UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
OR
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, IRS 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
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
Entergy Corporation Common Stock, $0.01 Par Value - 222,201,504 New York Stock Exchange, Inc.
shares outstanding at February 28, 2002 Chicago Stock Exchange Inc.
Pacific Exchange Inc.
Entergy Arkansas Capital I 8-1/2% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value:
$4.40 Dividend Series New York Stock Exchange, Inc.
$4.52 Dividend Series New York Stock Exchange, Inc.
$5.08 Dividend Series New York Stock Exchange, Inc.
Adjustable Rate Series B (Depository Receipts) New York Stock Exchange, Inc.
Entergy Gulf States Capital I 8.75% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Entergy Louisiana Capital I 9% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
Entergy Arkansas, Inc. Preferred Stock, Cumulative, $100 Par Value
Preferred Stock, Cumulative, $0.01 Par Value
Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value
Entergy Louisiana, Inc. Preferred Stock, Cumulative, $100 Par Value
Preferred Stock, Cumulative, $25 Par Value
Entergy Mississippi, Inc. Preferred Stock, Cumulative, $100 Par Value
Entergy New Orleans, Inc. Preferred Stock, Cumulative, $100 Par Value
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 ____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrants' knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Entergy Corporation Common Stock,
$0.01 Par Value, held by non-affiliates, was $9.2 billion based on the
reported last sale price of $41.28 per share for such stock on the New
York Stock Exchange on February 28, 2002. Entergy Corporation is
directly or indirectly the sole holder of the common stock of Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System
Energy Resources, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Entergy Corporation to be
filed in connection with its Annual Meeting of Stockholders, to be
held May 10, 2002, are incorporated by reference into Parts I and III
hereof.
TABLE OF CONTENTS
Page
Number
Definitions i
Part I
Item 1. Business 1
Item 2. Properties 45
Item 3. Legal Proceedings 45
Item 4. Submission of Matters to a Vote of Security 45
Holders
Directors and Executive Officers of Entergy 45
Corporation
Part II
Item 5. Market for Registrants' Common Equity and 48
Related Stockholder Matters
Item 6. Selected Financial Data 49
Item 7. Management's Discussion and Analysis of 49
Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures 49
About Market Risk
Item 8. Financial Statements and Supplementary Data 50
Item 9. Changes in and Disagreements with Accountants 228
on Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the 228
Registrants
Item 11. Executive Compensation 232
Item 12. Security Ownership of Certain Beneficial 244
Owners and Management
Item 13. Certain Relationships and Related Transactions 247
Part IV
Item 14. Exhibits, Financial Statement Schedules, and 248
Reports on Form 8-K
Signatures 249
Report of Independent Accountants on Financial Statement 257
Schedules
Index to Financial Statement Schedules S-1
Exhibit Index E-1
This combined Form 10-K is separately filed by Entergy
Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc. Information
contained herein relating to any individual company is filed by such
company on its own behalf. Each company makes representations only as
to itself and makes no other representations whatsoever as to any
other company.
This report should be read in its entirety. No one section of
the report deals with all aspects of the subject matter.
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 and the availability of
capital, the onset of competition, 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,
including the use of financial and derivative instruments and
volatility of changes in market prices, 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, actions of rating agencies, and other factors.
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are
defined below:
Abbreviation or Acronym Term
ADEQ Arkansas Department of Environmental Quality
AFUDC Allowance for Funds Used During Construction
Algiers 15th Ward of the City of New Orleans, Louisiana
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam
Electric Generating Station (nuclear), owned by
Entergy Arkansas
APB Accounting Principles Board
APSC Arkansas Public Service Commission
Availability
Agreement Agreement, dated as of June 21, 1974, as
amended, among System Energy and Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, and the assignments thereof
BCF One billion cubic feet of natural gas
BCF/D One billion cubic feet of natural gas per day
BPS British pounds sterling
Board Board of Directors of Entergy Corporation
Boston Edison Boston Edison Company
Cajun Cajun Electric Power Cooperative, Inc.
CitiPower CitiPower Pty., an electric distribution company
serving Melbourne, Australia and surrounding
suburbs, which was sold by Entergy effective
December 31, 1998
Consolidated Edison Consolidated Edison, Inc.
Council Council of the City of New Orleans, Louisiana
D.C. Circuit United States Court of Appeals for the District of
Columbia Circuit
DOE United States Department of Energy
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
EITF Emerging Issues Task Force
ENHC Entergy Nuclear Holding Company #1
EPA United States Environmental Protection Agency
EPAct Energy Policy Act of 1992
EPDC Entergy Power Development Corporation
EPMC Entergy Power Marketing Corporation
ET&M Entergy Trading and Marketing, Ltd.
ETHC Entergy Technology Holding Company
EWG Exempt wholesale generator under PUHCA
EWO Entergy Wholesale Operations, which primarily
consists of Entergy's 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
DEFINITIONS (Continued)
Abbreviation or Acronym Term
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 Nuclear Entergy Nuclear, Inc.
Entergy Nuclear
Operations Entergy Nuclear Operations, Inc.
Entergy Operations Entergy Operations, Inc.
Entergy Power Entergy Power, Inc.
Entergy Services Entergy Services, Inc.
FASB Financial Accounting Standards Board
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 NYPA by Entergy's domestic
non-utility nuclear business
FUCO Exempt foreign utility company under PUHCA
Grand Gulf 1 and 2 Units 1 and 2 of Grand Gulf Steam Electric
Generating Station (nuclear), 90% owned or leased
by System Energy
GWH Gigawatt hours, which equals one million kilowatt-
hours
Independence Independence Steam Electric Station (coal), owned
16% by Entergy Arkansas, 25% by Entergy
Mississippi, and 7% by Entergy Power
Indian Point 1 Indian Point Energy Center Unit 1 - nuclear power
plant that has been shut-down and in safe storage
since the 1970s, located in Westchester County,
New York, purchased in September 2001 from
Consolidated Edison by Entergy's domestic non-
utility nuclear business
Indian Point 2 Indian Point Energy Center Unit 2 - nuclear power
plant, 970 MW facility located in Westchester
County, New York, purchased in September 2001 from
Consolidated Edison by Entergy's domestic non-
utility nuclear business
Indian Point 3 Indian Point Energy Center Unit 3 - nuclear power
plant, 980 MW facility located in Westchester
County, New York, purchased in November 2000 from
NYPA by Entergy's domestic non-utility nuclear
business
IRS Internal Revenue Service
KV kilovolt
KW kilowatt
KWH kilowatt-hour(s)
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy London effective February 1,
1997, and was sold by Entergy effective December
4, 1998
LDEQ Louisiana Department of Environmental Quality
LPSC Louisiana Public Service Commission
MCF 1,000 cubic feet of gas
MMBTU One million British Thermal Units
MPSC Mississippi Public Service Commission
MW megawatt(s), which equals one thousand kilowatt(s)
DEFINITIONS (Concluded)
Abbreviation or Acronym Term
N/A Not applicable
Nelson Unit 6 Unit No. 6 (coal) of the Nelson Steam Electric
Generating Station, owned 70% by Entergy Gulf
States
NERC North American Electric Reliability Council
Net debt ratio Gross debt less cash and cash equivalents divided
by total capitalization less cash and cash equivalents
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
PRP Potentially Responsible Party (a person or entity
that may be responsible for remediation of
environmental contamination)
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935, as
amended
PURPA Public Utility Regulatory Policies Act of 1978
RTO Regional transmission organization
Reallocation
Agreement 1981 Agreement, superseded in part by a
June 13, 1985 decision of FERC, among Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy relating to
the sale of capacity and energy from Grand Gulf
Ritchie Unit 2 Unit 2 of the R. E. Ritchie Steam Electric
Generating Station (gas/oil)
River Bend River Bend Steam Electric Generating Station
(nuclear)
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards,
promulgated by the FASB
SMEPA South Mississippi Electric Power Agency, which
owns a 10% interest in Grand Gulf 1
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.
System Fuels System Fuels, Inc.
tons/hr Tons per hour, used as a measure of steam
production
UK The United Kingdom of Great Britain and Northern
Ireland
Unit Power Sales
Agreement Agreement, dated as of June 10, 1982, as
amended and approved by FERC, among Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy, relating
to the sale of capacity and energy from System
Energy's share of Grand Gulf 1
Warren Power Warren Power Plant, 300 MW simple cycle gas
turbine merchant power plant located in Vicksburg,
Mississippi
Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam
Electric Generating Station, 100% owned or leased
by Entergy Louisiana
weather-adjusted
usage electric usage excluding the effects of
weather deviations
White Bluff White Bluff Steam Electric Generating Station, 57%
owned by Entergy Arkansas
PART I
Item 1. Business
BUSINESS OF ENTERGY
Entergy Corporation
Entergy Corporation is a Delaware corporation which, through its
subsidiaries, engages principally in the following businesses: domestic
utility, domestic non-utility nuclear, and energy commodity services.
Domestic non-utility nuclear and energy commodity services are
sometimes referred to as the competitive businesses. Entergy
Corporation has no significant assets other than the stock of its
subsidiaries. Entergy Corporation is a registered public utility
holding company under PUHCA. As such, Entergy Corporation and its
subsidiaries generally are subject to the broad regulatory provisions
of PUHCA. PUHCA generally limits registered public utility holding
company activity to direct and indirect ownership of domestic
integrated utility businesses, domestic and foreign electric generation
ventures, foreign utility ownership, telecommunications and information
service businesses, and certain other domestic energy related
businesses. Following are the percentages of Entergy's consolidated
revenues and net income generated by Entergy's reportable operating
segments and the percentage of total assets held by them:
Segment % of Revenue % of Net Income % of Total Assets
2001 2000 1999 2001 2000 1999 2001 2000 1999
Domestic utility 77 74 73 77 87 93 78 81 82
Domestic non-utility nuclear 8 3 1 17 7 3 13 9 3
Energy commodity services 14 23 26 14 8 (7) 9 10 8
Other 1 - - (8) (2) 11 - - 7
Additional financial information regarding Entergy Corporation's
operating segments is contained in Note 12 to the financial statements.
Domestic Utility
The domestic utility is Entergy's predominant business segment, as
shown in the chart above. Entergy Corporation has five wholly-owned
domestic retail electric utility subsidiaries: Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans. As of December 31, 2001, these utility companies
provided retail electric service to approximately 2.6 million customers
in portions of the states of Arkansas, Louisiana, Mississippi, and
Texas. In addition, Entergy Gulf States furnishes natural gas utility
service in and around Baton Rouge, Louisiana, and Entergy New Orleans
furnishes natural gas utility service in New Orleans, Louisiana. The
business of the domestic utility companies is subject to seasonal
fluctuations, with the peak sales period normally occurring during the
third quarter of each year. During 2001, the domestic utility
companies' combined retail electric sales volumes as a percentage of
total electric sales volumes were: residential - 28.6%; commercial -
22.7%; and industrial - 38.2%. Retail electric revenues from these
sectors as a percentage of total electric revenues were: residential -
36.1%; commercial - 25.7%; and industrial - 31.7%. Sales to
governmental and municipal sectors and to nonaffiliated utilities
accounted for the balances of electric sales and revenues. The major
industrial customers of the domestic utility companies are in the
chemical, petroleum refining, and paper industries. State or local
regulatory authorities regulate the retail rates and services of
Entergy's domestic retail utility subsidiaries.
Entergy Corporation also owns 100% of the voting stock of System
Energy, an Arkansas corporation that owns and leases an aggregate 90%
undivided interest in Grand Gulf. System Energy sells all of the
capacity and energy from its interest in Grand Gulf 1 at wholesale to
its only customers, Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans. Management discusses sales from
Grand Gulf 1 more thoroughly in "CAPITAL REQUIREMENTS AND FUTURE
FINANCING - Certain Grand Gulf-related Financial and Support Agreements
- - Unit Power Sales Agreement" below. System Energy's wholesale power
sales are subject to the jurisdiction of FERC.
Entergy Services, a Delaware corporation wholly-owned by Entergy
Corporation, provides management, administrative, accounting, legal,
engineering, and other services primarily to the domestic utility
subsidiaries of Entergy Corporation. Entergy Operations, a Delaware
corporation, is also wholly-owned by Entergy Corporation and provides
nuclear management, operations and maintenance services under contract
for ANO, River Bend, Waterford 3, and Grand Gulf 1, subject to the
owner oversight of Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and System Energy, respectively. Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans own 35%, 33%,
19%, and 13%, respectively, of the common stock of System Fuels, a
Louisiana corporation that implements and manages certain programs to
procure, deliver, and store fuel supplies for those companies. Entergy
Services, Entergy Operations, and System Fuels provide their services
to the domestic utility companies and System Energy on an "at cost"
basis, pursuant to service agreements approved by the SEC under PUHCA.
Information regarding affiliate transactions is contained in Note 16 to
the financial statements.
Entergy Gulf States has wholly-owned subsidiaries that (i) own and
operate intrastate gas pipelines in Louisiana used primarily to
transport fuel to two of Entergy Gulf States' generating stations; (ii)
own the Lewis Creek Station, a gas-fired generating plant, which is
leased to and operated by Entergy Gulf States; and (iii) own several
miles of railroad track constructed in Louisiana primarily for the
purpose of transporting coal for use as boiler fuel at Entergy Gulf
States' Nelson Unit 6 generating facility.
Domestic Non-Utility Nuclear
Entergy's domestic non-utility nuclear business is focused on
acquiring, owning, operating, and selling power from nuclear power
plants and providing operations and management services to nuclear
power plants owned by other utilities in the United States. Operations
and management services, including decommissioning services, are
provided through Entergy's wholly-owned subsidiary, Entergy Nuclear.
Entergy's domestic non-utility nuclear business owns the following
operating nuclear power plants:
Power Plant Acquired Capacity Percent Ownership Location
Pilgrim July 1999 670 MW 100% Plymouth, MA
FitzPatrick Nov. 2000 825 MW 100% Oswego, NY
Indian Point 3 Nov. 2000 980 MW 100% Westchester County, NY
Indian Point 2 Sept. 2001 970 MW 100% Westchester County, NY
In August 2001, Entergy's domestic non-utility nuclear business
agreed to purchase the 510 MW Vermont Yankee Nuclear Power Plant in
Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation (VYNPC)
for $180 million, to be paid in cash upon closing. Entergy will
receive the plant, nuclear fuel, inventories, and related real estate.
The liability to decommission the plant, as well as related
decommissioning trust funds of approximately $280 million, will also be
transferred to Entergy. Management expects to close the transaction in
the summer of 2002, pending the approvals of the NRC, the Public
Service Board of Vermont, and other regulatory agencies.
Entergy's non-utility nuclear business has entered into power
purchase agreements (PPAs) to sell the power produced by its power
plants at prices established in the PPAs. To the extent that a plant's
output is not subject to a PPA, power sales would be subject to the
fluctuation of market power prices. Following is a summary of the
amount of the Entergy non-utility nuclear business's capacity currently
subject to PPAs. Entergy continues to pursue opportunities to extend
the existing PPAs and to enter into new PPAs with other parties.
Capacity subject to PPAs
Entergy's Capacity
Power Pool in the Power Pool 2002 2003 2004 2005
New York ISO 2,775 MW 100% 100% 79% 0%
ISO New England 670 MW 100% 85% 85% 20%
In addition, Entergy will sell 100% of Vermont Yankee's output up to
its rated capacity to VYNPC's current owner-utilities under a 10-year
PPA executed in conjunction with the transaction, which management
expects to close in the summer of 2002. The PPA includes an adjustment
clause where the prices specified in the PPA will be adjusted downward
annually, beginning in 2006, if power market prices drop below the PPA
prices. Vermont Yankee is a part of the ISO New England.
Entergy Nuclear is authorized to provide services to nuclear power
plants owned by entities that are not affiliated with Entergy.
Services provided include engineering, operations and maintenance, fuel
procurement, management and supervision, technical support and
training, administrative support, and other managerial or technical
services required to operate, maintain, and decommission nuclear
electric power facilities. Currently Entergy Nuclear is providing
decommissioning services for the Maine Yankee nuclear power plant,
which is owned by Maine Yankee Atomic Power Company. Entergy Nuclear
completed successfully in 2001 its decommissioning services project for
Millstone Unit 1. The cost of decommissioning and insuring the plants
that Entergy provides decommissioning services for is the
responsibility of the plant owners.
Entergy Nuclear also is a party to two business arrangements that
assist it in providing operation and management services. Entergy
Nuclear and Framatome ANP intend to jointly offer operating license
renewal and life extension services to nuclear power plants in the
United States. Framatome has provided and continues to provide license
renewal services to several utilities owning nuclear power plants in
the United States. Entergy Nuclear acquired TLG Services in September
2000. The TLG acquisition assists Entergy Nuclear in providing
decommissioning, engineering, and related services to nuclear power
plant owners.
Energy Commodity Services
During the third quarter of 2001, Entergy began integration of
Entergy-Koch and Entergy Wholesale Operations into the energy commodity
services segment. Prior to the third quarter of 2001, Entergy-Koch and
Entergy Wholesale Operations operated and were reported as separate
segments. Prior to the first quarter of 2001, Entergy had also
operated and reported its power marketing and trading segment
separately. On January 31, 2001, Entergy contributed substantially all
of its power marketing and trading business to Entergy-Koch, which is
now a part of the energy commodity services segment.
Marketing and Trading
In January 2001, subsidiaries of Entergy and Koch Industries, Inc.
formed an unconsolidated 50/50 limited partnership, Entergy-Koch, L.P.
Entergy-Koch engages in the gathering, transmission, and storage of
natural gas in the Gulf Coast region of the United States through its
Gulf South Pipeline subsidiary. Entergy-Koch also engages in physical
and financial natural gas and power trading, and weather derivatives
trading, in the United States, the United Kingdom, Western Europe, and
Canada through its Entergy-Koch Trading subsidiaries. In the formation
of the partnership, Entergy contributed most of the assets and trading
contracts of its power marketing and trading business and $414 million
of cash. Koch contributed its 8,800-mile Koch Gateway Pipeline (which
has been renamed the Gulf South Pipeline), gas storage facilities
including the 65.8 BCF Bistineau storage facility located near
Shreveport, Louisiana, and Koch Energy Trading, which marketed and
traded electricity, gas, weather derivatives, and other energy-related
commodities and services.
The Gulf South Pipeline system includes approximately 7,650 miles
of transmission pipelines and approximately 1,150 miles of gathering
pipelines. Gulf South Pipeline gathers natural gas from the Gulf South
region and transports it to local distribution companies, industrial
facilities, power generators, utility companies, other pipelines, and
natural gas marketing companies. The pipeline system covers parts of
Texas, Louisiana, Mississippi, Alabama, and Florida; connects to the
Henry Hub, located in Vermilion Parish, Louisiana; and has 67
interconnects with interstate pipelines. Gulf South Pipeline has a
total of 68 BCF of working gas storage capacity at two facilities,
including Bistineau.
Entergy-Koch Trading buys and sells natural gas, power, and other
energy-related services and commodities. Entergy-Koch Trading provides
energy management using knowledge systems that promote fundamental and
quantitative understanding of market risk. The energy management
services provide customers with the opportunity to manage the various
risk exposures embedded in their businesses and capitalize on non-
optimized resources. Entergy-Koch Trading provides customers these
solutions by utilizing its proprietary analytical models and its
knowledge of the marketplace, natural gas pipelines, power transmission
infrastructure, transportation management, gas storage, weather, and
the interaction of these factors.
Entergy and Koch Industries each indirectly own half of the
limited partnership interests in Entergy-Koch, L.P. Entergy and Koch
Industries also indirectly own half of the equity of the general
partner of Entergy-Koch, L.P. The general partner has an eight-member
board of directors. Entergy and Koch each appoint four members of the
board.
Although the ownership interests are equal, the capital accounts
for Entergy and Koch are different. As described above, each
contributed different assets to the partnership with those contributed
by Koch valued at more than those contributed by Entergy. Through
2003, substantially all of the partnership profits allocated to
Entergy, except that profits from weather trading and international
trading are allocated disproportionately to Koch and Entergy,
respectively.
In the partnership agreement, Entergy agreed to contribute $72.7
million to the partnership in January 2004. Koch also will receive a
distribution of $72.7 million in 2004. In addition, at that time,
Entergy-Koch's assets will be revalued for capital account purposes.
If the value of the assets exceeds their carrying value for capital
account purposes, then that difference will be allocated to the capital
accounts. Entergy expects that after this revaluation the capital
accounts of Entergy and Koch Industries will be approximately equal and
that future profit allocations other than for weather trading and
international trading will be equal. If the capital accounts differ
significantly, however, then profits may be allocated
disproportionately to one partner or the other until the capital
accounts are approximately equal.
The partnership agreement provides that losses are allocated
between the capital accounts of the partners based on ownership
interest. Distributions from operations are shared based on ownership
interest and distributions in the event of liquidation are shared based
on capital accounts, as revalued at the time of the liquidation. Prior
to 2004, a partner may transfer its partnership interest only with the
consent of the other partner. Beginning in 2004, a partner may
transfer its interest to a third party, only if it has first offered to
sell its interest to the other partner at the approximate sales price
and the other partner has not accepted the offer. Certain buy/sell
rights are triggered (a) at the option of the non-defaulting partner,
upon a change of control of, or material breach of the agreement by,
either partner or (b) at the option of either partner, at any time
beginning in 2004. Under the buy/sell rights, the initiating partner
offers to sell all its partnership interest at a specified price and
other terms or to buy all of the other partner's partnership interest
at the same price and same other terms.
Power Development
EWO primarily conducts Entergy's power development business, which
is focused on acquiring or developing power generation projects in
North America and Europe. The power development business owns
interests in the following electric generation assets that are
currently operating or are under construction:
Investment Percent Ownership Status
United Kingdom - Damhead Creek, 800 MW 100% operational
U.S. (AR)- Ritchie Unit 2, 544 MW 100% operational
U.S. (AR)- Independence Unit 2, 842 MW 14% operational
U.S. (MS)- Warren Power, 300 MW 100% operational
U.S. (IA)- Top of Iowa Wind Farm, 80 MW 99% operational
U.S. (LA)- RS Cogen, 425 MW 50% under construction
U.S. (IL)- Crete, 320 MW 50% under construction
U.S. (TX)- Harrison County, 550 MW 70% under construction
Entergy owns its interest in RS Cogen through an unconsolidated 50%
interest in RS Cogen, L.L.C., and the remaining 50% interest is owned
by PPG Industries, an industrial customer of Entergy Gulf States.
Entergy owns its interest in Crete through an unconsolidated 50%
interest in Crete Energy Ventures, LLC, and the remaining 50% interest
is owned by DTE Energy. The Harrison County plant will be co-owned,
with the other 30% held by Northeast Texas Electric Cooperative.
Entergy's power development business has several other development
projects in the planning stages, including announced projects in the
United States, Spain, and Bulgaria.
EWO also owns interests in projects in Argentina, Chile, and Peru
that are unconsolidated affiliates of Entergy. The Latin American
projects are not a core part of Entergy's strategy, and Entergy is
considering strategies to maximize the value of these investments,
including possibly selling them.
In 2000, Entergy entered into an unconsolidated 50/50 joint
venture with The Shaw Group Inc. that is named EntergyShaw, L.L.C.
EntergyShaw provides management, engineering, procurement,
construction, and commissioning services for electric power plants.
EntergyShaw was created to operate in the electric power generation
market and provide services to Entergy's power development business.
EntergyShaw's operations may require the support of Entergy Corporation
guarantees. EntergyShaw is currently constructing the Crete and
Harrison County plants. Entergy has guaranteed the obligations of
EntergyShaw to construct the Harrison County plant, and Entergy's
maximum liability on the guarantee is $232.5 million.
Domestic and Foreign Generation Investment Restrictions and Risks
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 December 31, 2001, Entergy's
investments subject to this rule totaled $1.64 billion constituting
46.6% of its average consolidated retained earnings.
Entergy's ability to guarantee obligations of its non-utility
subsidiaries is also limited by SEC regulations under PUHCA. In August
2000, the SEC issued an order, effective through December 31, 2005,
that allows Entergy to issue up to $2 billion of guarantees to its non-
utility companies.
International operations are subject to the risks inherent in
conducting business abroad, including possible nationalization or
expropriation, price and currency exchange controls, inflation,
limitations on foreign participation in local enterprises, and other
restrictions. Changes in the relative value of currencies may
favorably or unfavorably affect the financial condition and results of
operations of Entergy's non-U.S. businesses. In addition, exchange
control restrictions in certain countries may limit or prevent the
repatriation of earnings.
Selected Data
Selected domestic utility customers and sales data for 2001 are
summarized in the following tables:
Customers as of
December 31, 2001
Area Served Electric Gas
(In Thousands)
Entergy Arkansas Portions of Arkansas 647 -
Entergy Gulf States Portions of Texas and Louisiana 690 89
Entergy Louisiana Portions of Louisiana 644 -
Entergy Mississippi Portions of Mississippi 404 -
Entergy New Orleans City of New Orleans, except Algiers, which
is provided electric service by 189 148
Entergy Louisiana
----- ---
Total customers 2,574 237
===== ===
2001 - Selected Domestic Utility Electric Energy Sales Data
Entergy Entergy Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Mississippi New Orleans Energy Entergy (a)
(In GWH)
Electric Department:
Sales to retail
customers 19,377 33,837 28,524 12,621 5,597 - 99,956
Sales for resale:
Affiliates 7,217 1,087 381 1,728 115 8,921 -
Others 4,909 3,305 334 289 59 - 8,896
---------------------------------------------------------------------------------
Total 31,503 38,229 29,239 14,638 5,771 8,921 108,852
=================================================================================
Average use per
residential customer
(KWH) 12,627 15,115 14,670 14,268 11,650 - 13,993
=================================================================================
(a) Includes the effect of intercompany eliminations.
2001 - Selected Domestic Utility Natural Gas Sales Data
Entergy New Orleans and Entergy Gulf States sold 15,427,960 and
6,682,931 MCF, respectively, of natural gas to retail customers in
2001. For the years ended December 31, 2001, 2000, and 1999, revenues
from natural gas operations were not material for Entergy Gulf States.
Entergy New Orleans' products and services are discussed below in
"BUSINESS SEGMENTS".
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF
ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY
GULF STATES, INC., ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC.,
ENTERGY NEW ORLEANS, INC., and SYSTEM ENERGY RESOURCES, INC." which
follow each company's financial statements in this report, for further
information with respect to operating statistics.
Employees
As of December 31, 2001, Entergy had 15,054 employees as follows:
Full-time:
Entergy Corporation -
Entergy Arkansas 1,626
Entergy Gulf States 1,668
Entergy Louisiana 960
Entergy Mississippi 906
Entergy New Orleans 386
System Energy -
Entergy Operations 3,181
Entergy Services 2,632
Entergy Nuclear Operations 2,948
Other subsidiaries 564
------
Total Full-time 14,871
Part-time 183
------
Total Entergy 15,054
======
Approximately 4,900 employees are represented by the International
Brotherhood of Electrical Workers Union (IBEW), the Utility Workers
Union of America (UWUA), and the International Brotherhood of Teamsters
Union (IBT). In 2001, Entergy Gulf States - Transmission, Distribution
and Customer Service reached a new agreement with IBEW covering
approximately 814 employees. Entergy Gulf States - Fossil will be
negotiating a new agreement with IBEW covering approximately 297
employees in 2002.
Industry Restructuring and Competition
As a result of the actions of federal legislative and regulatory
bodies over the period of approximately the past twenty years,
wholesale markets have been developing in which electricity, gas, and
other energy-related products and services are purchased and sold at
market-based (rather than traditional cost-based) rates. These
wholesale markets are continuing to grow and evolve. This evolution is
changing the ways in which public utilities conduct their business and
has changed the nature of the participants in these wholesale markets,
which now include not only public utilities but also power marketers
and traders, other energy commodity marketers and traders, wholesale
generators of electricity, and a wide range of wholesale customers.
Utilities, including the domestic utility companies, may be
required or encouraged to sell generating plants or interests therein,
or the output from such plants. Additionally, with regard to
transmission assets, FERC originally set December 15, 2001 as the date
by which all owners and operators of transmission lines should sell or
turn over operating and management responsibility for their
transmission systems to independent parties. This date has also been
delayed as utility companies and their federal and state regulators
work to resolve various issues. Entergy responded to FERC by filing
plans to transfer control of its transmission assets to a non-
affiliated transmission company subject to control by an RTO, and is
now working with the Southern Company and others to obtain approval
from FERC of an RTO structure. These changes will alter the historical
structure from the operation of the domestic utility companies'
electric generation and transmission assets as an integrated system
supporting utility service throughout their combined service
territories.
Major changes in the retail utility business have also been
occurring in some parts of the United States, including some states in
which Entergy's domestic utility companies operate. Events that
occurred in 2001, including the crisis in California's restructured
power supply market and the bankruptcy of Enron, have slowed these
changes. Both Texas and Arkansas adopted legislation in 1999 aimed at
separating ("unbundling") traditionally integrated public utilities
into distinct distribution, transmission, generation, and various types
of retail marketing businesses, and aimed at introducing competition
into the generation component of utility service. Texas originally
required restructuring and corporate unbundling by January 1, 2002 but
has delayed implementation in Entergy Gulf States' service territory at
least until September 15, 2002. Arkansas has also delayed its retail
access plan until at least October 2003 and the APSC has asked the
Arkansas General Assembly for a further delay until at least 2010.
Other jurisdictions in which the domestic utility companies operate
have not enacted retail competition and utility unbundling legislation.
Further changes in restructuring in Entergy's service territories may
result from the effects of the developments in other electric retail
markets, the Enron bankruptcy, developments at the FERC on transmission
issues, and future developments in the power supply industry.
As changes in the wholesale and retail electricity markets in the
Entergy system have taken place, regulators and legislators in
different jurisdictions have not coordinated these changes. In some
cases, actions by one jurisdiction may conflict with actions by
another, creating potentially incompatible obligations for public
utilities and holding companies, including the Entergy system.
Examples include:
o the LPSC's docket relating to the changes in corporate structure
of Entergy Gulf States as a result of complying with the Texas
restructuring law, including generation issues, and its potential
impact on Louisiana retail ratepayers (described more fully below in
this "Industry Restructuring and Competition" under "Texas - Business
Separation Plan" and "Texas - Generation-Related Issues");
o System Agreement restructuring issues, including a separate
proceeding at the LPSC to review the proposed System Agreement
restructuring (described more fully below in "Rate Matters, Regulation
and Litigation - Wholesale Matters - System Agreement"); and
o an LPSC show cause order to Entergy Gulf States and Entergy
Louisiana why they should not be enjoined from transferring their
transmission assets to an independent transmission company or similar
organization (described more fully below in "Rate Matters, Regulation
and Litigation - Wholesale Matters - Open Access Transmission and
Entergy's Independent Transmission Company Proposal").
It is too early to predict accurately what the ultimate effects of
changes in U.S. energy markets will be, or their timing, or how
potentially incompatible regulatory obligations will be resolved.
Restructuring issues are complex and are continually affected by events
at the national, regional, state and local levels. However, these
changes may result in fundamental alterations in the way traditional
integrated utilities and holding company systems, like Entergy and its
domestic utility companies, conduct their business. Some of these
alterations may be positive for Entergy and its affiliates, while
others may not be.
These changes are resulting in increased costs associated with
utility unbundling and transitioning to new organizational structures
and ways of conducting business. It is possible that the new
organizational structures that may be required will result in lost
economies of scale, less beneficial cost sharing arrangements within
utility holding company systems, and, in some cases, greater difficulty
and cost in accessing capital. Furthermore, these changes could result
in early refinancing of debt, the reorganization of debt, or other
obligations between newly-formed companies. As a result of federal and
state "codes of conduct" and affiliate transaction rules, adopted as
part of restructuring, new non-utility affiliates in the Entergy System
may be precluded from, or limited in, doing business with affiliated
electric market participants. In addition, regulators may impose
limits on, rather than have the market set, wholesale energy prices.
There are a number of other changes that may result from electric
business competition and unbundling, including, but not limited to,
changes in labor relations, management and staffing, structure of
operations, environmental compliance responsibility, and other aspects
of the utility business.
As a potential result of restructuring, Entergy's domestic utility
companies may no longer be able to apply regulated utility accounting
principles to some or all of their operations, and they may be required
to write off certain regulatory assets or recognize asset impairments
(described more fully below in Note 2 to the financial statements under
"Rate and Regulatory Matters - Electric Industry Restructuring and the
Continued Application of SFAS 71"). Following is a summary of the
status of the transition to competition in Entergy's five retail
jurisdictions:
% of Entergy's
Consolidated 2001
Revenues Derived
from Retail Electric
Utility Operations
Jurisdiction Status of Retail Open Access in the Jurisdiction
Arkansas Commencement delayed by amended 13.6%
law until at least October
2003, APSC has recommended
delay until at least 2010.
Texas Delayed until at least 10.7%
September 15, 2002 in Entergy
Gulf States' service area in a
settlement approved by the
PUCT.
Louisiana The LPSC has deferred pursuing 33.4%
retail open access, pending
developments at the federal
level and in other states.
Mississippi MPSC has recommended not 9.8%
pursuing open access at this
time.
New Orleans City Council has taken no 5.1%
action on Entergy's proposal
filed in 1997.
Arkansas
Under current Arkansas legislation, 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 December 2001, the APSC recommended
to the Arkansas General Assembly that legislation be enacted during the
2003 legislative session to either repeal the legislation authorizing
retail open access or further delay retail open access until at least
2010. Entergy Arkansas supports the proposal for further delay of
retail open access but opposes repeal of deregulation legislation as
premature at this time.
Texas
In June 1999, the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open
access. The law provided for retail open access by most investor-owned
electric utilities on January 1, 2002. As discussed below, retail open
access for Entergy Gulf States was subsequently delayed until at least
September 15, 2002. With retail open access, generation and a new
retail electric provider operation are competitive businesses, but
transmission and distribution operations continue to be regulated. The
new retail electric providers are the primary point of contact with
customers. The provisions of the new law:
o require a rate freeze through December 31, 2001 (subject to
extension, as described below), with rates reduced by 6% beyond that
for residential and small commercial customers of most incumbent
utilities except Entergy Gulf States, whose rates are exempt from the
6% reduction requirement. These rates to residential and small
commercial customers are known as the "price-to-beat," and they may be
adjusted periodically after retail open access begins for fuel and
purchased power costs according to PUCT rules;
o require utilities to charge the price-to-beat rates until 36
months after the date competition begins or 40% of customers in the
jurisdiction have chosen an alternative supplier, whichever comes
first. Nevertheless, the price-to-beat rates must continue to be made
available at least through 2006;
o required utilities to submit a plan to separate (unbundle) their
generation, transmission, distribution, and retail electric provider
functions, which Entergy Gulf States filed in January 2000 as discussed
below;
o require utilities to comply with a code of conduct to ensure that
utilities do not allow affiliates to have a business advantage over
competitors;
o require operation in a non-discriminatory manner of transmission
and distribution facilities by an organization independent from the
generation and retail operations by the time competition is
implemented;
o allow for recovery of stranded costs incurred in purchasing power
and providing electric generation service if the costs are approved by
the PUCT;
o allow for securitization of regulatory assets and PUCT-approved
stranded costs;
o provide for the determination of and mitigation measures for
generation market power; and
o required utilities to file separated cost data and proposed
transmission, distribution, and competition transition tariffs by April
1, 2000 (Entergy Gulf States filed a non-unanimous settlement in March
2001 addressing these tariffs and costs, as discussed below).
On August 3, 2001, the PUCT staff filed a petition requesting that
the PUCT determine whether the market is ready for retail open access
in the portion of Texas within the Southeastern Electric Reliability
Council (SERC), which includes Entergy Gulf States' service territory.
Several parties, including Entergy Gulf States and the PUCT staff,
agreed to a non-unanimous settlement that was approved by the PUCT
after a hearing in October 2001. In December 2001, the PUCT issued a
written order approving the settlement. The settlement agreement
contains several points, including:
o a delay in the commencement of retail open access in Entergy Gulf
States' Texas service territory until at least September 15, 2002,
subject to certain provisions of the settlement agreement;
o recovery of transition to competition costs incurred by Entergy
Gulf States through December 31, 2001 if a rate proceeding is initiated
for Entergy Gulf States during the delay period. The settlement
agreement provides for a rate freeze during the delay period. Entergy
cannot predict whether a new rate proceeding for Entergy Gulf States
will be initiated during the delay period or what the outcome of such
proceeding might be;
o suspension of additional capacity auctions until at least sixty
days before retail open access commences (the capacity auctions are
discussed below);
o continuation of Entergy Gulf States' pilot project;
o initiation by the PUCT of a project to develop market protocols to
support retail open access;
o efforts to develop an interim solution to implement retail open
access no sooner than September 15, 2002 in the event that a
functional, FERC-approved RTO is not likely to be achieved in the 2002
time frame (the RTO and related power region certification issue are
discussed below);
o continuation of pending proceedings (discussed below) to determine
the fuel and base rate components of the price-to-beat rates with
implementation of these rates when retail open access begins, without
escalation of the fuel component during the delay period;
o continuation of Entergy Gulf States' current bundled rates and
fuel factor methodology until the commencement of retail open access
unless addressed in the interim solution;
o continuation of efforts by Entergy Gulf States to obtain the
appropriate approvals with respect to its business separation plan
(discussed below) with the actual business separation not occurring
until the eve of retail open access; and
o filing by Entergy Gulf States for certification by the PUCT of a
qualified power region, which filing must contain an assessment of
market power, including transmission constraints.
In February 2002, certain cities in Texas (cities) served by
Entergy Gulf States filed a petition in district court in Travis
County, Texas seeking judicial review of the order issued by the PUCT.
The cities' petition alleges that the PUCT's order is unlawful because
it violates statutory and constitutional provisions. Entergy will
defend vigorously its position that the cities' claims are without
merit. Management cannot predict the outcome of this litigation at
this time.
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 an intermediate transmission company;
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' December
31, 2001 net utility plant book value of $4.3 billion, for illustrative
purposes only, results in net book values of approximately $1.2 billion
for Texas generation, approximately $520 million for Texas
distribution, approximately $260 million for Texas transmission,
approximately $300 million for Louisiana transmission, approximately
$20 million for Texas retail, and 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. 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 within 1 year and 3 years,
respectively, of the assumption. 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 within one year of the assumption. The
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, and the transfers must be completed within 3 years
of the commencement of retail open access.
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 within the
required period 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 June and November 2000
and January 2001. In July 2000, the PUCT approved the amended business
separation plan in an interim order. In January 2001, the PUCT
consolidated remaining action on the business separation plan into the
unbundled cost of service proceeding discussed below. In December
2001, the PUCT abated the proceeding and indicated it will consider a
final order in a timely manner consistent with the settlement agreement
delaying retail open access. The outcome of the LPSC proceedings
described below, which have resulted in amendments to the plan beyond
what was approved by the PUCT, have been and will continue to 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.
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 described above, 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 the LPSC
approved the settlement in September 2001. With respect to issues
related to the separation of generation, the LPSC had scheduled a
hearing in November 2001 to address settled issues. In light of the
delay in the commencement of retail open access, the procedural
schedule in the LPSC docket has been temporarily suspended to assess
the impact of the PUCT approval of the settlement agreement delaying
retail open access.
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 within
three years from the commencement of retail open access in Texas,
Entergy Gulf States-Louisiana expects to sell most of the Texas
jurisdictional 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
Entergy's 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 stipulation,
Entergy Gulf States offered to sell at auction entitlements to
approximately 15% (approximately 425MW) of its Texas-jurisdictional
installed generation capacity. Auctions occurred in September 2001,
but because of the delay in retail open access, Entergy has unwound the
auction transactions, and no liability exists for them. Additional
capacity auctions are suspended until at least 60 days prior to the
introduction of retail open access. 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 proceedings affecting the System
Agreement, which are described below in "Rate Matters, Regulation, and
Litigation - Rate Matters - Wholesale Rate Matters - System Agreement,"
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 March 15, 2002 to elect to purchase its pro rata
share of the 5% of capacity. If the capacity purchase is elected, it
will be for the period from the inception of retail open access in
Texas for Entergy Gulf States through June 2008.
Beginning on the date retail open access begins, 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 it is found to have ownership and control in
excess of this limit.
Other PUCT Proceedings
In March 2001, Entergy Gulf States filed with the PUCT a non-
unanimous settlement agreement in the unbundled cost proceeding that
establishes the Texas distribution company's revenue requirement. The
settlement agreement is between Entergy Gulf States, the PUCT staff,
and other parties. Pursuant to a generic order 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 agreed 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. 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, which management does not
expect to have a material financial effect. 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. In
December 2001, the PUCT abated the proceeding and indicated its intent
to defer a final ruling on this proceeding until a date closer to the
commencement of retail open access.
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 order on the establishment of RTOs, discussed in "Rate
Matters, Regulation, and Litigation - Rate Matters - Wholesale Rate
Matters - Open Access Transmission and Entergy's Independent
Transmission Company Proposal,". In addition, the settlement that has
delayed the commencement of retail open access requires a new power
region certification proceeding. If Entergy Gulf States' power region
in Texas is not certified by the PUCT before retail open access is
introduced, 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 on its ability to compete for
retail customers in parts of its power region in Texas outside of its
current service area.
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, and the gas prices
included in that filing were updated in October 2001. After the gas
price update, Entergy Gulf States recommended that the PUCT approve an
average fuel factor of approximately $29/MWH adjusted, if necessary, to
maintain an adequate competitive margin. The request proceeded to
hearing in early October 2001, and an ALJ made a recommendation in
November 2001 that would result in a lower fuel factor than Entergy
Gulf States requested. The PUCT has requested additional data and has
remanded this matter to the State Office of Administrative Hearings for
additional findings. In June 2001, Entergy Gulf States filed tariffs
for the non-fuel component of the price-to-beat rates. The tariffs are
based on Entergy Gulf States' current base rates. In September 2001,
Entergy Gulf States entered into a unanimous settlement regarding the
non-fuel component of price-to-beat rates. In February 2002, the PUCT
voted to approve the settlement.
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
large non-residential customers in Entergy Gulf States' Texas service
territory. Retail open access has been delayed in SWEPCO's service
territory and it is likely Entergy's contract to provide POLR services
will expire before retail open access begins there. Another
designation of a POLR in that territory will be necessary if retail
open access is implemented there. The Office of Public Utility Counsel
(OPC) has filed a lawsuit in state court seeking a declaratory judgment
that the PUCT did not use proper procedures to designate POLRs and that
the POLR contracts are void. Neither the timing nor the outcome of
this proceeding can be predicted at this time. The PUCT initiated a
proceeding 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. Because of the delay in
retail open access in SWEPCO's service area until at least September
15, 2002, the PUCT decided to dismiss only the portion of the
proceeding that addressed designation of SWEPCO's affiliated retail
electric provider to serve as POLR in Entergy Gulf States' Texas
service area; the PUCT continued other portions of the proceeding. A
retail electric provider will have to be designated to serve as the
POLR when retail open access does begin in Entergy Gulf States' Texas
service territory. At that time, it is also possible that an Entergy-
affiliated Texas retail electric provider will be designated to serve
as the POLR for residential and small non-residential customers at the
price-to-beat rate in Entergy Gulf States' service territory. Neither
the timing nor the outcome of these proceedings can be predicted at
this time.
CAPITAL REQUIREMENTS AND FUTURE FINANCING
Management discusses Entergy's construction and other capital
investment plans, financing requirements, Entergy Corporation credit
support requirements, and its sources and uses of capital in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES" and Notes 4, 5, 6, 7, 9, and 10 to the financial statements.
Certain Grand Gulf-related Financial and Support Agreements
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
The Unit Power Sales Agreement allocates capacity, energy, and the
related costs from System Energy's 90% ownership and leasehold
interests in Grand Gulf 1 to Entergy Arkansas (36%), Entergy Louisiana
(14%), Entergy Mississippi (33%), and Entergy New Orleans (17%). Each
of these companies is obligated to make payments to System Energy for
its entitlement of capacity and energy on a full cost-of-service basis
regardless of the quantity of energy delivered, so long as Grand Gulf 1
remains in commercial operation. Payments under the Unit Power Sales
Agreement are System Energy's only source of operating revenues. The
financial condition of System Energy depends upon the continued
commercial operation of Grand Gulf 1 and the receipt of such payments.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans generally recover payments made under the Unit Power Sales
Agreement through the rates charged to their customers. In the case of
Entergy Arkansas and Entergy Louisiana, payments are also recovered
through sales of electricity from their respective retained shares of
Grand Gulf 1. The retained shares are discussed in Note 2 to the
financial statements under the heading "Grand Gulf 1 Deferrals and
Retained Shares."
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
The Availability Agreement among System Energy and Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans was entered into in 1974 in connection with the financing by
System Energy of Grand Gulf. The Availability Agreement provided that
System Energy would join in the System Agreement on or before the date
on which Grand Gulf 1 was placed in commercial operation and would make
available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
and Entergy New Orleans all capacity and energy available from System
Energy's share of Grand Gulf.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans also agreed severally to pay System Energy monthly
for the right to receive capacity and energy from Grand Gulf in amounts
that (when added to any amounts received by System Energy under the
Unit Power Sales Agreement, or otherwise) would at least equal System
Energy's total operating expenses for Grand Gulf (including
depreciation at a specified rate) and interest charges. The
September 1989 write-off of System Energy's investment in Grand Gulf 2,
amounting to approximately $900 million, is being amortized for
Availability Agreement purposes over 27 years.
The allocation percentages under the Availability Agreement are
fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana - 26.9%;
Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%. The
allocation percentages under the Availability Agreement would remain in
effect and would govern payments made under such agreement in the event
of a shortfall of funds available to System Energy from other sources,
including payments under the Unit Power Sales Agreement.
System Energy has assigned its rights to payments and advances
from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans under the Availability Agreement as security for
its first mortgage bonds and reimbursement obligations to certain banks
providing the letters of credit in connection with the equity funding
of the sale and leaseback transactions described in Note 10 to the
financial statements under "Sale and Leaseback Transactions - Grand
Gulf 1 Lease Obligations." In these assignments, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further
agreed that, in the event they were prohibited by governmental action
from making payments under the Availability Agreement (for example, if
FERC reduced or disallowed such payments as constituting excessive
rates), they would then make subordinated advances to System Energy in
the same amounts and at the same times as the prohibited payments.
System Energy would not be allowed to repay these subordinated advances
so long as it remained in default under the related indebtedness or in
other similar circumstances.
Each of the assignment agreements relating to the Availability
Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans will make payments directly to
System Energy. However, if there is an event of default, those
payments must be made directly to the holders of indebtedness that are
the beneficiaries of such assignment agreements. The payments must be
made pro rata according to the amount of the respective obligations
secured.
The obligations of Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans to make payments under the
Availability Agreement are subject to the receipt and continued
effectiveness of all necessary regulatory approvals. Sales of capacity
and energy under the Availability Agreement would require that the
Availability Agreement be submitted to FERC for approval with respect
to the terms of such sale. No such filing with FERC has been made
because sales of capacity and energy from Grand Gulf are being made
pursuant to the Unit Power Sales Agreement. If, for any reason, sales
of capacity and energy are made in the future pursuant to the
Availability Agreement, the jurisdictional portions of the Availability
Agreement would be submitted to FERC for approval. Other aspects of
the Availability Agreement are subject to the jurisdiction of the SEC,
whose approval has been obtained, under PUHCA.
Since commercial operation of Grand Gulf 1 began, payments under
the Unit Power Sales Agreement to System Energy have exceeded the
amounts payable under the Availability Agreement. Therefore, no
payments under the Availability Agreement have ever been required. If
Entergy Arkansas or Entergy Mississippi fails to make its Unit Power
Sales Agreement payments, and System Energy is unable to obtain funds
from other sources, Entergy Louisiana and Entergy New Orleans could
become subject to claims or demands by System Energy or its creditors
for payments or advances under the Availability Agreement (or the
assignments thereof) equal to the difference between their required
Unit Power Sales Agreement payments and their required Availability
Agreement payments.
The Availability Agreement may be terminated, amended, or modified
by mutual agreement of the parties thereto, without further consent of
any assignees or other creditors.
Capital Funds Agreement (Entergy Corporation and System Energy)
System Energy and Entergy Corporation have entered into the
Capital Funds Agreement, whereby Entergy Corporation has agreed to
supply System Energy with sufficient capital to (i) maintain System
Energy's equity capital at an amount equal to a minimum of 35% of its
total capitalization (excluding short-term debt) and (ii) permit the
continued commercial operation of Grand Gulf 1 and pay in full all
indebtedness for borrowed money of System Energy when due.
Entergy Corporation has entered into various supplements to the
Capital Funds Agreement. System Energy has assigned its rights under
such supplements as security for its first mortgage bonds and for
reimbursement obligations to certain banks providing letters of credit
in connection with the equity funding of the sale and leaseback
transactions described in Note 10 to the financial statements under
"Sale and Leaseback Transactions - Grand Gulf 1 Lease Obligations."
Each such supplement provides that permitted indebtedness for borrowed
money incurred by System Energy in connection with the financing of
Grand Gulf may be secured by System Energy's rights under the Capital
Funds Agreement on a pro rata basis (except for the Specific Payments,
as defined below). In addition, in the supplements to the Capital
Funds Agreement relating to the specific indebtedness being secured,
Entergy Corporation has agreed to make cash capital contributions
directly to System Energy sufficient to enable System Energy to make
payments when due on such indebtedness (Specific Payments). However,
if there is an event of default, Entergy Corporation must make those
payments directly to the holders of indebtedness benefiting from the
supplemental agreements. The payments (other than the Specific
Payments) must be made pro rata according to the amount of the
respective obligations benefiting from the supplemental agreements.
The Capital Funds Agreement may be terminated, amended, or
modified by mutual agreement of the parties thereto, upon obtaining the
consent, if required, of those holders of System Energy's indebtedness
then outstanding who have received the assignments of the Capital Funds
Agreement.
RATE MATTERS, REGULATION, AND LITIGATION
Rate Matters
The retail rates of Entergy's domestic utility companies are
regulated by state or local regulatory authorities, as described below.
FERC regulates wholesale rates (including intrasystem sales pursuant to
the System Agreement) and interstate transmission of electricity, as
well as rates for System Energy's sales of capacity and energy from
Grand Gulf 1 to Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales
Agreement.
Wholesale Rate Matters
System Energy
As described above under "CAPITAL REQUIREMENTS AND FUTURE
FINANCING - Certain Grand Gulf-related Financial and Support
Agreements," System Energy recovers costs related to its interest in
Grand Gulf 1 through rates charged to Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans for capacity
and energy under the Unit Power Sales Agreement.
In December 1995, System Energy implemented a $65.5 million rate
increase, subject to refund. In July 2001, the rate increase
proceeding became final, with FERC approving a prospective 10.94%
return on equity, which is less than System Energy sought. FERC's
decision also affected other aspects of System Energy's charges to the
domestic utility companies that it supplies with power. In 1998, FERC
approved requests by Entergy Arkansas and Entergy Mississippi to
accelerate a portion of their Grand Gulf purchased power obligations.
Entergy Arkansas' acceleration of Grand Gulf purchased power
obligations ceased effective July 2001, as approved by FERC. The rate
increase request filed by System Energy with FERC and the Grand Gulf
accelerated recovery tariffs are discussed in Note 2 to the financial
statements.
System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
The domestic utility companies have historically engaged in the
coordinated planning, construction, and operation of generation and
transmission facilities pursuant to the terms of the System Agreement,
as described under "PROPERTY - Generating Stations," below.
Restructuring in the electric utility industry will affect these
coordinated activities in the future.
The LPSC and the Council commenced a proceeding at FERC in April
2000 that requests revisions to the System Agreement that the LPSC and
the Council allege are necessary to accommodate the proposed
introduction of retail competition in Texas and Arkansas. In June
2000, the domestic utility companies filed proposed amendments to the
System Agreement with FERC to facilitate the proposed implementation of
retail competition in Arkansas and Texas and to provide for continued
equalization of costs among the domestic utility companies in Louisiana
and Mississippi. These proceedings have been consolidated with a
previous complaint filed with FERC by the LPSC in 1995. In that
complaint, the LPSC requested, among other things, modification of the
System Agreement to exclude curtailable load from the cost allocation
determination. 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 for Entergy Gulf States;
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 March 15, 2002 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 from the
inception of retail open access in Texas for Entergy Gulf States
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.
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 by either the System Agreement or the
Unit Power Sales Agreement. In addition the LPSC and the Council
allege that provisions of the System Agreement relating to minimum run
and must run units, the methodology of billing versus dispatch, and the
use of a rolling twelve month average of system peaks, increase costs
paid by ratepayers in the LPSC and Council's jurisdictions. 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 the 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 - Louisiana $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. In February 2002, the FERC set the
matter for hearing and established a refund effective period consisting
of the 15 months following September 13, 2001. Although FERC set the
matter for hearing, it held the hearing in abeyance to allow the
parties to negotiate. A settlement judge was appointed, and the judge
is ordered to issue a status report within 60 days. If FERC grants the
relief requested by the LPSC and the Council, 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.
The LPSC has instituted a companion ex parte System Agreement
investigation to litigate several of the System Agreement issues that
the LPSC is litigating before the FERC in the previously discussed
System Agreement proceeding. This companion proceeding will require
the LPSC to interpret various provisions of the System Agreement,
including those relating to minimum run and must run units, the
propriety of the methods used for billing and dispatch on the Entergy
System, and the use of a rolling, twelve-month average of system peaks
for allocating certain costs. In addition, by this companion
proceeding the LPSC is questioning whether Entergy Louisiana and
Entergy Gulf States were prudent for not seeking changes to the System
Agreement previously, so as to lower costs imposed upon their
ratepayers and to increase costs imposed upon ratepayers of other
domestic utility companies. The domestic utility companies have
challenged the propriety of the LPSC litigating System Agreement
issues. Nevertheless, on January 16, 2002 the LPSC affirmed a decision
of its ALJ upholding the LPSC staff's right to litigate System
Agreement issues at the LPSC, rather than before the FERC. These
System Agreement issues are to be litigated before the LPSC commencing
in August 2002.
Open Access Transmission and Entergy's Independent Transmission Company
Proposal (Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
FERC issued Order 2000 in December 1999, which calls for owners
and operators of transmission lines in the United States to join RTOs
on a voluntary basis. Order 2000 initially required that RTOs commence
independent operations no later than December 15, 2001.
In compliance with Order 2000, Entergy made a filing with FERC
that requested authorization to establish an independent transmission
company ("ITC") that would operate within and under the oversight of
the proposed Southwest Power Pool RTO. Entergy also requested
authorization to transfer the domestic utility companies' transmission
assets to the ITC. The amounts of the domestic utility companies' net
transmission utility plant assets recorded in their financial
statements are provided in Note 1 to the financial statements under the
heading "Property, Plant, and Equipment."
The proposed ITC would be a limited liability company. The
managing member of the ITC would be a separate corporation with a board
of directors independent of Entergy. The proposed ITC would:
o be regulated by FERC;
o own and operate (under the oversight of the RTO) the transmission
system transferred to it by the domestic utility companies and other
transmission owners in Entergy's current service territory region;
o be operated and maintained by employees who would work for the ITC
and who would not have any financial interest in Entergy or the
domestic utility companies; and
o be passively owned by the domestic utility companies and other
member companies who transfer assets to the ITC.
In March 2001, Entergy, Entergy Services, and the domestic utility
companies requested SEC approval under PUHCA of certain elements of the
ITC plan. The domestic utility companies have also made filings with
their local regulators seeking authorization to implement the ITC plan.
In July 2001, the FERC issued an order rejecting the Entergy and
SPP proposed RTO on the grounds that it was not large enough to satisfy
Order 2000's scope and configuration requirements. At the same time,
the FERC indicated that it envisioned the establishment of four RTOs in
the United States, one each for 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 regional
RTOs. While no consensus was reached during the mediation, following
the mediation Entergy continued discussions with the Southern Company
and certain municipal and cooperative systems within the Southeast to
attempt to develop an RTO proposal. On November 20, 2001, Entergy, the
Southern Company, and a number of public power entities filed a
proposal with the FERC to establish an RTO for the Southeast referred
to as SeTrans. The filing outlined the governance and scope elements
of the proposed RTO. The SeTrans sponsors have initiated the process
to identify an entity to operate as the RTO and intend to make a more
detailed filing with FERC by May 15, 2002. ITC proceedings with state
and local regulators have been suspended for the domestic utility
companies pending further development of the RTO proposal.
In November 2001, FERC issued an order that established a new
generation market power screen for purposes of evaluating a utility's
request for market-based rate authority, applied that new screen to the
Entergy System (among others), determined that Entergy and the others
failed the screen within their respective control areas, and ordered
these utilities to implement certain mitigation measures as a condition
to their continued ability to buy and sell at market-based rates.
Among other things, the mitigation measures would require that Entergy
transact at cost-based rates when it is buying or selling in the hourly
wholesale market within its control area. Entergy requested rehearing
of the order, and FERC has delayed the implementation of certain
mitigation measures until such time as it has had the opportunity to
consider the rehearing request. FERC announced it will convene a
technical conference prior to issuing a rehearing order.
In September 2001, the LPSC ordered Entergy Gulf States and
Entergy Louisiana to show cause as to why these companies should not be
enjoined from transferring their transmission assets to an ITC or any
similar organization, asserting that FERC does not have jurisdiction to
mandate an ITC or RTO. In October 2001, Entergy Gulf States and
Entergy Louisiana filed a response to the LPSC's show cause directives.
The ultimate outcome of this proceeding cannot be predicted at this
time.
Retail Rate Regulation
General (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans)
Certain costs related to Grand Gulf 1, Waterford 3, and River Bend
were phased into retail rates over a period of years in order to avoid
the "rate shock" associated with increasing rates to reflect all such
costs at once. Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and the portion of Entergy Gulf
States regulated by the LPSC have fully recovered such deferred costs
associated with one or more of the plants. Entergy New Orleans' phase-
in plan was completed in September 2001.
The retail regulatory philosophy has shifted in some jurisdictions
from traditional, cost-of-service regulation to include performance-
based rate elements. Performance-based formula rate plans are designed
to encourage efficiencies and productivity while permitting utilities
and their customers to share in the benefits. Entergy Mississippi and
Entergy Louisiana have implemented performance-based formula rate
plans, but Entergy Louisiana's performance-based formula rate plan
expired in 2001.
Entergy Arkansas
Retail Rate Proceedings
Entergy Arkansas' material retail rate proceedings that were
resolved during the past year, are currently pending, or affect current
year results are discussed in Note 2 to the financial statements.
Recovery of Grand Gulf 1 Costs
Under the settlement agreement entered into with the APSC in 1985
and amended in 1988, Entergy Arkansas retains 22% of its share of Grand
Gulf 1 costs and recovers the remaining 78% of its share through rates.
Under the Unit Power Sales Agreement, Entergy Arkansas' share of Grand
Gulf 1 costs is 36%. In the event Entergy Arkansas is not able to sell
its retained share to third parties, it may sell such energy to its
retail customers at a price equal to its avoided cost, which is
currently less than Entergy Arkansas' cost from the retained share.
Fuel Recovery
Entergy Arkansas' rate schedules include an energy cost recovery
rider to recover fuel and purchased energy costs in monthly bills. The
rider utilizes prior year energy costs and projected energy sales for
the twelve month period commencing on April 1 of each year to develop
an energy cost rate, which is redetermined annually and includes a true-
up adjustment reflecting the over-recovery or under-recovery, including
carrying charges, of the energy cost for the prior calendar year.
Rate Freeze
In December 1997, the APSC approved a settlement agreement
resolving Entergy Arkansas' transition to competition case. One
provision in that settlement was that base rates would remain at the
level resulting from that case until at least July 1, 2001. The base
rates will remain the same until the next general rate proceeding. The
terms of the settlement agreement are discussed in Note 2 to the
financial statements.
Entergy Gulf States
Retail Rate Proceedings
Entergy Gulf States' material retail rate proceedings that were
resolved during the past year, are currently pending, or affect current
year results are discussed in Note 2 to the financial statements. In
addition, the 1999 retail rate settlement agreement that resolved
Entergy Gulf States' 1996 and 1998 rate proceedings, which is currently
under appeal, and various other matters are discussed in Note 2 to the
financial statements. Entergy Gulf States' post-merger annual earnings
review requirement ceased after the 2001 filing. Entergy plans to
propose a statewide formula rate plan in Louisiana, which would include
Entergy Gulf States.
Texas Jurisdiction - River Bend Costs
In March 1998, the PUCT issued an order disallowing recovery of
$1.4 billion of company-wide River Bend plant costs which have been
held in abeyance since 1988. Entergy Gulf States has appealed the
PUCT's decision on this matter to a Texas District Court. The 1999
settlement agreement mentioned above addresses the treatment of abeyed
plant costs, and, as a result, Entergy Gulf States removed the reserve
for these costs and reduced the carrying value of the plant asset in
1999. Entergy Gulf States agreed not to prosecute its appeal before
January 1, 2002 and agreed to cap the recovery of Entergy Gulf States'
River Bend abeyed investment at $115 million net plant in service, less
depreciation. Entergy Gulf States is now prosecuting its appeal, and
argument on the appeal is scheduled for March 22, 2002. The abeyed
plant costs are discussed in more detail in Note 2 to the financial
statements.
Fuel Recovery
Entergy Gulf States' Texas rate schedules include a fixed fuel
factor to recover fuel and purchased power costs, including carrying
charges, not recovered in base rates. The 1999 settlement agreement
mentioned above established a methodology for semi-annual revisions of
the fixed fuel factor in March and September based on the market price
of natural gas. Entergy Gulf States will continue to use this
methodology until retail open access begins in Texas. To the extent
actual costs vary from the fixed fuel factor, refunds or surcharges are
required or permitted. The amounts collected under the fixed fuel
factor through the start of retail open access are subject to fuel
reconciliation proceedings before the PUCT. At the start of retail
open access for Entergy Gulf States in Texas, which will be no sooner
than September 15, 2002, fuel and purchased power cost recovery will be
subject to the fuel component of the price-to-beat rates approved by
the PUCT, as discussed in more detail above under "Industry
Restructuring and Competition - Texas - Other PUCT Proceedings."
Entergy Gulf States' Louisiana electric rate schedules include a
fuel adjustment clause designed to recover the cost of fuel and
purchased power costs in the second prior month, adjusted by a
surcharge or credit for deferred fuel expense and related carrying
charges arising from the monthly reconciliation of actual fuel costs
incurred with fuel revenues billed to customers. The LPSC and the PUCT
fuel cost reviews that were resolved during the past year or are
currently pending are discussed in Note 2 to the financial statements.
Entergy Gulf States' Louisiana gas rates include a purchased gas
adjustment based on estimated gas costs for the billing month adjusted
by a surcharge or credit for deferred fuel expense arising from the
monthly reconciliation of actual fuel costs incurred with fuel cost
revenues billed to customers.
Entergy Louisiana
Retail Rate Proceedings
Entergy Louisiana's material retail rate proceedings that were
resolved during the past year, are currently pending, or affect current
year results are discussed in Note 2 to the financial statements.
Recovery of Grand Gulf 1 Costs
In a series of LPSC orders, court decisions, and agreements from
late 1985 to mid-1988, Entergy Louisiana was granted rate relief with
respect to costs associated with Entergy Louisiana's share of capacity
and energy from Grand Gulf 1, subject to certain terms and conditions.
In November 1988, Entergy Louisiana agreed to retain 18% of its share
of Grand Gulf 1 costs and recover the remaining 82% of its share
through rates. Under the Unit Power Sales Agreement, Entergy
Louisiana's share of Grand Gulf 1 costs is 14%. Non-fuel operation and
maintenance costs for Grand Gulf 1 are recovered through Entergy
Louisiana's base rates. Additionally, Entergy Louisiana is allowed to
recover, through the fuel adjustment clause, 4.6 cents per KWH for the
energy related to its retained portion of these costs. Alternatively,
Entergy Louisiana may sell such energy to nonaffiliated parties at
prices above the fuel adjustment clause recovery amount, subject to the
LPSC's approval.
Performance-Based Formula Rate Plan
Entergy Louisiana has filed a performance-based formula rate plan
by April 15 of each year that compares the annual rate of return on
common equity (ROE) with a benchmark ROE. The benchmark ROE determined
under the formula rate plan includes the current approved ROE adjusted
for a customer satisfaction performance measure. The formula rate plan
allows for periodic adjustments in retail rates if the annually
determined actual ROE is outside an allowed range of the benchmark ROE.
The performance-based formula rate plan ended in 2001 after the filing
for the 2000 test year. Entergy Louisiana's performance-based formula
rate plan filings are discussed in Note 2 to the financial statements.
Several parties, including Entergy Louisiana, are currently working
with the LPSC staff to develop a proposal for a statewide formula rate
plan.
Fuel Recovery
Entergy Louisiana's rate schedules include a fuel adjustment
clause designed to recover the cost of fuel in the second prior month,
adjusted by a surcharge or credit for deferred fuel expense and related
carrying charges arising from the monthly reconciliation of actual fuel
costs incurred with fuel cost revenues billed to customers.
Entergy Mississippi
Retail Rate Proceedings
Entergy Mississippi's material retail rate proceedings that were
resolved during the past year, are currently pending, or affect current
year results are discussed in Note 2 to the financial statements.
Performance-Based Formula Rate Plan
Entergy Mississippi files a performance-based formula rate plan
every 12 months that compares the annual earned rate of return to, and
adjusts it against, a benchmark rate of return. The benchmark is
calculated under a separate formula within the formula rate plan. The
formula rate plan allows for periodic small adjustments in rates based
on a comparison of actual earned returns to benchmark returns and upon
certain performance factors. The formula rate plan filing for the 2000
test year is discussed in Note 2 to the financial statements. The
formula rate plan filing for the 2001 test year will be submitted in
March 2002.
Fuel Recovery
Entergy Mississippi's rate schedules include an energy cost
recovery rider to recover fuel and purchased energy costs. In December
2000, the MPSC approved the recovery of $136.7 million of under-
recoveries, plus carrying charges, over a 24-month period effective
with the first billing cycle of January 2001. Effective with January
2001 billings, the rider is utilizing projected energy costs filed
quarterly by Entergy Mississippi to develop an energy cost rate. The
energy cost rate is redetermined each calendar quarter and includes a
true-up adjustment reflecting the over-recovery or under-recovery of
the energy cost as of the second quarter preceding the redetermination.
Entergy New Orleans
Retail Rate Proceedings
Entergy New Orleans' material retail rate proceedings that were
resolved during the past year, are currently pending, or affect current
year results are discussed in Note 2 to the financial statements.
Recovery of Grand Gulf 1 Costs
Under Entergy New Orleans' various rate settlements with the
Council in 1986, 1988, and 1991, Entergy New Orleans agreed to absorb
and not recover from ratepayers a total of $96.2 million of its Grand
Gulf 1 costs. Entergy New Orleans was permitted to implement annual
rate increases in decreasing amounts each year through 1995, and to
defer certain costs and related carrying charges for recovery on a
schedule extending from 1991 through 2001.
