire the Texas companies' portion of existing debt through
2004. Regulatory approvals from FERC, the SEC, and the LPSC will be
required before the business separation plan can be implemented.
Remaining business separation issues in Texas will be addressed in the
cost unbundling proceeding before the PUCT. The LPSC has opened a docket
to identify the changes in corporate structure of Entergy Gulf States,
and their potential impact on Louisiana retail ratepayers, resulting from
restructuring in Texas and Arkansas. Entergy Gulf States filed testimony
in that proceeding in August 2000. The LPSC staff filed testimony in
that proceeding in October 2000 criticizing Entergy Gulf States'
proposal, particularly the part related to the Texas portion of
generation assets being transferred to an unregulated entity. Hearings
are scheduled for February 2001.
On March 31, 2000, pursuant to the Texas restructuring legislation,
Entergy Gulf States filed cost data with the PUCT for its unbundled
business functions and proposed tariffs for its unbundled distribution
utility. In the filing, Entergy Gulf States is seeking approval for
recovery of the following, among other things:
o the unbundled distribution utility's cost of service;
o a 12% return on equity for the unbundled distribution utility; and
o a ten-year non-bypassable charge to recover estimated stranded costs
and a non-bypassable charge to recover nuclear decommissioning costs.
A procedural schedule for the case has been established, calling for a
hearing in January 2001. Management cannot predict the outcome of this
proceeding. In connection with unbundled cost filings made by all Texas
investor-owned utilities, the PUCT has opened a "generic docket" to
determine issues that may be resolved on an industry-wide basis before
the individual utility hearings begin. These issues include updating gas
prices to be used in the model established by the PUCT for estimating
stranded costs, the use of generic O&M escalation factors, and incentive
mechanisms to enhance the authorized rate of return. The PUCT has ruled
on the gas prices for estimated stranded costs and the proper use of
operation and maintenance expense escalation. Additionally, the PUCT has
converted the incentive mechanism portion of the docket into a proceeding
on the generic use of capital structures and return on equity, while
ruling against the use of generic incentive returns. In October 2000,
Entergy Gulf States filed an updated revenue requirement reflecting the
generic decisions of the PUCT to date, which reflects a slightly lower
requirement than the March 2000 filing.
New Orleans
(Entergy Corporation and Entergy New Orleans)
In October 1998, the Council established a procedural schedule to
determine if natural gas retail competition is in the public interest.
In April 1999, Entergy New Orleans filed a plan that would allow for gas
retail open access in New Orleans. The plan outlines the conditions
under which Entergy New Orleans could support gas retail open access
should the Council find it in the public interest. Hearings were held on
retail competition for gas service in November 1999. The advisors to the
Council have issued a final report that proposes various pilot programs
and finds that retail gas open access is not in the public interest at
this time. The Council accepted an offer of settlement from Entergy New
Orleans in this matter that would allow for a voluntary pilot program for
a limited number of large industrial non-jurisdictional gas customers.
Federal Regulatory Activity (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy)
In April 2000, the LPSC and the Council filed a complaint with FERC
seeking revisions to the System Agreement that they allege are necessary
to accommodate the introduction of retail competition in Texas and
Arkansas, where Entergy Gulf States and Entergy Arkansas provide utility
service, and to protect Entergy's Louisiana customers from any adverse
impact that may occur due to the introduction of such retail competition
in some jurisdictions but not others. The LPSC and the Council requested
that FERC immediately institute a proceeding to permit changes to be
adopted prior to January 1, 2002, and requested, among other things, that
FERC cap certain of the System Agreement obligations of Entergy Gulf
States, Entergy Louisiana, and Entergy New Orleans and fix these
companies' access to pool energy at the average level existing for the
three years prior to the date that retail access is initiated in Texas
and Arkansas. Alternatively, the LPSC and the Council requested that
FERC require Entergy to provide wholesale power contracts to these
companies to satisfy their energy requirements at costs no higher than
would have been incurred if retail competition were not implemented. The
LPSC and the Council requested that the relief be made available for at
least eight years after implementation of retail competition or the
withdrawal of Entergy Arkansas and Entergy Gulf States from the System
Agreement, or until retail access is implemented in Louisiana and New
Orleans. In addition, among other things, the LPSC and the Council
asserted in their complaint that:
o unless the requested relief is granted, the restructuring legislation
adopted in Texas and Arkansas, to the extent such legislation requires,
or has the effect of, altering the rights of parties under the System
Agreement, will result in violations of the interstate commerce clause,
the due process clause, and the impairment of contracts clause in the
U.S. Constitution; and
o the failure of the domestic utility companies to honor a right of
first refusal with respect to any sale of generating capacity and
associated energy under the System Agreement, and any attempt to
eliminate such a right of first refusal from the System Agreement,
would violate the Federal Power Act and constitute a breach of the
System Agreement.
In June 2000, Entergy's domestic utility companies filed proposed
amendments to the System Agreement with FERC to facilitate the
implementation of retail competition in Arkansas and Texas and to provide
for continued equalization of costs among the domestic utilities in
Louisiana and Mississippi. The amendments provide the following:
o cessation of participation in all aspects of the System Agreement,
other than those related to transmission equalization, for any
jurisdictional division of a domestic utility operating in a
jurisdiction that initiates retail open access;
o certain sections of the System Agreement will no longer apply to the
sales of generating capacity, whether through the sale of the asset or
the output thereof, by a domestic utility operating in a jurisdiction
that has established a date by which it will implement retail access;
and
o modification of the service schedule developed to track changes in
energy costs resulting from the Entergy-Gulf States Utilities merger to
include one final true-up of fuel costs upon cessation of one company's
participation in the System Agreement, after which the service schedule
will no longer be applicable for any purpose.
