___________________________________________________________________________
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 June 30, 2001
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 July 31, 2001
Entergy Corporation ($0.01 par value) 221,706,367
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, 2000, and the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001, 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., and 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 and purchased power prices and
availability, the effects of regulatory decisions and changes in law,
litigation, capital spending requirements, the onset of competition,
including the ability to recover net regulatory assets and other potential
stranded costs, the effects of recent developments in the California
electricity market on the utility industry nationally, advances in
technology, changes in accounting standards, corporate restructuring and
changes in capital structure, the success of new business ventures, changes
in the markets for electricity and other energy-related commodities,
changes in interest rates and in financial and foreign currency markets
generally, the economic climate and growth in Entergy's service
territories, changes in corporate strategies, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2001
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 7
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 12
Consolidated Statements of Income 17
Consolidated Statements of Cash Flows 18
Consolidated Balance Sheets 20
Consolidated Statements of Retained Earnings,
Comprehensive Income, and Paid-In Capital 22
Selected Operating Results 23
Entergy Arkansas, Inc.:
Results of Operations 24
Income Statements 27
Statements of Cash Flows 29
Balance Sheets 30
Selected Operating Results 32
Entergy Gulf States, Inc.:
Results of Operations 33
Income Statements 36
Statements of Cash Flows 37
Balance Sheets 38
Selected Operating Results 40
Entergy Louisiana, Inc.:
Results of Operations 41
Income Statements 44
Statements of Cash Flows 45
Balance Sheets 46
Selected Operating Results 48
Entergy Mississippi, Inc.:
Results of Operations 49
Income Statements 51
Statements of Cash Flows 53
Balance Sheets 54
Selected Operating Results 56
Entergy New Orleans, Inc.:
Results of Operations 57
Income Statements 60
Statements of Cash Flows 61
Balance Sheets 62
Selected Operating Results 64
System Energy Resources, Inc.:
Results of Operations 65
Income Statements 66
Statements of Cash Flows 67
Balance Sheets 68
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 70
Part II:
Item 1. Legal Proceedings 82
Item 4. Submission of Matters to a Vote of
Security Holders 82
Item 5. Other Information 84
Item 6. Exhibits and Reports on Form 8-K 85
Signature 87
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 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
EPDC Entergy Power Development Corporation
EWG Exempt wholesale generator under PUHCA
EWO Entergy Wholesale Operations, which primarily
consists of Entergy's global power development
business
Entergy Entergy Corporation and its various direct and
indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc.
Entergy Corporation Entergy Corporation, a Delaware corporation
Entergy Gulf States Entergy Gulf States, Inc., including its wholly
owned subsidiaries - Varibus Corporation, GSG&T,
Inc., Prudential Oil & Gas, Inc., and Southern
Gulf Railway Company
Entergy-Koch Entergy-Koch, L.P., a joint venture equally owned
by Entergy and Koch Industries, Inc.
Entergy London Entergy London Investments plc, formerly Entergy
Power UK plc (including its wholly owned
subsidiary, London Electricity plc), which was
sold by Entergy effective December 4, 1998
Entergy Louisiana Entergy Louisiana, Inc.
Entergy Mississippi Entergy Mississippi, Inc.
Entergy New Orleans Entergy New Orleans, Inc.
Entergy Power Entergy Power, Inc.
FERC Federal Energy Regulatory Commission
FitzPatrick James A. FitzPatrick nuclear power plant, 825 MW
facility located near Oswego, New York, purchased
in November 2000, from New York Power Authority by
Entergy's domestic non-utility nuclear business
FUCO Exempt foreign utility company under PUHCA
Form 10-K The combined Annual Report on Form 10-K for the
year ended December 31, 2000 of Entergy, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and
System Energy
Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation
Plant
GGART Grand Gulf Accelerated Recovery Tariff
GWH One million kilowatt-hours
Independence Independence Steam Electric Station (coal), owned
16% by Entergy Arkansas, 25% by Entergy
Mississippi, and 7% by Entergy Power
Abbreviation or Acronym Term
Indian Point 3 Indian Point 3 nuclear power plant, 980 MW
facility located in Westchester County, New York,
purchased in November 2000, from New York Power
Authority by Entergy's domestic non-utility
nuclear business
LPSC Louisiana Public Service Commission
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,
which was mutually terminated on April 1, 2001
MPSC Mississippi Public Service Commission
MW Megawatt(s)
Net revenue Operating revenue net of fuel, fuel-related, and
purchased power expenses; other regulatory
credits; and amortization of rate deferrals
NRC Nuclear Regulatory Commission
NYPA New York Power Authority
Pilgrim Pilgrim Nuclear Station, 670 MW facility located
in Plymouth, Massachusetts purchased in July 1999
from Boston Edison by Entergy's domestic non-
utility nuclear business
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935, as
amended
River Bend River Bend Steam Electric Generating Station
(nuclear)
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.
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. See "Item 1. Business - BUSINESS OF ENTERGY - Industry
Restructuring and Competition" in the Form 10-K for issues concerning the
timing and implementation of Entergy's transition to competition, including
potential conflicts among Entergy's regulated jurisdictions. Although
transition to competition filings have been made in all jurisdictions,
proceedings have not yet commenced in all cases. Set forth below are
updates to the information contained therein.
Business Combination with FPL Group
On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into
a Merger Agreement providing for a business combination that would have
resulted in the creation of a new company. On April 1, 2001, Entergy
Corporation and FPL Group terminated the Merger Agreement by mutual
decision. Both companies agreed that no termination fee is payable under
the terms of the Merger Agreement, unless within nine months of the
termination one party agrees to a substantially similar transaction with
another party. Each company will bear its own merger-related expenses.
Entergy has filed for withdrawal of its merger-related filings submitted to
the FERC, the SEC, and state and local regulatory agencies.
Domestic Transition to Competition
Federal Regulatory Activity
System Agreement Proceedings
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the proposed
amendments to the System Agreement filed with FERC by the domestic utility
companies. The proposed amendments were designed to facilitate the
implementation of retail competition in Arkansas and Texas. As discussed
in the Form 10-K, the LPSC and the Council also filed a complaint with FERC
seeking revisions to the System Agreement.
In June 2001, in connection with these proceedings, the parties filed
an offer of settlement with FERC. The offer of settlement provides for the
following amendments to the System Agreement:
o the Texas retail jurisdictional division of Entergy Gulf States will
terminate its participation in the System Agreement, except for the
aspects related to transmission equalization, when Texas implements
retail open access, which is currently scheduled for January 1, 2002;
o five percent of Entergy Gulf States' megawatt capacity allocated to
the Texas retail load by the LPSC will be made available to the domestic
utility companies remaining under the System Agreement. Each company
has until November 15, 2001 to elect to purchase its pro rata share of
this capacity. Entergy Arkansas' pro rata share is 27.3%, Entergy Gulf
States - Louisiana's pro rata share is 20.2%, Entergy Louisiana's pro
rata share is 30.2%, Entergy Mississippi's pro rata share is 15.9%,
and Entergy New Orleans' pro rata share is 6.4%. If a company elects
to purchase capacity it will be for the period January 1, 2002 through
June 30, 2008. If a company elects not to purchase, the other
companies are not entitled to purchase that company's share of the
capacity; and
o the service schedule developed to track changes in energy costs
resulting from the Entergy-Gulf States Utilities merger is modified to
include one final true-up of fuel costs when the Texas retail
jurisdictional division of Entergy Gulf States ceases participation in
the System Agreement, after which the service schedule will no longer be
applicable for any purpose.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
The proceeding on the complaint filed with FERC in 1995 by the LPSC
requesting modification of the System Agreement to exclude curtailable load
from the cost allocation determination was not settled. In July 2001, an
ALJ issued decisions certifying the offer of settlement to the FERC and
generally continuing to include curtailable load served during 1995 in cost
allocation determinations. FERC approved the settlement in July 2001.
As anticipated by the offer of settlement, the LPSC and the Council
commenced a new proceeding at FERC in June 2001. In this proceeding, the
LPSC and the Council allege that the rough production cost equalization
required by FERC under the System Agreement and the Unit Power Sales
Agreement has been disrupted by changed circumstances. The LPSC and the
Council have requested that FERC amend the System Agreement or the Unit
Power Sales Agreement or both to achieve full production cost equalization
or to restore rough production cost equalization. Their complaint does not
seek a change in the total amount of the costs allocated under the Unit
Power Sales Agreement. Several parties have filed interventions in the
proceeding, including the APSC and the MPSC. Entergy filed its response to
the complaint in July 2001 denying the allegations of the LPSC and the
Council. The APSC and the MPSC also filed responses opposing the relief
sought by the LPSC and the Council.
In their complaint, the LPSC and Council allege that the domestic
utility companies' annual production costs over the period 2002 to 2007
will be over or (under) the average for the domestic utility companies by
the following amounts:
Entergy Arkansas ($130) to ($278) million
Entergy Gulf States - LA $11 to $87 million
Entergy Louisiana $139 to $132 million
Entergy Mississippi ($27) to $13 million
Entergy New Orleans $7 to $46 million
This range of results is a function of assumptions regarding such things as
future natural gas prices, the future market price of electricity, and
other factors. If FERC grants the relief requested, the relief may result
in a material increase in production costs allocated to companies whose
costs currently are projected to be less than the average and a material
decrease in production costs allocated to companies whose costs currently
are projected to exceed the average. Management believes that any changes
in the allocation of production costs resulting from a FERC decision should
result in similar rate changes for retail customers. Therefore, management
does not believe that this proceeding will have a material effect on the
financial condition of any of the domestic utility companies, although
neither the timing nor the outcome of the proceedings at FERC can be
predicted at this time.
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 FERC's Order 2000 and
Entergy's proposed Transco.
In July 2001, FERC issued orders on various proposals for transmission
owners in the United States to commit their assets to regional transmission
organizations (RTOs). In the orders, FERC indicated that it envisions the
establishment of four RTOs in the United States, one in each of the
Northeast, Southeast, Midwest, and West. FERC further required utilities
within the Northeast and Southeast, including Entergy, to participate in
mediation proceedings for the purpose of facilitating the establishment of
these two RTOs.
In July 2001, the domestic utility companies filed requests with their
state and local regulatory commissions to suspend proceedings regarding
Transco pending further action in the FERC-mandated mediation proceedings.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
State Regulatory Activity
Texas
Since the filing of the Form 10-K, several developments have occurred
in the Texas retail open access proceedings and in Texas and Louisiana
proceedings for the separation of the utility operations of Entergy Gulf
States among new corporate and partnership entities. See Note 2 to the
financial statements herein for a discussion of these developments.
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.
Filings with the APSC
In April 2001, Entergy Arkansas filed with the APSC a proposal to
recover, costs plus carrying charges associated with power restoration caused
by the December 2000 ice storms. In an order issued in June 2001, the APSC
decided that it would not give final approval to Entergy's proposed storm
cost recovery rider outside of a fully developed cost-of-service study in
a general rate proceeding. In a subsequent decision, the APSC ordered
Entergy Arkansas to commence such a proceeding by January 2002. The APSC
action resulted in the deferral in 2001 of previously expensed storm
damage costs as reflected in Entergy Arkansas' financial statements.
In July 2001, Entergy Arkansas filed with the APSC its final storm
damage cost determination of $195 million associated with power restoration
during the December 2000 ice storms. Entergy Arkansas is proposing to
recover $170 million, plus carrying charges, over approximately a six and
one-half year period. The remainder of the costs is primarily capital
expenditures that will be included in rate base in future general rate
proceedings. The APSC established a procedural schedule to consider
putting an interim rider in place to recover the ice storm costs, subject
to refund. The schedule calls for a January 2002 hearing date and the
issuance of a decision by February 2002. No assurance can be given as to
the timing or outcome of these proceedings before the APSC.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Filings with the Council
In June 2001, Entergy New Orleans filed with the Council for changes
in gas and electric rates based on a test year ending December 2000. The
filing indicated that an increase in both gas and electric rates might be
appropriate. Proceedings on Entergy New Orleans' filing have been deferred
until June 2002.
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. Resolution of the
regulatory proceedings affecting the transition to competition of Entergy
Gulf States' Texas generation business will likely require the
discontinuance of the application of SFAS 71 accounting treatment to that
business, which may occur in the fourth quarter of 2001. The regulatory
proceedings are discussed in "Domestic Transition to Competition - State
Regulatory and Legislative Activity - Texas" in "MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form
10-K and that discussion is updated in Note 2 to the financial
statements herein. Management does not expect a material adverse effect
on Entergy's and Entergy Gulf States' results of operations if SFAS 71
accounting treatment for the Texas generation business is discontinued
in the fourth quarter of 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Operating Activities
The following table summarizes net cash flow provided by (used in)
operating activities for Entergy, the domestic utility companies, and
System Energy:
Six Months Ended Six Months Ended
Company June 30, 2001 June 30, 2000
(In Millions)
Entergy $600.7 $839.8
Entergy Arkansas $160.5 $124.0
Entergy Gulf States $184.9 $138.6
Entergy Louisiana $195.2 $77.2
Entergy Mississippi ($8.4) $18.7
Entergy New Orleans ($1.8) $16.9
System Energy $95.5 $325.1
Entergy's consolidated net cash flow provided by operating activities
decreased primarily due to:
o a decrease, excluding the effect of money pool activity, of
$154 million in cash provided by the domestic utility companies and
System Energy; and
o net cash used of $35.1 million in operating activities in 2001 by EWO
compared with EWO providing $39.7 million of operating cash flow in
2000 due to a net loss generated in 2001 compared with net income in
2000.
These decreases in consolidated net operating cash flow were partially
offset by an increase in cash provided by the domestic non-utility nuclear
business of $47.5 million, primarily from the operation of the FitzPatrick
and Indian Point 3 plants, purchased in 2000.
Payments for higher fuel costs and for power restoration costs
associated with the December 2000 ice storms in Arkansas resulted in the
overall decrease in operating cash flow provided by the domestic utility
companies and System Energy. These payments were partially funded by
borrowings from the money pool and external lines of credit, which are
discussed below. Partially offsetting the higher fuel costs and power
restoration costs is an increase in fuel cost recovery in 2001,
primarily at Entergy Louisiana and Entergy Gulf States. The
increase in fuel cost recovery is partially offset by increased fuel cost
under-recovery at Entergy Mississippi. Increases in income taxes accrued
resulting from book and tax income timing differences also increased
operating cash flow in 2001 compared to 2000. Management expects that
these timing differences may continue to increase operating cash flow in
the immediate future.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Money pool activity also affected the operating cash flows of the
domestic utility companies and System Energy. The increases (decreases) in
money pool borrowings during 2001 and 2000 are as follows:
Six Months Ended Six Months Ended
Company June 30, 2001 June 30, 2000
(In Millions)
Entergy Arkansas $134.7 ($40.6)
Entergy Gulf States $26.6 ($36.1)
Entergy Louisiana - ($91.5)
Entergy Mississippi - ($50.0)
Entergy New Orleans $11.2 ($6.9)
For the lenders to the money pool in 2001, Entergy Louisiana's money pool
associated company receivables increased $49.1 million and System Energy's
money pool associate company receivables increased $101.4 million for the
six months ended June 30, 2001. In 2000, System Energy's money pool
associate company receivables decreased $176.3 million. System Energy's
money pool activity is the primary cause of the decrease in operating cash
flow for System Energy for the six months ended June 30, 2001 as compared
to the six months ended June 30, 2000.
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 - Sources of Capital" below for a discussion of the
limitations on these borrowings.
Investing Activities
Net cash used in investing activities increased for the six months
ended June 30, 2001 compared to the six months ended June 30, 2000
primarily due to:
o capital contributions made in the formation of Entergy-Koch, L.P.;
o the maturity of other temporary investments in 2000;
o investments used as collateral for letters of credit by the domestic
non-utility nuclear business, discussed below in "Uses of Capital -
Domestic Non-Utility Nuclear;" and
o proceeds from the sale of the Freestone power project in 2000.
The following factors partially offset the overall increase in cash
used in investing activities:
o decreased construction expenditures due to completion of construction
of the Saltend and Damhead Creek plants;
o decreased payments by EWO for turbines in 2001, discussed below in
"Uses of Capital - Entergy Wholesale Operations;" and
o decreased under-recovery of deferred fuel costs incurred at certain of
the domestic utility companies. Entergy Arkansas, the Texas portion of
Entergy Gulf States, and Entergy Mississippi for 2000 only, have treated
these costs as regulatory investments because these companies are
allowed by their regulatory jurisdictions to recover the accumulated
fuel cost regulatory asset over longer than a twelve month period.
The companies will earn a return on the under-recovered balances.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Financing Activities
Financing activities used cash in 2001 compared with cash provided in
2000 primarily due to:
o a higher amount of debt issued by the domestic utility companies in
2000 than in 2001;
o no additional borrowings in 2001 under the Saltend and Damhead Creek
credit facilities due to the completion of construction of the plants;
o decreased borrowings made during 2001 under the Entergy Corporation
credit facility compared to borrowings made in 2000; and
o increased debt retirements due to repayments on the Saltend and
Damhead Creek credit facilities by EWO, partially offset by decreased
debt retirements by the domestic utility companies.
Partially offsetting the overall increase in cash used in financing
activities were the following:
o redemption of Entergy Gulf States' preference stock in 2000;
o increased common stock issuances; and
o decreased repurchases of Entergy Corporation common stock in 2001.
Entergy anticipates limited repurchase activity for the remainder of
2001, as it considers various investment opportunities.
Capital Resources
See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES - Capital Resources" in the Form 10-K for a discussion of
Entergy's sources of funds and capital requirements. The following are
updates to the Form 10-K.
Sources of Capital
As discussed in the Form 10-K, certain of the domestic utility
companies have issued or expect to issue debt in 2001. See Note 4 to the
financial statements herein for details regarding long-term debt issued in
2001.
Short-term borrowings by the domestic utility companies and System
Energy, including borrowings under the money pool, are limited to amounts
authorized by the SEC. See Note 4 to the financial statements in the Form
10-K for further discussion of Entergy's short-term borrowing limits. In
2001, Entergy received SEC approval to increase the authorized limits for
the following companies, as follows:
Company Previous Limit Current Limit
Entergy Mississippi $103 million $160 million
Entergy New Orleans $ 35 million $100 million
Other Entergy subsidiaries $265 million $420 million
The approval increased the current SEC authorized short-term borrowing
limits for Entergy subsidiaries from $1.343 billion to $1.620 billion. The
SEC authorized limits are effective through November 30, 2001. In June
2001, Entergy filed with the SEC to extend the authorization period for the
current short-term borrowing limits and the money pool borrowing
arrangement.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The following companies had borrowings outstanding from the money pool
at June 30, 2001:
Outstanding
Company Borrowings
Entergy Arkansas $165.4 million
Entergy Gulf States $ 26.6 million
Entergy Mississippi $ 34.1 million
Entergy New Orleans $ 16.9 million
Other Entergy subsidiaries $111.5 million
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi each
obtained 364-day credit facilities in 2001 as follows:
Amount of Amount Drawn as
Company Date Obtained Facility of June 30, 2001
Entergy Arkansas January 31, 2001 $63 million -
Entergy Louisiana January 31, 2001 $30 million -
Entergy Mississippi February 2, 2001 $25 million $10 million
Entergy Louisiana decreased its available credit facility to $15 million in
May 2001. The facilities have variable interest rates and the average
commitment fee is 0.13%.
In May 2001, Entergy Corporation amended its 364-day bank credit
facility, increasing the capacity from $500 million to $1.275 billion, of
which $472 million was drawn as of June 30, 2001. Entergy Corporation will
use borrowings from the facility for general corporate purposes and to make
additional investments in competitive businesses, including some or all of
the purchase price for the Indian Point 2 nuclear unit which Entergy
expects to acquire from Consolidated Edison during the third quarter of
2001. In July 2001, the borrowing capacity on the facility was increased
to $1.325 billion.