Fuel Recovery
Entergy New Orleans' electric rate schedules include a fuel
adjustment clause designed to recover the cost of fuel in the second
prior month, adjusted by a surcharge or credit for deferred fuel
expense arising from the monthly reconciliation of actual fuel costs
incurred with fuel cost revenues billed to customers. The adjustment
also includes the difference between non-fuel Grand Gulf 1 costs paid
by Entergy New Orleans and the estimate of such costs, which are
included in base rates, as provided in Entergy New Orleans' Grand Gulf
1 rate settlements. Entergy New Orleans' gas rate schedules include an
adjustment to reflect estimated gas costs for the billing month,
adjusted by a surcharge or credit similar to that included in the
electric fuel adjustment clause, in addition to carrying charges. The
Council is currently studying Entergy New Orleans' fuel adjustment
methodologies, with the intention of considering means of mitigating
the effect on ratepayers of sudden increases in fuel costs. The
resolution commencing the study notes that the Council does not intend
to deny Entergy New Orleans full recovery of its prudently incurred
fuel and purchased power costs.
Regulation
Federal Regulation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
PUHCA
Entergy Corporation and its various direct and indirect
subsidiaries are subject to the broad regulatory provisions of PUHCA,
with the exception of its EWG and FUCO subsidiaries. Except with
respect to investments in EWGs and FUCOs, the principal regulatory
provisions of PUHCA:
o limit the operations of a registered holding company system to a
single, integrated public utility system, plus certain ancillary and
related systems and businesses;
o regulate certain transactions among affiliates within a holding
company system;
o govern the issuance, acquisition, and disposition of securities
and assets by registered holding companies and their subsidiaries;
o limit the entry by registered holding companies and their
subsidiaries into businesses other than electric and/or gas utility
businesses; and
o require SEC approval for certain utility mergers and acquisitions.
Entergy Corporation and other electric utility holding companies
have supported legislation in the United States Congress to repeal
PUHCA and transfer certain aspects of the oversight of public utility
holding companies from the SEC to FERC. Entergy believes that PUHCA
inhibits its ability to compete in the evolving electric energy
marketplace and largely duplicates the oversight activities otherwise
performed by FERC and other federal regulators and by state and local
regulators. In June 1995, the SEC adopted a report proposing options
for the repeal or significant modification of PUHCA, which it continues
to support, but the U.S. Congress has not passed legislation pursuant
to this report.
Federal Power Act
The domestic utility companies, System Energy, and Entergy Power
are subject to the Federal Power Act as administered by FERC and the
DOE. The Federal Power Act provides for regulatory jurisdiction over
the transmission and wholesale sale of electric energy in interstate
commerce, licensing of certain hydroelectric projects and certain other
activities, including accounting policies and practices. Such
regulation includes jurisdiction over the rates charged by System
Energy for Grand Gulf 1 capacity and energy provided to Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans.
Entergy Arkansas holds a FERC license for two hydroelectric
projects totaling 70 MW of capacity that was renewed on July 2, 1980
and expires on February 28, 2003. In December 2000, Entergy Arkansas
filed a license extension application with FERC for these two
facilities.
Regulation of the Nuclear Power Industry (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
Regulation of Nuclear Power
Under the Atomic Energy Act of 1954 and the Energy Reorganization
Act of 1974, the operation of nuclear plants is heavily regulated by
the NRC, which has broad power to impose licensing and safety-related
requirements. In the event of non-compliance, the NRC has the
authority to impose fines or shut down a unit, or both, depending upon
its assessment of the severity of the situation, until compliance is
achieved. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
and System Energy, as owners of all or portions of ANO, River Bend,
Waterford 3, and Grand Gulf 1, respectively, and Entergy Operations, as
the licensee and operator of these units, are subject to the
jurisdiction of the NRC. Additionally, Entergy's domestic non-utility
nuclear business is subject to the NRC's jurisdiction as the owner and
operator of Pilgrim, Indian Point Energy Center, and FitzPatrick.
Revised safety requirements promulgated by the NRC have, in the past,
necessitated substantial capital expenditures at these nuclear plants,
and additional expenditures could be required in the future.
The nuclear power industry faces uncertainties with respect to the
cost and long-term availability of sites for disposal of spent nuclear
fuel and other radioactive waste, nuclear plant operations, including
security costs, the technological and financial aspects of
decommissioning plants at the end of their licensed lives, and
requirements relating to nuclear insurance. These matters are briefly
discussed below.
Regulation of Spent Fuel and Other High-Level Radioactive Waste
Under the Nuclear Waste Policy Act of 1982, the DOE is required,
for a specified fee, to construct storage facilities for, and to
dispose of, all spent nuclear fuel and other high-level radioactive
waste generated by domestic nuclear power reactors. After twenty years
of study, the DOE, in February 2002, formally recommended, and
President Bush approved, Yucca Mountain, Nevada as the permanent spent
fuel repository. The State of Nevada may veto the site subject to
override by simple majority of both houses of Congress. If Yucca
Mountain is sustained as the repository site, DOE will proceed with the
licensing and eventual construction of the repository and may begin
receipt of spent fuel as early as approximately 2010. Otherwise, DOE
may not accept spent fuel for a significantly longer period of time.
As a result, future expenditures will be required to increase spent
fuel storage capacity at Entergy's nuclear plant sites. Information
concerning spent fuel disposal contracts with the DOE, current on-site
storage capacity, and costs of providing additional on-site storage is
presented in Note 9 to the financial statements.
Regulation of Low-Level Radioactive Waste
The availability and cost of disposal facilities for low-level
radioactive waste resulting from normal nuclear plant operations are
subject to a number of uncertainties. Under the Low-Level Radioactive
Waste Policy Act of 1980, as amended, each state is responsible for
disposal of waste originating in that state, but states may participate
in regional compacts to fulfill their responsibilities jointly.
Arkansas and Louisiana participate in the Central Interstate Low-Level
Radioactive Waste Compact (Central States Compact) and Mississippi
participates in the Southeast Low-Level Radioactive Waste Compact
(Southeast Compact). Both the Central States Compact and the Southeast
Compact waste facility development projects are on hold and further
development efforts are unknown at this time. Neither Massachusetts,
where Pilgrim is located, nor New York, where Indian Point Energy
Center and FitzPatrick are located, participates in any regional
compact and efforts to fulfill their responsibilities have been
minimal. Two licensed disposal sites are currently operating in the
United States, but only one site, the Barnwell Disposal Facility
(Barnwell) located in South Carolina, is open to out-of-region
generators. The availability of Barnwell provides only a temporary
solution for Entergy's low-level radioactive waste storage and does not
alleviate the need to develop new disposal capacity. In June 2000, the
governor of South Carolina signed legislation forming a new low-level
waste compact with the states of Connecticut and New Jersey. The
compact will start restricting acceptance of out-of-region waste in
2002 and totally ban out-of-region waste by 2008.
The Southeast Compact has filed sanctions against the host state
of North Carolina and the process is currently on hold pending
resolution of the sanctions action by the compact. In December 1998,
the host state for the Central States Compact, Nebraska, denied the
compact's license application. In December 1998, Entergy and two other
utilities in the Central States Compact filed a lawsuit against the
state of Nebraska seeking damages resulting from delays and a faulty
license review process. Entergy Arkansas, Entergy Louisiana, and
Entergy Gulf States, along with other waste generators, fund the
development costs for new disposal facilities relating to the Central
States Compact. Development costs to be incurred in the future are
difficult to predict. The current schedules for the site development
in both the Central States Compact and the Southeast Compact are
undetermined at this time. Until long-term disposal facilities are
established, Entergy will seek continued access to existing facilities.
If such access is unavailable, Entergy will store low-level waste at
its nuclear plant sites.
Regulation of Nuclear Plant Decommissioning
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy are recovering through electric rates the estimated
decommissioning costs for ANO, River Bend, Waterford 3, and Grand Gulf
1, respectively. These amounts are deposited in trust funds which,
together with the related earnings, can only be used for future
decommissioning costs. Estimated decommissioning costs are
periodically reviewed and updated to reflect inflation and changes in
regulatory requirements and technology. Applications are periodically
made to appropriate regulatory authorities to reflect, in rates, the
changes in projected decommissioning costs. Entergy Arkansas will not
recover decommissioning costs in 2002 for ANO 1 and 2 based on the
extension of the ANO 1 license and the assumption that the ANO 2
license will be extended and that the existing decommissioning trust
funds, together with their expected future earnings, will meet the
estimated decommissioning costs. In conjunction with the Pilgrim
acquisition, Entergy received Pilgrim's decommissioning trust fund.
Entergy believes that Pilgrim's decommissioning fund will be adequate
to cover future decommissioning costs for the plant without any
additional deposits to the trust. Subject to decommissioning service
agreements between Entergy and NYPA, NYPA retains the decommissioning
liability and trusts relating to Indian Point 3 and FitzPatrick up to a
specified amount. Entergy believes that the amounts that will be
available from the trusts will be sufficient to cover the future
decommissioning costs of Indian Point 3 and FitzPatrick without any
additional contributions to the trusts. As part of the Indian Point 1
and 2 purchase, Consolidated Edison transferred the decommissioning
trust fund and the liability to decommission Indian Point 1 and 2 to
Entergy. Entergy also funded an additional $25 million to the
decommissioning trust fund and believes that the trust will be adequate
to cover future decommissioning costs for Indian Point 1 and 2 without
any additional deposits to the trust. Additional information with
respect to decommissioning costs for ANO, River Bend, Waterford 3,
Grand Gulf 1, Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3,
and FitzPatrick is found in Note 9 to the financial statements.
The EPAct requires all electric utilities (including Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
that purchased uranium enrichment services from the DOE to contribute
up to a total of $150 million annually over approximately 15 years
(adjusted for inflation, up to a total of $2.25 billion) for
decontamination and decommissioning of enrichment facilities. At
December 31, 2001, five years of assessments remain. In accordance
with the EPAct, contributions to decontamination and decommissioning
funds are recovered through rates in the same manner as other fuel
costs. The estimated annual contributions by Entergy for
decontamination and decommissioning fees are discussed in Note 9 to the
financial statements.
Nuclear Insurance
The Price-Anderson Act limits public liability for a single
nuclear incident to approximately $9.5 billion. Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, System Energy, and Entergy's
domestic non-utility nuclear business have protection with respect to
this liability through a combination of private insurance and an
industry assessment program, as well as insurance for property damage,
costs of replacement power, and other risks relating to nuclear
generating units. Insurance applicable to the nuclear programs of
Entergy is discussed in Note 9 to the financial statements.
Nuclear Operations
General (Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and System Energy)
Entergy Operations operates ANO, River Bend, Waterford 3, and
Grand Gulf 1, subject to the owner oversight of Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and System Energy,
respectively. Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and System Energy pay directly or reimburse Entergy
Operations at cost for its operation of the nuclear units. Entergy's
domestic non-utility nuclear business is the operator of Pilgrim,
Indian Point Energy Center, and FitzPatrick.
ANO Matters (Entergy Corporation and Entergy Arkansas)
In August 2001, the NRC issued a bulletin requesting all
pressurized water reactor owners and operators to report on the
structural integrity of their reactor vessel head penetration nozzles
to justify continued operations past December 31, 2001. These types of
reactors are susceptible to water stress corrosion cracking of the
reactor vessel head nozzles. ANO 1 and 2 are pressurized water
reactors. In March 2001, an inspection of ANO 1 revealed one leaking
control rod drive mechanism nozzle, which was subsequently repaired.
An inspection at ANO 2 is scheduled during the next refueling outage in
April 2002. Entergy Arkansas has received favorable responses from the
NRC for continued operations of ANO 1 and 2.
Inspections of the ANO 1 steam generators during planned outages
also have revealed cracks in certain steam generator tubes, which have
been repaired or plugged. The current number of cracks is below the
limit authorized by the NRC to allow the unit to remain in operation
and has not affected ANO 1's output to date. Using current projections
of steam generator tube plugging, the current best estimate is that
replacement of the ANO Unit 1 steam generators will be required by
2013. Entergy Operations currently does not expect ANO Unit 1 to have
to conduct mid-cycle outages for steam generator inspection before
2005. ANO 2's steam generator was replaced during a refueling outage
in the second half of 2000.
Entergy Operations is in the process of gathering information and
assessing various options for the permanent repair or replacement of
ANO 1 and 2's reactor vessel heads and the replacement of ANO 1's steam
generators. Certain of these options could, in the future, require
significant capital expenditures and/or result in additional
unscheduled mid-cycle outages. A decision as to the permanent repair
or replacement of the reactor vessel heads and replacement of the steam
generators is anticipated in 2002. If permanent replacement is
selected, fabrication for a reactor vessel head and steam generators
may take up to four years.
In December 2000, Entergy Operations applied to the NRC for an
amendment to ANO 2's operating license that would allow for an increase
in the reactor core power rating. If granted, this amendment will allow
ANO 2 to increase its gross electrical output by approximately 90 MW.
Entergy Operations has requested action by the NRC on the amendment by
April 2002, to permit implementation of the uprate following ANO 2's
next scheduled refueling outage.
In June 2001, Entergy Arkansas received notification from the NRC
of approval for a renewed operating license authorizing operations at
ANO 1 through May 2034.
Domestic Non-Utility Nuclear (Entergy Corporation)
In November 2001, a nonprofit organization, joined by federal and
New York state and local officials and other organizations, filed a
petition with the NRC alleging that the Indian Point 2 and 3 nuclear
power plants were vulnerable to terrorist attack and seeking an
immediate shutdown of the plants. Entergy believes the petitioners'
requests are without merit and is vigorously contesting the
petitioners' allegations. A procedural schedule has not been set by
the NRC. Management cannot predict the timing of the NRC's
consideration, if any, of this matter.
State Regulation (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans)
General
Entergy Arkansas is subject to regulation by the APSC, which
includes the authority to:
o oversee utility service;
o set rates;
o determine reasonable and adequate service;
o require proper accounting;
o control leasing;
o control the acquisition or sale of any public utility plant or
property constituting an operating unit or system;
o set rates of depreciation;
o issue certificates of convenience and necessity and certificates
of environmental compatibility and public need; and
o regulate the issuance and sale of certain securities.
Entergy Gulf States may be subject to the jurisdiction of the
municipal authorities of a number of incorporated cities in Texas as to
retail rates and service within their boundaries, with appellate
jurisdiction over such matters residing in the PUCT. Entergy Gulf
States' Texas business is also subject to regulation by the PUCT as to:
o retail rates and service in rural areas;
o certification of new transmission lines; and
o extensions of service into new areas.
Entergy Gulf States' Louisiana electric and gas business and
Entergy Louisiana are subject to regulation by the LPSC as to:
o utility service;
o rates and charges;
o certification of generating facilities;
o power or capacity purchase contracts; and
o depreciation, accounting, and other matters.
Entergy Louisiana is also subject to the jurisdiction of the
Council with respect to such matters within Algiers in Orleans Parish.
Entergy Mississippi is subject to regulation by the MPSC as to the
following:
o utility service;
o service areas;
o facilities; and
o retail rates.
Entergy Mississippi is also subject to regulation by the APSC as
to the certificate of environmental compatibility and public need for
the Independence Station, which is located in Arkansas.
Entergy New Orleans is subject to regulation by the Council as to
the following:
o utility service;
o rates and charges;
o standards of service;
o depreciation, accounting, and issuance and sale of certain
securities; and
o other matters.
Franchises
Entergy Arkansas holds exclusive franchises to provide electric
service in approximately 304 incorporated cities and towns in Arkansas.
These franchises are unlimited in duration and continue unless the
municipalities purchase the utility property. In Arkansas, franchises
are considered to be contracts and, therefore, are terminable upon
breach of the terms of the franchise.
Entergy Gulf States holds non-exclusive franchises, permits, or
certificates of convenience and necessity to provide electric and gas
service in approximately 55 incorporated municipalities in Louisiana
and to provide electric service in approximately 63 incorporated
municipalities in Texas. Entergy Gulf States typically is granted 50-
year franchises in Texas and 60-year franchises in Louisiana. Entergy
Gulf States' current electric franchises will expire during 2007 - 2036
in Texas and during 2015 - 2046 in Louisiana. The natural gas
franchise in the City of Baton Rouge will expire in 2015. In addition,
Entergy Gulf States holds a certificate of convenience and necessity
from the PUCT to provide electric service to areas within 21 counties
in eastern Texas. Retail open access is scheduled to begin in Entergy
Gulf States' Texas service territory no sooner than September 15, 2002.
Entergy Louisiana holds non-exclusive franchises to provide
electric service in approximately 116 incorporated Louisiana
municipalities. Most of these franchises have 25-year terms, although
six of these municipalities have granted 60-year franchises. Entergy
Louisiana also supplies electric service in approximately 353
unincorporated communities, all of which are located in Louisiana
parishes in which it holds non-exclusive franchises.
Entergy Mississippi has received from the MPSC certificates of
public convenience and necessity to provide electric service to areas
within 45 counties, including a number of municipalities, in western
Mississippi. Under Mississippi statutory law, such certificates are
exclusive. Entergy Mississippi may continue to serve in such
municipalities upon payment of a statutory franchise fee, regardless of
whether an original municipal franchise is still in existence.
Entergy New Orleans provides electric and gas service in the City
of New Orleans pursuant to city ordinances (except electric service in
Algiers, which is provided by Entergy Louisiana). These ordinances
contain a continuing option for the City of New Orleans to purchase
Entergy New Orleans' electric and gas utility properties. A resolution
to study the advantages for ratepayers that might result from an
acquisition of these properties was filed in a committee of the Council
in January 2001. The committee has deferred consideration of and has
taken no further action regarding that resolution. The full Council
must approve the resolution to commence such a study before it can
become effective.
The business of System Energy is limited to wholesale power sales.
It has no distribution franchises.
Environmental Regulation
General
Entergy's facilities and operations are subject to regulation by
various domestic and foreign governmental authorities having
jurisdiction over air quality, water quality, control of toxic
substances and hazardous and solid wastes, and other environmental
matters. Management believes that its affected subsidiaries are in
substantial compliance with environmental regulations currently
applicable to their facilities and operations. Because environmental
regulations are subject to change, future compliance costs cannot be
precisely estimated.
Clean Air Legislation
The Clean Air Act Amendments of 1990 (the Act) established the
following four programs that currently or in the future may affect
Entergy's fossil-fueled generation:
o an acid rain program for control of sulfur dioxide (SO2) and
nitrogen oxides (NOx);
o an ozone non-attainment area program for control of NOx and
volatile organic compounds;
o a hazardous air pollutant emissions reduction program; and
o an operating permits program for administration and enforcement of
these and other Act programs.
Under the current acid rain program, Entergy's subsidiaries have
not required additional equipment to control SO2 or NOx. The Act
provides SO2 allowances to most of the affected Entergy generating
units for emissions based upon past emission levels and operating
characteristics. Each allowance is an entitlement to emit one ton of
SO2 per year. Under the Act, utilities are required to possess
allowances for SO2 emissions from affected generating units. All
Entergy fossil-fueled generating units are classified as "Phase II"
units under the Act and are subject to SO2 allowance requirements.
Entergy is a net buyer of allowances when it generates power using fuel
oil.
Controls were recently implemented at certain Entergy Gulf States
generating units to achieve NOx reductions due to the ozone non-
attainment status of areas served in and around Beaumont and Houston,
Texas. To date, the cost of additional control equipment necessary to
maintain this compliance is immaterial. In April and December 2000,
Texas authorities adopted future control strategies for the Beaumont
and Houston areas, respectively. These strategies adopted by the State
of Texas will cause Entergy Gulf States to incur additional costs for
NOx controls through 2007. Entergy commenced projects in 2000 to
engineer, procure, and construct needed air pollution control
facilities. Cost estimates will be refined as engineering design
progresses based on final strategies approved by the EPA. Entergy
currently estimates compliance costs to be $22 to $39 million in the
Beaumont area and approximately $15 million in the Houston area.
Entergy believes the future control strategies in the ozone non-
attainment regulations require emission limits that are more
restrictive than those related to utility restructuring in Texas. As
part of legislation passed in Texas in June 1999 to restructure the
electric power industry in the state, certain generating units of
Entergy Gulf States will be required to obtain operating permits and
meet new, lower emission limits for NOx. As part of its control
efforts, Entergy Gulf States is expected to incur costs through 2003 to
meet the standards in the restructuring legislation.
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 November 2001, the LDEQ issued a
draft rule for control of NOx as part of the State Implementation Plan
(SIP) to bring this area into attainment with the National Ambient Air
Quality standards for ozone by May 2005. The draft contains certain
provisions that would lead to installation of new NOx control equipment
at Entergy Gulf States generating units. Preliminary analyses indicate
compliance costs may be as much as $72 million in new capital spending.
Most of the related expenditures would take place in 2003 and 2004.
The final rule is expected to be in place by March 2002. Cost
estimates will be refined as engineering studies progress before and
after promulgation of the final NOx rule and approval of the SIP by the
EPA. Entergy Gulf States will be required to obtain revised operating
permits from the LDEQ and meet new, lower emission limits for NOx.
Entergy Gulf States expects to file before October 2002 revised permit
applications containing its detailed compliance strategy. In late
August 2001, however, a federal magistrate issued a report recommending
that the EPA be ordered to make a determination regarding the ozone non-
attainment status and any reclassification of the area required as a
result of the determination. The recommendation might result in an
upgrade from the current status of "serious" to "severe" non-attainment
classification for the Baton Rouge area. If this occurs, LDEQ ozone
SIP rulemakings could be affected, especially in terms of scheduling.
The specific impact of the magistrate's recommendation on Entergy Gulf
States will remain unclear until the EPA responds to the magistrate's
report.
Oil Pollution Prevention and Response
The EPA has issued a proposed rule on oil pollution prevention and
response. This rule could affect Entergy's operations of its
approximately 3,500 transmission and distribution electrical equipment
installations that are potentially subject to this proposed rule. If
the proposed rule is issued in the form expected by the industry,
Entergy will be substantially in compliance with the rule.
Nevertheless, there is the possibility that the rule could be issued in
a form that would require Entergy to develop site-specific oil spill
prevention control and countermeasure plans for the facilities subject
to the rule. In addition, secondary containment could be required
around the equipment in these facilities. Entergy participates in
industry groups involved with the proposed rule and will be monitoring
the development of the proposed rule. It is expected that the final
rule will be issued in mid-2002.
Other Environmental Matters
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (CERCLA), authorizes the EPA and,
indirectly, the states, to mandate clean-up, or reimbursement of clean-
up costs, by owners or operators of sites from which hazardous
substances may be or have been released. Parties that generated or
transported hazardous substances to these sites are also deemed liable
by CERCLA. CERCLA has been interpreted to impose joint and several
liability on responsible parties. The domestic utility companies have
sent waste materials to various disposal sites over the years. In
addition, environmental laws now regulate certain of the domestic
utility companies' operating procedures and maintenance practices which
historically were not subject to regulation. Some of Entergy's
disposal sites have been the subject of governmental action under
CERCLA, resulting in site clean-up activities. The domestic utility
companies have participated to various degrees in accordance with their
respective potential liabilities in such site clean-ups and have
developed experience with clean-up costs. The affected domestic
utility companies have established reserves for such environmental
clean-up and restoration activities.
Entergy Arkansas
Entergy Arkansas entered into a Consent Administrative Order with
the ADEQ in which it agreed to conduct initial stabilization associated
with contamination at the Utilities Services, Inc. state Superfund site
located near Rison, Arkansas. This site was never owned or operated by
any Entergy-affiliated company. This site was found to have soil
contaminated by polychlorinated biphenyls (PCBs) and pentachlorophenol
(a wood preservative). Containers and drums that contained PCBs and
other hazardous substances were found at the site. Entergy Arkansas
worked with the ADEQ to identify and notify other PRPs with respect to
this site. Approximately twenty PRPs have been identified to date. In
December 1999, Entergy Arkansas, along with several other PRPs, met
with ADEQ representatives to discuss the clean-up of the site. Entergy
Arkansas believes that its ultimate responsibility for this site will
not materially exceed its existing clean-up provision of $5 million.
Entergy has sent a letter of intent to the ADEQ to participate in the
site characterization, and Entergy is waiting for a response from the
ADEQ. As of December 31, 2001, Entergy Arkansas had incurred
approximately $400,000 of clean-up costs at the site.
Entergy Gulf States
Several class action and other suits have been filed in state and
federal courts seeking relief from Entergy Gulf States and others for
damages caused by the disposal of hazardous waste and for asbestos-
related disease allegedly resulting from exposure on Entergy Gulf
States' premises (see "Other Regulation and Litigation" below).
In August 1999, Entergy Gulf States received notice from the Texas
Natural Resource Conservation Commission (TNRCC) that it is considered
to be a PRP for the Spector Salvage Yard in Orange, Texas. The Spector
Salvage site operated from approximately 1944 until 1971. In addition
to general salvage, the facility functioned as a repository for
military surplus equipment and supplies purchased from military,
industrial, and chemical facilities. Soil samples from the site
indicate the presence of heavy metals and various organics, including
PCBs. The TNRCC requested of all PRPs a submission of a good faith
offer to fully fund or conduct a remedial investigation. Entergy Gulf
States believes that there is insufficient basis for including the
company as a PRP. If additional evidence that Entergy Gulf States is a
PRP were discovered, Entergy Gulf States would re-evaluate its
position. Based on the size of the site, Entergy Gulf States expects
that its future expenditures for investigation and clean-up should not
exceed its existing clean-up provision of $250,000.
Entergy Gulf States is currently involved in a remedial
investigation of the Lake Charles Service Center site, located in Lake
Charles, Louisiana. A manufactured gas plant (MGP) is believed to have
operated at this site from approximately 1916 to 1931. Coal tar, a by-
product of the distillation process employed at MGPs, was apparently
routed to a portion of the property for disposal. The same area has
also been used as a landfill. In 1999, Entergy Gulf States signed a
second Administrative Consent Order with the EPA to perform removal
action at the site. Entergy Gulf States believes that its ultimate
responsibility for this site will not materially exceed its existing
clean-up provision of $15.1 million.
Entergy Gulf States is currently involved in the second phase of
an investigation of contamination of an MGP site, known as the Old
Jennings Ice Plant, located in Jennings, Louisiana. The MGP is
believed to have operated from approximately 1909 to 1926. The site is
currently used for an electrical substation and storage of transmission
and distribution equipment. In July 1996, a petroleum-like substance
was discovered on the surface soil, and notification was made to the
LDEQ. The LDEQ was aware of this site based upon a survey performed by
an environmental consultant for the EPA. Entergy Gulf States obtained
the services of an environmental consultant to collect core samples and
to perform a search of historical records to determine what activities
occurred at Jennings. Results of the core sampling, which found
limited amounts of contamination on-site, were submitted to the LDEQ.
A plan to determine a cost-effective remediation strategy will be
developed and submitted to the LDEQ for review in 2002. Entergy does
not expect that its ultimate financial responsibility with respect to
this site will be material. The amount of its existing provision for
clean-up is $191,000.
In 1994, Entergy Gulf States performed a site assessment in
conjunction with a construction project at the Louisiana Station
Generating Plant (Louisiana Station). In 1995, a further assessment
confirmed subsurface soil and groundwater impact to three areas on the
plant site. After further review, a notification was made to the LDEQ.
The final phase of groundwater clean up and monitoring at Louisiana
Station is expected to continue through 2003. The remediation cost
incurred through December 31, 2001 for this site was $6.3 million.
Future costs are not expected to exceed the existing provision of $1.2
million.
Entergy New Orleans
Entergy New Orleans built a new substation on a parcel of land
located adjacent to an existing substation which is in close proximity
to the former Market Street power plant. During pre-construction
activities in January 2000, significant levels of lead were discovered
in the soil at this site. Entergy New Orleans notified the LDEQ of the
contamination. The contamination at this site was addressed using the
LDEQ Risk Evaluation/Corrective Action Plan. The work has been
completed and the final closure report was submitted in the first
quarter of 2001. The cost of this remediation was approximately $1
million. Entergy is awaiting final written LDEQ approval. No further
environmental activity is anticipated.
Entergy Louisiana and Entergy New Orleans
Several class action and other suits have been filed in state and
federal courts seeking relief from Entergy Louisiana and Entergy New
Orleans and others for damages caused by the disposal of hazardous
waste and for asbestos-related disease allegedly resulting from
exposure on Entergy Louisiana's and Entergy New Orleans' premises (see
"Other Regulation and Litigation" below).
The Southern Transformer shop located in New Orleans has served
both Entergy Louisiana and Entergy New Orleans. This transformer shop
is now being closed and environmental assessments are now being
performed to determine what remediation may be necessary. Based on
preliminary findings, an expected clean-up cost of $750,000 has been
accrued for this project.
From 1992 to 1994, Entergy Louisiana performed remedial activities
at a retired power plant known as the Thibodaux municipal site,
previously owned and operated by a Louisiana municipality. Entergy
Louisiana purchased the power plant at this site as part of the
acquisition of municipal electric systems. The site assessment
indicated some subsurface contamination from fuel oil. Remediation of
the Thibodaux site is expected to continue through 2002. The cost
incurred through December 31, 2001 for the Thibodaux site was
approximately $657,000. Future costs are not expected to exceed the
remaining provision of $174,000 at December 31, 2001. The LDEQ is
currently reviewing a groundwater assessment completed in 2001.
Results of the review will determine what additional remediation
remains to be completed.
During 1993, the LDEQ issued new rules for solid waste regulation,
including regulation of wastewater impoundments. Entergy Louisiana and
Entergy New Orleans have determined that certain of their power plant
wastewater impoundments were affected by these regulations and chose to
remediate and repair or close them. Completion of this work is pending
LDEQ approval. LDEQ has issued notices of deficiencies for certain of
these sites. As a result, recorded liabilities in the amounts of $5.8
million for Entergy Louisiana and $0.5 million for Entergy New Orleans
existed at December 31, 2001 for wastewater remediation and repairs and
closures. Management of Entergy Louisiana and Entergy New Orleans
believes these reserves are adequate based on current estimates.
Other Regulation and Litigation
Entergy Corporation and Entergy Gulf States Merger
The APSC, Arkansas Cities and Cooperatives, Arkansas Electric
Energy Consumers, the MPSC, and the State of Mississippi appealed to
the D.C. Circuit the FERC's approval of the merger of Entergy
Corporation and Gulf States Utilities. Entergy and the LPSC intervened
in support of the FERC. The appellants seek to overturn the FERC's
decision on two broad grounds: first, whether the FERC's approval of
the addition of Gulf States produced an unjust and discriminatory rate
in violation of Federal Power Act section 205; and second, whether the
FERC's approval of the merger without conducting an evidentiary hearing
on the effect of the merger on wholesale generation violated Federal
Power Act section 203. The D.C. Circuit scheduled oral argument for
April 2002. Management cannot predict the timing or outcome of this
proceeding.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
Entergy Corporation and the domestic utility companies are
defendants in numerous lawsuits that have been filed by former
employees alleging that they were wrongfully terminated and/or
discriminated against on the basis of age, race, and/or sex. Entergy
Corporation and the domestic utility 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, and at this
time management cannot estimate the total amount of damages sought.
Asbestos and Hazardous Waste Suits (Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in
Texas and Louisiana primarily by contractor employees in the 1950-1980
timeframe against Entergy Gulf States, Entergy Louisiana and Entergy
New Orleans, as premises owners of power plants, for damages caused by
alleged exposure to asbestos or other hazardous material. Many other
defendants are named in these lawsuits as well. Since 1992, the
Entergy companies have resolved over 3 thousand claims for nominal
amounts that in the aggregate total less that $13 million, including
defense costs. Some of this loss has been offset by reimbursement from
insurers. Presently there are over 3 thousand claims pending and
reserves have been established that should be adequate to cover any
exposure. Additionally, negotiations continue with insurers to recover
more reimbursement, while new coverage is being secured to minimize
anticipated future potential exposures. Management believes that loss
exposure has been and will continue to be handled successfully so that
the ultimate resolution of these matters will not be material, in the
aggregate, to its financial position or results of operation.
Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
Vidalia Project Sub-Docket
Marathon Oil Company and Louisiana Energy Users Group, intervenors
in another proceeding that has since been settled, requested that the
LPSC review the prudence of a contract entered into by Entergy
Louisiana to purchase energy generated by a hydroelectric facility
known as the Vidalia project through the year 2031. Note 9 to the
financial statements contains further discussion of the obligations
related to the Vidalia project. By orders entered by the LPSC in 1985
and 1990, the LPSC approved Entergy Louisiana's entry into the Vidalia
contract and Entergy Louisiana's right to recover, through the fuel
adjustment clause, the costs of power purchased thereunder.
Additionally, the wholesale electric rates under the Vidalia power
purchase contract were filed at FERC. In December 1999, the LPSC
instituted a review of the following issues relating to the Vidalia
project: (i) the LPSC's jurisdiction over the Vidalia project; (ii)
Entergy Louisiana's management of the Vidalia contract, including
opportunities to restructure or otherwise reform the contract; (iii)
the appropriateness of Entergy Louisiana's recovery of 100% of the
Vidalia contract costs from ratepayers; (iv) the appropriateness of the
fuel adjustment clause as the method for recovering all or part of the
Vidalia contract costs; (v) the appropriate regulatory treatment of
the Vidalia contract in the event the LPSC approves implementation of
retail competition; and (vi) Entergy Louisiana's communication of
pertinent information to the LPSC regarding the Vidalia project and
contract. Based on its review, the LPSC will determine whether it
should disallow any of the costs of the Vidalia project included in the
fuel adjustment clause. In late April and early May 2001, the LPSC
conducted hearings addressing these issues, except for the issue of the
appropriate regulatory treatment of the Vidalia contract in the event
the LPSC approves implementation of retail competition. With regard to
that issue, the parties entered a joint stipulation that the issue more
appropriately would be considered in a separate, existing docket
specifically devoted to stranded-cost-related issues.
With regard to the other issues, Entergy Louisiana asserted at the
hearings that it has prudently managed the Vidalia contract and that,
through final orders issued in 1985 and 1990, the LPSC itself
previously has recognized Entergy Louisiana's prudence by formally and
expressly approving the Vidalia contract and the recovery through the
fuel adjustment clause of all amounts paid by Entergy Louisiana
pursuant to the FERC-filed rate. The LPSC staff alleged at the
hearings that the Vidalia project owners' July 30, 1990 request that
the LPSC clarify the LPSC's 1985 order (approving the Entergy
Louisiana/Vidalia project purchase power agreement) and approve a sale
and leaseback of the project, presented Entergy Louisiana with an
approximately three-week "window of opportunity" (prior to the LPSC's
issuance of the 1990 order) during which Entergy Louisiana could have
used its purported leverage either: (1) to attempt to restructure the
FERC-filed rate schedule contained in the Vidalia contract; or (2) to
attempt to secure a concession from the Vidalia project owners whereby,
at a minimum, the owners would share with Entergy Louisiana ratepayers
some portion of what the LPSC staff quantifies as approximately $90
million of tax benefits. The LPSC staff and intervenors further
alleged at the hearings that Entergy Louisiana was imprudent for not
preparing and presenting to the LPSC during the August 1990 hearings on
the Vidalia project owners' motion for clarification, an updated life
cycle economic analysis showing that, as of August 1990, the Vidalia
contract appeared to have become uneconomic due to the significant drop
in projected avoided costs precipitated by, among other things, the
legislative repeal of the Fuel Use Act of 1978 and the steep decline in
oil and gas prices in the mid- to late-1980s. Additionally, Marathon
Oil Company and the Sewerage and Water Board of New Orleans alleged at
the hearings that the Vidalia project owners had incurred construction
cost overruns and escalating operating costs, and had paid excessive
royalties to the Town of Vidalia, and that these costs were imprudent
and should be disallowed, in whole or in part. However, these
intervenors recommended that, although Entergy Louisiana ratepayers
should reap the benefits of any such disallowances, the Town of Vidalia
and the Vidalia project owners, and not Entergy Louisiana, should bear
the cost of any such disallowances.
The LPSC staff has proposed several alternative and non-mutually-
exclusive remedies, including without limitation: reducing
prospectively some portion of the above market Vidalia contract costs
that Entergy Louisiana is allowed to recover through the fuel
adjustment clause; shifting prudently incurred costs to base rates and
disallowing imprudently-incurred costs; imposing a rate of return
performance penalty for some appropriate period of time; and
disallowing as part of fuel cost recovery some portion of the purported
tax savings and other benefits associated with the 1990 clarification
motion, plus interest since 1990. The LPSC staff has recommended that
the ALJ who presided over the hearings make a recommendation to the
LPSC with regard to the prudence and jurisdictional issues and certify
the question of remedies to the LPSC. The post-hearing briefing to the
ALJ was completed in November 2001. The parties await the ALJ's
recommendations.
Entergy New Orleans Fuel Clause Lawsuit
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 $100 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 began in February 2002. The
ultimate outcome of the lawsuit and the Council proceeding cannot be
predicted at this time.
Entergy New Orleans Rate of Return Lawsuit
In April 1998, a group of residential and business ratepayers
filed a complaint against Entergy New Orleans in state court in Orleans
Parish purportedly on behalf of all ratepayers in New Orleans. The
plaintiffs allege that Entergy New Orleans overcharged ratepayers by at
least $300 million since 1975 in violation of limits on Entergy New
Orleans' rate of return that the plaintiffs allege were established by
ordinances passed by the Council in 1922. The plaintiffs seek, among
other things, (i) a declaratory judgment that such franchise ordinances
have been violated; and (ii) a remand to the Council for the
establishment of the amount of overcharges plus interest. Entergy New
Orleans believes the lawsuit is without merit. Entergy New Orleans has
charged only those rates authorized by the Council in accordance with
applicable law. In May 2000, a court of appeal granted Entergy New
Orleans' exception to jurisdiction in the case and dismissed the
proceeding. The Louisiana Supreme Court denied the plaintiff's request
for a writ of certiorari. The plaintiffs then commenced a similar
proceeding before the Council. The plaintiffs and the advisors for the
Council each filed their first round of testimony in January 2002. In
their testimony, the plaintiffs allege that Entergy New Orleans earned
in excess of the legally authorized rate of return during the period
1979 to 2000 and that Entergy New Orleans should be required to refund
between $240 million and $825 million to its ratepayers. In the
testimony submitted by the Council advisors, the advisors allege that
Entergy New Orleans has not earned in excess of its authorized rate of
return for the period at issue and that no refund is therefore
warranted. A hearing is scheduled to begin in June 2002. Management
cannot predict the outcome of the proceeding before the Council.
Entergy Gulf States Merger Savings Lawsuit
In February 2002, various plaintiffs, who claim to be customers of
Entergy Gulf States in Texas and further claim to be class
representatives for all other similarly situated customers, filed a
lawsuit against Entergy Gulf States and Entergy Corporation in the
district court of Jefferson County, Texas. The petition alleges that
Entergy Corporation and Entergy Gulf States violated the 1993 agreement
entered by parties to the Entergy-Gulf States Utilities merger docket
in Texas by failing to pass 100% of Texas retail non-fuel merger-
related savings to Entergy Gulf States' ratepayers in Texas beginning
on January 1, 2002. The petition alleges that the non-fuel merger-
related savings accrue at a rate of about $2 million per month. The
petition seeks damages, exemplary damages, and attorney's fees and
costs, in addition to certification of the case as a class action.
Entergy will vigorously contest the plaintiffs' allegations.
Management cannot predict the outcome of this litigation at this time.
Entergy Louisiana Formula Ratemaking Plan Lawsuit
In May 1998, a group of ratepayers filed a complaint against
Entergy Louisiana and the LPSC in state court in East Baton Rouge
Parish purportedly on behalf of all Entergy Louisiana ratepayers. The
plaintiffs allege that the formula ratemaking plan authorized by the
LPSC has allowed Entergy Louisiana to earn amounts in excess of a fair
return. The plaintiffs seek, among other things, (i) a declaratory
judgment that the formula ratemaking plan is an improper ratemaking
practice; and (ii) a refund of the amounts allegedly charged in excess
of proper ratemaking practices. Entergy Louisiana believes the lawsuit
is without merit and plans to vigorously defend itself. This case has
not been active, and abandonment issues are being evaluated. At this
time, management cannot determine the amount of damages being sought.
July 1999 Power Outages Lawsuit (Entergy Gulf States, Entergy
Louisiana, Entergy New Orleans)
In February 2000, a lawsuit was commenced in state court in
Orleans Parish, Louisiana, against Entergy, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans relating to power outages
that occurred in July 1999. The plaintiff, who purports to represent a
class of similarly situated persons, claims unspecified damages as a
result of these outages, which the plaintiff claims were the result of
negligence on the part of the Entergy defendants. Plaintiffs have
instituted similar proceedings before the LPSC and the City Council.
All of these proceedings have been resolved by settlement for a nominal
amount.
Street Lighting Lawsuit (Entergy New Orleans)
In February 2002, the City of New Orleans (City) filed a petition
against Entergy New Orleans in state court in Orleans Parish, seeking
declaratory relief, injunctive relief, an unspecified amount of
monetary damages, and attorney and consulting fees and costs. The
City's petition alleges that Entergy New Orleans has breached its
obligations to the City related to the provision of street lighting.
The City claims that Entergy New Orleans has not fulfilled all services
required under the various street lighting contracts, has over-billed
for some services, and has billed for services that were not
authorized. Entergy New Orleans intends to defend this matter
vigorously. The ultimate outcome of the lawsuit cannot be predicted at
this time.
Franchise Fee Litigation (Entergy Corporation and Entergy Gulf States)
In September 1998, the City of Nederland filed a petition against
Entergy Gulf States and Entergy Services in state court in Jefferson
County, Texas, purportedly on behalf of all Texas municipalities that
have ordinances or agreements with Entergy Gulf States. The lawsuit
alleges that Entergy Gulf States has been underpaying its franchise
fees due to failure to properly calculate its gross receipts. The
plaintiff seeks a judgment for the allegedly underpaid fees and
punitive damages. Entergy Gulf States believes the lawsuit is without
merit and is vigorously defending itself. The trial in this matter is
scheduled to begin in November 2002. At this time, management cannot
determine the amount of damages being sought.
Fiber Optic Cable Litigation (Entergy Corporation, Entergy Gulf
States, and Entergy Louisiana)
In 1998, a group of property owners filed a class action suit
against Entergy Corporation, Entergy Gulf States, Entergy Services and
ETHC in state court in Jefferson County, Texas purportedly on behalf of
all property owners in each of the states throughout the Entergy
service area who have conveyed easements to the defendants. The
lawsuit alleged that Entergy installed fiber optic cable across their
property without obtaining appropriate easements. The plaintiffs
sought actual damages for the use of the land and a share of the
profits made through use of the fiber optic cables and punitive
damages. The state court petition was voluntarily dismissed, and the
plaintiffs commenced a class action suit with the same claims in the
United States District Court in Beaumont, Texas. Both sides have filed
motions for summary judgment, which were heard by the court in late
2001. The magistrate's recommendation to the district judge found that
two of the four types of easements did not allow Entergy to place its
fiber on the property and the other two were ambiguous and required a
jury determination. Subsequently, the district judge held oral
arguments and has taken the motions under advisement. Entergy believes
the easements did provide it the right to place the fiber optic cable.
If the court or jury disagrees, Entergy believes that any damages
suffered by the plaintiff landowners are negligible and that there is
no basis for the claim seeking a share of profits. At this time,
management cannot determine the specific amount of damages being
sought.
In January 2002, a class action lawsuit asserting similar
allegations to those alleged in the lawsuit filed in Texas was
commenced in state court in Ascension Parish, Louisiana, against
Entergy Louisiana, Entergy Services, ETHC, and Entergy Technology
Company, purportedly on behalf of all similarly situated property
owners in Louisiana. The plaintiffs seek injunctive and declaratory
relief and an unspecified amount of damages. The defendants intend to
vigorously defend the lawsuit. At this time, management cannot
determine the specific amount of damages being sought.
Franchise Service Area Litigation (Entergy Gulf States)
In early 1998, Beaumont Power and Light Company (BP&L)
unsuccessfully sought a franchise to provide electric service in the
City of Beaumont, Texas, where Entergy Gulf States already holds a
franchise. In November 1998, BP&L filed a request before the PUCT to
obtain a certificate of convenience and necessity (CCN) for those
portions of Jefferson County outside the boundaries of any municipality
for which Entergy Gulf States provides retail electric service. BP&L's
application contemplates using Entergy Gulf States' facilities in their
provision of service. In Texas, utilities are required to obtain a CCN
prior to providing retail electric service. Jefferson County is
currently singly certificated to Entergy Gulf States. If BP&L's
application is granted, BP&L would be able to provide retail service to
Entergy Gulf States' customers in the area for which the certificate
would apply. BP&L has amended its application to add a request for a
CCN to provide retail electric service within the City of Beaumont.
The amended application acknowledges that the Texas electric utility
restructuring law requires BP&L to use its own facilities to connect to
its customers if it is granted a CCN. In April 2000, the ALJ
recommended denial of BP&L's application. In May 2000, the PUCT voted
to remand the proceeding back to the ALJ to allow BP&L to provide
further evidence. BP&L filed an updated business plan, pro formas, and
direct testimony in response to the remand order. A hearing on the
merits was held in November 2001 in which Entergy Gulf States and the
PUCT staff argued that BP&L failed to demonstrate its requested
certificate should be granted. The parties are awaiting the ALJ's
proposal for decision.
Litigation Environment (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy)
The four states in which the domestic utility companies operate,
in particular Louisiana, Mississippi, and Texas, have proven to be
unusually litigious environments. Judges and juries in Louisiana,
Mississippi, and Texas have demonstrated a willingness to grant large
verdicts, including punitive damages, to plaintiffs in personal injury,
property damage, and business tort cases. Entergy uses legal and
appropriate means to contest litigation threatened or filed against it,
but the litigation environment in these states poses a significant
business risk.
EARNINGS RATIOS OF DOMESTIC UTILITY COMPANIES AND SYSTEM ENERGY
The domestic utility companies' and System Energy's ratios of
earnings to fixed charges and ratios of earnings to combined fixed
charges and preferred dividends pursuant to Item 503 of SEC Regulation
S-K are as follows:
Ratios of Earnings to Fixed Charges
Years Ended December 31,
2001 2000 1999 1998 1997
Entergy Arkansas 3.29 3.01 2.08 2.63 2.54
Entergy Gulf States 2.36 2.60 2.18 1.40 1.42
Entergy Louisiana 2.76 3.33 3.48 3.18 2.74
Entergy Mississippi 2.14 2.33 2.44 3.12 2.98
Entergy New Orleans (b) 2.66 3.00 2.65 2.70
System Energy 2.12 2.41 1.90 2.52 2.31
Ratios of Earnings to Combined Fixed
Charges and Preferred Dividends
Years Ended December 31,
2001 2000 1999 1998 1997
Entergy Arkansas 2.99 2.70 1.80 2.28 2.24
Entergy Gulf States (a) 2.21 2.39 1.86 1.20 1.23
Entergy Louisiana 2.51 2.93 3.09 2.75 2.36
Entergy Mississippi 1.96 2.09 2.18 2.80 2.69
Entergy New Orleans (b) (b) 2.43 2.74 2.41 2.44
(a) "Preferred Dividends" in the case of Entergy Gulf States also
include dividends on preference stock, which was redeemed in July 2000.
(b) For Entergy New Orleans, earnings for the twelve months ended
December 31, 2001 were not adequate to cover fixed charges and combined
fixed charges and preferred dividends by $6.6 million and $9.5 million,
respectively.
BUSINESS SEGMENTS AND PRODUCTS
Entergy Corporation
Entergy's business segments are discussed in Note 12 to the
financial statements.
Entergy New Orleans and Entergy Gulf States
Entergy New Orleans and Entergy Gulf States provide two products
within their utility operations, electric power and natural gas. For
the year ended December 31, 2001, 98% of Entergy Gulf States' operating
revenue was derived from the electric utility business, and only 2%
from the natural gas distribution business. Following is data
concerning Entergy New Orleans retail operating revenue sources and its
customer data as of December 31, 2001:
Electric Operating Natural Gas
Revenue Revenue
Residential 39% 55%
Commercial 38% 20%
Industrial 6% 11%
Governmental/Municipal 17% 14%
Number of Customers 189,000 148,000
Financial Information Relating to Products and Services
Revenues from Entergy New Orleans' and Entergy Gulf States'
electric power and natural gas sales are presented in their respective
income statements.
PROPERTY
Generating Stations
Domestic Utility and System Energy
The total capability of the generating stations owned and leased
by the domestic utility companies and System Energy as of December 31,
2001, by company and by fuel type, is indicated below:
Owned and Leased Capability MW(1)
Gas
Turbine
and
Internal
Company Total Fossil Nuclear Combustion Hydro
Entergy Arkansas 4,637 2,704 1,782 83 68
Entergy Gulf States 6,560 5,580 980 - -
Entergy Louisiana 5,286 4,181 1,093 12 -
Entergy Mississippi 2,922 2,917 - 5 -
Entergy New Orleans 967 956 - 11 -
System Energy 1,122 - 1,122 - -
------ ------ ----- --- --
Total 21,494 16,338 4,977 111 68
====== ====== ===== === ==
(1) "Owned and Leased Capability" is the dependable load carrying
capability as demonstrated under actual operating conditions based
on the primary fuel (assuming no curtailments) that each station
was designed to utilize.
Entergy's domestic utility business is subject to seasonal
fluctuations, with the peak period occurring in the summer months. The
2001 peak demand of 20,257 MW occurred on August 21, 2001. Entergy's
load and capacity projections are reviewed periodically to assess the
need and timing for additional generating capacity and interconnections
in light of the availability of power, the location of new loads, and
maximum economy to Entergy. Domestically, based on load and capability
projections and bulk power availability, Entergy's domestic utility
companies meet the need for new generation resources by means other
than construction of new base load generating capacity. Entergy's
domestic utility companies expect to meet future capacity needs by,
among other things, purchasing in the wholesale power market, including
plans to contract for up to 3,000 MW of purchased power to meet the
expected needs of the domestic utility companies in the summer of 2002.
In addition, to address this capacity shortage, the domestic utility
companies are currently considering resource plans that could include
building additional capacity, re-powering existing power plants,
continuing to obtain purchased power, or a combination of those
options. The domestic utility companies expect to present these
resource plans in 2002 to their regulators. Entergy also reactivated
several units in 1999 and 2000 that were in extended reserve shutdown
to assist in serving customers during periods of peak demand.
Under the terms of the System Agreement, generating capacity and
other power resources are shared among the domestic utility companies.
The System Agreement provides, among other things, that parties having
generating reserves greater than their load requirements (long
companies) shall receive payments from those parties having
deficiencies in generating reserves (short companies). Such payments
are at amounts sufficient to cover certain of the long companies'
costs, including operating expenses, fixed charges on debt, dividend
requirements on preferred and preference stock, and a fair rate of
return on common equity investment. Under the System Agreement, these
charges are based on costs associated with the long companies' steam
electric generating units fueled by oil or gas. In addition, for all
energy exchanged among the domestic utility companies under the System
Agreement, the short companies are required to pay the cost of fuel
consumed in generating such energy plus a charge to cover other
associated costs. FERC proceedings relating to proposed amendments to
the System Agreement are discussed more thoroughly in "RATE MATTERS,
REGULATION, AND LITIGATION - Rate Matters - Wholesale Rate Matters -
System Agreement," above.
Domestic Non-Utility Nuclear
The capacity of the operating nuclear generating stations owned by
the domestic non-utility nuclear segment as of December 31, 2001 is
indicated below:
Plant Location Owned Capacity MW
(1)
Pilgrim Plymouth, Massachusetts 670
FitzPatrick Oswego, New York 825
Indian Point 2 Westchester County, New York 970
Indian Point 3 Westchester County, New York 980
(1) "Owned Capacity" refers to the nameplate rating on the
generating unit.
In August 2001, Entergy's domestic non-utility nuclear segment
agreed to purchase the 510 MW Vermont Yankee Nuclear Power Plant in
Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation for $180
million, to be paid in cash upon closing. Entergy will receive the
plant, nuclear fuel, inventories, and related real estate. Management
expects to close the transaction by the summer of 2002, pending the
approvals of the NRC, the Public Service Board of Vermont, FERC, and
other regulatory agencies.
Energy Commodity Services
The capacity of the generating stations owned in the energy
commodity services segment as of December 31, 2001 is indicated below:
Owned Capacity (1)
Plant Location MW Type
North America
Ritchie Unit 2 Helena, Arkansas 544 Fossil
Independence Unit 2 Newark, Arkansas 121 (2) Fossil
Warren Power Vicksburg, Mississippi 300 Simple Cycle Gas Turbine
Top of Iowa Worth County, Iowa 80 Wind
Europe
Damhead Creek Kent, England 800 Combined-Cycle Gas Turbine
(1) "Owned Capacity" refers to the nameplate rating on the generating
unit.
(2) The owned MW capacity is the portion of the plant capacity owned
by Entergy. For a complete listing of Entergy's joint-owned
generating stations, refer to "Jointly-Owned Generating Stations"
in Note 1 to the financial statements.
Entergy's energy commodity services segment also has minority
investments in companies owning the following generating stations in
Latin America: Costanera, a 2000 MW fossil generation facility located
in Buenos Aires, Argentina; Central Buenos Aires, a 220 MW combined-
cycle gas turbine addition to the Costanera plant; San Isidro, a 375 MW
combined-cycle gas turbine power plant located in Quillota, Chile; and
Edegel, a 1000 MW hydroelectric and fossil generation facility located
in Lima, Peru.
Entergy's energy commodity services segment is currently
constructing the following projects. The Crete Project, a 320 MW
simple cycle gas turbine merchant power plant in Crete, Illinois, is
anticipated to be operational in June 2002. Entergy will own
approximately 160 MW of the capacity of the Crete plant, with the
remainder owned by DTE Energy. During 2000, construction began on the
RS Cogen Project, a 425 MW combined-cycle gas turbine power plant in
Lake Charles, Louisiana. Entergy will own approximately 212 MW, with
the remainder owned by PPG Industries. RS Cogen is expected to begin
operation in 2002. Construction also began in 2001 on the Northeast
Texas Electric Cooperative Project, a 550 MW combined-cycle gas turbine
power plant in Harrison County, Texas. Entergy will own approximately
385 MW once construction is completed and operation has begun
(currently projected to be June 2003), with Northeast Texas Electric
Cooperative, Inc. owning the remainder.
Interconnections
Domestic Utility
The electric generating facilities of Entergy's domestic utility
companies consist principally of steam-electric production facilities.
These generating units are interconnected by a transmission system
operating at various voltages up to 500 KV. With the exception of a
small portion of Entergy Mississippi's capacity, operating facilities
or interests therein generally are owned or leased by the domestic
utility company serving the area in which the generating facilities are
located. All of these generating facilities are centrally dispatched
and operated.
Entergy's domestic utility companies are interconnected with many
neighboring utilities. In addition, the domestic utility companies are
members of the Southeastern Electric Reliability Council (SERC). The
primary purpose of SERC is to ensure the reliability and adequacy of
the electric bulk power supply in the southeast region of the United
States. SERC is a member of the North American Electric Reliability
Council.
Domestic Non-Utility Nuclear
The electric generating facilities of Entergy's domestic non-
utility nuclear segment consists of the Pilgrim nuclear production
facility, the James A. FitzPatrick nuclear production facility, and the
Indian Point Energy Center nuclear production facility. The Pilgrim
plant is dispatched as a part of Independent System Operator (ISO) New
England. The primary purpose of ISO New England is to direct the
operations of the major generation and transmission facilities in the
New England region. The James A. FitzPatrick and Indian Point Energy
Center plants are dispatched by the New York Independent System
Operator (NYISO). The primary purpose of NYISO is to direct the
operations of the major generation and transmission facilities in New
York state.
Gas Property
As of December 31, 2001, Entergy New Orleans distributed and
transported natural gas for distribution solely within the limits of
the City of New Orleans through a total 33 miles of gas transmission
pipelines, 1,473 miles of gas distribution mains, and 1,034 miles of
gas service line from the distribution mains to the customers.
As of December 31, 2001, the gas properties of Entergy Gulf
States, which are located in and around Baton Rouge, Louisiana, were
not material to Entergy Gulf States' financial position.
Titles
Entergy's generating stations and major transmission substations
are generally located on properties owned in fee simple. The greater
portion of the transmission and distribution lines of the domestic
utility companies have been constructed on property of private owners
pursuant to easements or on public highways and streets pursuant to
appropriate franchises. The rights of each company in the property on
which its utility facilities are located are considered by such company
to be adequate for use in the conduct of its business. Minor defects
and irregularities customarily found in properties of like size and
character may exist, but such defects and irregularities do not, in the
opinion of management, materially impair the use of the properties
affected thereby. The domestic utility companies generally have the
right of eminent domain, whereby they may, if necessary, perfect or
secure titles to, or easements or servitudes on, privately held lands
used in or reasonably necessary for their utility operations.
Substantially all of the physical properties and assets owned by
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy are subject to the liens of mortgages securing the first
mortgage bonds of such company. The Lewis Creek generating station is
owned by GSG&T, Inc., a subsidiary of Entergy Gulf States, and is not
subject to the lien of the Entergy Gulf States mortgage securing the
first mortgage bonds of Entergy Gulf States, but is leased to and
operated by Entergy Gulf States. All of the debt outstanding under the
original first mortgages of Entergy Mississippi and Entergy New Orleans
has been retired and the original first mortgages were cancelled in
1999 and 1997, respectively. As a result, the general and refunding
mortgages of Entergy Mississippi and Entergy New Orleans now each
constitute a first mortgage lien on substantially all of the respective
physical properties and assets of these two companies.
FUEL SUPPLY
The sources of generation and average fuel cost per KWH for the
domestic utility companies and System Energy for the years 1999-2001
were:
Natural Gas Fuel Oil Nuclear Fuel Coal
% Cents % Cents % Cents % Cents
of Per of Per of Per of Per
Year Gen KWH Gen KWH Gen KWH Gen KWH
2001 34 4.62 8 4.33 43 .50 15 1.58
2000 42 4.90 4 3.90 39 .56 15 1.51
1999 45 2.75 4 2.06 35 .54 16 1.59
Actual 2001 and projected 2002 sources of generation for the
domestic utility companies and System Energy are:
Natural Gas Fuel Oil Nuclear Coal
2001 2002 2001 2002 2001 2002 2001 2002
Entergy Arkansas (a) 7% 7% - - 61% 61% 31% 31%
Entergy Gulf States 57% 57% 1% - 27% 25% 15% 18%
Entergy Louisiana 48% 58% 5% - 47% 42% - -
Entergy Mississippi 22% 69% 51% - - - 27% 31%
Entergy New Orleans 84% 100% 16% - - - - -
System Energy - - - - 100%(b) 100%(b) - -
Total (a) 34% 40% 8% 0% 43% 43% 15% 16%
(a) Hydroelectric power provided 1% of Entergy Arkansas' generation in
2001 and is expected to provide 1% of its generation in 2002.
(b) In addition to the nuclear capacity given above for the following
companies, the Unit Power Sales Agreement allocates capacity and
energy from System Energy's interest in Grand Gulf 1 as follows:
Entergy Arkansas - 36%; Entergy Louisiana - 14%; Entergy
Mississippi - 33%; and Entergy New Orleans - 17%.
Natural Gas
The domestic utility companies have long-term firm and short-term
interruptible gas contracts. Long-term firm contracts comprise less
than 26% of the domestic utility companies' total requirements but can
be called upon, if necessary, to satisfy a significant percentage of
the domestic utility companies' needs. Short-term contracts and spot-
market purchases satisfy additional gas requirements. Entergy Gulf
States has a transportation service agreement with a gas supplier that
provides flexible natural gas service to certain generating stations by
using such supplier's pipeline and gas storage facility. Entergy's
energy commodity services segment has entered into 15-year gas supply
contracts at the project level to supply up to 100% of the gas
requirements for the Damhead Creek power plant located in the UK.
Many factors, including wellhead deliverability, storage and
pipeline capacity, and demand requirements of end users, influence the
availability and price of natural gas supplies for power plants.
Demand is tied to weather conditions as well as to the prices of other
energy sources. Gas demands leveling out to meet more consistently with
supplies and higher storage levels brought prices down in 2001.
Entergy's supplies of natural gas are expected to be adequate in 2002.
However, pursuant to federal and state regulations, gas supplies to
power plants may be interrupted during periods of shortage. To the
extent natural gas supplies are disrupted or natural gas prices
significantly increase, the domestic utility companies will use
alternate fuels, such as oil, or rely to a larger extent on coal and
nuclear generation.
Coal
Entergy Arkansas has long-term contracts for low-sulfur Wyoming
coal for White Bluff and Independence. These contracts, which expire
in 2002 and 2011, respectively, provide for approximately 70% of
Entergy Arkansas' expected coal requirements for 2002. At the
expiration of the White Bluff long-term contract in 2002, Entergy plans
to enter into short-term and medium-term contracts for White Bluff coal
supply based on the company's procurement strategy. Entergy Arkansas
has an additional 20% of its 2002 coal requirement committed in a
number of one year contracts. Additional requirements are satisfied by
spot market purchases. Entergy Gulf States has a contract for the
supply of low-sulfur Wyoming coal for Nelson Unit 6, which should be
sufficient to satisfy its fuel requirements for that unit at current
consumption rates through the first quarter of 2003. The contract
includes options to extend supply to 2010 if all price re-openers are
accepted. If both parties cannot agree upon a price, then the contract
terminates. Effective April 1, 2000, Louisiana Generating LLC assumed
Cajun's ownership interest in the Big Cajun 2 generating facilities and
operates the plant, which is 42% owned by Entergy Gulf States. The
management of Louisiana Generating LLC has advised Entergy Gulf States
that it has executed coal supply and transportation contracts that
should provide an adequate supply of coal for the operation of Big
Cajun 2, Unit 3 for the foreseeable future.
Entergy Arkansas has a long-term railroad transportation contract
for the delivery of coal to both White Bluff and Independence. This
contract will expire in the year 2011. Entergy Arkansas has settled its
lawsuit against the railroad that claimed breach of contract by the
railroad and requested termination of the contract. Beginning in 2002,
a portion of White Bluff's coal requirements will be delivered by a
second carrier under a long-term transportation agreement. This
agreement will expire on December 31, 2006.
Entergy Gulf States has transportation requirements contracts with
railroads to deliver coal to Nelson Unit 6 through December 31, 2004.
Each of the two contracts governs the movement of approximately one-
half of the plant's requirements and the base contract provides
flexibility for shipping up to all of the plant's requirements.
Nuclear Fuel
The nuclear fuel cycle involves the following:
o mining and milling of uranium ore to produce a concentrate;
o conversion of the concentrate to uranium hexafluoride gas;
o enrichment of the hexafluoride gas;
o fabrication of nuclear fuel assemblies for use in fueling nuclear
reactors; and
o disposal of spent fuel.
System Fuels is responsible for contracts to acquire nuclear
material to be used in fueling Entergy Arkansas', Entergy Louisiana's,
and System Energy's nuclear units. System Fuels also maintains
inventories of such materials during the various stages of processing.
Each of these companies purchases enriched uranium hexafluoride from
System Fuels, but contracts separately for the fabrication of its own
nuclear fuel. The requirements for River Bend are pursuant to
contracts made by Entergy Gulf States. The requirements for Pilgrim,
FitzPatrick, Indian Point 2, and Indian Point 3 are pursuant to
contracts made by Entergy's domestic non-utility nuclear business.
Entergy Nuclear Fuels Company is responsible for contracts to acquire
nuclear materials, except for fuel fabrication, for these non-utility
nuclear plants.
Based upon currently planned fuel cycles, Entergy's nuclear units
currently have contracts and inventory that provide adequate materials
and services. Existing contracts for uranium concentrate, conversion
of the concentrate to uranium hexafluoride, and enrichment of the
uranium hexafluoride will provide a significant percentage of these
materials and services over the next several years. Additional
materials and services required beyond the coverage of these contracts
are expected to be available at a reasonable cost for the foreseeable
future.
Current fabrication contracts will provide a significant
percentage of these materials and services over the next several years.
The Nuclear Waste Policy Act of 1982 provides for the disposal of spent
nuclear fuel or high level waste by the DOE. Refer to Note 9 to the
financial statements for a discussion of spent nuclear fuel disposal.
It will be necessary for Entergy to enter into additional
arrangements to acquire nuclear fuel in the future. It is not possible
to predict the ultimate cost of such arrangements.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy each have made arrangements to lease nuclear fuel and
related equipment and services. The lessors finance the acquisition
and ownership of nuclear fuel through credit agreements and the
issuance of notes. These arrangements are subject to periodic renewal.
There is a discussion of nuclear fuel leases in Note 10 to the
financial statements.
Natural Gas Purchased for Resale
Entergy New Orleans has several suppliers of natural gas. Its
system is interconnected with three interstate and three intrastate
pipelines. Entergy New Orleans' primary suppliers currently are Enron
North America, Inc., an interstate gas marketer, Bridgeline Gas
Distributors, and Pontchartrain Natural Gas via Louisiana Gas Services.
Entergy New Orleans has a "no-notice" service gas purchase contract
with Enron North America, Inc. which guarantees Entergy New Orleans gas
delivery at specific delivery points and at any volume within the
minimum and maximum set forth in the contract amounts. The Enron North
America, Inc. gas supply is transported to Entergy New Orleans pursuant
to a transportation service agreement with Koch Gateway Pipeline
Company (now known as Gulf South Pipeline). This service is subject to
FERC-approved rates. The Gulf South Pipeline is now part of the
Entergy-Koch joint venture. Enron North America, Inc. ceased to
perform on its contract with Entergy New Orleans following the
bankruptcy of Enron Corporation late in 2001. Entergy New Orleans has
assumed the management of this gas supply contract, which is scheduled
to expire on March 31, 2002, with no interruption of supply. Entergy
New Orleans will replace the contract through its normal competitive
bid process such that supply will continue uninterrupted. Entergy New
Orleans has firm contracts with its two intrastate suppliers and also
makes interruptible spot market purchases. In recent years, natural
gas deliveries to Entergy New Orleans have been subject primarily to
weather-related curtailments. However, Entergy New Orleans experienced
no such curtailments in 2001.
As a result of the implementation of FERC-mandated interstate
pipeline restructuring in 1993, curtailments of interstate gas supply
could occur if Entergy New Orleans' suppliers failed to perform their
obligations to deliver gas under their supply agreements. Gulf South
Pipeline could curtail transportation capacity only in the event of
pipeline system constraints. Based on the current supply of natural
gas, and absent extreme weather-related curtailments, Entergy New
Orleans does not anticipate any interruptions in natural gas deliveries
to its customers.
Entergy Gulf States purchases natural gas for resale under an
agreement with Enbridge Marketing (U.S.) Inc. (formerly Mid Louisiana
Gas Company). Enbridge Marketing is not allowed to discontinue
providing gas to Entergy Gulf States without obtaining FERC approval.