Entergy believes that the proceedings relating to the proposed
amendments serve as a response to the complaint by the LPSC and the
Council and anticipates that the proceedings will be consolidated. In
response to Entergy's proposal, the LPSC and the Council have requested
that FERC dismiss the proposed amendments and proceed with the complaint
proceedings. Several other parties have also intervened in the
proceeding. In the event that the proceedings relating to the proposed
amendments proceed, the LPSC and the Council have asserted that the
charges to the domestic utility companies under the Unit Power Sales
Agreement need to be reconsidered. Entergy has requested an expedited
hearing on the proposed amendments and a final decision from FERC by
October 1, 2001. A procedural schedule has been established, with the
hearing beginning in February 2001 and an initial decision scheduled by
the end of May 2001. Neither the timing, nor the ultimate outcome of
these proceedings at FERC, can be predicted at this time.
Retail Rate Proceedings
Previous developments and information related to retail rate
proceedings are presented in Note 2 to the financial statements in the
Form 10-K.
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In March 2000, Entergy Arkansas filed its annually redetermined
energy cost recovery (ECR) rate with the APSC in accordance with the
energy cost recovery rider formula. The filing reflected that an
increase was warranted to collect an under-recovery of energy costs for
1999. The increased ECR rate is effective April 2000 through March 2001.
As discussed in Note 2 to the financial statements in the Form 10-K,
Entergy Arkansas is operating under the terms of a settlement agreement
approved by the APSC in December 1997 that allows the collection of
excess earnings in a transition cost account. During 2000, Entergy
Arkansas' operating expenses reflected reserves of $21.9 million ($13.5
million net of tax) to record the 2000 accrual of excess earnings and an
adjustment of the 1999 accrual. Interest of $3.9 million ($2.4 million
net of tax) was also recorded in the transition cost account for the
first nine months of 2000.
Filings with the PUCT and Texas Cities
Rate Proceedings (Entergy Corporation and Entergy Gulf States)
In September 1999, the PUCT approved the final adjustment of the
rate refunds ordered as a result of Entergy Gulf States' November 1996
rate case. These refunds were completed in the October 1999 billing
month. Pursuant to the September 1999 order, a true-up proceeding was
initiated, which required Entergy Gulf States to refund an additional $25
million. This refund was concluded in December 1999. The PUCT approved
the final refund and concluded the proceeding in June 2000.
PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States)
As determined in the settlement agreement discussed in Note 2 to the
financial statements in the Form 10-K, Entergy Gulf States adopted a
methodology for calculating its fixed fuel factor based on the market
price of natural gas. This calculation and any necessary adjustments
occur semi-annually and will continue until December 2001.
The amounts collected under Entergy Gulf States' fixed fuel factor
through December 2001 are subject to fuel reconciliation proceedings
before the PUCT, including a fuel reconciliation case filed by Entergy
Gulf States in July 1999. In February 2000, Entergy Gulf States reached
a settlement with all but one of the parties to that proceeding. The
settlement reduces Entergy Gulf States' requested surcharge in the
reconciliation filing from $14.7 million to $2.2 million. This
settlement was approved by the PUCT in April 2000, confirming an interim
order that allowed Entergy Gulf States to begin the recovery of the
$2.2 million surcharge between April 2000 and January 2001. In addition,
Entergy Gulf States agreed to file a fuel reconciliation case by January
12, 2001 covering the period from March 1, 1999 through August 31, 2000.
The decrease in the requested surcharge was recorded in March 2000 and is
reflected in Entergy Gulf States' operating income.
In September 1999, Entergy Gulf States filed an application with the
PUCT requesting an interim fuel surcharge to collect under-recovered fuel
and purchased power expenses incurred from March 1999 through July 1999.
In December 1999, the PUCT approved the collection of $33.9 million over
a five-month period beginning January 2000. An administrative appeal of
the interim fuel surcharge was filed by certain cities in Travis County
District Court. The fuel and purchased power expenses contained in this
surcharge will be subject to future fuel reconciliation proceedings.
In September 2000, Entergy Gulf States requested an interim
surcharge to collect the under-recovered fuel and purchased power
expenses, including accrued interest, incurred from August 1999 through
July 2000. Entergy Gulf States' requests the collection of $79.0 million
over an eleven-month period beginning February 2001, and the request is
currently pending before the PUCT. The fuel and purchased power expenses
contained in this surcharge will be subject to future fuel reconciliation
proceedings.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States)
In June 2000, the LPSC approved a settlement between Entergy Gulf
States and the LPSC staff to refund $83 million, including interest,
resolving refund issues in Entergy Gulf States' second, third, fourth,
and fifth post-Merger earnings reviews by the LPSC. The refund, for
which adequate reserves were recorded, occurred over a three-month period
beginning July 2000.