Uses of Capital
PUHCA Restrictions on Uses of Capital
Entergy's ability to invest in domestic and foreign generation
businesses is subject to the SEC's regulations under PUHCA. As authorized
by the SEC, Entergy is allowed to invest an amount equal to 100% of its
average consolidated retained earnings in domestic and foreign generation
businesses. As of June 30, 2001, Entergy's investments subject to this
rule totaled $832 million constituting 25.4% of its average consolidated
retained earnings.
See "PUHCA Restrictions on Uses of Capital" in "MANAGEMENT'S
DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K
for a discussion of other PUHCA restrictions affecting Entergy, such as its
capacity to invest in "energy-related" businesses and its ability to
guarantee obligations of its non-utility subsidiaries.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Other Uses of Capital by Entergy Corporation
For the six months ended June 30, 2001, Entergy Corporation paid
$134.8 million in cash dividends on its common stock and received dividend
payments and returns of capital totaling $287.2 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 Entergy common
stock dividends based upon Entergy's earnings, financial strength, and
capital requirements. Restrictions on the ability of Entergy's
subsidiaries to pay dividends are discussed in Note 8 to the financial
statements in the Form 10-K.
Domestic Non-Utility Nuclear
In connection with the acquisition of the FitzPatrick and Indian Point
3 nuclear power plants, the installment payments due by Entergy to NYPA
must be secured by a letter of credit from an eligible financial
institution. On November 21, 2000, upon closing the acquisition of the
NYPA plants, Entergy delivered a $577 million letter of credit, with NYPA
as beneficiary. The letter of credit was backed by cash collateral, and
this cash is reflected in the balance sheet at December 31, 2000, as
"Special deposits." In January 2001, Entergy replaced $440 million of the
cash collateral with an Entergy Corporation guarantee. Most of the cash
released by this guarantee was used to fund Entergy's contributions to
Entergy-Koch as discussed below under "Joint Ventures." In June 2001,
Entergy Corporation obtained new letters of credit totaling $577 million,
which replaced the letter of credit initially provided to NYPA. The
letters of credit are partially backed by an Entergy Corporation guarantee
and partially backed by $272 million of cash collateral. The cash
collateral is included in "Other investments" on the balance sheet at
June 30, 2001.
Entergy Wholesale Operations
As part of its turbine acquisition program, an EWO subsidiary (EPDC)
sold its rights and obligations under certain turbine acquisition contracts
with General Electric Company to a third party in May 2001. The rights to
twenty-two turbines were included in the sale. The sale price was
approximately $150 million, which corresponded to the amount EPDC had
invested in the turbines under construction. The purchaser obtained a
revolving financing facility of up to $450 million for the fabrication and
acquisition of turbines. EPDC has certain rights to reacquire the turbines
from the purchaser, whether pursuant to an interim lease commencing when a
turbine is ready for shipment or pursuant to certain purchase rights. The
lease payments and purchase price for each turbine have been established
pursuant to various agreements between EPDC, the purchaser, and its
lenders. If EPDC does not take title to the turbines prior to certain
specified dates, the purchaser has certain rights to sell the turbines and
EPDC may be held liable for specific defined shortfalls, if any. Certain
EPDC obligations under these agreements will be backed by an Entergy
Corporation guarantee.
In July 2001, EWO signed an agreement to sell the 1,200 MW Saltend
power plant to Calpine Corporation for approximately $800 million, which
management believes will result in a gain on the sale. The sale is subject
to certain conditions and EWO expects to complete the transaction in the
third quarter of 2001. A portion of the proceeds from the sale will be
used to repay borrowings outstanding under the Saltend project credit
facilities and make any payments necessary to terminate the Saltend
interest swap agreements.
As discussed in the Form 10-K, Entergy plans to spend $3.6 billion in
the years 2001 through 2003 in its capital investment plan for the global
development business. In many regions of the United States, the spark
spread (the difference between the price of electricity and the price of
natural gas at certain conversion efficiencies) has declined significantly
since earlier this year. EWO is attempting to address this spark spread
uncertainty through long-term power sales and tolling agreements.
Nevertheless, management can provide no assurance that EWO will be able to
obtain long-term agreements for these projects or will be able to operate
the projects, if built, profitably.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy-Koch, L.P.
In January 2001, subsidiaries of Entergy and Koch Industries, Inc.
formed a new limited partnership called Entergy-Koch, L.P. Entergy
contributed substantially all of its power marketing and trading business
in the United States and the United Kingdom and made other contributions,
including equity and loans, totaling $414 million. Koch contributed to the
venture its 9,000-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.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's consolidated earnings applicable to common stock were $238.9
million and $393.1 million for the three and six months ended June 30,
2001, respectively. The changes in earnings applicable to common stock by
operating segments for the three and six months ended June 30, 2001,
compared to the same periods in 2000, are as follows:
Three Months Ended Six Months Ended
Operating Segments Increase/(Decrease) Increase/(Decrease)
(In Thousands)
Domestic Utility and System Energy ($9,887) $26,047
Entergy-Koch/Power Marketing and Trading 38,073 43,102
Domestic Non-Utility Nuclear 21,028 40,953
Entergy Wholesale Operations (EWO) (40,461) (36,450)
Other, including parent company (7,039) (16,643)
------ -------
Total $1,714 $57,009
====== =======
Increases in earnings per average common share:
Basic 4% 23%
Diluted 2% 21%
See Note 6 to the financial statements for additional business segment
information.
The decreased earnings for the domestic utility and System Energy for
the three months ended June 30, 2001 were primarily due to a decrease in
unbilled revenues and an increase in interest expenses, partially offset
by a decrease in other operation and maintenance expenses, which includes
the reversal of Arkansas ice storm costs discussed below. The increased
earnings for the domestic utility and System Energy for the six months
ended June 30, 2001 were primarily due to:
o an increase in net revenues as a result of colder-than-normal weather
in the winter of 2001;
o higher prices of electricity sold for resale, particularly at Entergy
Gulf States; and
o a decrease in reserves for potential rate actions at Entergy
Louisiana.
The increased earnings for the six months ended June 30, 2001 were
partially offset by a decrease in unbilled revenues, an increase in
interest expense, and a decrease in first quarter 2000 fuel expense from a
true-up of the Entergy Arkansas deferred fuel balance.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Prior to 2001, revenues and expenses from the operation of Entergy's
power marketing and trading business were consolidated in Entergy's
financial statements. On January 31, 2001, Entergy contributed
substantially all of its power marketing and trading business to Entergy-
Koch. Entergy accounts for its share in the investment under the equity
method of accounting. Therefore, in 2001, the Entergy-Koch/Power
Marketing and Trading segment includes Entergy's equity in earnings
attributable to Entergy-Koch. Certain terms of the partnership
arrangement allocate income from various sources, and the taxes on that
income, on a disproportionate basis. These disproportionate allocations
have been favorable to Entergy in the aggregate in 2001.
The increases in earnings at domestic non-utility nuclear in 2001
were primarily due to the ownership of the FitzPatrick and Indian Point 3
plants, which Entergy purchased in November 2000.
The decreases in earnings at EWO for the three and six months ended
June 30, 2001, were primarily due to:
o more liquidated damages received as compensation for lost operating
margin due to plant construction delays from the Saltend contractor
in 2000 than from the Damhead Creek contractor in 2001;
o a decrease in gains on sales of power plants recognized in 2001;
o an increase in depreciation expense due to commercial operation of
the Saltend and Damhead Creek plants; and
o an increase in interest expense.
Entergy's share repurchase program also contributed to the increases
in earnings per share by decreasing the weighted average number of shares
outstanding.
Entergy's income before taxes is discussed according to the operating
segments listed above. "Competitive businesses" operating revenues in the
statements of income include primarily revenues generated by domestic non-
utility nuclear, EWO, and, for 2000 only, power marketing and trading.
Domestic Utility and System Energy
The changes in electric operating revenues for Entergy's domestic
utility companies for the three and six months ended June 30, 2001 compared
to the same periods in 2000 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes ($0.4) $0.9
Rate riders (1.9) 1.4
Fuel cost recovery 367.1 817.4
Sales volume/weather (9.8) 42.9
Other revenue (including unbilled) (30.4) (57.5)
Sales for resale 1.5 40.7
------ ------
Total $326.1 $845.8
====== ======
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
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 reflected
as deferred fuel costs on Entergy's financial statements such that these
costs do not have a material net effect on earnings.
The increases in fuel cost recovery revenue in 2001 were primarily due
to:
o increased fuel recovery factors at Entergy Arkansas, Entergy Gulf
States in the Texas jurisdiction, and Entergy Mississippi; and
o higher fuel and purchased power costs recovered through fuel
mechanisms at Entergy Gulf States in the Louisiana jurisdiction,
Entergy Louisiana, and Entergy New Orleans due to the increased
market prices of natural gas and purchased power.
Corresponding to fuel cost recovery revenue increases for the three
and six months ended June 30, 2001, fuel and purchased power expenses
related to electric sales increased approximately $371.7 million and
$810.6 million, respectively, primarily due to:
o an increase in the market prices of purchased power and natural gas;
and
o a decrease in first quarter 2000 fuel expense resulting from a true-up
of the Entergy Arkansas deferred fuel balance.
Other effects on electric operating revenue
Electric sales vary seasonally in response to weather and usually peak
in the summer. The effect of colder-than-normal winter weather conditions
caused an increase in electric sales in 2001. For the six months ended
June 30, 2001, electricity sales volume in the domestic utility companies'
service territories increased 649 GWH due to the impact of weather
conditions. The number of customers in the domestic utility companies'
service territories increased only slightly during these periods.
Unbilled revenues decreased for the three and six months ended June
30, 2001, as a result of decreased fuel prices and less favorable sales
volume in the period included in the unbilled revenue calculation compared
to the calculation in the prior year. Sales for resale increased for the
six months ended June 30, 2001 due to higher prices of resale electricity.
Gas operating revenues
Natural gas revenues increased $66.6 million for the six months ended
June 30, 2001, primarily due to increased market prices for natural gas and
additional sales volume due to the colder-than-normal winter. The increase
in gas revenues was largely offset by an increase of approximately $61.1
million in gas purchased for resale for the same period.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other impacts on results
Results for the three and six months ended June 30, 2001 for the
domestic utility companies and System Energy were also affected by the
following:
o decreases in other operation and maintenance expenses of $48.4 million
for the three months ended and $47.0 million for the six months ended;
o a net decrease in regulatory credits due to increased charges at
System Energy as a result of the GGART at Entergy Arkansas and Entergy
Mississippi and an accrual of excess earnings in 2001 in the transition
cost account at Entergy Arkansas; and
o increases in interest expenses of $9.7 million for the three months
ended and $20.8 million for the six months ended.
Results for the six months ended June 30, 2001 were also affected by
the following:
o an increase of $14.6 million in other taxes, primarily from increased
franchise taxes; and
o an increase of $17.1 million in interest income, primarily from
carrying charges on deferred fuel costs.
The decreases in other operation and maintenance expenses for the
three and six months ended June 30, 2001 compared to the same periods in
2000 were primarily due to:
o a decrease in property insurance expense primarily due to a reversal,
upon recommendation from the APSC, of $24.5 million of ice storm costs
previously charged to expense in December 2000 (these costs are now
reflected as regulatory assets);
o a decrease in plant maintenance expenses of $14.7 million for both the
three and six months ended June 30, 2001; and
o decreases in injury and damages claims and vegetation maintenance
spending.
The increases in interest expenses were primarily due to:
o debt issued at Entergy Gulf States in June 2000; and
o borrowings under credit facilities during 2001, primarily at Entergy
Arkansas and Entergy Louisiana.
Entergy-Koch/Power Marketing and Trading
As previously discussed, substantially all of Entergy's power
marketing and trading business was contributed to Entergy-Koch in 2001,
and earnings from this joint venture are reported as equity in earnings of
unconsolidated equity affiliates in the financial statements. As a
result, for the three and six months ended June 30, 2001, this segment
experienced decreased revenues of $346.6 million and $674.4 million,
respectively, and decreased purchased power expenses of $323 million and
$620 million, respectively. The negative impact on earnings for these
periods from these decreases, however, was more than offset by the equity
in earnings from Entergy's interest in the joint venture. The earnings
for this segment increased in 2001 due to increased electricity and gas
trading volumes and due to a broader range of commodity sources and
options provided to customers by the joint venture in 2001. Certain terms
of the partnership arrangement allocate income from various sources, and
the taxes on that income, on a disproportionate basis. These
disproportionate allocations have been favorable to Entergy in the
aggregate in 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Domestic Non-Utility Nuclear
Increases in earnings for the domestic non-utility nuclear business
were primarily due to revenue increases of $87.9 million and $206.5 million
for the three and six months ended June 30, 2001, respectively, primarily
due to the operation of the FitzPatrick and Indian Point 3 plants,
purchased in November 2000. The following also impacted earnings for
domestic non-utility nuclear for the three and six months ended June 30,
2001, all of which were primarily caused by the acquisition of FitzPatrick
and Indian Point 3:
o other operation and maintenance expenses increased $28.6 million and
$84.4 million, respectively;
o interest expense, primarily related to debt issued to purchase the
FitzPatrick and Indian Point 3 plants, increased $13.3 million and
$30.7 million, respectively;
o fuel expenses increased $8.6 million and $20 million, respectively;
and
o interest income increased $6.6 million and $16.9 million,
respectively.
For the six months ended June 30, 2001, earnings were also impacted by
increased taxes other than income taxes of $11.8 million.
Entergy Wholesale Operations
For the three and six months ended June 30, 2001, operating revenues
for EWO increased $280.5 million and $730.8 million, respectively. The
increases were primarily due to increases of $160 million and $368 million,
respectively, from EWO's interest in Highland Energy and increases of $116
million and $222 million, respectively, from the Saltend and Damhead Creek
plants. Highland Energy was acquired in June 2000 and the Saltend and
Damhead Creek plants began commercial operation in late November 2000 and
early 2001, respectively. For the three and six months ended June 30,
2001, the impact on earnings from the increased revenues is partially
offset by increases in fuel and purchased power expenses of $235.7 million
and $635.9 million, respectively, and increases in other operation and
maintenance expenses of $23.4 million and $60.2 million, respectively.
The decreases in earnings for the three and six months ended June 30,
2001, were primarily due to the following:
o liquidated damages of $32.9 million ($23.0 million net of tax)
received in 2000 from the Saltend contractor as compensation for lost
operating margin from the plant due to construction delays;
o a $20.5 million ($13.3 million net of tax) gain on the sale of the
Freestone project located in Fairfield, Texas, in June 2000; and
o increased depreciation expense in 2001 due to the commencement of the
commercial operation of the Saltend and Damhead Creek plants.
Increases in interest expense of $19.1 million for the three months ended
June 30, 2001 and $37.7 million for the six months ended June 30, 2001 also
decreased earnings, primarily because the interest related to the Saltend
and Damhead Creek plants was capitalized until those plants commenced
commercial operation.
Partially offsetting the overall decrease were the following in 2001:
o liquidated damages of $13.9 million ($9.7 million net of tax) received
from the Damhead Creek construction contractor as compensation for lost
operating margin from the plant due to construction delays; and
o an $11 million ($7.2 million net of tax) gain on the sale of a
permitted site in Desoto County, Florida, in May 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In July 2001, EWO signed an agreement to sell the Saltend power plant
for approximately $800 million, which management expects to result in a
gain on the sale of the plant. The sale, subject to certain conditions, is
anticipated to close during the third quarter of 2001. The sale will
reduce the impact on operating results of lower power prices in the United
Kingdom.
Other
Earnings for Other decreased primarily due to $21.8 million ($13.4
million net of tax) of merger-related expenses incurred by Entergy
Corporation in the first quarter of 2001 and decreased interest income of
$8 million and $11.2 million for the three and six months ended June 30,
2001, respectively.