Research
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans are members of the Electric Power
Research Institute (EPRI). EPRI conducts a broad range of research in
major technical fields related to the electric utility industry.
Entergy participates in various EPRI projects based on Entergy's needs
and available resources. Entergy and its subsidiaries contributed
approximately $5 million in 2001, $5 million in 2000, and $6 million in
1999 to EPRI.
Item 2. Properties
Information regarding the properties of the registrants is
included in Item 1. "Business - PROPERTY," in this report.
Item 3. Legal Proceedings
Details of the registrants' material rate proceedings,
environmental regulation and proceedings, and other regulatory
proceedings and litigation that are pending or those terminated in the
fourth quarter of 2001 are discussed in Item 1. "Business - RATE
MATTERS, REGULATION, AND LITIGATION," in this report.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 2001, no matters were submitted to a
vote of the security holders of Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, or System Energy.
DIRECTORS AND EXECUTIVE OFFICERS OF ENTERGY CORPORATION
Directors
Information required by this item concerning directors of Entergy
Corporation is set forth under the heading "Proposal 1--Election of
Directors" contained in the Proxy Statement of Entergy Corporation,
(the "Proxy Statement"), to be filed in connection with its Annual
Meeting of Stockholders to be held May 10, 2002, ("Annual Meeting"),
and is incorporated herein by reference. Information required by this
item concerning officers and directors of the remaining registrants is
reported in Part III of this document.
Executive Officers
Name Age Position Period
J. Wayne Leonard (a) 51 Chief Executive Officer and Director 1999-Present
of Entergy Corporation
Director of Entergy Arkansas, Entergy 1998-1999
Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New
Orleans, and System Energy
President and Chief Operating Officer 1998
of Entergy Corporation
Chief Operating Officer of Entergy 1998
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Vice Chairman of Entergy New Orleans 1998
President of Energy Commodities 1996-1998
Strategic Business Unit
President of Cinergy Capital & 1996-1998
Trading
Donald C. Hintz (a) 59 President of Entergy Corporation 1999-Present
Executive Vice President and Chief 1998
Nuclear Officer of Entergy Arkansas,
Entergy Gulf States, and Entergy
Louisiana
Group President and Chief Nuclear 1997-1998
Operating Officer of Entergy
Corporation, Entergy Arkansas,
Entergy Gulf States, and Entergy
Louisiana
Executive Vice President and Chief 1994-1997
Nuclear Officer of Entergy
Corporation
Executive Vice President - Nuclear of 1994-1997
Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana
Chief Executive Officer and President 1992-1998
of System Energy
Director of Entergy Gulf States 1993-Present
Director of Entergy Arkansas, Entergy 1992-Present
Louisiana, Entergy Mississippi, and
System Energy
Director of Entergy New Orleans 1999-Present
Richard J. Smith (a) 50 Group President, Utility Operations 2001-Present
of Entergy Corporation, Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Director of Entergy Arkansas, Entergy 2001-Present
Gulf States, Entergy Louisiana,
Entergy Mississippi and Entergy New
Orleans
Senior Vice President, Transition 2000-2001
Management of Entergy Corporation
President of Cinergy Resources, Inc. 1999
Vice President Energy Services 1999
Vice President of Finance Services 1996-1999
Business Unit
Curtis L. Hebert, Jr. (a) 39 Executive Vice President, External 2001-Present
Affairs of Entergy Corporation
Chairman and Commissioner of the 1997-2001
Federal Energy Regulatory Commission
Chairman and Commissioner of the 1992-1997
Mississippi Public Service
Commission
Jerry D. Jackson (a) 57 Executive Vice President of Entergy 1999-Present
Corporation
Group President - Utility Operations 2000-2001
of Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
President and Chief Executive Officer 1999-2000
- Louisiana of Entergy Gulf States
President and Chief Executive Officer 1999-2000
of Entergy Louisiana
Chief Administrative Officer of 1997-1998
Entergy Corporation, Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Executive Vice President - External 1995-1998
Affairs of Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New
Orleans
Executive Vice President - External 1994-1998
Affairs of Entergy Corporation
Director of Entergy Gulf States 1994-2001
Director of Entergy Louisiana 1992-2001
Director of Entergy Arkansas, Entergy 2000-2001
Mississippi, and Entergy New Orleans 1992-1999
Michael G. Thompson (a) 61 Executive Vice President, General 2001-Present
Counsel and Secretary of Entergy
Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and
Entergy New Orleans
Senior Vice President and General 1992-2001
Counsel of Entergy Corporation
Senior Vice President, General 1995-2001
Counsel, and Secretary of Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Secretary of Entergy Corporation 1994-2001
C. John Wilder (a) 43 Executive Vice President and Chief 1998-Present
Financial Officer of Entergy
Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi,
Entergy New Orleans, and System
Energy
Director of Entergy Arkansas, Entergy 1999-Present
Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New
Orleans, and System Energy
Chief Executive Officer of Shell 1998
Capital Company
Assistant Treasurer of the Royal 1996-1998
Dutch/Shell Group
Frank F. Gallaher (a) 56 Senior Vice President of Entergy 2001-Present
Corporation
Senior Vice President, Generation, 1999-2001
Transmission and Energy Management
of Entergy Corporation
President, Fossil Operations and 2000-Present
Transmission of Entergy Arkansas,
Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and
Entergy New Orleans
Senior Vice President, Generation, 1999-2000
Transmission and Energy Management
of Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Executive Vice President and Chief 1998-1999
Utility Operating Officer for
Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Group President and Chief Utility 1997-1999
Operating Officer of Entergy
Corporation
Group President and Chief Utility 1997-1998
Operating Officer of Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Director of Entergy Arkansas, Entergy 1997-1999
Louisiana, and Entergy Mississippi
Executive Vice President of 1996-1997
Operations of Entergy Corporation
Director of Entergy Gulf States 1993-1999
Executive Vice President of 1993-1997
Operations of Entergy Arkansas,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Joseph T. Henderson (a) 44 Senior Vice President and General Tax 2001-Present
Counsel of Entergy Corporation,
Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and System Energy
Vice President and General Tax 1999-2001
Counsel of Entergy Corporation,
Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and System Energy
Associate General Tax Counsel of 1998-1999
Shell Oil Company
Senior Tax Counsel of Shell Oil 1995-1998
Company
Nathan E. Langston (a) 53 Senior Vice President and Chief 2001-Present
Accounting Officer of Entergy
Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi,
Entergy New Orleans, and System
Energy
Vice President and Chief Accounting 1998-2001
Officer of Entergy Corporation,
Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and System Energy
Director of Tax Services of Entergy 1993-1998
Services
Steven C. McNeal (a) 45 Vice President and Treasurer of 1998-Present
Entergy Corporation, Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and System Energy
Assistant Treasurer of Entergy 1994-1998
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and System Energy
Director of Corporate Finance of 1994-1998
Entergy Services
(a) In addition, this officer is an executive officer and/or director
of various other wholly owned subsidiaries of Entergy Corporation and
its operating companies.
Each officer of Entergy Corporation is elected yearly by the Board
of Directors.
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters
Entergy Corporation
The shares of Entergy Corporation's common stock are listed on the
New York Stock, Chicago Stock, and Pacific Exchanges under the ticker
symbol ETR.
Entergy Corporation's stock price as of February 28, 2002 was
$41.28. The high and low prices of Entergy Corporation's common stock
for each quarterly period in 2001 and 2000 were as follows:
2001 2000
High Low High Low
(In Dollars)
First 42.88 32.56 26.75 15.94
Second 44.67 36.82 31.25 19.94
Third 40.95 33.60 38.13 26.94
Fourth 39.50 35.10 43.88 33.50
Consecutive quarterly cash dividends on common stock were paid to
stockholders of Entergy Corporation in 2001 and 2000. In 2001,
dividends of $0.315 per share were paid in the first three quarters,
and a dividend of $0.33 per share was paid in the fourth quarter. In
2000, dividends of $0.30 per share were paid in the first three
quarters, and a dividend of $0.315 per share was paid in the fourth
quarter.
As of February 28, 2002, there were 60,327 stockholders of record
of Entergy Corporation.
Entergy Corporation's future ability to pay dividends is discussed
in Note 8 to the financial statements. In addition to the restrictions
described in Note 8, PUHCA provides that, without approval of the SEC,
the unrestricted, undistributed retained earnings of any Entergy
Corporation subsidiary are not available for distribution to Entergy
Corporation's common stockholders until such earnings are made
available to Entergy Corporation through the declaration of dividends
by such subsidiaries.
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy
There is no market for the common stock of Entergy Corporation's
wholly owned subsidiaries. Cash dividends on common stock paid by the
domestic utility companies and System Energy to Entergy Corporation
during 2001 and 2000, were as follows:
2001 2000
(In Millions)
Entergy Arkansas $ 82.5 $ 44.6
Entergy Gulf States $ 83.7 $ 88.0
Entergy Louisiana $134.6 $ 62.4
Entergy Mississippi $ 19.6 $ 18.0
Entergy New Orleans $ 0.8 $ 9.5
System Energy $119.1 $ 91.8
Information with respect to restrictions that limit the ability of
System Energy and the domestic utility companies to pay dividends is
presented in Note 8 to the financial statements.
Item 6. Selected Financial Data
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF
ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY
GULF STATES, INC., ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC.,
ENTERGY NEW ORLEANS, INC., and SYSTEM ENERGY RESOURCES, INC." which
follow each company's financial statements in this report, for
information with respect to selected financial data and certain
operating statistics.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES," " - SIGNIFICANT FACTORS AND KNOWN
TRENDS," and "- RESULTS OF OPERATIONS OF ENTERGY CORPORATION AND
SUBSIDIARIES, ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA,
ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, and SYSTEM ENERGY."
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Entergy Corporation and Subsidiaries. Refer to information under
the heading "ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN
TRENDS."
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Entergy Corporation and Subsidiaries:
Report of Management 52
Management's Financial Discussion and Analysis 53
Report of Independent Accountants 76
Management's Financial Discussion and Analysis 77
Consolidated Statements of Income For the Years Ended December 31, 86
2001, 2000, and 1999
Consolidated Statements of Cash Flows For the Years Ended December 87
31, 2001, 2000, and 1999
Consolidated Balance Sheets, December 31, 2001 and 2000 89
Consolidated Statements of Retained Earnings, Comprehensive Income, 91
and Paid-In Capital for the Years Ended December 31, 2001, 2000,
and 1999
Selected Financial Data - Five-Year Comparison 92
Entergy Arkansas, Inc.:
Report of Independent Accountants 93
Management's Financial Discussion and Analysis 94
Income Statements For the Years Ended December 31, 2001, 2000, and 99
1999
Statements of Cash Flows For the Years Ended December 31, 2001, 100
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 101
Statements of Retained Earnings for the Years Ended December 31, 103
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 104
Entergy Gulf States, Inc.:
Report of Independent Accountants 105
Management's Financial Discussion and Analysis 106
Income Statements For the Years Ended December 31, 2001, 2000, and 111
1999
Statements of Cash Flows For the Years Ended December 31, 2001, 112
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 113
Statements of Retained Earnings for the Years Ended December 31, 115
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 116
Entergy Louisiana, Inc.:
Report of Independent Accountants 117
Management's Financial Discussion and Analysis 118
Income Statements For the Years Ended December 31, 2001, 2000, and 122
1999
Statements of Cash Flows For the Years Ended December 31, 2001, 124
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 125
Statements of Retained Earnings for the Years Ended December 31, 127
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 128
Entergy Mississippi, Inc.:
Report of Independent Accountants 129
Management's Financial Discussion and Analysis 130
Income Statements For the Years Ended December 31, 2001, 2000, and 134
1999
Statements of Cash Flows For the Years Ended December 31, 2001, 136
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 137
Statements of Retained Earnings for the Years Ended December 31, 139
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 140
Entergy New Orleans, Inc.:
Report of Independent Accountants 141
Management's Financial Discussion and Analysis 142
Statements of Operations For the Years Ended December 31, 2001, 145
2000, and 1999
Statements of Cash Flows For the Years Ended December 31, 2001, 146
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 147
Statements of Retained Earnings for the Years Ended December 31, 149
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 150
System Energy Resources, Inc.:
Report of Independent Accountants 151
Management's Financial Discussion and Analysis 152
Income Statements For the Years Ended December 31, 2001, 2000, and 154
1999
Statements of Cash Flows For the Years Ended December 31, 2001, 156
2000, and 1999
Balance Sheets, December 31, 2001 and 2000 157
Statements of Retained Earnings for the Years Ended December 31, 159
2001, 2000, and 1999
Selected Financial Data - Five-Year Comparison 160
Notes to Financial Statements for Entergy Corporation and 161
Subsidiaries
ENTERGY CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has
prepared and is responsible for the financial statements and related
financial information included herein. The financial statements are
based on generally accepted accounting principles in the United States.
Financial information included elsewhere in this report is consistent
with the financial statements.
To meet their responsibilities with respect to financial
information, management maintains and enforces a system of internal
accounting controls designed to provide reasonable assurance, on a
cost-effective basis, as to the integrity, objectivity, and reliability
of the financial records, and as to the protection of assets. This
system includes communication through written policies and procedures,
an employee Code of Entegrity, and an organizational structure that
provides for appropriate division of responsibility and the training of
personnel. This system is also tested by a comprehensive internal
audit program.
The Audit Committee of our Board of Directors, composed solely of
Directors who are not employees of our company, meets with the
independent auditors, management, and internal accountants periodically
to discuss internal accounting controls and auditing and financial
reporting matters. Upon recommendation from the Audit Committee, the
Board of Directors appoints the independent auditors annually.
However, in August 2001, the Audit Committee selected Deloitte & Touche
to succeed PricewaterhouseCoopers as the Company's independent
auditors; the Board of Directors ratified the selection in October
2001. The Audit Committee reviews with the independent auditors the
scope and results of the audit effort. The Committee also meets
periodically with the independent auditors and the chief internal
auditor without management, providing free access to the Committee.
Independent public accountants provide an objective assessment of
the degree to which management meets its responsibility for fairness of
financial reporting. They regularly evaluate the system of internal
accounting controls and perform such tests and other procedures as they
deem necessary to reach and express an opinion on the fairness of the
financial statements.
Management believes that these policies and procedures provide
reasonable assurance that its operations are carried out with a high
standard of business conduct.
J. WAYNE LEONARD C. JOHN WILDER
Chief Executive Officer of Entergy Executive Vice President and
Corporation Chief Financial Officer
HUGH T. MCDONALD JOSEPH F. DOMINO
Chairman, President, and Chief Chairman of Entergy Gulf States,
Executive Officer of Inc., President and Chief
Entergy Arkansas, Inc. Executive Officer - Texas
of Entergy Gulf States, Inc.
E. RENAE CONLEY CAROLYN C. SHANKS
Chairman, President, and Chief Chairman, President, and Chief
Executive Officer of Entergy Executive Officer of Entergy
of Entergy Louisiana, Inc.; Mississippi, Inc.
President and Chief Executive
Officer- Louisiana of Entergy
Gulf States, Inc.
DANIEL F. PACKER JERRY W. YELVERTON
Chairman, President, and Chief Chairman, President, and Chief
Executive Officer of Entergy Executive Officer of System
New Orleans, Inc. Energy Resources, Inc.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Entergy Corporation is an investor-owned public utility holding
company that operates through three business segments. The domestic
utility business generates, transmits, distributes, and sells electric
power to 2.6 million retail customers in portions of Arkansas,
Louisiana, Mississippi, and Texas. The domestic utility business,
particularly through Entergy Arkansas and Entergy Gulf States, also
generates some revenue from wholesale electric power sales. The
domestic non-utility nuclear business owns and operates four nuclear
power plants that it has acquired over the past three years, and sells
electric power produced by those plants to wholesale customers.
Domestic non-utility nuclear also generates some revenue by providing
operation and maintenance services to the owners of other nuclear power
plants. The energy commodity services business provides energy
commodity trading and gas transportation and storage services through
Entergy-Koch, L.P., and develops power generation projects in the
United States and Europe. Following are the percentages of Entergy's
consolidated revenues and net income generated by these segments and
the percentage of total assets held by them:
Segment % of Revenue % of Net Income % of Total Assets
2001 2000 1999 2001 2000 1999 2001 2000 1999
Domestic utility 77 74 73 77 87 93 78 81 82
Domestic non-utility nuclear 8 3 1 17 7 3 13 9 3
Energy commodity services 14 23 26 14 8 (7) 9 10 8
Other 1 - - (8) (2) 11 - - 7
Following are significant factors and known trends that may affect
our results of operations or financial position.
Critical Accounting Policies
Accounting and financial reporting involve significant estimates
and judgments, including the selection of appropriate accounting
policies. Note 1 to the financial statements provides a comprehensive
discussion of Entergy's significant accounting policies. The following
represent the accounting policies that Entergy's management believes
are especially important to the reporting of Entergy's financial
position and results of operations, due to their significance and
subjectivity:
Application of SFAS 71 - Entergy's application of SFAS 71,
"Accounting for the Effects of Certain Types of Regulation," to its
domestic utility operations has a significant and pervasive impact on
accounting and reporting for these operations. These matters are
discussed in "Significant Factors and Known Trends - Continued
Application of SFAS 71" and in Note 1 to the financial statements.
Accounting for Decommissioning - The accounting for
decommissioning costs for nuclear power plants involves significant
estimates related to costs to be incurred many years in the future.
Changes in these estimates could significantly impact Entergy's
financial position, results of operations, and cash flows (although
estimate changes for the nuclear plants in Entergy's domestic utility
operating segment should be earnings-neutral, because these costs are
collected from ratepayers). These issues are discussed in more detail
in Note 9 to the financial statements.
Accounting for Derivative Instruments and Hedges - Entergy's
application of the provisions of SFAS 133 and EITF 98-10 to its various
commodity and financial contracts has a significant impact on Entergy's
financial statements. The risks associated with these instruments and
Entergy's accounting for them are discussed in more detail in
"Significant Factors and Known Trends - Market Risks Disclosure" and in
Note 15 to the financial statements.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Accounting for Equity Method Investees and Off Balance Sheet
Arrangements - During 2001, Entergy entered into two significant
transactions that involved complex accounting judgments: 1) a joint
venture with Koch Industries, Inc. involving energy trading and
pipeline operations. This investment is accounted for under the equity
method of accounting, and is discussed in more detail in "Results of
Operations - Energy Commodity Services" and in Note 13 to the financial
statements; and 2) a financing arrangement for Entergy's turbine
acquisition program that involved the sale and assignment of Entergy's
interests under certain turbine acquisition contracts to an independent
special purpose entity. This transaction is described in more detail
in "Liquidity and Capital Resources - Off Balance Sheet and Equity
Method Investee Debt, Guarantees of Unconsolidated Obligations, and
Lease Obligations."
Domestic Utility Transition to Retail Competition
The electric utility industry for years has been preparing for the
advent of competition in its business. For most electric utilities, the
transition from a regulated monopoly to a competitive business is
challenging and complex. The new electric utility environment presents
opportunities to compete for new customers and creates the risk of loss
of existing customers. It presents risks along with opportunities to
enter into new businesses and to restructure existing businesses.
Events that occurred in 2001, particularly the crisis in California's
restructured power supply market, may slow the onset of competition.
The recent bankruptcy of Enron may further retard the move to
competition.
For Entergy, the domestic transition to competition is a
formidable undertaking, made uniquely difficult because the domestic
utility companies operate in five retail regulatory jurisdictions and
are subject to the System Agreement, which contemplates the integrated
operation of Entergy's electric generation and transmission assets
throughout the retail service territories. Entergy is striving to
achieve consistent paths to competition in all five retail regulatory
jurisdictions. Nevertheless, actions by one jurisdiction may conflict
with actions by another. In addition, while the Arkansas and Texas
legislatures have enacted laws to bring about electric utility
competition, the process is going forward only in Texas, and retail
competition in Entergy Gulf States' service area is subject to a delay
in that state. Entergy is continuing to work with regulatory and
legislative officials in all jurisdictions in designing the rules
surrounding the implementation of a competitive electricity industry.
There can be no assurance given as to the timing or results of the
transition to competition in Entergy's service territories. Following
is a summary of the status of the transition to competition in the five
retail jurisdictions:
% of Entergy's
Consolidated 2001
Revenues Derived
from Retail Electric
Utility Operations
Jurisdiction Status of Retail Open Access in the Jurisdiction
Arkansas Commencement delayed by amended 13.6%
law until at least October
2003, APSC has recommended
delay until at least 2010.
Texas Delayed until at least 10.7%
September 15, 2002 in Entergy
Gulf States' service area in a
settlement approved by the
PUCT.
Louisiana The LPSC has deferred pursuing 33.4%
retail open access, pending
developments at the federal
level and in other states.
Mississippi MPSC has recommended not 9.8%
pursuing open access at this
time.
New Orleans City Council has taken no 5.1%
action on Entergy's proposal
filed in 1997.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Arkansas
Under current Arkansas legislation, 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 December 2001, the APSC recommended
to the Arkansas General Assembly that legislation be enacted during the
2003 legislative session to either repeal the legislation authorizing
retail open access or further delay retail open access until at least
2010. Entergy Arkansas supports the proposal for further delay of
retail open access but opposes repeal of deregulation legislation as
premature at this time.
Texas
In June 1999, the Texas legislature enacted a law providing for
competition in the electric utility industry through retail open
access. With retail open access, generation and a new retail electric
provider operation are competitive businesses, but transmission and
distribution operations continue to be regulated. The new retail
electric providers are the primary point of contact with customers.
Although retail open access legislation is in place in Texas, its
implementation in Entergy Gulf States' territory is delayed until at
least September 15, 2002.
Pursuant to the provisions of the retail open access law, Entergy
Gulf States' business separation plan provides that Entergy Gulf States
will be divided into:
o a Texas distribution company;
o an intermediate transmission company;
o a Texas generation company;
o at least two Texas retail electricity providers; and
o a Louisiana company that will encompass distribution, generation,
transmission, and retail operations.
Several proceedings necessary to implement retail open access are
still pending, including proceedings to set the price-to-beat rates
that will be charged by Entergy's retail electric service provider, to
implement Entergy Gulf States' business separation plan, and to form an
RTO that includes Entergy's service area. In addition, the LPSC has
not approved for the Louisiana jurisdictional operations the transfer
of generation assets to, or a power purchase agreement with, Entergy's
proposed Texas generation company.
Louisiana
In a July 2001 report to the LPSC, the LPSC staff concluded that
retail competition is not in the public interest at this time for any
customer class. Nevertheless, the LPSC staff recommended 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 recommended 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. During its October 2001 meeting, the LPSC adopted
dates by which a total of 800 MW of co- or self-generation could be
developed in Louisiana without being affected by stranded costs. During
its November 2001 meeting, the LPSC decided not to adopt a plan for
retail open access at this time, but to have collaborative group
meetings concerning open access from time to time, and to have the LPSC
staff monitor developments in neighboring states and to report to the
LPSC regarding the progress of retail access developments in those
states.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Continued Application of SFAS 71
The domestic utility companies' and System Energy's financial
statements primarily reflect assets and costs based on existing cost-
based ratemaking regulation in accordance with SFAS 71, "Accounting for
the Effects of Certain Types of Regulation." Under traditional
ratemaking practice, regulated electric utilities are granted exclusive
geographic franchises to sell electricity. In return, the utilities
must make investments and incur obligations to serve customers.
Prudently incurred costs are recovered from customers along with a
return on investment. Regulators may require utilities to defer
collecting from customers some operating costs until a future date.
These deferred costs are recorded as regulatory assets in the financial
statements. In order to continue applying SFAS 71 to its financial
statements, a utility's rates must be set on a cost-of-service basis by
an authorized body and the rates must be charged to and collected from
customers.
As the generation portion of the utility industry moves toward
competition, it is likely that generation rates will no longer be set
on a cost-of-service basis. When that occurs, the generation portion
of the business could be required to discontinue application of SFAS
71. The result of discontinuing application of SFAS 71 would be the
removal of regulatory assets and liabilities from the balance sheet,
and could include the recording of asset impairments. This result is
because some of the costs or commitments incurred under a regulated
pricing system might be impaired or not recovered in a competitive
market. These costs are referred to as stranded costs.
In the non-unanimous settlement agreement filed with the PUCT by
Entergy Gulf States in March 2001 described above, the parties agreed
that Entergy Gulf States will not implement a charge to recover
stranded costs in Texas. A rider to recover nuclear decommissioning
costs will be implemented. The PUCT approved the settlement in an
interim written order issued in May 2001. In December 2001, the PUCT
abated the proceeding until a date closer to opening the market to
retail open access.
Management believes that definitive outcomes have not yet been
determined regarding the transition to competition in any of Entergy's
jurisdictions. While Arkansas and Texas have enacted retail open
access laws as described above, Entergy believes that significant
issues remain to be addressed by Arkansas and Texas regulators, and the
enacted laws do not provide sufficient detail to determine definitively
the impact on Entergy Arkansas' and Entergy Gulf States' regulated
operations. Resolution of the regulatory proceedings affecting the
transition to competition of Entergy Gulf States' Texas generation
business may require the discontinuance of the application of SFAS 71
accounting treatment to that business. 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. Several uncertainties still exist in the
transition to competition in Texas, including the effects of the
settlement agreement that the PUCT approved that delays retail open
access until at least September 15, 2002, and the effects of the
ongoing proceedings in Texas. Therefore, the criteria under EITF 97-4
for discontinuing SFAS 71 treatment have not been met as of December
31, 2001.
Federal deregulation legislation
Over the past several years, a number of bills have been
introduced in the United States Congress to deregulate the generation
function of the electric power industry. The bills generally have
provisions that would give retail consumers the ability to choose their
own electric service provider. Entergy Corporation has supported some
deregulation legislation in Congress that would lead to an orderly
transition to competition and would also repeal PUHCA and PURPA.
Congressional sentiment appears to be against mandating retail
competition by a certain date and in favor of clarifying state
authority to order retail choice for consumers. Congress adjourned in
2001 without final action on a deregulation bill by a committee of the
House or Senate, and has not taken any significant action on such a
bill in its 2002 session thus far.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
State and Local Rate Regulation and Fuel-Cost Recovery
The retail regulatory basis for setting rates for electric service
is shifting in some jurisdictions from traditional, exclusively cost-of-
service regulation to include performance-based elements. Performance-
based formula rate plans are designed to reward increased efficiency
and productivity, with utility shareholders and customers sharing in
the benefits. Entergy Mississippi and Entergy Louisiana have
implemented performance-based rate plans, although Entergy Louisiana's
formula rate plan expired at the end of 2001. Entergy plans to propose
a statewide formula rate plan in Louisiana, which would include Entergy
Louisiana and Entergy Gulf States.
If a statewide formula rate plan is not adopted in Louisiana in
2002, Entergy Gulf States will have to file a cost-of-service rate case
by mid-2002, and Entergy Louisiana may have to file a rate case in the
same timeframe. These filings are required because Entergy Gulf States'
annual earnings review requirement ceased after the 2001 filing, and
Entergy Louisiana's formula rate plan expired with the 2001 filing.
These cost-of-service rate cases would be in addition to the Entergy
New Orleans case that is scheduled to be filed by mid-2002.
In addition to their rate proceedings, the domestic utility
companies' fuel costs recovered from customers are subject to
regulatory scrutiny. This regulatory risk represents the domestic
utility companies' largest potential exposure to price changes in the
commodity markets.
The domestic utility companies' retail and wholesale rate matters
and proceedings, including fuel cost recovery- related issues, are
discussed more thoroughly in Note 2 to the financial statements.
System Agreement Proceedings
The System Agreement provides for the integrated planning,
construction, and operation of Entergy's electric generation and
transmission assets throughout the retail service territories of the
domestic utility companies. Under the terms of the System Agreement,
generating capacity and other power resources are shared among the
domestic utility companies. The System Agreement provides that parties
having generating reserves greater than their load requirements (long
companies) shall receive payments from those parties having
deficiencies in generating reserves (short companies). Such payments
are at amounts sufficient to cover certain of the long companies' costs
for generating units fueled by oil or gas, including operating
expenses, fixed charges on debt, dividend requirements on preferred and
preference stock, and a fair rate of return on common equity
investment. In addition, for all energy exchanged among the domestic
utility companies under the System Agreement, the short companies are
required to pay the cost of fuel consumed in generating such energy
plus a charge to cover other associated costs.
The LPSC and the Council commenced a proceeding in 2001 at the
FERC that requests amendments to the System Agreement, particularly in
the area of production cost equalization. The LPSC and Council also
allege that certain provisions of the System Agreement increase costs
paid by the ratepayers in their jurisdictions. The APSC, MPSC, and
Entergy have each opposed the relief sought by the LPSC and the
Council. The LPSC also instituted a proceeding in 2001 to litigate
several of the same issues. In the proceeding, the LPSC also questions
whether Entergy Louisiana and Entergy Gulf States were prudent for not
seeking changes to the System Agreement previously, so as to lower
costs imposed upon their ratepayers and to increase costs imposed upon
ratepayers of the other domestic utility companies. The domestic
utility companies have challenged the propriety of the LPSC litigating
these issues, and will oppose the relief sought by the LPSC staff.
Nevertheless, the decisions in these proceedings could affect the rates
charged to ratepayers by the individual domestic utility companies, and
the timing and outcome of these proceedings cannot be predicted at this
time.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Industrial, Commercial, and Wholesale Customers
Some of Entergy Gulf States' and Entergy Louisiana's large
industrial and commercial customers continually explore ways to reduce
their energy costs. In particular, cogeneration is an option available
to a significant portion of Entergy Gulf States' and Entergy
Louisiana's industrial customer base. Entergy responds by working with
industrial and commercial customers and negotiating electric service
contracts that provide service at rates lower than would otherwise be
charged. Despite these actions, Entergy Gulf States and Entergy
Louisiana each expect to lose large industrial customers to
cogeneration by the end of 2002. Entergy Gulf States expects to lose
two customers that accounted for approximately 1% of its net revenue in
2001. Entergy Louisiana expects to lose a customer that accounted for
approximately 2% of its net revenue in 2001. In addition to working
with its current customers, Entergy also continually participates in
economic development activities that can increase industrial and
commercial energy demand, from both current and new customers.
Entergy also faces competition in making wholesale power sales.
In 2001, Entergy Arkansas lost a contract with a municipal wholesale
customer that accounted for approximately 2% of its 2001 net revenue.
The current contract with this customer expires on June 30, 2002, at
which time the customer will buy power from another supplier. Entergy
Arkansas is aggressively pursuing other wholesale power sales
opportunities, however, to offset the revenue loss resulting from the
loss of this contract.
Attacks of September 11, 2001
Since the attacks on New York and Washington, D.C. on September
11, 2001, security at Entergy's nuclear power plants has been at a
heightened alert level. Entergy is working with the NRC and other
government agencies on security at its nuclear sites. Based on current
security plans, management does not expect a material effect on
Entergy's financial statements to result from additional security
measures that may be implemented at its nuclear sites. As the NRC,
other governmental entities, and the industry continue to consider
security issues, it is possible that more extensive security plans
requiring higher-than-expected costs could be required.
Environmental Matters
Entergy is subject to federal and state regulation regarding air
and water quality and other environmental matters. The Clean Air Act
amendments of 1990 established programs to control sulfur dioxide,
nitrogen oxides, and hazardous air pollutant emissions (primarily
mercury). The ozone non-attainment program for control of nitrogen
oxides currently impacts Entergy Gulf States' operations in the
Beaumont and Houston areas. Entergy expects to incur up to $54 million
in capital costs through 2007 to comply with the program controls. In
addition, Entergy Gulf States expects to spend up to $72 million in
capital costs through 2005 if LDEQ-proposed controls for the Baton
Rouge area are implemented.
The United States Congress is considering a multi-pollutant
approach to reauthorization of the Clean Air Act. In addition to the
three types of emissions mentioned above, Congress is considering
controls on carbon dioxide emissions. Entergy is committed to
environmental compliance, and its high percentage of nuclear and
natural gas capacity gives it an advantage when compared to the costs
other utilities will face from potential environmental requirements.
Furthering its commitment to reduce emissions, Entergy purchased 80 MW
of wind-powered capacity in December 2001, and will consider additional
investment in wind power.
Nuclear Matters
Concerns continue to be expressed in public forums about the safety
of nuclear generation units and nuclear fuel. These concerns have led
to various proposals being made to federal authorities as well as in
some of the localities where Entergy owns nuclear power plants
for legislative and regulatory changes that could lead to shut down
of nuclear units, denial of life extension applications, unavailability
of sites for spent nuclear fuel disposal, or other adverse effects
on nuclear generation. Entergy currently owns 9 nuclear generation
units and has agreed to acquire a tenth unit. If any of these
proposals become effective, it may have a material adverse effect on
the results of operations or financial condition of Entergy.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Market Risks Disclosure
Entergy is exposed to the following market risks (market risk is
the risk of changes in the value of commodity and financial
instruments, or in future operating results or cash flows, in response
to changing market conditions):
o the commodity price risk associated with its energy commodity
services segment;
o the foreign currency exchange rate risk associated with certain of
its contractual obligations;
o the interest rate risk associated with variable rate credit
facilities in its energy commodity services segment; and
o the interest rate and equity price risk associated with its
investments in decommissioning trust funds.
In addition to these market risks, Entergy is also exposed to credit
risk. Credit risk is risk of loss from nonperformance by suppliers,
customers, or financial counter-parties to a contract or agreement.
Where it is a significant consideration, counter-party credit risk is
addressed in the discussions that follow.
Commodity Price Risk
Power Generation
The sale of electricity from the power generation plants owned by
Entergy's non-utility nuclear business and energy commodity services is
subject to the fluctuation of market power prices. Entergy's non-
utility nuclear business has entered into power purchase agreements
(PPAs) to sell the power produced by its power plants at prices
established in the PPAs. To the extent that a plant's output is not
subject to a PPA, power sales would be subject to market fluctuations.
Following is a summary of the amount of the Entergy non-utility nuclear
business' capacity currently subject to PPAs. Entergy continues to
pursue opportunities to extend the existing PPAs and to enter into new
PPAs with other parties.
Capacity subject to PPAs
Entergy's Capacity
Power Pool in the Power Pool 2002 2003 2004 2005
New York ISO 2,775 MW 100% 100% 79% 0%
ISO New England 670 MW 100% 85% 85% 20%
In addition, Entergy will sell 100% of Vermont Yankee's output up to
its rated capacity to Vermont Yankee Nuclear Power Corporation's
current owner-utilities under a 10-year PPA executed in conjunction
with the transaction, which management expects to close in the summer
of 2002. The PPA includes an adjustment clause where the prices
specified in the PPA will be adjusted downward annually, beginning in
2006, if power market prices drop below the PPA prices. Vermont Yankee
is a part of ISO New England.
Under the PPAs with NYPA for the output of power from Indian Point
3 and FitzPatrick, Entergy's non-utility nuclear business is obligated
to produce at an average capacity factor of 85% with a financial true-
up payment due to NYPA should NYPA's cost to purchase power due to an
output shortfall be higher than the PPAs' price. These plants operated
at 94% and 99% capacity factors, respectively, in 2001. The financial
true-up obligation is guaranteed up to $20 million by an Entergy
affiliate.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Energy commodity services enters into forward power sale
agreements to hedge its exposure to market price fluctuations. The
following represents the percentage of planned electricity output under
physical or financial contract for energy commodity services'
generation facilities as of December 31, 2001:
2002 2003
% under % under
Planned GWH contract Planned GWH contract
Peaking plants 303 81% 345 12%
Base load plants 8,089 62% 10,463 25%
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 in
2001. The decline is adversely impacting the profitability of power
projects selling into power markets on a spot or short-term basis.
Energy commodity services actively manages its assets as an investment
portfolio, and attempts to maximize flexibility to respond to different
market environments. Active management of the portfolio by energy
commodity services is expected to result in: the commercial operation
of projects by energy commodity services; the sale of projects at
various stages in their planning, development, or operation; or the
abandonment of projects. Entergy continually monitors industry trends
in order to determine whether asset impairments or other losses could
result from a decline in value, or cancellation, of merchant power
projects and the related turbines, and records provisions for
impairments and losses accordingly.
Marketing and Trading
The earnings of Entergy's energy commodity services segment are
exposed to commodity price market risks through Entergy's 50%-owned,
unconsolidated investment in Entergy-Koch, energy-related derivative
commodity and financial instruments held by certain consolidated
subsidiaries, and Entergy's consolidated power marketing and trading
business in 2000, which was contributed to Entergy-Koch in January
2001.
Entergy-Koch Trading (EKT) and Entergy use VAR models as one
measure of the market risk of a loss in fair value for EKT's natural
gas and power trading portfolio and energy commodity services' mark-to-
market portfolio. VAR acts in conjunction with stress testing,
position reporting, and profit and loss reporting in order to measure
and control the risk inherent in these portfolios. The primary use of
VAR is to provide a benchmark for market risk contained in these
portfolios. VAR does not function as a comprehensive measure of all
risks in the portfolios.
EKT's and Entergy's calculations of VAR exposure represent an
estimate of reasonably possible net losses that would be recognized on
portfolios of commodities and derivative financial instruments,
assuming hypothetical movements in prices. VAR does not represent the
maximum possible loss, because actual future gains and losses will
differ from those estimated based upon actual fluctuations in market
rates, operating exposures, and the timing thereof, and changes in the
portfolio of derivative financial instruments during the year.
EKT
To manage its portfolio, EKT enters into various derivative and
contractual transactions in accordance with the policy approved by the
trading committee of the governing board of its general partner. The
trading portfolio consists of physical and financial natural gas and
power as well as other energy and weather-related contracts. These
contracts take many forms, including futures, forwards, swaps, and
options.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
EKT estimates its VAR using a model based on J.P. Morgan's Risk
Metrics methodology combined with a Monte Carlo simulation approach.
EKT estimates its daily VAR for natural gas and power using a 97.5%
confidence level. EKT's daily VAR is a measure that indicates that, if
prices moved against the positions, the loss in neutralizing the
portfolio would not be expected to exceed the calculated VAR. EKT
seeks to limit the daily VAR on any given day to a certain dollar
amount approved by the trading committee. EKT's daily VAR for natural
gas at December 31, 2001 was $4 million, with an average of $3 million
for the year, and its daily VAR for power at December 31, 2001 was $2
million, with an average of $1 million for the year.
For all derivative and contractual transactions, EKT is exposed to
losses in the event of nonperformance by counter-parties to these
transactions. EKT's operations are primarily concentrated in the
energy industry. Its trade receivables and other financial instruments
are predominantly with energy, utility, and financial services related
companies, as well as other trading companies in the United States, UK,
and Western Europe. EKT maintains credit policies, which its
management believes minimize overall credit risk. Prospective and
existing customers are reviewed for creditworthiness based upon pre-
established standards, with customers not meeting minimum standards
providing various requisite secured payment terms, including the
posting of cash collateral. EKT also has master netting agreements in
place that allow EKT to offset gains and losses arising from derivative
instruments that may be settled in cash and/or gains and losses arising
from derivative instruments that may be settled with the underlying
physical commodity. EKT's policy is to have such master netting
agreements in place with significant counter-parties. Based on EKT's
policies, risk exposures, and valuation adjustments related to credit,
EKT does not anticipate a material adverse effect on its financial
position as a result of counter-party nonperformance.
Other Marketing and Trading
The energy commodity services segment's VAR methodology for its
derivative instruments, and for its consolidated power marketing and
trading business in 2000, uses a variance/covariance approach to the
measurement of market risk. The variance/covariance approach assumes
that prices follow a "random-walk" process in which prices are
lognormally distributed. This approach requires the following inputs:
o a test with a 97.5% confidence interval that measures the
probability of loss; and
o a cross-product correlation matrix that measures the tendency of
different basis products to move together.
Energy commodity services' consolidated subsidiaries VAR for its mark-
to-market derivative instruments was approximately $7.3 million as of
December 31, 2001. Management excludes the long-term gas supply
contract for its UK power plant from this VAR computation due to its
size and length. Management estimates that a 10% change in UK gas
prices would result in approximately a $7.7 million change in net
income due to mark-to-market accounting for this contract.
Power marketing and trading's VAR was approximately $3 million as
of December 31, 2000.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Mark-to-market accounting
As required by generally accepted accounting principles, Entergy
and Entergy-Koch mark-to-market commodity instruments held by them for
trading and risk management purposes that are considered derivatives
under SFAS 133 or energy trading contracts under EITF 98-10.
Conversely, commodity contracts that are not considered derivatives or
energy trading contracts, generally because they involve physical
delivery of a commodity to the purchaser, are not marked to market.
Examples of commodity instruments that are marked to market include:
o commodity options, swaps, and forwards that are expected to be net
settled;
o power sales agreements that do not involve delivery of power from
Entergy's power plants; and
o fuel supply contracts with volumetric optionality.
Examples of commodity contracts that are not marked to market include:
o the PPAs for Entergy's domestic non-utility nuclear plants;
o capacity purchases and sales by the domestic utility companies;
and
o forward contracts that will result in physical delivery.
Fair value estimates of the commodity instruments that are marked
to market are made at discrete points in time based on relevant market
information. Market quotes are used in determining fair value
whenever they are available. When market quotes are not available
(e.g., in the case of a long-dated commodity contract), other
information is used, including transactional data and internally
developed models. Fair value estimates based on these other
methodologies are necessarily subjective in nature and involve
uncertainties and matters of significant judgment. Therefore, actual
results may differ from these estimates. Following are the net mark-to-
market assets and the period within which the assets would be realized
in cash if they are held to maturity and market prices are unchanged:
Net mark-to-
market asset at Cumulative cash realization
Dec. 31, 2001 period
2002 2003 2004-2005
Entergy consolidated subsidiaries $41 million 55% 98% 100%
Entergy-Koch $107 million 10% 83% 100%
Foreign Currency Exchange Rate Risk
System Fuels and Entergy's domestic non-utility nuclear business
entered into foreign currency forward contracts to hedge the Euro-
denominated payments due under certain purchase contracts. The
notional amounts of the foreign currency forward contracts are 61.3
million Euro ($54.5 million) and the forward currency rates range from
.8690 to .8981. The maturities of these forward contracts depend on
the purchase contract payment dates and range in time from June 2002 to
February 2004. The mark-to-market valuation of the forward contracts
at December 31, 2001 was a net liability of $0.4 million. The counter-
party banks obligated on these agreements are rated by Standard and
Poor's Rating Services at AA on their senior debt obligations as of
December 31, 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Interest Rate Risk - Debt
Entergy uses interest rate swaps to reduce the impact of interest
rate changes on the Damhead Creek variable-rate credit facilities.
Under the interest rate swap agreements, Entergy receives floating-rate
interest payments and pays fixed-rate interest rate payments over the
life of the agreements. The floating-rate interest that Entergy
receives is approximately equal to the interest it must pay on the
variable-rate credit facilities. Therefore, through the use of the
swap agreements, Entergy effectively achieves a fixed rate of interest
on the credit facilities. The following details information about the
interest rate swaps as of December 31, 2001:
Average
Notional Amount Fixed Maturity Fair value
Pay Rate
Damhead Creek BPS275.8 million 6.52% 2010 BPS15.9 million
($396.8 million) liability ($22.9
million)
The counter-party banks obligated on these interest swaps are rated by
Standard & Poor's Rating Services at AA- or higher on their senior debt
obligations.
Interest Rate and Equity Price Risk - Decommissioning Trust Funds
Entergy's nuclear decommissioning trust funds expose it to
fluctuations in equity prices and interest rates. The NRC requires
Entergy to maintain trusts to fund the costs of decommissioning ANO 1,
ANO 2, River Bend, Waterford 3, Grand Gulf 1, Pilgrim, and Indian Point
1 and 2 (NYPA currently retains the decommissioning trusts and
liabilities for Indian Point 3 and Fitzpatrick). The funds are
invested primarily in equity securities; fixed-rate, fixed-income
securities; and cash and cash equivalents. Management believes that
its exposure to market fluctuations will not affect results of
operations for the ANO, River Bend, Grand Gulf 1, and Waterford 3 trust
funds because of the application of regulatory accounting principles.
The Pilgrim and Indian Point 1 and 2 trust funds collectively hold
approximately $542 million of fixed-rate, fixed-income securities as of
December 31, 2001. These securities have an average coupon rate of
approximately 6.8%, an average duration of approximately 5.4 years, and
an average maturity of approximately 8.3 years. The Pilgrim and Indian
Point 1 and 2 trust funds also collectively hold equity securities
worth approximately $272 million as of December 31, 2001. These
securities are held in funds that are designed to approximate or
somewhat exceed the return of the Standard & Poor's 500 Index. The
decommissioning trust funds are discussed more thoroughly in Notes 1
and 9 to the financial statements.
Litigation Environment
The four states in which the domestic utility companies operate,
in particular Louisiana, Mississippi, and Texas, have proven to be
unusually litigious environments. Judges and juries in Louisiana,
Mississippi, and Texas have demonstrated a willingness to grant large
verdicts, including punitive damages, to plaintiffs in personal injury,
property damage, and business tort cases. Entergy uses legal and
appropriate means to contest litigation threatened or filed against it,
but the litigation environment in these states poses a significant
business risk.
New Accounting Pronouncements
The FASB issued several new accounting pronouncements in mid-2001.
See Note 1 to the financial statements for a discussion of the expected
effects of these pronouncements on Entergy.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Operations
Net cash flow provided by operating activities for Entergy, the
domestic utility companies, and System Energy for the years ended
December 31, 2001, 2000, and 1999 was:
2001 2000 1999
(In Millions)
Entergy $2,215.5 $1,967.8 $1,389.0
Entergy Arkansas $ 413.2 $ 421.6 $ 352.6
Entergy Gulf States $ 338.5 $ 403.9 $ 387.6
Entergy Louisiana $ 430.5 $ 270.4 $ 410.4
Entergy Mississippi $ 178.1 $ 182.3 $ 142.4
Entergy New Orleans $ 77.7 $ 30.5 $ 60.2
System Energy $ 165.9 $ 395.6 $ 102.8
Entergy's consolidated net cash flow provided by operating
activities increased in 2001 primarily due to:
o an increase, after eliminating the effect of money pool activity,
of $432 million in cash provided by the parent company, Entergy
Corporation, primarily due to decreased income taxes paid resulting
from book and tax income timing differences and the receipt of a
federal tax refund associated primarily with deductions for 2000 ice
storm costs, partially offset by increased interest expense and the
payment of FPL merger-related costs; and
o an increase of $171 million in cash provided by the domestic non-
utility nuclear business, primarily from the operation of the
FitzPatrick and Indian Point 3 plants purchased in the fourth quarter
of 2000 and the Indian Point 2 plant purchased in the third quarter of
2001.
These increases were partially offset by a decrease, after
eliminating the effect of money pool activity, of $129 million in cash
provided by the domestic utility companies and System Energy and net
cash used of $128 million in 2001 compared to net cash provided of
$64.3 million in 2000 by the energy commodity services segment. The
energy commodity services segment includes the EWO business and the
Entergy-Koch joint venture. In 2001, EWO used $73 million of net cash
in operating activities; in 2000, EWO provided $37 million of operating
cash flow. This fluctuation is primarily due to a net loss, excluding
the gain on the sale of the Saltend plant, generated in 2001 compared
with net income generated in 2000. Entergy's investment in Entergy-
Koch used $55 million of net cash in operating activities in 2001
compared with power marketing and trading providing $27 million of
operating cash flow in 2000. This fluctuation is primarily because,
although income from this activity is higher in 2001, Entergy has not
received dividends from Entergy-Koch, as the joint venture is currently
retaining capital for trading opportunities.
Entergy Louisiana made a tax accounting election in 2001 that is
expected to provide a cash flow benefit in 2002 through 2005. For the
years 2006 through 2031, this benefit is expected to reverse, resulting
in increased tax payments. The amount of the benefits in 2002 through
2005 will vary, depending on market prices of power, but it is likely
to be substantial.
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 following represents
the domestic utility companies and System Energy's receivables from and
(payables) to the money pool as of December 31 for each of the years
presented below. An increase in a company's (payable) to the money
pool increases the operating cash flow of that company. An increased
in a company's receivable from the money pool decreases the operating
cash flow of that company.
Company 2001 2000 1999
(In Millions)
Entergy Arkansas $23.8 ($30.7) ($40.6)
Entergy Gulf States $27.7 $23.4 ($36.1)
Entergy Louisiana $3.8 $22.9 ($91.5)
Entergy Mississippi $11.5 ($33.3) ($50.0)
Entergy New Orleans $9.2 ($5.7) ($9.6)
System Energy $13.9 $155.3 $234.2
See Note 4 to the financial statements for a description of the money
pool.
The reduction in System Energy's net cash provided by operating
activities in 2001 was caused by its payment of a refund to the four
domestic utility companies that buy power from Grand Gulf 1. In the
third quarter of 2001, System Energy's 1995 rate proceeding became
final. System Energy refunded a total of $530.7 million in December
2001 to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans. A total of $108.4 million will in turn be
refunded to the customers of these domestic utility companies in early
2002. Refunds to customers will be lower than the amounts received
from System Energy because the utility companies did not pass through
to customers all of System Energy's proposed rate increase. The
refunds from System Energy and the amounts due customers are as
follows:
System Energy Refund due
refund customers
(In Millions)
Entergy Arkansas $191.1 $53.7
Entergy Louisiana $74.3 $ 6.2
Entergy Mississippi $175.1 $14.8
Entergy New Orleans $90.2 $33.6
See Note 2 to the financial statements for additional discussion of the
rate proceeding and refunds.
Entergy's consolidated cash flow from operations increased in 2000
primarily due to the domestic utility companies and System Energy
providing an additional $277.5 million and the competitive businesses
providing an additional $223.7 million to operating cash flows for the
year ended December 31, 2000.
Fuel cost recovery activity in 2000 significantly affected the
operating cash flows for the domestic utility companies. Historically
high natural gas and purchased power costs in 2000 caused the domestic
utility companies' fuel payments to increase significantly during the
year. In the case of Entergy Arkansas, the Texas portion of Entergy
Gulf States, and Entergy Mississippi, the 2000 under-recoveries have
been treated as regulatory investments in the cash flow statements
because those companies are allowed by their regulatory jurisdictions
to recover the fuel costs accumulated in 2000 over longer than a twelve-
month period, and are earning a return on the under-recovered balances.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Arkansas' and Entergy Gulf States' operating cash flows
were also affected by increases in their net income for the year ended
December 31, 2000. The increase in operating cash flow for Entergy
Gulf States was partially offset by the increased use of cash for fuel
costs related to the Louisiana jurisdiction and refunds of $83 million
paid to Louisiana customers during the third quarter of 2000 as a
result of earnings reviews settled with the LPSC, as discussed further
in Note 2 to the financial statements. The decrease in operating cash
flow for Entergy Louisiana and Entergy New Orleans was partially caused
by the increased use of cash related to fuel costs in 2000.
The increase in operating cash flow in 2000 for the competitive
businesses is attributable to the following:
o the operations of Pilgrim, Indian Point 3, and FitzPatrick that
primarily caused an increase of $73.9 million in operating cash flow
from the domestic non-utility nuclear business; and
o net income generated by and improved operations in the power
marketing and trading and power development businesses in 2000, which
resulted in an additional $40.2 million and $91.0 million of operating
cash flow, respectively, compared with net losses from their operations
in 1999.
Pilgrim was purchased in July 1999 and provided operating cash flow for
all of 2000 compared with only six months in 1999. Indian Point 3 and
FitzPatrick were purchased in November 2000 and provided operating cash
flow for two months in 2000.
Investing Activities
Net cash used in investing activities increased in 2001 primarily
due to:
o approximately $600 million paid to acquire the Indian Point 2
nuclear plant in the third quarter of 2001;
o cash contributions of approximately $414 million made in the
formation of Entergy-Koch;
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 the maturity of other temporary investments in 2000 and additional
temporary investments made in 2001.
The following factors partially offset the overall increase in
cash used in investing activities for 2001:
o receipt of approximately $810 million in proceeds from the sale of
the Saltend plant to Calpine Corporation in August 2001;
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 - Energy Commodity Services"; 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. Entergy Mississippi's fuel recovery mechanism changed
effective January 2001, and Entergy Mississippi's fuel cost under-
recoveries incurred after that date are being recovered over less than
a twelve-month period. The companies will earn a return on the under-
recovered balances.
Net cash used in investing activities increased for 2000 due to
increased construction expenditures, decreased proceeds from sales of
businesses, decreased net proceeds from maturities of notes receivable,
and higher fuel costs.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The increased construction expenditures were primarily due to:
o spending on customer service and reliability improvements by the
domestic utility companies;
o costs incurred related to the December 2000 ice storms, primarily
at Entergy Arkansas; and
o costs incurred for replacement of the steam generators at ANO 2.
The following items also contributed to the overall increase in
cash used in 2000:
o the maturity of notes receivable in August 1999 when only a
portion of the proceeds were reinvested in other temporary investments;
o payments made by Entergy's power development business in 2000 for
turbines; and
o the under-recovery of deferred fuel costs incurred in 2000 at
certain of the domestic utility companies due to significantly higher
market prices of fuel and purchased power expenses.
Partially offsetting the overall increase in cash used is the maturity
of other temporary investments and proceeds from the sale of the
Freestone power project in 2000.
Financing Activities
Financing activities used cash in 2001 compared to providing a
small amount of cash in 2000 primarily due to:
o the $555 million retirement of the Saltend credit facility in
August 2001 when the plant was sold;
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 the construction of
the plants in 2000; and
o a reduction in the amount of debt outstanding on the Entergy
Corporation credit facility.
Partially offsetting the increase in cash used in 2001 were the
following:
o decreased repurchases of Entergy common stock in 2001; and
o the redemption of Entergy Gulf States' preference stock in 2000.
Financing activities provided cash for 2000 primarily due to:
o new long-term debt issuances by each of the domestic utility
companies; and
o increased borrowings under the Entergy Corporation credit
facility.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Partially offsetting the overall cash provided were the following
in 2000:
o increased repurchases of Entergy Corporation common stock;
o redemption of Entergy Gulf States' preference stock; and
o decreased borrowings under the credit facilities for the
construction of the Saltend and Damhead Creek power projects by
Entergy's power development business.
Capital Resources
Uses of Capital
Entergy requires capital resources for:
o construction and other capital investments;
o debt and preferred stock maturities;
o working capital purposes, including the financing of fuel and
purchased power costs;
o dividend and interest payments; and
o common stock repurchases.
Following are the amounts of Entergy's planned construction and
other capital investments, existing debt and lease obligations, and other
purchase obligations (the domestic utility companies and System Energy
present this information in their "Selected Financial Data - Five-Year
Comparison," which follow their respective financial statements):
2002 2003 2004 After
2004
(In Millions)
Planned construction and capital $1,731 $1,352 $1,225 N/A
investment
Long-term debt maturities $683 $1,170 $899 $5,252
Short-term facility maturities (1) $350 N/A N/A N/A
Capital and operating lease $102 $88 $85 $180
payments(2)
Unconditional fuel and purchased $424 $379 $385 $5,453
power obligations(3)
Nuclear fuel lease obligations (2)(4) $138 $129 N/A N/A
(1) These 364-day credit facilities are discussed below under "Sources
of Capital."
(2) Lease obligations are discussed in Note 10 to the financial
statements.
(3) Unconditional fuel and purchased power obligations are discussed
in Note 9 to the financial statements under "Fuel Purchase Agreements"
and "Power Purchase Agreements."
(4) It is expected that additional financing under these leases will
be arranged as needed to acquire additional fuel, to pay interest, and
to pay maturing debt. If such additional financing cannot be arranged,
however, the lessee in each case must repurchase sufficient nuclear
fuel to allow the lessor to meet its obligations.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In addition to the capital spending plans and contractual commitments,
Entergy has guarantees of unconsolidated obligations outstanding as of
December 31, 2001 as follows:
Total
Amounts
Committed Amount of Commitment Expiration per Period
2002-2003 2004-2006 Beyond 2006
Guarantees of
unconsolidated obligations $617 million $40 million $542 million $35 million
These guarantees of unconsolidated obligations are discussed further in
the section below titled "Off Balance Sheet and Equity Method Investee
Debt, Guarantees of Unconsolidated Obligations, and Lease Obligations."
The planned capital investment estimate includes $2.8 billion in
spending by the domestic utility companies and System Energy,
$0.8 billion in spending by energy commodity services, and $0.7 billion
in spending by the domestic non-utility nuclear business. This plan
reflects capital required to support existing businesses and Board-
approved investments. The estimated capital expenditures are subject
to periodic review and modification and may vary based on the ongoing
effects of regulatory constraints, business opportunities, market
volatility, economic trends, business restructuring, and the ability to
access capital. Management provides more information on construction
expenditures and long-term debt and preferred stock maturities in Notes
5, 6, 7, and 9 to the financial statements.
The domestic utility companies and System Energy will focus their
planned spending on projects that will support continued reliability
improvements and customer growth. Following is a discussion, by
business segment, of potential significant uses of capital by Entergy.
Entergy Corporation
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 and financial
strength. At its October 2001 meeting, the Board increased Entergy's
quarterly dividend per share by 5%, to $0.33. In 2001, Entergy
Corporation paid $269.1 million in cash dividends on its common stock.
Dividend restrictions are discussed in Note 8 to the financial
statements.
Management is also actively considering a share repurchase program
and expects to reach a decision sometime in 2002.
Domestic Non-Utility Nuclear
The domestic non-utility nuclear business will focus its planned
spending on routine construction projects and nuclear fuel purchases
for owned plants, power uprates for those plants, and on the
anticipated purchase of the Vermont Yankee nuclear power plant. In
August 2001, Entergy's domestic non-utility nuclear business agreed to
purchase the 510 MW Vermont Yankee Nuclear Power Plant in Vernon,
Vermont, from Vermont Yankee Nuclear Power Corporation for $180
million, to be paid in cash upon closing. Management expects to close
the transaction in the summer of 2002, pending the approvals of the
NRC, the Public Service Board of Vermont, and other regulatory
agencies.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In connection with the acquisition of FitzPatrick and Indian Point
3 in 2000, 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 consolidated 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 the Entergy-Koch joint venture.
In June 2001, Entergy Corporation obtained new letters of credit
totaling $577 million, which replaced the letter of credit initially
provided to NYPA. The new 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" in the
Other Property and Investments section of the consolidated balance
sheet at December 31, 2001.
Energy Commodity Services
Energy commodity services will focus its planned spending on
merchant power plant projects currently under construction, including
the purchase of some of the gas turbines scheduled for delivery in 2002
through 2004 under an option to purchase obtained from General Electric
Company that is discussed below. The estimate does not include
potential acquisitions of assets that may be offered for sale by third
parties or additional capital investment in Entergy-Koch, which is an
unconsolidated equity investment. Entergy is obligated to make a $73
million cash contribution to Entergy-Koch in January 2004.
Entergy's energy commodity services segment is currently
constructing the following projects. The Crete Project, a 320 MW
simple cycle gas turbine merchant power plant in Crete, Illinois, is
anticipated to be operational in June 2002. Entergy will own
approximately 160 MW of the capacity of the Crete plant, with the
remainder owned by DTE Energy. During 2000, construction began on the
RS Cogen Project, a 425 MW combined-cycle gas turbine power plant in
Lake Charles, Louisiana. Entergy will own approximately 212 MW, with
the remainder owned by PPG Industries. RS Cogen is expected to begin
operation in 2002. Construction also began in 2001 on the Northeast
Texas Electric Cooperative Project, a 550 MW combined-cycle gas turbine
power plant in Harrison County, Texas. Entergy will own approximately
385 MW once construction is completed and operation has begun
(currently projected to be June 2003), with Northeast Texas Electric
Cooperative, Inc. owning the remainder.
The power development business obtained contracts in October 1999
to acquire 36 turbines from General Electric Company. The rights and
obligations under the contracts for 22 of the turbines were sold to an
independent special purpose entity in May 2001. In conjunction with
Entergy's obligations related to this sale, Entergy retained certain
rights to reacquire turbines or to cancel the construction of turbines.
Thus far, EWO has placed 17 of the originally planned 36 turbines at
sites that are either operating, under construction, or sold. In
addition, as allowed by the May 2001 sale agreement, cancellation of
four turbines is pending. If EWO were to decide to cancel the
remaining turbines subject to the May 2001 sale agreement, its maximum
projected exposure would be approximately $250 million. This exposure,
however, does not take into account EWO's ongoing efforts to develop
sites for the turbines. Entergy continually monitors its obligations
under this arrangement and provides for potential losses (e.g., as a
result of turbine cancellations) when the losses become likely. EWO
will continue to actively manage its assets as an investment portfolio,
and attempt to maximize flexibility to respond to different market
environments. Active management of the portfolio by EWO is expected to
result in: the commercial operation of projects by EWO; the sale of
projects at various stages in their planning, development, or
operation; or the abandonment of projects.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
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 December 31, 2001, Entergy's
investments subject to this rule totaled $1.64 billion constituting
46.6% of its average consolidated retained earnings.
Entergy's ability to guarantee obligations of its non-utility
subsidiaries is also limited by SEC regulations under PUHCA. In August
2000, the SEC issued an order, effective through December 31, 2005,
that allows Entergy to issue up to $2 billion of guarantees to its non-
utility companies.
Under PUHCA, the SEC imposes a limit equal to 15% of consolidated
capitalization on the amount that may be invested in "energy-related"
businesses without specific SEC approval. Entergy has made investments
in energy-related businesses, including power marketing and trading.
Entergy's available capacity to make additional investments at December
31, 2001 was approximately $1.7 billion.
Sources of Capital
Entergy's sources to meet its capital requirements include:
o internally generated funds, which have been the source of the
majority of Entergy's capital;
o cash on hand ($750 million as of December 31, 2001) and other
temporary investments ($150 million as of December 31, 2001);
o debt issuances;
o bank financing under new or existing facilities; and
o sales of assets.
The majority of Entergy's internally generated funds come from the
domestic utility segment. Circumstances such as unusual weather
patterns, unusual price fluctuations, and unanticipated expenses,
including unscheduled plant outages, could affect the level of
internally generated funds in the future.
Each of the domestic utility companies issued debt in 2001, with
the exception of Entergy Louisiana. The net proceeds of these
issuances were used for general corporate purposes, including capital
expenditures and the retirement of short-term indebtedness incurred for
working capital and other purposes. The domestic utility companies and
System Energy expect to continue refinancing or redeeming higher-cost
debt and preferred stock prior to maturity, to the extent market
conditions and interest and dividend rates are favorable.
In December 2001, Entergy indirectly acquired the controlling
interest in the Top of Iowa Wind Farm, an 80 MW wind generation
facility. An Entergy subsidiary in the energy commodity services
segment financed the acquisition of its interest in the wind farm
through a $95 million credit facility that is backed by an Entergy
Corporation guarantee. As of December 31, 2001, $78.5 million had been
drawn on the facility. The facility is a bridge loan that matures
January 19, 2003. The interest margins and commitment fees under the
credit facility vary based on the rating of the second-lowest credit
rating for senior secured long-term debt of Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana and Entergy Mississippi. Entergy is not
in default under the credit facility if a minimum credit rating is not
maintained. The Entergy guarantee does not require the posting of
alternative credit support or cash collateral if a minimum credit
rating is not maintained.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In 2000, long-term debt on Entergy's balance sheet was increased
by approximately $750 million by the issuance of notes payable to NYPA
in the Indian Point 3 and FitzPatrick acquisition. Also in 2000, the
power development business increased its borrowings under the Damhead
Creek credit facility by approximately $164 million to finance
construction of the plant. Damhead Creek commenced commercial
operation in 2001. The Damhead Creek credit facility requires that the
annual debt service coverage ratio be at least 1.05 to 1 for the
previous 12 months at semi-annual dates commencing with June 30, 2002.
Given the low electricity prices currently affecting the UK market,
Damhead Creek may not meet the annual debt service coverage ratio test
in respect of the 12 months to June 30, 2002, which could trigger an
event of default. In the event the annual debt service coverage ratio
is deficient at June 30, 2002, the power development business will seek
a waiver of the default from the lenders. There is no requirement for
EPDC to make capital contributions or provide credit support to Damhead
Creek following the occurrence of an event of default. Note 7 to the
financial statements more thoroughly discusses long-term debt.
All debt and common and preferred stock issuances by the domestic
utility companies and System Energy require prior regulatory approval.
Preferred stock and debt issuances are also subject to issuance tests
set forth in corporate charters, bond indentures, and other agreements.
As shown in the earnings ratios in Item 1 of this Form 10-K, Entergy
New Orleans' earnings for the year ended December 31, 2001 were not
adequate to cover its fixed charges. Under its mortgage covenants,
Entergy New Orleans does not have the capacity to issue new secured
debt. Management does not have plans to issue new secured debt at
Entergy New Orleans through at least 2002, however, and believes that
its short-term and unsecured borrowing capacity will be sufficient for
its foreseeable capital needs. Under restrictions contained in its
articles of incorporation, Entergy New Orleans could issue
approximately $38 million of new unsecured debt as of December 31,
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. Under the SEC order authorizing the
short-term borrowing limits, the domestic operating companies cannot
incur new short-term indebtedness if the issuer's equity would comprise
less than 30% of its capital. In addition, this order restricts
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, or System
Energy from issuing long-term debt unless that debt will be rated as
investment grade. See Note 4 to the financial statements for further
discussion of Entergy's short-term borrowing limits.
Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and
Entergy Mississippi each have 364-day credit facilities available as
follows:
Amount of Amount Drawn
Company Expiration Facility as of Dec.
Date 31, 2001
Entergy Corporation May 2002 $1.375 billion $350 million
Entergy Arkansas May 2002 $63 million -
Entergy Louisiana January 2003 $15 million -
Entergy Mississippi May 2002 $25 million -
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Corporation has used borrowings from its facility for general
corporate purposes and to make additional investments in competitive
businesses, including the purchase of Indian Point 2 from Consolidated
Edison in September 2001. Entergy Corporation's facility requires
Entergy to maintain a consolidated debt ratio of 65% or less of its
total capitalization. If Entergy's debt ratio exceeds this limit, or
if Entergy or the domestic utility companies default on other credit
facilities or are in bankruptcy or insolvency proceedings, an
acceleration of the facility's maturity may occur.
Off Balance Sheet and Equity Method Investee Debt, Guarantees of
Unconsolidated Obligations, and Lease Obligations
Entergy has an off balance sheet financing arrangement to finance
EWO's turbine acquisition program, and the debt of its equity method
investees is not consolidated in Entergy's financial statements,
according to generally accepted accounting principles. The equity
method investees are discussed more thoroughly in Note 13 to the
financial statements. Entergy also has guarantees outstanding, which
are discussed below, in support of unconsolidated obligations. In
addition, Entergy has operating lease obligations that are not
reflected as liabilities in the financial statements, according to
generally accepted accounting principles. The operating leases are
discussed more thoroughly in Note 10 to the financial statements.