In May 2000, Entergy Gulf States filed its seventh required post-
Merger earnings analysis with the LPSC. This filing will be subject to
review by the LPSC, which may result in a change in rates. Entergy Gulf
States also is proposing that the allowed return on common equity be
increased from 10.95% to 11.60%. A procedural schedule has been
established by the LPSC and hearings will begin in March 2001.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In April 1999, Entergy Louisiana submitted its fourth annual
performance-based rate plan filing for the 1998 test year. A rate
reduction of $15 million was implemented effective August 1, 1999. In
May 2000, the LPSC ordered an additional $6.4 million refund. The
refund, for which an adequate reserve has been established, occurred in
July 2000. In addition, the LPSC extended Entergy Louisiana's formula
rate plan for an additional year with the last filing to be made on April
15, 2001.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based rate plan filing for the 1999 test year. As a result
of this filing, Entergy Louisiana implemented a $24.8 million base rate
reduction in August 2000. Entergy Louisiana is proposing to increase
prospectively the allowed return on common equity from 10.5% to 11.6%,
which, if approved, would reduce the amount of the rate reduction
implemented. This filing will be subject to review by the LPSC. A
procedural schedule has not yet been established by the LPSC.
Filings with the Council
The Council held hearings in May 1999 regarding the prudence of
Entergy New Orleans' natural gas purchasing practices. Entergy New
Orleans made an offer to settle this matter in conjunction with the offer
to settle the gas retail open access issue that was accepted by the
Council. Management has provided reserves for its estimate of the
outcome of this proceeding.
Fuel Adjustment Clause Litigation
(Entergy Corporation and Entergy Louisiana)
In May 1998, a group of ratepayers filed a complaint against Entergy
Corporation, Entergy Power, and Entergy Louisiana in state court in
Orleans Parish purportedly on behalf of all Entergy Louisiana ratepayers.
The plaintiffs seek treble damages for alleged injuries arising from
alleged violations by the defendants of Louisiana's antitrust laws in
connection with the costs included in fuel filings with the LPSC and
passed through to ratepayers. Among other things, the plaintiffs allege
that Entergy Louisiana improperly introduced certain costs into the
calculation of the fuel charges, including high-cost electricity
imprudently purchased from its affiliates and high-cost gas imprudently
purchased from independent third party suppliers. In addition,
plaintiffs seek to recover interest and attorneys' fees. Exceptions were
filed by Entergy, asserting that this dispute should be litigated before
the LPSC and FERC. At the appropriate time, if necessary, Entergy will
raise its defenses to the antitrust claims. At present, the suit in
state court is stayed by stipulation of the parties.
Plaintiffs also requested that the LPSC initiate a review of Entergy
Louisiana's monthly fuel adjustment charge filings and force restitution
to ratepayers of all costs that the plaintiffs allege were improperly
included in those fuel adjustment filings. A few parties have also
intervened in the LPSC proceeding. Discovery at the LPSC has been
conducted. Direct testimony was filed with the LPSC by plaintiffs and
the intervenors in July 1999. In their testimony for the period 1989
through 1998, plaintiffs purport to quantify many of their claims in an
amount totaling $544 million, plus interest. The plaintiffs will likely
assert additional damages for the period 1974 through 1988, if the
proceeding continues. The Entergy companies filed responsive and
rebuttal testimony in September 1999. Rebuttal testimony by the
plaintiffs and intervenors was filed in November 1999.
Entergy Louisiana has reached an agreement in principle with the
LPSC staff for the settlement of the matter before the LPSC and has
executed a definitive agreement with the plaintiffs for the settlement of
the matter before the LPSC and the state court. The terms of the
settlement agreement have not as yet been agreed to by intervenors to the
LPSC proceeding, and must be approved by the LPSC and the state court.
Under the terms of the settlement agreement, Entergy Louisiana would
agree to refund to customers approximately $72 million to resolve all
claims arising out of or relating to Entergy Louisiana's fuel adjustment
clause filings from January 1, 1975 through December 31, 1999, except
with respect to purchased power and associated costs included in the fuel
adjustment clause filings for the period May 1 through September 30,
1999. Reserves were previously provided by Entergy Louisiana for the
refund. If the proposed settlement is approved, Entergy Louisiana would
also consent to future fuel cost recovery under a long-term gas contract
based on a formula that would likely result in an under-recovery of
actual costs under that contract for the remainder of its term, which
runs through 2013. The future under-recovery cannot be precisely
estimated at this time because it will depend upon factors that are not
certain, such as the price of gas and the amount of gas purchased under
the long-term contract. In recent years, Entergy Louisiana has made
purchases under that contract totaling from $91 million to $121 million
annually. Had the proposed settlement terms been applicable to such
purchases, the under-recoveries would have ranged from $4 million to $9
million per year. A fairness hearing on the settlement agreement
currently is scheduled before the ALJ on November 8 and 9, 2000.
Following the hearing, the ALJ will make a recommendation to the LPSC and
the LPSC will consider the matter at its meeting scheduled for December
2000. The settlement agreement with the plaintiffs contemplates that,
within ten days of the LPSC's approval of the settlement, plaintiffs will
seek class certification and approval of the settlement by the state
court.
Two of the intervenors, Marathon Oil Company and Louisiana Energy
Users Group, requested that the LPSC review the prudence of a contract
entered into by Entergy Louisiana to purchase energy generated by a
hydroelectric facility known as the Vidalia project through the year
2031. Note 9 to the financial statements in the Form 10-K contains
further discussions of the obligations related to the Vidalia project.