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 40.3% and 37.9%, respectively. The effective income tax
rates for the six months ended June 30, 2001 and 2000 were 40.3% and 39.6%,
respectively.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $1,990,838 $1,664,688 $3,863,383 $3,017,570
Natural gas 30,548 28,396 140,931 74,292
Competitive businesses 473,890 444,704 1,143,388 857,418
---------- ---------- ---------- ----------
TOTAL 2,495,276 2,137,788 5,147,702 3,949,280
---------- ---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 1,025,619 464,436 2,151,481 962,190
Purchased power 245,895 502,521 609,774 872,064
Nuclear refueling outage expenses 23,077 16,629 40,283 35,186
Other operation and maintenance 448,610 450,223 919,069 827,634
Decommissioning 8,903 6,169 17,804 17,106
Taxes other than income taxes 89,662 83,540 192,125 163,158
Depreciation and amortization 183,372 178,749 386,448 357,025
Other regulatory charges (credits) - net 8,389 (5,900) 3,546 (20,506)
Amortization of rate deferrals 4,699 7,883 9,153 15,279
---------- ---------- ---------- ----------
TOTAL 2,038,226 1,704,250 4,329,683 3,229,136
---------- ---------- ---------- ----------
OPERATING INCOME 457,050 433,538 818,019 720,144
---------- ---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 6,644 8,041 11,587 15,735
Gain on sale of assets - net 11,759 21,057 12,348 21,574
Equity in earnings of unconsolidated equity affiliates 70,780 - 95,543 -
Miscellaneous - net 46,527 73,651 102,220 102,633
---------- ---------- ---------- ----------
TOTAL 135,710 102,749 221,698 139,942
---------- ---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 130,732 118,462 259,703 232,121
Other interest - net 51,386 23,369 99,300 43,652
Distributions on preferred securities of subsidiary 4,709 4,709 9,419 9,419
Allowance for borrowed funds used during construction (5,492) (5,889) (9,431) (11,977)
---------- ---------- ---------- ----------
TOTAL 181,335 140,651 358,991 273,215
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 411,425 395,636 680,726 586,871
Income taxes 165,842 149,863 274,272 232,688
---------- ---------- ---------- ----------
CONSOLIDATED NET INCOME 245,583 245,773 406,454 354,183
Preferred dividend requirements and other 6,677 8,581 13,393 18,131
---------- ---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $238,906 $237,192 $393,061 $336,052
========== ========== ========== ==========
Earnings per average common share:
Basic $1.08 $1.04 $1.78 $1.45
Diluted $1.06 $1.04 $1.75 $1.45
Dividends declared per common share $0.32 $0.30 $0.63 $0.60
Average number of common shares outstanding:
Basic 221,113,598 228,097,385 220,518,674 232,352,915
Diluted 225,706,421 228,152,627 224,749,374 232,382,112
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $406,454 $354,183
Noncash items included in net income:
Amortization of rate deferrals 9,153 15,279
Reserve for regulatory adjustments 50,533 37,113
Other regulatory charges (credits) - net 3,546 (20,506)
Depreciation, amortization, and decommissioning 404,252 374,131
Deferred income taxes and investment tax credits (6,673) (25,070)
Allowance for equity funds used during construction (11,587) (15,735)
Gain on sale of assets - net (12,348) (21,574)
Equity in earnings of unconsolidated equity affiliates (95,543) -
Changes in working capital:
Receivables 55,382 (219,406)
Fuel inventory (19,701) (28,416)
Accounts payable (433,769) 185,462
Taxes accrued 230,308 131,612
Interest accrued (2,697) 26,391
Deferred fuel 217,152 (52,215)
Other working capital accounts (115,947) 59,295
Provision for estimated losses and reserves (10,890) (28,396)
Changes in other regulatory assets (139,361) (32,028)
Other 72,435 99,715
--------- ---------
Net cash flow provided by operating activities 600,699 839,835
--------- ---------
INVESTING ACTIVITIES
Construction/capital expenditures (583,782) (822,584)
Allowance for equity funds used during construction 11,587 15,735
Nuclear fuel purchases (97,126) (73,533)
Proceeds from sale/leaseback of nuclear fuel 60,632 43,758
Proceeds from sale of businesses 14,000 61,519
Changes in other nonregulated/nonutility properties - net 17,515 (98,493)
Increase in other investments (621,801) -
Proceeds from other temporary investments - 298,251
Decommissioning trust contributions and realized change in trust assets (38,842) (26,732)
Other regulatory investments (56,722) (101,999)
Other 43,447 5,624
--------- ---------
Net cash flow used in investing activities (1,251,092) (698,454)
--------- ---------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 90,382 925,889
Common stock 59,304 9,385
Retirement of long-term debt (126,156) (103,970)
Repurchase of common stock (7,813) (392,591)
Redemption of preferred and preference stock (4,574) (152,493)
Changes in short-term borrowings - net 95,000 315,000
Other 9,133 -
Dividends paid:
Common stock (134,760) (139,585)
Preferred stock (11,214) (16,715)
--------- ----------
Net cash flow provided by (used in) financing activities (30,698) 444,920
--------- ----------
Effect of exchange rates on cash and cash equivalents (2,638) (2,946)
--------- ----------
Net increase (decrease) in cash and cash equivalents (683,729) 583,355
Cash and cash equivalents at beginning of period 1,382,424 1,213,719
--------- ----------
Cash and cash equivalents at end of period $698,695 $1,797,074
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $351,033 $224,697
Income taxes $6,038 $94,478
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($8,862) $7,379
Net assets contributed to Entergy-Koch $80,145 -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $186,365 $157,550
Temporary cash investments - at cost,
which approximates market 501,583 640,038
Special deposits 10,747 584,836
----------- -----------
Total cash and cash equivalents 698,695 1,382,424
----------- -----------
Notes receivable 832 3,608
Accounts receivable:
Customer 498,308 497,821
Allowance for doubtful accounts (11,389) (9,947)
Other 186,029 395,518
Accrued unbilled revenues 445,154 415,409
----------- -----------
Total receivables 1,118,102 1,298,801
----------- -----------
Deferred fuel costs 450,040 568,331
Fuel inventory - at average cost 113,430 93,679
Materials and supplies - at average cost 434,126 425,357
Rate deferrals 7,430 16,581
Deferred nuclear refueling outage costs 119,119 46,544
Prepayments and other 124,922 122,690
----------- -----------
TOTAL 3,066,696 3,958,015
----------- -----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 573,647 214
Decommissioning trust funds 1,346,003 1,315,857
Non-utility property - at cost (less accumulated depreciation) 288,522 262,952
Non-regulated investments 146,707 189,154
Other - at cost (less accumulated depreciation) 330,476 27,036
----------- -----------
TOTAL 2,685,355 1,795,213
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Electric 25,498,989 25,137,562
Plant acquisition adjustment 382,532 390,664
Property under capital lease 838,899 831,822
Natural gas 194,769 190,989
Construction work in progress 910,677 936,785
Nuclear fuel under capital lease 260,660 277,673
Nuclear fuel 190,065 157,603
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 28,276,591 27,923,098
Less - accumulated depreciation and amortization 11,725,598 11,477,352
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - NET 16,550,993 16,445,746
----------- -----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 970,223 980,266
Unamortized loss on reacquired debt 175,060 183,627
Deferred fuel costs 53,522 95,661
Other regulatory assets 941,917 792,515
Long-term receivables 32,316 29,575
Other 890,760 1,171,278
----------- -----------
TOTAL 3,063,798 3,252,922
----------- -----------
TOTAL ASSETS $25,366,842 $25,451,896
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $828,322 $464,215
Notes payable 485,519 388,023
Accounts payable 641,371 1,204,227
Customer deposits 181,717 172,169
Taxes accrued 694,974 451,811
Accumulated deferred income taxes 168,853 225,649
Nuclear refueling outage costs 16,276 10,209
Interest accrued 173,189 172,033
Obligations under capital leases 155,803 156,907
Other 208,525 192,908
----------- -----------
TOTAL 3,554,549 3,438,151
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,307,492 3,249,083
Accumulated deferred investment tax credits 482,702 494,315
Obligations under capital leases 177,737 201,873
FERC settlement - refund obligation 27,134 30,745
Other regulatory liabilities 146,765 104,841
Decommissioning 772,888 749,708
Transition to competition 212,576 191,934
Regulatory reserves 447,322 396,789
Accumulated provisions 337,581 390,116
Other 699,342 853,137
----------- -----------
TOTAL 6,611,539 6,662,541
----------- -----------
Long-term debt 7,305,513 7,732,093
Preferred stock with sinking fund 61,185 65,758
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
Preferred stock without sinking fund 334,687 334,688
Common stock, $.01 par value, authorized 500,000,000
shares; issued 248,174,087 shares in 2001 and
248,094,614 shares in 2000 2,482 2,481
Paid-in capital 4,661,334 4,660,483
Retained earnings 3,445,141 3,190,639
Accumulated other comprehensive loss (100,433) (75,033)
Less - treasury stock, at cost (26,496,354 shares in 2001 and
28,490,031 shares in 2000) 724,155 774,905
----------- -----------
TOTAL 7,619,056 7,338,353
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,366,842 $25,451,896
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME,
AND PAID-IN CAPITAL
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended
2001 2000
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,275,548 $2,814,499
Add - Earnings applicable to common stock 238,906 $238,906 237,192 $237,192
Deduct:
Dividends declared on common stock 69,679 68,393
Capital stock and other expenses (366) 803
---------- ----------
Total 69,313 69,196
---------- ----------
Retained Earnings - End of period $3,445,141 $2,982,495
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($117,968) ($79,447)
Net derivative instrument fair value changes
arising during the period 20,645 20,645 - -
Foreign currency translation adjustments (1,608) (1,608) (322) (322)
Net unrealized investment gains (losses) (1,502) (1,502) 3,683 3,683
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (21,868) -
Other accumulated comprehensive income (loss) items (78,565) (76,086)
---------- ----------
Total ($100,433) -------- ($76,086) --------
Comprehensive Income ========== $256,441 ========== $240,553
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,663,923 $4,636,474
Add: Common stock issuances related to stock plans (2,589) (67)
---------- ----------
Paid-in Capital - End of period $4,661,334 $4,636,407
========== ==========
Six Months Ended
2001 2000
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,190,639 $2,786,467
Add - Earnings applicable to common stock 393,061 $393,061 336,052 $336,052
Deduct:
Dividends declared on common stock 138,925 140,051
Capital stock and other expenses (366) (27)
---------- ----------
Total 138,559 140,024
---------- ----------
Retained Earnings - End of period $3,445,141 $2,982,495
========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Balance at beginning of period ($75,033) ($73,805)
Cumulative effect to January 1, 2001 of accounting
change regarding fair value of derivative instruments (29,067) - - -
Net derivative instrument fair value changes
arising during the period 7,199 7,199 - -
Foreign currency translation adjustments (3,635) (3,635) (1,029) (1,029)
Net unrealized investment gains (losses) 103 103 (1,252) (1,252)
---------- -------- ---------- --------
Balance at end of period:
Accumulated derivative instrument fair value changes (21,868) -
Other accumulated comprehensive income (loss) items (78,565) (76,086)
---------- ----------
Total ($100,433) -------- ($76,086) --------
Comprehensive Income ========== $396,728 ========== $333,771
======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,660,483 $4,636,163
Add: Common stock issuances related to stock plans 851 244
---------- ----------
Paid-in Capital - End of period $4,661,334 $4,636,407
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 617.2 $ 524.9 $ 92.3 18
Commercial 481.4 387.7 93.7 24
Industrial 652.9 497.1 155.8 31
Governmental 53.7 41.3 12.4 30
--------- --------- -------
Total retail 1,805.2 1,451.0 354.2 24
Sales for resale 94.4 92.9 1.5 2
Other 91.2 120.8 (29.6) (25)
--------- --------- -------
Total $ 1,990.8 $ 1,664.7 $ 326.1 20
========= ========= =======
Billed Electric Energy
Sales (GWH):
Residential 6,733 6,857 (124) (2)
Commercial 5,908 5,880 28 -
Industrial 10,710 11,021 (311) (3)
Governmental 630 635 (5) (1)
--------- --------- -------
Total retail 23,981 24,393 (412) (2)
Sales for resale 2,182 2,523 (341) (14)
--------- --------- -------
Total 26,163 26,916 (753) (3)
========= ========= =======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 1,252.2 $ 993.1 $ 259.1 26
Commercial 932.9 734.6 198.3 27
Industrial 1,306.5 950.5 356.0 37
Governmental 107.2 80.1 27.1 34
--------- --------- -------
Total retail 3,598.8 2,758.3 840.5 30
Sales for resale 216.8 176.1 40.7 23
Other 47.8 83.2 (35.4) (43)
--------- --------- -------
Total $ 3,863.4 $ 3,017.6 $ 845.8 28
========= ========= =======
Billed Electric Energy
Sales (GWH):
Residential 14,269 13,369 900 7
Commercial 11,482 11,160 322 3
Industrial 21,022 21,638 (616) (3)
Governmental 1,245 1,222 23 2
--------- --------- -------
Total retail 48,018 47,389 629 1
Sales for resale 4,631 4,795 (164) (3)
--------- --------- -------
Total 52,649 52,184 465 1
========= ========= =======
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended June 30, 2001 compared
to the three months ended June 30, 2000 primarily due to decreased other
operation and maintenance expenses, which includes the reversal of Arkansas
ice storm costs discussed below. The decrease was partially offset by
increased other regulatory charges and increased interest charges.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes ($1.3) ($10.6)
Rate riders 1.0 4.3
Fuel cost recovery 22.9 42.4
Sales volume/weather 6.4 26.3
Other revenue (including unbilled) 0.9 (8.1)
Sales for resale (24.6) (2.1)
----- -----
Total $5.3 $52.2
===== =====
Base rate changes
Base rate changes decreased revenues for the six months ended June 30,
2001 primarily due to the effect of block rates for residential customers
and lower prices for industrial and commercial customers. The decrease in
rates is offset by increased revenues from favorable volume and weather
from those customers as discussed below.
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 reflected as
deferred fuel costs on Entergy Arkansas' financial statements such that
these costs generally have no net effect on earnings.
Fuel cost recovery revenue increased for the three months ended June
30, 2001 primarily due to an increase in the energy cost rate, which became
effective in April 2001. The increase in the energy cost rate allows
Entergy Arkansas to recover previously under-recovered fuel expenses.
Fuel cost recovery revenue increased for the six months ended June 30,
2001 primarily due to increases in the energy cost rate, which became
effective in April 2000 and April 2001.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Electric sales volume increased revenues for the three and six months
ended June 30, 2001 due to increased usage of 96 GWH and 190 GWH,
respectively, in the residential and commercial sectors. Electric sales
vary seasonally in response to weather and usually peak in the summer.
Favorable weather also increased electric sales for the six months ended
June 30, 2001. The effect of colder-than-normal winter weather in the
first quarter of 2001 contributed 322 GWH to the increase in electric sales
volume in the residential and commercial sectors for the six months
ended June 30, 2001.
Other revenue (including unbilled)
Unbilled revenue decreased for the six months ended June 30, 2001
primarily due to the effect of less favorable weather on the period
included in the June 2001 unbilled revenue calculation compared to the
calculation in the prior year.
Sales for resale
Sales for resale decreased for the three months ended June 30, 2001
primarily due to a decrease in sales volume to affiliated companies as a
result of decreased generation, coupled with a decrease in the average
market price of energy.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the six months ended
June 30, 2001 primarily due to:
o increased market prices of natural gas and purchased power; and
o the effect on 2000 expenses of a $23.5 million true-up of the deferred
fuel balance made in the first quarter of 2000 as a result of the
energy cost recovery filing.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
months ended June 30, 2001 primarily due to:
o a decrease in property insurance expense of $24.5 million due to a
reversal, upon recommendation from the APSC, of ice storm costs
previously charged to expense in December 2000 (these costs are now
reflected as regulatory assets on Entergy Arkansas' balance sheet); and
o a decrease in overhead line maintenance expense of $4.8 million due to
decreased vegetation maintenance spending.
Other operation and maintenance expenses decreased for the six months
ended June 30, 2001 primarily due to:
o a decrease in property insurance expense of $24.5 million due to a
reversal, upon recommendation from the APSC, of ice storm costs
previously charged to expense in December 2000 (these costs are
now reflected as regulatory assets on Entergy Arkansas' balance
sheet);
o a decrease in overhead line maintenance expense of $6.1 million due to
decreased vegetation maintenance spending; and
o a decrease in nuclear operation expense of $4.8 million primarily due
to decreased industry support and operation spending, staff reduction,
and a refueling outage at ANO 1 in March and April 2001.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory charges (credits)
Other regulatory charges increased for the three and six months ended
June 30, 2001 primarily due to a transition cost account accrual of $10.9
million to reflect 2000 excess earnings. The accrual resulted partially
from the APSC's recommendation (discussed above) that ice storm costs
charged to expense in 2000 should be reversed, which caused an increase in
the final determination of excess earnings for 2000.
Other regulatory credits also decreased for the six months ended June
30, 2001 due to an increase in the Grand Gulf 1 rider, which allows for
increased recovery of Grand Gulf 1 costs effective January 2001.
Other
Other income
Other income decreased for the three and six months ended June 30,
2001 primarily due to a decrease in the allowance for equity funds used
during construction due to a lower construction work in progress balance
during 2001 compared to the same period in 2000. The construction balance
was lower because the ANO 2 replacement steam generators were placed in
service in late 2000. The decrease was partially offset by increased
interest income recorded on the deferred fuel balance.
Interest and other charges
Interest and other charges increased for the three and six months
ended June 30, 2001 due to:
o interest expense on intercompany money pool borrowings;
o interest expense on a $63 million credit facility obtained in January
2001; and
o an unfavorable decrease in the allowance for borrowed funds used
during construction because of the lower construction work in progress
balance during 2001.
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 40.8% and 38.5%, respectively. The effective income tax
rates for the six months ended June 30, 2001 and 2000 were 41.3% and 39.6%,
respectively. The increases in the effective tax rates were due to
decreased tax benefits from the allowance for equity funds used during
construction as well as decreased flow-through and permanent tax benefits.
The increases were partially offset by increased depreciation tax benefits.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $453,108 $447,823 $846,907 $794,700
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 107,414 102,179 178,162 149,856
Purchased power 120,412 120,163 244,510 218,960
Nuclear refueling outage expenses 7,716 6,439 14,537 12,878
Other operation and maintenance 65,279 99,583 136,824 175,508
Decommissioning - (2,741) (3) (713)
Taxes other than income taxes 8,664 8,979 17,428 17,695
Depreciation and amortization 39,388 41,695 86,023 82,996
Other regulatory charges (credits) - net 117 (11,405) (6,339) (22,170)
-------- -------- -------- --------
TOTAL 348,990 364,892 671,142 635,010
-------- -------- -------- --------
OPERATING INCOME 104,118 82,931 175,765 159,690
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,548 3,842 2,639 7,420
Miscellaneous - net 976 695 4,783 2,239
-------- -------- -------- --------
TOTAL 2,524 4,537 7,422 9,659
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 21,868 23,229 44,304 44,134
Other interest - net 5,115 2,111 8,505 4,408
Distributions on preferred securities of subsidiary 1,275 1,275 2,550 2,550
Allowance for borrowed funds used during construction (1,004) (2,512) (1,715) (4,816)
-------- -------- -------- --------
TOTAL 27,254 24,103 53,644 46,276
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 79,388 63,365 129,543 123,073
Income taxes 32,350 24,387 53,527 48,781
-------- -------- -------- --------
NET INCOME 47,038 38,978 76,016 74,292
Preferred dividend requirements and other 1,944 1,944 3,888 3,888
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $45,094 $37,034 $72,128 $70,404
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $76,016 $74,292
Noncash items included in net income:
Other regulatory credits - net (6,339) (22,170)
Depreciation, amortization, and decommissioning 86,020 82,283
Deferred income taxes and investment tax credits 9,611 (7,228)
Allowance for equity funds used during construction (2,639) (7,420)
Changes in working capital:
Receivables 11,851 (51,535)
Fuel inventory 6,417 (122)
Accounts payable (45,335) (46,445)
Taxes accrued 41,001 47,006
Interest accrued (503) 5,535
Deferred fuel costs 38,828 15,754
Other working capital accounts (310) 21,053
Provision for estimated losses and reserves (4,009) (2,577)
Changes in other regulatory assets (108,297) (17,793)
Changes in other deferred credits 29,225 19
Other 28,913 33,356
-------- --------
Net cash flow provided by operating activities 160,450 124,008
-------- --------
INVESTING ACTIVITIES
Construction expenditures (117,970) (156,875)
Allowance for equity funds used during construction 2,639 7,420
Nuclear fuel purchases (19,103) (148)
Proceeds from sale/leaseback of nuclear fuel 19,103 148
Decommissioning trust contributions and realized
change in trust assets (4,379) (5,670)
Other regulatory investments (16,796) (14,313)
-------- --------
Net cash flow used in investing activities (136,506) (169,438)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 99,487
Dividends paid:
Common stock (11,500) (5,600)
Preferred stock (1,944) (1,859)
-------- --------
Net cash flow provided by (used in) financing activities (13,444) 92,028
-------- --------
Net increase in cash and cash equivalents 10,500 46,598
Cash and cash equivalents at beginning of period 7,838 6,862
-------- --------
Cash and cash equivalents at end of period $18,338 $53,460
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $53,353 $43,037
Income taxes ($3) ($883)
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($3,877) $4,506
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $18,338 $7,838
Accounts receivable:
Customer 90,037 98,550
Allowance for doubtful accounts (1,667) (1,667)
Associated companies 22,248 22,286
Other 11,052 26,221
Accrued unbilled revenues 77,756 65,887
---------- ----------
Total accounts receivable 199,426 211,277
---------- ----------
Deferred fuel costs 80,938 102,970
Fuel inventory - at average cost 3,392 9,809
Materials and supplies - at average cost 76,050 80,682
Deferred nuclear refueling outage costs 28,446 23,541
Prepayments and other 11,901 5,540
---------- ----------
TOTAL 418,491 441,657
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 11,217 11,217
Decommissioning trust funds 356,354 355,852
Non-utility property - at cost (less accumulated depreciation) 1,467 1,469
Other - at cost (less accumulated depreciation) 2,975 3,032
---------- ----------
TOTAL 372,013 371,570
---------- ----------
UTILITY PLANT
Electric 5,300,698 5,274,066
Property under capital lease 39,184 40,289
Construction work in progress 146,500 87,389
Nuclear fuel under capital lease 91,008 107,023
Nuclear fuel 10,118 6,720
---------- ----------
TOTAL UTILITY PLANT 5,587,508 5,515,487
Less - accumulated depreciation and amortization 2,586,180 2,534,463
---------- ----------
UTILITY PLANT - NET 3,001,328 2,981,024
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 168,713 162,952
Unamortized loss on reacquired debt 42,597 44,428
Other regulatory assets 324,341 221,805
Other 9,823 4,775
---------- ----------
TOTAL 545,474 433,960
---------- ----------
TOTAL ASSETS $4,337,306 $4,228,211
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $85,000 $100
Notes payable 667 667
Accounts payable:
Associated companies 212,877 94,776
Other 67,877 231,313
Customer deposits 34,643 29,775
Taxes accrued 81,264 40,263
Accumulated deferred income taxes 43,040 55,127
Interest accrued 27,121 27,624
Obligations under capital leases 46,091 45,962
Other 25,214 14,942
---------- ----------
TOTAL 623,794 540,549
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 748,179 715,891
Accumulated deferred investment tax credits 85,751 88,264
Obligations under capital leases 84,101 101,350
Transition to competition 133,478 119,553
Accumulated provisions 38,384 42,393
Other 93,492 64,267
---------- ----------
TOTAL 1,183,385 1,131,718
---------- ----------
Long-term debt 1,158,866 1,239,712
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 2001
and 2000 470 470
Paid-in capital 591,127 591,127
Retained earnings 603,314 548,285
---------- ----------
TOTAL 1,311,261 1,256,232
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,337,306 $4,228,211
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 124.3 $ 112.4 $ 11.9 11
Commercial 81.0 72.3 8.7 12
Industrial 91.8 83.9 7.9 9
Governmental 4.2 3.7 0.5 14
------- ------- ------
Total retail 301.3 272.3 29.0 11
Sales for resale
Associated companies 70.1 93.4 (23.3) (25)
Non-associated companies 47.8 49.1 (1.3) (3)
Other 33.9 33.0 0.9 3
------- ------- ------
Total $ 453.1 $ 447.8 $ 5.3 1
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,383 1,302 81 6
Commercial 1,213 1,161 52 4
Industrial 1,687 1,714 (27) (2)
Governmental 60 58 2 3
------- ------- ------
Total retail 4,343 4,235 108 3
Sales for resale
Associated companies 1,953 2,584 (631) (24)
Non-associated companies 1,296 1,341 (45) (3)
------- ------- ------
Total 7,592 8,160 (568) (7)
======= ======= ======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 264.3 $ 230.1 $ 34.2 15
Commercial 149.5 134.5 15.0 11
Industrial 170.0 157.5 12.5 8
Governmental 7.7 7.0 0.7 10
------- ------- ------
Total retail 591.5 529.1 62.4 12
Sales for resale
Associated companies 119.7 138.5 (18.8) (14)
Non-associated companies 107.6 90.9 16.7 18
Other 28.1 36.2 (8.1) (22)
------- ------- ------
Total $ 846.9 $ 794.7 $ 52.2 7
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 3,237 2,852 385 13
Commercial 2,363 2,237 126 6
Industrial 3,347 3,366 (19) (1)
Governmental 117 112 5 4
------- ------- ------
Total retail 9,064 8,567 497 6
Sales for resale
Associated companies 3,080 4,265 (1,185) (28)
Non-associated companies 2,627 2,491 136 5
------- ------- ------
Total 14,771 15,323 (552) (4)
======= ======= ======
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2001 compared
to the three months ended June 30, 2000 primarily due to decreased unbilled
revenue, increased other operation and maintenance expenses, and increased
interest expense, partially offset by increases in sales for resale and
interest income.