In order to provide a source of financing for EWO's turbine
acquisition program, an Entergy subsidiary (EPDC) sold its rights and
obligations under certain of its turbine acquisition contracts with
General Electric Company to an independent special-purpose entity in
May 2001. The special-purpose entity was formed through equity
contributions from an unrelated third party. The rights to 22 turbines
were included in the sale. As discussed above in "Uses of Capital,"
cancellation of four of these turbines is pending, and three others
have been committed to a site under construction. Construction of some
of the turbines had begun at the time of the sale, and the sale price
of approximately $150 million corresponded to the amount that EPDC had
invested in the turbines that were under construction at that time.
The purchaser obtained a revolving financing facility of up to $450
million for the construction 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 methodology for
calculation of the lease payments and purchase price for each turbine
have been established pursuant to various agreements between EPDC,
the purchaser, and the purchaser's 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. If Entergy were to
consolidate the special-purpose entity as of December 31, 2001,
its net debt ratio would increase from 49.7% to 50.5%. Certain
EPDC obligations under these agreements are backed by an Entergy
Corporation guarantee of up to $309 million as of December
31, 2001, including $84 million related to the Harrison County project
currently under construction. In addition, if Entergy Corporation's
debt is rated by two rating agencies (Entergy Corporation currently
does not have debt issued that is rated) and if one rating falls below
investment grade, or if two or more of its significant subsidiaries
have their credit ratings downgraded to below investment grade, Entergy
will have to put up cash collateral. As of December 31, 2001, Entergy
would have to post up to $258 million as collateral in the event of
such downgrades, including $59 million related to the Harrison County
project.
Two of Entergy's unconsolidated 50/50 joint ventures, Entergy-Koch
and RS Cogen, have obtained long-term financing. As of December 31,
2001, 50% of the debt financing outstanding for those two entities was
$347 million. Two of the contracts transferred to Entergy-Koch by
Entergy's power marketing and trading business were backed by Entergy
Corporation guarantees authorized in the amount of $45 million at
December 31, 2001. RS Cogen is currently in the construction phase,
and Entergy's $30 million equity commitment has not been funded. This
commitment is secured by an Entergy Corporation guarantee, which will
terminate when Entergy makes its equity contribution upon completion of
construction. Entergy has also supported the RS Cogen project by
causing a subsidiary to enter into a power toll processing agreement
(PTPA) with RS Cogen. The PTPA provides for a 20-year term, dedicates
50% of RS Cogen's conversion capacity to the Entergy subsidiary and
obligates the Entergy subsidiary to pay a monthly capacity charge.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
In August 2001, EntergyShaw entered into a turnkey construction
agreement with an Entergy subsidiary, Entergy Power Ventures, L.P.
(EPV), and with Northeast Texas Electric Cooperative, Inc. (NTEC),
providing for the construction by EntergyShaw of a 550 MW electric
generating station to be located in Harrison County, Texas. Entergy has
guaranteed the obligations of EntergyShaw to construct the plant, which
will be 70% owned by EPV. Entergy's maximum liability on the guarantee
is $232.5 million.
Entergy Corporation and System Energy
Pursuant to an agreement with certain creditors, Entergy
Corporation has agreed to supply System Energy with sufficient capital
to:
o maintain System Energy's equity capital at a minimum of 35% of its
total capitalization (excluding short-term debt);
o permit the continued commercial operation of Grand Gulf 1;
o pay in full all System Energy indebtedness for borrowed money when
due; and
o enable System Energy to make payments on specific System Energy
debt, under supplements to the agreement assigning System Energy's
rights in the agreement as security for the specific debt.
The Capital Funds Agreement and other Grand Gulf 1-related
agreements are more thoroughly discussed in Note 9 to the financial
statements.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Corporation:
We have audited the accompanying consolidated balance sheets of Entergy
Corporation and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, of retained earnings,
comprehensive income, and paid-in capital and of cash flows (pages 86
through 91 and pages 161 through 227) for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Corporation's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Entergy Corporation
and subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for derivative instruments in
2001.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Entergy's consolidated earnings applicable to common stock were
$726.2 million and $679.3 million for the years ended December 31, 2001
and 2000, respectively. The changes in earnings applicable to common
stock by operating segments for 2001 and 2000 as compared to the prior
year are as follows:
Increase/(Decrease)
Operating Segments 2001 2000
(In Thousands)
Domestic Utility and System Energy ($36,399) $75,684
Domestic Non-Utility Nuclear 78,722 33,453
Energy Commodity Services (primarily EWO and Entergy-Koch) 51,031 94,848
Other, including parent company (46,452) (77,150)
------- --------
Total $46,902 $126,835
======= ========
Increases in earnings per average common share for Entergy:
Basic 10% 33%
Diluted 9% 32%
Entergy's income before taxes is discussed according to the
operating segments listed above. See Note 12 to the financial
statements for further discussion of Entergy's operating segments and
their financial results in 2001, 2000, and 1999. In addition to the
matters discussed below, Entergy's share repurchase program contributed
to the increases in earnings per share in both 2001 and 2000 by
decreasing the weighted average number of shares outstanding. Also, as
noted below under Energy Commodity Services, the cumulative effect of
$23.5 million (net of tax) of an accounting change made in the fourth
quarter of 2001 contributed to the increase in net income.
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF
ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY
GULF STATES, INC. AND SUBSIDIARIES, ENTERGY LOUISIANA, INC., ENTERGY
MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., AND SYSTEM ENERGY
RESOURCES, INC." which follow each company's financial statements in
this report for further information with respect to operating
statistics.
Domestic Utility and System Energy
The decrease in earnings for the domestic utility companies and
System Energy in 2001 was primarily due to less favorable sales volume
and weather, a decrease in the pricing of unbilled revenue, and an
increase in interest expense. The decrease in earnings was partially
offset by decreases in decommissioning expense, other operation and
maintenance expenses, and depreciation and amortization expense,
largely as a result of adjustments made after receipt of a final FERC
order issued in connection with the 1995 System Energy rate increase
filing, as well as by increased interest and dividend income. See Note
2 to the financial statements herein for further discussion of the
System Energy rate proceeding.
The increase in 2000 earnings at the domestic utility companies
and System Energy was primarily due to more favorable sales volume and
weather, an increase in the pricing of unbilled revenue, and a decrease
in interest expense, partially offset by increases in other operation
and maintenance expenses, depreciation and amortization expense, taxes
other than income taxes, and the effective income tax rate.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues
The changes in electric operating revenues for Entergy's domestic
utility companies for 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes $62.0 ($94.2)
Rate riders (38.5) (17.1)
Fuel cost recovery 462.7 792.5
Sales volume/weather (76.8) 107.1
Unbilled revenue (261.1) 94.7
Other revenue (95.0) 39.6
Sales for resale (28.2) 25.7
----- ------
Total $25.1 $948.3
===== ======
Base rate changes
Base rate changes increased revenue in 2001 primarily due to lower
accruals for rate refund provisions at Entergy Gulf States and Entergy
Louisiana.
Base rate changes decreased revenue in 2000 primarily due to the
non-recurring effect on 1999 revenues of the reversal of regulatory
reserves associated with the accelerated amortization of accounting
order deferrals resulting from the settlement agreement in Entergy Gulf
States' 1996 and 1998 Texas rate filings.
Rate riders
Rate rider revenues do not impact earnings since specific incurred
expenses offset them.
In 2001, rate rider revenues decreased as a result of the
cessation of the ANO decommissioning rate rider for calendar year 2001
at Entergy Arkansas and decreases in the Grand Gulf riders effective
July 2001 and October 2000 at Entergy Arkansas and Entergy Mississippi,
respectively.
Fuel cost recovery
The domestic utility companies are allowed to recover certain fuel
and purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy's financial statements
such that these costs do not have a material net effect on earnings.
The increase in fuel cost recovery revenue in 2001 is 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 and
Entergy New Orleans due to the increased market prices of natural gas
and purchased power early in 2001.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Corresponding to the increase in fuel cost recovery revenue, fuel
and purchased power expenses related to electric sales increased by
$418.0 million in 2001 primarily due to an increase in the market
prices of natural gas and purchased power early in 2001.
Fuel cost recovery revenues increased in 2000 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 at Entergy Gulf States in
the Louisiana jurisdiction, Entergy Louisiana, and Entergy New Orleans
due to the increased market price of natural gas.
Along with the increase in fuel cost recovery revenue, fuel and
purchased power expenses increased by $794.2 million in 2000 primarily
due to:
o an increase in the market prices of purchased power, natural gas,
and fuel oil; and
o an increase in volume due to an increase in demand.
The increase in fuel and purchased power expenses in 2000 was partially
offset by a $23.5 million adjustment to the Entergy Arkansas deferred
fuel balance to record deferred fuel costs that Entergy Arkansas
expects to recover in the future through its fuel adjustment clause.
Sales volume/weather
Lower electric sales volume reduced revenues in 2001 due to
decreased weather-adjusted usage of 2,067 GWH. The primary decreases
in weather-adjusted usage were from industrial customers at Entergy
Louisiana and Entergy Gulf States. The effect of milder-than-normal
weather conditions also caused a decrease in electric sales in 2001.
Electric sales volume in the domestic utility companies' service
territories decreased 1,194 GWH due to the impact of weather conditions
in 2001. The number of customers in the domestic utility companies'
service territories increased only slightly during these periods.
In 2000, higher electric sales volume increased revenues primarily
due to increased usage and more favorable weather conditions as well as
increased generation and subsequent sales from River Bend in 2000 as a
result of a refueling outage in 1999.
Unbilled revenue
Unbilled revenues decreased in 2001 due to the effect of higher
fuel prices and more favorable weather in December 2000 on the unbilled
revenue calculation.
In 2000, unbilled revenues increased due to the effect of higher
fuel prices in December 2000 on the unbilled revenue calculation.
Other revenue
Other revenue decreased in 2001, reflecting the receipt of a final
FERC order requiring System Energy to refund a portion of its December
1995 rate increase, which increased provisions for rate refunds by $93
million at System Energy. The net income impact of the provision was
more than offset by the other effects of the final FERC order that are
discussed below in "Other effects on results of operations."
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas operating revenues
Natural gas revenues increased $20.0 million in 2001, primarily
due to increased market prices for natural gas early in 2001 and
additional sales volume due to the colder-than-normal January 2001
winter period.
Natural gas revenues increased $55.5 million in 2000, primarily
due to higher natural gas prices in late 2000.
Other effects on results of operations
Results for the year ended December 31, 2001 for the domestic
utility companies and System Energy were also affected by the
following:
o decreases in other operation and maintenance expenses of $95.6
million, which are explained below;
o a decrease in decommissioning expense at System Energy of $32.4
million resulting from the final resolution of the FERC order
addressing the 1995 rate increase filing;
o decreases in depreciation and amortization expense at System
Energy of $74.5 million primarily resulting from the final resolution
of the FERC order addressing the 1995 rate increase filing;
o net increases in regulatory credits of $40.8 million, which are
explained below; and
o increases in interest expense of $61.5 million, which are
explained below.
The decreases in other operation and maintenance expenses in 2001
were primarily due to:
o a decrease in property damage expenses of $49.7 million primarily
due to a reversal of $24.5 million in June 2001, upon recommendation
from the APSC, of ice storm costs previously charged to expense in
December 2000 (these costs are now reflected as regulatory assets).
The effect of the reversal of the ice storm costs on net income was
largely offset by the adjustment to the transition cost account as a
result of the 2000 earnings review in 2001;
o decreases in outside services employed of $9.3 million and $11.0
million at Entergy Arkansas and Entergy Louisiana, respectively, as a
result of rate and regulatory proceedings in 2000; and
o decreases of $10.7 million and $14.6 million at Entergy Louisiana
and Entergy Mississippi, respectively, because of maintenance and
planned maintenance outages at certain fossil plants in 2000.
The net increases in regulatory credits in 2001 were primarily due
to:
o the amount of capacity charges included in purchased power costs
for the summers of 2000 and 2001 that Entergy Gulf States and Entergy
Louisiana deferred and will recover in future periods; and
o an under-recovery of Grand Gulf costs in 2001 at Entergy
Mississippi as a result of a lower rider implemented in October 2000.
The net increases in regulatory credits in 2001 were partially
offset by the following:
o the accrual of $22.3 million in the transition cost account at
Entergy Arkansas; and
o the amortization of the 2000 capacity charges mentioned above,
which will occur through July 2002.
The increases in interest expense in 2001 were primarily due to:
o the final FERC order addressing the 1995 System Energy rate
increase filing;
o debt issued at Entergy Arkansas in July 2001, at Entergy Gulf
States in June 2000 and August 2001, at Entergy Mississippi in January
2001, and at Entergy New Orleans in July 2000 and February 2001; and
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
o borrowings under credit facilities during 2001, primarily at
Entergy Arkansas.
Results for the year ended December 31, 2000 for the domestic
utility companies and System Energy were also affected by the
following:
o increases in other operation and maintenance expenses of $95.8
million, which are explained below;
o an increase of $44.5 million in depreciation and amortization
expenses, which is explained below; and
o a decrease in interest charges of $21.4 million primarily due to
an adjustment in 1999 at System Energy to the interest recorded for the
potential refund to customers of its proposed rate increase.
Other operation and maintenance expenses increased in 2000
primarily due to:
o increased damage expenses of $22.8 million primarily due to storm
damage accruals related to the December 2000 ice storms at Entergy
Arkansas, and due to changes in storm damage reserve amortization at
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi in
accordance with regulatory treatment;
o increased customer service expenses of $11.4 million primarily
related to spending on vegetation management at Entergy Arkansas;
o increased nuclear expenses of $17.2 million primarily from Entergy
Arkansas and Entergy Gulf States;
o an increase of $28.4 million primarily due to an increase in legal
and contract expenses for the transition to retail open access at
Entergy Arkansas and Entergy Gulf States, and for legal services
employed for rate-related proceedings at Entergy Louisiana; and
o an increase of $21.9 million in plant maintenance expense
primarily at Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy Mississippi.
The increase in other operation and maintenance expenses in 2000
was partially offset by the following:
o a $9.5 million larger nuclear insurance refund in 2000 compared to
1999; and
o a decrease in injury and damages claims of $12.3 million.
Depreciation and amortization expenses increased in 2000 primarily
due to:
o the review of plant-in-service dates for consistency with
regulatory treatment that reduced depreciation expense by $17.7 million
in August 1999;
o increased depreciation of $14.0 million associated with the
principal payment on the sale and leaseback of Grand Gulf 1; and
o net capital additions primarily at Entergy Louisiana and Entergy
Mississippi.
Domestic Non-Utility Nuclear
The increase in earnings in 2001 for the domestic non-utility
nuclear business was primarily due to the operation of FitzPatrick and
Indian Point 3 for a full year, as each was purchased in November 2000,
and the operation of Indian Point 2, which was purchased in September
2001. Following are key performance measures for domestic non-utility
nuclear operations:
2001 2000
Net MW in operation at December 31 3,445 2,475
Generation in GWH for the year 22,614 7,171
Capacity factor for the year 93% 94%
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following fluctuations in the results of operations for
domestic non-utility nuclear in 2001 were primarily caused by the
acquisition of FitzPatrick, Indian Point 3, and Indian Point 2:
o revenues increased by $491.1 million;
o other operation and maintenance expenses increased $217.6 million;
o interest expense, primarily related to debt incurred to purchase
the plants, increased $47.9 million;
o fuel expenses increased $51.0 million; and
o taxes other than income taxes increased $30.9 million.
The increased earnings in 2000 for the domestic non-utility
nuclear business were primarily due to increased revenues from the
operation of the Pilgrim, FitzPatrick, and Indian Point 3 plants.
Pilgrim was purchased in July 1999 and FitzPatrick and Indian Point 3
were purchased in November 2000. Partially offsetting the increased
revenues were increases in fuel and purchased power expense, other
operation and maintenance expense, and interest expense resulting from
the acquisition of these three plants.
Energy Commodity Services
The increase in earnings for energy commodity services in 2001 was
primarily due to:
o the gain on the sale of EWO's Saltend plant discussed below;
o the favorable results from Entergy-Koch discussed below;
o the $33.5 million ($23.5 million net of tax) cumulative effect of
an accounting change marking to market the Damhead Creek gas contract;
o liquidated damages of $13.9 million ($9.7 million net of tax)
received in 2001 from the Damhead Creek construction contractor as
compensation for lost operating margin from the plant due to
construction delays; and
o a $12.2 million ($7.9 million net of tax) gain on the sale of a
permitted site in Desoto County, Florida, in May 2001.
Partially offsetting the increase in earnings for energy commodity
services in 2001 was the following:
o $60.1 million ($49.9 million net of tax) of losses or asset
impairments recorded on EWO's Latin American investments and other
development projects;
o a $9.8 million ($6.4 million net of tax) loss recorded primarily
because of the pending cancellation of four gas turbines scheduled for
delivery in 2004;
o liquidated damages of $55.1 million ($38.6 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 $19.7 million ($12.8 million net of tax) gain on the sale of the
Freestone project located in Fairfield, Texas, in June 2000;
o increased depreciation expense of $23.6 million in 2001 primarily
due to the commencement of the commercial operation of the Saltend and
Damhead Creek plants; and
o increased interest expense of $78.7 million in 2001 primarily
because of the commencement of commercial operation of the Saltend and
Damhead Creek plants.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Revenues decreased for energy commodity services by
$983.3 million in 2001, primarily due to the contribution of
substantially all of Entergy's power marketing and trading business to
Entergy-Koch in 2001. Earnings from Entergy-Koch are reported as
equity in earnings of unconsolidated equity affiliates in the
financial statements. As a result, in 2001, revenues from this
activity were lower by $1,957.0 million compared to 2000 revenue for
Entergy's power marketing and trading segment, and purchased power
expenses were lower by $1,830.0 million. The net income effect in
2001 of the lower revenue was more than offset by the equity in
earnings from Entergy's interest in Entergy-Koch. Entergy's earnings
from this activity increased in 2001 as a result of increased
electricity and gas trading volumes as well as a broader range of
commodity sources and options provided to customers by the joint
venture than provided previously by Entergy. Following are key
performance measures for Entergy-Koch's operations in 2001:
Entergy-Koch Trading
Gas volatility 81%
Electricity volatility 66%
Gas marketed (BCF/D) 6.9
Electricity marketed (GWH) 108,645
Gulf South Pipeline
Throughput (BCF/D) 2.45
Production cost ($/MMBTU) $0.093
Entergy accounts for its 50% share in Entergy-Koch 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 significantly disproportionate basis through 2003. Losses and
distributions from operations are allocated to the partners equally.
The disproportionate allocations were favorable to Entergy in the
aggregate in 2001. In 2004, a revaluation of Entergy-Koch's assets for
capital account purposes will occur, and future allocations will change
after the revaluation. The profit allocations other than for weather
trading and international trading are expected to become equal, unless
special allocations are necessary to equalize the partners' capital
accounts. Earnings allocated under the terms of the partnership
agreement constitute equity, not subject to reallocation, for the
partners.
The decrease in revenues in 2001 was partially offset by an
increase in operating revenues for EWO primarily due to an increase of
$409.8 million from EWO's interest in Highland Energy and an increase
of $450.1 million 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. Highland Energy was sold in the fourth quarter of 2001.
The increase in revenues for EWO is largely offset by increased fuel
and purchased power expenses of $644.1 million and increased other
operation and maintenance expenses of $94.6 million.
EWO sold the Saltend plant in August 2001 and revenues include the
$88.1 million ($57.2 million net of tax) gain on the sale.
In 2000, the increase in earnings for energy commodity services
was primarily due to the following related to the power marketing and
trading business:
o improved trading performance in electricity;
o increased long-term marketing of electricity; and
o trading gains in natural gas in 2000 due to natural gas prices
reaching record high levels compared to trading losses in 1999.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Also contributing to the increase in earnings in energy commodity
services in 2000 was $55.1 million of liquidated damages received from
the Saltend contractor as compensation for lost operating margin from
the plant due to construction delays and a $19.7 million ($12.8 million
net of tax) gain in June 2000 on the sale of the power development
business' investment in the Freestone project located in Fairfield,
Texas. Partially offsetting the increase was the absence of a $26.7
million ($17 million net of tax) gain on the sale of Entergy Power
Edesur Holdings which occurred in June 1999.
Other, including parent company
Earnings from Other decreased in 2001 primarily due to a decrease
in interest income of $41.2 million and $21.8 million ($14.1 million
net of tax) of merger-related expenses incurred by Entergy Corporation
in the first quarter of 2001. Also contributing to the decreased
earnings was an increase in interest expense of $19.5 million. The
decreased earnings were partially offset by the write-down of
investments in Latin American projects in 2000 discussed below.
Earnings from Other decreased in 2000 primarily due to a
$42.5 million ($27.6 million net of tax) write-down in 2000 of
investments in Latin American projects to their estimated fair values.
The decrease is also due to the absence of the following items that
occurred in 1999:
o a $12.9 million ($8 million net of tax) gain on the sale of
Entergy Hyperion Telecommunications in June 1999;
o a $22.0 million ($6.4 million net of tax) gain on the sale of
Entergy Security, Inc. in January 1999, including a true-up recognized
in December 1999;
o a $7.6 million ($4.9 million net of tax) favorable adjustment to
the final sale price of CitiPower in January 1999; and
o a more favorable experience on warranty reserves in 1999 for the
businesses sold during 1998.
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
38.5%, 40.3%, and 37.5%, respectively. The decrease in 2001 was
primarily due to the effects of the final FERC order addressing System
Energy's 1995 rate proceeding. The increase in 2000 was primarily due
to the recognition in 1999 of deferred tax benefits related to the
expected utilization of foreign tax credits resulting in lower income
taxes.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
2001 2000 1999
(In Thousands, Except Share Data)
OPERATING REVENUES
Domestic electric $7,244,827 $7,219,686 $6,271,414
Natural gas 185,902 165,872 110,355
Steam products - - 15,852
Competitive businesses 2,190,170 2,636,571 2,368,014
----------- ----------- -----------
TOTAL 9,620,899 10,022,129 8,765,635
----------- ----------- -----------
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 3,681,677 2,645,835 2,082,875
Purchased power 1,021,432 2,662,881 2,442,484
Nuclear refueling outage expenses 89,145 70,511 76,057
Other operation and maintenance 2,151,742 1,943,814 1,705,545
Decommissioning 3,189 39,484 45,988
Taxes other than income taxes 399,849 370,344 339,284
Depreciation and amortization 721,033 746,125 698,881
Other regulatory charges (credits) - net (37,093) 3,681 14,833
Amortization of rate deferrals 16,583 30,392 115,627
----------- ----------- -----------
TOTAL 8,047,557 8,513,067 7,521,574
----------- ----------- -----------
OPERATING INCOME 1,573,342 1,509,062 1,244,061
----------- ----------- -----------
OTHER INCOME
Allowance for equity funds used during
construction 26,209 32,022 29,291
Gain on sale of assets - net 5,226 2,340 71,926
Interest and dividend income 159,805 163,050 143,601
Equity in earnings of unconsolidated
equity affiliates 180,956 13,715 7,593
Miscellaneous - net (22,843) 27,077 10,822
----------- ----------- -----------
TOTAL 349,353 238,204 263,233
----------- ----------- -----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 544,920 477,071 476,877
Other interest - net 197,638 85,635 82,471
Distributions on preferred securities of
subsidiaries 18,838 18,838 18,838
Allowance for borrowed funds used during
construction (21,419) (24,114) (22,585)
----------- ----------- -----------
TOTAL 739,977 557,430 555,601
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,182,718 1,189,836 951,693
Income taxes 455,693 478,921 356,667
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 727,025 710,915 595,026
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (net of income taxes of $10,064) 23,482 - -
----------- ----------- -----------
CONSOLIDATED NET INCOME 750,507 710,915 595,026
Preferred dividend requirements and other 24,311 31,621 42,567
----------- ----------- -----------
EARNINGS APPLICABLE TO
COMMON STOCK $726,196 $679,294 $552,459
=========== =========== ===========
Earnings per average common share before
cumulative effect of accounting change:
Basic $3.18 $3.00 $2.25
Diluted $3.13 $2.97 $2.25
Earnings per average common share:
Basic $3.29 $3.00 $2.25
Diluted $3.23 $2.97 $2.25
Dividends declared per common share $1.28 $1.22 $1.20
Average number of common shares
outstanding:
Basic 220,944,270 226,580,449 245,127,460
Diluted 224,733,662 228,541,307 245,326,883
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $750,507 $710,915 $595,026
Noncash items included in net income:
Amortization of rate deferrals 16,583 30,392 115,627
Reserve for regulatory adjustments (359,199) 18,482 10,531
Other regulatory charges (credits) - net (37,093) 3,681 14,833
Depreciation, amortization, and decommissioning 724,222 785,609 744,869
Deferred income taxes and investment tax
credits 87,752 124,457 (189,465)
Allowance for equity funds used during
construction (26,209) (32,022) (29,291)
Cumulative effect of accounting change (23,482) - -
(Gain) on sale of assets - net (5,226) (2,340) (71,926)
Equity in undistributed earnings of
subsidiaries and unconsolidated affiliates (168,873) (13,715) (7,593)
Changes in working capital (net of effects from
acquisitions and dispositions):
Receivables 302,230 (437,146) 9,246
Fuel inventory (3,419) (20,447) (1,359)
Accounts payable (415,160) 543,606 35,233
Taxes accrued 486,676 20,871 158,733
Interest accrued 17,287 45,789 (56,552)
Deferred fuel 495,007 (38,001) 10,583
Other working capital accounts (39,978) 102,336 45,285
Provision for estimated losses and reserves 19,093 6,019 (59,464)
Changes in other regulatory assets 119,215 (66,903) (36,379)
Other 275,615 186,264 101,087
------------ ----------- ------------
Net cash flow provided by operating activities 2,215,548 1,967,847 1,389,024
------------ ----------- ------------
INVESTING ACTIVITIES
Construction/capital expenditures (1,380,417) (1,493,717) (1,195,750)
Allowance for equity funds used during
construction 26,209 32,022 29,291
Nuclear fuel purchases (130,670) (121,127) (137,649)
Proceeds from sale/leaseback of nuclear fuel 71,964 117,154 137,093
Proceeds from sale of businesses 784,282 61,519 351,082
Investment in other nonregulated/nonutility
properties (1,278,990) (238,062) (81,273)
Changes in other temporary investments - net (150,000) 321,351 635,005
Decommissioning trust contributions and realized
change in trust assets (95,571) (63,805) (61,766)
Other regulatory investments (3,460) (385,331) (81,655)
Other (68,067) (44,016) (42,258)
------------ ----------- ------------
Net cash flow used in investing activities (2,224,720) (1,814,012) (447,880)
------------ ----------- ------------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt 682,402 904,522 1,113,370
Common stock 64,345 41,908 15,320
Retirement of:
Long-term debt (962,112) (181,329) (1,195,451)
Repurchase of common stock (36,895) (550,206) (245,004)
Redemption of preferred stock (39,574) (157,658) (98,597)
Changes in short-term borrowings - net (37,004) 267,000 (165,506)
Dividends paid:
Common stock (269,122) (271,019) (291,483)
Preferred stock (24,044) (32,400) (43,621)
----------- ----------- -----------
Net cash flow provided by (used in) financing
activities (622,004) 20,818 (910,972)
----------- ----------- -----------
Effect of exchange rates on cash and cash
equivalents 325 (5,948) (948)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents (630,851) 168,705 29,224
Cash and cash equivalents at beginning of period 1,382,424 1,213,719 1,184,495
----------- ----------- -----------
Cash and cash equivalents at end of period $751,573 $1,382,424 $1,213,719
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized $708,748 $505,414 $601,739
Income taxes ($118,881) $345,361 $373,537
Noncash investing and financing activities:
Change in unrealized appreciation/
(depreciation) of decommissioning trust assets ($34,517) ($11,577) $41,582
Proceeds from long-term debt issued for the
purpose of refunding prior long-term debt $47,000 - -
Decommissioning trust funds acquired in
nuclear power plant acquisitions $430,000 - $428,284
Acquisition of Indian Point 3 and FitzPatrick
Fair value of assets acquired - $917,667 -
Initial cash paid at closing - $50,000 -
Liabilities assumed and notes issued to
seller - $867,667 -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $129,866 $157,550
Temporary cash investments - at cost,
which approximates market 618,327 640,038
Special deposits 3,380 584,836
----------- ----------
Total cash and cash equivalents 751,573 1,382,424
----------- ----------
Other temporary investments 150,000 -
Notes receivable 2,137 3,608
Accounts receivable:
Customer 294,799 497,821
Allowance for doubtful accounts (19,255) (9,947)
Other 286,671 395,518
Accrued unbilled revenues 268,680 415,409
----------- ----------
Total receivables 830,895 1,298,801
----------- ----------
Deferred fuel costs 172,444 568,331
Accumulated deferred income taxes 6,488 -
Fuel inventory - at average cost 97,497 93,679
Materials and supplies - at average cost 460,644 425,357
Rate deferrals - 16,581
Deferred nuclear refueling outage costs 79,755 46,544
Prepayments and other 129,251 122,690
----------- ----------
TOTAL 2,680,684 3,958,015
----------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 766,103 136,487
Decommissioning trust funds 1,775,950 1,315,857
Non-utility property - at cost (less
accumulated depreciation) 295,616 262,952
Other 495,542 79,917
----------- ----------
TOTAL 3,333,211 1,795,213
----------- ----------
PROPERTY, PLANT AND EQUIPMENT
Electric 26,359,376 25,137,562
Plant acquisition adjustment 374,399 390,664
Property under capital lease 753,310 831,822
Natural gas 201,841 190,989
Construction work in progress 882,829 936,785
Nuclear fuel under capital lease 265,464 277,673
Nuclear fuel 232,387 157,603
----------- ----------
TOTAL PROPERTY, PLANT AND EQUIPMENT 29,069,606 27,923,098
Less - accumulated depreciation and
amortization 11,805,578 11,477,352
----------- ----------
PROPERTY, PLANT AND EQUIPMENT - NET 17,264,028 16,445,746
----------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 946,126 980,266
Unamortized loss on reacquired debt 166,546 183,627
Deferred fuel costs - 95,661
Other regulatory assets 707,439 792,515
Long-term receivables 28,083 29,575
Other 784,194 1,171,278
----------- ----------
TOTAL 2,632,388 3,252,922
----------- ----------
TOTAL ASSETS $25,910,311 $25,451,896
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $682,771 $464,215
Notes payable 351,018 388,023
Accounts payable 592,529 1,204,227
Customer deposits 188,230 172,169
Taxes accrued 700,133 451,811
Accumulated deferred income taxes - 225,649
Nuclear refueling outage costs 2,080 10,209
Interest accrued 192,420 172,033
Obligations under capital leases 149,352 156,907
Other 345,387 192,908
----------- ----------
TOTAL 3,203,920 3,438,151
----------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 3,574,664 3,249,083
Accumulated deferred investment tax credits 471,090 494,315
Taxes accrued 250,000 -
Obligations under capital leases 181,085 201,873
Other regulatory liabilities 135,878 135,586
Decommissioning 1,194,333 749,708
Transition to competition 231,512 191,934
Regulatory reserves 37,591 396,789
Accumulated provisions 425,399 390,116
Other 852,269 853,137
----------- ----------
TOTAL 7,353,821 6,662,541
----------- ----------
Long-term debt 7,321,028 7,732,093
Preferred stock with sinking fund 26,185 65,758
Preferred stock without sinking fund 334,337 334,688
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts
holding solely junior subordinated
deferrable debentures 215,000 215,000
SHAREHOLDERS' EQUITY
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 4,662,704 4,660,483
Retained earnings 3,638,448 3,190,639
Accumulated other comprehensive loss (88,794) (75,033)
Less - treasury stock, at cost (27,441,384
shares in 2001 and 28,490,031 shares
in 2000) 758,820 774,905
----------- -----------
TOTAL 7,456,020 7,003,665
----------- -----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $25,910,311 $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 Years Ended December 31,
2001 2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,190,639 $2,786,467 $2,526,888
Add-Earnings applicable to common stock 726,196 $726,196 679,294 $679,294 552,459 $552,459
Deduct:
Dividends declared on common stock 278,342 275,929 294,352
Capital stock and other expenses 45 (807) (1,472)
------------ ----------- -----------
Total 278,387 275,122 292,880
------------ ----------- -----------
Retained Earnings - End of period $3,638,448 $3,190,639 $2,786,467
============ =========== ===========
ACCUMULATED OTHER COMPREHENSIVE INCOME
(LOSS) (Net of tax):
Balance at beginning of period ($75,033) ($73,805) ($46,739)
Cumulative effect to January 1, 2001 of
accounting change regarding fair value
of derivative instruments (18,021) - -
Net derivative instrument fair value changes
arising during the period 48 48 - - - -
Foreign currency translation adjustments 4,615 4,615 (5,216) (5,216) (22,043) (22,043)
Net unrealized investment gains (losses) (403) (403) 3,988 3,988 (5,023) (5,023)
------------ ----------- -----------
Balance at end of period:
Accumulated derivative instrument fair
value changes (17,973) - -
Other accumulated comprehensive income
(loss) items (70,821) (75,033) (73,805)
------------ ----------- -----------
Total ($88,794) ($75,033) ($73,805)
============ =========== ===========
Comprehensive Income $730,456 $678,066 $525,393
======== ======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,660,483 $4,636,163 $4,630,609
Add:
Common stock issuances related to
stock plans 2,221 24,320 5,554
------------ ----------- -----------
Paid-in Capital - End of period $4,662,704 $4,660,483 $4,636,163
=========== =========== ===========
See Notes to Financial Statements
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 (1) 1997 (2)
(In Thousands, Except Percentages and Per Share Amounts)
Operating revenues $ 9,620,899 $10,022,129 $ 8,765,635 $11,494,772 $ 9,538,926
Income before cumulative
effect of accounting change $ 727,025 $ 710,915 $ 595,026 $ 785,629 $ 300,899
Earnings per share before
cumulative effect of
accounting change
Basic $ 3.18 $ 3.00 $ 2.25 $ 3.00 $ 1.03
Diluted $ 3.13 $ 2.97 $ 2.25 $ 3.00 $ 1.03
Dividends declared per share $ 1.28 $ 1.22 $ 1.20 $ 1.50 $ 1.80
Return on average common equity 10.04% 9.62% 7.77% 10.71% 3.71%
Book value per share, year-end $ 33.78 $ 31.89 $ 29.78 $ 28.82 $ 27.23
Total assets $25,910,311 $25,451,896 $22,969,940 $22,836,694 $27,000,700
Long-term obligations (3) $ 7,743,298 $ 8,214,724 $ 7,252,697 $ 7,349,349 $10,154,330
(1) Includes the effects of the sales of London Electricity and
CitiPower in December 1998.
(2) Includes the effects of the London Electricity acquisition in
February 1997.
(3) Includes long-term debt (excluding currently maturing debt),
preferred stock with sinking fund, preferred securities of subsidiary
trusts and partnership, and noncurrent capital lease obligations.
2001 2000 1999 1998 1997
(Dollars In Thousands)
Domestic Electric Operating Revenues:
Residential $2,612,889 $2,524,529 $2,231,091 $2,299,317 $2,271,363
Commercial 1,860,040 1,699,699 1,502,267 1,513,050 1,581,878
Industrial 2,298,825 2,177,236 1,878,363 1,829,085 2,018,625
Governmental 205,054 185,286 163,403 172,368 171,773
--------------------------------------------------------------------
Total retail 6,976,808 6,586,750 5,775,124 5,813,820 6,043,639
Sales for resale 395,353 423,519 397,844 448,842 359,881
Other (1) (127,334) 209,417 98,446 (126,340) 135,311
--------------------------------------------------------------------
Total $7,244,827 $7,219,686 $6,271,414 $6,136,322 $6,538,831
====================================================================
Billed Electric Energy
Sales (GWH):
Residential 31,080 31,998 30,631 30,935 28,286
Commercial 24,706 24,657 23,775 23,177 21,671
Industrial 41,577 43,956 43,549 43,453 44,649
Governmental 2,593 2,605 2,564 2,659 2,507
--------------------------------------------------------------------
Total retail 99,956 103,216 100,519 100,224 97,113
Sales for resale 8,896 9,794 9,714 11,187 9,707
--------------------------------------------------------------------
Total 108,852 113,010 110,233 111,411 106,820
====================================================================
(1) 1998 includes the effect of a reserve for rate refund at Entergy
Gulf States. 2001 includes the effect of a reserve for rate refund at
System Energy.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Arkansas, Inc.:
We have audited the accompanying balance sheets of Entergy Arkansas,
Inc. as of December 31, 2001 and 2000, and the related statements of
income, retained earnings, and cash flows (pages 99 through 103 and
pages 161 through 227) for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Entergy Arkansas, Inc. as
of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased in 2001 primarily due to a refund from System
Energy as a result of the receipt of a final FERC order in System
Entergy's 1995 rate proceeding and decreased operation and maintenance
expenses. The adjustments necessary to record the effects of the FERC
order reduced purchased power expense by $62.7 million ($38.6 million
net-of-tax). The increase was partially offset by decreased regulatory
credits and other income and increased interest charges. Refer to Note
2 of the financial statements for further discussion of the FERC order
in System Entergy's 1995 rate proceeding.
Net income increased in 2000 primarily due to increased electric
operating revenues and lower regulatory charges, partially offset by
increased operation and maintenance expenses.
Revenues and Sales
The changes in electric operating revenues for the twelve months
ended December 31, 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes $0.7 ($6.5)
Rate riders (18.6) (21.8)
Fuel cost recovery 78.8 61.8
Sales volume/weather 5.1 30.8
Unbilled revenue (15.9) 45.1
Other revenue 3.2 2.5
Sales for resale (39.2) 108.8
----- ------
Total $14.1 $220.7
===== ======
Rate riders
Rate rider revenues have no material effect on net income because
specific incurred expenses offset them.
In 2001, rate rider revenues decreased as a result of the
cessation of the ANO Decommissioning rate rider for the calendar year
2001. The ANO Decommissioning rider allows Entergy Arkansas to recover
the decommissioning costs associated with ANO 1 and 2. In October
2000, the APSC concluded that funds previously collected, together with
future earnings on those funds, will be sufficient to decommission ANO
1 and 2. Also contributing to the decrease in rate rider revenues is a
decrease in the Grand Gulf rate rider effective July 2001. The Grand
Gulf rate rider allows Entergy Arkansas to recover 78% of its share of
operating costs for Grand Gulf 1.
In 2000, rate rider revenues decreased as a result of decreased
ANO Decommissioning and Grand Gulf rate riders. The decreased rates in
both riders became effective in January 2000.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery
Entergy Arkansas is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates that are
recorded as fuel cost recovery revenues. The difference between
revenues collected and current fuel and purchased power costs is
recorded as deferred fuel costs on Entergy Arkansas' financial
statements such that these costs generally have no net effect on
earnings.
Fuel cost recovery revenues increased in 2001 primarily due to
increases in the energy cost rate that became effective in April 2000
and April 2001. The energy cost recovery rider (Rider ECR) is
determined annually by formula. The increase in the energy cost rate
allows Entergy Arkansas to recover previously under-recovered fuel
expenses. Rider ECR is discussed further in Note 2 to the financial
statements.
Fuel cost recovery revenues increased in 2000 primarily due to an
increase in the energy cost rate in April 2000.
Sales volume/weather
Electric sales vary seasonally in response to weather and usually
peak in the summer. The colder winter weather in 2000 contributed
1,508 GWH to the increase in electric sales volume in the residential
and commercial sectors as compared to 1999. Higher electric sales
volume in 2000 also increased revenues due to increased weather-
adjusted usage of 742 GWH in the residential and commercial sectors.
Increased usage in the industrial sector of 406 GWH also contributed to
the increase in electric sales.
Unbilled revenue
In 2001, unbilled revenue decreased primarily due to the effect of
colder weather in December 2000 on the unbilled revenue calculation
compared to the calculation in the current year.
In 2000, unbilled revenue increased primarily as a result of a
change in estimated unbilled revenues and a $13.4 million adjustment to
third quarter 1999 unbilled revenues that excluded fuel recovery and
rate rider revenues from the unbilled balance in accordance with
regulatory treatment. Unbilled revenues also increased due to greater
unbilled volume and the addition of unbilled revenue for wholesale
customers to the unbilled balance.
Sales for resale
In 2001, sales for resale decreased due to a decrease in sales
volume to adjoining utility systems and municipal and co-operative
customers as a result of less energy available for resale, coupled with
a decrease in the average price of energy.
In 2000, sales for resale increased primarily due to an increase
in the market price of electricity.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Fuel and purchased power
In 2001, fuel and purchased power expenses decreased primarily due
to:
o decreased gas generation as a result of displacement by nuclear
generation;
o decreased purchased power volume as a result of displacement by
nuclear generation; and
o receipt of a final FERC order requiring System Energy to refund a
portion of its requested December 1995 rate increase. The effect of
the order required adjustments that reduced purchased power expense at
Entergy Arkansas by $62.7 million.
In 2000, fuel and purchased power expenses increased primarily due
to:
o an increase in the market price of natural gas;
o an increase in the market price of purchased power; and
o increased purchased power volume due to increased demand for
electricity and to offset decreased nuclear generation due to
maintenance, inspection, and refueling outages during the year.
The increased fuel and purchased power expenses were partially offset
by a $23.5 million adjustment to the deferred fuel balance as a result
of the 1999 and 2000 Rider ECR filings. This adjustment reflects
deferred costs that Entergy Arkansas expects to recover in the future.
Other operation and maintenance
Other operation and maintenance expenses decreased for 2001
primarily due to:
o a decrease in damage expenses of $49.7 million primarily due to a
reversal of $24.5 million in June 2001, upon recommendation from the
APSC, of ice storm costs previously charged to expense in December 2000
(these costs are now reflected in other regulatory assets on Entergy
Arkansas' balance sheet). The effect of the reversal of the ice storm
costs on net income was largely offset by the adjustment to the
transition cost account as a result of the 2000 earnings review in
2001;
o a decrease in nuclear expenses of $17 million due to maintenance
and inspection outages in 2000, compared to no outages in 2001, as well
as the steam generator replacement project at ANO 2 in late 2000; and
o a decrease in outside service expense of $9.3 million primarily
due to decreased transition to competition support costs.
The decrease in other operation and maintenance expenses was partially
offset by a $15.9 million increase due to the payment of turbine
refurbishing costs for the Blytheville plant, the lease of which
expired after the summer of 1999.
Other operation and maintenance expenses increased for 2000
primarily due to:
o an increase in property damage expense of $14.5 million due to
December 2000 ice storms;
o an increase in nuclear expenses of $7.9 million related to
maintenance and inspection outages and the steam generator replacement
project at ANO 2;
o an increase in spending of $7.1 million on vegetation management;
o an increase in plant maintenance expense of $5.0 million; and
o an increase in spending of $4.5 million for outside services
employed related primarily to transition to competition support work.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Decommissioning
Decommissioning expense decreased in 2001 primarily due to the
cessation of the ANO Decommissioning rate rider for the calendar year
2001. In October 2000, the APSC concluded that funds previously
collected, together with future earnings on those funds, will be
sufficient to decommission ANO 1 and 2.
Decommissioning expense decreased in 2000 primarily due to a true-
up of the decommissioning liability in June 2000 for previous over-
accruals.
Other regulatory charges (credits) - net
In 2001, other regulatory credits decreased primarily due to:
o the accrual of $22.3 million to the transition cost account;
o the decreased accrual of transition costs recorded as a regulatory
asset expected to be recovered in a customer transition tariff; and
o increased recovery of Grand Gulf 1 costs due to an increase in the
Grand Gulf 1 rider effective January 2001, partially offset by a later
decrease in the rider effective July 2001.
In 2000, other regulatory credits increased primarily due to:
o a $16.6 million under-recovery of Grand Gulf 1 costs as a result
of a decreased rate rider that became effective in January 2000 as
ordered by the APSC;
o the recording of a regulatory asset for certain transition costs
expected to be recovered in a customer transition tariff; and
o accruals in 1999 of $15.4 million to the transition cost account.
The transition cost account and the December 2000 ice storms are
discussed in more detail in Note 2 to the financial statements.
Other
Other income
Other income decreased in 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.
Interest charges
Interest charges increased in 2001 primarily due to:
o a decrease in the allowance for borrowed funds used for
construction because of the lower construction work in progress balance
during 2001;
o the issuance of $100 million of long-term debt in July 2001; and
o interest expense on a $63 million credit facility obtained in
January 2001.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Interest charges increased in 2000 due to the issuance of $100
million of long-term debt in March 2000.
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
37.3%, 42.3%, and 43.8%, respectively.
The effective income tax rate decreased in 2001 primarily due to
resolution of matters related to prior year taxes, which were lower
than previously estimated. Also contributing to the decreased rate was
lower tax depreciation.
ENTERGY ARKANSAS, INC.
INCOME STATEMENTS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $1,776,776 $1,762,635 $1,541,894
---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 397,080 258,294 257,946
Purchased power 397,885 560,793 455,425
Nuclear refueling outage expenses 28,695 25,884 29,857
Other operation and maintenance 364,409 427,409 389,462
Decommissioning 13 3,845 10,670
Taxes other than income taxes 35,186 39,662 36,669
Depreciation and amortization 174,539 169,806 161,234
Other regulatory charges (credits) - net (721) (33,078) 5,230
---------- ---------- ----------
TOTAL 1,397,086 1,452,615 1,346,493
---------- ---------- ----------
OPERATING INCOME 379,690 310,020 195,401
---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 6,115 15,020 12,866
Interest and dividend income 8,983 8,784 7,274
Miscellaneous - net (5,109) (4,453) (3,652)
---------- ---------- ----------
TOTAL 9,989 19,351 16,488
---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 90,260 88,140 80,800
Other interest - net 14,163 8,360 11,123
Distributions on preferred securities of subsidiary 5,100 5,100 5,100
Allowance for borrowed funds used during construction (3,962) (9,788) (8,459)
---------- ---------- ----------
TOTAL 105,561 91,812 88,564
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 284,118 237,559 123,325
Income taxes 105,933 100,512 54,012
---------- ---------- ----------
NET INCOME 178,185 137,047 69,313
Preferred dividend requirements and other 7,744 7,776 10,854
---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $170,441 $129,271 $58,459
========== ========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $178,185 $137,047 $69,313
Noncash items included in net income:
Other regulatory charges (credits) - net (721) (33,078) 5,230
Depreciation, amortization, and decommissioning 174,552 173,651 171,904
Deferred income taxes and investment tax credits 6,389 39,776 22,421
Allowance for equity funds used during construction (6,115) (15,020) (12,866)
Changes in working capital:
Receivables (16,073) (47,647) 40,375
Fuel inventory 5,437 (6,512) (4,633)
Accounts payable (206,185) 141,172 56,985
Taxes accrued 64,018 1,731 (30,054)
Interest accrued 2,920 5,246 (2,908)
Deferred fuel costs 89,184 35,993 38,814
Other working capital accounts 23,283 17,162 2,444
Provision for estimated losses and reserves (978) (895) (8,116)
Changes in other regulatory assets (39,924) (85,452) 45,898
Other 139,206 58,386 (42,249)
-------- -------- --------
Net cash flow provided by operating activities 413,178 421,560 352,558
-------- -------- --------
INVESTING ACTIVITIES
Construction expenditures (280,755) (369,370) (238,009)
Allowance for equity funds used during construction 6,115 15,020 12,866
Nuclear fuel purchases (19,103) (44,722) (32,517)
Proceeds from sale/leaseback of nuclear fuel 19,103 44,722 32,517
Decommissioning trust contributions and realized
change in trust assets (10,105) (15,761) (17,746)
Changes in other temporary investments - net (38,397) - -
Other regulatory investments (3,460) (97,343) (39,243)
-------- -------- --------
Net cash flow used in investing activities (326,602) (467,454) (282,132)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 97,384 99,381 -
Retirement of long-term debt - (220) (39,607)
Redemption of preferred stock - - (22,666)
Dividends paid:
Common stock (82,500) (44,600) (82,700)
Preferred stock (5,832) (7,691) (11,696)
-------- -------- --------
Net cash flow provided by (used in) financing activities 9,052 46,870 (156,669)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 95,628 976 (86,243)
Cash and cash equivalents at beginning of period 7,838 6,862 93,105
-------- -------- --------
Cash and cash equivalents at end of period $103,466 $7,838 $6,862
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $101,330 $91,291 $94,872
Income taxes $31,939 $60,291 $61,273
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($14,843) ($3,920) $22,980
Proceeds from long-term debt issued for the purpose
of refunding prior long-term debt $47,000 - -
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $18,331 $7,838
Temporary cash investments - at cost,
which approximates market 85,135 -
---------- ----------
Total cash and cash equivalents 103,466 7,838
---------- ----------
Other temporary investments 38,397 -
Accounts receivable:
Customer 80,719 98,550
Allowance for doubtful accounts (1,667) (1,667)
Associated companies 65,102 22,286
Other 20,889 26,221
Accrued unbilled revenues 62,307 65,887
---------- ----------
Total accounts receivable 227,350 211,277
---------- ----------
Deferred fuel costs 17,246 102,970
Accumulated deferred income taxes 22,698 -
Fuel inventory - at average cost 4,372 9,809
Materials and supplies - at average cost 75,499 80,682
Deferred nuclear refueling outage costs 14,508 23,541
Prepayments and other 53,386 5,540
---------- ----------
TOTAL 556,922 441,657
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 11,217 11,217
Decommissioning trust funds 351,114 355,852
Non-utility property - at cost (less accumulated depreciation) 1,465 1,469
Other - at cost (less accumulated depreciation) 2,976 3,032
---------- ----------
TOTAL 366,772 371,570
---------- ----------
UTILITY PLANT
Electric 5,399,294 5,274,066
Property under capital lease 35,604 40,289
Construction work in progress 157,994 87,389
Nuclear fuel under capital lease 65,556 107,023
Nuclear fuel 8,156 6,720
---------- ----------
TOTAL UTILITY PLANT 5,666,604 5,515,487
Less - accumulated depreciation and amortization 2,615,013 2,534,463
---------- ----------
UTILITY PLANT - NET 3,051,591 2,981,024
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 164,146 162,952
Unamortized loss on reacquired debt 40,817 44,428
Other regulatory assets 260,535 221,805
Other 10,797 4,775
---------- ----------
TOTAL 476,295 433,960
---------- ----------
TOTAL ASSETS $4,451,580 $4,228,211
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $85,000 $100
Notes payable 667 667
Accounts payable:
Associated companies 32,868 94,776
Other 87,036 231,313
Customer deposits 32,589 29,775
Taxes accrued 104,281 40,263
Accumulated deferred income taxes - 55,127
Interest accrued 30,544 27,624
Obligations under capital leases 51,973 45,962
System Energy refund 53,732 -
Other 17,221 14,942
---------- ----------
TOTAL 495,911 540,549
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 809,742 715,891
Accumulated deferred investment tax credits 83,239 88,264
Obligations under capital leases 49,187 101,350
Transition to competition 152,414 119,553
Accumulated provisions 41,415 42,393
Other 107,424 64,267
---------- ----------
TOTAL 1,243,421 1,131,718
---------- ----------
Long-term debt 1,308,075 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 636,226 548,285
---------- ----------
TOTAL 1,344,173 1,256,232
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,451,580 $4,228,211
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $548,285 $463,614 $487,855
Add:
Net income 178,185 137,047 69,313
Deduct:
Dividends declared:
Preferred stock 7,744 7,776 9,223
Common stock 82,500 44,600 82,700
Capital stock expenses and other - - 1,631
-------- -------- --------
Total 90,244 52,376 93,554
-------- -------- --------
Retained Earnings, December 31 $636,226 $548,285 $463,614
======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(In Thousands)
Operating revenues $1,776,776 $1,762,635 $1,541,894 $1,608,698 $1,715,714
Net income $ 178,185 $ 137,047 $ 69,313 $ 110,951 $ 127,977
Total assets $4,451,580 $4,228,211 $3,917,111 $4,006,651 $4,106,877
Long-term obligations (1) $1,417,262 $1,401,062 $1,265,846 $1,335,248 $1,419,728
(1) Includes long-term debt (excluding currently maturing debt),
preferred securities of subsidiary trust, and noncurrent capital lease
obligations.
2001 2000 1999 1998 1997
Electric Operating Revenues: (Dollars In Thousands)
Residential $586,361 $561,363 $533,245 $562,325 $551,821
Commercial 329,437 307,320 288,677 288,816 332,715
Industrial 370,772 353,046 335,824 330,016 372,083
Governmental 16,149 14,935 14,606 14,640 18,200
---------------------------------------------------------------
Total retail 1,302,719 1,236,664 1,172,352 1,195,797 1,274,819
Sales for resale:
Associated companies 240,073 245,541 178,150 149,603 213,845
Non-associated companies 201,111 234,873 193,449 240,090 215,249
Other 32,873 45,557 (2,057) 23,208 11,801
---------------------------------------------------------------
Total $1,776,776 $1,762,635 $1,541,894 $1,608,698 $1,715,714
===============================================================
Billed Electric Energy
Sales (GWH):
Residential 6,918 6,791 6,493 6,613 5,988
Commercial 5,162 5,063 4,880 4,773 4,445
Industrial 7,052 7,240 7,054 6,837 6,647
Governmental 245 239 237 233 239
---------------------------------------------------------------
Total retail 19,377 19,333 18,664 18,456 17,319
Sales for resale:
Associated companies 7,217 6,513 7,592 6,500 9,557
Non-associated companies 4,909 5,537 4,868 5,948 6,828
---------------------------------------------------------------
Total 31,503 31,383 31,124 30,904 33,704
===============================================================
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $239 $200 $194 N/A
Long-term debt maturities $85 $255 $- $1,053
Short-term facility maturities (1) $- N/A N/A N/A
Capital and operating lease payments $31 $22 $22 $45
Unconditional fuel and purchased power $228 $200 $203 $1,428
obligations
Nuclear fuel lease obligations (2) $47 $19 N/A N/A
(1) Entergy Arkansas' 364-day credit facility is discussed in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES".
(2) It is expected that additional financing under the leases will be
arranged as needed to acquire additional fuel, to pay interest, and to
pay maturing debt. If such additional financing cannot be arranged,
however, the lessee in each case must repurchase sufficient nuclear
fuel to allow the lessor to meet its obligations.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Gulf States, Inc.:
We have audited the accompanying balance sheets of Entergy Gulf States,
Inc. as of December 31, 2001 and 2000, and the related statements of
income, retained earnings, and cash flows (pages 111 through 115 and
pages 161 through 227) for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Entergy Gulf States, Inc.
as of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased slightly in 2001 primarily due to decreased
unbilled revenue, less favorable sales volume and weather, and
increased interest expense. The decrease was offset by lower rate
refund provisions, decreased nuclear refueling outage expenses,
increased interest income, and lower income taxes.
Net income increased in 2000 primarily due to increased sales
volume, increased unbilled revenue, increased wholesale revenue, and
decreased charges for regulatory reserves.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the twelve months
ended December 31, 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes $35.9 ($83.2)
Fuel cost recovery 200.9 342.5
Sales volume/weather (30.9) 40.7
Unbilled revenue (96.8) 33.7
Other revenue (2.0) (3.9)
Sales for resale 12.9 58.7
------ ------
Total $120.0 $388.5
====== ======
Base rate changes
In 2001, base rate changes increased primarily due to lower
accruals for rate refund provisions in 2001.
In 2000, base rate changes decreased primarily due to the reversal
in 1999 of regulatory reserves associated with the accelerated
amortization of accounting order deferrals and rate refunds in
conjunction with the Texas rate settlement in June 1999.
The LPSC and PUCT rate issues are discussed in Note 2 to the
financial statements.
Fuel cost recovery
Entergy Gulf States is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates that are recorded as fuel cost recovery revenues. The difference
between revenues collected and current fuel and purchased power costs
is recorded as deferred fuel costs on Entergy Gulf States' financial
statements such that these costs generally have no net effect on
earnings.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In 2001, fuel cost recovery revenues increased in both operational
jurisdictions of Entergy Gulf States. In the Louisiana jurisdiction,
fuel recovery revenues increased $103.9 million due to the recovery
through the fuel adjustment clause of higher fuel and purchased power
costs in 2001. In the Louisiana jurisdiction, these fuel costs are
recovered on a two-month lag. In the Texas jurisdiction, fuel cost
recovery revenues increased $97 million due to increases in the fixed
fuel factor in March 2001 and August 2001 as well as a fuel recovery
surcharge which became effective in February 2001 and expired in
December 2001.
In 2000, fuel cost recovery revenues increased primarily due to
increased market prices for fuel and purchased power, resulting in an
increased recovery of $226.7 million in the Louisiana jurisdiction.
Fuel cost recovery revenues increased in the Texas jurisdiction by
$82.4 million due to a higher fuel recovery factor that became
effective in September 1999 and by $33.4 million due to a fuel
surcharge implemented in January 2000.
Sales volume/weather
Electric sales vary seasonally in response to weather and usually
peak in the summer. Lower electric sales volume reduced revenues for
2001 primarily due to decreased usage of 379 GWH in the residential and
commercial sectors as a result of less favorable summer weather. Lower
usage in the industrial sector of 1,302 GWH also contributed to the
decrease in electric sales.
In 2000, higher electric sales volume increased revenues primarily
due to more favorable weather. The effect of more favorable winter
weather increased usage by 462 GWH in the residential and commercial
sectors. The increase in revenues was also due to increased usage of
276 GWH in the industrial sector.
Unbilled revenue
In 2001, unbilled revenue decreased as a result of higher fuel
prices and more favorable weather in December 2000.
In 2000, unbilled revenue increased due to the effect of a change
in estimate on unbilled revenue, more favorable weather, and increased
sales volume.
Sales for resale
In 2001, sales for resale increased primarily due to increased
sales volume to municipal and co-op customers coupled with an increase
in the average price of energy supplied, partially offset by decreased
sales volume to adjoining utility systems and affiliated companies due
to decreased demand.
In 2000, sales for resale increased primarily due to increased
sales volume including sales of energy from the non-regulated piece of
River Bend to affiliated companies. Such sales volume was possible as
a result of increased generation, particularly nuclear generation,
resulting in more energy available for resale.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas and steam operating revenues
Gas operating revenues increased in 2001 primarily due to a 39%
increase in the market price for natural gas as well as increased sales
volume in the residential and commercial sectors, particularly during
the first quarter of 2001. The increase in gas revenues was largely
offset by increased expense for gas purchased for resale.
Gas operating revenues increased in 2000 due to an increase in the
market price for natural gas as well as increased sales volume in the
residential and commercial sectors.
In 2000, steam operating revenues decreased primarily due to a new
lease arrangement that began in June 1999 for the Louisiana Station 1
generating facility. Under the new arrangement, revenues and expenses
are now classified as other income. The previous classifications were
steam operating revenues and other operation and maintenance expenses.
Expenses
Fuel and purchased power
In 2001, fuel and purchased power expenses increased primarily due
to adjustments to the deferred fuel balance as a result of the over-
recovery of fuel and purchased power costs. The over-recovery in the
Louisiana jurisdiction is due to the collection of higher fuel and
purchased power costs through the fuel adjustment clause as discussed
above. The over-recovery in the Texas jurisdiction is due to increases
in the fixed fuel factor and a fuel recovery surcharge.
In 2000, fuel and purchased power expenses increased primarily due
to:
o higher market prices for gas and purchased power;
o increased nuclear generation; and
o an adjustment in March 2000 of $11.5 million to the Texas
jurisdiction deferred fuel balance as a result of a fuel reconciliation
settlement with the PUCT.
Nuclear refueling outage expenses
In 2001, nuclear refueling outage expenses decreased as a result
of the lower accrual of anticipated future outage expenses. River
Bend's next refueling outage is not scheduled until 2003.
Other operation and maintenance expenses
In 2000, other operation and maintenance expenses increased
primarily due to increased expenses of $12.6 million in outside
services employed related to legal and contract services for transition
work and increased nuclear plant operations costs of $5.8 million.
These increases were largely offset by decreases in pension and
benefits costs of $7.3 million and a decrease in environmental reserve
charges of $5.7 million.
Depreciation and amortization
In 2000, depreciation and amortization increased primarily due to
a review of plant-in-service dates for consistency with regulatory
treatment, reducing depreciation expense by $6.7 million in 1999, as
well as additional depreciation expense related to net capital
additions in 2000.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory credits
In 2001, other regulatory credits increased due to:
o the establishment of the Texas System Benefit Fund; and
o the deferral of the Louisiana Retail jurisdiction portion of
capacity charges included in purchased power costs for the summers of
2000 and 2001 that Entergy Gulf States expects to recover in the
future.
The increase was partially offset by the amortization of the 2000
capacity charges, which will occur through July 2002.
In 2000, other regulatory credits decreased due to:
o the amortization of the Year 2000 regulatory asset deferred in
1999; and
o the completion of the amortization of the deferred financing costs
in accordance with the December 1998 rate order settlement with the
PUCT.
Amortization of rate deferrals
In 2000, the amortization of rate deferrals decreased primarily
due to the large reduction in the rate deferral balance upon the PUCT's
approval in June 1999 of the Texas rate settlement. This settlement
increased amortization expense in 1999 but was offset by increased
revenues.
As of December 31, 2001, the rate deferrals have been fully
amortized.
Other
Other income
In 2001, other income increased primarily due to increased
interest income recorded on the deferred fuel balance.
In 2000, other income decreased primarily due to decreased non-
utility operating income from Louisiana Station 1 as well as the 1999
adjustment to the accumulated depreciation balance of River Bend abeyed
plant.
Interest charges
Interest charges increased in 2001 primarily due to:
o the issuance of $300 million of long-term debt in June 2000 and
the net issuance of an additional $177 million of long-term debt in
August 2001; and
o an adjustment to the liability for deferred compensation for
certain former Entergy Gulf States employees in accord with an
actuarial study.
In 2000, interest charges increased as a result of the issuance of
$300 million of long-term debt in June 2000.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
31.4%, 36.5%, and 37.6%, respectively.
The decrease in the effective income tax rate in 2001 was
primarily due to accelerated tax depreciation deductions accounted for
on a flow-through basis and an adjustment of prior year taxes, which
were lower than estimated.
ENTERGY GULF STATES, INC.
INCOME STATEMENTS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $2,590,836 $2,470,884 $2,082,358
Natural gas 57,724 40,356 28,998
Steam products - - 15,852
---------- ---------- ----------
TOTAL 2,648,560 2,511,240 2,127,208
---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 1,061,037 895,361 634,726
Purchased power 467,196 455,300 365,245
Nuclear refueling outage expenses 11,159 16,663 16,307
Other operation and maintenance 422,667 423,031 419,713
Decommissioning 6,247 6,273 7,588
Taxes other than income taxes 118,670 120,428 111,872
Depreciation and amortization 191,120 189,149 185,254
Other regulatory credits - net (32,334) (13,860) (24,092)
Amortization of rate deferrals 5,606 5,606 89,597
---------- ---------- ----------
TOTAL 2,251,368 2,097,951 1,806,210
---------- ---------- ----------
OPERATING INCOME 397,192 413,289 320,998
---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 9,248 7,617 6,306
Gain on sale of assets 2,454 2,327 2,046
Interest and dividend income 24,818 16,428 18,069
Miscellaneous - net (7,148) (3,692) 4
---------- ---------- ----------
TOTAL 29,372 22,680 26,425
---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 153,393 143,053 138,602
Other interest - net 13,537 8,458 6,994
Distributions on preferred securities of subsidiary 7,438 7,438 7,438
Allowance for borrowed funds used during construction (9,286) (6,926) (5,776)
---------- ---------- ----------
TOTAL 165,082 152,023 147,258
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 261,482 283,946 200,165
Income taxes 82,038 103,603 75,165
---------- ---------- ----------
NET INCOME 179,444 180,343 125,000
Preferred dividend requirements and other 5,025 9,998 17,423
---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $174,419 $170,345 $107,577
========== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $179,444 $180,343 $125,000
Noncash items included in net income:
Amortization of rate deferrals 5,606 5,606 89,597
Reserve for regulatory adjustments (27,374) (49,571) (97,953)
Other regulatory credits - net (32,334) (13,860) (24,092)
Depreciation, amortization, and decommissioning 197,367 195,422 192,842
Deferred income taxes and investment tax credits 4,320 54,279 (1,495)
Allowance for equity funds used during construction (9,248) (7,617) (6,306)
Gain on sale of assets (2,454) (2,327) (2,046)
Changes in working capital:
Receivables 59,132 (131,643) 9,791
Fuel inventory (16,753) 1,013 (8,070)
Accounts payable (151,090) 130,435 42,370
Taxes accrued (41,764) 30,570 46,018
Interest accrued (125) 14,969 (14,061)
Deferred fuel costs 161,396 (26,291) 40,851
Other working capital accounts 6,183 20,896 (10,954)
Provision for estimated losses and reserves (3,593) (1,991) 8,496
Changes in other regulatory assets (54,613) (47,777) (59,242)
Other 64,386 51,424 56,817
-------- -------- --------
Net cash flow provided by operating activities 338,486 403,880 387,563
-------- -------- --------
INVESTING ACTIVITIES
Construction expenditures (317,776) (277,635) (199,076)
Allowance for equity funds used during construction 9,248 7,617 6,306
Nuclear fuel purchases (14,148) (34,735) (53,293)
Proceeds from sale/leaseback of nuclear fuel 15,222 34,154 53,293
Decommissioning trust contributions and realized
change in trust assets (11,319) (12,051) (10,853)
Changes in other temporary investments - net (44,643) - -
Other regulatory investments - (127,377) (42,412)
-------- -------- --------
Net cash flow used in investing activities (363,416) (410,027) (246,035)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 298,554 298,819 122,906
Retirement of long-term debt (124,829) (185) (197,960)
Redemption of preferred stock (4,573) (157,658) (25,931)
Dividends paid:
Common stock (83,700) (88,000) (107,000)
Preferred stock (5,073) (10,862) (16,967)
-------- -------- --------
Net cash flow provided by (used in) financing activities 80,379 42,114 (224,952)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 55,449 35,967 (83,424)
Cash and cash equivalents at beginning of period 68,279 32,312 115,736
-------- -------- --------
Cash and cash equivalents at end of period $123,728 $68,279 $32,312
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $169,067 $136,154 $161,326
Income taxes $107,726 $23,259 $28,410
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($9,492) ($3,172) $14,054
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $19,503 $10,726
Temporary cash investments - at cost,
which approximates market 104,225 57,553
---------- ----------
Total cash and cash equivalents 123,728 68,279
---------- ----------
Other temporary investments 44,643 -
Accounts receivable:
Customer 81,136 125,412
Allowance for doubtful accounts (2,131) (2,131)
Associated companies 34,032 27,660
Other 53,249 22,837
Accrued unbilled revenues 84,744 136,384
---------- ----------
Total accounts receivable 251,030 310,162
---------- ----------
Deferred fuel costs 126,730 288,126
Fuel inventory - at average cost 54,011 37,258
Materials and supplies - at average cost 95,674 100,018
Rate deferrals - 5,606
Prepayments and other 22,373 22,332
---------- ----------
TOTAL 718,189 831,781
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 245,382 243,555
Non-utility property - at cost (less accumulated depreciation) 194,830 194,422
Other 15,970 14,826
---------- ----------
TOTAL 456,182 452,803
---------- ----------
UTILITY PLANT
Electric 7,694,226 7,574,905
Property under capital lease 28,087 38,564
Natural gas 59,100 56,163
Construction work in progress 221,730 144,814
Nuclear fuel under capital lease 67,688 57,472
---------- ----------
TOTAL UTILITY PLANT 8,070,831 7,871,918
Less - accumulated depreciation and amortization 3,750,770 3,680,662
---------- ----------
UTILITY PLANT - NET 4,320,061 4,191,256
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 426,623 403,934
Unamortized loss on reacquired debt 34,321 37,903
Other regulatory assets 201,329 169,405
Long-term receivables 26,576 29,586
Other 26,460 17,349
---------- ----------
TOTAL 715,309 658,177
---------- ----------
TOTAL ASSETS $6,209,741 $6,134,017
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $147,921 $122,750
Accounts payable:
Associated companies 38,728 66,312
Other 135,023 258,529
Customer deposits 45,876 37,489
Taxes accrued 90,604 132,368
Accumulated deferred income taxes 21,412 94,032
Nuclear refueling outage costs 2,080 10,209
Interest accrued 43,414 43,539
Obligations under capital leases 36,668 42,524
Other 20,995 19,418
---------- ----------
TOTAL 582,721 827,170
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 1,227,084 1,115,119
Accumulated deferred investment tax credits 163,766 171,000
Obligations under capital leases 60,163 53,512
Other regulatory liabilities - 669
Decommissioning 144,926 142,604
Transition to competition 79,098 72,381
Regulatory reserves 33,591 60,965
Accumulated provisions 63,811 67,404
Other 93,719 98,501
---------- ----------
TOTAL 1,866,158 1,782,155
---------- ----------
Long-term debt 1,958,897 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 47,327 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 1,157,459 1,153,195
Retained earnings 371,939 285,128
---------- ----------
TOTAL 1,690,780 1,600,055
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,209,741 $6,134,017
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $285,128 $202,782 $202,205
Add:
Net income 179,444 180,343 125,000
Deduct:
Dividends declared:
Preferred and preference stock 5,025 9,933 16,784
Common stock 83,700 88,000 107,000
Capital stock expenses and other 3,908 64 639
-------- -------- --------
Total 92,633 97,997 124,423
-------- -------- --------
Retained Earnings, December 31 $371,939 $285,128 $202,782
======== ======== ========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(In Thousands)
Operating revenues $2,648,560 $2,511,240 $2,127,208 $1,853,809 $2,147,829
Net income $ 179,444 $ 180,343 $ 125,000 $ 46,393 $ 59,976
Total assets $6,209,741 $6,134,017 $5,733,022 $6,293,744 $6,488,637
Long-term obligations (1) $2,130,245 $1,978,149 $1,966,269 $1,993,811 $2,098,752
(1) Includes long-term debt (excluding currently maturing debt),
preferred stock with sinking fund, preferred securities of subsidiary
trust, and noncurrent capital lease obligations.