By orders entered by the LPSC in 1985 and 1990, the LPSC approved Entergy
Louisiana's entry into the Vidalia contract and Entergy Louisiana's right
to recover, through the fuel adjustment clause, the costs of power
purchased thereunder. Additionally, the wholesale electric rates under
the Vidalia power purchase contract were filed at FERC. In December
1999, the LPSC instituted a review of the following issues relating to
the Vidalia project: (i) the LPSC's jurisdiction over the Vidalia
project; (ii) Entergy Louisiana's management of the Vidalia contract,
including opportunities to restructure or otherwise reform the contract;
(iii) the appropriateness of Entergy Louisiana's recovery of 100% of the
Vidalia contract costs from ratepayers; (iv) the appropriateness of the
fuel adjustment clause as the method for recovering all or part of the
Vidalia contract costs; (v) the appropriate regulatory treatment of the
Vidalia contract in the event the LPSC approves implementation of retail
competition; and (vi) Entergy Louisiana's communication of pertinent
information to the LPSC regarding the Vidalia project and contract.
Based on its review, the LPSC will determine whether it should disallow
any of the costs of the Vidalia project included in the fuel adjustment
clause.
In March 2000, Entergy Louisiana filed testimony in this sub-docket
asserting that the prudence of the Vidalia contract already has been
approved by final orders of the LPSC and that recovery of all amounts
paid by Entergy Louisiana related to the Vidalia project pursuant to the
FERC-filed rate is appropriate. Direct testimony was filed by intervenor
Marathon Oil Company in May 2000 and by the LPSC staff and intervenor
Louisiana Energy Users Group in July 2000. In its testimony the LPSC
staff alleges that Entergy Louisiana was imprudent for not declaring to
the LPSC that the Vidalia project had become uneconomic and not
threatening to block the Vidalia project's owners' July 30, 1990 request
that the LPSC clarify the LPSC's 1985 order (approving the Entergy
Louisiana/Vidalia project power purchase agreement), unless the Vidalia
project's owners' shared with Entergy Louisiana's ratepayers some portion
of what the LPSC staff quantifies as approximately $90 million of tax
consequences available to the project. The LPSC staff's testimony does
not quantify how much of the potential tax savings Entergy Louisiana
should have demanded in exchange for not attempting to block the Vidalia
project's owners' request for clarification; however, that testimony does
suggest various alternatives by which some portion of the $90 million,
perhaps $45 million plus interest since 1990, could be returned to the
ratepayers. The direct testimony of the intervenor Louisiana Energy
Users Group alleges that Entergy Louisiana was imprudent for not
attempting to block the Vidalia project's owners' July 30, 1990 request
that the LPSC clarify the LPSC's 1985 order approving the Entergy
Louisiana/Vidalia project power purchase agreement; however, that
intervenor does not quantify the amount of damage alleged to have been
caused by this alleged imprudence. The direct testimony of the intervenor
Marathon Oil Company alleges with respect to Entergy Louisiana that
imprudent Vidalia project costs should be disallowed and that Entergy
Louisiana's customers should not be charged 100% of the Vidalia costs.
It is anticipated that hearings in this sub-docket concerning the Vidalia
contract will begin in January 2001.
(Entergy Corporation and Entergy New Orleans)
In April 1999, a group of ratepayers filed a complaint 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. The plaintiffs seek treble damages for
alleged injuries arising from the defendants' alleged violations of
Louisiana's antitrust laws in connection with certain costs passed on to
ratepayers in Entergy New Orleans' fuel adjustment filings with the
Council. In particular, plaintiffs allege that Entergy New Orleans
improperly included certain costs in the calculation of fuel charges and
that Entergy New Orleans imprudently purchased high-cost fuel from other
Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the
other defendant Entergy companies conspired to make these purchases to
the detriment of Entergy New Orleans' ratepayers and to the benefit of
Entergy's shareholders, in violation of Louisiana's antitrust laws.
Plaintiffs also seek to recover interest and attorney's fees. Exceptions
to the plaintiffs' allegations were filed by Entergy, asserting, among
other things, that jurisdiction over these issues rests with the Council
and FERC. If necessary, at the appropriate time, Entergy will also raise
its defenses to the antitrust claims. At present, the suit in state
court is stayed by stipulation of the parties.
Plaintiffs also filed this complaint with the Council in order to
initiate a review by the Council of the plantiffs' allegations and to
force restitution to ratepayers of all costs they allege were improperly
and imprudently included in the fuel adjustment filings. Discovery has
begun in the proceedings before the Council. In April 2000, testimony
was filed on behalf of the plaintiffs in this proceeding. The testimony
asserts, among other things, that Entergy New Orleans and other
defendants have engaged in fuel procurement and power purchasing
practices that could have resulted in New Orleans customers being
overcharged by more than $45 million over a period of years. However, it
is not clear precisely what periods and damages are being alleged.
Entergy intends to defend this matter vigorously, both in court and
before the Council. The ultimate outcome of the lawsuit and the Council
proceeding cannot be predicted at this time.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
In March 2000, Entergy Mississippi submitted its annual performance-
based formula rate plan filing for the 1999 test year. The filing
indicated that no change in rate levels was warranted and the current
rate levels remain in effect.
Purchased Power for Summer 2000 (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans)
The domestic utility companies filed applications with the APSC, the
LPSC, the MPSC, and the Council to approve the sale of power by Entergy
Gulf States from its unregulated, undivided 30% interest in River Bend
formerly owned by Cajun to the other domestic utility companies during
the summer of 2000. In addition, Entergy Gulf States and Entergy
Louisiana filed an application with the LPSC for authorization to
purchase capacity and electric power from third parties for the summer of
2000. The commissions and Council have approved the applications, with a
reservation of their right to review the prudence of the purchases and
the appropriate categorization of the costs as either capacity charges or
energy charges for purposes of recovery.