Net income increased for the six months ended June 30, 2001 compared
to the six months ended June 30, 2000 primarily due to increases in net
revenue and interest income, partially offset by increased interest expense.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and six
months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes $0.8 ($0.9)
Fuel cost recovery 149.4 320.6
Sales volume/weather (3.8) 11.6
Other revenue (including unbilled) (19.0) (12.4)
Sales for resale 14.1 50.7
------ ------
Total $141.5 $369.6
====== ======
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 reflected as
deferred fuel costs on Entergy Gulf States' financial statements such that
these costs generally have no net effect on earnings.
Fuel cost recovery revenues increased for the three and six months
ended June 30, 2001 in both operational jurisdictions of Entergy Gulf
States. In the Louisiana jurisdiction, fuel recovery revenues increased
$103.1 million and $243.8 million for the three and six months ended June
30, 2001, respectively, due to the current period recovery through the fuel
adjustment clause of higher fuel and purchased power costs from prior
months. In the Louisiana jurisdiction, these fuel costs are recovered on a
two-month lag. In the Texas jurisdiction, fuel cost recovery revenues
increased $46.3 million and $76.8 million for the three and six months
ended June 30, 2001, respectively, due to increases in the fixed fuel
factor in August 2000 and March 2001 and due to a fuel recovery surcharge
which became effective in February 2001.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales volume/weather
Electric sales vary seasonally in response to weather and usually peak
in the summer. Electric sales volume increased revenues for the six months
ended June 30, 2001 due to more favorable weather. The effect of colder-
than-normal winter weather in the first quarter of 2001 and slightly more
favorable weather in the second quarter of 2001 across both jurisdictions
contributed 229 GWH to the increase in electric sales volume in the
residential and commercial sectors.
Other revenue (including unbilled)
Other revenue decreased for the three months ended June 30, 2001
primarily due to decreases in unbilled revenue as a result of decreased
fuel prices in the Louisiana jurisdiction in the period included in the
June 2001 unbilled revenue calculation compared to the calculation in the
prior period, and decreased wholesale unbilled volume, particularly in the
Texas jurisdiction.
Other revenue decreased for the six months ended June 30, 2001
primarily due to decreases in unbilled revenue as a result of decreased
volume for retail customers in the Louisiana jurisdiction and wholesale
customers in the Texas jurisdiction, partially offset by increased fuel
prices for the Louisiana jurisdiction.
Sales for resale
Sales for resale increased for the three and six months ended June 30,
2001 primarily due to:
o increased sales volume to municipal and co-op customers;
o increased prices for resale electricity in 2001; and
o increased sales volume to affiliated customers because more power was
available for sale.
Included in the sales for resale is the sale to adjoining utility systems
of power from the 30% share of River Bend acquired from Cajun, which is not
subject to state rate regulation.
Gas operating revenues
Gas operating revenues increased for the three and six months ended
June 30, 2001 due to the increased market price of natural gas and
increased sales volume. The increase in gas revenues was largely offset by
increased fuel expenses for gas purchased for resale.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three and six
months ended June 30, 2001 due to
o higher average market prices for natural gas, which increased 26% and
74%, respectively, over the same periods of 2000; and
o higher market prices for purchased power.
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 June 30, 2001 primarily due to:
o increased transmission and distribution expenses of $2.7 million and
$2.0 million, respectively; and
o increased nuclear operation and maintenance expenses of $3.1 million.
Other
Other income
Other income increased $5.8 million and $9.1 million for the three and
six months ended June 30, 2001, respectively, primarily due to increased
interest income recorded on the deferred fuel balance.
Interest charges
Interest charges increased for the three and six months ended June 30,
2001 primarily due to the issuance of $300 million of long-term debt in
June 2000.
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 35.0% and 32.8%, respectively. The effective income tax
rates for the six months ended June 30, 2001 and 2000 were 36.1% and 35.4%,
respectively.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $721,597 $580,103 $1,420,473 $1,050,905
Natural gas 9,296 6,283 44,896 18,697
-------- -------- ---------- ----------
TOTAL 730,893 586,386 1,465,369 1,069,602
-------- -------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 306,998 168,989 600,165 360,540
Purchased power 125,903 115,145 267,855 187,280
Nuclear refueling outage expenses 3,021 3,090 6,111 8,583
Other operation and maintenance 108,159 100,340 201,413 197,240
Decommissioning 1,561 1,568 3,123 3,136
Taxes other than income taxes 27,563 27,904 58,559 54,758
Depreciation and amortization 45,190 46,560 94,951 93,378
Other regulatory credits - net (466) (3,645) (7,356) (11,790)
Amortization of rate deferrals 1,402 1,402 2,803 2,803
-------- -------- ---------- ----------
TOTAL 619,331 461,353 1,227,624 895,928
-------- -------- ---------- ----------
OPERATING INCOME 111,562 125,033 237,745 173,674
-------- -------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 2,342 1,745 4,167 3,486
Gain on sale of assets 603 532 1,188 1,047
Miscellaneous - net 5,131 (20) 11,652 3,410
-------- -------- ---------- ----------
TOTAL 8,076 2,257 17,007 7,943
-------- -------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 39,359 34,812 78,152 67,188
Other interest - net 1,858 1,705 4,195 3,110
Distributions on preferred securities of subsidiary 1,860 1,859 3,719 3,719
Allowance for borrowed funds used during construction (2,441) (1,602) (4,155) (3,213)
-------- -------- ---------- ----------
TOTAL 40,636 36,774 81,911 70,804
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 79,002 90,516 172,841 110,813
Income taxes 27,620 29,701 62,413 39,241
-------- -------- ---------- ----------
NET INCOME 51,382 60,815 110,428 71,572
Preferred dividend requirements and other 1,271 3,175 2,581 7,319
-------- -------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $50,111 $57,640 $107,847 $64,253
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $110,428 $71,572
Noncash items included in net income:
Amortization of rate deferrals 2,803 2,803
Reserve for regulatory adjustments 1,932 (638)
Other regulatory credits - net (7,356) (11,790)
Depreciation, amortization, and decommissioning 98,074 96,514
Deferred income taxes and investment tax credits 10,793 (12,174)
Allowance for equity funds used during construction (4,167) (3,486)
Gain on sale of assets (1,188) (1,047)
Changes in working capital:
Receivables (4,676) (76,632)
Fuel inventory (21,056) (6,898)
Accounts payable (117,594) 25,972
Taxes accrued 55,386 19,347
Interest accrued 1,544 16,507
Deferred fuel costs 66,419 8,208
Other working capital accounts 7,536 5,945
Provision for estimated losses and reserves (3,164) (3,075)
Changes in other regulatory assets (14,365) (18,426)
Other 3,539 25,931
-------- --------
Net cash flow provided by operating activities 184,888 138,633
-------- --------
INVESTING ACTIVITIES
Construction expenditures (145,421) (138,464)
Allowance for equity funds used during construction 4,167 3,486
Nuclear fuel purchases (3,929) (33,510)
Proceeds from sale/leaseback of nuclear fuel 3,937 13,797
Decommissioning trust contributions and realized
change in trust assets (5,912) (5,489)
Other regulatory investments (39,926) (33,057)
-------- --------
Net cash flow used in investing activities (187,084) (193,237)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 299,086
Redemption of preferred stock (4,574) (152,493)
Dividends paid:
Common stock (34,000) (14,200)
Preferred stock (2,588) (8,174)
-------- --------
Net cash flow provided by (used in) financing activities (41,162) 124,219
-------- --------
Net increase (decrease) in cash and cash equivalents (43,358) 69,615
Cash and cash equivalents at beginning of period 68,279 32,312
-------- --------
Cash and cash equivalents at end of period $24,921 $101,927
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $81,891 $54,877
Income taxes $920 $33,835
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($2,138) $2,128
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $20,775 $10,726
Temporary cash investments - at cost,
which approximates market 4,146 57,553
---------- ----------
Total cash and cash equivalents 24,921 68,279
---------- ----------
Accounts receivable:
Customer 129,565 125,412
Allowance for doubtful accounts (2,131) (2,131)
Associated companies 4,075 27,660
Other 25,960 22,837
Accrued unbilled revenues 157,369 136,384
---------- ----------
Total accounts receivable 314,838 310,162
---------- ----------
Deferred fuel costs 261,633 288,126
Fuel inventory - at average cost 58,314 37,258
Materials and supplies - at average cost 99,425 100,018
Rate deferrals 2,803 5,606
Prepayments and other 22,449 22,332
---------- ----------
TOTAL 784,383 831,781
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 247,329 243,555
Non-utility property - at cost (less accumulated depreciation) 194,160 194,422
Other - at cost (less accumulated depreciation) 15,849 14,826
---------- ----------
TOTAL 457,338 452,803
---------- ----------
UTILITY PLANT
Electric 7,563,192 7,574,905
Property under capital lease 32,446 38,564
Natural gas 57,281 56,163
Construction work in progress 235,480 144,814
Nuclear fuel under capital lease 47,086 57,472
---------- ----------
TOTAL UTILITY PLANT 7,935,485 7,871,918
Less - accumulated depreciation and amortization 3,709,549 3,680,662
---------- ----------
UTILITY PLANT - NET 4,225,936 4,191,256
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 410,597 403,934
Unamortized loss on reacquired debt 36,112 37,903
Other regulatory assets 177,107 169,405
Long-term receivables 28,121 29,586
Other 19,834 17,349
---------- ----------
TOTAL 671,771 658,177
---------- ----------
TOTAL ASSETS $6,139,428 $6,134,017
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $272,750 $122,750
Accounts payable:
Associated companies 86,716 66,312
Other 120,531 258,529
Customer deposits 39,865 37,489
Taxes accrued 187,754 132,368
Accumulated deferred income taxes 80,566 94,032
Nuclear refueling outage costs 16,276 10,209
Interest accrued 45,083 43,539
Obligations under capital leases 42,277 42,524
Other 19,887 19,418
---------- ----------
TOTAL 911,705 827,170
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,152,598 1,115,119
Accumulated deferred investment tax credits 167,383 171,000
Obligations under capital leases 37,256 53,512
Other regulatory liabilities - 669
Decommissioning 144,062 142,604
Transition to competition 79,098 72,381
Regulatory reserves 62,897 60,965
Accumulated provisions 64,240 67,404
Other 76,107 98,501
---------- ----------
TOTAL 1,783,641 1,782,155
---------- ----------
Long-term debt 1,658,996 1,808,879
Preferred stock with sinking fund 26,185 30,758
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 47,677 47,677
Common stock, no par value, authorized 200,000,000
shares; issued and outstanding 100 shares in 2001 and 2000 114,055 114,055
Paid-in capital 1,153,253 1,153,195
Retained earnings 358,916 285,128
---------- ----------
TOTAL 1,673,901 1,600,055
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,139,428 $6,134,017
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 194.4 $ 159.1 $ 35.3 22
Commercial 156.7 120.8 35.9 30
Industrial 285.3 208.2 77.1 37
Governmental 10.2 8.0 2.2 28
------- ------- ------
Total retail 646.6 496.1 150.5 30
Sales for resale
Associated companies 16.9 11.9 5.0 43
Non-associated companies 33.5 24.4 9.1 37
Other 24.6 47.7 (23.1) (48)
------- ------- ------
Total $ 721.6 $ 580.1 $ 141.5 24
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 2,017 2,100 (83) (4)
Commercial 1,836 1,864 (28) (2)
Industrial 4,584 4,545 39 1
Governmental 110 109 1 1
------- ------- ------
Total retail 8,547 8,618 (71) (1)
Sales for resale
Associated companies 341 248 93 38
Non-associated companies 736 769 (33) (4)
------- ------- ------
Total 9,624 9,635 (11) -
======= ======= ======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 382.8 $ 296.9 $ 85.9 29
Commercial 302.0 229.1 72.9 32
Industrial 565.9 392.7 173.2 44
Governmental 20.3 15.8 4.5 28
-------- --------- -------
Total retail 1,271.0 934.5 336.5 36
Sales for resale
Associated companies 29.3 18.4 10.9 59
Non-associated companies 84.6 44.8 39.8 89
Other 35.6 53.2 (17.6) (33)
-------- --------- -------
Total $1,420.5 $ 1,050.9 $ 369.6 35
======== ========= =======
Billed Electric Energy
Sales (GWH):
Residential 4,143 3,934 209 5
Commercial 3,581 3,506 75 2
Industrial 8,836 8,915 (79) (1)
Governmental 221 214 7 3
-------- --------- -------
Total retail 16,781 16,569 212 1
Sales for resale
Associated companies 448 436 12 3
Non-associated companies 1,695 1,568 127 8
-------- --------- -------
Total 18,924 18,573 351 2
======== ========= =======
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30, 2001
compared to the three and six months ended June 30, 2000 primarily due to
decreased net revenue and increased interest expense. The decreases were
partially offset by decreased other operation and maintenance expenses.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes $1.9 $17.1
Fuel cost recovery 113.1 310.3
Sales volume/weather (10.5) (0.1)
Other revenue (including unbilled) (8.4) (26.9)
Sales for resale 3.6 1.4
----- ------
Total $99.7 $301.8
===== ======
Base rate changes
Base rate changes increased for the six months ended June 30, 2001
primarily due to accruals for potential rate refunds in 2000, partially
offset by additional formula rate plan reductions effective August 2000.
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 reflected 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 six months
ended June 30, 2001 as a result of higher fuel and purchased power expenses
primarily due to the increased market prices of natural gas and purchased
power.
Sales volume/weather
Electric sales volume decreased revenues for the three months ended
June 30, 2001 due to decreased usage of 365 GWH in the industrial and
residential sectors. The decreased usage in the industrial sector resulted
in higher rates for that sector, which is reflected in base rate changes.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other revenue (including unbilled)
Unbilled revenue decreased for the three and six months ended June 30,
2001 primarily due to the effect of fuel prices for the period included in
the June 2001 unbilled revenue calculation compared to the calculation in
the prior year. The decrease for the six months ended was also due to less
favorable volume in June 2001.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three and six
months ended June 30, 2001 primarily due to increased market prices of
natural gas and purchased power, partially offset by decreased generation
requirements.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three
months ended June 30, 2001 primarily due to:
o a decrease of $11.0 million in plant maintenance expenses as a result
of prior year maintenance outages at Waterford 3 and certain fossil
plants; and
o a decrease of $2.0 million in injuries and damages expense.
Other operation and maintenance expenses decreased for the six months
ended June 30, 2001 primarily due to a decrease of $7.0 million in plant
maintenance expenses as a result of prior year maintenance outages at
Waterford 3 and certain fossil plants.
Depreciation and amortization
Depreciation and amortization expenses decreased for the three months
ended June 30, 2001 primarily due to revisions made to the useful lives of
certain intangible plant assets to more appropriately reflect their actual
lives.
Other
Other income
Interest income increased for the six months ended June 30, 2001
primarily due to interest earned on money pool investments.