2001 2000 1999 1998 1997
Electric Operating Revenues: (Dollars In Thousands)
Residential $787,960 $717,453 $607,875 $605,759 $624,862
Commercial 587,148 505,346 430,291 422,944 452,724
Industrial 945,733 870,594 718,779 704,393 740,418
Governmental 38,215 32,939 28,475 35,930 33,774
----------------------------------------------------------------
Total retail 2,359,056 2,126,332 1,785,420 1,769,026 1,851,778
Sales for resale:
Associated companies 72,961 93,675 38,416 14,172 14,260
Non-associated companies 146,092 112,522 109,132 112,182 59,015
Other (1) 12,727 138,355 149,390 (117,796) 136,458
----------------------------------------------------------------
Total $2,590,836 $2,470,884 $2,082,358 $1,777,584 $2,061,511
================================================================
Billed Electric Energy
Sales (GWH):
Residential 9,059 9,405 8,929 8,903 8,178
Commercial 7,668 7,660 7,310 6,975 6,575
Industrial 16,658 17,960 17,684 18,158 18,038
Governmental 452 450 425 560 481
----------------------------------------------------------------
Total retail 33,837 35,475 34,348 34,596 33,272
Sales for resale:
Associated companies 1,087 1,381 677 380 414
Non-associated companies 3,305 3,248 3,408 3,701 1,503
----------------------------------------------------------------
Total Electric Department 38,229 40,104 38,433 38,677 35,189
================================================================
(1) 1998 includes the effects of an Entergy Gulf States reserve for
rate refund.
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $317 $265 $277 N/A
Long-term debt maturities $148 $339 $592 $1,028
Capital and operating lease payments $26 $26 $27 $40
Unconditional fuel and purchased power $53 $34 $32 N/A
obligations
Nuclear fuel lease obligations (1) $30 $39 N/A N/A
(1) It is expected that additional financing under the leases will be
arranged as needed to acquire additional fuel, to pay interest, and to
pay maturing debt. If such additional financing cannot be arranged,
however, the lessee in each case must repurchase sufficient nuclear
fuel to allow the lessor to meet its obligations.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Louisiana, Inc.:
We have audited the accompanying balance sheets of Entergy Louisiana,
Inc. as of December 31, 2001 and 2000, and the related statements of
income, retained earnings, and cash flows (pages 122 through 127 and
pages 161 through 227) for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Entergy Louisiana, Inc. as
of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased in 2001 primarily due to decreased unbilled
revenue and less favorable sales volume and weather. The decrease was
partially offset by decreases in rate refund provisions and other
operation and maintenance expenses, an increase in regulatory credits,
and a refund from System Energy as a result of receipt of a final FERC
order in System Entergy's rate proceeding. The adjustments necessary
to record the effects of the FERC order reduced purchased power
expenses by $68.1 million ($41.9 million net-of-tax).
Net income decreased in 2000 primarily due to increased
depreciation and amortization costs, increased other operation and
maintenance expenses, and decreased unbilled revenue and other
regulatory credits, partially offset by decreased provisions for rate
refunds.
Revenues and Sales
The changes in electric operating revenues for the twelve months
ended December 31, 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes $31.8 ($4.7)
Fuel cost recovery (28.2) 270.8
Sales volume/weather (33.0) 23.9
Unbilled revenue (128.0) (9.2)
Other revenue 9.0 (4.3)
Sales for resale (12.1) (20.7)
------- ------
Total ($160.5) $255.8
======= ======
Base rate changes
In 2001, base rate changes increased primarily due to $48 million
of lower accruals for potential rate refunds and $11 million of higher
prices for special-use industrial customers as a result of decreased
usage which is reflected in sales volume/weather. The increase in base
rate changes was partially offset by additional formula rate plan
reductions of $27 million effective August 2000 and October 2001 in the
residential, commercial, and industrial sectors.
In 2000, base rate changes decreased primarily due to additional
formula rate plan reductions in the residential, commercial, and
industrial sectors, partially offset by lower accruals for potential
rate refunds.
Fuel cost recovery revenues
Entergy Louisiana is allowed to recover certain fuel and purchased
power costs through fuel mechanisms included in electric rates that are
recorded as fuel cost recovery revenues. The difference between
revenues collected and current fuel and purchased power costs is
recorded as deferred fuel costs on Entergy Louisiana's financial
statements such that these costs generally have no net effect on
earnings.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In 2001, fuel cost recovery revenues decreased as a result of
lower fuel and purchased power expenses primarily due to the decreased
market price of natural gas coupled with decreased generation
requirements.
In 2000, fuel cost recovery revenues increased as a result of
higher fuel and purchased power expenses primarily due to the increased
market price of natural gas.
Sales volume/weather
Electric sales vary seasonally in response to weather and usually
peak in the summer. In 2001, lower electric sales volume decreased
revenues due to decreased usage of 168 GWH in the residential sector
after adjusting for the weather effect and 782 GWH in the industrial
sector. The decreased usage in the industrial sector resulted in
higher rates for that sector, which is reflected in base rate changes.
The effect of less favorable weather decreased usage by 225 GWH in the
residential sector.
In 2000, higher electric sales volume increased revenues primarily
due to more favorable weather, which increased usage by 392 GWH in the
residential and commercial sectors. The increase in revenues was also
due to increased usage of 132 GWH in the industrial sector.
Unbilled revenue
In 2001, unbilled revenue decreased primarily due to the effect of
higher fuel prices and more favorable weather in December 2000 on the
unbilled calculation.
In 2000, unbilled revenue decreased primarily due to the effect of
a change in estimate on the 1999 unbilled revenue calculation.
Sales for resale
In 2001, sales for resale decreased as a result of decreased
demand in addition to a decrease in the average market price of energy.
In 2000, sales for resale decreased as a result of increased sales
to retail customers resulting in less energy available for resale.
Expenses
Fuel and purchased power
In 2001, fuel and purchased power expenses decreased primarily due
to:
o decreased market prices of natural gas;
o decreased demand; and
o the reduction of $68.1 million in purchased power expenses as a
result of the FERC-ordered refund from System Energy.
In 2000, fuel and purchased power expenses increased primarily due
to an increase in the market price of natural gas.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other operation and maintenance
Other operation and maintenance expenses decreased in 2001
primarily due to:
o a decrease of $11.0 million in outside services employed as a
result of legal services for potential rate actions in 2000; and
o a decrease of $10.7 million in expenses from maintenance and
planned maintenance outages at certain fossil plants in 2000.
Other operation and maintenance expenses increased in 2000
primarily due to:
o an increase in expenses from maintenance and planned maintenance
outages at Waterford 3 and certain fossil plants of $17.9 million;
o an increase of $11.0 million in outside services employed for
legal services for potential rate actions; and
o an increase in property insurance provisions of $5.0 million
primarily due to changes in storm damage provisions effective August
1999.
The overall increase in other operation and maintenance expenses
in 2000 was partially offset by the following:
o a decrease in injury and damages claims of $3.5 million;
o a decrease of $3.0 million in benefits expense; and
o higher nuclear insurance refunds of $1.8 million.
Depreciation and amortization
In 2000, depreciation and amortization expenses increased
primarily due to a review of plant-in-service dates for consistency
with regulatory treatment reducing depreciation expense by $3.4 million
in August 1999, as well as depreciation expense related to net capital
additions in 2000.
Other regulatory charges (credits)
In 2001, other regulatory credits increased due to the deferral of
capacity charges included in purchased power costs for the summers of
2000 and 2001 that Entergy Louisiana expects to recover in the future.
The increase was partially offset by the amortization of the 2000
capacity charges. The amortization of these charges will occur through
July 2002.
In 2000, other regulatory credits decreased due to the LPSC-
required deferral in 1999 of Year 2000 costs and the amortization of
these costs in 2000. The deferred costs are being recovered over a
five-year period.
Other
Interest and dividend income
The decrease in 2001 and the increase in 2000 in interest income
were due to interest recorded on deferred fuel costs in 2000.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Interest charges
In 2001, other interest increased primarily due to:
o interest accrued on reserves provided for fuel-related refunds
that were refunded in July through September 2001; and
o interest accrued on over-recovered fuel and purchased power
expenses that will be refunded to customers through the fuel adjustment
clause.
In 2000, interest on long-term debt decreased primarily due to the
refinancing and net redemption of $77 million of long-term debt in
1999, partially offset by interest expense incurred on the issuance of
$150 million of long-term debt in May 2000.
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
39.4%, 40.9%, and 39.0%, respectively.
ENTERGY LOUISIANA, INC.
INCOME STATEMENTS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $1,901,913 $2,062,437 $1,806,594
---------- ---------- ----------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 620,415 560,329 421,763
Purchased power 410,435 537,589 418,878
Nuclear refueling outage expenses 12,624 13,542 15,756
Other operation and maintenance 299,532 318,841 289,348
Decommissioning 10,422 10,422 8,786
Taxes other than income taxes 77,376 77,190 75,447
Depreciation and amortization 171,217 171,204 161,754
Other regulatory charges (credits) - net (24,738) 960 (5,280)
---------- ---------- ----------
TOTAL 1,577,283 1,690,077 1,386,452
---------- ---------- ----------
OPERATING INCOME 324,630 372,360 420,142
---------- ---------- ----------
OTHER INCOME
Allowance for equity funds used during construction 4,531 4,328 4,925
Gain on sale of assets 152 - -
Interest and dividend income 6,234 10,100 5,102
Miscellaneous - net (4,056) (3,496) (2,896)
---------- ---------- ----------
TOTAL 6,861 10,932 7,131
---------- ---------- ----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 97,887 98,655 103,937
Other interest - net 11,889 6,788 7,010
Distributions on preferred securities of subsidiary 6,300 6,300 6,300
Allowance for borrowed funds used during construction (3,422) (3,775) (4,112)
---------- ---------- ----------
TOTAL 112,654 107,968 113,135
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 218,837 275,324 314,138
Income taxes 86,287 112,645 122,368
---------- ---------- ----------
NET INCOME 132,550 162,679 191,770
Preferred dividend requirements and other 7,495 9,514 9,955
---------- ---------- ----------
EARNINGS APPLICABLE TO
COMMON STOCK $125,055 $153,165 $181,815
========== ========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $132,550 $162,679 $191,770
Noncash items included in net income:
Reserve for regulatory adjustments (11,456) 11,456 -
Other regulatory charges (credits) - net (24,738) 960 (5,280)
Depreciation, amortization, and decommissioning 181,639 181,626 170,540
Deferred income taxes and investment tax credits (27,382) 16,350 (15,487)
Allowance for equity funds used during construction (4,531) (4,328) (4,925)
Gain on sale of assets (152) - -
Changes in working capital:
Receivables 131,313 (97,154) (41,565)
Accounts payable (50,121) (11,848) 95,120
Taxes accrued (2,897) (2,555) 7,659
Interest accrued (1,012) 15,300 (33,066)
Deferred fuel costs 151,544 (81,890) (9,959)
Other working capital accounts (71,119) 38,064 56,714
Provision for estimated losses and reserves 4,321 6,114 5,442
Changes in other regulatory assets 2,569 25,400 38,577
Other 19,987 10,249 (45,146)
--------- --------- ---------
Net cash flow provided by operating activities 430,515 270,423 410,394
--------- --------- ---------
INVESTING ACTIVITIES
Construction expenditures (203,059) (203,049) (130,933)
Allowance for equity funds used during construction 4,531 4,328 4,925
Nuclear fuel purchases - (38,270) (11,308)
Proceeds from sale/leaseback of nuclear fuel - 38,270 11,308
Decommissioning trust contributions and realized
change in trust assets (13,651) (12,299) (13,678)
Changes in other temporary investments - net (6,152) - -
--------- --------- ---------
Net cash flow used in investing activities (218,331) (211,020) (139,686)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - 148,736 298,092
Retirement of long-term debt (35,088) (100,000) (386,707)
Redemption of preferred stock (35,000) - (50,000)
Dividends paid:
Common stock (134,600) (62,400) (197,000)
Preferred stock (9,047) (9,514) (10,389)
--------- --------- ---------
Net cash flow used in financing activities (213,735) (23,178) (346,004)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (1,551) 36,225 (75,296)
Cash and cash equivalents at beginning of period 43,959 7,734 83,030
--------- --------- ---------
Cash and cash equivalents at end of period $42,408 $43,959 $7,734
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $110,971 $89,627 $144,731
Income taxes $111,507 $105,354 $132,924
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($4,251) ($2,979) $4,585
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $28,768 $14,138
Temporary cash investments - at cost,
which approximates market 13,640 29,821
---------- ----------
Total cash and cash equivalents 42,408 43,959
---------- ----------
Other temporary investments 6,152 -
Notes receivable 8 1,510
Accounts receivable:
Customer 48,640 111,292
Allowance for doubtful accounts (1,771) (1,771)
Associated companies 9,090 30,518
Other 47,965 13,698
Accrued unbilled revenues 71,200 152,700
---------- ----------
Total accounts receivable 175,124 306,437
---------- ----------
Deferred fuel costs - 84,051
Accumulated deferred income taxes 42,566 -
Materials and supplies - at average cost 77,523 77,389
Deferred nuclear refueling outage costs 4,096 16,425
Prepayments and other 9,000 9,996
---------- ----------
TOTAL 356,877 539,767
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 14,230 14,230
Decommissioning trust funds 119,663 110,263
Non-utility property - at cost (less accumulated depreciation) 21,671 21,700
---------- ----------
TOTAL 155,564 146,193
---------- ----------
UTILITY PLANT
Electric 5,456,093 5,357,920
Property under capital lease 239,395 238,427
Construction work in progress 110,792 85,299
Nuclear fuel under capital lease 70,316 63,923
---------- ----------
TOTAL UTILITY PLANT 5,876,596 5,745,569
Less - accumulated depreciation and amortization 2,538,964 2,441,937
---------- ----------
UTILITY PLANT - NET 3,337,632 3,303,632
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 179,368 204,810
Unamortized loss on reacquired debt 28,341 33,244
Other regulatory assets 73,754 50,881
Long-term receivables 1,515 -
Other 16,650 10,882
---------- ----------
TOTAL 299,628 299,817
---------- ----------
TOTAL ASSETS $4,149,701 $4,289,409
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $185,627 $35,088
Accounts payable:
Associated companies 73,208 71,948
Other 93,460 144,841
Customer deposits 61,359 60,227
Taxes accrued 20,410 23,307
Accumulated deferred income taxes - 20,545
Interest accrued 34,524 35,536
Deferred fuel cost 67,493 -
Obligations under capital leases 34,171 34,274
Other 14,119 102,614
---------- ----------
TOTAL 584,371 528,380
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 776,610 757,362
Accumulated deferred investment tax credits 111,942 117,393
Obligations under capital leases 36,144 29,649
Regulatory reserves - 11,456
Accumulated provisions 68,522 64,201
Other 82,780 61,724
---------- ----------
TOTAL 1,075,998 1,041,785
---------- ----------
Long-term debt 1,091,329 1,276,696
Preferred stock with sinking fund - 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 (1,718) (2,171)
Retained earnings 140,321 150,319
---------- ----------
TOTAL 1,328,003 1,337,548
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,149,701 $4,289,409
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $150,319 $59,554 $74,739
Add:
Net income 132,550 162,679 191,770
Deduct:
Dividends declared:
Preferred stock 7,495 9,514 9,805
Common stock 134,600 62,400 197,000
Capital stock expenses 453 - 150
-------- -------- -------
Total 142,548 71,914 206,955
-------- -------- -------
Retained Earnings, December 31 $140,321 $150,319 $59,554
======== ======== =======
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(In Thousands)
Operating revenues $1,901,913 $2,062,437 $1,806,594 $1,710,908 $1,803,272
Net income $ 132,550 $ 162,679 $ 191,770 $ 179,487 $ 141,757
Total assets $4,149,701 $4,289,409 $4,084,650 $4,181,041 $4,175,400
Long-term obligations (1) $1,197,473 $1,411,345 $1,274,006 $1,530,590 $1,522,043
(1) Includes long-term debt (excluding currently maturing debt),
preferred stock with sinking fund, preferred securities of subsidiary
trust, and noncurrent capital lease obligations.
2001 2000 1999 1998 1997
Electric Operating Revenues: (Dollars In Thousands)
Residential $658,137 $716,708 $620,146 $598,573 $606,173
Commercial 429,388 441,338 386,042 367,151 379,131
Industrial 759,580 767,052 646,517 597,536 708,356
Governmental 39,203 38,772 33,738 32,795 34,171
------------------------------------------------------------
Total retail 1,886,308 1,963,870 1,686,443 1,596,055 1,727,831
Sales for resale:
Associated companies 24,993 20,763 27,253 16,002 3,817
Non-associated companies 23,352 39,704 53,923 53,538 55,345
Other (32,740) 38,100 38,975 45,313 16,279
------------------------------------------------------------
Total $1,901,913 $2,062,437 $1,806,594 $1,710,908 $1,803,272
============================================================
Billed Electric Energy
Sales (GWH):
Residential 8,255 8,648 8,354 8,477 7,826
Commercial 5,369 5,367 5,221 5,265 4,906
Industrial 14,402 15,184 15,052 14,781 16,390
Governmental 498 481 468 481 460
------------------------------------------------------------
Total retail 28,524 29,680 29,095 29,004 29,582
Sales for resale:
Associated companies 381 228 415 386 104
Non-associated companies 334 554 831 855 805
------------------------------------------------------------
Total 29,239 30,462 30,341 30,245 30,491
============================================================
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $218 $197 $198 N/A
Long-term debt maturities $186 $185 $15 $891
Short-term facility maturities (1) $- N/A N/A N/A
Capital and operating lease payments $13 $12 $11 $13
Unconditional fuel and purchased power $100 $103 $110 $3,169
obligations
Nuclear fuel lease obligations (2) $34 $36 N/A N/A
(1) Entergy Louisiana's 364-day credit facility is discussed in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES".
(2) It is expected that additional financing under the leases will be
arranged as needed to acquire additional fuel, to pay interest, and to
pay maturing debt. If such additional financing cannot be arranged,
however, the lessee in each case must repurchase sufficient nuclear
fuel to allow the lessor to meet its obligations.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.:
We have audited the accompanying balance sheets of Entergy Mississippi,
Inc. as of December 31, 2001 and 2000, and the related statements of
income, retained earnings, and cash flows (pages 134 through 139 and
pages 161 through 227) for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Entergy Mississippi, Inc.
as of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased slightly in 2001 primarily due to a decrease
in other operation and maintenance expenses, increased interest income,
and a decrease in the effective tax rate. These changes were almost
entirely offset by decreased unbilled revenues, less favorable sales
volume and weather, and increased interest expense.
Net income decreased in 2000 primarily due to increases in other
operation and maintenance expenses, interest expense, depreciation
expense, and an increase in the effective income tax rate. These
decreases were partially offset by increases in unbilled revenues and
sales volume.
Revenues and Sales
The changes in electric operating revenues for the twelve months
ended December 31, 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes $5.2 ($3.8)
Grand Gulf rate rider (19.9) 4.7
Fuel cost recovery 157.8 54.8
Sales volume/weather (5.2) 9.6
Unbilled revenue (8.3) 22.3
Other revenue 4.8 1.6
Sales for resale 22.0 15.4
------ ------
Total $156.4 $104.6
====== ======
Base rate changes
Base rate changes increased in 2001 primarily due to an annual
rate increase of $5.6 million under the formula rate plan, which became
effective in May 2001. The formula rate plan filing is discussed in
Note 2 to the financial statements.
Base rate changes decreased in 2000 primarily due to an annual
rate reduction of $13.3 million under the formula rate plan, which was
effective in May 1999.
Grand Gulf rate rider
Rate rider revenues have no material effect on net income because
specific incurred expenses offset them.
Grand Gulf rate rider revenue decreased in 2001 as a result of a
lower rider which became effective in October 2000.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fuel cost recovery
Entergy Mississippi is allowed to recover certain fuel and
purchased power costs through fuel mechanisms included in electric
rates, recorded as fuel cost recovery revenues. The difference between
revenues collected and current fuel and purchased power costs is
recorded as deferred fuel costs on Entergy Mississippi's financial
statements such that these costs generally have no net effect on
earnings.
In 2001, fuel cost recovery revenues increased 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 in April 2001.
In 2000, fuel cost recovery revenues increased primarily due to
the MPSC's review and subsequent increase of Entergy Mississippi's
energy cost recovery rider effective in January 2000.
Sales volume/weather
Electric sales vary seasonally in response to weather and usually
peak in the summer. In 2001, the effect of less favorable weather
decreased usage by 204 GWH in the residential and commercial sectors.
Lower electric sales volume in the industrial sector of 137 GWH also
decreased revenues. These decreases were partially offset by increased
usage of 143 GWH in the commercial sector after adjusting for the
effect of weather.
In 2000, sales volume increased as a result of increased usage
after adjusting for weather effects in the residential and commercial
sectors, as well as the effect of more favorable weather in the
residential sector.
Unbilled revenue
In 2001, unbilled revenue decreased primarily due to more
favorable weather in December 2000 on the unbilled calculation.
In 2000, unbilled revenue increased primarily due to the effect of
favorable weather in 2000 and the effect of a change in estimate on the
1999 unbilled revenue calculation.
Sales for resale
In 2001, sales for resale increased primarily due to increased net
generation resulting in more energy available for sale. The increase
came from sales to affiliates, which are generally made at a low
margin. The increase was partially offset by a decrease in the average
market price of energy.
In 2000, sales for resale increased primarily due to an increase
in the average price of energy supplied for resale sales. The
increase was partially offset by less energy available for resale sales
due to plant outages early in 2000, which resulted in lower sales
volume.
Expenses
Fuel and purchased power
In 2001, fuel and purchased power expenses increased primarily due
to over-recovery of fuel costs, including the effect of increased
recoveries approved by the MPSC to recover previous under-recoveries.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In 2000, fuel and purchased power expenses increased primarily due
to the increased market prices of natural gas, oil, and purchased
power.
Other operation and maintenance
In 2001, other operation and maintenance expenses decreased
primarily due to a decrease in plant maintenance expenses of $14.6
million due to outage costs at certain fossil plants in 2000.
In 2000, other operation and maintenance expenses increased
primarily due to:
o an increase in property insurance expense of $9.3 million
primarily due to a change in storm damage provision amortization in
accordance with regulatory treatment; and
o an increase in maintenance of electric plant of $7.0 million.
Depreciation and Amortization
In 2000, depreciation and amortization expenses increased due to a
review of plant-in-service dates for consistency with regulatory
treatment reducing depreciation expense by $2.6 million in August 1999.
Capital additions in 1999 and 2000 also contributed to the increase.
Other regulatory credits
In 2001, other regulatory credits increased primarily due to an
under-recovery of Grand Gulf 1-related costs as a result of a lower
rider implemented in October 2000.
In 2000, other regulatory credits decreased due to a decrease in
the deferral of Grand Gulf 1 expenses associated with the System Energy
rate increase.
Other
Other income
Interest income increased in 2001 primarily due to interest
recorded on the deferred fuel balance as a result of the 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 in 2001 primarily due to the
issuance of $70 million of long-term debt in January 2001.
Interest on long-term debt increased in 2000 primarily due to the
issuance of $120 million of long-term debt in February 2000.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
34.1%, 37.0%, and 29.7%, respectively.
The decrease in the effective income tax rate in 2001 is primarily
due to an adjustment of prior year taxes, which were lower than
previously estimated.
The increase in the effective income tax rate in 2000 is primarily
due to the effect that the distribution of the Entergy Corporation
income tax benefit had on the 1999 effective income tax rate. In 1999,
a tax benefit was recorded related to the 1998 tax return.
ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $1,093,741 $937,371 $832,819
---------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 415,347 221,075 185,063
Purchased power 365,540 366,491 332,015
Other operation and maintenance 155,646 168,432 152,817
Taxes other than income taxes 47,956 45,436 44,013
Depreciation and amortization 48,933 49,046 42,870
Other regulatory credits - net (29,993) (6,872) (12,044)
---------- -------- --------
TOTAL 1,003,429 843,608 744,734
---------- -------- --------
OPERATING INCOME 90,312 93,763 88,085
---------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 2,559 2,385 1,569
Gain on sale of assets 3 19 -
Interest and dividend income 18,904 10,750 8,513
Miscellaneous - net (2,918) (2,070) (1,732)
---------- -------- --------
TOTAL 18,548 11,084 8,350
---------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 46,950 41,583 35,265
Other interest - net 4,041 3,294 3,574
Allowance for borrowed funds used during construction (2,215) (1,871) (1,529)
---------- -------- --------
TOTAL 48,776 43,006 37,310
---------- -------- --------
INCOME BEFORE INCOME TAXES 60,084 61,841 59,125
Income taxes 20,464 22,868 17,537
---------- -------- --------
NET INCOME 39,620 38,973 41,588
Preferred dividend requirements and other 3,082 3,370 3,370
---------- -------- --------
EARNINGS APPLICABLE TO
COMMON STOCK $36,538 $35,603 $38,218
========== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $39,620 $38,973 $41,588
Noncash items included in net income:
Other regulatory credits - net (29,993) (6,872) (12,044)
Depreciation and amortization 48,933 49,046 42,870
Deferred income taxes and investment tax credits (68,133) 51,081 18,066
Allowance for equity funds used during construction (2,559) (2,385) (1,569)
Gain on sale of assets (3) (19) -
Changes in working capital:
Receivables 1,059 (30,628) 24,208
Fuel inventory (1,388) 338 (771)
Accounts payable (46,976) 3,064 54,317
Taxes accrued (378) (4,106) 29,955
Interest accrued 4,568 3,062 (4,595)
Deferred fuel costs 54,453 47,939 (45,830)
Other working capital accounts 13,672 6,160 10,072
Provision for estimated losses and reserves 821 (568) 4,173
Changes in other regulatory assets 130,333 (9,929) (30,179)
Other 34,081 37,105 12,152
--------- --------- ---------
Net cash flow provided by operating activities 178,110 182,261 142,413
--------- --------- ---------
INVESTING ACTIVITIES
Construction expenditures (159,815) (121,252) (94,717)
Allowance for equity funds used during construction 2,559 2,385 1,569
Changes in other temporary investments - net (18,566) - -
Other regulatory investments - (160,611) -
--------- --------- ---------
Net cash flow used in investing activities (175,822) (279,478) (93,148)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 69,616 118,913 153,629
Retirement of long-term debt - - (163,278)
Changes in short-term borrowing, net - - (6)
Dividends paid:
Common stock (19,600) (18,000) (34,100)
Preferred stock (3,369) (3,370) (3,363)
--------- --------- ---------
Net cash flow provided by (used in) financing activities 46,647 97,543 (47,118)
--------- --------- ---------
Net increase in cash and cash equivalents 48,935 326 2,147
Cash and cash equivalents at beginning of period 5,113 4,787 2,640
--------- --------- ---------
Cash and cash equivalents at end of period $54,048 $5,113 $4,787
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $43,915 $39,569 $41,567
Income taxes $88,657 ($23,763) ($29,850)
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $12,883 $5,113
Temporary cash investments - at cost,
which approximates market 41,165 -
---------- ----------
Total cash and cash equivalents 54,048 5,113
---------- ----------
Other temporary investments 18,566 -
Accounts receivable:
Customer 50,370 44,517
Allowance for doubtful accounts (1,044) (1,044)
Associated companies 14,201 10,741
Other 2,892 9,964
Accrued unbilled revenues 30,300 33,600
---------- ----------
Total accounts receivable 96,719 97,778
---------- ----------
Deferred fuel costs 106,158 64,950
Fuel inventory - at average cost 4,824 3,436
Materials and supplies - at average cost 16,896 18,485
Prepayments and other 8,521 3,004
---------- ----------
TOTAL 305,732 192,766
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 5,531 5,531
Non-utility property - at cost (less accumulated depreciation) 6,723 6,851
---------- ----------
TOTAL 12,254 12,382
---------- ----------
UTILITY PLANT
Electric 1,939,182 1,885,501
Property under capital lease 211 290
Construction work in progress 110,450 44,085
---------- ----------
TOTAL UTILITY PLANT 2,049,843 1,929,876
Less - accumulated depreciation and amortization 741,892 733,977
---------- ----------
UTILITY PLANT - NET 1,307,951 1,195,899
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 22,387 25,544
Unamortized loss on reacquired debt 13,925 15,122
Deferred fuel costs - 95,661
Other regulatory assets 13,503 140,679
Other 7,274 5,886
---------- ----------
TOTAL 57,089 282,892
---------- ----------
TOTAL ASSETS $1,683,026 $1,683,939
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $65,000 $-
Accounts payable:
Associated companies 45,554 92,980
Other 27,383 26,933
Customer deposits 29,421 26,368
Taxes accrued 31,484 31,862
Accumulated deferred income taxes 19,277 47,734
Interest accrued 17,667 13,099
Obligations under capital leases 36 79
System Energy refund 14,836 -
Other 1,964 2,540
---------- ----------
TOTAL 252,622 241,595
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 266,498 306,295
Accumulated deferred investment tax credits 17,908 19,408
Obligations under capital leases 175 211
Accumulated provisions 7,627 6,806
Other 37,678 31,339
---------- ----------
TOTAL 329,886 364,059
---------- ----------
Long-term debt 589,762 584,467
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 261,108 244,170
---------- ----------
TOTAL 510,756 493,818
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,683,026 $1,683,939
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $244,170 $226,567 $222,449
Add:
Net income 39,620 38,973 41,588
Deduct:
Dividends declared:
Preferred stock 3,082 3,370 3,370
Common stock 19,600 18,000 34,100
-------- -------- --------
Total 22,682 21,370 37,470
-------- -------- --------
Retained Earnings, December 31 $261,108 $244,170 $226,567
======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(In Thousands)
Operating revenues $1,093,741 $ 937,371 $ 832,819 $ 976,300 $ 937,395
Net Income $ 39,620 $ 38,973 $ 41,588 $ 62,638 $ 66,661
Total assets $1,683,026 $1,683,939 $1,460,017 $1,350,929 $1,439,561
Long-term obligations (1) $ 589,937 $ 584,678 $ 464,756 $ 464,000 $ 464,156
(1) Includes long-term debt (excluding currently maturing debt) and
noncurrent capital lease obligations.
2001 2000 1999 1998 1997
Electric Operating Revenues: (Dollars In Thousands)
Residential $390,957 $340,691 $311,003 $367,895 $342,818
Commercial 327,770 275,010 250,929 284,787 274,195
Industrial 191,014 161,065 151,659 170,910 173,152
Governmental 30,569 25,612 23,528 26,670 26,882
-----------------------------------------------------------
Total retail 940,310 802,378 737,119 850,262 817,047
Sales for resale:
Associated companies 110,553 82,844 63,004 80,357 78,233
Non-associated companies 21,333 27,058 31,546 32,442 21,276
Other 21,545 25,091 1,150 13,239 20,839
-----------------------------------------------------------
Total $1,093,741 $937,371 $832,819 $976,300 $937,395
===========================================================
Billed Electric Energy
Sales (GWH):
Residential 4,867 4,976 4,753 4,800 4,323
Commercial 4,322 4,307 4,156 4,015 3,673
Industrial 3,051 3,188 3,246 3,163 3,089
Governmental 381 376 363 347 333
-----------------------------------------------------------
Total retail 12,621 12,847 12,518 12,325 11,418
Sales for resale:
Associated companies 1,728 1,276 1,774 2,424 1,918
Non-associated companies 289 313 426 484 412
-----------------------------------------------------------
Total 14,638 14,436 14,718 15,233 13,748
===========================================================
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $153 $131 $131 N/A
Long-term debt maturities $65 $255 $150 $185
Short-term facility maturities (1) $- N/A N/A N/A
(1) Entergy Mississippi's 364-day credit facility is discussed in
"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL
RESOURCES".
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.:
We have audited the accompanying balance sheets of Entergy New Orleans,
Inc. as of December 31, 2001 and 2000, and the related statements of
operations, retained earnings, and cash flows (pages 145 through 149 and
pages 161 through 227) for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Entergy New Orleans, Inc.
as of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Entergy New Orleans experienced a net loss in 2001 because of
significantly lower operating revenues. Compared to 2000, operating
revenues decreased $7.9 million as a result of lower electric sales
volume and less favorable weather and unbilled revenues decreased $7.5
million as a result of lower fuel prices. An increase of $3.0 million
in other operation and maintenance expenses, $2.0 million in interest
expense, and $2.7 million in rate refund provisions also contributed to
the decrease in 2001.
Net income decreased slightly in 2000 primarily due to increased
other operation and maintenance expenses.
Revenues and Sales
Electric operating revenues
The changes in electric operating revenues for the twelve months
ended December 31, 2001 and 2000 are as follows:
Increase/(Decrease)
Description 2001 2000
(In Millions)
Base rate changes ($11.6) $4.0
Fuel cost recovery 53.4 62.6
Sales volume/weather (12.8) 2.1
Unbilled revenue (12.1) 2.8
Other revenue (2.2) 1.4
Sales for resale (26.8) 15.4
------ -----
Total ($12.1) $88.3
====== =====
Base rate changes
In 2001, base rate changes decreased primarily due to $12.2
million of rate reductions that became effective in October 2000. The
rate reductions are discussed in Note 2 to the financial statements.
In 2000, base rate changes increased primarily due to a decrease
in provision for rate refunds accrued for potential rate matters.
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
recorded as deferred fuel costs on Entergy New Orleans' financial
statements such that these costs generally have no net effect on
earnings.
In 2001, fuel cost recovery revenues increased primarily due to
recovery, through the fuel adjustment clause, of higher fuel and
purchased power expenses. The increase in fuel and purchased power
expenses was a result of increased market prices of natural gas and
purchased power early in 2001.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In 2000, fuel cost recovery revenues increased primarily due to
the increased market price of natural gas.
Sales volume/weather
Electric sales vary seasonally in response to weather and usually
peak in the summer. In 2001, lower electric sales volume reduced
revenues due to decreased usage of 186 GWH in the residential,
commercial, and governmental sectors after adjusting for the effects of
weather. The effect of less favorable weather decreased usage by 107
GWH in the residential sector.
Unbilled revenue
In 2001, unbilled revenue decreased primarily due to the effect of
higher fuel prices in December 2000 as compared to December 2001 on the
unbilled revenue calculation.
In 2000, unbilled revenue increased primarily due to the effect of
favorable weather and higher fuel and purchased power costs on the
unbilled revenue calculation.
Sales for resale
In 2001, sales for resale decreased due to decreased demand from
affiliated systems somewhat offset by increased prices for resale
electricity.
In 2000, sales for resale increased due to an increase in the
average price of electricity supplied for resale sales, coupled with an
increase in affiliated sales volume.
Gas operating revenues
In 2001, gas operating revenues increased primarily due to the
increased market prices of natural gas early in the year, partially
offset by decreased sales volume.
In 2000, gas operating revenues increased primarily due to the
increased market price of natural gas.
Expenses
Fuel and purchased power
In 2001, fuel and purchased power expenses increased primarily due
to the increased market prices of natural gas and purchased power.
In 2000, fuel and purchased power expenses increased primarily due
to the increased market price of natural gas.
Other operation and maintenance
In 2001, other operation and maintenance expenses increased
primarily due to increases in:
o maintenance of fossil plants of $2.4 million;
o rate proceedings costs of $3.3 million; and
o uncollectible accounts expense for miscellaneous accounts
receivable of $3.5 million.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The increases are partially offset by a decrease in administrative
and general salaries expense of $2.2 million and a decrease in injuries
and damage expense of $1.5 million.
In 2000, other operation and maintenance expenses increased
primarily due to increases in:
o uncollectible accounts expense for miscellaneous accounts
receivable of $1.3 million;
o maintenance of fossil plants of $1.1 million; and
o advertising expenses of $1.3 million.
Taxes other than income taxes
In 2001 and 2000, taxes other than income taxes increased
primarily due to increased local franchise taxes as a result of higher
retail revenue.
Other regulatory credits
In 2001, other regulatory credits increased primarily due to the
deferral of capacity charges included in purchased power costs for
summer capacity that Entergy New Orleans expects to recover in the
future. The increase was also due to an under-recovery of Grand Gulf 1
related costs in 2001 compared to an over-recovery in 2000.
In 2000, other regulatory credits decreased due to an over-
recovery of Grand Gulf 1 related costs in 2000 compared to an under-
recovery in 1999 and the deferral of Year 2000 costs in 1999.
Amortization of rate deferrals
In 2001 and 2000, amortization of rate deferrals decreased due to
scheduled rate changes in the amortization of Grand Gulf 1 phase-in
expenses. The Grand Gulf 1 phase-in plan was completed in September
2001.
Other
Interest and other charges
In 2001, interest on long-term debt increased primarily due to the
issuance of $30 million of long-term debt in February 2001 and the
issuance of $30 million of long-term debt in July 2000.
In 2000, interest on long-term debt increased primarily due to the
issuance of $30 million of long-term debt in July 2000.
Income taxes
The effective income tax rates for 2001, 2000, and 1999 were
66.7%, 41.2%, and 40.7%, respectively.
The increase in the effective income tax rate for 2001 was
primarily due to the pre-tax loss, which increased the impact of flow-
through items.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $502,672 $514,774 $426,431
Natural gas 128,178 125,516 81,357
-------- -------- --------
TOTAL 630,850 640,290 507,788
-------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 240,781 253,869 135,242
Purchased power 220,268 173,371 166,579
Other operation and maintenance 92,023 87,254 83,197
Taxes other than income taxes 46,878 45,132 39,621
Depreciation and amortization 24,922 23,550 21,219
Other regulatory credits - net (12,049) (7,058) (9,036)
Amortization of rate deferrals 10,977 24,786 28,430
-------- -------- --------
TOTAL 623,800 600,904 465,252
-------- -------- --------
OPERATING INCOME 7,050 39,386 42,536
-------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,987 1,190 1,084
Miscellaneous - net 2,330 2,530 2,263
-------- -------- --------
TOTAL 4,317 3,720 3,347
-------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 17,699 14,429 13,277
Other interest - net 1,962 1,462 1,403
Allowance for borrowed funds used during construction (1,703) (900) (788)
-------- -------- --------
TOTAL 17,958 14,991 13,892
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (6,591) 28,115 31,991
Income taxes (4,396) 11,597 13,030
-------- -------- --------
NET INCOME (LOSS) (2,195) 16,518 18,961
Preferred dividend requirements and other 965 965 965
-------- -------- --------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK ($3,160) $15,553 $17,996
======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income (loss) ($2,195) $16,518 $18,961
Noncash items included in net income:
Amortization of rate deferrals 10,977 24,786 28,430
Other regulatory credits - net (12,049) (7,058) (9,036)
Depreciation and amortization 24,922 23,550 21,219
Deferred income taxes and investment tax credits (24,198) (639) (3,131)
Allowance for equity funds used during construction (1,987) (1,190) (1,084)
Changes in working capital:
Receivables 33,183 (45,580) (7,258)
Fuel inventory 1,123 (911) 179
Accounts payable (40,364) 29,592 23,319
Taxes accrued (5,823) 5,394 429
Interest accrued 913 1,163 37
Deferred fuel costs 38,430 (13,751) (13,293)
Other working capital accounts 9,115 (223) 6,607
Provision for estimated losses and reserves (2,669) (365) (531)
Changes in other regulatory assets 33,833 (11,637) (11,482)
Other 14,495 10,812 6,796
-------- -------- --------
Net cash flow provided by operating activities 77,706 30,461 60,162
-------- -------- --------
INVESTING ACTIVITIES
Construction expenditures (61,189) (48,902) (46,239)
Allowance for equity funds used during construction 1,987 1,190 1,084
Changes in other temporary investments - net (14,859) - -
-------- -------- --------
Net cash flow used in investing activities (74,061) (47,712) (45,155)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt 29,761 29,564 -
Dividends paid:
Common stock (800) (9,500) (26,500)
Preferred stock (724) (965) (1,206)
-------- -------- --------
Net cash flow provided by (used in) financing activities 28,237 19,099 (27,706)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 31,882 1,848 (12,699)
Cash and cash equivalents at beginning of period 6,302 4,454 17,153
-------- -------- --------
Cash and cash equivalents at end of period $38,184 $6,302 $4,454
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $18,230 $14,331 $14,281
Income taxes $47,380 $9,207 $12,476
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $5,237 $6,302
Temporary cash investments - at cost,
which approximates market 32,947 -
-------- --------
Total cash and cash equivalents 38,184 6,302
-------- --------
Other temporary investments 14,859 -
Accounts receivable:
Customer 33,827 67,264
Allowance for doubtful accounts (2,234) (770)
Associated companies 10,527 2,800
Other 4,511 3,709
Accrued unbilled revenues 20,027 26,838
-------- --------
Total accounts receivable 66,658 99,841
-------- --------
Deferred fuel costs - 28,234
Accumulated deferred income taxes 4,882 -
Fuel inventory - at average cost 3,081 4,204
Materials and supplies - at average cost 8,273 9,630
Rate deferrals - 10,974
Prepayments and other 26,239 1,416
-------- --------
TOTAL 162,176 160,601
-------- --------
OTHER PROPERTY AND INVESTMENTS
Investment in affiliates - at equity 3,259 3,259
-------- --------
UTILITY PLANT
Electric 597,575 572,061
Natural gas 142,741 134,826
Construction work in progress 43,166 36,489
-------- --------
TOTAL UTILITY PLANT 783,482 743,376
Less - accumulated depreciation and amortization 396,535 394,271
-------- --------
UTILITY PLANT - NET 386,947 349,105
-------- --------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Unamortized loss on reacquired debt 761 974
Other regulatory assets 10,843 44,676
Other 2,051 616
-------- --------
TOTAL 13,655 46,266
-------- --------
TOTAL ASSETS $566,037 $559,231
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies $18,199 $24,637
Other 23,640 57,566
Customer deposits 18,931 18,311
Taxes accrued - 5,823
Accumulated deferred income taxes - 6,543
Interest accrued 7,032 6,119
Deferred fuel cost 10,196 -
Obligations under capital leases - -
System Energy refund 33,614 -
Other 1,799 3,211
-------- --------
TOTAL 113,411 122,210
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 25,326 43,754
Accumulated deferred investment tax credits 5,361 5,868
SFAS 109 regulatory liability - net 19,868 12,607
Other regulatory liabilities - 537
Accumulated provisions 5,802 8,471
Other 16,735 12,356
-------- --------
TOTAL 73,092 83,593
-------- --------
Long-term debt 229,097 199,031
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 60,619 64,579
-------- --------
TOTAL 150,437 154,397
-------- --------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $566,037 $559,231
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $64,579 $58,526 $67,030
Add:
Net income (loss) (2,195) 16,518 18,961
Deduct:
Dividends declared:
Preferred stock 965 965 965
Common stock 800 9,500 26,500
------- ------- -------
Total 1,765 10,465 27,465
------- ------- -------
Retained Earnings, December 31 $60,619 $64,579 $58,526
======= ======= =======
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(In Thousands)
Operating revenues $630,850 $640,290 $507,788 $513,750 $504,822
Net Income (Loss) $ (2,195) $ 16,518 $ 18,961 $ 16,137 $ 15,451
Total assets $566,037 $559,231 $485,746 $471,904 $498,150
Long-term obligations (1) $229,097 $199,031 $169,083 $169,018 $168,953
(1) Includes long-term debt (excluding currently maturing debt).
2001 2000 1999 1998 1997
Electric Operating Revenues: (Dollars In Thousands)
Residential $189,474 $188,314 $158,822 $164,765 $145,688
Commercial 186,299 170,684 146,328 149,353 143,113
Industrial 31,725 25,479 25,584 26,229 24,616
Governmental 80,918 73,028 63,056 62,332 58,746
-----------------------------------------------------
Total retail 488,416 457,505 393,790 402,679 372,163
Sales for resale:
Associated companies 9,864 31,629 14,207 10,451 10,342
Non-associated companies 3,466 8,504 10,545 10,590 8,996
Other 926 17,136 7,889 7,733 18,630
-----------------------------------------------------
Total $502,672 $514,774 $426,431 $431,453 $410,131
=====================================================
Billed Electric Energy
Sales (GWH):
Residential 1,981 2,178 2,102 2,141 1,971
Commercial 2,185 2,260 2,208 2,149 2,072
Industrial 414 384 514 514 484
Governmental 1,017 1,058 1,071 1,037 994
-----------------------------------------------------
Total retail 5,597 5,880 5,895 5,841 5,521
Sales for resale:
Associated companies 115 570 441 370 316
Non-associated companies 59 141 180 199 160
-----------------------------------------------------
Total 5,771 6,591 6,516 6,410 5,997
=====================================================
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $51 $49 $49 N/A
Long-term debt maturities $- $25 $30 $174
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
System Energy Resources, Inc.:
We have audited the accompanying balance sheets of System Energy
Resources, Inc. as of December 31, 2001 and 2000, and the related
statements of income, retained earnings, and cash flows (pages 154
through 159 and pages 161 through 227) for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of System Energy Resources,
Inc. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased in 2001 due to the final resolution of System
Energy's 1995 rate proceeding and the resulting reductions in
decommissioning, depreciation, and income tax expenses, partially
offset by a decrease in revenue and an increase in interest expense.
See Note 2 to the financial statements for further discussion of System
Energy's rate proceeding.
Net income increased in 2000 due to increased interest earnings
from the money pool, an inter-company funding arrangement, and
decreased interest expense associated with the potential refund of
System Energy's proposed rate increase. This increase in net income
was partially offset by a higher effective income tax rate in 2000.
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 in 2001 primarily due to an increase
in the provision for rate refund resulting from the final resolution of
System Energy's 1995 rate proceeding.
Operating revenues increased in 2000 primarily due to an increase
in recoverable expenses.
Expenses
Fuel expenses
In 2001, fuel expenses decreased primarily due to decreased
nuclear fuel burn as a result of Grand Gulf 1 being operational 331
days as compared to 358 days in 2000.
In 2000, fuel expenses increased primarily due to increased
nuclear fuel burn as a result of Grand Gulf 1 being operational 358
days as compared to 295 days in 1999.
Decommissioning
Decommissioning expenses decreased in 2001 primarily due to the
effects of the final FERC order addressing System Energy's rate
proceeding.
Depreciation and amortization
Depreciation and amortization expenses decreased in 2001 primarily
due to the effects of the final FERC order addressing System Energy's
rate proceeding.
In 2000, depreciation expense increased due to higher depreciation
associated with the principal payment on the sale and leaseback of a
portion of Grand Gulf 1. The depreciation schedule matches the
collection of lease principal and revenues with the depreciation of the
asset.
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other regulatory charges
In 2000, other regulatory charges increased due to higher
accelerated recovery under the GGART at Entergy Arkansas and Entergy
Mississippi. The GGART is discussed in Note 2 to the financial
statements.
Other
Interest and dividend income
Interest and dividend income increased in 2001 as a result of
increased interest on decommissioning trust funds due to the effects of
the final FERC order addressing System Energy's rate proceeding.
Interest and dividend income increased in 2000 as a result of the
interest earned on System Energy's advances to the money pool, an inter-
company funding arrangement. The money pool is discussed in Note 4 to
the financial statements.
Interest charges
Interest on long-term debt decreased in 2001 and 2000 primarily
due to a decrease in interest expense associated with the sale-
leaseback of Grand Gulf 1, decreased interest expense on the sale-
leaseback line of credit, and a decrease in interest expense due to the
retirement of long-term debt. In 2001, System Energy retired $135
million of first mortgage bonds. In 2000, System Energy retired $75
million of debenture bonds.
Other interest increased in 2001 primarily due to the effects of
the final FERC order addressing System Energy's rate proceeding.
Other interest decreased in 2000 primarily due to decreased
interest expense recorded on the potential refund of System Energy's
proposed rate increase.
Income taxes
The effective income tax rates in 2001, 2000, and 1999 were 27.3%,
46.4% and 39.5%, respectively.
The decrease in the effective income tax rate in 2001 is primarily
due to decreased depreciation as a result of the final resolution of
System Energy's 1995 rate proceeding and the distribution of an income
tax benefit from Entergy Corporation related to the 2000 tax return.
The effective income tax rate for 2000 increased primarily due to
the amortization of investment tax credits related to Grand Gulf 2 in
1999.
SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING REVENUES
Domestic electric $535,027 $656,749 $620,032
-------- -------- --------
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 37,010 42,369 37,336
Nuclear refueling outage expenses 13,275 14,423 14,136
Other operation and maintenance 85,491 88,257 87,450
Decommissioning (13,493) 18,944 18,944
Taxes other than income taxes 26,134 30,517 27,212
Depreciation and amortization 53,414 127,904 113,862
Other regulatory charges - net 62,742 63,590 57,656
-------- -------- --------
TOTAL 264,573 386,004 356,596
-------- -------- --------
OPERATING INCOME 270,454 270,745 263,436
-------- -------- --------
OTHER INCOME
Allowance for equity funds used during construction 1,769 1,482 2,540
Interest and dividend income 26,271 20,528 16,366
Miscellaneous - net (1,190) (82) (57)
-------- -------- --------
TOTAL 26,850 21,928 18,849
-------- -------- --------
INTEREST AND OTHER CHARGES
Interest on long-term debt 68,833 87,689 102,764
Other interest - net 69,185 30,830 45,218
Allowance for borrowed funds used during construction (830) (854) (1,920)
-------- -------- --------
TOTAL 137,188 117,665 146,062
-------- -------- --------
INCOME BEFORE INCOME TAXES 160,116 175,008 136,223
Income taxes 43,761 81,263 53,851
-------- -------- --------
NET INCOME $116,355 $93,745 $82,372
======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
OPERATING ACTIVITIES
Net income $116,355 $93,745 $82,372
Noncash items included in net income:
Reserve for regulatory adjustments (322,368) 54,598 108,484
Other regulatory charges - net 62,742 63,590 57,656
Depreciation, amortization, and decommissioning 39,921 146,848 132,806
Deferred income taxes and investment tax credits 106,764 (71,212) (86,860)
Allowance for equity funds used during construction (1,769) (1,482) (2,540)
Changes in working capital:
Receivables 142,797 87,212 (172,354)
Accounts payable (9,587) (7,401) (11,688)
Taxes accrued 43,992 13,147 (21,424)
Interest accrued 3,088 4,008 (2,022)
Other working capital accounts (664) 20,754 (4,425)
Provision for estimated losses and reserves 16 (1,328) 45
Changes in other regulatory assets 38,732 58,592 (18,492)
Other (54,124) (65,491) 41,250
-------- -------- --------
Net cash flow provided by operating activities 165,895 395,580 102,808
-------- -------- --------
INVESTING ACTIVITIES
Construction expenditures (40,144) (36,555) (28,848)
Allowance for equity funds used during construction 1,769 1,482 2,540
Nuclear fuel purchases (37,639) - (39,975)
Proceeds from sale/leaseback of nuclear fuel 37,639 - 39,975
Decommissioning trust contributions and realized
change in trust assets (16,147) (23,694) (22,139)
Changes in other temporary investments - net (22,354) - -
Other 29,242 - -
-------- -------- --------
Net cash flow used in investing activities (47,634) (58,767) (48,447)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt - - 101,835
Retirement of long-term debt (151,800) (77,947) (282,885)
Dividends paid:
Common stock (119,100) (91,800) (75,000)
-------- -------- --------
Net cash flow used in financing activities (270,900) (169,747) (256,050)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (152,639) 167,066 (201,689)
Cash and cash equivalents at beginning of period 202,218 35,152 236,841
-------- -------- --------
Cash and cash equivalents at end of period $49,579 $202,218 $35,152
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid/(received) during the period for:
Interest - net of amount capitalized $130,596 $109,046 $141,731
Income taxes ($107,831) $143,040 $154,336
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($5,931) ($1,506) ($37)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
December 31,
2001 2000
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash $15 $44
Temporary cash investments - at cost,
which approximates market 49,564 202,174
---------- ----------
Total cash and cash equivalents 49,579 202,218
---------- ----------
Other temporary investments 22,354 -
Accounts receivable:
Associated companies 70,755 212,551
Other 1,193 2,194
---------- ----------
Total accounts receivable 71,948 214,745
---------- ----------
Materials and supplies - at average cost 51,665 52,235
Deferred nuclear refueling outage costs 8,728 6,577
Prepayments and other 1,631 2,639
---------- ----------
TOTAL 205,905 478,414
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds 138,546 157,572
---------- ----------
UTILITY PLANT
Electric 3,098,446 3,093,033
Property under capital lease 450,014 449,851
Construction work in progress 36,868 24,029
Nuclear fuel under capital lease 61,905 49,256
---------- ----------
TOTAL UTILITY PLANT 3,647,233 3,616,169
Less - accumulated depreciation and amortization 1,416,337 1,407,885
---------- ----------
UTILITY PLANT - NET 2,230,896 2,208,284
---------- ----------
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
SFAS 109 regulatory asset - net 173,470 195,634
Unamortized loss on reacquired debt 48,381 51,957
Other regulatory assets 157,949 174,517
Other 8,894 8,172
---------- ----------
TOTAL 388,694 430,280
---------- ----------
TOTAL ASSETS $2,964,041 $3,274,550
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
2001 2000
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt $100,891 $151,800
Accounts payable:
Associated companies 2,404 2,722
Other 14,316 23,585
Taxes accrued 112,522 68,530
Accumulated deferred income taxes 2,360 1,648
Interest accrued 47,095 44,007
Obligations under capital leases 26,503 32,119
Other 1,583 1,674
---------- ----------
TOTAL 307,674 326,085
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes 498,404 391,505
Accumulated deferred investment tax credits 86,040 89,516
Obligations under capital leases 35,401 17,137
Other regulatory liabilities 135,878 103,634
Decommissioning 140,103 153,197
Regulatory reserves - 322,368
Accumulated provisions 705 689
Other 39,117 46,139
---------- ----------
TOTAL 935,648 1,124,185
---------- ----------
Long-term debt 830,038 930,854
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 101,331 104,076
---------- ----------
TOTAL 890,681 893,426
---------- ----------
Commitments and Contingencies
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,964,041 $3,274,550
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Retained Earnings, January 1 $104,076 $102,131 $94,759
Add:
Net income 116,355 93,745 82,372
Deduct:
Dividends declared 119,100 91,800 75,000
-------- -------- --------
Retained Earnings, December 31 $101,331 $104,076 $102,131
======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
2001 2000 1999 1998 1997
(Dollars In Thousands)
Operating revenues $ 535,027 $ 656,749 $ 620,032 $ 602,373 $ 633,698
Net income $ 116,355 $ 93,745 $ 82,372 $ 106,476 $ 102,295
Total assets $2,964,041 $3,274,550 $3,369,048 $3,431,205 $3,432,031
Long-term obligations (1) $ 865,439 $ 947,991 $1,122,178 $1,182,616 $1,364,161
Electric energy sales (GWH) 8,921 9,621 7,567 8,259 9,735
(1) Includes long-term debt (excluding current maturities) and
noncurrent capital lease obligations.
2002 2003 2004 after
2004
(In Millions)
Planned construction and capital investment $25 $20 $20 N/A
Long-term debt maturities $101 $11 $6 $813
Nuclear fuel lease obligations (1) $27 $35 N/A N/A
(1) It is expected that additional financing under the leases will be
arranged as needed to acquire additional fuel, to pay interest, and to
pay maturing debt. If such additional financing cannot be arranged,
however, the lessee in each case must repurchase sufficient nuclear
fuel to allow the lessor to meet its obligations.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
The accompanying consolidated financial statements include the
accounts of Entergy Corporation and its direct and indirect
subsidiaries, including the domestic utility companies and System
Energy, whose separate financial statements are included in this
document. The financial statements presented herein result from these
companies having registered securities with the SEC.
As required by generally accepted accounting principles, all
significant intercompany transactions have been eliminated in the
consolidated financial statements. The domestic utility companies and
System Energy maintain accounts in accordance with FERC and other
regulatory guidelines. Certain previously reported amounts have been
reclassified to conform to current classifications, with no effect on
net income or shareholders' equity.
Use of Estimates in the Preparation of Financial Statements
The preparation of Entergy Corporation's and its subsidiaries'
financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities and the reported amounts of revenues
and expenses. Adjustments to the reported amounts of assets and
liabilities may be necessary in the future to the extent that future
estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi
generate, transmit, and distribute electric power primarily to retail
customers in Arkansas, Louisiana, and Mississippi, respectively.
Entergy Gulf States generates, transmits, and distributes electric
power primarily to retail customers in Texas and Louisiana. Entergy
Gulf States also distributes gas to retail customers in and around
Baton Rouge, Louisiana. Entergy New Orleans sells both electric power
and gas to retail customers in the City of New Orleans, except for
Algiers, where Entergy Louisiana is the electric power supplier.
Entergy's domestic non-utility nuclear and energy commodity services
segments derive almost all of their revenue from sales of electric
power generated by plants owned by them, except for gains or losses on
power plant development projects for energy commodity services, which
are discussed below.
System Energy's operating revenues are intended to recover from
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans operating expenses and capital costs attributable to Grand
Gulf 1. The capital costs are computed by allowing a return on System
Energy's common equity funds allocable to its net investment in Grand
Gulf 1, plus System Energy's effective interest cost for its debt
allocable to its investment in Grand Gulf 1. System Energy's recently
resolved rate proceeding is discussed in Note 2 to the financial
statements.
Entergy recognizes revenue from electric power and gas sales when
it delivers power or gas to its customers. To the extent that
deliveries have occurred but a bill has not been issued, the domestic
utility companies accrue an estimate of the revenues for energy
delivered since the latest billings. The monthly estimated unbilled
revenue amounts are recorded as revenue and a receivable, and are
reversed the following month.
The domestic utility companies' rate schedules include either fuel
adjustment clauses or fixed fuel factors, both of which allow either
current recovery in billings to customers or deferral of fuel costs
until the costs are billed to customers. Because the fuel adjustment
clause mechanism allows monthly adjustments to recover fuel costs,
Entergy Louisiana, Entergy New Orleans, and the Louisiana portion of
Entergy Gulf States include a component of fuel cost recovery in their
unbilled revenue calculations. Where the fuel component of revenues is
billed based on a pre-determined fuel cost (fixed fuel factor), the
fuel factor remains in effect until changed as part of a general rate
case, fuel reconciliation, or fixed fuel factor filing. Effective
January 2001, Entergy Mississippi's fuel factor includes an energy cost
rider that is adjusted quarterly. In the case of Entergy Arkansas and
the Texas portion of Entergy Gulf States, their fuel under-recoveries
are treated as regulatory investments in the cash flow statements
because those companies are allowed by their regulatory jurisdictions
to recover the fuel cost regulatory asset over longer than a twelve-
month period, and the companies earn a return on the under-recovered
balances.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. The
original cost of plant retired or removed, plus the applicable removal
costs, less salvage, is charged to accumulated depreciation. Normal
maintenance, repairs, and minor replacement costs are charged to
operating expenses. Substantially all of the domestic utility
companies' and System Energy's plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf 1 and Waterford
3 that have been sold and leased back. For financial reporting
purposes, these sale and leaseback arrangements are reflected as
financing transactions.
Net property, plant, and equipment by company and functional
category, as of December 31, 2001 and 2000, is shown below (in
millions):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Production
Nuclear $7,657 $1,053 $1,764 $1,722 $- $- $2,103
Other 2,016 317 573 192 206 12 -
Transmission 1,788 533 568 336 319 23 9
Distribution 3,848 1,123 1,064 838 551 272 -
Other 778 157 156 189 122 37 20
Plant acquisition adjustment -
Entergy Gulf States 374 - - - - - -
Construction work in progress 883 158 222 111 110 43 37
Nuclear fuel
(leased and owned) 498 74 68 70 - - 62
Accumulated provision for
decommissioning (1) (578) (363) (95) (120) - - -
---------------------------------------------------------------------
Property, plant, and equipment -net $17,264 $3,052 $4,320 $3,338 $1,308 $387 $2,231
=====================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Production
Nuclear $7,126 $1,092 $1,817 $1,779 $- $- $2,103
Other 2,021 329 595 195 204 12 -
Transmission 1,693 504 517 323 316 24 9
Distribution 3,532 1,074 963 796 517 182 -
Other 879 149 187 172 115 95 23
Plant acquisition adjustment -
Entergy Gulf States 391 - - - - - -
Construction work in progress 937 87 145 85 44 36 24
Nuclear fuel
(leased and owned) 435 114 57 64 - - 49
Accumulated provision for
decommissioning (1) (568) (368) (90) (110) - - -
---------------------------------------------------------------------
Property, plant, and equipment -net $16,446 $2,981 $4,191 $3,304 $1,196 $349 $2,208
=====================================================================
(1) This is reflected in accumulated depreciation and amortization on
the balance sheet. The decommissioning liabilities related to
Grand Gulf 1, Pilgrim, Indian Point 2, and the 30% of River Bend
previously owned by Cajun are reflected in the applicable balance
sheets in "Deferred Credits and Other Liabilities -
Decommissioning."
Depreciation is computed on the straight-line basis at rates based
on the estimated service lives of the various classes of property.
Depreciation rates on average depreciable property are shown below:
Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy(1)
States Orleans
2001 2.8% 3.1% 2.5% 2.9% 2.4% 3.0% 2.8%
2000 2.9% 3.2% 2.4% 3.0% 2.5% 3.1% 3.3%
1999 2.9% 3.2% 2.4% 2.9% 2.4% 3.0% 3.3%
(1) Per a FERC order in 2001, the depreciation rate for System Energy
was changed from 3.3% to 2.8%, retroactive to December 1995. The
retroactive effect of the change is reflected in the 2001 financial
statements. Refer to Note 2 to the financial statements for further
details of the FERC order in the System Energy rate proceeding.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating
facilities with third parties. The investments and expenses associated
with these generating stations are recorded by the Entergy subsidiaries
to the extent of their respective undivided ownership interests. As of
December 31, 2001, the subsidiaries' investment and accumulated
depreciation in each of these generating stations were as follows:
Total
Megawatt Accumulated
Generating Stations Fuel-Type Capability (1) Ownership Investment Depreciation
(In Milliions)
Entergy Arkansas -
Independence Unit 1 Coal 836 31.50% $117 $ 62
Common Facilities Coal 15.75% 31 15
White Bluff Units 1 and 2 Coal 1,610 57.00% 414 231
Entergy Gulf States -
Roy S. Nelson Unit 6 Coal 550 70.00% 404 218
Big Cajun 2 Unit 3 Coal 562 42.00% 228 117
Entergy Mississippi - Units 1 and 2 and Coal 1,651 25.00% 227 102
Independence Common Facilities
System Energy -
Grand Gulf Unit 1 Nuclear 1,247 90.00%(2) 3,549 1,416
Entergy Power -
Independence Unit 2 Coal 815 14.37% 76 33
Common Facilities Coal 7.18% 5 3
(1)"Total Megawatt Capability" is the dependable load carrying
capability as demonstrated under actual operating conditions based
on the primary fuel (assuming no curtailments) that each station
was designed to utilize.
(2)Includes an 11.5% leasehold interest held by System Energy. System
Energy's Grand Gulf 1 lease obligations are discussed in Note 10 to
the financial statements.
Gains or Losses on Sales of Power Development Projects
EWO actively manages its assets as an investment portfolio, and
attempts to maximize flexibility to respond to different market
environments. Active management of the portfolio by EWO is expected to
result in: the commercial operation of projects by EWO; the sale of
projects at various stages in their planning, development, or
operation; or the abandonment of projects. As a result, project sales
are a part of the revenue generating activities of EWO, and gains or
losses on those sales are reported in operating revenue for that
business segment.