During its November 2000 meeting, the LPSC considered the Entergy
Gulf States and Entergy Louisiana costs. The LPSC found that the costs
were prudently incurred, but decided that approximately 34% of the costs
should be categorized as capacity charges, and therefore should be
recovered through base rates and not through the fuel adjustment clause.
The LPSC's decision will result in refunds of approximately $11.1 million
for Entergy Louisiana and approximately $3.6 million for Entergy Gulf
States. These costs categorized as capacity charges will be included in
the costs of service used to determine the base rates of those companies.
Proposed Rate Increase (Entergy Corporation, Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
As discussed in Note 2 to the financial statements in the Form 10-K,
System Energy applied to FERC in May 1995 for a $65.5 million rate
increase. The request sought changes to System Energy's rate schedule,
including increases in the revenue requirement associated with
decommissioning costs, the depreciation rate, and the rate of return on
common equity. In December 1995, System Energy implemented the $65.5
million rate increase, subject to refund, for which a portion has been
reserved.
After a hearing, FERC issued an order in July 2000 in the
proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on
equity, but modified the return to reflect changes in capital market
conditions since the ALJ's decision. FERC adjusted the rate of return to
10.58% for the period December 1995 to the date of FERC's decision, and
prospectively adjusted the rate of return to 10.94% from the date of
FERC's decision. FERC's decision also changed other aspects of System
Energy's proposed rate schedule, including the depreciation rate and
decommissioning costs and their methodology.
System Energy has provided reserves for a potential refund to the
rate level of the initial ALJ decision, including interest. Management
has analyzed the effect of FERC's decision, and concluded that a refund
to the FERC decision rate level is not expected to have a material
adverse effect on Entergy's, System Energy's, or the domestic utility
companies results of operations. System Energy has filed a request for
rehearing of FERC's order, which defers any refunds until after further
FERC action.
In August 2000, the MPSC approved Entergy Mississippi's second
revised deferral plan that provides for a one-year suspension, until
October 2001, of the recovery of the ALJ amount deferred prior to October
1998. The recovery of $11.8 million of the System Energy rate increase
began in October 1998 and was being amortized over 48 months. The amount
of System Energy's proposed rate increase in excess of this amount will
continue to be deferred until the issuance of a final order by FERC, or
October 2002, whichever occurs first. These deferred amounts, plus
carrying charges, will be amortized over a 36-month period beginning in
October 2002.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the nine months ended September 30, 2000, Entergy Corporation
repurchased 19,465,800 shares of common stock in the open market for an
aggregate purchase price of approximately $496 million. These shares
were purchased pursuant to Entergy's stock repurchase plan, to fulfill
the requirements of various stock-based compensation and benefit plans,
or under the terms of the Merger Agreement. Under the terms of the
Merger Agreement, Entergy committed to use its commercially reasonable
efforts to purchase in open market transactions $430 million of its
common stock prior to the close of the Merger. After the signing of the
Merger Agreement, Entergy repurchased 3.0 million shares for an aggregate
amount of $100.2 million as of September 30, 2000.
During the nine months ended September 30, 2000, Entergy Corporation
issued 472,303 shares of its previously repurchased common stock to
satisfy stock options exercised and employee stock purchases. In
addition, Entergy Corporation received proceeds of approximately $2.0
million from the issuance of 89,894 shares of common stock under its
dividend reinvestment and stock purchase plan.
NOTE 4. LONG-TERM DEBT
(Entergy Mississippi)
On February 15, 2000, Entergy Mississippi issued $120 million of
7.75% Series First Mortgage Bonds due February 15, 2003. The proceeds
are being used for general corporate purposes, including the retirement
of short-term indebtedness that was incurred for working capital needs
and capital expenditures.
(Entergy Arkansas)
On March 9, 2000, Entergy Arkansas issued $100 million of 7.72%
Series First Mortgage Bonds due March 1, 2003. The proceeds are being
used for general corporate purposes, including the retirement of short-
term indebtedness that was incurred for working capital needs and capital
expenditures.
(Entergy Louisiana)
On March 1, 2000, Entergy Louisiana redeemed, at maturity, $100
million of 6.00% Series First Mortgage Bonds using funds received from an
open-account advance from Entergy Corporation.
On May 23, 2000, Entergy Louisiana issued $150 million of 8.50%
Series First Mortgage Bonds due June 1, 2003. The proceeds are being
used for general corporate purposes, including the repayment of the open
account advance from Entergy Corporation and of short-term indebtedness
that was incurred for capital needs and capital expenditures.
(Entergy Gulf States)
On June 1, 2000, Entergy Gulf States issued $300 million of First
Mortgage Bonds due June 2, 2003 bearing an initial rate of 8.04%. The
interest rate is floating and is computed each quarter. The current rate
is 7.88%. The proceeds are being used for general corporate purposes,
including the retirement of short-term indebtedness that was incurred for
capital needs and capital expenditures, and the mandatory redemption of
$150 million of preference stock in June 2000.
(Entergy New Orleans)
On July 25, 2000, Entergy New Orleans issued $30 million of 8.125%
Series First Mortgage Bonds due July 15, 2005. The proceeds are being
used for general corporate purposes, including the retirement of short-
term indebtedness that was incurred for capital needs and capital
expenditures.
(System Energy)
On August 1, 2000, System Energy redeemed, at maturity, $45 million
of 7.80% Series Debentures with internally generated funds.