Interest and other charges
Other interest increased for the three and six months ended June 30,
2001 primarily due to interest accrued on reserves provided for fuel-
related refunds. The refunds began in July 2001. Interest on long-term
debt also increased for the six months ended primarily due to the issuance
of an additional $50 million of long-term debt in May 2000.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 40.3% and 40.1%, respectively. The effective income tax
rates for the six months ended June 30, 2001 and 2000 were 41.8% and 41.2%,
respectively.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $547,784 $448,067 $1,096,698 $794,888
-------- -------- ---------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 190,046 48,748 424,469 131,940
Purchased power 132,485 145,243 267,990 234,119
Nuclear refueling outage expenses 3,262 3,410 6,524 6,820
Other operation and maintenance 71,269 85,098 141,083 148,173
Decommissioning 2,606 2,606 5,212 5,211
Taxes other than income taxes 18,165 17,953 36,717 34,715
Depreciation and amortization 40,498 42,182 85,444 84,329
Other regulatory charges - net 540 240 1,080 480
-------- -------- ---------- --------
TOTAL 458,871 345,480 968,519 645,787
-------- -------- ---------- --------
OPERATING INCOME 88,913 102,587 128,179 149,101
-------- -------- ---------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,226 1,196 2,161 1,879
Gain on sale of assets 152 - 152 -
Miscellaneous - net 744 435 2,680 543
-------- -------- ---------- --------
TOTAL 2,122 1,631 4,993 2,422
-------- -------- ---------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 24,734 23,779 49,190 47,942
Other interest - net 3,570 1,896 7,087 3,946
Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150
Allowance for borrowed funds used during construction (922) (911) (1,632) (1,868)
-------- -------- ---------- --------
TOTAL 28,957 26,339 57,795 53,170
-------- -------- ---------- --------
INCOME BEFORE INCOME TAXES 62,078 77,879 75,377 98,353
Income taxes 25,044 31,192 31,483 40,474
-------- -------- ---------- --------
NET INCOME 37,034 46,687 43,894 57,879
Preferred dividend requirements and other 2,378 2,378 4,757 4,757
-------- -------- ---------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $34,656 $44,309 $39,137 $53,122
======== ======== ========== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $43,894 $57,879
Noncash items included in net income:
Reserve for regulatory adjustments (3,698) -
Other regulatory charges - net 1,080 480
Depreciation, amortization, and decommissioning 90,656 89,540
Deferred income taxes and investment tax credits (55,432) 15,191
Allowance for equity funds used during construction (2,161) (1,879)
Gain on sale of assets (152) -
Changes in working capital:
Receivables (15,569) (12,108)
Accounts payable (66,985) (57,456)
Taxes accrued 103,346 25,659
Interest accrued (7,192) 10,250
Deferred fuel costs 121,877 (80,801)
Other working capital accounts (24,616) 29,378
Provision for estimated losses and reserves 2,133 3,375
Changes in other regulatory assets (3,779) 6,663
Other 11,750 (8,977)
-------- -------
Net cash flow provided by operating activities 195,152 77,194
-------- -------
INVESTING ACTIVITIES
Construction expenditures (99,550) (90,488)
Allowance for equity funds used during construction 2,161 1,879
Nuclear fuel purchases - (29,806)
Proceeds from sale/leaseback of nuclear fuel - 29,806
Decommissioning trust contributions and realized
change in trust assets (9,043) (4,030)
-------- -------
Net cash flow used in investing activities (106,432) (92,639)
-------- -------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 149,003
Retirement of long-term debt (35,088) (100,000)
Dividends paid:
Common stock (13,300) (6,200)
Preferred stock (4,757) (4,757)
-------- -------
Net cash flow provided by (used in) financing activities (53,145) 38,046
-------- -------
Net increase in cash and cash equivalents 35,575 22,601
Cash and cash equivalents at beginning of period 43,959 7,734
-------- -------
Cash and cash equivalents at end of period $79,534 $30,335
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $63,521 $40,981
Income taxes $550 $17,572
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($1,430) $545
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $22,250 $14,138
Temporary cash investments - at cost,
which approximates market 57,284 29,821
---------- ----------
Total cash and cash equivalents 79,534 43,959
---------- ----------
Notes receivable 8 1,510
Accounts receivable:
Customer 101,588 111,292
Allowance for doubtful accounts (1,771) (1,771)
Associated companies 79,005 30,518
Other 6,784 13,698
Accrued unbilled revenues 136,400 152,700
---------- ----------
Total accounts receivable 322,006 306,437
---------- ----------
Deferred fuel costs - 84,051
Accumulated deferred income taxes 34,854 -
Materials and supplies - at average cost 77,465 77,389
Deferred nuclear refueling outage costs 10,168 16,425
Prepayments and other 18,804 9,996
---------- ----------
TOTAL 542,839 539,767
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 14,230 14,230
Decommissioning trust funds 117,876 110,263
Non-utility property - at cost (less accumulated depreciation) 21,762 21,700
---------- ----------
TOTAL 153,868 146,193
---------- ----------
UTILITY PLANT
Electric 5,383,873 5,357,920
Property under capital lease 238,427 238,427
Construction work in progress 126,277 85,299
Nuclear fuel under capital lease 47,571 63,923
---------- ----------
TOTAL UTILITY PLANT 5,796,148 5,745,569
Less - accumulated depreciation and amortization 2,497,084 2,441,937
---------- ----------
UTILITY PLANT - NET 3,299,064 3,303,632
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 205,887 204,810
Unamortized loss on reacquired debt 30,792 33,244
Other regulatory assets 53,583 50,881
Long-term receivables 2,851 -
Other 15,302 10,882
---------- ----------
TOTAL 308,415 299,817
---------- ----------
TOTAL ASSETS $4,304,186 $4,289,409
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $113,968 $35,088
Accounts payable:
Associated companies 45,063 71,948
Other 104,741 144,841
Customer deposits 60,877 60,227
Taxes accrued 126,653 23,307
Accumulated deferred income taxes - 20,545
Interest accrued 28,344 35,536
Deferred fuel cost 37,826 -
Obligations under capital leases 34,274 34,274
Other 80,048 102,614
---------- ----------
TOTAL 631,794 528,380
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 763,330 757,362
Accumulated deferred investment tax credits 114,668 117,393
Obligations under capital leases 13,297 29,649
Regulatory reserves 7,758 11,456
Accumulated provisions 66,334 64,201
Other 75,762 61,724
---------- ----------
TOTAL 1,041,149 1,041,785
---------- ----------
Long-term debt 1,162,858 1,276,696
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 2001
and 2000 1,088,900 1,088,900
Capital stock expense and other (2,171) (2,171)
Retained earnings 176,156 150,319
---------- ----------
TOTAL 1,363,385 1,337,548
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,304,186 $4,289,409
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 163.5 $ 143.3 $ 20.2 14
Commercial 114.9 94.9 20.0 21
Industrial 218.2 160.8 57.4 36
Governmental 10.5 8.4 2.1 25
--------- ------- -------
Total retail 507.1 407.4 99.7 24
Sales for resale
Associated companies 7.3 0.2 7.1 3,550
Non-associated companies 6.5 10.0 (3.5) (35)
Other 26.9 30.5 (3.6) (12)
--------- ------- -------
Total $ 547.8 $ 448.1 $ 99.7 22
========= ======= =======
Billed Electric Energy
Sales (GWH):
Residential 1,839 1,939 (100) (5)
Commercial 1,291 1,296 (5) -
Industrial 3,583 3,881 (298) (8)
Governmental 120 117 3 3
--------- ------- -------
Total retail 6,833 7,233 (400) (6)
Sales for resale
Associated companies 108 3 105 3,500
Non-associated companies 79 110 (31) (28)
--------- ------- -------
Total 7,020 7,346 (326) (4)
========= ======= =======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 348.3 $ 262.3 $ 86.0 33
Commercial 236.0 178.1 57.9 33
Industrial 463.4 313.5 149.9 48
Governmental 22.8 16.4 6.4 39
--------- ------- -------
Total retail 1,070.5 770.3 300.2 39
Sales for resale
Associated companies 11.4 0.7 10.7 1,529
Non-associated companies 12.3 21.6 (9.3) (43)
Other 2.5 2.3 0.2 9
--------- ------- -------
Total $ 1,096.7 $ 794.9 $ 301.8 38
========= ======= =======
Billed Electric Energy
Sales (GWH):
Residential 3,783 3,672 111 3
Commercial 2,508 2,444 64 3
Industrial 7,157 7,642 (485) (6)
Governmental 248 231 17 7
--------- ------- -------
Total retail 13,696 13,989 (293) (2)
Sales for resale
Associated companies 161 17 144 847
Non-associated companies 174 313 (139) (44)
--------- ------- -------
Total 14,031 14,319 (288) (2)
========= ======= =======
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30, 2001
compared to the three and six months ended June 30, 2000 primarily due to
decreased other operation and maintenance expenses and increased interest
income, partially offset by decreased unbilled revenues and increased
interest charges.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes $1.0 ($1.0)
Grand Gulf rate rider (2.9) (2.9)
Fuel cost recovery 44.0 67.4
Sales volume/weather 0.8 7.1
Other revenue (including unbilled) (1.7) (4.3)
Sales for resale 17.3 65.6
----- ------
Total $58.5 $131.9
===== ======
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 reflected 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 six months
ended June 30, 2001 primarily due to an increase in the energy cost
recovery rider to collect the under-recovered fuel and purchased power
costs incurred as of September 30, 2000. The recovery of $136.7 million,
plus carrying charges, will occur over a 24-month period which began in
January 2001. The increase was also due to an additional increase in the
energy cost recovery rider effective April 2001.
Sales volume/weather
Electric sales volume increased revenues for the six months ended June
30, 2001 due to increased usage of 318 GWH in the residential and
commercial sectors.
Other revenue (including unbilled)
Unbilled revenue decreased for the six months ended June 30, 2001
primarily due to the effect of less favorable weather for the period
included in the June 2001 unbilled revenue calculation compared to the
calculation in the prior year.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for resale
Sales for resale increased for the three and six months ended June 30,
2001 primarily due to increased net generation resulting in more energy
available for sale, partially offset by decreased prices for resale
electricity. The increase came from sales to affiliates, which are
generally made at a low margin.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three and six
months ended June 30, 2001 primarily due to increased generation
requirements and increased market prices of natural gas and purchased
power.
Other operation and maintenance
Other operation and maintenance expenses decreased for the three and
six months ended June 30, 2001 primarily due to a decrease of $6 million
and $10 million, respectively, in plant maintenance expenses due to outage
costs at certain fossil plants in 2000. The decreases were partially
offset by the following increases:
o increased charitable donations of $1.2 million and $1.6 million for
the three and six months ended, respectively; and
o increased steam expenses of $1 million for the six months ended.
Other
Other income
Interest income increased for the three and six months ended June 30,
2001 primarily due to interest recorded on the deferred fuel balance as a
result of an MPSC order providing for a 24-month recovery of the September
2000 under-recovered deferred fuel balance of $136.7 million.
Interest and other charges
Interest on long-term debt increased for the three and six months
ended June 30, 2001 primarily due to the issuance of $120 million of long-
term debt in February 2000 and the issuance of $70 million of long-term
debt in January 2001.
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 33.4% and 35.8%, respectively. The effective income tax
rate for each of the six months ended June 30, 2001 and 2000 was 33.9%.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $274,148 $215,606 $530,306 $398,381
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 95,493 31,043 205,552 75,330
Purchased power 94,374 95,038 177,838 171,866
Other operation and maintenance 39,473 43,082 72,721 78,705
Taxes other than income taxes 11,792 11,091 23,065 21,267
Depreciation and amortization 10,941 11,977 24,215 23,702
Other regulatory credits - net (9,572) (5,409) (19,256) (14,487)
-------- -------- -------- --------
TOTAL 242,501 186,822 484,135 356,383
-------- -------- -------- --------
OPERATING INCOME 31,647 28,784 46,171 41,998
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 592 613 1,015 1,250
Miscellaneous - net 4,001 2,380 8,146 4,411
-------- -------- -------- --------
TOTAL 4,593 2,993 9,161 5,661
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 12,159 10,561 23,303 20,014
Other interest - net 1,079 676 2,312 1,696
Allowance for borrowed funds used during construction (516) (479) (863) (983)
-------- -------- -------- --------
TOTAL 12,722 10,758 24,752 20,727
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 23,518 21,019 30,580 26,932
Income taxes 7,845 7,516 10,373 9,132
-------- -------- -------- --------
NET INCOME 15,673 13,503 20,207 17,800
Preferred dividend requirements and other 842 842 1,685 1,685
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $14,831 $12,661 $18,522 $16,115
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $20,207 $17,800
Noncash items included in net income:
Other regulatory credits - net (19,256) (14,487)
Depreciation and amortization 24,215 23,702
Deferred income taxes and investment tax credits 11,402 2,554
Allowance for equity funds used during construction (1,015) (1,250)
Changes in working capital:
Receivables 699 (14,566)
Fuel inventory (6,951) (885)
Accounts payable (5,983) (32,666)
Taxes accrued (15,104) 8,947
Interest accrued 2,884 1,908
Deferred fuel costs (21,692) 21,117
Other working capital accounts (4,495) 2,557
Provision for estimated losses and reserves (4,733) (591)
Changes in other regulatory assets (23,075) (18,550)
Other 34,461 23,127
-------- --------
Net cash flow provided by (used in) operating activities (8,436) 18,717
-------- --------
INVESTING ACTIVITIES
Construction expenditures (60,961) (63,770)
Allowance for equity funds used during construction 1,015 1,250
Other regulatory investments - (54,629)
-------- --------
Net cash flow used in investing activities (59,946) (117,149)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 69,624 119,175
Changes in short-term borrowings 10,000 -
Dividends paid:
Common stock (5,500) (5,800)
Preferred stock (1,685) (1,685)
-------- --------
Net cash flow provided by financing activities 72,439 111,690
-------- --------
Net increase in cash and cash equivalents 4,057 13,258
Cash and cash equivalents at beginning of period 5,113 4,787
-------- --------
Cash and cash equivalents at end of period $9,170 $18,045
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $21,406 $18,600
Income taxes - ($5,830)
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $9,170 $5,113
Accounts receivable:
Customer 53,699 44,517
Allowance for doubtful accounts (1,044) (1,044)
Associated companies 2,941 10,741
Other 3,583 9,964
Accrued unbilled revenues 37,900 33,600
---------- ----------
Total accounts receivable 97,079 97,778
---------- ----------
Deferred fuel costs 128,781 64,950
Fuel inventory - at average cost 10,387 3,436
Materials and supplies - at average cost 18,034 18,485
Prepayments and other 10,104 3,004
---------- ----------
TOTAL 273,555 192,766
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,787 6,851
---------- ----------
TOTAL 12,318 12,382
---------- ----------
UTILITY PLANT
Electric 1,899,572 1,885,501
Property under capital lease 240 290
Construction work in progress 74,235 44,085
---------- ----------
TOTAL UTILITY PLANT 1,974,047 1,929,876
Less - accumulated depreciation and amortization 740,789 733,977
---------- ----------
UTILITY PLANT - NET 1,233,258 1,195,899
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 28,691 25,544
Unamortized loss on reacquired debt 14,523 15,122
Deferred fuel costs 53,522 95,661
Other regulatory assets 160,607 140,679
Other 8,537 5,886
---------- ----------
TOTAL 265,880 282,892
---------- ----------
TOTAL ASSETS $1,785,011 $1,683,939
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $65,000 $-
Notes payable 10,000 -
Accounts payable:
Associated companies 91,372 92,980
Other 22,558 26,933
Customer deposits 28,010 26,368
Taxes accrued 16,758 31,862
Accumulated deferred income taxes 50,048 47,734
Interest accrued 15,983 13,099
Obligations under capital leases 46 79
Other 3,055 2,540
---------- ----------
TOTAL 302,830 241,595
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 320,320 306,295
Accumulated deferred investment tax credits 18,658 19,408
Obligations under capital leases 193 211
Accumulated provisions 2,073 6,806
Other 44,510 31,339
---------- ----------
TOTAL 385,754 364,059
---------- ----------
Long-term debt 589,587 584,467
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 2001 and 2000 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 257,192 244,170
---------- ----------
TOTAL 506,840 493,818
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,785,011 $1,683,939
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 89.1 $ 73.4 $ 15.7 21
Commercial 80.9 65.3 15.6 24
Industrial 49.2 39.3 9.9 25
Governmental 8.0 6.3 1.7 27
------- ------- ------
Total retail 227.2 184.3 42.9 23
Sales for resale
Associated companies 26.0 7.0 19.0 271
Non-associated companies 5.1 6.8 (1.7) (25)
Other 15.8 17.5 (1.7) (10)
------- ------- ------
Total $ 274.1 $ 215.6 $ 58.5 27
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 1,037 1,013 24 2
Commercial 1,024 1,008 16 2
Industrial 751 786 (35) (4)
Governmental 93 89 4 4
------- ------- ------
Total retail 2,905 2,896 9 -
Sales for resale
Associated companies 459 82 377 460
Non-associated companies 57 62 (5) (8)
------- ------- ------
Total 3,421 3,040 381 13
======= ======= ======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 170.0 $ 139.5 $ 30.5 22
Commercial 148.5 124.7 23.8 19
Industrial 90.5 76.7 13.8 18
Governmental 14.6 12.1 2.5 21
------- ------- ------
Total retail 423.6 353.0 70.6 20
Sales for resale
Associated companies 82.7 13.0 69.7 536
Non-associated companies 9.6 13.7 (4.1) (30)
Other 14.4 18.7 (4.3) (23)
------- ------- ------
Total $ 530.3 $ 398.4 $ 131.9 33
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 2,252 2,036 216 11
Commercial 1,999 1,926 73 4
Industrial 1,485 1,529 (44) (3)
Governmental 183 169 14 8
------- ------- ------
Total retail 5,919 5,660 259 5
Sales for resale
Associated companies 1,332 207 1,125 543
Non-associated companies 107 139 (32) (23)
------- ------- ------
Total 7,358 6,006 1,352 23
======= ======= ======
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 2001 compared
to the three months ended June 30, 2000 primarily due to decreased net
revenue and increased interest expense, partially offset by decreased other
operation and maintenance expense.
Net income decreased for the six months ended June 30, 2001 compared
to the six months ended June 30, 2000 primarily due to increased other
operation and maintenance expense and increased interest expense, partially
offset by increased unbilled revenue.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the three and six
months ended June 30, 2001 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Base rate changes ($2.8) ($3.7)
Fuel cost recovery 37.7 76.7
Sales volume/weather (2.7) (2.1)
Other revenue (including unbilled) 2.7 4.2
Sales for resale (10.4) (7.6)
----- -----
Total $24.5 $67.5
===== =====
Base rate changes
Base rate changes decreased revenues for the three and six months
ended June 30, 2001 primarily due to rate reductions effective October
2000.
Fuel cost recovery
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 reflected 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 six months
ended June 30, 2001 primarily due to the increased market prices of natural
gas and purchased power.
Sales volume/weather
Electric sales volume decreased revenues for the three and six months
ended June 30, 2001 due to decreased usage of 36 GWH and 57 GWH,
respectively, primarily in the residential and governmental sectors.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other revenue (including unbilled)
Unbilled revenues increased for the three months ended June 30, 2001
primarily due to increased volume in June 2001, partially offset by the
effect of decreased fuel prices for the period included in the June 2001
unbilled revenue calculation compared to the calculation in the prior year.
Unbilled revenues increased for the six months ended June 30, 2001
primarily due to the effect of higher fuel prices for the period included
in the June 2001 unbilled revenue calculation.
Sales for resale
Sales for resale decreased for the three and six months ended June 30,
2001 primarily due to a decrease in net generation resulting in less energy
available for sale, partially offset by increased prices for resale
electricity.
Gas operating revenues
Gas operating revenues increased for the six months ended June 30,
2001 primarily due to the increased market price of natural gas and
increased sales due to a colder-than-normal winter. The increase in gas
revenues was largely offset by increased expenses for gas purchased for
resale.
Expenses
Fuel and purchased power
Fuel and purchased power expenses increased for the three and six
months ended June 30, 2001 primarily due to the increased market prices of
natural gas and purchased power.
Other operation and maintenance
Other operation and maintenance expenses increased for the six months
ended June 30, 2001 primarily due to increases in uncollectible receivable
write-offs of $1.0 million and maintenance of customer records of $1.2
million.
Taxes other than income taxes
Taxes other than income taxes increased for three and six months ended
June 30, 2001 primarily due to an increase in local franchise taxes as a
result of higher retail revenue.
Amortization of rate deferrals
Amortization of rate deferrals decreased for the three and six months
ended June 30, 2001 primarily due to a scheduled rate change in the
amortization of Grand Gulf 1 phase-in expenses. The Grand Gulf 1 phase-in
plan will be complete in November 2001.
Other
Interest and other charges
Interest on long-term debt increased for the three and six months
ended June 30, 2001 primarily due to $30 million issuances of long-term
debt in July 2000 and February 2001.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Income taxes
For the three months ended June 30, 2001 and 2000, the effective
income tax rates were 40.8% and 43.0%, respectively. For the six months
ended June 30, 2001 and 2000, the effective income tax rates were 43.3% and
45.1%, respectively. The decreases for the three and six months ended June
30, 2001 in the effective tax rate were primarily due to the decrease in
pre-tax income increasing the impact of flow-through items.