Nuclear Refueling Outage Costs
Entergy records nuclear refueling outage costs in accordance with
regulatory treatment and the matching principle. These refueling
outage expenses are incurred to prepare the units to operate for the
next 18 months without having to be taken off line. Except for the
River Bend plant, the costs are deferred during the outage and
amortized over the period to the next outage. In accordance with the
regulatory treatment of the River Bend plant, the costs are accrued in
advance and included in the cost of service used to establish retail
rates. Entergy Gulf States relieves the accrual when it incurs costs
during the next River Bend outage.
Allowance for Funds Used During Construction
AFUDC represents the approximate net composite interest cost of
borrowed funds and a reasonable return on the equity funds used for
construction. Although AFUDC increases both the plant balance and
earnings, it is realized in cash through depreciation provisions
included in rates.
Income Taxes
Entergy Corporation and its subsidiaries file a U.S. consolidated
federal income tax return. Income taxes are allocated to the
subsidiaries in proportion to their contribution to consolidated
taxable income. SEC regulations require that no Entergy subsidiary pay
more taxes than it would have paid if a separate income tax return had
been filed. In accordance with SFAS 109, "Accounting for Income
Taxes," deferred income taxes are recorded for all temporary
differences between the book and tax basis of assets and liabilities,
and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion
of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and
rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the
average useful life of the related property, in accordance with
ratemaking treatment.
Earnings per Share
The average number of common shares outstanding for the
presentation of diluted earnings per share was greater by 3,789,392
shares in 2001, 1,960,858 shares in 2000, and 199,423 shares in 1999,
than the number of such shares for the presentation of basic earnings
per share due to Entergy's stock option and other stock compensation
plans discussed more thoroughly in Note 5 to the financial statements.
The dilutive effect of the stock options on earnings per share was $.06
in 2001, $.03 in 2000, and $.00 in 1999.
Options to purchase approximately 148,500 and 5,205,000 shares of
common stock at various prices were outstanding at the end of 2001 and
1999, respectively, that were not included in the computation of
diluted earnings per share because the exercise prices were greater
than the average market price of the common shares at the end of each
of the years presented. At the end of 2000, all outstanding options,
totaling 11,468,316, were included in the computation of diluted
earnings per share as a result of the average market price of the
common shares being greater than the exercise prices.
Application of SFAS 71
The domestic utility companies and System Energy currently account
for the effects of regulation pursuant to SFAS 71, "Accounting for the
Effects of Certain Types of Regulation." This statement applies to the
financial statements of a rate-regulated enterprise that meet three
criteria. The enterprise must have rates that (i) are approved by a
body empowered to set rates that bind customers (its regulator); (ii)
are cost-based; and (iii) can be charged to and collected from
customers. These criteria may also be applied to separable portions of
a utility's business, such as the generation or transmission functions,
or to specific classes of customers. If an enterprise meets these
criteria, it capitalizes costs that would otherwise be charged to
expense if the rate actions of its regulator make it probable that
those costs will be recovered in future revenue. Such capitalized
costs are reflected as regulatory assets in the accompanying financial
statements. A significant majority of Entergy's regulatory assets, net
of related regulatory and deferred tax liabilities, earn a return on
investment during their recovery periods. SFAS 71 requires that rate-
regulated enterprises assess the probability of recovering their
regulatory assets at each balance sheet date. When an enterprise
concludes that recovery of a regulatory asset is no longer probable,
the regulatory asset must be removed from the entity's balance sheet.
SFAS 101, "Accounting for the Discontinuation of Application of
FASB Statement No. 71," specifies how an enterprise that ceases to meet
the criteria for application of SFAS 71 for all or part of its
operations should report that event in its financial statements. In
general, SFAS 101 requires that the enterprise report the
discontinuation of the application of SFAS 71 by eliminating from its
balance sheet all regulatory assets and liabilities related to the
applicable segment. Additionally, if it is determined that a regulated
enterprise is no longer recovering all of its costs and therefore no
longer qualifies for SFAS 71 accounting, it is possible that an
impairment may exist that could require further write-offs of plant
assets.
EITF 97-4: "Deregulation of the Pricing of Electricity - Issues
Related to the Application of FASB Statements No. 71 and 101" specifies
that SFAS 71 should be discontinued at a date no later than when the
effects of a transition to competition plan for all or a portion of the
entity subject to such plan are reasonably determinable. Additionally,
EITF 97-4 promulgates that regulatory assets to be recovered through
cash flows derived from another portion of the entity that continues to
apply SFAS 71 should not be written off; rather, they should be
considered regulatory assets of the segment that will continue to apply
SFAS 71.
See Note 2 to the financial statements for discussion of
transition to competition activity in the retail regulatory
jurisdictions served by the domestic utility companies. Arkansas and
Texas have enacted retail open access laws, but Entergy believes that
significant issues remain to be addressed by Arkansas and Texas
regulators, and the enacted laws do not provide sufficient detail to
reasonably determine the impact on Entergy Arkansas' and Entergy Gulf
States' regulated operations.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents. Investments with original maturities of more than three
months are classified as other temporary investments on the balance
sheet.
Investments
Entergy applies the provisions of SFAS 115, "Accounting for
Investments for Certain Debt and Equity Securities," in accounting for
investments in decommissioning trust funds. As a result, Entergy has
recorded on the consolidated balance sheet $93 million of additional
value in its decommissioning trust funds as of December 31, 2001, and
$128 million as of December 31, 2000. This additional value represents
the amount by which the fair value of the securities held in such funds
exceeds the amounts deposited plus the earnings on the deposits. In
accordance with the regulatory treatment for decommissioning trust
funds, the domestic utility companies have recorded an offsetting
amount of unrealized gains on investment securities in accumulated
depreciation. System Energy's offsetting amount of unrealized gains on
investment securities is in other regulatory liabilities.
Decommissioning trust funds for Pilgrim and Indian Point 2 do not
receive regulatory treatment. Accordingly, unrealized gains and losses
recorded on the assets in these trust funds are recognized as a
separate component of shareholders' equity because these assets are
classified as available for sale.
Equity Method Investees
Entergy owns a number of investments that are accounted for under
the equity method of accounting because Entergy's ownership level
results in significant influence, but not control, over the investee
and its operations. Entergy records its share of earnings or losses of
the investee based on the change during the period in the estimated
liquidation value of the investment, assuming that the investee's
assets were to be liquidated at book value. Entergy discontinues the
recognition of losses on equity investments when its share of losses
equals or exceeds its carrying amount of investee plus any advances
made or commitments to provide additional financial support. See Note
13 to the financial statements for additional information regarding
Entergy's equity method investments.
Derivative Financial Instruments and Commodity Derivatives
Entergy implemented SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" on January 1, 2001. The 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 cash-flow hedge transactions in which Entergy is hedging the
variability of cash flows related to a variable-rate asset, liability,
or forecasted transaction, changes in the fair value of the derivative
instrument are reported in other comprehensive income. The gains and
losses on the derivative instrument that are reported in other
comprehensive income are reclassified as earnings in the periods in
which earnings are impacted by the variability of the cash flows of the
hedged item. The ineffective portions of all hedges are recognized in
current-period earnings.
Contracts for commodities that will be delivered in quantities
expected to be used or sold in the ordinary course of business,
including certain purchases and sales of power and fuel, are not
classified as derivatives. Revenues and expenses from these contracts
are reported on a gross basis in the appropriate revenue and expense
categories as the commodities are received or delivered.
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.
Additional information concerning Entergy's interest rate swaps
outstanding as of December 31, 2001 is included in Note 7 to the
financial statements. Effective October 1, 2001, Entergy recorded an
additional net-of-tax cumulative-effect-type adjustment that increased
net income by approximately $23.5 million. This adjustment resulted
from the implementation of an interpretation of SFAS 133 that requires
fuel supply agreements with volumetric optionality to be classified as
derivative instruments. The agreement that resulted in the adjustment
is in the energy commodity services segment.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its
business segments whenever events or changes in circumstances indicate
that recoverability of these assets is uncertain. Generally, the
determination of recoverability is based on the net cash flows expected
to result from such operations and assets. Projected net cash flows
depend on the future operating costs associated with the assets, the
efficiency and availability of the assets and generating units, and the
future market and price for energy over the remaining life of the
assets.
Assets regulated under traditional cost-of-service ratemaking, and
thereby subject to SFAS 71 accounting, are generally not subject to
impairment because this form of regulation assures that all allowed
costs are subject to recovery. However, certain deregulated assets and
other operations of the domestic utility companies totaling
approximately $1.2 billion (pre-tax) could be affected in the future.
Those assets include Entergy Arkansas' and Entergy Louisiana's retained
shares of Grand Gulf 1, Entergy Gulf States' Louisiana deregulated
asset plan, the Texas jurisdictional abeyed portion of the River Bend
plant and the portion of River Bend transferred from Cajun, and
wholesale operations. Additionally, as noted above, the
discontinuation of SFAS 71 regulatory accounting principles would
require that Entergy review the affected assets for impairment.
Regulatory Assets
The domestic utility companies and System Energy are subject to
the provisions of SFAS 71, "Accounting for the Effects of Certain Types
of Regulation." Regulatory assets represent probable future revenues
associated with certain costs that are expected to be recovered from
customers through the ratemaking process. In addition to the
regulatory assets that are specifically disclosed on the face of the
balance sheets, the tables below provide detail of "Other regulatory
assets" included on the balance sheets of Entergy, the domestic utility
companies, and System Energy as of December 31, 2001 and 2000 (in
millions).
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
DOE Fees (Note 9) $47.5 $24.6 $4.3 $9.4 $- $- $9.2
Provisions for storm damages (Note 2) 214.0 178.7 8.7 26.6 - - -
Imputed capacity charges (Note 2) 41.7 - 14.8 26.9 - - -
Postretirement benefits 26.3 26.3 - - - - -
Depreciation re-direct (Note 1) 79.1 - 79.1 - - - -
River Bend AFUDC (Note 1) 43.2 - 43.2 - - - -
Spindletop gas storage lease 32.2 - 32.2 - - - -
1994 FERC Settlement (Note 2) 20.2 - - - - - 20.2
Sale-leaseback deferral (Note 10) 128.3 - - - - - 128.3
Other 74.9 30.9 19.0 10.9 13.5 10.8 0.2
---------------------------------------------------------------------
Total $707.4 $260.5 $201.3 $73.8 $13.5 $10.8 $157.9
=====================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
DOE Fees (Note 9) $53.9 $27.9 $4.9 $10.6 $- $- $10.5
Provisions for storm damages (Note 2) 117.8 80.3 5.7 27.0 4.8 - -
Deferred System Energy rate increase 221.1 54.9 - - 129.0 37.2 -
(Note 2)
Postretirement benefits 28.7 28.7 - - - - -
Depreciation re-direct (Note 1) 72.4 - 72.4 - - - -
River Bend AFUDC (Note 1) 45.1 - 45.1 - - - -
Spindletop gas storage lease 30.2 - 30.2 - - - -
1994 FERC Settlement (Note 2) 28.3 - - - - - 28.3
Sale-leaseback deferral (Note 10) 135.7 - - - - - 135.7
Other 59.3 30.0 11.1 13.3 6.9 7.5 -
----------------------------------------------------------------------
Total $792.5 $221.8 $169.4 $50.9 $140.7 $44.7 $174.5
======================================================================
River Bend AFUDC
The River Bend AFUDC gross-up represents the incremental
difference imputed by the LPSC between the AFUDC actually recorded by
Gulf States Utilities on a net-of-tax basis during the construction of
River Bend and what the AFUDC would have been on a pre-tax basis. The
imputed amount was only calculated on that portion of River Bend that
the LPSC allowed in rate base and is being amortized over the estimated
remaining economic life of River Bend.
Transition to Competition Liabilities
In conjunction with electric utility industry restructuring
activity in Arkansas and Texas, regulatory mechanisms were established
to mitigate potential stranded costs. These mechanisms include the
transition cost account at Entergy Arkansas, which is discussed further
in Note 2 to the financial statements. Also included is a provision in
the Texas restructuring legislation that allows depreciation on
transmission and distribution assets to be directed toward generation
assets. The liabilities recorded as a result of these mechanisms are
classified as "transition to competition" deferred credits.
Reacquired Debt
The premiums and costs associated with reacquired debt of the
domestic utility companies and System Energy (except that portion
allocable to the deregulated operations of Entergy Gulf States) are
being amortized over the life of the related new issuances, in
accordance with ratemaking treatment.
Entergy Gulf States' Deregulated Operations
Entergy Gulf States does not apply regulatory accounting principles
to its wholesale jurisdiction, Louisiana retail deregulated portion of
River Bend, and the 30% interest in River Bend formerly owned by Cajun.
The Louisiana retail deregulated portion of River Bend is operated
under a deregulated asset plan representing a portion (approximately
24%) of River Bend plant costs, generation, revenues, and expenses
established under a 1992 LPSC order. The plan allows Entergy Gulf
States to sell the electricity from the deregulated assets to Louisiana
retail customers at 4.6 cents per KWH or off-system at higher prices,
with certain provisions for sharing such incremental revenue above 4.6
cents per KWH between ratepayers and shareholders.
The results of these deregulated operations before interest charges
for the years ended December 31, 2001, 2000, and 1999 are as follows
(in thousands):
2001 2000 1999
Operating revenues $238,590 $200,023 $166,509
Operating expenses
Fuel, operation, and maintenance 136,043 141,822 126,917
Depreciation 35,508 36,158 35,141
-------- -------- --------
Total operating expense 171,551 177,980 162,058
-------- -------- --------
Operating income 67,039 22,043 4,451
Income tax expense 25,549 8,278 628
-------- -------- --------
Net income from deregulated utility operations $41,490 $13,765 $3,823
======== ======== ========
The net investment associated with these deregulated operations as
of December 31, 2001 and 2000 was approximately $822 million and $821
million, respectively.
Foreign Currency Translation
All assets and liabilities of Entergy's foreign subsidiaries are
translated into U.S. dollars at the exchange rate in effect at the end
of the period. Revenues and expenses are translated at average
exchange rates prevailing during the period. The resulting translation
adjustments are reflected in a separate component of shareholders'
equity. Current exchange rates are used for U.S. dollar disclosures of
future obligations denominated in foreign currencies.
New Accounting Pronouncements
In mid-2001, the FASB issued the following pronouncements:
o SFAS 141, "Business Combinations";
o SFAS 142, "Goodwill and Other Intangible Assets";
o SFAS 143, "Accounting for Asset Retirement Obligations"; and
o SFAS 144, "Accounting for the Impairment or Disposal of Long-lived
Assets".
SFAS 141, which is effective for all business combinations
initiated after June 30, 2001, eliminates the pooling-of-interests
method of accounting for business combinations and requires that all
business combinations be accounted for using the purchase accounting
method. SFAS 141 also requires the recording of all acquired
intangible assets that either arise from contractual or legal rights,
or that are separable from the acquired entity. The implementation of
SFAS 141 on July 1, 2001 had no impact on Entergy's financial
statements.
SFAS 142, which Entergy implemented effective January 1, 2002,
eliminates the amortization of goodwill arising from business
combinations. Instead, goodwill will be subject to a periodic
impairment test at the "reporting unit" level. SFAS 142 also
eliminates the arbitrary 40-year cap on useful lives of intangible
assets, and acknowledges that some intangible assets may have
indefinite useful lives. The implementation of SFAS 142 will require
Entergy to cease the amortization of the remaining plant acquisition
adjustment recorded in conjunction with its acquisition of Entergy Gulf
States; this will increase Entergy's annual net income by approximately
$16.3 million. Entergy will also perform an impairment test on the
remaining acquisition adjustment. As SFAS 142 allows, Entergy will
complete this impairment test in the second quarter of 2002. Entergy
does not believe an impairment will result from this test when it is
completed.
SFAS 143, which must be implemented by January 1, 2003, requires
the recording of liabilities for all legal obligations associated with
the retirement of long-lived assets that result from the normal
operation of those assets. These liabilities will be recorded at their
fair values (which are likely to be the present values of the estimated
future cash outflows) in the period in which they are incurred, with an
accompanying addition to the recorded cost of the long-lived asset.
The asset retirement obligation will be accreted each year through a
charge to expense, to reflect the time value of money for this present
value obligation. The amounts added to the carrying amounts of the
long-lived assets will be depreciated over the useful lives of the
assets. Entergy expects that the net effect of implementing this
standard for Entergy's regulated utilities will be recorded as a
regulatory asset or liability, with no resulting impact on Entergy's
net income. Upon adoption, the net effects of implementing this
standard, to the extent that they are not recorded as regulatory assets
or liabilities, will be recognized as cumulative effects of an
accounting change in Entergy's income statement. Entergy has not yet
completed its assessment of the likely overall impact of this standard
on its financial statements, but anticipates that its assets and
liabilities will increase upon implementation.
SFAS 144, which Entergy implemented effective January 1, 2002,
promulgates standards for measuring and recording impairments of long-
lived assets. Additionally, this standard establishes requirements for
classifying an asset as held for sale, and changes existing accounting
and reporting standards for discontinued operations and exchanges of
long-lived assets. Entergy does not expect the implementation of this
standard to have a significant effect on Entergy's financial position
or results of operations.
NOTE 2. RATE AND REGULATORY MATTERS
Electric Industry Restructuring and the Continued Application of SFAS
71
Although Arkansas and Texas have enacted retail open access laws,
retail open access proceedings in Arkansas are currently suspended.
Retail open access in Entergy Gulf States' service territory in Texas
has been delayed. Entergy also believes that significant issues remain
to be addressed by Texas regulators, and the enacted law does not
provide sufficient detail to reasonably determine the impact on Entergy
Gulf States' regulated operations. Entergy therefore continues to
apply regulatory accounting principles to the retail operations of all
of the domestic utility companies. Following is a summary of the
status of retail open access in the domestic utility companies' retail
service territories.
Arkansas
(Entergy Corporation and Entergy Arkansas)
Under current Arkansas legislation, 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 December 2001, the APSC recommended
to the Arkansas General Assembly that legislation be enacted during the
2003 legislative session to either repeal the legislation authorizing
retail open access or further delay retail open access until at least
2010. Entergy Arkansas supports the proposal for further delay of
retail open access but opposes repeal of deregulation legislation as
premature at this time. Based on the anticipated delay in retail open
access, Entergy Arkansas withdrew its notice of intent to recover
stranded costs in December 2001.
Texas
(Entergy Corporation and Entergy Gulf States)
Retail open access legislation is in place in Texas, but the
implementation of retail open access in Entergy Gulf States' territory
is delayed until at least September 15, 2002. Several proceedings
necessary to implement retail open access are still pending, including
proceedings to set the price-to-beat rates that will be charged by
Entergy's retail electric service provider, to implement Entergy Gulf
States' business separation plan, and to form an RTO that includes
Entergy's service area. In addition, the LPSC has not approved for the
Louisiana jurisdictional operations the transfer of generation assets
to, or a power purchase agreement with, Entergy's Texas generation
company. Therefore, neither the necessary regulatory actions nor the
reasonable determinability of the effect of deregulation has occurred
for Entergy Gulf States to discontinue the application of regulatory
accounting principles to its Texas generation operations.
Louisiana
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
In March 1999, the LPSC deferred making a decision on whether
competition in the electric utility industry is in the public interest.
However, 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 concluded that retail competition is not in
the public interest at this time for any customer class. Nevertheless,
the LPSC staff recommended 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 recommended
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. During
its October 2001 meeting, the LPSC adopted dates by which a total of
800 MW of co- or self-generation could be developed in Louisiana
without being affected by stranded costs. During its November 2001
meeting, the LPSC decided not to adopt a plan for retail open access
for any customers at this time, but to have collaborative group
meetings concerning open access from time to time, and to have the LPSC
staff monitor developments in neighboring states and to report to the
LPSC regarding the progress of retail access developments in those
states.
Mississippi
(Entergy Corporation and Entergy Mississippi)
In May 2000, after two years of studies and hearings, the MPSC
announced that it was suspending its docket studying the opening of the
state's retail electricity markets to competition. The MPSC based its
decision on its finding that competition could raise the electric rates
paid by residential and small commercial customers. The final decision
regarding the introduction of retail competition ultimately lies with
the Mississippi Legislature, which is holding its 2002 session from
January through March. Management cannot predict when, or if,
Mississippi will deregulate its retail electricity market.
New Orleans
(Entergy Corporation and Entergy New Orleans)
Entergy New Orleans filed an electric transition to competition
plan in September 1997. This plan is similar to plans that were filed
by the other domestic utility companies. No procedural schedule has
been established for consideration of that plan by the Council.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
March 2002 Settlement Agreement
In March 2002, Entergy Arkansas, the APSC staff, and the Arkansas
Attorney General submitted a settlement agreement to the APSC for
approval. The agreement resolves issues discussed below under "Retail
Rates," "Transition Cost Account," and "December 2000 Ice Storm Cost
Recovery." A hearing before the APSC to consider the settlement is
scheduled for April 11, 2002. No assurance can be given as to the
timing or outcome of the proceedings before the APSC.
Retail Rates
Entergy Arkansas is operating under the terms of a 1997 settlement
agreement approved by the APSC that currently provides for a rate
freeze. As discussed in "December 2000 Ice Storm Cost Recovery" below,
Entergy Arkansas was scheduled to file a general rate proceeding in
February 2002, in which Entergy Arkansas would have sought an increase
in rates. The March 2002 settlement agreement states, however, that
Entergy Arkansas will not file an application seeking to increase base
rates prior to January 2003.
Transition Cost Account
The 1997 settlement also provides for the collection of earnings
in excess of an 11% return on equity in a transition cost account (TCA)
to offset stranded costs if retail open access were implemented. Upon
recommendation from the APSC, Entergy Arkansas' 2001 operating expense
reflects an adjustment for 2000 TCA accruals of $18.9 million ($11.6
million after tax). Entergy Arkansas filed for a rehearing of the
APSC's review of 2000 earnings. The March 2002 settlement agreement
would resolve this matter, and issues related to the 1998 and 1999
earnings reviews, resulting in immaterial adjustments to the TCA. In
2001, Entergy Arkansas also recorded $7.9 million ($4.9 million after
tax) for 2001 TCA accruals and interest expense of $6.0 million ($3.7
million after tax). As of December 31, 2001, the transition cost
account balance was $152.4 million. In light of the delay in retail
open access, Entergy Arkansas filed a proposal in December 2001 with
the APSC that the balance in the transition cost account be used to
offset a large portion of the December 2000 ice storm expenses
discussed below. Entergy Arkansas' withdrawal of its notice of intent
to recover stranded costs will end the transition cost account earnings
review process after the 2001 earnings review is complete.
December 2000 Ice Storm Cost Recovery
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.
Entergy Arkansas filed a proposal to recover costs plus carrying
charges associated with power restoration caused by the ice storms. In
an order issued in June 2001, the APSC decided not to 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 storm damage costs
expensed in 2000 as reflected in Entergy Arkansas' financial
statements.
Entergy Arkansas filed its final storm damage cost determination,
which reflects costs of approximately $195 million. The filing asked
for recovery of approximately $170 million through a rider over
approximately a six and one-half year period. The remainder of the
costs is primarily capital expenditures that would be included in rate
base in the general rate proceeding. In December 2001, Entergy
Arkansas filed a proposal with the APSC to reduce the ice storm costs
with the balance in the transition cost account.
In the March 2002 settlement, the parties agree that $159 million
of the ice storm costs would be classified as incremental ice storm
expenses that can be offset against the TCA, and any excess of ice
storm costs over the amount available in the TCA will be deferred for
recovery over 30 years. The actual amount available in the TCA will
not be known until the 2001 earnings review is complete. Of the
remaining ice storm costs, $32.2 million will be addressed through
established ratemaking procedures, including $22.2 million classified
as capital additions. $3.8 million of the ice storm costs will not be
recovered through rates.
Grand Gulf Accelerated Recovery Tariff
In April 1998, FERC approved the Grand Gulf Accelerated Recovery
Tariff (GGART). 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 open access in Arkansas. The
GGART provided for the acceleration of $165 million of this 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.
Fuel Cost Recovery
In March 2001, Entergy Arkansas filed its annually redetermined
energy cost rate with the APSC in accordance with the energy cost
recovery rider formula and special circumstances agreement, including a
new energy allocation factor. The filing reflected that an increase
was warranted due to an 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.
Decommissioning Cost Recovery
The APSC ordered Entergy Arkansas to cease collection of funds to
decommission ANO 1 and 2 for the calendar year 2001, and approved the
continued cessation of collection of funds during 2002. The APSC based
its decision on the anticipated approval of Entergy's application with
the NRC to extend the license of ANO 1 by 20 years, and the conclusion
that the funds previously collected will be sufficient to decommission
the units. This decision will be reviewed annually and reflected in
Entergy Arkansas' filing of its annual determination of the nuclear
decommissioning rate rider.
Filings with the PUCT and Texas Cities
Rate Proceedings (Entergy Corporation and Entergy Gulf States)
In June 1999, the PUCT approved a settlement agreement that
Entergy Gulf States entered into in February 1999. The settlement
agreement resolved Entergy Gulf States' 1996 and 1998 rate proceedings
and all of the settling parties' pending appeals in other matters,
except for the appeal in the River Bend abeyed cost recovery proceeding
discussed below. The Office of Public Utility Counsel, an intervenor
in the proceeding, has appealed certain aspects of this settlement to
Travis County District Court. Entergy Gulf States cannot predict the
outcome of the appeal.
The settlement agreement provides for the following:
o an annual $4.2 million base rate reduction, effective March 1,
1999, which is in addition to the annual $69 million base rate
reduction (net of River Bend accounting order deferrals) in the PUCT's
second order on rehearing in October 1998;
o a methodology for semi-annual revisions of the fixed fuel factor
through December 2001 based on the market price of natural gas, which
has been extended until the start of retail open access;
o a base rate freeze through June 1, 2000. The Texas restructuring
law extends the base rate freeze through December 2001. The freeze is
still in effect in 2002 pursuant to the settlement that delayed the
start of retail open access in Entergy Gulf States' service territory;
o amortization of the remaining River Bend accounting order
deferrals as of January 1, 1999, over three years on a straight-line
basis, and the accounting order deferrals will not be recognized in any
subsequent base rate case or stranded cost calculation;
o the dismissal of all pending appeals of the settling parties
relating to Entergy Gulf States' proceedings with the PUCT, except the
River Bend abeyed plant costs appeal discussed below; and
o the potential recovery in the River Bend abeyed plant costs appeal
is limited to $115 million net plant in service as of January 1, 2002,
less depreciation over the remaining life of the plant beginning
January 1, 2002 through the date the plant costs are included in rate
base (see "Recovery of River Bend Costs" in this note for further
discussion).
As a result of the settlement agreement, in June 1999, Entergy
Gulf States removed the $93.9 million provision recorded in 1998 for
the amortization of River Bend accounting order deferrals to reflect
the three-year amortization schedule detailed in the agreement. The
income impact of this removal was largely offset by an increase in the
rate of amortization of the accounting order deferrals.
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. In June
1999, subsequent to the settlement agreement discussed above, Entergy
Gulf States removed the reserve for River Bend plant costs held in
abeyance and reduced the value of the plant asset. The settlement
agreement limits potential recovery of the remaining plant asset, less
depreciation, to $115 million as of January 1, 2002. In a settlement
in its transition to competition proceedings, and consistent with the
June 1999 settlement, Entergy Gulf States agreed not to prosecute its
appeal until January 1, 2002. Entergy Gulf States is now prosecuting
its appeal, and the argument on the appeal is scheduled for March 22,
2002. Entergy Gulf States also agreed that it will not seek recovery
of the abeyed plant costs through any additional charge to Texas
ratepayers. The financial statement impact of the retail rate
settlement agreement on the abeyed plant costs will ultimately depend
on several factors, including the possible discontinuance of SFAS 71
accounting treatment to the Texas generation business, the
determination of the market value of generation assets, and any future
legislation in Texas addressing 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 retail rate settlement agreement
discussed above, 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. The settlement that delayed implementation of retail open
access in Texas for Entergy Gulf States provides that Entergy Gulf
States will continue the use of this methodology until retail open
access begins. The amounts collected under Entergy Gulf States' fixed
fuel factor until the date retail open access commences are subject to
fuel reconciliation proceedings before the PUCT.
In September 1998, Entergy Gulf States filed an application with
the PUCT for an increase in its fixed fuel factor and for a surcharge
to Texas retail customers for the cumulative under-recovery of fuel and
purchased power costs. The PUCT issued an order in December 1998
approving the implementation of a revised fuel factor and fuel and
purchased power surcharge that would result in recovery of $112.1
million of under-recovered fuel costs, inclusive of interest, over a 24-
month period. These increases were implemented in the first billing
cycle in February 1999. North Star Steel Texas, Inc. has appealed the
PUCT's order to the State District Court in Travis County, Texas.
Entergy Gulf States cannot predict the outcome of this appeal.
Entergy Gulf States filed a fuel reconciliation case in July 1999
reconciling approximately $731 million (after excluding approximately
$14 million related to Cajun issues to be handled in a subsequent
proceeding) of fuel and purchased power costs incurred from July 1996
through February 1999. In February 2000, Entergy Gulf States reached a
settlement with all but one of the parties to the proceeding. The
settlement reduced Entergy Gulf States' requested surcharge in the
reconciliation filing from $14.7 million to $2.2 million. In April
2000, the PUCT approved this settlement allowing Entergy Gulf States to
recover the $2.2 million surcharge beginning with the April 2000
billing cycle and continuing until January 2001.
In January 2001, Entergy Gulf States filed a fuel reconciliation
case covering the period from March 1999 through August 2000. Entergy
Gulf States is reconciling approximately $583 million of fuel and
purchased power costs. As part of this filing, Entergy Gulf States
requested a surcharge to collect $28 million, plus interest, of under-
recovered fuel and purchased power costs. A hearing on the merits
concluded in August 2001 and the ALJ has recommended that the surcharge
be reduced to $7 million. The PUCT considered the ALJ's recommendation
in February 2002, but did not reach a final decision. The PUCT
recommended certain issues for further consideration by the State
Office of Administrative Hearings. No assurance can be given as to the
outcome of this proceeding.
In November 2001, Entergy Gulf States filed an application with
the PUCT requesting an interim surcharge to collect $71 million, plus
interest, of under-recovered fuel and purchased power expenses incurred
from September 2000 through September 2001. Entergy Gulf States made
the application pursuant to one of the terms of the settlement
agreement that delayed implementation of retail open access in Texas
for Entergy Gulf States. In February 2002, Entergy Gulf States revised
its request to collect $40.9 million, plus interest, of under-recovered
fuel and purchased power expenses incurred from September 2000 through
January 2002. Entergy Gulf States requests that the surcharge begin in
March 2002 and extend through August 2002. The ALJ has recommended
that the PUCT approve Entergy Gulf States' request. No assurance can
be given as to the outcome of this request before the PUCT.
Filings with the LPSC
Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States)
In June 2000, the LPSC approved a settlement between Entergy Gulf
States and the LPSC staff to refund $83 million, including interest,
resolving refund issues in Entergy Gulf States' second, third, fourth,
and fifth post-merger earnings reviews filed with the LPSC in May 1995,
1996, 1997, and 1998, respectively. The refund was made over a three-
month period beginning July 2000. Although refund issues in the third,
fourth, and fifth post-merger earnings reviews were resolved by the
June 2000 settlement, certain prospective issues remained in dispute
following the settlement. The fourth earnings review is currently on
appeal at the Nineteenth Judicial District Court. A decision from the
LPSC in the fifth earnings review is expected in the second quarter of
2002.
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 was 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 is subject to
review by the LPSC and may result in a change in rates. In February
2002, the LPSC staff filed testimony recommending a $16.4 million rate
refund and a $39.8 million prospective rate reduction. The prospective
reduction includes a recommended reduction in return on equity that
would not take effect until June 2003. A procedural schedule has been
established by the LPSC and a hearing is scheduled for April 2002.
Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana)
In May 1997, Entergy Louisiana made its second annual performance-
based formula rate plan filing with the LPSC for the 1996 test year.
This filing resulted in a total rate reduction of approximately $54.5
million, which was implemented in July 1997. At the same time, rates
were reduced by an additional $0.7 million and by an additional $2.9
million effective March 1998. Upon completion of the hearing process
in December 1998, the LPSC issued an order requiring an additional rate
reduction and refund, although the resulting amounts were not
quantified. Entergy Louisiana has appealed this order and obtained a
preliminary injunction pending a final decision on appeal. This appeal
is pending before the Louisiana Supreme Court.
In April 1999, Entergy Louisiana submitted its fourth annual
performance-based formula rate plan filing for the 1998 test year. A
rate reduction of $15.0 million was implemented effective August 1,
1999. In May 2000, the LPSC ordered a $6.4 million refund. This
refund was made in July 2000.
In May 2000, Entergy Louisiana submitted its fifth annual
performance-based formula rate plan filing for the 1999 test year. As
a result of this filing, Entergy Louisiana implemented a $24.8 million
base rate reduction in August 2000. In September 2001, the LPSC
approved a settlement in which Entergy Louisiana 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 to address the
return on common equity issue has been established and a hearing will
be held in March 2002.
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 is subject to review by the LPSC. A
procedural schedule has been established and a hearing is scheduled in
the second quarter of 2002.
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 sought 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.
Entergy Louisiana 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
provisions for the refund, which Entergy Louisiana made through the
fuel adjustment clause over a three-month period beginning in July
2001.
Also under the terms of the settlement, Entergy Louisiana
consented to future fuel cost recovery under a long-term gas contract
based on a formula that will 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
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 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
Formula Rate Plan Filings (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 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.
In March 1999, Entergy Mississippi submitted its annual
performance-based formula rate plan filing for the 1998 test year. In
April 1999, the MPSC approved a prospective rate reduction of $13.3
million, effective May 1999. In June 1999, Entergy Mississippi revised
its March 1999 filing to include a portion of refinanced long-term debt
not included in the original filing. This revision resulted in an
additional rate reduction of approximately $1.5 million, effective July
1999.
MPSC Fuel Cost Review (Entergy Corporation and Entergy Mississippi)
In December 2000, the MPSC approved an increase in Entergy
Mississippi's 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, is occurring over a
24-month period which began with the first billing cycle of January
2001. As approved by the MPSC, Entergy Mississippi also began making
quarterly energy cost recovery filings beginning in January 2001 to
reflect under-recovered fuel and purchased power costs from the second
prior calendar quarter.
Grand Gulf Accelerated Recovery Tariff (GGART) (Entergy Corporation and
Entergy Mississippi)
In September 1998, FERC approved the GGART for Entergy
Mississippi's allocable portion of Grand Gulf, which was filed with
FERC in August 1998. The GGART provides for the acceleration of
Entergy Mississippi's Grand Gulf purchased power obligation in an
amount totaling $221.3 million over the period October 1, 1998 through
June 30, 2004.
Filings with the Council
Rate Proceedings (Entergy Corporation and Entergy New Orleans)
Entergy New Orleans operates currently under the terms of a
settlement agreement approved by the Council in November 1998. The
settlement agreement required base rate reductions for electric
customers of $7.1 million effective January 1, 1999, $3.2 million
effective October 1, 1999, $16.1 million effective October 1, 2000,
and no base rate increases prior to October 1, 2001. 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 of $12.7 million in gas rates and an
increase of $12.5 million in electric rates might be appropriate.
Proceedings on Entergy New Orleans' filing have been deferred until
June 2002. Entergy New Orleans' rate decrease that would have occurred
in October 2001 upon completion of its Grand Gulf 1 phase-in plan has
also been deferred. As a result of the deferral of the proceedings,
Entergy New Orleans' rates will remain at their current level at this
time.
Natural Gas (Entergy Corporation and Entergy New Orleans)
In a resolution adopted in August 2001, the Council ordered
Entergy New Orleans to account for $36 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 filed a response
to the Council in September 2001. Entergy New Orleans has documented a
full reconciliation for the natural gas costs during that period. The
ultimate outcome of the proceeding cannot be predicted at this time.
Fuel Adjustment Clause Litigation (Entergy Corporation and Entergy New
Orleans)
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy
Power in state court in Orleans Parish purportedly on behalf of all
Entergy New Orleans ratepayers. The plaintiffs seek treble damages for
alleged injuries arising from the defendants' alleged violations of
Louisiana's antitrust laws in connection with certain costs passed on
to ratepayers in Entergy New Orleans' fuel adjustment filings with the
Council. In particular, plaintiffs allege that Entergy New Orleans
improperly included certain costs in the calculation of fuel charges
and that Entergy New Orleans imprudently purchased high-cost fuel from
other Entergy affiliates. Plaintiffs allege that Entergy New Orleans
and the other defendant Entergy companies conspired to make these
purchases to the detriment of Entergy New Orleans' ratepayers and to
the benefit of Entergy's shareholders, in violation of Louisiana's
antitrust laws. Plaintiffs also seek to recover interest and
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.
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 $100 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
began in February 2002. The ultimate outcome of the lawsuit and the
Council proceeding cannot be predicted at this time.
Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The domestic utility companies filed applications with the APSC,
the LPSC, the MPSC, and the Council to approve the sale of power by
Entergy Gulf States from its unregulated, undivided 30% interest in
River Bend formerly owned by Cajun to the other domestic utility
companies during the summer of 2000. These applications were approved
subject to subsequent prudence reviews. In addition, Entergy Gulf
States and Entergy Louisiana filed an application with the LPSC for
authorization to purchase capacity and electric power from third
parties for the summer of 2000, and filed a similar application for the
summer of 2001. The LPSC approved these applications, with
reservations of its rights to review the prudence of the purchases and
the appropriate categorization of the costs as either capacity or
energy charges for purposes of recovery. A similar application was
filed with the LPSC on March 1, 2002 for the summer of 2002, but no
action yet has been taken by the LPSC on that filing.
The LPSC reviewed the 2000 purchases and found that Entergy
Louisiana's and Entergy Gulf States' costs were prudently incurred, but
decided that approximately 34% of the costs should be categorized as
capacity charges, and therefore should be recovered through base rates
and not through the fuel adjustment clause. In November 2000, the LPSC
ordered refunds of $11.1 million for Entergy Louisiana and $3.6 million
for Entergy Gulf States, for which adequate provisions have been made.
In May 2001, the LPSC determined that 24% of Entergy Louisiana's and
Entergy Gulf States' costs relating to summer 2001 purchases should be
categorized as capacity charges, and is still reviewing certain
prudence issues related to the 2001 purchases. Those costs that are
categorized as capacity charges will be included in the costs of
service used to determine the base rates of Entergy Louisiana and
Entergy Gulf States. In 2001, these companies recorded a regulatory
asset for the capacity charges incurred in both 2000 and 2001. The
capacity charges for 2000 are being amortized through May 2002 for
Entergy Gulf States and through July 2002 for Entergy Louisiana. The
capacity charges for 2001 will be amortized over a twelve-month period
beginning in June 2002 for Entergy Gulf States and August 2002 for
Entergy Louisiana.
River Bend Cost Deferrals (Entergy Corporation and Entergy Gulf
States)
Entergy Gulf States was amortizing $182 million of River Bend
operating and purchased power costs, depreciation, and accrued carrying
charges over a 20-year period. In accordance with the June 1999 Texas
settlement agreement discussed above, Entergy Gulf States reduced these
deferred costs by $93.9 million, for which adequate reserves had been
recorded. Entergy Gulf States also was allowed to amortize the
remainder of the accelerated balance as of January 1, 1999, over three
years on a straight-line basis, which ended December 31, 2001.
Grand Gulf 1 Deferrals and Retained Shares
(Entergy Corporation and Entergy Arkansas)
Under the settlement agreement entered into with the APSC in 1985
and amended in 1988, Entergy Arkansas retains 22% of its 36% share of
Grand Gulf 1-related costs and recovers the remaining 78% of its share
in rates. In the event that Entergy Arkansas is not able to sell its
retained share to third parties, it may sell such energy to its retail
customers at a price equal to its avoided cost, which is currently less
than Entergy Arkansas' cost from its retained share.
(Entergy Corporation and Entergy Louisiana)
In a series of LPSC orders, court decisions, and agreements from
late 1985 to mid-1988, Entergy Louisiana was granted rate relief with
respect to costs associated with Entergy Louisiana's share of capacity
and energy from Grand Gulf 1, subject to certain terms and conditions.
Entergy Louisiana retains and does not recover from retail ratepayers,
18% of its 14% share of the costs of Grand Gulf 1 capacity and energy
and recovers the remaining 82% of its share in rates. Entergy Louisiana
is allowed to recover through the fuel adjustment clause 4.6 cents per
KWH for the energy related to its retained portion of these costs. Non-
fuel operation and maintenance costs for Grand Gulf 1 are recovered
through Entergy Louisiana's base rates. Alternatively, Entergy
Louisiana may sell such energy to non-affiliated parties at prices
above the fuel adjustment clause recovery amount, subject to the LPSC's
approval.
(Entergy Corporation and Entergy New Orleans)
Under various rate settlements with the Council in 1986, 1988, and
1991, Entergy New Orleans agreed to absorb and not recover from
ratepayers a total of $96.2 million of its Grand Gulf 1 costs. Entergy
New Orleans was permitted to implement annual rate increases in
decreasing amounts each year through 1995, and to defer certain costs
and related carrying charges for recovery on a schedule extending from
1991 through 2001. As of December 31, 2001, the entire deferred amount
has been recovered through rates.
System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
System Energy applied to FERC in May 1995 for a rate increase, and
implemented the increase in December 1995. 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. The request also
included a proposed change in the accounting recognition of nuclear
refueling outage costs from that of expensing those costs as incurred
to the deferral and amortization method described in Note 1 to the
financial statements. After holding hearings in 1996, a FERC ALJ found
that portions of System Energy's request should be rejected, including
a proposed increase in return on common equity from 11% to 13% and a
requested change in decommissioning cost methodology. The ALJ
recommended a decrease in the return on common equity from 11% to
10.8%. Other portions of System Energy's request for a rate increase
were approved by the ALJ.
After a hearing, FERC issued an order in the proceeding in July
2000. 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 and the July 2000
order became final. System Energy made a compliance tariff filing in
August 2001 and it was accepted by FERC in November 2001. System
Energy made refunds to the domestic utility companies in December 2001.
In accordance with regulatory accounting principles, during the
pendency of the case, System Energy recorded reserves for potential
refunds against its revenues. Upon the order becoming final, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy recorded entries to spread the impacts of FERC's
order to the various revenue, expense, asset, and liability accounts
affected, as if the order had been in place since commencement of the
case in 1995. System Energy also recorded an additional reserve amount
against its revenue, to adjust its estimate of the impact of the order,
and recorded additional interest expense on that reserve. System
Energy also recorded reductions in its depreciation and its
decommissioning expenses to reflect the lower levels in FERC's order,
and reduced tax expense affected by the order.
In December 2001, Entergy Arkansas filed with the APSC the amount
of the refund to retail customers in Arkansas. The total refund of
$53.7 million, including interest, is expected to be refunded through
the issuance of refund checks in March 2002 after approval by the APSC
of the refund rates.
Entergy Mississippi's allocation of the proposed System Energy
wholesale rate increase was $21.6 million annually. In July 1995,
Entergy Mississippi filed a schedule with the MPSC that deferred the
retail recovery of the System Energy rate increase. The deferral plan,
which was approved by the MPSC, began in December 1995, the effective
date of the System Energy rate increase, and was effective until the
issuance of the final order by FERC. Entergy Mississippi revised the
deferral plan two times during the pendency of the System Energy
proceeding. As a result of the final resolution of the FERC order and
in accordance with Entergy Mississippi's second revised deferral plan,
refunds to Entergy Mississippi from System Energy, including interest,
have been credited against deferral balances and refund amounts in
excess of the deferral balances are being included as a credit to the
amounts billed to Entergy Mississippi's customers in October 2001
through September 2002 under its Grand Gulf Riders.
Entergy New Orleans' allocation of the proposed System Energy
wholesale rate increase was $11.1 million annually. In February 1996,
Entergy New Orleans filed a plan with the Council to defer 50% of the
amount of the System Energy rate increase. In December 2001, the
Council approved a refund to customers. The total amount of the refund
to Entergy New Orleans' customers is $43 million. In anticipation of
the FERC order, Entergy New Orleans advanced the refunding of $10
million in February 2001 to customers to assist with unexpected high
energy bills. The total refund will also be reduced by an additional
$6 million which will be used for the establishment of a public
benefits and payments assistance program. The remaining $27 million
was refunded through the issuance of refund checks during the first
quarter of 2002.
FERC Settlement (Entergy Corporation, Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
In November 1994, FERC approved an agreement settling a long-
standing dispute involving income tax allocation procedures of System
Energy. In accordance with the agreement, System Energy has been
refunding a total of approximately $62 million, plus interest, to
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans through June 2004. System Energy also reclassified from
utility plant to other deferred debits approximately $81 million of
other Grand Gulf 1 costs. Although such costs are excluded from rate
base, System Energy is amortizing and recovering these costs over a 10-
year period. Interest on the $62 million refund and the loss of the
return on the $81 million of other Grand Gulf 1 costs is reducing
Entergy's and System Energy's net income by approximately $10 million
annually.
NOTE 3. INCOME TAXES
Income tax expenses for 2001, 2000, and 1999 consist of the
following (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Current:
Federal $321,085 $83,314 $60,333 $97,265 $77,074 $16,844 ($56,166)
Foreign 3,355 - - - - - -
State 53,565 16,230 17,385 16,404 11,523 2,958 (6,837)
-----------------------------------------------------------------------
Total 378,005 99,544 77,718 113,669 88,597 19,802 (63,003)
Deferred -- net 110,944 11,414 11,554 (21,931) (66,633) (23,691) 110,240
Investment tax credit
adjustments - net (23,192) (5,025) (7,234) (5,451) (1,500) (507) (3,476)
-----------------------------------------------------------------------
Recorded income tax expense $465,757 $105,933 $82,038 $86,287 $20,464 ($4,396) $43,761
=======================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Current:
Federal $291,616 $51,042 $42,587 $83,369 ($24,598) $10,530 $132,725
Foreign 11,555 - - - - - -
State 51,293 9,694 6,737 12,926 (3,615) 1,706 19,750
-----------------------------------------------------------------------
Total 354,464 60,736 49,324 96,295 (28,213) 12,236 152,475
Deferred -- net 150,018 46,365 61,779 22,111 52,581 (129) (67,509)
Investment tax credit
adjustments - net (25,561) (6,589) (7,500) (5,761) (1,500) (510) (3,703)
-----------------------------------------------------------------------
Recorded income tax expense $478,921 100,512 $103,603 $112,645 $22,868 $11,597 $81,263
=======================================================================
1999 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf Louisiana New Energy
States Mississippi Orleans
Current:
Federal $452,568 $25,811 $64,991 $115,180 ($660) $13,238 $121,733
Foreign 27,730 - - - - - -
State 65,834 5,780 11,669 22,675 131 2,923 18,979
-----------------------------------------------------------------------
Total 546,132 31,591 76,660 137,855 (529) 16,161 140,712
Deferred -- net (153,304) 26,335 13,513 (9,953) 19,566 (2,615) (77,173)
Investment tax credit
adjustments - net (36,161) (3,914) (15,008) (5,534) (1,500) (516) (9,688)
-----------------------------------------------------------------------
Recorded income tax expense $356,667 $54,012 $75,165 $122,368 $17,537 $13,030 $53,851
=======================================================================
Total income taxes differ from the amounts computed by applying
the statutory income tax rate to income before taxes. The reasons for
the differences for the years 2001, 2000, and 1999 are (in thousands):
Entergy Entergy Entergy Entergy Entergy System
2001 Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Computed at statutory rate (35%) $425,692 $99,441 $91,520 $76,594 $21,029 ($2,307) $56,041
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 45,124 12,098 7,897 10,160 1,935 (292) 5,803
Depreciation 11,890 4,136 1,504 10,542 (1,091) 17 (3,218)
Amortization of investment
tax credits (22,488) (5,028) (6,528) (5,448) (1,500) (504) (3,480)
Flow-through/permanent
Differences (20,698) (5,582) (11,318) (1,620) (856) (702) (620)
US tax on foreign income 21,422 - - - - - -
Benefit of Entergy Corp.
expenses - - (1,510) (4,647) - (746) (10,697)
Other - net 4,815 868 473 706 947 138 (68)
----------------------------------------------------------------------
Total income taxes $465,757 $105,933 $82,038 $86,287 $20,464 ($4,396) $43,761
======================================================================
Effective Income Tax Rate 38.3% 37.3% 31.4% 39.4% 34.1% 66.7% 27.3%
Entergy Entergy Entergy Entergy Entergy System
2000 Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Computed at statutory rate (35%) $416,443 $83,147 $99,380 $96,363 $21,644 $9,840 $61,253
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 47,504 11,571 14,421 11,389 2,239 824 7,060
Depreciation 49,741 16,098 4,791 10,810 1,346 1,441 15,255
Amortization of investment
tax credits (23,783) (5,112) (7,664) (5,520) (1,500) (507) (3,480)
Flow-through/permanent
Differences (18,495) (5,596) (10,032) (1,623) (825) (401) (18)
US tax on foreign income 1,472 - - - - - -
Other - net 6,039 404 2,707 1,226 (36) 400 1,193
----------------------------------------------------------------------
Total income taxes $478,921 $100,512 $103,603 $112,645 $22,868 $11,597 $81,263
======================================================================
Effective Income Tax Rate 40.3% 42.3% 36.5% 40.9% 37.0% 41.2% 46.4%
Entergy Entergy Entergy Entergy Entergy System
1999 Entergy Arkansas Gulf Louisiana Mississippi New Energy
States Orleans
Computed at statutory rate (35%) $333,093 $43,164 $70,058 $109,948 $20,693 $11,196 $47,678
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 49,487 6,949 18,805 13,741 1,982 1,930 6,080
Depreciation 49,460 18,429 4,718 9,577 (1,093) 2,232 15,597
Amortization of investment
tax credits (29,015) (5,132) (6,642) (5,532) (1,500) (518) (9,691)
Flow-through/permanent
Differences (8,042) (5,250) (2,795) (1,191) (284) (272) 27
US tax benefit on foreign
income (9,584) - - - - - -
Benefit of Entergy Corporation
expenses - (3,341) (4,046) (4,053) (1,936) (754) (4,552)
Change in valuation allowance (46,315) - - - - - -
Other - net 17,583 (807) (4,933) (122) (325) (784) (1,288)
----------------------------------------------------------------------
Total income taxes $356,667 $54,012 $75,165 $122,368 $17,537 $13,030 $53,851
======================================================================
Effective Income Tax Rate 37.5% 43.8% 37.6% 39.0% 29.7% 40.7% 39.5%
Significant components of net deferred tax liabilities as of
December 31, 2001 and 2000 are as follows (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Deferred Tax Liabilities:
Net regulatory
assets/(liabilities) ($1,195,100) ($196,800) ($469,073) ($222,443) ($29,237) $17,806 ($274,899)
Plant-related basis
differences (3,189,015) (608,488) (1,025,047) (741,553) (276,098) (68,765) (391,391)
Storm Damage (65,744) (65,744) - - - - -
Nuclear Decommissioning (163,869) - (638) - - - (5,047)
Other (97,373) (62,630) (13,478) (25,733) (1,531) (3,938) (9,952)
-----------------------------------------------------------------------------------------
Total (4,711,101) (933,662) (1,508,236) (989,729) (306,866) (54,897) (681,289)
-----------------------------------------------------------------------------------------
Deferred Tax Assets:
Accumulated deferred
investment tax credit 160,003 32,655 42,450 43,075 6,850 2,063 32,910
Capital loss carryforwards 55,845 - - - - - -
Foreign tax credits 73,741 - - - - - -
Sale and leaseback 230,157 - - 99,353 - - 130,804
Removal cost 103,338 802 26,877 64,809 (912) 11,762 -
Unbilled/Deferred revenues 64,178 - 11,689 - 6,767 - -
Pension-related items 113,133 - 5,558 5,529 (4,542) 6,857 3,429
Rate refund 12,477 - 14,545 (4,060) - 1,992 -
Reserve for regulatory
adjustments 109,370 - 109,370 - - - -
Transition cost accrual 55,919 55,919 - - - - -
Customer Deposits 77,321 26,664 11,842 25,731 12,928 156 -
Nuclear Decommissioning 15,599 12,766 - 2,833 - - -
Other 169,855 17,812 37,409 18,415 - 11,623 13,382
Valuation allowance (98,011) - - - - - -
-----------------------------------------------------------------------------------------
Total 1,142,925 146,618 259,740 255,685 21,091 34,453 180,525
-----------------------------------------------------------------------------------------
Net deferred tax liability ($3,568,176) ($787,044) ($1,248,496) ($734,044) ($285,775) ($20,444) ($500,764)
==========================================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Deferred Tax Liabilities:
Net regulatory
assets/(liabilities) ($1,193,795) ($197,577) ($448,460) ($249,983) ($32,968) $9,755 ($274,562)
Plant-related basis
differences (3,067,528) (536,985) (1,034,502) (746,274) (223,369) (65,066) (413,200)
Rate deferrals (159,148) (17,554) (1,594) - (111,045) (28,955) -
Storm Damage (31,424) (31,424) - - - - -
Nuclear Decommissioning (19,157) - (509) - - - (5,204)
Other (185,640) (101,186) (9,462) (60,390) (4,051) (2,682) (11,815)
-----------------------------------------------------------------------------------------
Total (4,656,692) (884,726) (1,494,527) (1,056,647) (371,433) (86,948) (704,781)
-----------------------------------------------------------------------------------------
Deferred Tax Assets:
Accumulated deferred
investment tax credit 168,841 34,626 44,526 45,173 7,424 2,852 34,240
Capital loss carryforwards 39,091 - - - - - -
Foreign tax credits 98,468 - - - - - -
Sale and leaseback 229,169 - - 103,200 - - 125,969
Removal cost 105,842 872 27,101 65,690 203 11,976 -
Unbilled/Deferred revenues 25,790 - 13,143 - 4,845 7,802 -
Pension-related items 56,860 - 7,874 7,889 (2,335) 6,217 2,926
Rate refund 152,407 - 25,607 35,803 - - 123,306
Reserve for regulatory
adjustments 117,437 - 117,437 - - - -
Transition cost accrual 43,568 43,568 - - - - -
Customer Deposits 30,747 7,266 - 16,092 7,267 122 -
Nuclear Decommissioning 15,354 12,521 - 2,833 - - -
Other 191,799 14,855 49,688 2,060 - 7,682 25,187
Valuation allowance (93,413) - - - - - -
-----------------------------------------------------------------------------------------
Total 1,181,960 113,708 285,376 278,740 17,404 36,651 311,628
-----------------------------------------------------------------------------------------
Net deferred tax
liability ($3,474,732) ($771,018) ($1,209,151) ($777,907) ($354,029) ($50,297) ($393,153)
==========================================================================================
The valuation allowance is provided primarily against foreign tax
credit carryforwards, which can be utilized against future United
States taxes on foreign source income. If these carryforwards are not
utilized, they will expire between 2002 and 2006.
At December 31, 2001, unremitted earnings of foreign subsidiaries
were approximately $60.3 million. Since it is Entergy's intention to
indefinitely reinvest these earnings, no U.S. taxes have been provided.
Upon distribution of these earnings in the form of dividends or
otherwise, Entergy could be subject to U.S. income taxes (subject to
foreign tax credits) and withholding taxes payable to various foreign
countries.
NOTE 4. LINES OF CREDIT AND RELATED SHORT-TERM BORROWINGS (Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
The short-term borrowings of the domestic utility companies and
System Energy are limited to amounts authorized by the SEC. The
current limits authorized are effective through November 30, 2004. In
addition to borrowing from commercial banks, Entergy companies are
authorized to borrow from the Entergy System Money Pool (money pool).
The money pool is an inter-company borrowing arrangement designed to
reduce the domestic utility companies' dependence on external short-
term borrowings. Borrowings from the money pool and external
borrowings combined may not exceed the SEC authorized limits. The
following are the SEC-authorized limits and borrowings from the money
pool for the domestic utility companies, System Energy, and other
Entergy subsidiaries as of December 31, 2001 (there were no borrowings
outstanding from external sources):
Outstanding
Authorized Borrowings
(In Millions)
Entergy Arkansas $235 $ -
Entergy Gulf States 340 -
Entergy Louisiana 225 -
Entergy Mississippi 160 -
Entergy New Orleans 100 -
System Energy 140 -
Other Entergy subsidiaries 420 93
------ ----
Total $1,620 $ 93
====== ====
In May 2001, Entergy Corporation amended its 364-day bank credit
facility, increasing the capacity from $500 million to $1.275 billion.
In July 2001, the borrowing capacity on the facility was increased to
$1.325 billion, of which $300 million was outstanding as of December
31, 2001. In December 2001, Entergy Corporation obtained a new line of
credit expiring May 16, 2002 with a capacity of $50 million, of which
the entire $50 million was drawn as of December 31, 2001. The weighted-
average interest rate on Entergy's outstanding borrowings under these
facilities as of December 31, 2001 and 2000 was 3.2% and 7.43%,
respectively. The commitment fee for this facility is currently 0.20%
of the line amount. Commitment fees and interest rates on loans under
the credit facility can fluctuate depending on the senior debt ratings
of the domestic utility companies. There is further discussion of
commitments for long-term financing arrangements in Note 7 to the
financial statements.
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi each
have 364-day credit facilities available as follows:
Expiration Amount of Amount Drawn as of
Company Date Facility Dec. 31, 2001
Entergy Arkansas May 2002 $63 million -
Entergy Louisiana January 2003 $15 million -
Entergy Mississippi May 2002 $25 million -
The facilities have variable interest rates and the average commitment
fee is 0.13%.
NOTE 5. PREFERRED, PREFERENCE, AND COMMON STOCK (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
Preferred Stock
The number of shares authorized and outstanding, and dollar value
of preferred stock for Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans as of December 31, 2001, and 2000 were:
Shares Call Price Per
Authorized Share as of
and Outstanding December 31,
2001 2000 2001 2000 2001
(Dollars in Thousands)
Entergy Arkansas Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.32% Series 70,000 70,000 $ 7,000 $ 7,000 $103.65
4.72% Series 93,500 93,500 9,350 9,350 107.00
4.56% Series 75,000 75,000 7,500 7,500 102.83
4.56% 1965 Series 75,000 75,000 7,500 7,500 102.50
6.08% Series 100,000 100,000 10,000 10,000 102.83
7.32% Series 100,000 100,000 10,000 10,000 103.17
7.80% Series 150,000 150,000 15,000 15,000 103.25
7.40% Series 200,000 200,000 20,000 20,000 102.80
7.88% Series 150,000 150,000 15,000 15,000 103.00
Cumulative, $0.01 par value:
$1.96 Series (a) 600,000 600,000 15,000 15,000 25.00
--------- --------- -------- --------
Total without sinking fund 1,613,500 1,613,500 $116,350 $116,350
========= ========= ======== ========
Shares Call Price Per
Authorized Share as of
and Outstanding December 31,
2001 2000 2001 2000 2001
(Dollars in Thousands)
Entergy Gulf States Preferred Stock
Preferred Stock
Authorized 6,000,000 shares,
$100 par value, cumulative
Without sinking fund:
4.40% Series 51,173 51,173 $ 5,117 $ 5,117 $108.00
4.50% Series 5,830 5,830 583 583 105.00
4.40%-1949 Series 1,655 1,655 166 166 103.00
4.20% Series 9,745 9,745 975 975 102.82
4.44% Series 14,804 14,804 1,480 1,480 103.75
5.00% Series 10,993 10,993 1,099 1,099 104.25
5.08% Series 26,845 26,845 2,685 2,685 104.63
4.52% Series 10,564 10,564 1,056 1,056 103.57
6.08% Series 32,829 32,829 3,283 3,283 103.34
7.56% Series 308,830 312,329 30,883 31,233 101.80
--------- --------- -------- --------
Total without sinking fund 473,268 476,767 $ 47,327 $ 47,677
========= ========= ======== ========
With sinking fund:
Adjustable Rate - A, 7.0%(b) 112,666 132,024 $ 11,267 $ 13,202 $100.00
Adjustable Rate - B, 7.0%(b) 149,182 175,562 14,918 17,556 100.00
--------- --------- -------- --------
Total with sinking fund 261,848 307,586 $ 26,185 $ 30,758
========= ========= ======== ========
Fair Value of Preferred Stock
with sinking fund (d) $ 26,160 $ 29,475
======== ========
Shares Call Price Per
Authorized Share as of
and Outstanding December 31,
2001 2000 2001 2000 2001
(Dollars in Thousands)
Entergy Louisiana Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.96% Series 60,000 60,000 $ 6,000 $ 6,000 $104.25
4.16% Series 70,000 70,000 7,000 7,000 104.21
4.44% Series 70,000 70,000 7,000 7,000 104.06
5.16% Series 75,000 75,000 7,500 7,500 104.18
5.40% Series 80,000 80,000 8,000 8,000 103.00
6.44% Series 80,000 80,000 8,000 8,000 102.92
7.84% Series 100,000 100,000 10,000 10,000 103.78
7.36% Series 100,000 100,000 10,000 10,000 103.36
Cumulative, $25 par value:
8.00% Series 1,480,000 1,480,000 37,000 37,000 25.00
--------- --------- -------- --------
Total without sinking fund 2,115,000 2,115,000 $100,500 $100,500
========= ========= ======== ========
With sinking fund:
8.00% Series (c) - 350,000 $ - 35,000 -
--------- --------- -------- --------
Total with sinking fund - 350,000 $ - $ 35,000
========= ========= ======== ========
Fair Value of Preferred Stock
with sinking fund (d) $ - $ 34,300
======== ========
Shares Call Price Per
Authorized Share as of
and Outstanding December 31,
2001 2000 2001 2000 2001
(Dollars in Thousands)
Entergy Mississippi Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.36% Series 59,920 59,920 $ 5,992 $ 5,992 $103.86
4.56% Series 43,887 43,887 4,389 4,389 107.00
4.92% Series 100,000 100,000 10,000 10,000 102.88
7.44% Series 100,000 100,000 10,000 10,000 102.81
8.36% Series 200,000 200,000 20,000 20,000 100.00
--------- --------- -------- --------
Total without sinking fund 503,807 503,807 $ 50,381 $ 50,381
========= ========= ======== ========
Shares Call Price Per
Authorized Share as of
and Outstanding December 31,
2001 2000 2001 2000 2001
(Dollars in Thousands)
Entergy New Orleans Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.75% Series 77,798 77,798 $ 7,780 $ 7,780 $105.00
4.36% Series 60,000 60,000 6,000 6,000 104.57
5.56% Series 60,000 60,000 6,000 6,000 102.59
--------- --------- -------- --------
Total without sinking fund 197,798 197,798 $ 19,780 $ 19,780
Entergy Corporation
Subsidiaries' Preferred Stock:
Without sinking fund: 4,903,373 4,906,872 $334,337 $334,688
========= ========= ======== ========
With sinking fund: 261,848 657,586 $ 26,185 $ 65,758
========= ========= ======== ========
Fair Value of Preferred Stock
with sinking fund (d) $ 26,160 $ 63,775
======== ========
(a) The total dollar value represents the liquidation value of $25 per
share.
(b) Represents weighted-average annualized rates for 2001.
(c) This series was redeemed in August 2001.
(d) Fair values were determined using bid prices reported by dealer
markets and by nationally recognized investment banking firms. There
is additional disclosure of fair value of financial instruments in Note
15 to the financial statements.
Changes in the preferred stock and preference stock of Entergy
Arkansas, Entergy Gulf States, and Entergy Louisiana during the last
three years were:
Number of Shares
2001 2000 1999
Preference stock retirements
Entergy Gulf States - (6,000,000) -
Preferred stock retirements
Entergy Arkansas
$100 par value - - (200,000)
$25 par value - - (81,085)
Entergy Gulf States
$100 par value (49,237) (76,585) (258,471)
Entergy Louisiana
$100 par value (350,000) - (500,000)
Entergy Gulf States has annual sinking fund requirements of $3.45
million through 2006 for its preferred stock outstanding. Entergy Gulf
States has the annual non-cumulative option to redeem, at par,
additional amounts of certain series of its outstanding preferred
stock.
Common Stock
Entergy Corporation reissues treasury shares to meet the
requirements of the Stock Plan for Outside Directors (Directors' Plan),
the Equity Ownership Plan of Entergy Corporation and Subsidiaries
(Equity Ownership Plan), the Equity Awards Plan, and certain other
stock benefit plans. The Directors' Plan awards to non-employee
directors a portion of their compensation in the form of a fixed number
of shares of Entergy Corporation common stock.
Treasury Cost
Shares
(In Thousands)
Beginning Balance, January 1, 2001 28,490,031 $774,905
Repurchases 989,100 (36,895)
Transfers 361,720 -
Issuances:
Equity Ownership/Equity Awards Plans 2,393,177 20,638
Directors' Plan 6,290 172
---------- --------
Ending Balance, December 31, 2001 27,441,384 $758,820
========== ========
Entergy Corporation may also issue newly registered shares to meet
the requirements of these plans. Entergy Corporation received proceeds
of $2.1 million from the issuance of 79,473 shares of common stock to
satisfy stock option exercises during 2001.
Entergy has two plans that grant stock options, equity awards, and
incentive awards to key employees of the Entergy subsidiaries. The
Equity Ownership Plan is a shareholder-approved stock-based
compensation plan. The Equity Awards Plan is a non-shareholder, Board-
approved stock-based compensation plan. The following table summarizes
information about Entergy's stock options awarded under these plans.
Securities
Stock Other stock- remaining
Current Options based plans under current
Plan Authorization granted authorizations
Equity Ownership Plan 15.0 million 3,563,793 123,714 11.3 million
Equity Awards Plan 30.0 million 17,086,300 126,284 12.8 million
Stock options are granted at exercise prices not less than market
value on the date of grant. The majority of options granted in 2001,
2000, and 1999 will become exercisable in equal amounts on each of the
first three anniversaries of the date of grant. Options are forfeited
if they are not exercised within ten years from the date of the grant.
Entergy does not recognize compensation expense for stock options
granted with exercise prices at market value on the date of grant. The
impact on Entergy's net income for each of the years 2001, 2000, and
1999 would have been reductions of $42.9 million, $19.0 million, and
$15.5 million, respectively, had compensation cost for the stock
options been recognized based on the fair value of options at the
grant date for awards under the option plans. The impact on earnings
per share for each of the years 2001, 2000, and 1999 would have been
a reduction of $.19, $.08, and $.06, respectively.
During 2001, Entergy began granting most of the equity awards and
incentive awards earned under its stock benefit plans in the form of
performance units, which are equal to the cash value of shares of
Entergy Corporation common stock at the time of payment. In addition
to the potential for equivalent share appreciation or depreciation,
performance units will earn the cash equivalent of the dividends paid
during the performance period applicable to each plan. The amount of
performance units awarded will not reduce the amount of securities
remaining under the current authorizations. The costs of equity and
incentive awards, given either as company stock or performance units,
are charged to income over the period of the grant or restricted
period, as appropriate. In 2001 and 2000, $15 million and $14 million,
respectively, were charged to compensation expense.