On October 1, 2000, System Energy redeemed, at maturity, $30 million
of 7.38% Series Debentures with internally generated funds.
(Entergy Corporation)
As discussed in Note 7 to the Form 10-K, Saltend Cogeneration
Company Limited (SCCL), an indirect wholly-owned subsidiary of EPDC, has
in place a non-recourse senior credit facility and a non-recourse
subordinated credit facility to finance the construction and operation of
the Saltend power plant in the UK. All of the assets of SCCL are pledged
as collateral under the senior credit facility and the subordinated
credit facility. These facilities contain certain covenants, including
the requirement that the Saltend power plant begin commercial operation
by October 1, 2000. The plant has not commenced commercial operation,
and therefore SCCL is in technical default on the facilities. The lender
has agreed not to take any action at this time as a result of the default,
but reserves all of its rights. Final testing of the Saltend plant
is scheduled for early to mid-November 2000. The testing is required
before commercial operation begins, and if successful the testing will
remove the event of default. The amount of debt outstanding on the
facilities as of September 30, 2000 is $588.2 million.
Entergy's global power development business has entered into 10-year
interest rate swap agreements with an average fixed rate of 6.539% for
approximately 100% of the debt outstanding under the Damhead Creek bridge
and term loan portion of the Senior Credit Facility. The global power
development business is exposed to market risks from movements in
interest rates for the hedged portion of the debt only in the unlikely
event that the counter-parties to the interest rate swap agreements were
to default on contractual payments. At September 30, 2000, Entergy's
global power development business had interest rate swap agreements
outstanding totalling a notional amount of $415.2 million. Under the
senior credit facility and the subordinated credit facility, the ability
of the global power development business to make distributions of
dividends, loans, or advances to Entergy Corporation is restricted by,
among other things, the requirement to pay permitted project costs, make
debt repayments, and maintain cash reserves. See Note 7 to the financial
statements in the Form 10-K for further discussion of the financing of
the Damhead Creek project.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On October 27, 2000, Entergy Corporation's Board of Directors
declared a common stock dividend of $0.315 per share, payable on December
1, 2000 to holders of record on November 10, 2000.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
See Note 14 to the financial statements in the Form 10-K for
information regarding Entergy's adoption of SFAS 131 and its operating
segments. Entergy's segment financial information for the three months
ended September 30, 2000 and 1999 is as follows (in thousands):
Domestic Power All Consolidated
Utility and Marketing Other* Eliminations
System Energy and Trading*
2000
Operating Revenues $2,412,482 $953,970 $ 82,660 $ (17,557) $ 3,431,555
Income Taxes 199,142 8,892 (107) - 207,927
Net Income 290,694 12,289 3,706 - 306,689
1999
Operating Revenues $ 2,044,282 $988,550 $ 45,853 $ (14,150) $ 3,064,535
Income Taxes 193,998 9,504 7,295 - 210,797
Net Income 292,297 17,287 (13,426) - 296,158
Entergy's segment financial information for the nine months ended
September 30, 2000 and 1999 is as follows (in thousands):
Domestic Power All Consolidated
Utility and Marketing Other* Eliminations
System and Trading*
Energy
2000
Operating Revenues $ 5,511,403 $1,672,931 $238,498 $ (41,997) $ 7,380,835
Income Taxes 390,640 16,688 33,288 - 440,616
Net Income 564,978 27,409 68,485 - 660,872
Total Assets 20,560,181 612,501 3,384,263 (529,842) 24,027,103
1999
Operating Revenues $ 4,977,012 $2,002,146 $ 67,581 $ (25,878) $ 7,020,861
Income Taxes 361,494 2,468 (21,559) - 342,403
Net Income 549,741 3,132 25,949 - 578,822
Total Assets 19,545,541 719,725 3,455,765 (323,205) 23,397,826
Businesses marked with * are referred to as the "competitive
businesses," with the exception of the parent company, Entergy
Corporation, which is also included in the "All Other" column. The "All
Other" category includes the parent, Entergy Corporation, segments below
the quantitative threshold for separate disclosure, and other business
activities. Other segments principally include global power development
and non-utility nuclear power operations and management. Other business
activities principally include the gains on the sales of businesses. The
elimination of power marketing and trading mark-to-market profits on
intercompany power transactions is also included in "All Other".
Eliminations are primarily inter-segment activity.
NOTE 7. ENTERGY-FPL GROUP MERGER (Entergy Corporation)
On July 30, 2000, Entergy Corporation and FPL Group entered into a
Merger Agreement, providing for a business combination that results in
the creation of a new company. For accounting purposes, the Merger will
be recorded under the purchase method of accounting as an acquisition of
Entergy by FPL Group. Each outstanding share of FPL Group common stock
will be converted into the right to receive one share of the new
company's common stock, and each outstanding share of Entergy Corporation
common stock will be converted into the right to receive 0.585 of a share
of the new company's common stock. It is expected that FPL Group's
shareholders will own approximately 57% of the common equity of the new
company and Entergy's shareholders will own approximately 43%. The new
company will be given a new name that will be agreed upon between the
Boards of Directors of FPL and Entergy prior to the consummation of the
Merger. The new company will maintain its principal corporate offices
and headquarters in Juno Beach, Florida, and will maintain its utility
headquarters in New Orleans, Louisiana. The Merger is conditioned, among
other things, upon approvals of the shareholders of FPL Group and Entergy
and approvals of various local, state, and federal regulatory agencies
and commissions. Entergy and FPL Group will seek to consummate the
Merger by late 2001.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENT (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy)
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which will be effective for Entergy
in 2001. This statement requires that all derivatives be recognized in
the balance sheet, either as assets or liabilities, measured at fair
value. The changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. For fair-value hedge transactions
in which Entergy is hedging changes in an asset's, liability's, or firm
commitment's fair value, changes in the fair value of the derivative
instrument will generally be offset in the income statement by changes in
the hedged item's fair value. For cash-flow hedge transactions, in which
Entergy is hedging the variability of cash flows related to a variable-
rate asset, liability, or a forecasted transaction, changes in the fair
value of the derivative instrument will be reported in other
comprehensive income. The gains and losses on the derivative instrument
that are reported in other comprehensive income will be reclassified as
earnings in the periods in which earnings are impacted by the variability
of the cash flows of the hedged item. The ineffective portion of all
hedges will be recognized in current-period earnings.