ENTERGY NEW ORLEANS, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $139,057 $114,539 $268,289 $200,797
Natural gas 21,252 22,112 96,035 55,595
-------- -------- -------- --------
TOTAL 160,309 136,651 364,324 256,392
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 51,860 40,231 160,687 82,032
Purchased power 58,859 38,784 107,326 73,895
Other operation and maintenance 21,615 22,806 42,576 39,657
Taxes other than income taxes 11,308 9,184 24,994 18,696
Depreciation and amortization 6,181 5,809 12,507 11,510
Other regulatory credits - net (2,185) (1,732) (3,706) (3,333)
Amortization of rate deferrals 3,298 6,482 6,349 12,476
-------- -------- -------- --------
TOTAL 150,936 121,564 350,733 234,933
-------- -------- -------- --------
OPERATING INCOME 9,373 15,087 13,591 21,459
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 453 270 851 595
Miscellaneous - net 320 819 1,014 1,417
-------- -------- -------- --------
TOTAL 773 1,089 1,865 2,012
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 4,450 3,319 8,568 6,638
Other interest - net 386 410 812 826
Allowance for borrowed funds used during construction (386) (207) (706) (445)
-------- -------- -------- --------
TOTAL 4,450 3,522 8,674 7,019
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 5,696 12,654 6,782 16,452
Income taxes 2,327 5,437 2,938 7,418
-------- -------- -------- --------
NET INCOME 3,369 7,217 3,844 9,034
Preferred dividend requirements and other 241 241 482 482
-------- -------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $3,128 $6,976 $3,362 $8,552
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $3,844 $9,034
Noncash items included in net income:
Amortization of rate deferrals 6,349 12,476
Reserve for regulatory adjustments (1,176) -
Other regulatory credits - net (3,706) (3,333)
Depreciation and amortization 12,507 11,510
Deferred income taxes and investment tax credits (2,588) 2,405
Allowance for equity funds used during construction (851) (595)
Changes in working capital:
Receivables (4,101) (2,623)
Fuel inventory 4,096 1,920
Accounts payable (12,011) 6,956
Taxes accrued 3,971 2,348
Interest accrued 307 (417)
Deferred fuel costs 11,719 (16,493)
Other working capital accounts (8,049) (4,787)
Provision for estimated losses and reserves (2,136) (509)
Changes in other regulatory assets (12,295) (4,977)
Other 2,357 3,983
-------- --------
Net cash flow provided by (used in) operating activities (1,763) 16,898
-------- --------
INVESTING ACTIVITIES
Construction expenditures (28,898) (17,463)
Allowance for equity funds used during construction 851 595
-------- --------
Net cash flow used in investing activities (28,047) (16,868)
-------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 29,769 -
Dividends paid:
Preferred stock (241) (241)
-------- --------
Net cash flow provided by (used in) financing activities 29,528 (241)
-------- --------
Net decrease in cash and cash equivalents (282) (211)
Cash and cash equivalents at beginning of period 6,302 4,454
-------- --------
Cash and cash equivalents at end of period $6,020 $4,243
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $8,845 $7,702
Income taxes - ($2,386)
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $6,020 $6,302
Accounts receivable:
Customer 64,240 67,264
Allowance for doubtful accounts (770) (770)
Associated companies 1,272 2,800
Other 3,609 3,709
Accrued unbilled revenues 35,591 26,838
-------- --------
Total accounts receivable 103,942 99,841
-------- --------
Deferred fuel costs 16,515 28,234
Accumulated deferred income taxes 1,140 -
Fuel inventory - at average cost 108 4,204
Materials and supplies - at average cost 8,947 9,630
Rate deferrals 4,627 10,974
Prepayments and other 9,779 1,416
-------- --------
TOTAL 151,078 160,601
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 573,244 572,061
Natural gas 137,489 134,826
Construction work in progress 53,537 36,489
-------- --------
TOTAL UTILITY PLANT 764,270 743,376
Less - accumulated depreciation and amortization 397,960 394,271
-------- --------
UTILITY PLANT - NET 366,310 349,105
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Unamortized loss on reacquired debt 868 974
Other regulatory assets 56,971 44,676
Long-term receivables 1,343 -
Other 2,039 616
-------- --------
TOTAL 61,221 46,266
-------- --------
TOTAL ASSETS $581,868 $559,231
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies $43,015 $24,637
Other 27,177 57,566
Customer deposits 18,322 18,311
Taxes accrued 9,794 5,823
Accumulated deferred income taxes - 6,543
Interest accrued 6,426 6,119
Other 3,072 3,211
-------- --------
TOTAL 107,806 122,210
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 47,838 43,754
Accumulated deferred investment tax credits 5,614 5,868
SFAS 109 regulatory liability - net 14,578 12,607
Other regulatory liabilities 227 537
Accumulated provisions 6,335 8,471
Other 12,670 12,356
-------- --------
TOTAL 87,262 83,593
-------- --------
Long-term debt 229,042 199,031
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 2001 and 2000 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings 67,940 64,579
-------- --------
TOTAL 157,758 154,397
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $581,868 $559,231
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 45.8 $ 36.7 $ 9.1 25
Commercial 48.0 34.4 13.6 40
Industrial 8.4 5.0 3.4 68
Governmental 20.9 14.8 6.1 41
------- ------- ------
Total retail 123.1 90.9 32.2 35
Sales for resale
Associated companies 1.7 11.0 (9.3) (85)
Non-associated companies 1.1 2.2 (1.1) (50)
Other 13.1 10.4 2.7 26
------- ------- ------
Total $ 139.0 $ 114.5 $ 24.5 21
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 457 503 (46) (9)
Commercial 545 550 (5) (1)
Industrial 104 95 9 9
Governmental 247 264 (17) (6)
------- ------- ------
Total retail 1,353 1,412 (59) (4)
Sales for resale
Associated companies 26 218 (192) (88)
Non-associated companies 15 35 (20) (57)
------- ------- ------
Total 1,394 1,665 (271) (16)
======= ======= ======
Six Months Ended Increase/
Description 2001 2000 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 86.8 $ 64.2 $ 22.6 35
Commercial 96.9 68.1 28.8 42
Industrial 16.7 10.1 6.6 65
Governmental 41.8 28.9 12.9 45
------- ------- ------
Total retail 242.2 171.3 70.9 41
Sales for resale
Associated companies 8.7 13.6 (4.9) (36)
Non-associated companies 1.7 4.4 (2.7) (61)
Other 15.7 11.5 4.2 37
------- ------- ------
Total $ 268.3 $ 200.8 $ 67.5 34
======= ======= ======
Billed Electric Energy
Sales (GWH):
Residential 854 876 (22) (3)
Commercial 1,033 1,047 (14) (1)
Industrial 196 186 10 5
Governmental 475 497 (22) (4)
------- ------- ------
Total retail 2,558 2,606 (48) (2)
Sales for resale
Associated companies 90 301 (211) (70)
Non-associated companies 27 79 (52) (66)
------- ------- ------
Total 2,675 2,986 (311) (10)
======= ======= ======
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the six months ended June 30, 2001 compared
to the six months ended June 30, 2000 due to an increase in the provision
for rate refunds, partially offset by decreased interest 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 decreased for the
three and six months ended June 30, 2001 primarily due to the increase in
the provision for rate refund. System Energy's proposed rate increase,
which is subject to refund, is discussed in Note 2 to the financial
statements in the Form 10-K.
Expenses
Other regulatory charges
Other regulatory charges increased for the three and six months ended
June 30, 2001 primarily due to charges associated with the GGART in place
at Entergy Arkansas and Entergy Mississippi. The GGART is discussed in
Note 2 to the financial statements.
Other
Interest charges
Interest on long-term debt decreased for the three and six months
ended June 30, 2001 primarily due to a decrease in interest expense
associated with the sale-leaseback of Grand Gulf 1 and a decrease in
interest expense due to the retirement of long-term debt in 2000.
Other interest expense increased for the three and six months ended
June 30, 2001 primarily due to interest on the potential refund of System
Energy's proposed rate increase.
Income taxes
The effective income tax rates for the three months ended June 30,
2001 and 2000 were 45.7% and 48.9%, respectively. The effective income tax
rates for the six months ended June 30, 2001 and 2000 were 45.7% and 47.9%,
respectively. The decreases for the three and six months ended June 30,
2001 in the effective tax rate were primarily due to the decrease in pre-
tax income increasing the impact of flow-through items.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended Six Months Ended
2001 2000 2001 2000
(In Thousands) (In Thousands)
OPERATING REVENUES
Domestic electric $152,902 $159,389 $304,068 $316,479
-------- -------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 7,822 10,858 17,894 21,540
Nuclear refueling outage expenses 3,988 3,690 8,022 6,904
Other operation and maintenance 21,433 23,059 37,806 38,332
Decommissioning 4,736 4,736 9,472 9,472
Taxes other than income taxes 6,460 6,225 13,168 12,168
Depreciation and amortization 27,227 27,875 56,708 55,931
Other regulatory charges - net 19,955 16,051 39,122 30,796
-------- -------- -------- --------
TOTAL 91,621 92,494 182,192 175,143
-------- -------- -------- --------
OPERATING INCOME 61,281 66,895 121,876 141,336
-------- -------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 484 374 754 1,106
Miscellaneous - net 4,723 5,096 9,794 9,192
-------- -------- -------- --------
TOTAL 5,207 5,470 10,548 10,298
-------- -------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 18,756 22,636 37,767 46,762
Other interest - net 8,929 7,298 17,636 14,141
Allowance for borrowed funds used during construction (224) (177) (361) (653)
-------- -------- -------- --------
TOTAL 27,461 29,757 55,042 60,250
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 39,027 42,608 77,382 91,384
Income taxes 17,825 20,822 35,382 43,811
-------- -------- -------- --------
NET INCOME $21,202 $21,786 $42,000 $47,573
======== ======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
(Unaudited)
2001 2000
(In Thousands)
OPERATING ACTIVITIES
Net income $42,000 $47,573
Noncash items included in net income:
Reserve for regulatory adjustments 53,475 37,751
Other regulatory charges - net 39,122 30,796
Depreciation, amortization, and decommissioning 66,180 65,403
Deferred income taxes and investment tax credits (44,214) (39,621)
Allowance for equity funds used during construction (754) (1,106)
Changes in working capital:
Receivables (101,734) 186,754
Accounts payable (11,514) (14,193)
Taxes accrued 62,571 2,751
Interest accrued (18,683) (9,375)
Other working capital accounts (7,612) 12,218
Provision for estimated losses and reserves (425) (106)
Changes in other regulatory assets 20,394 19,298
Other (3,295) (13,084)
-------- --------
Net cash flow provided by operating activities 95,511 325,059
-------- --------
INVESTING ACTIVITIES
Construction expenditures (22,758) (24,557)
Allowance for equity funds used during construction 754 1,106
Nuclear fuel purchases (37,592) (7)
Proceeds from sale/leaseback of nuclear fuel 37,592 7
Decommissioning trust contributions and realized
change in trust assets (11,676) (11,544)
-------- --------
Net cash flow used in investing activities (33,680) (34,995)
-------- --------
FINANCING ACTIVITIES
Retirement of long-term debt (16,800) (2,947)
Dividends paid:
Common stock (43,000) (47,000)
-------- --------
Net cash flow used in financing activities (59,800) (49,947)
-------- --------
Net increase in cash and cash equivalents 2,031 240,117
Cash and cash equivalents at beginning of period 202,218 35,152
-------- --------
Cash and cash equivalents at end of period $204,249 $275,269
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $71,878 $54,870
Income taxes $3,463 $37,045
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($1,417) $199
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $15 $44
Temporary cash investments - at cost,
which approximates market 204,234 202,174
---------- ----------
Total cash and cash equivalents 204,249 202,218
---------- ----------
Accounts receivable:
Associated companies 315,361 212,551
Other 1,118 2,194
---------- ----------
Total accounts receivable 316,479 214,745
---------- ----------
Materials and supplies - at average cost 52,276 52,235
Deferred nuclear refueling outage costs 12,117 6,577
Prepayments and other 4,547 2,639
---------- ----------
TOTAL 589,668 478,414
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 167,831 157,572
---------- ----------
UTILITY PLANT
Electric 3,095,868 3,093,033
Property under capital lease 449,851 449,851
Construction work in progress 43,934 24,029
Nuclear fuel under capital lease 74,994 49,256
---------- ----------
TOTAL UTILITY PLANT 3,664,647 3,616,169
Less - accumulated depreciation and amortization 1,466,886 1,407,885
---------- ----------
UTILITY PLANT - NET 2,197,761 2,208,284
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 170,913 195,634
Unamortized loss on reacquired debt 50,169 51,957
Other regulatory assets 178,844 174,517
Other 8,457 8,172
---------- ----------
TOTAL 408,383 430,280
---------- ----------
TOTAL ASSETS $3,363,643 $3,274,550
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
June 30, 2001 and December 31, 2000
(Unaudited)
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $182,691 $151,800
Accounts payable:
Associated companies 1,435 2,722
Other 13,358 23,585
Taxes accrued 131,101 68,530
Accumulated deferred income taxes 3,811 1,648
Interest accrued 25,324 44,007
Obligations under capital leases 32,119 32,119
Other 1,551 1,674
---------- ----------
TOTAL 391,390 326,085
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 334,917 391,505
Accumulated deferred investment tax credits 87,778 89,516
Obligations under capital leases 42,875 17,137
FERC settlement - refund obligation 27,134 30,745
Other regulatory liabilities 146,672 103,634
Decommissioning 164,874 153,197
Regulatory reserves 375,843 322,368
Accumulated provisions 264 689
Other 16,270 15,394
---------- ----------
TOTAL 1,196,627 1,124,185
---------- ----------
Long-term debt 883,201 930,854
SHAREHOLDER'S EQUITY
Common stock, no par value, authorized 1,000,000 shares;
issued and outstanding 789,350 shares in 2001 and 2000 789,350 789,350
Retained earnings 103,075 104,076
---------- ----------
TOTAL 892,425 893,426
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,363,643 $3,274,550
========== ==========
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 (including
nuclear fuel but excluding AFUDC), long-term debt and preferred stock
maturities, and cash sinking fund requirements.
Sales Warranties and Indemnities (Entergy Corporation)
In the Entergy London and CitiPower sales transactions, Entergy or its
subsidiaries made certain warranties to the purchasers. These warranties
include representations regarding litigation, accuracy of financial
accounts, and the adequacy of existing tax provisions. Notice of a claim
on the CitiPower warranties must have been given by December 2000, and
Entergy's potential liability is limited to A$100 million ($51 million).
Notice of a claim on the Entergy London warranties had to be given for
certain items by December 1999, and for the tax warranties, must have been
given by June 30, 2001. Entergy's liability is limited to BPS1.4 billion
($2.0 billion) on certain tax warranties and BPS140 million ($200 million)
on the remaining warranties relating to the Entergy London sale. Entergy
also agreed to maintain the net asset value of the subsidiary that sold
Entergy London at $700 million through June 30, 2001.
For both of the sales, the notice period is extended if a taxing
authority has begun a review before expiration of the notice period.
Entergy received notice in June 2001 from both purchasers regarding issues
that have not been resolved by the respective taxing authorities concerning
reviews that commenced before the notice deadlines. Entergy responded to
both purchasers, and denies that valid claims by the purchasers have been
made under the warranties. Management periodically reviews reserve levels
for these warranties and as of June 30, 2001 believes it has adequately
provided for the ultimate resolution of these matters.
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, Pilgrim, Indian Point 3, and
FitzPatrick.
Environmental Issues
(Entergy Arkansas)
In previous years, 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 a site in Arkansas. As of June
30, 2001, a remaining recorded liability of approximately $5.0 million
existed related to the cleanup of that site.
(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 currently
negotiating with the EPA and state authorities regarding the cleanup of
these sites. As of June 30, 2001, a remaining recorded liability of
approximately $17.0 million existed related to the cleanup of the remaining
sites at which the EPA has designated Entergy Gulf States as 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 have chosen to upgrade or close them.
Recorded liabilities in the amounts of $5.8 million for Entergy Louisiana
and $0.5 million for Entergy New Orleans existed at June 30, 2001 for
wastewater upgrades and closures. Completion of this work is awaiting LDEQ
approval.
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. Upon the occurrence of certain events, Entergy
Louisiana may be obligated to pay amounts sufficient to permit the Owner
Participants to withdraw from these lease transactions and may be required
to assume the outstanding bonds issued to finance, in part, the lessors'
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 June 30, 2001. 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,
the target date for retail open access has been delayed until no sooner
than October 1, 2003 and no later than October 1, 2005.
In October 2000, in compliance with the currently enacted deregulation
law, Entergy Arkansas filed a market power study in accordance with the
guidelines adopted by the APSC. In December 2000, Entergy Arkansas filed
an application for approval to transfer Entergy Arkansas' transmission
assets to the Transco. In February 2001, Entergy Arkansas filed
supplemental testimony to address the effects of the proposed Transco on
Entergy Arkansas' market power. In July 2001, Entergy Arkansas filed a
request, which the APSC approved, to suspend proceedings regarding Transco
pending further action in the FERC-mandated mediation proceedings.
Texas (Entergy Corporation and Entergy Gulf States)
As discussed in Note 2 to the financial statements in the Form 10-K,
the Texas legislature enacted a law providing for retail open access by
most investor-owned electric utilities, including Entergy Gulf States, on
January 1, 2002, unless delayed by the PUCT. As described below, the PUCT
staff and certain cities served by Entergy Gulf States filed separate
petitions with the PUCT in August 2001 requesting relief that may result in
a delay in retail competition in the power region in which Entergy Gulf
States operates in Texas. With retail open access, generation and a new
retail electric provider operation will be competitive businesses, but
transmission and distribution operations will continue to be regulated.
The new retail electric providers will be the primary point of contact with
customers.
Business Separation Plan
Entergy Gulf States' business separation plan provides for the
separation of its generation, transmission, distribution and retail
electric functions. It has been amended during the course of various PUCT
and LPSC proceedings and is subject to further change and regulatory
proceedings as described below.
The amended plan currently provides that Entergy Gulf States will be
separated into the following principal companies:
o a Texas distribution company, which will own and operate Entergy Gulf
States' electric distribution system in Texas;
o a Texas generation company (which may be more than one legal entity),
which initially will purchase capacity and energy from the generating
assets allocated to Texas load (Texas generating assets), and
eventually will own those assets;
o Texas retail electric providers, which will provide competitive retail
electric service in Texas; and
o Entergy Gulf States-Louisiana.
Entergy Gulf States-Louisiana will:
o own and operate Entergy Gulf States' electric distribution system in
Louisiana, the Texas generating assets (until they are transferred to
the Texas generation company), the remainder of Entergy Gulf States'
generating assets, and Entergy Gulf States' other businesses that are
not separated, and own Entergy Gulf States' transmission assets
allocated to Louisiana (until they are transferred to the intermediate
transmission company described in the next bullet); and
o indirectly own a portion of an intermediate transmission company,
which will own Entergy Gulf States' electric transmission assets
allocated to Texas, and later Entergy Gulf States' transmission assets
allocated to Louisiana.
Entergy Gulf States' assets and liabilities (other than its long-term
debt and liabilities) will be allocated among these companies generally
based upon categorizing them by function. Entergy Gulf States will
allocate assets and liabilities not associated with a single function based
upon specified factors. In an April 2001 filing with the LPSC discussing
its separation methodology, Entergy Gulf States included a balance sheet
separated by jurisdiction and function. The balance sheet was based on
September 30, 1999 balances. In this balance sheet, Entergy Gulf States
allocated approximately 27% of the net utility plant balance to Texas
generation, approximately 12% to Texas distribution, approximately 6% to
Texas transmission, approximately 7% to Louisiana transmission, and less
than 1% to Texas retail. Applying these percentages to Entergy Gulf
States' June 30, 2001 net utility plant book value of $4.2 billion, for
illustrative purposes only, results in net book values of approximately
$1.2 billion for Texas generation, approximately $580 million for Texas
distribution, approximately $180 million for Texas transmission,
approximately $210 million for Louisiana transmission, approximately
$20 million for Texas retail, and would result in approximately $2.0
billion for the remainder of Entergy Gulf States-Louisiana. The actual
allocations could materially differ from these figures because of a number
of factors, including changes to the plan and the allocation methodology.