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
stock option weighted-average assumptions:
2001 2000 1999
Stock price volatility 26.3% 24.4% 20.3%
Expected term in years 5 5 5
Risk-free interest rate 4.9% 6.6% 4.7%
Dividend yield 3.4% 5.2% 4.0%
Dividend payment $1.26 $1.20 $1.20
Stock option transactions are summarized as follows:
2001 2000 1999
---------------------- ----------------------- --------------------
Average Average Average
Number Option Number Option Number Option
of Options Price of Options Price of Options Price
Beginning-of-year balance 11,468,316 $ 25.52 5,493,882 $ 29.48 901,639 $ 26.21
Options granted 8,602,300 36.96 7,219,134 22.98 5,228,189 29.88
Options exercised (2,407,783) 25.85 (920,077) 28.26 (213,084) 23.69
Options forfeited (346,017) 30.35 (324,623) 28.29 (422,862) 30.38
----------- ----------- ----------
End-of-year balance 17,316,816 $ 31.06 11,468,316 $ 25.52 5,493,882 $ 29.48
=========== =========== ==========
Options exercisable
at year-end 2,923,452 1,641,062 601,307
Weighted-average fair
value of options at time
of grant
$ 8.14 $ 4.30 $ 4.72
The following table summarizes information about stock options
outstanding as of December 31, 2001:
Options Outstanding Options Exercisable
Weighted-Avg
Range of Remaining Weighted- Number Weighted-
Exercise As of Contractual Avg. Exercise Exercisable Avg. Exercise
Prices 12/31/01 Life-Yrs. Price at 12/31/01 Price
$18 - $30 8,532,058 8.2 $25.16 2,621,734 $ 26.62
$30 - $41 8,784,758 9.0 $ 36.80 301,718 $ 33.69
---------- ---------
$18 - $41 17,316,816 8.6 $ 31.06 2,923,452 $ 27.35
========== =========
Near the end of January 2002, an additional 4,823,981 options
became exercisable with a weighted-average exercise price of $30.84.
Entergy sponsors the Savings Plan of Entergy Corporation and
Subsidiaries (Savings Plan). The Savings Plan is a defined
contribution plan covering eligible employees of Entergy and its
subsidiaries. The Savings Plan provides that the employing Entergy
subsidiary may:
o make matching contributions to the plan in an amount equal to 75%
of the participant's basic contribution, up to 6% of their salary, in
shares of Entergy Corporation common stock if the employee directs
their company-matching contribution to the purchase of Entergy
Corporation's common stock;
or
o make matching contributions in the amount of 50% of the
participant's basic contribution, up to 6% of their salary, if the
employee directs their company-matching contribution to other
investment funds.
Entergy's subsidiaries contributed $25.4 million in 2001, $16.1 million
in 2000, and $14.5 million in 1999 to the Savings Plan.
NOTE 6. COMPANY-OBLIGATED REDEEMABLE PREFERRED SECURITIES
(Entergy Arkansas, Entergy Gulf States, Entergy Louisiana)
Entergy Louisiana Capital I, Entergy Arkansas Capital I, and
Entergy Gulf States Capital I (Trusts) were established as financing
subsidiaries of Entergy Louisiana, Entergy Arkansas, and Entergy Gulf
States, respectively, for the purpose of issuing common and preferred
securities. The Trusts issue Cumulative Quarterly Income Preferred
Securities (Preferred Securities) to the public and issue common
securities to their parent companies. Proceeds from such issues are
used to purchase junior subordinated deferrable interest debentures
(Debentures) from the parent company. The Debentures held by each
Trust are its only assets. Each Trust uses interest payments received
on the Debentures owned by it to make cash distributions on the
Preferred Securities.
Fair Market
Interest Trust's Value of
Preferred Common Rate Investment Preferred
Date Securities Securities Securities/ In Securities at
Trusts Of Issue Issued Issued Debentures Debentures 12-31-01
(In Millions) (In Millions)
Louisiana Capital I 7-16-96 $70.0 $2.2 9.00% $72.2 $70.5
Arkansas Capital I 8-14-96 $60.0 $1.9 8.50% $61.9 $59.8
Gulf States Capital I 1-28-97 $85.0 $2.6 8.75% $87.6 $85.3
The Preferred Securities of the Trusts mature in the years 2045
and 2046. The Preferred Securities are redeemable at 100% of their
principal amount at the option of Entergy Arkansas, Entergy Louisiana,
and Entergy Gulf States in 2002, including the loss of the tax
deduction arising out of the interest paid on the Debentures. Entergy
Louisiana, Entergy Arkansas, and Entergy Gulf States have, pursuant to
certain agreements, fully and unconditionally guaranteed payment of
distributions on the Preferred Securities issued by their respective
trusts. Entergy Louisiana, Entergy Arkansas, and Entergy Gulf States
are the owners of all of the common securities of their individual
Trusts, which constitute 3% of each Trust's total capital.
NOTE 7. LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, and System Energy)
Long-term debt as of December 31, 2001 was:
Maturities Interest Rates Entergy Entergy Entergy Entergy Entergy System
From To From To Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
Mortgage Bonds
2002 2006 5.800% 8.500% $2,716,579 $555,000 $1,176,920 $319,659 $470,000 $125,000 $70,000
2007 2011 6.450% 7.500% 325,000 100,000 115,000 80,000 30,000
2012 2026 7.000% 8.940% 954,950 260,000 444,950 115,000 60,000 75,000
Governmental Obligations (a)
2010 2020 5.450% 8.000% 298,300 214,200 84,100
2021 2030 4.850% 9.000% 1,392,080 119,000 395,330 415,120 46,030 416,600
Damhead Creek Project Credit
Facilities, avg rate 6.53% 458,385
Note Payable to NYPA
non-interest bearing,
4.8% implicit rate 756,914
Long-Term DOE Obligation (Note 9) 150,217 150,217
Waterford 3 Lease Obligation
7.45% (Note 10) 313,918 313,918
Grand Gulf Lease Obligation
7.02% (Note 10) 445,734 445,734
Other Long-Term Debt 206,855 621 9,371
Unamortized Premium and Discount - Net (15,133) (5,963) (3,853) (1,741) (1,268) (903) (1,405)
---------------------------------------------------------------------------------
Total Long-Term Debt 8,003,799 1,393,075 2,106,818 1,276,956 654,762 229,097 930,929
Less Amount Due Within One Year 682,771 85,000 147,921 185,627 65,000 - 100,891
---------------------------------------------------------------------------------
Long-Term Debt Excluding Amount Due
Within One Year $7,321,028 $1,308,075 $1,958,897 $1,091,329 $589,762 $229,097 $830,038
=================================================================================
Fair Value of Long-Term Debt (b) $6,764,419 $1,255,690 $2,173,994 $986,476 $668,526 $235,875 $463,352
=================================================================================
Long-term debt as of December 31, 2000 was:
Maturities Interest Rates Entergy Entergy Entergy Entergy Entergy System
From To From To Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
Mortgage Bonds
2001 2005 5.800% 8.500% $2,455,109 $455,000 $1,001,750 $338,359 $400,000 $55,000 $205,000
2006 2010 6.450% 8.000% 365,000 100,000 115,000 80,000 70,000
2011 2026 7.000% 8.940% 954,950 260,000 444,950 115,000 60,000 75,000
Governmental Obligations (a)
2010 2020 5.450% 9.000% 591,635 214,200 377,435
2021 2030 4.850% 8.000% 1,051,750 72,000 102,000 415,120 46,030 416,600
Saltend Project Credit
Facilities, avg rate 6.70% 581,938
Damhead Creek Project Credit
Facilities, avg rate 6.55% 507,194
Note Payable to NYPA
non-interest bearing, 4.8% implicit rate 744,405
Long-Term DOE Obligation (Note 9) 144,316 144,316
Waterford 3 Lease Obligation
7.45% (Note 10) 330,306 330,306
Grand Gulf Lease Obligation
7.02% (Note 10) 462,534 462,534
Other Long-Term Debt 23,596 621 9,581
Unamortized Premium and Discount - Net (16,425) (6,325) (4,087) (2,001) (1,563) (969) (1,480)
-------------------------------------------------------------------------------------
Total Long-Term Debt 8,196,308 1,239,812 1,931,629 1,311,784 584,467 199,031 1,082,654
Less Amount Due Within One Year 464,215 100 122,750 35,088 - - 151,800
-------------------------------------------------------------------------------------
Long-Term Debt Excluding Amount Due
Within One Year $7,732,093 $1,239,712 $1,808,879 $1,276,696 $584,467 $199,031 $930,854
=====================================================================================
Fair Value of Long-Term Debt (b) $7,342,810 $1,104,206 $2,013,249 $1,003,426 $592,697 $202,525 $593,170
=====================================================================================
(a) Consists of pollution control bonds, certain series of which are
secured by non-interest bearing first mortgage bonds.
(b) The fair value excludes lease obligations, long-term DOE
obligations, and other long-term debt and includes debt due within
one year. It is determined using bid prices reported by dealer
markets and by nationally recognized investment banking firms.
The annual long-term debt maturities (excluding lease obligations)
and annual cash sinking fund requirements for debt outstanding as of
December 31, 2001, for the next five years are as follows:
Entergy Entergy Entergy Entergy Entergy System
Entergy(a) Arkansas Gulf States(b) Louisiana(c) Mississippi New Orleans Energy
(In Thousands)
2002 $ 637,993 $ 85,000 $148,000 $169,660 $ 65,000 - $70,000
2003 1,123,426 255,000 339,000 150,000 255,000 $25,000 -
2004 877,854 - 592,000 - 150,000 30,000 -
2005 457,174 215,000 98,000 - - 30,000 -
2006 159,276 - - - - 40,000 -
(a) Not included are other sinking fund requirements of approximately
$34.9 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
(b) Not included are other sinking fund requirements of approximately
$34.2 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
(c) Not included are other sinking fund requirements of approximately
$0.7 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
In December 2001, Entergy Arkansas issued $47 million of 5.05%
Pollution Control Revenue Bonds due September 1, 2028. The proceeds of
the issuance were used to refund $20 million and $27 million of 8.0%
Series Pollution Control Revenue Bonds prior to maturity.
In August 2001 when the Saltend plant was sold, EPDC repaid the
outstanding Saltend credit facilities of approximately $555 million and
terminated the Saltend interest rate swaps paying mark-to-market
breakage costs of approximately $22 million. EPDC used proceeds from
the sale of the plant for these payments.
EPDC maintains a credit facility of BPS45 million ($67.2 million)
to finance the Damhead Creek project and for general corporate purposes
in connection with the acquisition and development of power generation,
distribution, or transmission facilities. No cash advances were
outstanding under this facility at December 31, 2001 and 2000. In
February 2001, after the Damhead Creek project reached commercial
operation, EPDC paid its equity commitment of BPS36.1 million ($53.9
million) on the project and a letter of credit facility under this
credit facility was cancelled in July 2001.
Damhead Finance LDC (DFLDC), an indirect wholly-owned subsidiary
of EPDC, maintains a BPS483.4 million ($695.5 million) non-recourse
senior credit facility. The facility finances the construction and
operation of the Damhead Creek power plant. Borrowings under the
senior credit facility are repayable over a fifteen-year period
beginning December 31, 2001. In July 2001, the commitment of BPS20
million ($28.8 million) for a cost overrun facility was cancelled.
DFLDC also maintains a BPS36.1 million ($53.9 million) subordinated
credit facility, which was drawn in February 2001. DFLDC used the
proceeds from the subordinated credit facility to repay a portion of
the senior credit facility. The subordinated credit facility is
payable over a ten-year period beginning December 31, 2001. After EPDC
paid its equity commitment in February 2001, an equity bridge facility
of BPS35.8 million ($53.5 million) under the senior credit facility was
repaid. All of the assets of DFLDC are pledged as collateral under the
senior credit facility and the subordinated credit facility. DFLDC's
ability to make distributions of dividends, loans, or advances to EPDC
is restricted by, among other things, the requirement to pay permitted
project costs, make debt repayments, and maintain cash reserves.
The Damhead Creek credit facility requires that the annual debt
service coverage ratio be at least 1.05 to 1 for the previous 12 months
at semi-annual dates commencing with June 30, 2002. Given the low
electricity prices currently affecting the UK market, Damhead Creek may
not meet the annual debt service coverage ratio test in respect of the
12 months to June 30, 2002, which could trigger an event of default.
In the event the annual debt service coverage ratio is deficient at
June 30, 2002, the power development business will seek a waiver of the
default from the lenders. There is no requirement for EPDC to make
capital contributions or provide credit support to Damhead Creek
following the occurrence of an event of default.
In 2000, a subsidiary of DFLDC entered into 10-year interest rate
swap agreements with an average fixed rate of 6.52% for approximately
99% of the debt outstanding under the bridge and senior term loan
portion of the senior credit facility. At December 31, 2001, the
interest rate swap agreements outstanding totalled a notional amount of
BPS275.8 million ($396.8 million). The mark-to-market valuation of the
interest rate swap agreements at December 31, 2001, was a net liability
of BPS15.9 million ($22.9 million).
In November 2000, Entergy's domestic non-utility nuclear business
purchased the FitzPatrick and Indian Point 3 power plants in a seller-
financed transaction. Entergy issued notes to NYPA with seven annual
installments of approximately $108 million commencing one year from the
date of the closing, and eight annual installments of $20 million
commencing eight years from the date of the closing. These notes do
not have a stated interest rate. In accordance with the purchase
agreement with NYPA, the purchase of Indian Point 2 resulted in
Entergy's domestic non-utility nuclear business becoming liable to NYPA
for an additional $10 million per year for 10 years, beginning in
September 2003. This liability was recorded upon the purchase of
Indian Point 2 in September 2001.
NOTE 8. DIVIDEND RESTRICTIONS (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, System Energy)
Provisions within the Articles of Incorporation or pertinent
indentures and various other agreements relating to the long-term debt
and preferred stock of certain of Entergy Corporation's subsidiaries
restrict the payment of cash dividends or other distributions on their
common and preferred stock. Additionally, PUHCA prohibits Entergy
Corporation's subsidiaries from making loans or advances to Entergy
Corporation. As of December 31, 2001, Entergy Arkansas and Entergy
Mississippi had restricted retained earnings unavailable for
distribution to Entergy Corporation of $253.3 million and $15.8
million, respectively. In 2001, Entergy Corporation received dividend
payments totaling $440.3 million from subsidiaries.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy)
Entergy plans to spend approximately $4.3 billion on construction
and other capital investments during 2002-2004. This estimate includes
$2.8 billion in spending by the domestic utility companies and System
Energy, $0.8 billion in spending by energy commodity services, and $0.7
billion in spending by the domestic non-utility nuclear business. This
plan reflects capital required to support existing business and Board-
approved acquisitions. The estimated capital expenditures are subject
to periodic review and modification and may vary based on the ongoing
effects of business restructuring, regulatory constraints, business
opportunities, market volatility, economic trends, and the ability to
access capital. Entergy's firm estimated construction and other
capital expenditures by year for 2002-2004 are as follows:
2002 2003 2004 Total
(In Millions)
Entergy Arkansas $239 $200 $194 $633
Entergy Gulf States 317 265 277 859
Entergy Louisiana 218 197 198 613
Entergy Mississippi 153 131 131 415
Entergy New Orleans 51 49 49 149
System Energy 25 20 20 65
Other entities 728 490 356 1,574
------ ------ ------ ------
Entergy $1,731 $1,352 $1,225 $4,308
====== ====== ====== ======
Additional capital investments are possible during these years, but
they will be discretionary in nature and no commitments exist currently
for additional spending.
The domestic utility companies and System Energy will focus their
planned spending on projects that will support continued reliability
improvements and customer growth.
Energy commodity services will focus its planned spending on
merchant power plant projects currently under construction, including
the purchase of gas turbines scheduled for delivery in 2002 through
2004, under an option to purchase obtained from General Electric
Company that is now held by an independent special purpose entity
established to finance the turbine acquisition program. The estimate
does not include potential acquisitions of assets that may be offered
for sale by third parties or additional capital investment in Entergy-
Koch, which is an unconsolidated equity investment. Entergy is
scheduled to make a $73 million cash contribution to Entergy-Koch in
January 2004.
The domestic non-utility nuclear business will focus its planned
spending on routine construction projects and nuclear fuel acquisitions
for the plants it owns, power uprates, and on the anticipated purchase
in 2002 of the 510 MW Vermont Yankee nuclear power plant.
Entergy will also require $2.8 billion during the period 2002-2004
to meet long-term debt and preferred stock maturities and cash sinking
fund requirements. Entergy plans to meet these requirements primarily
with internally generated funds and cash on hand, supplemented by
proceeds from the issuance of debt, outstanding credit facilities, and
project financing. Certain domestic utility companies and System
Energy may also continue the reacquisition or refinancing of all or a
portion of certain outstanding series of preferred stock and long-term
debt. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY
AND CAPITAL RESOURCES" for additional discussion of Entergy's capital
spending plans.
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 had to be 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, had to be given by June 30, 2001. Entergy's
liability is limited to BPS1.4 billion ($2.0 billion) on certain tax
warranties and BPS140 million ($203 million) on the remaining
warranties relating to the Entergy London sale.
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 terms of the warranties.
Management periodically reviews reserve levels for these warranties and
as of December 31, 2001 believes it has adequately provided for the
ultimate resolution of these matters.
Fuel Purchase Agreements
(Entergy Corporation)
Entergy's energy commodity services segment has entered into a gas
supply contract at the project level to supply up to 100% of the gas
requirements for the Damhead Creek power plant located in the UK. This
contract, which expires in 2016, includes a take-or-pay obligation for
approximately 75% of the gas requirement for this plant.
(Entergy Arkansas and Entergy Mississippi)
Entergy Arkansas has long-term contracts for the supply of low-
sulfur coal for White Bluff and Independence (which is also 25% owned
by Entergy Mississippi). These contracts, which expire in 2002 and
2011, respectively, provide for approximately 70% of Entergy Arkansas'
expected annual coal requirements. Additional requirements are
satisfied by spot market purchases.
(Entergy Gulf States)
Entergy Gulf States has a contract for a supply of low-sulfur coal
for Nelson Unit 6, which should be sufficient to satisfy the fuel
requirements at Nelson Unit 6 through 2010. Effective April 1, 2000,
Louisiana Generating LLC assumed ownership of Cajun's interest in the
Big Cajun generating facilities, in which Entergy Gulf States owns a
42% interest. The management of Louisiana Generating LLC has advised
Entergy Gulf States that it has executed coal supply and transportation
contracts that should provide an adequate supply of coal for the
operation of Big Cajun 2, Unit 3 for the foreseeable future.
(Entergy Louisiana)
In June 1992, Entergy Louisiana agreed to a 20-year natural gas
supply contract, in which Entergy Louisiana agreed to purchase natural
gas in annual amounts equal to approximately one-third of its projected
annual fuel requirements for certain generating units. Annual demand
charges associated with this contract are estimated to be $7.6 million.
Such charges aggregate $84 million for the years 2002 through 2012.
Power Purchase Agreements
(Entergy Louisiana)
Entergy Louisiana has an agreement extending through the year 2031
to purchase energy generated by a hydroelectric facility known as the
Vidalia project. Entergy Louisiana made payments under the contract of
approximately $86.0 million in 2001, $58.6 million in 2000, and $70.3
million in 1999. If the maximum percentage (94%) of the energy is made
available to Entergy Louisiana, current production projections would
require estimated payments of approximately $92.3 million in 2002, and
a total of $3.3 billion for the years 2003 through 2031. Entergy
Louisiana currently recovers the costs of the purchased energy through
its fuel adjustment clause.
System Fuels (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
The domestic utility companies that are owners of System Fuels
have made loans to System Fuels to finance its fuel procurement,
delivery, and storage activities. The following loans outstanding to
System Fuels as of December 31, 2001 mature in 2008:
Owner Ownership Loan Outstanding at
Percentage December 31, 2001
Entergy Arkansas 35% $11.0 million
Entergy Louisiana 33% $14.2 million
Entergy Mississippi 19% $5.5 million
Entergy New Orleans 13% $3.3 million
Nuclear Insurance (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
The Price-Anderson Act, which is scheduled for renewal in August
2002, limits public liability of a nuclear plant owner for a single
nuclear incident to approximately $9.5 billion. Protection for this
liability is provided through a combination of private insurance
underwritten by American Nuclear Insurers (ANI) (currently $200 million
for each reactor) and an industry assessment program. Effective
January 1, 2002, liability arising out of terrorist acts will be
covered by ANI subject to one industry aggregate limit of $200 million,
with a conditional option for one shared industry aggregate limit
reinstatement of $200 million. Under the assessment program, the
maximum payment requirement for each nuclear incident would be
$88.1 million per reactor, payable at a rate of $10 million per
licensed reactor per incident per year. Entergy has nine licensed
reactors. As a co-licensee of Grand Gulf 1 with System Energy, SMEPA
would share in 10% of this obligation. In addition, each
owner/licensee of Entergy's nine nuclear units participates in a
private insurance program that provides coverage for worker tort claims
filed for bodily injury caused by radiation exposure. The program
provides for a maximum assessment of approximately $27.9 million for
the nine nuclear units in the event that losses exceed accumulated
reserve funds.
Entergy's nuclear owner/licensee subsidiaries are also members of
certain insurance programs that provide coverage for property damage,
including decontamination and premature decommissioning expense, to
members' nuclear generating plants. These programs are underwritten by
Nuclear Electric Insurance, Limited (NEIL). As of December 31, 2001,
Entergy was insured against such losses up to $2.3 billion for each of
its nuclear units, except for Pilgrim, which is insured for
$1.115 billion in property damages. In addition, Entergy's nuclear
owner/licensee subsidiaries are members of the NEIL insurance program
that covers certain replacement power and business interruption costs
incurred due to prolonged nuclear unit outages. Under the property
damage and replacement power/business interruption insurance programs,
these Entergy subsidiaries could be subject to assessments if losses
exceed the accumulated funds available to the insurers. As of
December 31, 2001, the maximum amounts of such possible assessments
were: Entergy Arkansas - $24.9 million; Entergy Gulf States - $18.8
million; Entergy Louisiana - $21.1 million; Entergy Mississippi - $1.4
million; Entergy New Orleans - $0.7 million; System Energy - $16.1
million, and for Entergy's domestic non-utility nuclear business -
$54.8 million.
Effective November 15, 2001, in the event that one or more acts of
terrorism cause accidental property damage under one or more of all
nuclear insurance policies issued by NEIL (including, but not limited
to those described above) within 12 months from the date the first
accidental property damage occurs, the maximum recovery under all such
nuclear insurance policies shall be an aggregate of $3.24 billion plus
the additional amounts recovered for such losses from reinsurance,
indemnity, and any other source applicable to such losses.
Entergy maintains property insurance for each of its nuclear units
in excess of the NRC's minimum requirement for nuclear power plant
licensees of $1.06 billion per site. NRC regulations provide that the
proceeds of this insurance must be used, first, to render the reactor
safe and stable, and second, to complete decontamination operations.
Only after proceeds are dedicated for such use and regulatory approval
is secured would any remaining proceeds be made available for the
benefit of plant owners or their creditors.
Spent Nuclear Fuel and Decommissioning Costs (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy)
Spent Nuclear Fuel
Entergy's nuclear owner/licensee subsidiaries provide for the
estimated future disposal costs of spent nuclear fuel in accordance
with the Nuclear Waste Policy Act of 1982. The affected Entergy
companies entered into contracts with the DOE, whereby the DOE will
furnish disposal service at a cost of one mill per net KWH generated
and sold after April 7, 1983, plus a one-time fee for generation prior
to that date. Entergy Arkansas is the only Entergy company that
generated electric power with nuclear fuel prior to that date and has a
recorded liability as of December 31, 2001 of $150 million for the one-
time fee. The fees payable to the DOE may be adjusted in the future to
assure full recovery. Entergy considers all costs incurred for the
disposal of spent nuclear fuel, except accrued interest, to be proper
components of nuclear fuel expense. Provisions to recover such costs
have been or will be made in applications to regulatory authorities.
Entergy's domestic non-utility nuclear business has accepted
assignment of the Pilgrim, FitzPatrick, Indian Point 3, and Indian
Point 2 spent fuel disposal contracts with the DOE previously held by
Boston Edison, NYPA, and Consolidated Edison. Boston Edison, NYPA, and
Consolidated Edison have paid or retained liability for the fees for
all generation prior to the purchase dates of those plants.
Delays have occurred in the DOE's program for the acceptance and
disposal of spent nuclear fuel at a permanent repository. After twenty
years of study, the DOE, in February 2002, formally recommended, and
President Bush approved, Yucca Mountain, Nevada as the permanent spent
fuel repository. The State of Nevada may veto the site subject to
override by simple majority of both houses of Congress. If Yucca
Mountain is sustained as the repository site, DOE will proceed with the
licensing and eventual construction of the repository and may begin
receipt of spent fuel as early as approximately 2010. Otherwise, DOE
may not accept spent fuel for a significantly longer period of time.
Considerable uncertainty exists regarding the time frame under which
the DOE will begin to accept spent fuel from Entergy facilities for
storage or disposal. As a result, future expenditures will be required
to increase spent fuel storage capacity at Entergy's nuclear plant
sites.
Pending DOE acceptance and disposal of spent nuclear fuel, the
owners of nuclear plants are responsible for their own spent fuel
storage. Current on-site spent fuel storage capacity at Grand Gulf 1
and River Bend is estimated to be sufficient until approximately 2005
and 2004, respectively, at which time dry cask storage facilities will
be placed into service. The spent fuel pool at Waterford 3 was
recently expanded through the replacement of the existing storage racks
with higher density storage racks. This expansion should provide
sufficient storage for Waterford 3 until after 2010. An ANO storage
facility using dry casks began operation in 1996 and has been expanded
since and will be further expanded as needed. The spent fuel storage
facility at Pilgrim is licensed to provide enough storage capacity
until approximately 2012. FitzPatrick has sufficient spent fuel storage
capacity through 2002, and additional dry cask storage capacity is
being constructed that will provide sufficient storage capacity through
2004 and will be expanded as needed. Indian Point 2 and Indian Point 3
currently have sufficient spent fuel storage capacity until
approximately 2004 and 2010, respectively.
Nuclear Decommissioning Costs
Total approved decommissioning costs for rate recovery purposes as
of December 31, 2001, for Entergy Arkansas', Entergy Gulf States',
Entergy Louisiana's, and System Energy's nuclear power plants,
excluding SMEPA's share of Grand Gulf 1, are as follows:
Total Approved Estimated
Decommissioning Costs
(In Millions)
ANO 1 and ANO 2 (based on a 1998 cost study $813.1
reflecting 1997 dollars)
River Bend - Louisiana (based on a 1996 cost study 419.0
reflecting 1996 dollars)
River Bend - Texas (based on a 1996 cost study 385.2
reflecting 1996 dollars)
Waterford 3 (based on a 1994 updated study in 1993 320.1
dollars)
Grand Gulf 1 (based on a 1994 cost study using 1993 341.1
dollars) --------
$2,278.5
========
Entergy records decommissioning liabilities for these plants as the
estimated decommissioning costs are collected from customers or as
earnings on the trust funds are realized. The decommissioning
liabilities recorded are discussed below.
Entergy periodically reviews and updates estimated decommissioning
costs. Although Entergy is presently under-recovering for Grand Gulf
1, Waterford 3, and River Bend based on more recent estimates,
applications have been and will continue to be made to the appropriate
regulatory authorities to reflect projected decommissioning costs in
rates. Decommissioning costs recovered in rates are deposited in trust
funds and reported at market value based upon market quotes or as
determined by widely used pricing services. These trust fund assets
largely offset the accumulated decommissioning liability that is
recorded as accumulated depreciation for Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana, and are recorded as deferred credits for
System Energy and Entergy's domestic non-utility nuclear business. The
liability associated with the trust funds received from Cajun with the
transfer of Cajun's 30% share of River Bend is also recorded as a
deferred credit by Entergy Gulf States. The actual decommissioning
costs may vary from the estimates because of regulatory requirements,
changes in technology, and increased costs of labor, materials, and
equipment.
In June 2001, Entergy Arkansas received notification from the NRC
of approval for a renewed operating license authorizing operations at
ANO 1 through May 2034. In November 2001, the APSC ordered Entergy
Arkansas to reflect 20-year license extensions in its determination of
the ANO 1 and ANO 2 decommissioning revenue requirements for rates to
be effective January 1, 2002. Entergy Arkansas will not recover
decommissioning costs in 2002 for ANO 1 and 2 based on the extension of
the ANO 1 license and the assumption that the ANO 2 license will be
extended and that the existing decommissioning trust funds, together
with their expected future earnings, will meet the estimated
decommissioning costs.
Entergy Louisiana prepared a decommissioning cost update for
Waterford 3 in 1999 and produced a revised decommissioning cost update
of $481.5 million. This cost update was filed with the LPSC in the
third quarter of 2000.
In the Texas retail jurisdiction in a case filed with the PUCT in
March 2000, Entergy Gulf States included River Bend decommissioning
costs of $481.5 million based on a 1999 cost update amount of $525.8
million. PUCT substantive rules for rate requests for decommissioning
limit the allowance for contingencies to ten percent, although the
actual estimate employs greater contingency amounts. In LPSC rate
reviews filed in May 1999 and 2000, Entergy Gulf States included
decommissioning costs based on a 1998 update of $562.7 million and a
1999 update of $525.8 million, respectively. The decommissioning
liability for the 30 percent share of River Bend formerly owned by
Cajun was funded by a transfer of $132 million to the River Bend
Decommissioning Trust at the completion of Cajun's bankruptcy
proceedings.
System Energy included updated decommissioning costs (based on the
updated 1994 study) in its 1995 rate increase filing with FERC. Rates
requested in this proceeding were placed into effect in December 1995,
subject to refund. In July 2000, FERC issued an order approving a
lower decommissioning cost than what was requested by System Energy.
System Energy filed a motion for rehearing, which was granted, and FERC
affirmed its previous decision. System Energy adjusted its collection
to the FERC-approved level of $341 million in the third quarter of
2001. A 1999 decommissioning cost update of $540.8 million for Grand
Gulf has not yet been filed with FERC.
As part of the Pilgrim purchase, Boston Edison funded a $471.3
million decommissioning trust fund, which was transferred to Entergy.
After a favorable tax determination regarding the trust fund, Entergy
returned $43 million of the trust fund to Boston Edison. Entergy
believes that Pilgrim's decommissioning fund will be adequate to cover
future decommissioning costs for the Pilgrim plant without any
additional deposits to the trust.
As part of the Indian Point 1 and 2 purchase, Consolidated Edison
transferred a $430 million decommissioning trust fund, along with the
liability to decommission Indian Point 1 and Indian Point 2, to
Entergy. Entergy also funded an additional $25 million resulting in a
total fund of $455 million. Entergy believes that Indian Point 1 and
2's decommissioning trust fund will be adequate to cover future
decommissioning costs for these plants without any additional deposits
to the trust.
For the Indian Point 3 and FitzPatrick plants purchased in 2000,
NYPA retained the decommissioning trusts and the decommissioning
liability. NYPA and Entergy executed decommissioning agreements, which
specify their decommissioning obligations. NYPA has the right to
require Entergy to assume the decommissioning liability provided that
it assigns the corresponding decommissioning trust, up to a specified
level, to Entergy. If the decommissioning liability is retained by
NYPA, Entergy will perform the decommissioning of the plants at a price
equal to the lesser of a pre-specified level or the amount in the
decommissioning trusts. Entergy believes that the amounts available to
it under either scenario are sufficient to cover the future
decommissioning costs without any additional contributions to the
trusts.
The cumulative liabilities and decommissioning expenses recorded
in 2001 by Entergy were as follows:
Cumulative 2001 Cumulative
Liabilities as of 2001 Trust Decommissioning Liabilities as
December 31, Earnings Expenses of December 31,
2000 2001
(In Millions)
ANO 1 and ANO 2 $283.3 $9.5 $- $292.8
River Bend 215.5 5.1 6.2 226.8
Waterford 3 97.9 3.2 10.4 111.5
Grand Gulf 1 153.0 5.1 (23.8) (a) 134.3
Pilgrim 454.0 - (b) 20.1 474.1
Indian Point 1 & 2 430.0 (c) - (b) 5.3 435.3
-------- ----- ----- --------
$1,633.7 $22.9 $18.2 $1,674.8
======== ===== ===== ========
(a) Totals for Grand Gulf 1 include the effect of the FERC-ordered
refund.
(b) Trust earnings on the decommissioning trust funds for Pilgrim and
Indian Point 1 & 2 are recorded as income and do not increase the
decommissioning liability.
(c) Added in third quarter of 2001, when the units were acquired.
In 2000 and 1999, ANO's decommissioning expense was $3.8 million
and $10.7 million, respectively; River Bend's decommissioning expense
was $6.2 million and $7.6 million, respectively; Waterford 3's
decommissioning expense was $10.4 and $8.8 million, respectively; Grand
Gulf 1's decommissioning expense was $18.9 million in both years; and
Pilgrim's decommissioning expense was $19.2 and $6.8 million,
respectively.
The EPAct contains a provision that assesses domestic nuclear
utilities with fees for the decontamination and decommissioning of the
DOE's past uranium enrichment operations. Annual assessments (in 2001
dollars), which will be adjusted annually for inflation, are for 15
years and are approximately $4.1 million for Entergy Arkansas, $1.0
million for Entergy Gulf States, $1.6 million for Entergy Louisiana,
and $1.5 million for System Energy. At December 31, 2001, five years
of assessments were remaining. DOE fees are included in other current
liabilities and other non-current liabilities and, as of December 31,
2001, recorded liabilities were $20.5 million for Entergy Arkansas,
$3.6 million for Entergy Gulf States, $7.8 million for Entergy
Louisiana, and $7.7 million for System Energy. Regulatory assets in
the financial statements offset these liabilities. FERC requires that
utilities treat these assessments as costs of fuel as they are
amortized and recover these costs through rates in the same manner as
other fuel costs.
Environmental Issues
(Entergy Arkansas)
Entergy Arkansas has received notices from the EPA and the
Arkansas Department of Environmental Quality alleging that Entergy
Arkansas, along with others, may be a PRP for clean-up costs associated
with a site in Arkansas. As of December 31, 2001, Entergy Arkansas
does not expect the remaining clean-up costs to exceed its recorded
liability of approximately $5 million.
(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 December 31, 2001, Entergy Gulf States
does not expect the remaining clean-up costs to exceed its recorded
liability of $15.1 million for the remaining sites at which the EPA has
designated Entergy Gulf States as a PRP.
(Entergy Louisiana and Entergy New Orleans)
During 1993, the 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. As a result, a remaining recorded
liability in the amount of $5.8 million for Entergy Louisiana and $0.5
million for Entergy New Orleans existed at December 31, 2001 for
wastewater upgrades and closures. Completion of this work is pending
LDEQ approval. Entergy Louisiana and Entergy New Orleans do not expect
the remaining costs for work at these sites to exceed the recorded
provisions.
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. A resolution to study
the advantages for ratepayers that might result from an acquisition of
these properties was filed in a committee of the Council in January
2001. The committee has deferred consideration of and has taken no
further action regarding that resolution. The full Council must
approve the resolution to commence such a study before it can become
effective.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
identical transactions for the sale and leaseback of undivided
interests (aggregating approximately 9.3%) in Waterford 3. In July
1997, Entergy Louisiana caused the lessors to issue $307.6 million
aggregate principal amount of Waterford 3 Secured Lease Obligation
Bonds, 8.76% Series due 2017, to refinance the outstanding bonds
originally issued to finance the purchase of the undivided interests by
the lessors. The lease payments were reduced to reflect the lower
interest costs. Upon the occurrence of certain events, Entergy
Louisiana may be obligated to pay amounts sufficient to permit the
termination of the 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.
Off Balance Sheet Turbine Financing Arrangement (Entergy Corporation)
EWO obtained contracts in October 1999 to acquire 36 turbines from
General Electric. Entergy's rights and obligations under the contracts
for 22 of the turbines were sold to a third party in May 2001. Entergy
has certain rights to reacquire the turbines from the third party,
whether pursuant to an interim lease commencing when a turbine is ready
for shipment or pursuant to certain purchase rights. If Entergy does
not take title to the turbines prior to certain specified dates, the
third party has certain rights to sell the turbines and Entergy may be
held liable for specific defined shortfalls, if any. Entergy's maximum
projected exposure under this arrangement is approximately $250
million. This exposure, however, does not take into account Entergy's
ongoing efforts to develop sites for the turbines.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans 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. Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and Entergy New Orleans are vigorously
defending these suits and deny any liability to the plaintiffs.
Nevertheless, no assurance can be given as to the outcome of these
cases.
Asbestos and Hazardous Material Litigation (Entergy Gulf States,
Entergy Louisiana, Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in
Texas and Louisiana primarily by contractor employees in the 1950-1980
timeframe against Entergy Gulf States, Entergy Louisiana, and Entergy
New Orleans, as premises owners of power plants, for damages caused by
alleged exposure to asbestos or other hazardous material. Many other
defendants are named in these lawsuits as well. Since 1992, the
Entergy companies have resolved over 3 thousand claims for nominal
amounts that in the aggregate total less than $13 million, including
defense costs. Some of this loss has been offset by reimbursement from
insurers. Presently there are over 3 thousand claims pending and
reserves have been established that should be adequate to cover any
exposure. Additionally, negotiations continue with insurers to recover
more reimbursement, while new coverage is being secured to minimize
anticipated future potential exposures. Management believes that loss
exposure has been and will continue to be handled successfully so that
the ultimate resolution of these matters will not be material, in the
aggregate, to its financial position or results of operation.
Grand Gulf 1-Related Agreements
Capital Funds Agreement (Entergy Corporation and System Energy)
Entergy Corporation has agreed to supply System Energy with
sufficient capital to (i) maintain System Energy's equity capital at an
amount equal to a minimum of 35% of its total capitalization (excluding
short-term debt), and (ii) permit the continued commercial operation of
Grand Gulf 1 and pay in full all indebtedness for borrowed money of
System Energy when due. In addition, under supplements to the Capital
Funds Agreement assigning System Energy's rights as security for
specific debt of System Energy, Entergy Corporation has agreed to make
cash capital contributions to enable System Energy to make payments on
such debt when due.
System Energy has entered into agreements with Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby
they are obligated to purchase their respective entitlements of
capacity and energy from System Energy's 90% interest in Grand Gulf 1,
and to make payments that, together with other available funds, are
adequate to cover System Energy's operating expenses. System Energy
would have to secure funds from other sources, including Entergy
Corporation's obligations under the Capital Funds Agreement, to cover
any shortfalls from payments received from Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans under these
agreements.
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy has agreed to sell all of its 90% share of capacity
and energy from Grand Gulf 1 to Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans in accordance with
specified percentages (Entergy Arkansas-36%, Entergy Louisiana-14%,
Entergy Mississippi-33%, and Entergy New Orleans-17%) as ordered by
FERC. Charges under this agreement are paid in consideration for the
purchasing companies' respective entitlement to receive capacity and
energy and are payable irrespective of the quantity of energy delivered
so long as the unit remains in commercial operation. The agreement
will remain in effect until terminated by the parties and the
termination is approved by FERC, most likely upon Grand Gulf 1's
retirement from service. Monthly obligations for payments under the
agreement are approximately $20 million for Entergy Arkansas, $7
million for Entergy Louisiana, $20 million for Entergy Mississippi, and
$9 million for Entergy New Orleans.
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans are individually obligated to make payments or
subordinated advances to System Energy in accordance with stated
percentages (Entergy Arkansas-17.1%, Entergy Louisiana-26.9%, Entergy
Mississippi-31.3%, and Entergy New Orleans-24.7%) in amounts that, when
added to amounts received under the Unit Power Sales Agreement or
otherwise, are adequate to cover all of System Energy's operating
expenses as defined, including an amount sufficient to amortize the
cost of Grand Gulf 2 over 27 years. (See Reallocation Agreement terms
below.) System Energy has assigned its rights to payments and advances
to certain creditors as security for certain obligations. Since
commercial operation of Grand Gulf 1, payments under the Unit Power
Sales Agreement have exceeded the amounts payable under the
Availability Agreement. Accordingly, no payments under the
Availability Agreement have ever been required. If Entergy Arkansas or
Entergy Mississippi fails to make its Unit Power Sales Agreement
payments, and System Energy is unable to obtain funds from other
sources, Entergy Louisiana and Entergy New Orleans could become subject
to claims or demands by System Energy or its creditors for payments or
advances under the Availability Agreement (or the assignments thereof)
equal to the difference between their required Unit Power Sales
Agreement payments and their required Availability Agreement payments.
Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
System Energy, Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans entered into the Reallocation
Agreement relating to the sale of capacity and energy from Grand Gulf
and the related costs, in which Entergy Louisiana, Entergy Mississippi,
and Entergy New Orleans agreed to assume all of Entergy Arkansas'
responsibilities and obligations with respect to Grand Gulf under the
Availability Agreement. FERC's decision allocating a portion of Grand
Gulf 1 capacity and energy to Entergy Arkansas supersedes the
Reallocation Agreement as it relates to Grand Gulf 1. Responsibility
for any Grand Gulf 2 amortization amounts has been individually
allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and
Entergy New Orleans-29.80%) under the terms of the Reallocation
Agreement. However, the Reallocation Agreement does not affect Entergy
Arkansas' obligation to System Energy's lenders under the assignments
referred to in the preceding paragraph. Entergy Arkansas would be
liable for its share of such amounts if Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans were unable to meet their
contractual obligations. No payments of any amortization amounts will
be required so long as amounts paid to System Energy under the Unit
Power Sales Agreement, including other funds available to System
Energy, exceed amounts required under the Availability Agreement, which
is expected to be the case for the foreseeable future.
Reimbursement Agreement (System Energy)
In December 1988, System Energy entered into two separate, but
identical, arrangements for the sale and leaseback of an approximate
aggregate 11.5% ownership interest in Grand Gulf 1. In connection with
the equity funding of the sale and leaseback arrangements, letters of
credit are required to be maintained to secure certain amounts payable
for the benefit of the equity investors by System Energy under the
leases. The current letters of credit are effective until March 20,
2003.
Under the provisions of a bank letter of credit 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 reimbursement
agreement, to maintain its equity at not less than 33% of its adjusted
capitalization (defined in the reimbursement 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 reimbursement agreement, a
ratio of adjusted net income to interest expense (calculated, in each
case, as specified in the reimbursement agreement) of at least 1.60
times earnings. As of December 31, 2001, System Energy's equity
approximated 46.35% of its adjusted capitalization, and its fixed
charge coverage ratio for 2001 was 2.17.
Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
In addition to those discussed above, Entergy and the domestic
utility companies are involved in a number of legal proceedings and
claims in the ordinary course of their business. While management is
unable to predict the outcome of such litigation, it is not expected
that the ultimate resolution of these matters will have a material
adverse effect on results of operations, cash flows, or financial
condition of these entities.
NOTE 10. LEASES
General
As of December 31, 2001, Entergy had capital leases and non-
cancelable operating leases for equipment, buildings, vehicles, and
fuel storage facilities (excluding nuclear fuel leases and the sale and
leaseback transactions) with minimum lease payments as follows:
Capital Leases
Entergy Entergy
Year Entergy Arkansas Gulf States
(In Thousands)
2002 $18,695 $9,646 $9,000
2003 18,695 9,646 9,000
2004 18,695 9,646 9,000
2005 9,660 9,611 -
2006 5,724 5,683 -
Years thereafter 7,997 7,986 -
------- ------- -------
Minimum lease payments 79,466 52,218 27,000
Less: Amount
representing interest 20,197 16,075 4,082
------- ------- -------
Present value of net
minimum lease payments $59,269 $36,143 $22,918
======= ======= =======
Operating Leases
Entergy Entergy Entergy
Year Entergy Arkansas Gulf States Louisiana
(In Thousands)
2002 $89,517 $25,411 $19,671 $13,209
2003 74,521 15,820 18,545 12,062
2004 67,880 14,808 17,517 10,555
2005 53,970 12,607 15,356 7,139
2006 43,964 9,607 14,118 4,192
Years thereafter 65,435 6,318 11,256 2,145
-------- ------- ------- -------
Minimum lease payments $395,287 $84,571 $96,463 $49,302
======== ======= ======= =======
Rental expense for Entergy's leases (excluding nuclear fuel leases
and the Grand Gulf 1 and Waterford 3 sale and leaseback transactions)
amounted to $65.1 million, $53.3 million, and $65.2 million, in 2001,
2000, and 1999, respectively. These amounts include $21.1 million,
$18.9 million, and $23.9 million for Entergy Arkansas; $22.0 million,
$18.9 million, and $19.2 million for Entergy Gulf States; and $11.7
million, $7.9 million, and $13.1 million for Entergy Louisiana. In
addition to the above rental expense, railcar operating lease payments,
which are recorded in fuel expense, were $12.2 million in 2001, $12.5
million in 2000, and $12.6 million in 1999 for Entergy Arkansas and
$2.8 million in 2001 and 2000 and $4.1 million in 1999 for Entergy Gulf
States. The railcar lease payments are recorded as fuel expense in
accordance with regulatory treatment.
Nuclear Fuel Leases (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and System Energy)
As of December 31, 2001, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and System Energy each had arrangements to lease
nuclear fuel in an aggregate amount up to $135 million, $90 million,
$90 million, and $95 million, respectively. As of December 31, 2001,
the unrecovered cost base of Entergy Arkansas', Entergy Gulf States',
Entergy Louisiana's, and System Energy's nuclear fuel leases amounted
to approximately $65.6 million, $67.7 million, $70.3 million, and $61.9
million, respectively. The lessors finance the acquisition and
ownership of nuclear fuel through loans made under revolving credit
agreements, the issuance of commercial paper, and the issuance of
intermediate-term notes. The credit agreements for Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and System Energy have
termination dates of November 2003, November 2003, December 2004, and
November 2003, respectively. Such termination dates may be extended
from time to time with the consent of the lenders. The intermediate-
term notes issued pursuant to these fuel lease arrangements have
varying maturities through March 15, 2005. It is expected that
additional financing under the leases will be arranged as needed to
acquire additional fuel, to pay interest, and to pay maturing debt.
However, if such additional financing cannot be arranged, the lessee in
each case must repurchase sufficient nuclear fuel to allow the lessor
to meet its obligations.
Lease payments are based on nuclear fuel use. The table below
represents the total nuclear fuel lease payments (principal and
interest) as well as the separate interest component charged to
operations by the domestic utility companies and System Energy in 2001,
2000, and 1999:
2001 2000 1999
Lease Lease Lease
Payments Interest Payments Interest Payments Interest
(In Millions)
Entergy Arkansas $54.1 $5.7 $42.7 $5.5 $48.6 $5.6
Entergy Gulf States 31.5 4.1 54.3 6.1 31.4 1.8
Entergy Louisiana 37.2 3.8 30.5 3.1 29.7 3.7
System Energy 26.5 3.6 31.2 5.2 28.1 3.4
------ ----- ------ ----- ------ -----
Total $149.3 $17.2 $158.7 $19.9 $137.8 $14.5
====== ===== ====== ===== ====== =====
Sale and Leaseback Transactions
Waterford 3 Lease Obligations (Entergy Louisiana)
In 1989, Entergy Louisiana sold and leased back 9.3% of its
interest in Waterford 3 for the aggregate sum of $353.6 million. The
lease has an approximate term of 28 years. The lessors financed the
sale-leaseback through the issuance of Waterford 3 Secured Lease
Obligation Bonds. The lease payments made by Entergy Louisiana are
sufficient to service the debt.
In 1994, Entergy Louisiana did not exercise its option to
repurchase the 9.3% interest in Waterford 3. As a result, Entergy
Louisiana issued $208.2 million of non-interest bearing first mortgage
bonds as collateral for the equity portion of certain amounts payable
under the lease.
In 1997, the lessors refinanced the outstanding bonds used to
finance the purchase of Waterford 3 at lower interest rates, which
reduced the annual lease payments.
Upon the occurrence of certain events, Entergy Louisiana may be
obligated to assume the outstanding bonds used to finance the purchase
of the unit and to pay an amount sufficient to withdraw from the lease
transaction. Such events include lease events of default, events of
loss, deemed loss events, or certain adverse "Financial Events."
"Financial Events" include, among other things, failure by Entergy
Louisiana, following the expiration of any applicable grace or cure
period, to maintain (i) total equity capital (including preferred
stock) at least equal to 30% of adjusted capitalization, or (ii) a
fixed charge coverage ratio of at least 1.50 computed on a rolling 12
month basis.
As of December 31, 2001, Entergy Louisiana's total equity capital
(including preferred stock) was 48.37% of adjusted capitalization and
its fixed charge coverage ratio for 2001 was 2.75.
As of December 31, 2001, Entergy Louisiana had future minimum
lease payments (reflecting an overall implicit rate of 7.45%) in
connection with the Waterford 3 sale and leaseback transactions, which
are recorded as long-term debt, as follows (in thousands):
2002 $39,246
2003 59,709
2004 31,739
2005 14,554
2006 18,261
Years thereafter 407,874
--------
Total 571,383
Less: Amount representing interest 257,465
--------
Present value of net minimum lease payments $313,918
========
Grand Gulf 1 Lease Obligations (System Energy)
In December 1988, System Energy sold 11.5% of its undivided
ownership interest in Grand Gulf 1 for the aggregate sum of $500
million. Subsequently, System Energy leased back its interest in the
unit for a term of 26-1/2 years. System Energy has the option of
terminating the lease and repurchasing the 11.5% interest in the unit
at certain intervals during the lease. Furthermore, at the end of the
lease term, System Energy has the option of renewing the lease or
repurchasing the 11.5% interest in Grand Gulf 1.
System Energy is required to report the sale-leaseback as a
financing transaction in its financial statements. For financial
reporting purposes, System Energy expenses the interest portion of the
lease obligation and the plant depreciation. However, operating
revenues include the recovery of the lease payments because the
transactions are accounted for as a sale and leaseback for ratemaking
purposes. Until 2004, the total of interest and depreciation expense
exceeds the corresponding revenues realized. Consistent with a
recommendation contained in a FERC audit report, System Energy recorded
as a net deferred asset the difference between the recovery of the
lease payments and the amounts expensed for interest and depreciation
and is recording this difference as a deferred asset or liability on an
ongoing basis. The amount of this net deferred asset was $88.7 million
and $100.8 million as of December 31, 2001 and 2000, respectively.
As of December 31, 2001, System Energy had future minimum lease
payments (reflecting an implicit rate of 7.02%), which are recorded as
long-term debt as follows (in thousands):
2002 $53,827
2003 48,524
2004 36,133
2005 52,253
2006 52,253
Years thereafter 470,276
--------
Total 713,266
Less: Amount representing interest 267,532
--------
Present value of net minimum lease payments $445,734
========
NOTE 11. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
Pension Plans
Entergy has five postretirement benefit plans, "Entergy
Corporation Retirement Plan for Non-Bargaining Employees," "Entergy
Corporation Retirement Plan for Bargaining Employees," "Entergy
Corporation Retirement Plan II for Non-Bargaining Employees," "Entergy
Corporation Retirement Plan II for Bargaining Employees," and "Entergy
Corporation Retirement Plan III" covering substantially all of its
domestic employees. Except for the Entergy Corporation Retirement Plan
III, the pension plans are noncontributory and provide pension benefits
that are based on employees' credited service and compensation during
the final years before retirement. The Entergy Corporation Retirement
Plan III includes a mandatory employee contribution of 3% of earnings
during the first 10 years of plan participation, and allows voluntary
contributions from 1% to 10% of earnings for a limited group of
employees. Entergy Corporation and its subsidiaries fund pension costs
in accordance with contribution guidelines established by the Employee
Retirement Income Security Act of 1974, as amended, and the Internal
Revenue Code of 1986, as amended. The assets of the plans include
common and preferred stocks, fixed-income securities, interest in a
money market fund, and insurance contracts.
Total 2001, 2000, and 1999 pension cost of Entergy Corporation and
its subsidiaries, including amounts capitalized, included the following
components (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $49,166 $9,207 $6,645 $5,358 $2,659 $1,280 $2,423
Interest cost on projected
benefit obligation 118,448 30,746 26,292 19,114 10,602 3,643 3,366
Expected return on assets (157,889) (41,308) (44,511) (31,089) (16,547) (2,712) (3,865)
Amortization of transition asset (7,142) (2,336) - (2,792) (1,250) - (319)
Amortization of prior service cost 5,735 1,697 1,896 759 694 262 59
Recognized net (gain)/loss (6,573) (2,228) (7,266) (2,398) (1,406) 172 (52)
--------------------------------------------------------------------------
Net pension cost (income) $1,745 ($4,222) ($16,944) ($11,048) ($5,248) $2,645 $1,612
==========================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $37,130 $8,125 $6,051 $4,710 $2,314 $1,138 $2,140
Interest cost on projected
benefit obligation 108,782 31,128 25,135 18,287 11,268 3,591 2,430
Expected return on assets (145,717) (38,571) (41,322) (28,588) (15,341) (2,710) (3,014)
Amortization of transition asset (9,740) (2,336) (2,387) (2,823) (1,250) (180) (319)
Amortization of prior service cost 12,953 1,701 1,896 805 669 262 59
Recognized net (gain)/loss (8,576) (200) (7,204) (1,849) (292) 247 (96)
-------------------------------------------------------------------------
Net pension cost (income) ($5,168) ($153) ($17,831) ($9,458) ($2,632) $2,348 $1,200
=========================================================================
1999 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $39,327 $8,723 $6,531 $4,948 $2,278 $997 $2,334
Interest cost on projected
benefit obligation 104,591 29,457 24,757 17,950 10,810 3,296 3,017
Expected return on assets (130,535) (34,784) (37,170) (25,629) (13,815) (2,601) (3,738)
Amortization of transition asset (9,740) (2,336) (2,387) (2,808) (1,250) (195) (482)
Amortization of prior service cost 11,362 1,227 1,434 558 480 165 64
---------------------------------------------------------------------------
Net pension cost (income) $15,005 $2,287 ($6,835) ($4,981) ($1,497) $1,662 $1,195
===========================================================================
The funded status of Entergy's various pension plans as of
December 31, 2001 and 2000 was (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Change in Projected Benefit
Obligation (PBO)
Balance at 12/31/00 $1,602,673 $441,108 $352,815 $259,365 $158,166 $51,491 $36,895
Service cost 49,166 9,207 6,645 5,358 2,659 1,280 2,423
Interest cost 118,448 30,746 26,292 19,114 10,602 3,643 3,366
Amendment 212 (48) - - 260 - -
Actuarial (gain)/loss 16,369 (18,323) 10,753 6,911 (11,759) (1,880) 8,002
Benefits paid (88,476) (25,137) (25,598) (18,296) (10,120) (2,140) (122)
Acquisition 22,100 - - - - - -
----------------------------------------------------------------------------
Balance at 12/31/01 $1,720,492 $437,553 $370,907 $272,452 $149,808 $52,394 $50,564
----------------------------------------------------------------------------
Change in Plan Assets
Fair value of assets at 12/31/00 $1,843,115 $484,060 $522,257 $362,427 $193,788 $31,707 $36,915
Actual return on plan assets (80,335) (15,056) (28,201) (20,566) (9,052) 2,243 3,756
Employer contributions 10,532 - - - - - -
Employee contributions 2,000 - - - - - -
Benefits paid (88,476) (25,137) (25,598) (18,296) (10,120) (2,140) (122)
----------------------------------------------------------------------------
Fair value of assets at 12/31/01 $1,686,836 $443,867 $468,458 $323,565 $174,616 $31,810 $40,549
----------------------------------------------------------------------------
Funded status ($33,656) $6,314 $97,551 $51,113 $24,808 ($20,584)($10,015)
Unrecognized transition asset (3,202) - - - (222) - (1,262)
Unrecognized prior service cost 40,330 13,299 11,516 5,813 4,334 1,979 364
Unrecognized net (gain)/loss (70,934) (37,662) (101,785) (27,798) (19,620) 7,819 1,205
----------------------------------------------------------------------------
Prepaid/(accrued) pension cost ($67,462) ($18,049) $7,282 $29,128 $9,300 ($10,786) ($9,708)
============================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Change in Projected Benefit
Obligation (PBO)
Balance at 12/31/99 $1,499,601 $424,554 $348,217 $256,949 $153,262 $46,042 $43,262
Service cost 37,130 8,125 6,051 4,710 2,314 1,138 2,140
Interest cost 108,782 31,128 25,135 18,287 11,268 3,591 2,430
Amendment 18,376 5,321 5,166 3,139 2,129 1,220 11
Actuarial (gain)/loss (32,916) (3,455) (6,134) (7,077) (901) 1,739 (10,810)
Benefits paid (85,185) (24,565) (25,620) (16,643) (9,906) (2,239) (138)
Acquisitions 56,884 - - - - - -
----------------------------------------------------------------------------
Balance at 12/31/00 $1,602,672 $441,108 $352,815 $259,365 $158,166 $51,491 $36,895
----------------------------------------------------------------------------
Change in Plan Assets
Fair value of assets at 12/31/99 $1,965,178 $518,262 $563,597 $389,755 $207,475 $31,370 $56,442
Actual return on plan assets (40,047) (9,637) (15,720) (10,685) (3,781) 2,576 (19,389)
Employer contributions 3,083 - - - - - -
Employee contributions 86 - - - - - -
Benefits paid (85,185) (24,565) (25,620) (16,643) (9,906) (2,239) (138)
----------------------------------------------------------------------------
Fair value of assets at 12/31/00 $1,843,115 $484,060 $522,257 $362,427 $193,788 $31,707 $36,915
----------------------------------------------------------------------------
Funded status $240,443 $42,952 $169,442 $103,062 $35,622 ($19,784) $20
Unrecognized transition asset (10,094) (2,336) - (2,792) (1,250) - (1,262)
Unrecognized prior service cost 44,223 14,822 13,050 6,572 4,915 2,241 364
Unrecognized net (gain)/loss (328,642) (77,710) (192,154) (88,761) (35,234) 9,402 (7,219)
----------------------------------------------------------------------------
Prepaid/(accrued) pension cost ($54,070) ($22,272) ($9,662) $18,081 $4,053 ($8,141) ($8,097)
============================================================================
Other Postretirement Benefits
Entergy also provides health care and life insurance benefits for
retired employees. Substantially all domestic employees may become
eligible for these benefits if they reach retirement age while still
working for Entergy.
Effective January 1, 1993, Entergy adopted SFAS 106, which
required a change from a cash method to an accrual method of accounting
for postretirement benefits other than pensions. At January 1, 1993,
the actuarially determined accumulated postretirement benefit
obligation (APBO) earned by retirees and active employees was estimated
to be approximately $241.4 million for Entergy (other than Entergy Gulf
States) and $128 million for Entergy Gulf States. Such obligations are
being amortized over a 20-year period that began in 1993.
Entergy Arkansas, the portion of Entergy Gulf States regulated by
the PUCT, Entergy Mississippi, and Entergy New Orleans have received
regulatory approval to recover SFAS 106 costs through rates. Entergy
Arkansas began recovery in 1998, pursuant to an APSC order. This order
also allowed Entergy Arkansas to amortize a regulatory asset
(representing the difference between SFAS 106 costs and cash
expenditures for other postretirement benefits incurred for a five-year
period that began January 1, 1993) over a 15-year period that began in
January 1998.
The LPSC ordered the portion of Entergy Gulf States regulated by
the LPSC and Entergy Louisiana to continue the use of the pay-as-you-go
method for ratemaking purposes for postretirement benefits other than
pensions. However, the LPSC retains the flexibility to examine
individual companies' accounting for postretirement benefits to
determine if special exceptions to this order are warranted.
Pursuant to regulatory directives, Entergy Arkansas, Entergy
Mississippi, Entergy New Orleans, the portion of Entergy Gulf States
regulated by the PUCT, and System Energy fund postretirement benefit
obligations collected in rates. System Energy is funding on behalf of
Entergy Operations postretirement benefits associated with Grand Gulf
1. Entergy Louisiana and Entergy Gulf States continue to recover a
portion of these benefits regulated by the LPSC and FERC on a pay-as-
you-go basis. The assets of the various postretirement benefit plans
other than pensions include common stocks, fixed-income securities, and
a money market fund.
Total 2001, 2000, and 1999 postretirement benefit costs of Entergy
Corporation and its subsidiaries, including amounts capitalized and
deferred, included the following components (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $24,225 $4,969 $3,606 $2,707 $1,302 $739 $1,094
Interest cost on APBO 38,811 8,551 8,911 5,527 2,816 3,158 907
Expected return on assets (12,578) (3,218) (4,104) - (1,933) (1,832) (959)
Amortization of transition obligation 17,874 3,954 5,803 2,971 1,502 2,678 220
Amortization of prior service cost 992 245 278 141 87 89 24
Recognized net (gain)/loss (1,506) 173 (1,028) 45 - (180) -
-------------------------------------------------------------------------
Net postretirement benefit cost $67,818 $14,674 $13,466 $11,391 $3,774 $4,652 $1,286
=========================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $18,252 $4,395 $3,147 $2,405 $1,236 $667 $998
Interest cost on APBO 34,022 7,945 8,346 5,073 2,714 3,012 788
Expected return on assets (10,566) (2,196) (3,682) - (1,696) (1,661) (811)
Amortization of transition obligation 17,874 3,954 5,803 2,971 1,502 2,678 220
Amortization of prior service cost 520 123 161 71 44 45 12
Recognized net (gain) (3,070) - (1,803) (30) - (561) (8)
-------------------------------------------------------------------------
Net postretirement benefit cost $57,032 $14,221 $11,972 $10,490 $3,800 $4,180 $1,199
=========================================================================
1999 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $16,950 $3,952 $3,227 $2,140 $1,009 $512 $982
Interest cost on APBO 29,467 6,596 8,206 4,234 2,167 2,699 631
Expected return on assets (8,208) (1,309) (2,980) - (1,634) (1,425) (522)
Amortization of transition obligation 17,874 3,954 5,803 2,971 1,502 2,678 222
Amortization of prior service cost 44 - 44 - - - -
Recognized net (gain) (1,452) - (393) (227) (69) (616) (8)
-------------------------------------------------------------------------
Net postretirement benefit cost $54,675 $13,193 $13,907 $9,118 $2,975 $3,848 $1,305
=========================================================================
The funded status of Entergy's postretirement plans as of December
31, 2001 and 2000 was (in thousands):
2001 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Change in APBO
Balance at 12/31/00 $507,756 $114,667 $118,824 $72,721 $38,994 $42,133 $11,990
Service cost 24,225 4,969 3,606 2,707 1,302 739 1,094
Interest cost 38,811 8,551 8,911 5,527 2,816 3,158 907
Actuarial loss 44,289 8,573 9,203 7,182 1,680 4,406 1,536
Benefits paid (37,403) (8,825) (9,293) (6,438) (2,996) (4,452) (524)
Acquisitions 13,053 - - - -
--------------------------------------------------------------------------
Balance at 12/31/01 $590,731 $127,935 $131,251 $81,699 $41,796 $45,984 $15,003
--------------------------------------------------------------------------
Change in Plan Assets
Fair value of assets at 12/31/00 $143,038 $32,843 $44,408 $ - $21,657 $26,217 $11,655
Actual return on plan assets 663 160 222 - 43 327 (163)
Employer contributions 51,892 16,155 13,106 6,438 4,151 5,668 1,583
Benefits paid (37,403) (8,825) (9,293) (6,438) (2,996) (4,452) (524)
--------------------------------------------------------------------------
Fair value of assets at 12/31/01 $158,190 $40,333 $48,443 $ - $22,855 $27,760 $12,551
--------------------------------------------------------------------------
Funded status ($432,541) ($87,602) ($82,808) ($81,699) ($18,941) ($18,224) ($2,452)
Unrecognized transition obligation 126,196 43,482 63,838 32,691 16,521 29,471 2,453
Unrecognized prior service cost 4,514 1,103 1,302 636 393 402 103
Unrecognized net (gain)/loss 70,208 19,391 (10,198) 3,670 5,787 (2,250) 640
---------------------------------------------------------------------------
Prepaid/(accrued) postretirement ($231,623) ($23,626) ($27,866) ($44,702) $3,760 $9,399 $744
benefit asset/(liability) ===========================================================================
2000 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Change in APBO
Balance at 12/31/99 $429,772 $95,656 $118,295 $61,156 $31,133 $38,363 $9,546
Service cost 18,252 4,395 3,147 2,405 1,236 667 998
Interest cost 34,022 7,945 8,346 5,073 2,714 3,012 788
Amendment 5,691 1,471 1,406 848 524 536 139
Actuarial (gain)/loss 34,759 13,486 (3,845) 8,551 6,060 3,891 1,104
Benefits paid (33,238) (8,286) (8,525) (5,312) (2,673) (4,336) (585)
Acquisitions 18,498 - - - - - -
-----------------------------------------------------------------------------
Balance at 12/31/00 $507,756 $114,667 $118,824 $72,721 $38,994 $42,133 $11,990
-----------------------------------------------------------------------------
Change in Plan Assets
Fair value of assets at 12/31/99 $120,208 $22,205 $39,045 $ - $19,614 $23,716 $9,549
Actual return on plan assets 3,719 808 1,448 - 422 584 288
Employer contributions 52,339 18,116 12,440 5,312 4,294 6,253 2,403
Benefits paid (33,238) (8,286) (8,525) (5,312) (2,673) (4,336) (585)
Acquisitions 10 - - - - - -
-----------------------------------------------------------------------------
Fair value of assets at 12/31/00 $143,038 $32,843 $44,408 $ - $21,657 $26,217 $11,655
-----------------------------------------------------------------------------
Funded status ($364,718) ($81,824) ($74,416) ($72,721) ($17,337) ($15,916) ($335)
Unrecognized transition obligation 137,669 47,436 69,641 35,662 18,023 32,149 2,673
Unrecognized prior service cost 5,506 1,348 1,580 777 480 491 127
Unrecognized net (gain)/loss 18,900 7,933 (24,311) (3,467) 2,217 (8,341) (2,018)
-----------------------------------------------------------------------------
Prepaid/(accrued) postretirement ($202,643) ($25,107) ($27,506) ($39,749) $3,383 $8,383 $447
benefit asset/(liability) ==============================================================================
The assumed health care cost trend rate used in measuring the APBO of
Entergy was 8% for 2002, gradually decreasing each successive year
until it reaches 5% in 2009 and beyond. A one percentage-point change
in the assumed health care cost trend rate for 2001 would have the
following effects (in thousands):
1 Percentage Point 1 Percentage Point
Increase Decrease
2001 Increase Increase Decrease in Decrease
in the in the sum the APBO in the sum
APBO of service of service
cost and cost and
interest interest
cost cost
Entergy $61,321 $8,651 $51,408 $7,077
Entergy Arkansas $12,480 $1,767 $10,509 $1,451
Entergy Gulf States $12,975 $1,624 $10,951 $1,337
Entergy Louisiana $7,512 $1,014 $6,356 $839
Entergy Mississippi $3,834 $494 $3,240 $408
Entergy New Orleans $3,383 $376 $2,914 $315
System Energy $1,938 $328 $1,599 $265
The significant actuarial assumptions used in determining the pension
PBO and the SFAS 106 APBO for 2001, 2000, and 1999 were as follows:
2001 2000 1999
Weighted-average discount rate 7.50% 7.50% 7.50%
Weighted-average rate of increase
in future compensation levels 4.60% 4.60% 4.60%
Expected long-term rate of
return on plan assets:
Taxable assets 5.50% 5.50% 5.50%
Non-taxable assets 9.00% 9.00% 9.00%
Entergy's remaining pension transition assets are being amortized over
the greater of the remaining service period of active participants or
15 years and its SFAS 106 transition obligations are being amortized
over 20 years.