Entergy utilizes derivative financial instruments primarily for the
following purposes:
o trading activity in its power marketing and trading business;
o to ensure adequate power supplies and to mitigate certain risks in
the domestic utility business; and
o to hedge cash flows for various transactions in its competitive
businesses.
The implementation of SFAS 133 will not materially impact the power
marketing and trading business, as its derivative portfolio is already
marked-to-market under the provisions of EITF 98-10, "Measuring the Value
of Energy-Related Contracts". The derivatives utilized in the domestic
utility business will be recorded at their fair value upon implementation
of SFAS 133. However, these fair values will be offset by related
regulatory assets and liabilities, as all revenues and costs associated
with these derivatives are ultimately recovered from ratepayers. Based
on Entergy's preliminary assessment of the impact of SFAS 133 on its
other cash flow hedging derivative instruments, Entergy estimates that a
net-of-tax cumulative-effect-type-adjustment in accumulated other
comprehensive income and the impact on the consolidated income statements
due to any ineffectiveness of these cash flow hedges will not be
significant when the company adopts SFAS 133 on January 1, 2001.
__________________________________
In the opinion of the management of Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy, the accompanying unaudited
condensed 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.
However, the business of the domestic utility companies and System Energy
is subject to seasonal fluctuations 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.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Other Regulation and Litigation" in the Form 10-
K for a discussion of legal proceedings affecting Entergy. Set forth
below are updates to the information contained in the Form 10-K.
Union Pacific Railroad (Entergy Corporation and Entergy Arkansas)
See "Union Pacific Railroad" in Item 1 of Part 1 of the Form 10-K
for information relating to the civil suit filed by Entergy Arkansas and
Entergy Services against Union Pacific Railroad Company (Union Pacific)
seeking damages and the termination of coal shipping contracts with Union
Pacific because of its failure to meet its contractual obligations to
ship coal to Entergy Arkansas' two coal-fired plants. In the third
quarter of 2000, Entergy and Union Pacific settled the dispute and the
litigation has been dismissed.
Aquila Power Corporation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
See "Aquila Power Corporation" in Item 1 of Part 1 of the Form 10-K
and in Item 1 of Part II of the 2000 first quarter Form 10-Q for
information relating to the lawsuit filed by Aquila Power Corporation
(Aquila) against Entergy Services, as agent for the domestic utility
companies.
Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See "Ratepayer Lawsuits" in Item 1 of Part I of the Form 10-K for a
discussion of the lawsuits filed by ratepayers with the LPSC, the
Council, and in Louisiana state courts in Orleans and East Baton Rouge
Parishes. See "Fuel Adjustment Clause Litigation" in Note 2 to the
financial statements herein for developments that have occurred since the
filing of the Form 10-K.
In the lawsuit filed in state court in Orleans Parish alleging
violations of Entergy New Orleans' limit on rate of return, in May 2000 a
court of appeal granted Entergy New Orleans' exception to jurisdiction in
the case and dismissed the proceeding. The Louisiana Supreme Court has
denied the plaintiff's request for a writ of certiorari. The plaintiffs
then commenced a similar proceeding before the Council. Management
cannot predict the outcome of the proceeding before the Council.
Franchise Service Area Litigation (Entergy Gulf States)
See "Franchise Service Area Litigation" in Item 1 of Part 1 of the
Form 10-K for information relating to the request filed by Beaumont Power
and Light Company (BP&L) with the PUCT to obtain a certificate of
convenience and necessity for those portions of Jefferson County, Texas,
outside the boundaries of any municipality, except for the city of
Beaumont, for which Entergy Gulf States provides retail electric service.
In April 2000, the ALJ recommended denial of BP&L's application. In May
2000, the PUCT voted to remand the proceeding back to the ALJ to allow
BP&L to provide further evidence. No procedural schedule has been set.
Ice Storm Litigation (Entergy Corporation and Entergy Gulf States)
See "Ice Storm Litigation" in Part I of the Form 10-K for
information relating to the lawsuit filed by a group of Entergy Gulf
States customers in Texas against Entergy Corporation, Entergy Gulf
States, and other Entergy subsidiaries in state court in Jefferson
County, Texas purportedly on behalf of all Entergy Gulf States customers
in Texas who sustained outages in a January 1997 ice storm. In March
2000, an appellate court affirmed the district court's decision to
certify the class. In response to Entergy's motion for rehearing, the
appellate court reversed the district court, denied class certification,
and remanded the case to the district court for proceedings consistent
with its ruling. Management cannot predict the outcome of this matter.