In addition, the actual allocations will be based on allocation factors
and account balances as of a different date.
The business separation plan provides that Entergy Gulf States-
Louisiana will retain liability for all of its long-term debt and
liabilities and that the property transferred to the Texas companies will
be released from the lien of Entergy Gulf States' mortgage on the basis of
property additions, retired bond credits, or both. Pursuant to separate
agreements, the Texas distribution company and the intermediate
transmission company will each assume a portion of Entergy Gulf States'
long-term debt and liabilities, which assumptions will not act to release
Entergy Gulf States-Louisiana's liability. The Texas distribution company
and the intermediate transmission company will undertake to pay the
outstanding assumed long-term debt and liabilities by the end of 2002 and
2004, respectively. Entergy must provide a contingent indemnity with
respect to the intermediate transmission company's assumed portion of
Entergy Gulf States' long-term debt and liabilities in the event that the
obligations under the debt assumption agreement have not been extinguished
prior to the end of 2002. Texas generation company will be required to pay
an allocated portion of the outstanding principal amount of Entergy Gulf
States' long-term debt and liabilities each time that Texas generating
assets are transferred to it, which must be completed no later than 2004.
After the transfer of the Texas distribution and transmission assets
contemplated by the current business separation plan, the distribution and
transmission businesses conducted by the Texas distribution company and the
intermediate transmission company, respectively, will continue to be
regulated as to rates by the PUCT and the FERC, respectively. Accordingly,
management believes that the Texas distribution company and the
intermediate transmission company will be able to fund the payment of the
assumed debt by the end of 2002 from a combination of cash flow from
operations and third party financing.
Entergy Gulf States filed the business separation plan with the PUCT
in January 2000 and amended that plan in November 2000 and January 2001.
In May 2001, the PUCT approved the amended business separation plan. The
outcome of the LPSC proceedings described below, which have resulted in
amendments to the plan beyond what was approved by the PUCT, will be
reported to the PUCT and the Office of Public Utility Counsel and may
require additional PUCT action before the business separation plan is
final. In addition, the petitions described below that may result in a
delay in retail competition may affect the approval.
The LPSC opened a docket to identify the changes in corporate
structure and operations of Entergy Gulf States, and their potential impact
on Louisiana retail ratepayers, resulting from restructuring in Texas and
Arkansas. In those proceedings, Entergy Gulf States and the LPSC staff
reached a settlement on certain Texas business separation plan issues, and
after a May 2001 hearing, the LPSC issued an interim order in July 2001
approving the settlement. In July 2001, Entergy Gulf States and the LPSC
staff completed an additional settlement on business separation plan issues
relating to the separation of Texas distribution and transmission. A
hearing on the distribution and transmission settlement has been held and
a decision is expected in September 2001. With respect to issues related
to the separation of generation, Entergy Gulf States and the LPSC staff
are preparing a revised procedural schedule to address remaining issues
in a timely manner. The procedural schedule initially will focus on the
power sale agreement described below.
Generation-related Issues
Regarding the generation-related issues referred to in the preceding
paragraph, Entergy Gulf States has not yet reached agreement with the LPSC
staff on certain matters related to the separation of the Texas generating
assets. Entergy Gulf States has proposed that Texas generating assets be a
jurisdictional portion (approximately 45 - 50%) of each generating plant
and that Entergy Gulf States-Louisiana continue to operate the plants.
Entergy Gulf States has also suggested that certain generating assets be
allocated by specific plant such that the Texas generating assets have
approximately the Texas jurisdictional portion of the capacity and value of
all of Entergy Gulf States' generating assets.
Until the Texas generating assets are transferred to the Texas
generation company, which, as currently proposed, will occur by the end of
2004, Entergy Gulf States-Louisiana expects to sell most of the capacity
and energy from these assets to the Texas generation company under a power
sale agreement. The power sale agreement is expected to require the
Texas generation company to pay all costs, including a reasonable return on
equity, for the capacity and energy of the Texas generating assets. The
Texas generation company is expected to sell most of this capacity and
energy to Entergy's affiliated Texas retail electric providers at a
negotiated rate and sell any remainder to the market. Entergy's affiliated
Texas retail electric providers will use the capacity and energy to provide
retail electric service to retail customers in Texas, including its "price-
to-beat" obligation, which requires it to sell electricity to residential
and small commercial customers in the service territory of the Texas
distribution company at a rate equal to the existing base rates plus a fuel
component.
Up to 20% of capacity and energy from the Texas generating assets must
be sold to third parties under PUCT rules, or to Entergy's domestic utility
companies that elect to purchase it, as described below:
o Under the Texas restructuring legislation and a recent stipulation,
Entergy Gulf States will sell at auction entitlements to approximately
425 megawatts of its installed generation capacity in Texas currently
scheduled to begin in September 2001. In its August 3, 2001 petition
discussed below, however, the PUCT staff has requested that the PUCT
suspend Entergy Gulf States' capacity auctions pending consideration
of the petition. The obligation to auction capacity entitlements
continues for up to 60 months after retail open access occurs, or
until 40% of current customers have chosen an alternative supplier,
whichever comes first.
o Under the settlement of System Agreement proceedings, which are
described in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS", Entergy's domestic utility
companies have the option to purchase up to 5% of the megawatt
capacity of the Texas generating assets. Each company has until
November 2001 to elect to purchase its pro rata share of this
capacity. If the capacity purchase is elected, it will be for
the period January 2002 through June 2008.
Beginning January 2002, the market power measures in the Texas
restructuring law will prohibit the Texas generation company and its
affiliates from owning and controlling more than 20% of the installed
generation capacity located in, or capable of delivering electricity to, a
power region. The implications of this limit are uncertain. It is
possible that the Texas generation company or its affiliates could be
required to auction additional capacity entitlements, divest some of the
Texas generating assets, or seek other means of mitigation if found to have
ownership in excess of this limit.
Other PUCT Proceedings
In March 2001, Entergy Gulf States filed with the PUCT a non-unanimous
settlement agreement in its unbundled cost of service proceeding that
establishes the Texas distribution company's revenue requirement. The
settlement agreement is among Entergy Gulf States, the PUCT staff, and
other parties. Pursuant to a generic rule prescribed by the PUCT, the
Texas distribution company's allowed return on equity will be 11.25%. The
capital structure prescribed by the PUCT is 60% debt and 40% equity. A
rider to recover nuclear decommissioning costs will be implemented. Also
in the settlement agreement, the parties agree that Entergy Gulf States'
Texas jurisdictional stranded costs and benefits are $0, and no charge to
recover stranded costs or credit to refund excess mitigation will be
implemented. Nevertheless, if new legislation passes in Texas that
requires or expressly authorizes the PUCT to require Entergy Gulf States to
pass-through or share stranded benefits with its customers, that
legislation will control this issue. Entergy Gulf States agreed in the
settlement to refund any excess earnings resulting from the restructuring
law's annual report process for 2000 and 2001. After a hearing in April
2001, the PUCT voted to approve a rate order consistent with the terms of
the settlement. A written interim order was signed in May 2001 and a final
order is expected in the fall of 2001.
In June 2001, Entergy filed an application with the PUCT seeking
certification of the Southwest Power Pool (SPP) as a power region under the
Texas restructuring law. The proceeding has been abated, however, due to
FERC's recent order on the establishment of regional transmission
organizations (RTOs), discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS". If Entergy Gulf States'
power region in Texas is not certified by the PUCT before retail open
access is introduced on January 1, 2002, Entergy's affiliated Texas retail
electric provider could be required to maintain rates at the price-to-beat
levels for residential and small commercial customers in Entergy Gulf
States' service territory beyond January 1, 2007. Entergy's affiliated
Texas retail electric provider could also be required to offer rates to
industrial and large commercial customers in Entergy Gulf States' service
territory that are no higher than the rates that, on a bundled basis, were
in effect on January 1, 1999, subject to fuel factor adjustments. Entergy's
affiliated Texas retail electric provider might also face requests for
restrictions in its ability to compete for retail customers in parts of its
power region in Texas outside of its current service area. Neither the
timing nor the outcome of the power region certification proceeding can be
predicted at this time.
In July 2001, Entergy Gulf States filed an application for approval of
the fuel factor portion of Entergy's affiliated Texas retail electric
provider's price-to-beat rates. The non-fuel component of the price-to-
beat rate is based on Entergy Gulf States' current base rates. The fuel
factor component established in this proceeding will be subject to a gas
price update in October 2001. Entergy Gulf States has recommended that the
PUCT approve its current average fuel factor, which currently is higher
than the average fuel factor included in the filing, in order to maintain
an adequate competitive margin. The request is currently pending before
the PUCT and an order is expected by December 2001.
The PUCT has designated an Entergy-affiliated Texas retail electric
provider to serve as the provider of last resort (POLR) for residential and
small non-residential customers in the service territory of Southwestern
Electric Power Company (SWEPCO), and for industrial and large commercial
customers in Entergy Gulf States' Texas service territory. The contract
with the PUCT containing the rates at which the designated retail electric
provider will provide service to these customer classes has been signed. A
proceeding has been initiated to designate SWEPCO's affiliated retail
electric provider as the POLR for the residential and small non-residential
customers in Entergy Gulf States' Texas service territory. If SWEPCO's
affiliate is not designated as the POLR for Entergy Gulf States' Texas
service territory, it is possible that the PUCT could designate the Entergy-
affiliated Texas retail electric provider to serve as the POLR for those
customers at the price-to-beat rate. Neither the timing nor the outcome of
these proceedings can be predicted at this time.
The Texas legislation requires Entergy Gulf States to conduct a
customer choice "Pilot Project" for retail customers. The full
implementation originally scheduled for June 1, 2001 was delayed until July
31, 2001. The PUCT is scheduled to evaluate the results of the Pilot
Project beginning in November 2001. If the PUCT determines, based upon the
results of the evaluation, that the Entergy Gulf States' power region is
unable to offer fair competition and reliable service to all retail
customer classes on January 1, 2002, the PUCT is required to delay customer
choice for the power region. The PUCT can also choose to continue the
Pilot Project. If retail open access is delayed, the PUCT has the option
to thereafter establish new rates for all electric utilities in the power
region under cost-of-service ratemaking.
On August 3, 2001, the PUCT staff filed a petition requesting that the
PUCT determine whether the market is ready for retail competition in the
portion of Texas within the Southeastern Electric Reliability Council
(SERC), which includes Entergy Gulf States' service territory. In its
petition, the PUCT staff states that the retail electric power pilot
programs in SERC have not been successful to date in creating competition.
The petition also states that, in light of information received by the
PUCT staff indicating a lack of interest in SERC by the retail electric
provider community at this time and the uncertainty surrounding the status
of an RTO in SERC, it is unlikely that the competitive situation in SERC
will improve to any significant degree before the current date for full
customer choice to begin in SERC. The PUCT staff also requests an
expedited procedural schedule. Entergy Gulf States' initial response to
the PUCT staff's petition is due by August 13, 2001. Certain cities served
by Entergy Gulf States also filed a petition asking the PUCT to delay
competition for Entergy Gulf States. Entergy Gulf States is unable
to predict whether PUCT action on this petition will result in delays or
modifications of the implementation of competition or the Entergy Gulf
States business separation plan.
Other Regulatory Proceedings and Uncertainties
In addition to the PUCT and LPSC proceedings relating to the business
separation plan described above, certain aspects of the business separation
plan will also have to be approved by the SEC under PUHCA. Entergy Gulf
States filed an application for SEC approval in August 2001. In addition,
as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS", FERC has approved a settlement
providing for certain amendments to the System Agreement required by the
Texas restructuring. Certain aspects of the Texas restructuring will
require additional FERC approvals. Entergy Gulf States will also have to
obtain the approval of the NRC to transfer ownership of any interest in
River Bend.
The regulatory proceedings described above have affected, and are
likely to continue to affect, the final form and timing of implementation
of the business separation plan. It is possible that these approvals or
related regulatory orders
o may not be received in time to implement the plan on January 1, 2002;
o may be obtained with requirements or conditions that differ from the
business separation plan described above or that conflict with each
other; or
o may be obtained with conditions that are unacceptable to Entergy or
that do not permit timely implementation.
Entergy Gulf States' business separation plan has already been amended
during the course of the PUCT and LPSC proceedings described above and is
subject to further change as a result of the regulatory approval process or
otherwise. As a result, no assurance can be given that the business
separation plan will be implemented as described above or that it will not
change significantly before implementation.
Louisiana
(Entergy Corporation and Entergy Louisiana)
As discussed in Note 2 to the financial statements in the Form 10-K,
the LPSC directed the LPSC staff, outside consultants, and counsel to work
together to analyze and resolve issues related to competition and to
recommend a plan for consideration by the LPSC. In July 2001, the LPSC
staff submitted a final response to the LPSC. In its report the LPSC staff
concludes that retail competition is not in the public interest at this
time for any customer class. Nevertheless, the LPSC staff recommends that
retail open access be made available for certain large industrial customers
as early as January 2003. An eligible customer choosing to go to
competition would be required to provide its utility with a minimum of six
months notice prior to the date of retail open access. The LPSC staff
report also recommends that all customers who do not currently co- or self-
generate, or have co- or self-generation under construction as of a date to
be specified by the LPSC, remain liable for their share of stranded costs.
This proposal is currently pending consideration by the LPSC.
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 2001, Entergy Arkansas filed its annually redetermined energy
cost rate with the APSC in accordance with the energy cost rate formula,
including a new energy allocation factor. The filing reflected that an
increase was warranted due to the increase in fuel and purchased power
costs in 2000 and the accumulated under-recovery of 2000 energy costs. The
increased energy cost rate is effective April 2001 through March 2002.
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 that allows the collection of excess earnings in a
transition cost account. In June 2001, upon recommendation from the APSC,
Entergy Arkansas recorded an adjustment for 2000 excess earnings in the
transition cost account of $10.9 million ($6.7 million after tax).
Interest of $3.0 million ($1.8 million after tax) was also recorded in the
transition cost account for the first six months of 2001.
December 2000 Ice Storms
In mid- and late December 2000, two separate ice storms left 226,000
and 212,500 Entergy Arkansas customers, respectively, without electric
power in its service area. The storms were the most severe natural
disasters ever to affect Entergy Arkansas, causing damage to transmission
and distribution lines, equipment, poles, and facilities. In April 2001,
Entergy Arkansas filed with the APSC a proposal to recover, over
approximately a five and one-half year period, costs plus carrying charges
associated with power restoration caused by the December 2000 ice storms.
In an order issued in June 2001, the APSC decided that it would not give
final approval to Entergy's proposed storm cost recovery rider outside of a
fully developed cost-of-service study in a general rate proceeding. The
APSC action resulted in the deferral in 2001 of previously expensed storm
damage costs as reflected in Entergy Arkansas' financial statements. In a
subsequent decision, the APSC ordered Entergy Arkansas to commence such a
proceeding by January 2002.
In the subsequent order, the APSC also established a procedural
schedule to consider putting an interim rider in place to recover the ice
storm costs, subject to refund. The schedule calls for a January 2002
hearing date and the issuance of a decision by February 2002. In accord
with the schedule, Entergy Arkansas filed its final storm damage cost
determination, which reflects costs of approximately $195 million. The
filing asks for recovery of approximately $170 million through the rider
over approximately a six and one-half year period. The remainder of the
costs is primarily capital expenditures that will be included in rate base
in future general rate proceedings. No assurance can be given as to the
timing or outcome of these proceedings before the APSC.
Filings with the PUCT and Texas Cities
Recovery of River Bend Costs (Entergy Corporation and Entergy Gulf States)
In March 1998, the PUCT disallowed recovery of $1.4 billion of company-
wide abeyed River Bend plant costs, which have been held in abeyance since
1988. Entergy Gulf States appealed the PUCT's decision on this matter to
the Travis County District Court in Texas. Subsequent to the June 1999
settlement agreement discussed in Note 2 to the financial statements in the
Form 10-K, Entergy Gulf States removed the reserve for River Bend plant
costs held in abeyance and reduced the net book value of the plant asset.
The June 1999 settlement agreement limits potential recovery of the
remaining plant asset, less depreciation, to $115 million as of January 1,
2002. In the unbundled cost of service settlement discussed above, and
consistent with the June 1999 settlement, Entergy Gulf States agrees not to
prosecute its appeal until January 1, 2002. Entergy Gulf States also
agrees that it will not seek recovery of the abeyed plant costs through any
additional charge to Texas ratepayers. The financial statement impact of
the settlement agreement on the abeyed plant costs will ultimately depend
on several factors, including the probable discontinuance of SFAS 71
accounting treatment to the Texas generation business, the determination of
the market value of generation assets, and the possible enactment of
legislation in Texas requiring the pass-through or sharing of any stranded
benefits with Texas ratepayers. No assurance can be given that additional
reserves or write-offs will not be required in the future.
PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States)
As determined in the June 1999 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 unless the PUCT orders
otherwise. In July 2001, Entergy Gulf States filed with the PUCT a
petition to abolish the fuel factor methodology and to permit instead
Entergy Gulf States' existing fixed fuel factor to remain in effect until
the fuel factor component of its price-to-beat rate takes effect. Entergy
Gulf States cannot predict whether the PUCT will grant the petition. The
amounts collected under Entergy Gulf States' fixed fuel factor through the
date retail open access commences are subject to fuel reconciliation
proceedings before the PUCT.
In January 2001, Entergy Gulf States filed a fuel reconciliation case
covering the period from March 1, 1999 to August 31, 2000. Entergy Gulf
States is reconciling approximately $583 million of fuel and purchased
power costs. As part of this filing, Entergy Gulf States requested the
collection of $28 million, plus interest, of under-recovered fuel and
purchased power costs. A procedural schedule has been established calling
for a hearing in August 2001. The PUCT has deferred additional fuel
surcharges for several utilities including Entergy Gulf States until the
final fuel reconciliation that is scheduled to be filed in March 2003.
Therefore, no assurance can be given as to the collection of the surcharge
prior to that time.
In March 2001, Entergy Gulf States filed an application with the PUCT
requesting an interim surcharge to collect $82 million, plus interest, of
under-recovered fuel and purchased power expenses incurred from September
2000 through January 2001. In May 2001, the PUCT denied Entergy Gulf
States' request to implement the interim fuel surcharge and ordered that
the uncollected fuel surcharge be carried over subject to the final fuel
reconciliation that is scheduled to be filed in March 2003.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States)
In June 2001, the LPSC approved a settlement between Entergy Gulf
States and the LPSC staff to refund $25.9 million, including interest,
resolving issues in Entergy Gulf States' third, sixth, and seventh post-
merger earnings reviews filed with the LPSC in May 1996, 1999, and 2000,
respectively. The refund is being made over a three month period beginning
July 2001. The settlement resolved the prospective return on common equity
issue on remand from the Louisiana Supreme Court in the third earnings
review. Refund issues from the sixth and seventh earnings reviews were
also resolved; however, certain prospective issues remain in dispute. The
LPSC approved an 11.1% return on common equity through June 2003, which
Entergy Gulf States was allowed to include in its eighth post-merger
earnings analysis discussed below.
In May 2001, Entergy Gulf States filed its eighth 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. A procedural schedule has
not yet been established.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In May 2000, Entergy Louisiana submitted its fifth annual performance-
based formula rate plan filing. The filing used a 1999 test year. As a
result of this filing, Entergy Louisiana implemented a $24.8 million base
rate reduction in August 2000. Entergy Louisiana has reached a proposed
settlement with the LPSC staff in which Entergy Louisiana has agreed to
increase to $28.2 million the total base rate reduction, effective August
2000. The settlement resolves all issues in the proceeding except
for Entergy Louisiana's claim for an increase in its allowed return on
common equity from 10.5% to 11.6%. A procedural schedule has not yet been
established by the LPSC for its consideration of the proposed settlement
and the return on common equity issue.
In April 2001, Entergy Louisiana submitted its sixth annual
performance-based formula rate plan filing, which used a 2000 test year.
The filing indicated that an immaterial base rate reduction might
be appropriate. This filing will be subject to review by the LPSC.
A procedural schedule has not yet been established by the LPSC.
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. 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
intervened in the LPSC proceeding. In direct testimony, plaintiffs purport
to quantify many of their claims for the period 1989 through 1998 in an
amount totaling $544 million, plus interest.
Entergy Louisiana has agreed to settle both of these proceedings. The
LPSC approved the settlement agreement following a fairness hearing before
an ALJ in November 2000. The state court certified the plaintiff class and
approved the settlement after a fairness hearing in April 2001. Under the
terms of the settlement agreement, Entergy Louisiana agreed 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. Entergy Louisiana previously
recorded reserves for the refund, which Entergy Louisiana began making over
a three month period beginning in July of 2001 through the fuel adjustment
clause.
Also under the terms of the settlement, Entergy Louisiana consents 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 for the
remainder of the contract's 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.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
In March 2001, Entergy Mississippi submitted its annual performance-
based formula rate plan filing for the 2000 test year. The submittal
indicated that a $6.7 million rate increase adjustment was appropriate
under the formula rate plan. In April 2001, the MPSC Staff and Entergy
Mississippi entered into a stipulation that provides for an increase of
$5.6 million, which was approved by the MPSC and was effective May 2001.
Filings with the Council (Entergy Corporation and Entergy New Orleans)
Rate Proceedings
In June 2001, Entergy New Orleans filed with the Council for changes
in gas and electric rates based on a test year ending December 31, 2000.
The filing indicated that an increase in both gas and electric rates might
be appropriate. Proceedings on Entergy New Orleans' filing have been
deferred until June 2002.
Fuel Adjustment Clause Litigation
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 attorneys' 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 plaintiffs' 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. Testimony was filed on behalf
of the plaintiffs in this proceeding in April 2000 and has been
supplemented. The testimony, as supplemented, asserts, among other things,
that Entergy New Orleans and other defendants have engaged in fuel
procurement and power purchasing practices and included costs in Entergy
New Orleans' fuel adjustment that could have resulted in New Orleans
customers being overcharged by more than $98 million over a period of
years. In June 2001, the Council's Advisors filed testimony on these
issues in which they allege that Entergy New Orleans ratepayers may have
been overcharged by more than $32 million, the vast majority of which is
reflected in the plaintiffs' claim. However, it is not clear precisely
what periods and damages are being alleged in the proceeding. Entergy
intends to defend this matter vigorously, both in court and before the
Council. Hearings are to be held in November 2001. The ultimate
outcome of the lawsuit and the Council proceeding cannot be predicted at
this time.
Natural Gas Purchases
In a resolution adopted August 2, 2001, the Council ordered Entergy
New Orleans to account for $30.1 million of certain natural gas costs
charged to its gas distribution customers from July 1997 through May 2001.
The resolution suggests that refunds may be due to the gas distribution
customers if Entergy New Orleans cannot account satisfactorily for these
costs. Entergy New Orleans' response to the Council is due within 45 days
of the adoption of the resolution. The ultimate outcome of the proceeding
cannot be predicted at this time.
Proposed System Energy 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 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.
In July 2001, FERC denied requests for rehearing, including System
Energy's request. Management is currently evaluating its possible
responses to this denial. System Energy has provided reserves for a
potential refund to the rate level of the initial ALJ decision, including
interest. Management has analyzed the financial effect of FERC's July 2000
order, 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.
Grand Gulf Accelerated Recovery Tariff (Entergy Arkansas)
In April 1998, FERC approved the GGART that Entergy Arkansas filed as
part of the settlement agreement that the APSC approved in December 1997.
The GGART was designed to allow Entergy Arkansas to pay down a portion of
its Grand Gulf purchased power obligation in advance of the implementation
of retail access in Arkansas. The GGART provides for the acceleration of
$165.3 million of its obligation over the period January 1, 1999 through
June 30, 2004. In April 2001, FERC approved Entergy Arkansas' filing that
requested cessation of the GGART effective July 1, 2001. Entergy Arkansas
made the filing pursuant to the terms of a December 2000 settlement
agreement with the APSC, which is discussed in Note 2 to the financial
statements in the Form 10-K.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 2001, Entergy Corporation
repurchased 203,500 shares of common stock in the open market for an
aggregate purchase price of approximately $7.9 million.
During the six months ended June 30, 2001, Entergy Corporation issued
2,197,177 shares of its previously repurchased common stock to satisfy
stock options exercised and employee stock purchases. In addition, Entergy
Corporation received proceeds of approximately $2.1 million from the
issuance of 79,473 shares of common stock to satisfy stock options
exercised.
NOTE 4. LONG-TERM DEBT
(Entergy Arkansas)
On July 17, 2001, Entergy Arkansas issued $100 million of 6.125%
Series First Mortgage Bonds due July 1, 2005. The proceeds are being used
for general corporate purposes, including the retirement of short-term
indebtedness associated with ice storm expenses.
(Entergy Gulf States)
On August 1, 2001, Entergy Gulf States retired, at maturity, $122.8
million of 6.41% Series First Mortgage Bonds with internally generated
funds, primarily from the Entergy inter-company money pool funding
arrangement.
(Entergy Louisiana)
On April 1, 2001, Entergy Louisiana retired, at maturity, $18.7
million of 7.875% Series First Mortgage Bonds with internally generated
funds.
(Entergy Mississippi)
On January 31, 2001, Entergy Mississippi issued $70 million of 6.25%
Series First Mortgage Bonds due February 1, 2003. The proceeds are being
used for general corporate purposes, including the retirement of short-term
indebtedness incurred from money pool borrowings for capital expenditures
and working capital needs.
(Entergy New Orleans)
On February 23, 2001, Entergy New Orleans issued $30 million of 6.65%
Series First Mortgage Bonds due March 1, 2004. The proceeds are being used
for general corporate purposes, including the retirement of short-term
indebtedness incurred from money pool borrowings for capital expenditures
and working capital needs.
(System Energy)
On August 1, 2001, System Energy retired, at maturity, $135 million of
7.71% Series First Mortgage Bonds with internally generated funds.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 27, 2001, Entergy Corporation's Board of Directors declared a
common stock dividend of $0.315 per share, payable on September 1, 2001, to
holders of record on August 14, 2001.
NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation)
Entergy's reportable segments as of June 30, 2001, are domestic
utility and System Energy, Entergy-Koch, Entergy Wholesale Operations
(EWO), and domestic non-utility nuclear. Prior to the first quarter of
2001, Entergy also reported its power marketing and trading segment that
engaged in the marketing of wholesale electricity, gas, other generating
fuels, electric capacity, and financial instruments. On January 31, 2001,
Entergy contributed substantially all of the power marketing and trading
business to Entergy-Koch, and now reports results from the joint venture as
equity in earnings of unconsolidated equity affiliates in the financial
statements. See Note 9 to the financial statements for further discussion
of the investment in Entergy-Koch, L.P. EWO, which includes Entergy's
global power development business, and domestic non-utility nuclear were
formerly reported in "all other," but are now reportable segments. "All
Other" now includes the parent company, Entergy Corporation, and other
business activity. Other business activity in the All Other column is
principally gains or losses on the sales of businesses and the earnings on
the proceeds of those sales.
Entergy's segment financial information for the three months ended
June 30, 2001 and 2000 is as follows (in thousands):
Domestic Entergy- EWO* Domestic All Other* Eliminations Consolidated
Utility Koch/ Non-Utility
and System Power Nuclear *
Energy Marketing
and
Trading*
2001
Operating Revenues $2,022,354 $625 $315,407 $150,041 $8,092 ($1,243) $2,495,276
Equity in Earnings
(Loss) of Unconsol.
Equity Affiliates - 71,478 (698) - - - 70,780
Income Taxes 115,228 26,664 308 21,403 2,239 - 165,842
Net Income (Loss) 175,155 43,463 (13,284) 33,101 7,148 - 245,583
2000
Operating Revenues $1,697,577 $347,257 $34,901 $62,119 $8,514 ($12,580) $2,137,788
Income Taxes 120,306 3,055 11,646 8,480 6,376 - 149,863
Net Income 186,946 5,390 27,177 12,073 14,187 - 245,773
Entergy's segment financial information for the six months ended June
30, 2001 and 2000 is as follows (in thousands):
Domestic Entergy- EWO* Domestic All Other* Eliminations Consolidated
Utility Koch/ Non-
and System Power Utility
Energy Marketing Nuclear *
and
Trading*
2001
Operating Revenues $4,006,062 $625 $793,352 $329,416 $20,482 ($2,235) $5,147,702
Equity in Earnings
(Loss) of Unconsol.
Equity Affiliates - 97,146 (1,603) - - - 95,543
Income Taxes (Benefit) 200,733 36,838 (2,269) 42,089 (3,119) - 274,272
Net Income (Loss) 295,593 60,028 (11,504) 64,484 (2,147) - 406,454
Total Assets 20,706,094 620,192 1,984,206 2,093,291 958,379 (995,320) 25,366,842
2000
Operating Revenues $3,098,921 $675,042 $62,532 $122,949 $14,276 ($24,440) $3,949,280
Income Taxes 191,497 8,929 8,217 17,044 7,001 - 232,688
Net Income 274,284 16,926 24,946 23,531 14,496 - 354,183
Total Assets 20,228,032 724,066 1,758,639 604,973 1,542,609 (534,043) 24,324,276
Businesses marked with * are sometimes referred to as the "competitive
businesses," with the exception of the parent company, Entergy Corporation.
Eliminations are primarily inter-segment activity.
NOTE 7. ENTERGY-FPL GROUP MERGER (Entergy Corporation)
On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into
a Merger Agreement providing for a business combination that would have
resulted in the creation of a new company. On April 1, 2001, Entergy
Corporation and FPL Group, Inc. terminated the Merger Agreement by mutual
decision. Both companies agreed that no termination fee is payable under
the terms of the Merger Agreement, unless within nine months of the
termination one party agrees to a substantially similar transaction with
another party. Each company will bear its own merger-related expenses.
Entergy has filed for withdrawal of its merger-related filings submitted to
the FERC, the SEC, and state and local regulatory agencies.
NOTE 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (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 was implemented effective
January 1, 2001. This statement requires that all derivatives be
recognized in the balance sheet, either as assets or liabilities, 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 to ensure adequate power supplies and to mitigate certain risks in the
domestic utility business; and
o to hedge cash flows for certain risks in its competitive businesses,
including certain interest rate, currency, and commodity price risks.
The implementation of SFAS 133 did not materially impact the power
marketing and trading business, as its derivative portfolio was already
marked-to-market under the provisions of EITF 98-10, "Measuring the Value
of Energy-Related Contracts". Effective January 1, 2001, Entergy recorded
a net-of-tax cumulative-effect-type adjustment of approximately $18.0
million reducing accumulated other comprehensive income to recognize at
fair value all derivative instruments that are designated as cash-flow
hedging instruments, primarily interest rate swaps and foreign currency
forward contracts related to Entergy's competitive businesses.
FASB is considering certain interpretations of SFAS 133 that could
affect the power industry. Entergy's interpretation of these issues in its
initial implementation of SFAS 133 is based on management's application of
existing accounting literature. To the extent that FASB ultimately
interprets these issues differently than Entergy, Entergy's financial
statements could be materially affected in future periods, although the
amount of the possible effect cannot be quantified at this time.
NOTE 9. INVESTMENT IN ENTERGY-KOCH, L.P. (Entergy Corporation)
On January 31, 2001, subsidiaries of Entergy and Koch Industries, Inc.
formed Entergy-Koch, L.P., a limited partnership equally owned by Entergy
and Koch Industries, Inc. An eight-member board of directors, equally
appointed by Entergy and Koch Industries, Inc., governs Entergy-Koch, L.P.
As part of the joint venture agreement, Entergy contributed substantially
all of its power marketing and trading business in the United States and
the United Kingdom and made other contributions, including equity and
loans, totaling $414 million. Koch contributed to the venture its 9,000-
mile Koch Gateway Pipeline (which has been renamed the Gulf South
Pipeline), gas storage facilities, including the Bistineau storage facility
near Shreveport, Louisiana, and Koch Energy Trading, which marketed and
traded electricity, gas, weather derivatives, and other energy-related
commodities and services. Entergy's investment in Entergy-Koch, L.P. is
accounted for under the equity method of accounting. Certain terms of the
partnership arrangement allocate income from various sources, and the taxes
on that income, on a disproportionate basis. These disproportionate
allocations have been favorable to Entergy in the aggregate in 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.
Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See "Ratepayer Lawsuits, Entergy Louisiana Fuel Clause Lawsuit" in
Item 1 of Part I of the Form 10-K for a discussion of the complaints filed
by ratepayers with the LPSC and in Louisiana state court in Orleans Parish.
See "Filings with the LPSC, Fuel Adjustment Clause Litigation" and "Filings
with the Council, 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.
See "Ratepayer Lawsuits, Vidalia Project Sub-Docket" in Item 1 of Part
I of the Form 10-K and in Item 1 of Part II of the 2001 first quarter Form
10-Q for a discussion of the sub-docket established in the Entergy
Louisiana Fuel Clause Lawsuit at the LPSC.
Franchise Service Area Litigation (Entergy Gulf States)
See "Franchise Service Area Litigation" in Item 1 of Part I of the
Form 10-K for a discussion of the litigation with Beaumont Power & Light
(BP&L). In May 2000, the PUCT voted to remand the proceeding back to the
ALJ to allow BP&L to provide further evidence. A hearing on the merits of
the case has been scheduled for October 2001.
Hindusthan Development Corporation, Ltd. (Entergy Corporation)
See "Hindusthan Development Corporation, Ltd." in Item 1 of Part I of
the Form 10-K for a discussion of the arbitration proceeding in India
against Entergy Power Asia Ltd. (EPAL), a wholly-owned subsidiary of
Entergy Corporation. In the second quarter of 2001, EPAL and HDC settled
the arbitration for an immaterial amount, and the claim has been dismissed.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was held on
May 11, 2001. The following matters were voted on and received the
specified number of votes for, abstentions, votes withheld (against), and
broker non-votes:
1. Election of Directors:
Broker
Name of Nominee Votes For Abstentions Votes Withheld Non-Votes
Maureen S. Bateman 176,556,569 N/A 12,652,626 N/A
W. Frank Blount 176,655,654 N/A 12,553,541 N/A
George W. Davis 176,606,967 N/A 12,602,228 N/A
Norman C. Francis 176,572,938 N/A 12,636,257 N/A
J. Wayne Leonard 176,664,856 N/A 12,544,339 N/A
Robert v.d. Luft 176,622,393 N/A 12,586,802 N/A
Kathleen A. Murphy 176,634,842 N/A 12,574,353 N/A
Broker
Name of Nominee Votes For Abstentions Votes Withheld Non-Votes
Paul W. Murrill 176,592,924 N/A 12,616,271 N/A
James R. Nichols 176,669,396 N/A 12,539,799 N/A
William A. Percy, II 176,597,119 N/A 12,612,076 N/A
D. H. Reilley 176,601,257 N/A 12,607,938 N/A
Wm. Clifford Smith 176,662,576 N/A 12,546,619 N/A
Bismark A. Steinhagan 176,635,906 N/A 12,573,289 N/A
(Entergy Arkansas)
A consent in lieu of the annual meeting of common stockholders was
executed on June 27, 2001. 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 June 27, 2001. 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 June 27, 2001. 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 June 27, 2001. 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 June 27, 2001. 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, 2001. 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
Environmental Regulation (Entergy Gulf States, Entergy Louisiana)
The State of Louisiana is considering future emission control
strategies to address continued ozone non-attainment status of areas in and
around Baton Rouge, Louisiana. In May 2001 the Louisiana Department of
Environmental Quality issued an advance notice of rulemaking for control of
NOx as part of a developing plan to bring this area into attainment with
the air quality standards for ozone by May 2005. The notice contains
certain provisions that would lead to installation of new NOx control
equipment at Entergy Gulf States and Entergy Louisiana generating units.
Preliminary analyses indicate compliance costs are likely to be
approximately $120 million but could be as much as approximately $300
million overall. Entergy Gulf States and Entergy Louisiana at this time
are expected to incur roughly similar shares of these additional costs.
Most of the related expenditures would take place in 2003 and 2004. The
final rule is expected to be in place by December 2001. Cost estimates
will be refined as engineering studies progress before and after
promulgation of the final rule and approval of the state implementation
plan by EPA. Entergy Gulf States and Entergy Louisiana will be required to
obtain revised operating permits and meet new, lower emission limits for
NOx. Entergy expects to file before October 2002 revised permit
applications containing its detailed compliance strategy.
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, June 30,
1996 1997 1998 1999 2000 2001
Entergy Arkansas 2.93 2.54 2.63 2.08 3.01 3.02
Entergy Gulf States 1.47 1.42 1.40 2.18 2.60 2.81
Entergy Louisiana 3.16 2.74 3.18 3.48 3.33 3.04
Entergy Mississippi 3.40 2.98 3.12 2.44 2.33 2.29
Entergy New Orleans 3.51 2.70 2.65 3.00 2.66 1.97
System Energy 2.21 2.31 2.52 1.90 2.41 2.36
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, June 30,
1996 1997 1998 1999 2000 2001
Entergy Arkansas 2.44 2.24 2.28 1.80 2.70 2.71
Entergy Gulf States (a) 1.19 1.23 1.20 1.86 2.39 2.69
Entergy Louisiana 2.64 2.36 2.75 3.09 2.93 2.69
Entergy Mississippi 2.95 2.69 2.80 2.18 2.09 2.08
Entergy New Orleans 3.22 2.44 2.41 2.74 2.43 1.82
(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*
4(a) - Third Amended and Restated Credit Agreement, dated as of
May 17, 2001, among Entergy, the Banks (Citibank, N.A.,
ABN AMRO Bank N.V., The Bank of New York, Bayerische Hypo-
und Vereinsbank AG (New York Branch), The Industrial Bank
of Japan, Ltd., The Fuji Bank, Limited, Bayerische
Landesbank Girozentrale, The Chase Manhattan Bank, The
Royal Bank of Scotland PLC, The Bank of Nova Scotia, Bank
One, N.A., Barclays Bank PLC, Mellon Bank, N.A., Royal
Bank of Canada, Union Bank of California, N.A., IntesaBCI
(Los Angeles Foreign Branch), KBC Bank N.V., and
Westdeutsche Landesbank Girozentrale), and Citibank,
N.A., as Agent
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.
___________________________
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 June 30, 2001, 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 June 30, 2001.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy
A Current Report on Form 8-K, dated April 2, 2001,
was filed with the SEC on April 2, 2001, 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 April 3, 2001,
was filed with the SEC on April 3, 2001, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated April 25, 2001,
was filed with the SEC on April 25, 2001, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated July 3, 2001, was
filed with the SEC on July 3, 2001, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Corporation
A Current Report on Form 8-K, dated July 5, 2001, was
filed with the SEC on July 5, 2001, 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 5, 2001, was
filed with the SEC on July 5, 2001, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy
A Current Report on Form 8-K, dated July 6, 2001, was
filed with the SEC on July 13, 2001, reporting
information under Item 5. "Other Events".
Entergy Corporation
A Current Report on Form 8-K, dated July 31, 2001,
was filed with the SEC on July 31, 2001, reporting
information under Item 7. "Financial Statements, Pro
Forma Financial Statements and Exhibits" and Item 9.
"Regulation FD Disclosure".
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: August 10, 2001