Litigation Environment (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
The four states in which Entergy and the domestic utility companies
operate have proven to be unusually litigious environments. Judges and
juries in these states, and in particular Louisiana and Texas, have
demonstrated a willingness to grant large verdicts, including punitive
damages, to plaintiffs in personal injury, property damage, and business
tort cases. Entergy uses all appropriate legal means to contest
litigation threatened or filed against it, but the litigation environment
in these states poses a business risk.
Item 4. Submission of Matters to a Vote of Security Holders
(Entergy Arkansas)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Arkansas: Hugh T. McDonald, Donald C. Hintz, Jerry D. Jackson,
and C. John Wilder.
(Entergy Gulf States)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Gulf States: E. Renae Conley, Joseph F. Domino, Donald C. Hintz,
Jerry D. Jackson, and C. John Wilder.
(Entergy Louisiana)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Louisiana: E. Renae Conley, Donald C. Hintz, Jerry D. Jackson,
and C. John Wilder.
(Entergy Mississippi)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Mississippi: Carolyn C. Shanks, Donald C. Hintz, Jerry D.
Jackson, and C. John Wilder.
(Entergy New Orleans)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy New Orleans: Daniel F. Packer, Donald C. Hintz, Jerry D.
Jackson, and C. John Wilder.
(System Energy)
A consent in lieu of the annual meeting of common stockholders was
executed on July 31, 2000. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
System Energy: Jerry W. Yelverton, Donald C. Hintz, and C. John Wilder.
Item 5. Other Information
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to combined
fixed charges and preferred dividends pursuant to Item 503 of Regulation
S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, September 30,
1995 1996 1997 1998 1999 2000
Entergy Arkansas 2.56 2.93 2.54 2.63 2.08 2.42
Entergy Gulf States 1.86 1.47 1.42 1.40 2.18 2.59
Entergy Louisiana 3.18 3.16 2.74 3.18 3.48 2.90
Entergy Mississippi 2.92 3.40 2.98 3.12 2.44 2.38
Entergy New Orleans 3.93 3.51 2.70 2.65 3.00 3.15
System Energy 2.07 2.21 2.31 2.52 1.90 2.42
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, September 30,
1995 1996 1997 1998 1999 2000
Entergy Arkansas 2.12 2.44 2.24 2.28 1.80 2.13
Entergy Gulf States (a) 1.54 1.19 1.23 1.20 1.86 2.31
Entergy Louisiana 2.60 2.64 2.36 2.75 3.09 2.57
Entergy Mississippi 2.51 2.95 2.69 2.80 2.18 2.14
Entergy New Orleans 3.56 3.22 2.44 2.41 2.74 2.87
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
** 2(a) - Agreement and Plan of Merger dated as of July 30, 2000,
among FPL Group, Inc., Entergy Corporation, WCB Holding
Corp., Ranger Acquisition Corp. and Ring Acquisition Corp
(filed as Exhibit 2.1 to Form 8-K dated July 31, 2000 in
1-11299).
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of September 30, 2000.
27(b) - Financial Data Schedule for Entergy Arkansas as of
September 30, 2000.
27(c) - Financial Data Schedule for Entergy Gulf States as of
September 30, 2000.
27(d) - Financial Data Schedule for Entergy Louisiana as of
September 30, 2000.
27(e) - Financial Data Schedule for Entergy Mississippi as of
September 30, 2000.
27(f) - Financial Data Schedule for Entergy New Orleans as of
September 30, 2000.
27(g) - Financial Data Schedule for System Energy as of September
30, 2000.
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed Charges
and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 99(g) - Annual Reports on Form 10-K of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System
Energy for the fiscal year ended December 31, 1999,
portions of which are incorporated herein by reference as
described elsewhere in this document (filed with the SEC
in File Nos. 1-11299, 1-10764, 1-27031, 1-8474, 0-320, 0-
5807, and 1-9067, respectively).
** 99(h) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System
Energy for the quarter ended March 31, 2000, portions of
which are incorporated herein by reference as described
elsewhere in this document (filed with the SEC in File
Nos. 1-11299, 1-10764, 1-27031, 1-8474, 0-320, 0-5807,
and 1-9067, respectively).
** 99(i) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System
Energy for the quarter ended June 30, 2000, portions of
which are incorporated herein by reference as described
elsewhere in this document (filed with the SEC in File
Nos. 1-11299, 1-10764, 1-27031, 1-8474, 0-320, 0-5807,
and 1-9067, respectively).
___________________________
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 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 September 30, 2000, which list, prepared in
accordance with Item 102 of Regulation S-T of the SEC,
immediately precedes the exhibits being filed with this
report on Form 10-Q for the quarter ended September 30,
2000.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation
A Current Report on Form 8-K, dated July 26, 2000,
was filed with the SEC on July 27, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2000,
was filed with the SEC on July 31, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation
A Current Report on Form 8-K, dated July 30, 2000,
was filed with the SEC on August 3, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation and Entergy Louisiana
A Current Report on Form 8-K, dated August 11, 2000,
was filed with the SEC on August 18, 2000, reporting
information under Item 5. "Other Events".
Entergy Corporation and Entergy Louisiana
A Current Report on Form 8-K, dated October 19, 2000,
was filed with the SEC on October 19, 2000, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements, Pro Forma Financial Statements
and Exhibits".
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
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Nathan E. Langston
Nathan E. Langston
Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
Date: November 9, 2000