NOTE 12. BUSINESS SEGMENT INFORMATION (Entergy Corporation and
Entergy New Orleans)
Entergy's reportable segments as of December 31, 2001 are domestic
utility, domestic non-utility nuclear, and energy commodity services.
Domestic utility provides retail electric service in portions of
Arkansas, Louisiana, Mississippi, and Texas, and provides natural gas
utility service in portions of Louisiana. Entergy's domestic non-
utility nuclear segment is focused on acquiring, owning, operating, and
selling power from nuclear power plants and providing operations and
management services to nuclear power plants owned by other utilities in
the United States. Energy commodity services includes the: 1) Entergy-
Koch joint venture, engaged in the marketing of wholesale electricity,
gas, other generating fuels, electric capacity, and financial
instruments, and also transports and stores natural gas; and 2) Entergy
Wholesale Operations, focused on acquiring or developing power
generation projects in North America and Europe. Entergy's operating
segments are strategic business units managed separately due to their
different operating and regulatory environments. Entergy's chief
operating decision maker is its Office of the Chief Executive, which
consists of its highest-ranking officers.
During the third quarter of 2001, Entergy began integration of
Entergy-Koch and Entergy Wholesale Operations into the energy commodity
services segment. Prior to the third quarter of 2001, Entergy-Koch and
Entergy Wholesale Operations were reported as separate segments. Prior
to the first quarter of 2001, Entergy reported its power marketing and
trading segment separately. On January 31, 2001, Entergy contributed
substantially all of its power marketing and trading business to
Entergy-Koch, which is now a part of the energy commodity services
segment. Results from Entergy-Koch are reported as equity in earnings
of unconsolidated equity affiliates in the financial statements. See
Note 13 to the financial statements for further discussion of the
investment in Entergy-Koch, L.P. The segment financial information for
1999 and 2000 has been restated to conform with the 2001 presentation.
"All other" includes the parent company, Entergy Corporation, and
other business activity, which is principally gains or losses on the
sales of businesses and the earnings on the proceeds of those sales.
Entergy's segment financial information is as follows (in
thousands):
Domestic Domestic Energy All Other* Eliminations Consolidated
Utility Non-Utility Commodity
Nuclear* Services*
2001
Operating revenues $7,432,920 $789,244 $1,370,485 $34,603 ($6,353) $9,620,899
Deprec, amort. & decomm. 667,333 17,706 34,667 4,516 - 724,222
Amort. of rate deferrals 16,583 - - - - 16,583
Interest income 79,702 54,053 23,169 37,235 (34,354) 159,805
Equity in earnings of
unconsolidated equity affiliates - - 180,956 - - 180,956
Interest charges 576,705 81,114 74,953 41,558 (34,353) 739,977
Income taxes 300,284 80,053 74,493 863 - 455,693
Cumulative effect of accounting change - - 23,482 - - 23,482
Net income (loss) 574,554 127,880 105,939 (57,866) - 750,507
Total assets 20,309,695 3,449,156 2,377,733 863,906 (1,090,179) 25,910,311
Investment in affiliates - at equity 214 - 765,889 - - 766,103
Cash paid for long-lived asset additions 1,110,484 705,216 199,387 21,550 - 2,036,637
Domestic Domestic Non- Energy All Other* Eliminations Consolidated
Utility Utility Commodity
Nuclear* Services*
2000
Operating revenues $7,401,598 $298,147 $2,353,792 $32,450 ($63,858) $10,022,129
Deprec, amort. & decomm. 770,144 1,191 10,996 3,278 - 785,609
Amort. of rate deferrals 30,392 - - - - 30,392
Interest income 57,795 29,534 5,838 78,390 (8,507) 163,050
Equity in earnings of
unconsolidated equity affiliates - - 13,715 - - 13,715
Interest charges 515,156 33,213 (3,725) 22,103 (9,317) 557,430
Income taxes 435,667 31,492 24,689 (12,927) - 478,921
Net income 618,263 49,158 54,908 (11,414) - 710,915
Total assets 20,567,433 2,227,177 2,590,678 620,104 (553,496) 25,451,896
Investment in affiliates - at equity 214 - 136,273 - - 136,487
Cash paid for long-lived asset additions 1,080,055 63,593 390,298 9,771 - 1,543,717
Domestic Domestic Energy All Other* Eliminations Consolidated
Utility Non-Utility Commodity
Nuclear* Services*
1999
Operating revenues $6,414,623 $109,699 $2,292,158 ($17,030) ($33,815) $8,765,635
Deprec, amort. & decomm. 732,182 131 6,934 5,622 - 744,869
Amort. of rate deferrals 115,627 - - - - 115,627
Interest income 49,556 8,673 15,459 73,453 (3,540) 143,601
Equity in earnings of
unconsolidated equity affiliates - - 7,593 - - 7,593
Interest charges 536,543 7,527 9,392 5,679 (3,540) 555,601
Income taxes 351,448 10,525 (28,998) 23,692 - 356,667
Net income (loss) 553,525 15,705 (39,940) 65,736 - 595,026
Total assets 18,941,603 573,330 1,832,316 1,816,532 (193,841) 22,969,940
Investment in affiliates - at equity 214 - 117,164 - - 117,378
Cash paid for long-lived asset additions 761,356 92,625 420,024 2,709 - 1,276,714
Businesses marked with * are referred to as the "competitive
businesses," with the exception of the parent company, Entergy
Corporation, which is also included in the "All Other" column.
Eliminations are primarily intersegment activity.
Products and Services
In addition to retail electric service, Entergy New Orleans
supplies natural gas services in the City of New Orleans. Revenue from
these two services is separately reported in Entergy New Orleans'
Income Statements.
Geographic Areas
For the year ended December 31, 2001, Entergy derived
approximately 6% of its revenue from outside of the United States. For
the years ended 2000 and 1999, Entergy derived less than 1% of its
operating revenue from outside of the United States.
Long-lived assets as of December 31 were as follows (in
thousands):
2001 2000 1999
Domestic $16,842,158 $15,425,915 $14,751,166
Foreign 421,870 1,019,831 749,590
----------- ----------- -----------
Consolidated $17,264,028 $16,445,746 $15,500,756
=========== =========== ===========
NOTE 13. EQUITY METHOD INVESTMENTS (Entergy Corporation)
In January 2001, subsidiaries of Entergy and Koch Industries, Inc.
formed a limited partnership, Entergy-Koch, L.P. Entergy-Koch engages
in the gathering, transmission, and storage of natural gas in the Gulf
Coast region of the United States through its Gulf South Pipeline
subsidiary. Entergy-Koch engages in physical and financial natural gas
and power trading, and weather derivatives trading, in the United
States, the United Kingdom, Western Europe, and Canada through its
Entergy-Koch Trading subsidiaries. In the formation of the
partnership, Entergy contributed most of the assets and trading
contracts of its power marketing and trading business and $414 million
of cash. Koch Industries contributed its 8,800-mile Koch Gateway
Pipeline (which has been renamed the Gulf South Pipeline), gas storage
facilities including the 65.8 BCF Bistineau storage facility located
near Shreveport, Louisiana, and Koch Energy Trading, which marketed and
traded electricity, gas, weather derivatives, and other energy-related
commodities and services.
Entergy and Koch have equal ownership interests in Entergy-Koch,
L.P., which is governed by an eight-member board of directors. Each
partner appointed four members of the board. Although the ownership
interests are equal, the partnership agreement allocates Entergy-Koch's
profits differently through 2003 based upon the source of the earnings.
Losses and distributions from operations are allocated to the partners
equally. These significantly disproportionate profit allocations were
favorable to Entergy in the aggregate in 2001. In 2004, a revaluation
of Entergy-Koch's assets for capital account purposes will occur, and
future profit allocations will change after the revaluation. The
profit allocations other than for weather trading and international
trading are expected to become equal, unless special allocations are
necessary to equalize the partners' capital accounts. Earnings
allocated under the terms of the partnership agreement constitute
equity, not subject to reallocation, for the partners.
Entergy also owns investments in the following companies that it
accounts for under the equity method of accounting: Generandes Peru
S.A. (in which Entergy owns 34% of the voting power), a privatized
generation company that provides a significant portion of electricity
for Lima, Peru; Compania Electrica San Isidro S.A. (in which Entergy
owns 25% of the voting power), a power plant that provides power to the
Chilean market with a portion under contract and the remainder on a
merchant basis; RS Cogen LLC (in which Entergy holds a 50% member
interest), a co-generation project that will provide power on an
industrial and merchant basis in the Lake Charles, Louisiana area;
EntergyShaw LLC (in which Entergy holds a 50% member interest), a
company which provides management, engineering, procurement,
construction, and commissioning services for electric power plants; and
Crete Energy Ventures, LLC (in which Entergy holds a 50% member
interest), a merchant power plant under construction in Crete,
Illinois. Following is a reconciliation of Entergy's investments in
equity affiliates (in thousands):
2001 2000 1999
Beginning of year $136,487 $117,378 $139,064
Additional investments 471,102 25,943 296
Equity in net income 180,956 13,715 7,593
Dividends received (21,191) (20,468) (9,389)
Currency translation adjustments 138 (891) (20,186)
Dispositions and other adjustments (1,389) 810 -
-------- -------- --------
End of year $766,103 $136,487 $117,378
======== ======== ========
The following is a summary of combined financial information
reported by Entergy's equity method investees (in thousands):
2001 2000 1999
Income Statement Items
Operating revenues $693,400 $200,026 $188,617
Operating income 309,752 90,694 82,336
Net income 226,039 74,042 49,473
Balance Sheet Items
Current assets $2,969,132 $82,044
Noncurrent assets 3,309,752 1,554,022
Current liabilities 2,729,769 163,063
Noncurrent liabilities 1,491,957 489,544
Related-party transactions
During 2001, Entergy procured various services from Entergy-Koch
consisting primarily of pipeline transportation services for natural
gas and risk management services for electricity and natural gas. The
total cost of such services in 2001 was approximately $7.8 million.
Entergy's operating transactions with its other equity method investees
were not material in 2001, 2000, or 1999.
EntergyShaw is currently constructing two projects for Entergy or
its affiliates, the Crete and Harrison County projects. Entergy has
guaranteed the obligations of EntergyShaw to construct the Harrison
County plant, and Entergy's maximum liability on the guarantee is
$232.5 million.
NOTE 14. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation)
Asset Acquisitions
Indian Point 2
In September 2001, Entergy's domestic non-utility nuclear business
acquired the 970 MW Indian Point 2 nuclear power plant located in
Westchester County, New York from Consolidated Edison. Entergy paid
approximately $600 million in cash at the closing of the purchase and
received the plant, nuclear fuel, materials and supplies, a purchase
power agreement (PPA), and assumed certain liabilities. On the second
anniversary of the Indian Point 2 acquisition, Entergy's nuclear
business will also begin to pay NYPA $10 million per year for up to 10
years in accordance with the Indian Point 3 purchase agreement. Under
the PPA, Consolidated Edison will purchase 100% of Indian Point 2's
output for an average price of $39/MWh through 2004. Consolidated
Edison transferred a $430 million decommissioning trust fund, along
with the liability to decommission Indian Point 2 and Indian Point 1,
to Entergy. Entergy acquired Indian Point 1 in the transaction, a
plant that has been shut down and in safe storage since the 1970s.
The acquisition was accounted for using the purchase method. The
results of operations of Indian Point 2 subsequent to the purchase date
have been included in Entergy's consolidated results of operations.
The Indian Point 2 purchase price has been preliminarily allocated to
the assets acquired and liabilities assumed based on their estimated
fair values on the purchase date. The allocation was based on
preliminary information and amounts recorded may change, primarily as a
result of additional expected information on the fair value of the
plant facility.
Indian Point 3 and FitzPatrick
In November 2000, Entergy's domestic non-utility nuclear business
acquired from NYPA the 825 MW James A. FitzPatrick nuclear power plant
near Oswego, New York, and the 980 MW Indian Point 3 nuclear power
plant located in Westchester County, New York, in exchange for $50
million at closing and notes to NYPA with payments totaling
$906 million. Entergy will also be required to make certain additional
payments to NYPA in the event that the plants' license lives are
extended.
The acquisition encompassed the nuclear plants, materials and
supplies, and nuclear fuel, as well as the assumption of $124 million
in liabilities. The purchase agreement provides that NYPA will
purchase a substantial majority of the output of the units at specified
prices through 2004. The purchase agreement also provides that NYPA
will retain the decommissioning obligations and related trust funds
through the original license expiration date (approximately 2015). At
that time, NYPA is required either to transfer the decommissioning
liability to Entergy along with a specified amount in the
decommissioning trust funds, or to retain Entergy to perform
decommissioning services for a specified price that may be limited by
the amount in the trust. In the purchase price allocation, Entergy
recorded an asset representing its estimate of the net present value of
the decommissioning contract obtained in the acquisition, based on an
independent decommissioning cost study and other projections. The
asset increases by monthly accretion based on the discount rate used to
determine the original net present value. Entergy records the monthly
accretion as interest income.
The acquisition was accounted for using the purchase method. The
results of operations of Indian Point 3 and FitzPatrick subsequent to
November 21, 2000 have been included in Entergy's consolidated
statements of income. The purchase price has been allocated to the
acquired assets, including identifiable intangible assets, and
liabilities assumed based on their estimated fair values on the
purchase date. Intangible assets are being amortized straight-line
over the remaining lives of the plants.
Pilgrim Nuclear Station
In July 1999, Entergy's domestic non-utility nuclear business
acquired the 670 MW Pilgrim Nuclear Station located in Plymouth,
Massachusetts, from Boston Edison. The acquisition included the plant,
real estate, materials and supplies, and nuclear fuel, for a total
purchase price of $81 million. As part of the Pilgrim purchase, Boston
Edison funded a $471 million decommissioning trust fund, which was
transferred to an Entergy subsidiary. Based on a favorable tax
determination regarding the trust fund, Entergy returned $43 million of
the trust fund to Boston Edison.
Asset Dispositions
In August 2001, Entergy's EWO business sold the Saltend plant to
Calpine Corporation for a cash payment of approximately $800 million.
Entergy's gain on the sale was approximately $88.1 million ($57.2
million after tax). The results of operations of the Saltend plant are
included in Entergy's consolidated statements of income through the
date of sale. The gain arising from the sale is included in operating
revenues in that statement. EWO actively manages its assets as an
investment portfolio, and attempts to maximize flexibility to respond
to different market environments. Active management of the portfolio
is expected to result in: the commercial operation of projects by EWO;
the sale of projects at various stages in their planning, development,
or operation; or the abandonment of projects. In the sales
transaction, Entergy or its subsidiaries made certain warranties to the
purchasers relating primarily to the performance of certain remedial
work on the facility and the assumption of responsibility for certain
contingent liabilities. The warranties are backed by an Entergy
Corporation guarantee, and Entergy believes that it has provided
adequate reserves for the warranties as of December 31, 2001.
In January 1999, Entergy disposed of its security monitoring
subsidiary, Entergy Security, Inc. at a minimal gain. Several
telecommunication businesses were sold in June 1999, also at small
gains. The results of operations of these businesses are included in
Entergy's consolidated statements of income through their respective
dates of sale. Gains and losses arising from these sales are included
in "Other Income, Gain (loss) on sale of assets - net" in that
statement.
NOTE 15. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation)
Market and Commodity Risks
In the normal course of business, Entergy is exposed to a number
of market and commodity risks. Market risk is the potential loss that
Entergy may incur as a result of changes in the market or fair value of
a particular instrument or commodity. All financial and commodity-
related instruments, including derivatives, are subject to market risk.
Entergy is subject to a number of commodity and market risks,
including:
Type of risk Primary Affected Segments
Power price risk All reportable segments
Fuel price risk All reportable segments
Interest rate risk - variable rate debt Energy Commodity Services
Foreign currency exchange rate risk All reportable segments
Equity price and interest rate risk - Domestic Utility, Domestic
investments Non-utility Nuclear
Entergy manages these risks through both contractual arrangements
and derivatives. Contractual risk management tools include long-term
power and fuel purchase agreements, capacity contracts, and tolling
agreements. Entergy also uses a variety of commodity and financial
derivatives, including natural gas and electricity futures, forwards
and options, foreign currency forwards, and interest rate swaps as a
part of its overall risk management strategy. Additionally, certain
fuel supply contracts with volumetric optionality are required to be
classified as derivatives under interpretations of SFAS 133. Except
for the energy trading activities conducted by the energy commodity
services segment, Entergy enters into derivatives only to manage
natural risks inherent in its physical or financial assets or
liabilities.
Entergy's exposure to market risk is determined by a number of
factors, including the size, term, composition, and diversification of
positions held, as well as market volatility and liquidity. For
instruments such as options, the time period during which the option
may be exercised and the relationship between the current market price
of the underlying instrument and the option's contractual strike or
exercise price also affects the level of market risk. A significant
factor influencing the overall level of market risk to which Entergy is
exposed is its use of hedging techniques to mitigate such risk.
Entergy manages market risk by actively monitoring compliance with
stated risk management policies as well as monitoring the effectiveness
of its hedging policies and strategies. Entergy's risk management
policies limit the amount of total net exposure and rolling net
exposure during the stated periods. These policies, including related
risk limits, are regularly assessed to ensure their appropriateness
given Entergy's objectives.
Hedging Derivatives
Entergy classifies substantially all of the following types of
derivative instruments as cash flow hedges:
Instrument Business Segment
Interest rate swaps Energy Commodity Services
Natural gas and electricity futures Energy Commodity Services
and forwards
Foreign currency forwards Domestic Utility, Domestic Non-
utility Nuclear
The scheduled maturity of futures, forwards, and swaps that are
classified as cash flow hedges will result in the reclassification into
earnings during 2002 of approximately $5.2 million of net losses that
are recorded in accumulated other comprehensive income at December 31,
2001. During 2001, net losses on cash flow hedges of approximately
$22.2 million were reclassified into earnings. The maximum length of
time over which Entergy is currently hedging the variability in future
cash flows for forecasted transactions (excluding interest rate swaps)
at December 31, 2001 is approximately 25 months. The ineffective
portion of the change in the value of Entergy's cash flow hedges during
2001 was insignificant.
Other Derivatives
Entergy also holds derivative instruments such as natural gas and
electricity options and forwards that are not accounted for as hedges.
These instruments are entered into to optimize asset values or limit
risks. Additionally, fuel supply contracts that are required to be
classified as derivatives under SFAS 133 are not accounted for as
hedges. These contracts are entered into in order to secure long term
supplies of fuel for certain of Entergy's independent power generation
plants.
Fair Values
Commodity Instruments
Fair value estimates of energy commodity services' commodity
instruments are made at discrete points in time based on relevant
market information. Market quotes are used in determining fair value
whenever they are available. When market quotes are not available
(e.g. in the case of a long-dated commodity contract), other
information is used, including transactional data and internally
developed models. Fair value estimates based on these other
methodologies are necessarily subjective in nature and involve
uncertainties and matters of significant judgment. Therefore, actual
results may differ from these estimates. At December 31, 2001 and
2000, the fair values of energy commodity services' energy-related
commodity contracts accounted for on a mark-to-market basis were as
follows:
2001 2000
Assets Liabilities Assets Liabilities
(In Thousands)
Consolidated subsidiaries $59,996 $18,882 $623,190 $563,447
Equity method investees $2,088,953 $1,982,196 - -
(1)
(1) As required by equity method accounting principles, only
Entergy's net investment in these investees is reflected in its balance
sheet, and these assets and liabilities are not reflected in Entergy's
balance sheet. See Note 13 to the financial statements for more
information on Entergy's equity method investees.
Following are the cumulative periods in which the net mark-to-market
assets would be realized in cash if they are held to maturity and
market prices are unchanged:
2002 2003 2004-2005
Consolidated subsidiaries 55% 98% 100%
Equity method investees 10% 83% 100%
Financial Instruments
The estimated fair value of Entergy's financial instruments is
determined using bid prices reported by dealer markets and by
nationally recognized investment banking firms. The estimated fair
value of derivative financial instruments is based on market quotes of
the applicable interest rates. Considerable judgment is required in
developing the estimates of fair value. Therefore, estimates are not
necessarily indicative of the amounts that Entergy could realize in a
current market exchange. In addition, gains or losses realized on
financial instruments held by regulated businesses may be reflected in
future rates and therefore do not accrue to the benefit or detriment of
stockholders.
Entergy considers the carrying amounts of most of its financial
instruments classified as current assets and liabilities to be a
reasonable estimate of their fair value because of the short maturity
of these instruments. Additional information regarding financial
instruments and their fair values is included in Notes 5, 6, and 7 to
the financial statements.
NOTE 16. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
Each domestic utility company purchases electricity from and sells
electricity to the other domestic utility companies, System Energy, and
Entergy Power (in the case of Entergy Arkansas) under rate schedules
filed with FERC. In addition, the domestic utility companies and
System Energy purchase fuel from System Fuels; receive management,
technical, advisory, operating, and administrative services from
Entergy Services; and receive management, technical, and operating
services from Entergy Operations. Pursuant to SEC rules under PUHCA,
these transactions are on an "at cost" basis, and are eliminated in the
consolidated financial statements of Entergy.
As described in Note 1 to the financial statements, all of System
Energy's operating revenues consist of billings to Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
The tables below contain the various affiliate transactions among
the domestic utility companies and System Energy (in millions).
Intercompany Revenues
Entergy Entergy Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Mississippi New Orleans Energy
2001 $250.2 $75.2 $26.1 $118.3 $10.0 $535.0
2000 $255.3 $93.7 $20.8 $88.1 $31.6 $656.7
1999 $189.2 $38.4 $27.3 $68.3 $14.2 $620.0
Intercompany Operating Expenses
Entergy Entergy Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(1)
2001 $262.9 $274.8 $298.1 $535.2 $231.7 $ 9.5
2000 $387.9 $239.4 $388.5 $388.2 $177.0 $10.1
1999 $357.5 $223.9 $294.3 $315.6 $182.5 $ 9.8
(1) Includes $3.5 million in 2001, $47.3 million in 2000, and $15.8
million in 1999 for power purchased from Entergy Power.
Operating Expenses Paid or Reimbursed to Entergy Operations
Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Energy
2001 $141.4 $102.7 $104.6 $75.8
2000 $163.0 $116.0 $113.2 $92.6
1999 $179.2 $110.9 $113.8 $91.3
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
The business of the domestic utility companies and System Energy
is subject to seasonal fluctuations with the peak periods occurring
during the third quarter. Operating results for the four quarters of
2001 and 2000 were:
Operating Revenue
Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
2001:
First Quarter $2,652,427 $393,800 $734,476 $548,914 $256,158 $204,015 $151,166
Second Quarter 2,507,430 453,108 730,893 547,784 274,148 160,309 152,902
Third Quarter 2,575,736 541,556 714,488 473,342 354,518 167,137 66,276
Fourth Quarter 1,885,306 388,312 468,703 331,873 208,917 99,389 164,683
2000:
First Quarter $1,804,661 $346,877 $483,231 $346,820 $182,775 $119,742 $157,089
Second Quarter 2,153,487 447,823 586,386 448,067 215,606 136,651 159,389
Third Quarter 3,429,651 548,156 817,152 722,175 297,966 200,861 169,114
Fourth Quarter 2,634,330 419,779 624,471 545,375 241,024 183,036 171,157
Operating Income (Loss)
Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
2001:
First Quarter $360,967 $71,647 $126,182 $39,267 $14,524 $4,218 $60,594
Second Quarter 481,704 104,118 111,562 88,913 31,647 9,373 61,281
Third Quarter 606,503 163,538 118,201 192,528 34,302 2,653 83,906
Fourth Quarter 124,168 40,387 41,247 3,922 9,839 (9,194) 64,673
2000:
First Quarter $279,773 $76,759 $50,435 $46,513 $13,214 $6,372 $74,440
Second Quarter 449,237 82,931 125,033 102,587 28,784 15,087 66,895
Third Quarter 591,933 93,917 190,136 178,889 36,295 32,136 67,580
Fourth Quarter 188,119 56,413 47,685 44,371 15,470 (14,209) 61,830
Net Income (Loss)
Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
2001:
First Quarter $160,871 $28,978 $59,046 $6,859 $4,535 $474 $20,798
Second Quarter 245,583 47,038 51,382 37,034 15,673 3,369 21,202
Third Quarter 317,454 82,401 52,353 101,515 18,748 (308) 37,793
Fourth Quarter 26,599(a) 19,768 16,663 (12,858) 664 (5,730) 36,562
2000:
First Quarter $108,410 $35,314 $10,757 $11,191 $4,295 $1,817 $25,786
Second Quarter 245,773 38,978 60,815 46,687 13,503 7,217 21,786
Third Quarter 306,689 43,922 97,325 94,167 17,611 17,593 23,709
Fourth Quarter 50,043 18,833 11,446 10,634 3,564 (10,109) 22,464
(a) Net income before cumulative effect of accounting change for the
fourth quarter of 2001 was $3,117.
Earnings per Average Common Share (Entergy Corporation)
2001 2000
Basic Diluted Basic Diluted
First Quarter $0.70 $0.69 $0.42 $0.42
Second Quarter $1.08 $1.06 $1.04 $1.04
Third Quarter $1.41 $1.39 $1.35 $1.34
Fourth Quarter $0.10 (b) $0.09 (b) $0.19 $0.17
(b) Basic and diluted earnings per average common share before the
cumulative effect of accounting change for the fourth quarter of 2001
was ($0.01).
Item 9. Changes In and Disagreements With Accountants On Accounting
and Financial Disclosure.
On the recommendation of the Audit Committee of the Board, the
Executive Committee of the Board (acting between board meetings) has
appointed Deloitte & Touche as independent accountants for Entergy
Corporation, effective August 13, 2001. The Boards of Directors of
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy also appointed
Deloitte & Touche as independent accountants for each of those
corporations effective August 13, 2001. Entergy's former independent
accountants, PricewaterhouseCoopers, were dismissed effective August
13, 2001. The reports issued by PricewaterhouseCoopers on Entergy's
financial statements for either of the two most recent fiscal years
did not contain any adverse opinion or a disclaimer of opinion, or any
qualification or modification as to uncertainty, audit scope or
accounting principles. During Entergy's two most recent fiscal years
and through August 13, 2001, there were no disagreements with
PricewaterhouseCoopers on a matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved to the satisfaction of
PricewaterhouseCoopers, would have caused PricewaterhouseCoopers to
make reference to the subject matter of the disagreement in connection
with its reports.
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy initially reported the change in accountants on Form 8-K
on August 13, 2001. The Form 8-K contained a letter from
PricewaterhouseCoopers to the Securities and Exchange Commission
stating that it agreed with the statements concerning their firm made
therein.
PART III
Item 10. Directors and Executive Officers of the Registrants (Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy)
All officers and directors listed below held the specified
positions with their respective companies as of the date of filing
this report.
Name Age Position Period
ENTERGY ARKANSAS, INC.
Directors
Hugh T. McDonald 43 President and Chief Executive Officer of 2000-Present
Entergy Arkansas
Director of Entergy Arkansas 2000-Present
Senior Vice President, Retail of Entergy 1999-2000
Services, Inc.
Director, Regulatory Affairs - TX of 1995-1999
Entergy Gulf States
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
William E. Madison 55 Senior Vice President - Human Resources 2001-Present
and Administration of Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New
Orleans
Senior Vice President & Chief Human 2000-2001
Resources Officer, Avis Group Holdings,
Inc. - Garden City, New York
President, US Region and Vice President, 1997-2000
Global Human Resource Strategy, E.I.
DuPont de Nemours, Wilmington, Delaware
John Thomas Kennedy 42 Vice President - State Governmental 2000-Present
Affairs of Entergy Arkansas
Attorney at Law, Russellville, Arkansas 1985-2000
Frank F. Gallaher See information under the Entergy
Corporation Officers Section in Part I.
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
Hugh T. McDonald See information under the Entergy
Arkansas Directors Section above.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
Michael G. Thompson See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
ENTERGY GULF STATES, INC.
Directors
E. Renae Conley 44 Director of Entergy Gulf States and 2000-Present
Entergy Louisiana
President and Chief Executive Officer - 2000-Present
LA of Entergy Gulf States and Entergy
Louisiana
Vice President, Investor Relations of 1999-2000
Entergy Services
President of Cincinnati Gas & Electric, 1998-1999
(a subsidiary of Cinergy Corp.)
Chief Executive Officer of Cadence LLC 1997-1998
(a subsidiary of Cinergy Corp.)
Vice President of Sales of Cinergy Corp. 1996-1997
Joseph F. Domino 53 Director of Entergy Gulf States 1999-Present
President and Chief Executive Officer - 1998-Present
TX of Entergy Gulf States
Director - Southwest Franchise of 1997-1998
Entergy Gulf States
Director - Eastern Region of Entergy 1995-1997
Services
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
James D. Bruno 62 Vice President - Region of Entergy Gulf 1999-Present
States and Entergy Louisiana
Vice President of Customer Service of 1998-1999
Entergy Louisiana and Entergy Gulf
States
Vice President of Customer Service of 1994-1998
Entergy Louisiana and Entergy New
Orleans
Murphy A. Dreher 49 Vice President - State Governmental 1999-Present
Affairs - LA of Entergy Gulf States and
Entergy Louisiana
Legislative Executive - Governmental 1995-1998
Affairs of Entergy Gulf States
Randall W. Helmick 47 Vice President - Operations - LA of 1998-Present
Entergy Gulf States and Entergy
Louisiana
Director of Special Projects of London 1997-1998
Electricity
Director of Reliability of Entergy 1997
Services
Director of Operations and Engineering 1994-1997
of Entergy Services
Eduardo Melendreras 44 Vice President, Customer Service and 2001-Present
Commercial and Industrial Accounts of
Entergy Gulf States and Entergy
Louisiana
Director - Jurisdictional Accounts of 2000-2001
Entergy Services
Director - Large Industrial Sales & 1996-2000
Service of Entergy Gulf States
J. Parker McCollough 50 Vice President - State Governmental 1996-Present
Affairs - TX of Entergy Gulf States
Wade H. Stewart 56 Vice President, Regulatory Affairs - LA 2000-Present
of Entergy Gulf States and Entergy
Louisiana
Director, Regulatory Affairs - LA of 1995-2000
Entergy Gulf States and Entergy
Louisiana
E. Renae Conley See information under the Entergy Gulf
States Directors Section above.
Joseph F. Domino See information under the Entergy Gulf
States Directors Section above.
Frank F. Gallaher See information under the Entergy
Corporation Officers Section in Part I.
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
William E. Madison See information under the Entergy
Arkansas Officers Section above.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
Michael G. Thompson See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
ENTERGY LOUISIANA, INC.
Directors
E. Renae Conley See information under the Entergy Gulf
States Directors Section above.
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
James D. Bruno See information under the Entergy Gulf
States Officers Section above.
E. Renae Conley See information under the Entergy Gulf
States Directors Section above.
Murphy A. Dreher See information under the Entergy Gulf
States Officers Section above.
Frank F. Gallaher See information under the Entergy
Corporation Officers Section in Part I.
Randall W. Helmick See information under the Entergy Gulf
States Officers Section above.
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
William E. Madison See information under the Entergy
Arkansas Officers Section above.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
Eduardo Melendreras See information under the Entergy Gulf
States Officers Section above.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
Michael G. Thompson See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Wade H. Stewart See information under the Entergy Gulf
States Officers Section above.
ENTERGY MISSISSIPPI, INC.
Directors
Carolyn C. Shanks 40 President and Chief Executive Officer of 1999-Present
Entergy Mississippi
Director of Entergy Mississippi 1999-Present
Vice President of Finance and 1997-1999
Administration of Entergy Mississippi
Director of Business Services of Entergy 1994-1997
Operations
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
Bill F. Cossar 63 Vice President - State Governmental 1987-Present
Affairs of Entergy Mississippi
Frank F. Gallaher See information under the Entergy
Corporation Officers Section in Part I.
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
William E. Madison See information under the Entergy
Arkansas Officers Section above.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
Carolyn C. Shanks See information under the Entergy
Mississippi Directors Section above.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
Michael G. Thompson See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
ENTERGY NEW ORLEANS, INC.
Directors
Daniel F. Packer 54 Chief Executive Officer Entergy New 1998-Present
Orleans
President and Director of Entergy New 1997-Present
Orleans
State President - City of New Orleans 1996-1997
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
Elaine Coleman 52 Vice President, External Affairs of 1998-Present
Entergy New Orleans
Director of Customer Service of Entergy 1998
Services
Lead Customer Service Manager of Entergy 1995-1998
Services
Frank F. Gallaher See information under the Entergy
Corporation Officers Section in Part I.
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
William E. Madison See information under the Entergy
Arkansas Officers Section above.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
Daniel F. Packer See information under the Entergy New
Orleans Directors Section above.
Richard J. Smith See information under the Entergy
Corporation Officers Section in Part I.
Michael G. Thompson See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
SYSTEM ENERGY RESOURCES, INC.
Directors
Jerry W. Yelverton 57 Director, President and Chief Executive 1999-Present
Officer of System Energy
Senior Vice President of Nuclear of 1997-1998
Entergy Services
Executive Vice President and Chief 1996-1998
Operating Officer of Entergy Operations
In addition, Mr. Yelverton is an
executive officer and/or director of
various other wholly owned subsidiaries
of Entergy Corporation and its operating
companies.
Donald C. Hintz See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Officers
Joseph L. Blount 55 Secretary of System Energy and Entergy 1991-Present
Operations
Joseph T. Henderson See information under the Entergy
Corporation Officers Section in Part I.
Nathan E. Langston See information under the Entergy
Corporation Officers Section in Part I.
Steven C. McNeal See information under the Entergy
Corporation Officers Section in Part I.
C. John Wilder See information under the Entergy
Corporation Officers Section in Part I.
Jerry W. Yelverton See information under the System Energy
Directors Section above.
Each director and officer of the applicable Entergy company is
elected yearly to serve by the unanimous consent of the sole
stockholder, Entergy Corporation, at its annual meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Information called for by this item concerning the directors and
officers of Entergy Corporation is set forth in the Proxy Statement of
Entergy Corporation to be filed in connection with its Annual Meeting
of Stockholders to be held on May 10, 2002, under the heading "Section
16(a) Beneficial Ownership Reporting Compliance", which information is
incorporated herein by reference.
Item 11. Executive Compensation
ENTERGY CORPORATION
Information called for by this item concerning the directors and
officers of Entergy Corporation is set forth in the Proxy Statement
under the headings "Executive Compensation Tables", "General
Information About Nominees", "Director Compensation", and "Comparison
of Five Year Cumulative Total Return", all of which information is
incorporated herein by reference.
ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY
MISSISSIPPI, ENTERGY NEW ORLEANS, AND SYSTEM ENERGY
Summary Compensation Table
The following table includes the Chief Executive Officer and the
four other most highly compensated executive officers in office as of
December 31, 2001 at Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy
(collectively, the "Named Executive Officers"). This determination
was based on total annual base salary and bonuses from all Entergy
sources earned by each officer for the year 2001. See Item 10,
"Directors and Executive Officers of the Registrants," for information
on the principal positions of the Named Executive Officers in the
table below.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy
As shown in Item 10, most Named Executive Officers are employed
by several Entergy companies. Because it would be impracticable to
allocate such officers' salaries among the various companies, the
table below includes the aggregate compensation paid by all Entergy
companies.
Long-Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities (a) (b) All
Annual Stock Underlying LTIP Other
Name Year Salary Bonus Comp. Awards Options Payouts Comp.
E. Renae Conley 2001 $308,769 $486,186 $46,240 (c) 34,600 shares $ - $10,742
CEO-Entergy Louisiana 2000 282,642 280,000 41,573 (c) 20,000 181,109 8,559
CEO-LA-Entergy Gulf States 1999 215,000 344,934 29,662 $84,188(c)(d) 7,500 - 7,747
Joseph F. Domino 2001 $245,384 $292,583 $48,254 (c) 14,800 shares $ - $7,150
CEO-TX-Entergy Gulf States 2000 235,358 180,732 51,399 (c) 20,000 142,314 7,084
1999 223,569 200,210 7,072 (c) 13,487 - 6,838
Donald C. Hintz 2001 $599,423 $779,000 $198,321 (c) 160,000 shares $ - $21,605
2000 570,096 743,000 104,399 (c) 175,000 1,181,837 26,516
1999 535,713 495,000 76,188 (c) 272,000 - 22,156
Jerry D. Jackson 2001 $475,345 $576,382 $19,646 (c) 80,000 shares $ - $17,378
2000 458,223 554,214 58,758 (c) 58,500 1,181,575 15,162
1999 442,809 403,554 39,670 (c) 94,000 - 15,497
J. Wayne Leonard 2001 $897,500 $1,684,800 $3,709 $7,400,000(c)(d) 330,600 shares $ - $ -
2000 836,538 1,190,000 11,646 (c) 330,600 2,410,413 -
1999 771,938 840,000 2,570 (c) 255,000 - -
Hugh T. McDonald 2001 $231,335 $333,078 $118,502 (c) 14,800 shares $ - $18,664
CEO-Entergy Arkansas 2000 209,400 165,000 53,808 (c) 34,600 172,773 54,878
1999 181,704 176,267 438 (c) 14,700 - 5,429
Daniel F. Packer 2001 $228,209 $262,881 $15,410 (c) 14,800 shares $ - $7,055
CEO-Entergy New Orleans 2000 219,432 167,382 16,433 (c) 20,000 196,929 6,658
1999 211,055 127,920 10,517 (c) 16,750 - 6,583
Carolyn C. Shanks 2001 $241,085 $287,672 $17,140 (c) 14,800 shares $ - $7,206
CEO-Entergy Mississippi 2000 231,193 182,530 2,594 (c) 20,000 104,241 4,858
1999 208,931 133,950 2,549 (c) 11,050 - 4,800
C. John Wilder 2001 $493,128 $600,000 $158,059 (c) 87,700 shares $ - $16,284
2000 468,392 619,370 148,540 (c) 87,700 953,006 13,919
1999 445,191 406,693 119,878 (c) 52,500 - 20,035
Jerry W. Yelverton 2001 $443,269 $540,000 $145,389 (c) 65,000 shares $ - $14,697
CEO-System Energy 2000 408,846 510,000 4,197 $201,875(c)(d) 58,900 503,482 12,732
1999 363,997 328,500 8,036 (c) 49,400 - 11,286
(a) Amounts include the value of restricted shares that vested in
2000 (see note (c) below) under Entergy's Equity Ownership Plan.
(b) Includes the following:
(1) 2001 benefit accruals under the Defined Contribution Restoration
Plan as follows: Ms. Conley $3,392; Mr. Domino $1,600; Mr. Hintz
$14,415; Mr. Jackson $11,272; Mr. McDonald $1,666; Mr. Packer $1,473;
Ms. Shanks $2,003; Mr. Wilder $8,367; and Mr. Yelverton $8,732.
(2) 2001 employer contributions to the System Savings Plan as
follows: Ms. Conley $6,269; Mr. Domino $5,550; Mr. Hintz $6,681; Mr.
Jackson $6,106; Mr. McDonald $5,527; Mr. Packer $5,582; Ms. Shanks
$5,203; Mr. Wilder $7,917; and Mr. Yelverton $5,965.
(3) 2001 reimbursements for moving expenses as follows: Ms. Conley
$1,081; Mr. Hintz $509; and Mr. McDonald $11,471.
(c) Restricted unit awards (equivalent to shares of Entergy
Corporation common stock) in 2001 are reported under the "Long-Term
Incentive Plan Awards" table, and reference is made to this table for
information on the aggregate number of restricted units awarded during
2001 and the vesting schedule for such units. At December 31, 2001,
the number and value of the aggregate restricted unit holdings were as
follows: Ms. Conley 15,200 units, $594,472; Mr. Domino 6,200 units,
$242,482; Mr. Hintz 57,000 units, $2,229,270; Mr. Jackson 25,400
units, $993,394; Mr. Leonard 246,000 units, $9,621,060; Mr. McDonald
6,800 units, $265,948; Mr. Packer 6,200 units, $242,482; Ms. Shanks
6,200 units, $242,482; Mr. Wilder 25,400 units, $993,394; and Mr.
Yelverton 32,400 units, $1,267,164. Accumulated dividends are paid on
restricted units when vested. The value of restricted unit holdings
as of December 31, 2001 is determined by multiplying the total number
of units held by the closing market price of Entergy Corporation
common stock on the New York Stock Exchange Composite Transactions on
December 31, 2001 ($39.11 per share). The value of stock for which
restrictions were lifted in 2000, and the applicable portion of
accumulated cash dividends, are reported in the LTIP payouts column in
the above table.
(d) Restricted units were granted to the following individuals in
addition to those granted under the Long Term Incentive Plan. Ms.
Conley was granted 3,000 units in 1999. The units will vest
incrementally over a three-year period that began in 2000, based on
continued service with Entergy Corporation. Accumulated dividends
will be paid. In January 2001, Mr. Leonard was granted 200,000
restricted units. 50,000 of the restricted stock units will vest on
each of December 31, 2001, December 31, 2002, December 31, 2003 and
December 31, 2004, based on continued service with Entergy
Corporation. Accumulated dividends will not be paid on Mr. Leonard's
restricted units when vested. Mr. Yelverton was granted 10,000 units
in 2000. Restrictions will be lifted on 3,000 units in 2001 and 2002,
and the remaining 4,000 units in 2003. Accumulated dividends will not
be paid. The value these individuals may realize is dependent upon
both the number of units that vest and the future market price of
Entergy Corporation common stock.
Option Grants in 2001
The following table summarizes option grants during 2001 to the
Named Executive Officers. The absence, in the table below, of any
Named Executive Officer indicates that no options were granted to such
officer.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy
Individual Grants Potential Realizable
% of Total Value
Number of Options at Assumed Annual
Securities Granted to Exercise Rates of Stock
Underlying Employees Price Price Appreciation
Options in (per Expiration for Option Term(b)
Name Granted (a) 2001 share) (a) Date 5% 10%
E. Renae Conley 34,600 0.4% $ 37.00 1/25/11 $ 805,111 $2,040,309
Joseph F. Domino 14,800 0.2% 37.00 1/25/11 344,383 872,733
Donald C. Hintz 160,000 1.9% 37.00 1/25/11 3,723,056 9,434,955
Jerry D. Jackson 80,000 0.9% 37.00 1/25/11 1,861,528 4,717,478
J. Wayne Leonard 330,600 3.8% 37.00 1/25/11 7,692,765 19,494,977
Hugh T. McDonald 14,800 0.2% 37.00 1/25/11 344,383 872,733
Daniel F. Packer 14,800 0.2% 37.00 1/25/11 344,383 872,733
Carolyn C. Shanks 14,800 0.2% 37.00 1/25/11 344,383 872,733
C. John Wilder 87,700 1.0% 37.00 1/25/11 2,040,700 5,171,535
Jerry W. Yelverton 65,000 0.8% 37.00 1/25/11 1,512,492 3,832,951
(a) Options were granted on January 25, 2001, pursuant to the Equity
Ownership Plan. All options granted on this date have an exercise
price equal to the closing price of Entergy Corporation common stock
on the New York Stock Exchange Composite Transactions on
January 25, 2001. These options will vest in equal increments,
annually, over a three-year period beginning in 2002.
(b) Calculation based on the market price of the underlying
securities assuming the market price increases over a ten-year
option period and assuming annual compounding. The column
presents estimates of potential values based on simple
mathematical assumptions. The actual value, if any, a Named
Executive Officer may realize is dependent upon the market price
on the date of option exercise.
Aggregated Option Exercises in 2001 and December 31, 2001 Option
Values
The following table summarizes the number and value of all
unexercised options held by the Named Executive Officers. The
absence, in the table below, of any Named Executive Officer indicates
that no options are held by such officer.
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
Shares Acquired Value as of December 31, 2001 as of December 31, 2001(b)
Name on Exercise Realized (a) Exercisable Unexercisable Exercisable Unexercisable
E. Renae Conley - $ - 11,666 50,434 $162,627 $315,436
Joseph F. Domino - - 17,156 32,631 213,265 287,288
Donald C. Hintz 2,500 22,916 238,833 420,667 2,778,663 3,477,946
Jerry D. Jackson - - 60,833 150,334 633,897 1,084,501
J. Wayne Leonard - - 280,200 636,000 3,334,647 5,027,873
Hugh T. McDonald 18,199 293,945 3,133 42,768 28,738 455,918
Daniel F. Packer - - 17,832 33,718 209,809 297,258
Carolyn C. Shanks 10,349 185,632 - 31,818 - 279,831
C. John Wilder - - 64,233 163,667 791,892 1,287,469
Jerry W. Yelverton 60,816 893,685 - 120,734 - 920,785
(a) Based on the difference between the closing price of Entergy
Corporation's common stock on the New York Stock Exchange Composite
Transactions on the exercise date and the option exercise price.
(b) Based on the difference between the closing price of Entergy
Corporation's common stock on the New York Stock Exchange Composite
Transactions on December 31, 2001, and the option exercise price.
Long-Term Incentive Plan Awards in 2001
The following Table summarizes the awards of restricted units
(equivalent to shares of Entergy Corporation common stock) granted
under the Equity Ownership Plan in 2000 to the Named Executive
Officers.
Estimated Future Payouts Under
Non-Stock Price-Based Plans (#
of units) (a) (b)
Number of Performance Period Until
Name Units Maturation or Payout Threshold Target Maximum
E. Renae Conley 7,500 1/1/01-12/31/03 2,500 5,000 7,500
Joseph F. Domino 3,100 1/1/01-12/31/03 1,100 2,100 3,100
Donald C. Hintz 28,500 1/1/01-12/31/03 9,500 19,000 28,500
Jerry D. Jackson 12,700 1/1/01-12/31/03 4,300 8,500 12,700
J. Wayne Leonard 48,000 1/1/01-12/31/03 16,000 32,000 48,000
Hugh T. McDonald 3,100 1/1/01-12/31/03 1,100 2,100 3,100
Daniel F. Packer 3,100 1/1/01-12/31/03 1,100 2,100 3,100
Carolyn C. Shanks 3,100 1/1/01-12/31/03 1,100 2,100 3,100
C. John Wilder 12,700 1/1/01-12/31/03 4,300 8,500 12,700
Jerry W. Yelverton 12,700 1/1/01-12/31/03 4,300 8,500 12,700
(a) Restricted units awarded will vest at the end of a three-year
period, subject to the attainment of approved performance goals for
Entergy. Restrictions are lifted based upon the achievement of the
cumulative result of these goals for the performance period. The
value any Named Executive Officer may realize is dependent upon both
the number of units that vest and the future market price of Entergy
Corporation common stock.
(b) The threshold, target, and maximum levels correspond to the
achievement of 50%, 100%, and 150%, respectively, of Equity
Ownership Plan goals. Achievement of a threshold, target, or
maximum level would result in the award of the number of units
indicated in the respective column. Achievement of a level between
these three specified levels would result in the award of a number
of units calculated by means of interpolation.
Pension Plan Tables
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy
Retirement Income Plan Table
Annual
Covered Years of Service
Compensation 15 20 25 30 35
$100,000 $22,500 $30,000 $37,500 $45,000 $52,500
200,000 45,000 60,000 75,000 90,000 105,000
300,000 67,500 90,000 112,500 135,000 157,500
400,000 90,000 120,000 150,000 180,000 210,000
500,000 112,500 150,000 187,500 225,000 262,500
650,000 146,250 195,000 243,750 292,500 341,250
950,000 213,750 285,000 356,250 427,500 498,750
All of the Named Executive Officers participate in a Retirement
Income Plan, a defined benefit plan, that provides a benefit for
employees at retirement from Entergy based upon (1) generally all
years of service beginning at age 21 through termination, with a
forty-year maximum, multiplied by (2) 1.5%, multiplied by (3) the
final average compensation. Final average compensation is based on
the highest consecutive 60 months of covered compensation in the last
120 months of service. The normal form of benefit for a single
employee is a lifetime annuity and for a married employee is a 50%
joint and survivor annuity. Other actuarially equivalent options are
available to each retiree. Retirement benefits are not subject to any
deduction for Social Security or other offset amounts. The amount of
the Named Executive Officers' annual compensation covered by the plan
as of December 31, 2001, is represented by the salary column in the
Summary Compensation Table above.
The credited years of service under the Retirement Income Plan,
as of December 31, 2001, for the following Named Executive Officers is
as follows: Mr. Domino 31; Mr. Jackson 22; Mr. Leonard 3; Mr. McDonald
19; Mr. Packer 19; Ms. Shanks 18; and Mr. Yelverton 22. The credited
years of service under the Retirement Income Plan, as of
December 31, 2001 for the following Named Executive Officers, as a
result of entering into supplemental retirement agreements, is as
follows: Ms. Conley 19; Mr. Hintz 30; and Mr. Wilder 18.
The maximum benefit under the Retirement Income Plan is limited
by Sections 401 and 415 of the Internal Revenue Code of 1986, as
amended; however, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy
have elected to participate in the Pension Equalization Plan sponsored
by Entergy Corporation. Under this plan, certain executives,
including the Named Executive Officers, would receive an additional
amount equal to the benefit that would have been payable under the
Retirement Income Plan, except for the Sections 401 and 415
limitations discussed above.
In addition to the Retirement Income Plan discussed above,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy participate in the
Supplemental Retirement Plan of Entergy Corporation and Subsidiaries
and the Post-Retirement Plan of Entergy Corporation and Subsidiaries.
Participation is limited to one of these two plans and is at the
invitation of Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy. The participant may receive from the appropriate Entergy
company a monthly benefit payment not in excess of .025 (under the
Supplemental Retirement Plan) or .0333 (under the Post-Retirement
Plan) times the participant's average basic annual salary (as defined
in the plans) for a maximum of 120 months. Mr. Hintz, Mr. Packer and
Mr. Yelverton have entered into a Supplemental Retirement Plan
participation contract, and Mr. Jackson has entered into a Post-
Retirement Plan participation contract. Current estimates indicate
that the annual payments to each Named Executive Officer under the
above plans would be less than the payments to that officer under the
System Executive Retirement Plan discussed below.
System Executive Retirement Plan Table (1)
Annual
Covered Years of Service
Compensation 10 15 20 25 30+
$ 200,000 $60,000 $90,000 $100,000 $110,000 $120,000
300,000 90,000 135,000 150,000 165,000 180,000
400,000 120,000 180,000 200,000 220,000 240,000
500,000 150,000 225,000 250,000 275,000 300,000
600,000 180,000 270,000 300,000 330,000 360,000
700,000 210,000 315,000 350,000 385,000 420,000
1,000,000 300,000 450,000 500,000 550,000 600,000
(1) Covered pay includes the average of the highest three years of
annual base pay and incentive awards earned by the executive
during the ten years immediately preceding his retirement.
Benefits shown are based on a target replacement ratio of 50%
based on the years of service and covered compensation shown. The
benefits for 10, 15, and 20 or more years of service at the 45%
and 55% replacement levels would decrease (in the case of 45%) or
increase (in the case of 55%) by the following percentages: 3.0%,
4.5%, and 5.0%, respectively.
In 1993, Entergy Corporation adopted the System Executive
Retirement Plan (SERP). This plan was amended in 1998. Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy are participating employers in
the SERP. The SERP is an unfunded defined benefit plan offered at
retirement to certain senior executives, which would currently include
all the Named Executive Officers. Participating executives choose, at
retirement, between the retirement benefits paid under provisions of
the SERP or those payable under the Supplemental Retirement Plan or
the Post-Retirement Plan discussed above. The plan was amended in
1998 to provide that covered pay is the average of the highest three
years annual base pay and incentive awards earned by the executive
during the ten years immediately preceding his retirement. Benefits
paid under the SERP are calculated by multiplying the covered pay
times target pay replacement ratios (45%, 50%, or 55%, dependent on
job rating at retirement) that are attained, according to plan design,
at 20 years of credited service. The target ratios are increased by
1% for each year of service over 20 years, up to a maximum of 30 years
of service. In accordance with the SERP formula, the target ratios
are reduced for each year of service below 20 years. The credited
years of service under this plan are identical to the years of service
for Named Executive Officers (other than Ms. Conley, Mr. Jackson, Mr.
Wilder and Mr. Yelverton) disclosed above in the section entitled
"Pension Plan Tables-Retirement Income Plan Table". Ms. Conley, Mr.
Jackson, Mr. Wilder, and Mr. Yelverton have 2 years, 28 years, 3
years, and 32 years, respectively, of credited service under this
plan.
The amended plan provides that a single employee receives a
lifetime annuity and a married employee receives the reduced benefit
with a 50% surviving spouse annuity. Other actuarially equivalent
options are available to each retiree. SERP benefits are offset by
any and all defined benefit plan payments from Entergy. SERP benefits
are not subject to Social Security offsets.
Eligibility for and receipt of benefits under any of the
executive plans described above are contingent upon several factors.
The participant must agree, without the specific consent of the
Entergy company for which such participant was last employed, not to
take employment after retirement with any entity that is in
competition with, or similar in nature to, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy or any affiliate thereof. Eligibility for
benefits is forfeitable for various reasons, including violation of an
agreement with Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy, certain resignations of employment, or certain terminations of
employment without Company permission.
In addition to the Retirement Income Plan discussed above,
Entergy Gulf States provides, among other benefits to officers, an
Executive Income Security Plan for key managerial personnel. The plan
provides participants with certain retirement, disability,
termination, and survivors' benefits. To the extent that such
benefits are not funded by the employee benefit plans of Entergy Gulf
States or by vested benefits payable by the participants' former
employers, Entergy Gulf States is obligated to make supplemental
payments to participants or their survivors. The plan provides that
upon the death or disability of a participant during his employment,
he or his designated survivors will receive (i) during the first year
following his death or disability an amount not to exceed his annual
base salary, and (ii) thereafter for a number of years until the
participant attains or would have attained age 65, but not less than
nine years, an amount equal to one-half of the participant's annual
base salary. The plan also provides supplemental retirement benefits
for life for participants retiring after reaching age 65 equal to one-
half of the participant's average final compensation rate, with one-
half of such benefit upon the death of the participant being payable
to a surviving spouse for life.
Entergy Gulf States amended and restated the plan effective March
1, 1991, to provide such benefits for life upon termination of
employment of a participating officer or key managerial employee
without cause (as defined in the plan) or if the participant separates
from employment for good reason (as defined in the plan), with 1/2 of
such benefits to be payable to a surviving spouse for life. Further,
the plan was amended to provide medical benefits for a participant and
his family when the participant separates from service. These medical
benefits generally continue until the participant is eligible to
receive medical benefits from a subsequent employer; but in the case
of a participant who is over 50 at the time of separation and was
participating in the plan on March 1, 1991, medical benefits continue
for life. By virtue of the 1991 amendment and restatement, benefits
for a participant under such plan cannot be modified once he becomes
eligible to participate in the plan. Mr. Domino is a participant in
this plan.
Compensation of Directors
For information regarding compensation of the directors of
Entergy Corporation, see the Proxy Statement under the heading
"Director Compensation", which information is incorporated herein by
reference. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy currently
have no non-employee directors, and none of the current directors of
these companies are compensated for their responsibilities as
director.
Retired non-employee directors of Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans with a minimum
of five years of service on the respective Boards of Directors are
paid $200 a month for a term of years corresponding to the number of
years of active service as directors. Retired non-employee directors
with over ten years of service receive a lifetime benefit of $200 a
month. Years of service as an advisory director are included in
calculating this benefit. System Energy has no retired non-employee
directors.
Retired non-employee directors of Entergy Gulf States receive
retirement benefits under a plan in which all directors who served
continuously for a period of years will receive a percentage of their
retainer fee in effect at the time of their retirement for life. The
retirement benefit is 30 percent of the retainer fee for service of
not less than five nor more than nine years, 40 percent for service of
not less than ten nor more than fourteen years, and 50 percent for
fifteen or more years of service. For those directors who retired
prior to the retirement age, their benefits are reduced. The plan
also provides disability retirement and optional hospital and medical
coverage if the director has served at least five years prior to the
disability. The retired director pays one-third of the premium for
such optional hospital and medical coverage and Entergy Gulf States
pays the remaining two-thirds. Years of service as an advisory
director are included in calculating this benefit.
Executive Retention and Employment Agreements and Change-in-Control
Arrangements
Entergy Gulf States
As a result of the merger between Entergy and Entergy Gulf
States, Entergy Gulf States is obligated to pay benefits under the
Executive Income Security Plan to those persons who were participants
at the time of the merger and who later terminated their employment
under circumstances described in the plan. For additional description
of the benefits under the Executive Income Security Plan, see the
"Pension Plan Tables-System Executive Retirement Plan Table" section
noted above.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy
Upon completion of a transaction resulting in a change-in-control
of Entergy (a "Merger"), benefits already accrued under Entergy's
System Executive Retirement Plan, Post-Retirement Plan, Supplemental
Retirement Plan and Pension Equalization Plan will become fully vested
if the participant is involuntarily terminated without "cause" or
terminates employment for "good reason" (as such terms are defined in
such plans).
Retention Agreement with Mr. Leonard - The retention agreement with
Mr. Leonard provides that upon a termination of employment while a
Merger is pending (a) by Entergy without "cause" or by Mr. Leonard
for "good reason", as such terms are defined in the agreement, other
than a termination of employment described in the next paragraph, or
(b) by reason of Mr. Leonard's death or disability:
o Entergy will pay to him a lump sum cash severance payment equal
to three times (in limited circumstances, five times) the sum of Mr.
Leonard's base salary and target annual incentive award;
o Entergy will pay to him a pro rata annual incentive award, based
on an assumed maximum annual achievement of applicable performance
goals;
o his supplemental retirement benefit will fully vest, will be
determined as if he had remained employed with Entergy until the
attainment of age 55, and will commence upon his attainment of age 55;
o he will be entitled to immediate payment of performance awards,
based upon an assumed target achievement of applicable performance
goals;
o all of his stock options will become fully vested and will remain
outstanding for their full ten-year term; and
o Entergy will pay to him a "gross-up" payment in respect of any
excise taxes he might incur.
If Mr. Leonard's employment is terminated by Entergy for "cause"
at any time, or by Mr. Leonard without "good reason" and without
Entergy's permission prior to his attainment of age 55, Mr. Leonard
will forfeit his supplemental retirement benefit. If Mr. Leonard's
employment is terminated by Mr. Leonard without "good reason" with
Entergy's permission prior to his attainment of age 55, Mr. Leonard
will be entitled to a supplemental retirement benefit, reduced by
6.5% for each year that the termination date precedes his attainment
of age 55, payable commencing upon Mr. Leonard's attainment of age
62. If Mr. Leonard's employment is terminated by Mr. Leonard without
"good reason" following his attainment of age 55, Mr. Leonard will be
entitled to his full supplemental retirement benefit. The amounts
payable under the agreement will be funded in a rabbi trust.
Retention agreement with Mr. Hintz - The retention agreement with Mr.
Hintz provides that Mr. Hintz will be paid an initial retention
payment of approximately $2.8 million on the date on which a Merger
is completed and an additional retention payment of approximately
$2.3 million on the second anniversary of the completion of a Merger
if he remains employed on each of those dates. The agreement also
provides that upon termination of employment while a Merger is
pending and for two years after completion (a) by Mr. Hintz for "good
reason" or by Entergy without "cause", as such terms are defined in
the agreement or (b) by reason of Mr. Hintz's death or disability:
o Entergy will pay to him a lump sum cash severance payment equal
to $2.8 million if such termination occurs prior to completion of a
Merger or equal to $2.3 million if such termination occurs following
completion of a Merger;
o Entergy will pay to him a pro rata annual incentive award, based
on an assumed maximum achievement of applicable performance goals, if
such termination occurs following completion of a Merger;
o he will be entitled to immediate payment of performance awards
based upon an assumed target achievement of applicable performance
goals, if such termination occurs prior to completion of a Merger, or
based upon an assumed maximum achievement of applicable performance
goals, if such termination occurs following completion of a Merger;
o all of his stock options will become fully vested and will remain
outstanding for their full ten-year term;
o he will be entitled to receive a supplemental retirement benefit
that, when combined with Mr. Hintz's SERP benefit, equals the benefit
he would have earned under the terms of the SERP as in effect
immediately prior to March 25, 1998; and
o Entergy will pay to him a "gross-up" payment in respect of any
excise taxes he might incur.
Retention Agreement with Mr. Jackson - The retention agreement with
Mr. Jackson provides that upon retirement in accordance with the
agreement, Mr. Jackson: (a) will be entitled to a subsidized
retirement benefit equal to the applicable nonqualified retirement
benefit payable to Mr. Jackson without reduction for early retirement
("Subsidized Retirement Benefit"); and (b) may enter into a
consulting arrangement with Entergy through March 31, 2005, under
terms and conditions set forth in the agreement.
Pursuant to the agreement, should Mr. Jackson experience a
Qualifying Event (as defined in the agreement) after the Successor
Placement Date (as defined in the agreement) but before March 31,
2003, he shall not be entitled to benefits under the System Executive
Continuity Plan but shall instead be entitled to the following:
o a lump sum amount equal to any unpaid base salary that would
otherwise have been paid through March 31, 2003;
o the Subsidized Retirement Benefit; and
o all other benefits to which he may be entitled under the terms
and conditions of those Entergy plans and programs in which he
participates in accordance with the agreement.
Additionally, Mr. Jackson is entitled to certain benefits, as
described in the agreement, in the event of a change in control (as
defined in the System Executive Continuity Plan) after which Entergy
or its successor company fails to honor Mr. Mr. Jackson's consulting
arrangement.
Retention Agreement with Mr. Wilder - The retention agreement with
Mr. Wilder provides the following: if Mr. Wilder terminates his
employment for any reason following shareholder approval of the
merger with FPL Group, or, alternatively, following shareholder
approval of any other Merger, but prior to completion of a Merger,
Entergy will pay to him a lump sum cash severance payment equal to
three times the sum of his base salary and target annual incentive
award and a "gross-up" payment in respect of any excise taxes he
might incur.
The agreement also provides that, as a substitute for the above
entitlement, upon termination of employment (a) by Mr. Wilder for
"good reason" or by Entergy without "cause", as such terms are
defined in the agreement, in each case prior to the termination of a
Merger or prior to the second anniversary of the completion of a
Merger, (b) by reason of Mr. Wilder's death or disability while a
Merger is pending and for two years after completion of a Merger or
(c) for any reason following the second anniversary of a Merger:
o Mr. Wilder will be entitled to a lump sum cash severance payment
equal to four times (in limited circumstances, three times) the sum of
the his base salary and maximum annual incentive award;
o Mr. Wilder will be entitled to a pro rata annual incentive award,
based on an assumed maximum achievement of applicable performance
goals;
o except in the case of a termination by reason of death or
disability, he will continue to be employed as a Special Project
Coordinator at an annual base salary of $200,000, and will continue to
participate in all of Entergy's benefit plans, until the earliest of
(a) his attainment of age 55 (at which time he will be deemed eligible
to retire under Entergy's plans then in effect), (b) his employment
with a company listed in the Fortune Global 500 Index or (c) his
employment with any company that has a conflict of interest policy
that would prohibit his continued employment with Entergy;
o Entergy will credit him with 15 additional years of service under
Entergy's supplemental retirement plan and he may elect to receive
either (a) approximately $1.9 million in a cash lump sum in full
settlement of all nonqualified retirement benefits or (b) the benefit
that he would have earned under the terms of the SERP applicable to
individuals who became participants on or after March 25, 1998 (which
amount he may elect to receive upon completion of a Merger);
o he will be entitled to immediate vesting of performance awards,
based upon an assumed maximum achievement of applicable performance
goals;
o all of his stock options will become fully vested and will remain
outstanding for their full ten-year term; and
o he will be entitled to a "gross-up" payment in respect of any
excise taxes he might incur.
If Mr. Wilder terminates employment without good reason and
other than on account of death or disability, on or after the
completion of a Merger and before the second anniversary of the
completion of a Merger:
o Mr. Wilder is entitled to a lump sum cash severance payment equal
to three times the sum of his base salary and target annual incentive
award;
o Mr. Wilder is entitled to a pro rata annual incentive award,
based on an assumed maximum achievement of applicable performance
goals;
o he will continue to be employed as a Special Project Coordinator
at an annual base salary of $200,000, and will continue to participate
in all of Entergy's benefit plans, until the earliest of (a) his
attainment of age 55 (at which time he will be deemed eligible to
retire under Entergy's plans then in effect), (b) his employment with
a company listed in the Fortune Global 500 Index or (c) his employment
with any company that has a conflict of interest policy that would
prohibit his continued employment with Entergy;
o Entergy will credit him with 15 additional years of service under
Entergy's supplemental retirement plan and he may elect either (a)
approximately $1.9 million in a cash lump sum in full settlement of
all nonqualified retirement benefits or (b) the benefit that he would
have earned under the terms of the SERP applicable to individuals who
became participants on or after March 25, 1998 (which amount he may
elect to receive upon completion of a Merger);
o he will be entitled to immediate vesting of performance awards,
based upon an assumed target achievement of applicable performance
goals;
o all of his stock options will become fully vested and will remain
outstanding for their full ten-year term; and
o he will be entitled to a "gross-up" payment in respect of any
excise taxes he might incur.
Retention Agreement with Mr. Yelverton - The retention agreement with
Mr. Yelverton provides that he will be paid cash retention payments
of $680,000 on each of the first three anniversaries of the
completion of a Merger if he remains employed on each of those dates.
The agreement also provides that upon termination of employment while
a Merger is pending and for three years after completion (a) by Mr.
Yelverton for "good reason" or by Entergy without "cause", as such
terms are defined in the agreement or (b) by reason of Mr.
Yelverton's death or disability:
o Entergy will pay him a lump sum cash severance payment equal to
the remaining unpaid portion of the cash retention payments;
o he will be entitled to immediate payment of performance awards,
based upon an assumed target achievement of applicable performance
goals;
o all of his stock options will become fully vested and will remain
outstanding for their full ten-year term; and
o Entergy will pay to him a "gross-up" payment in respect of any
excise taxes he might incur.
System Executive Continuity Plan - Ms. Conley, Mr. Domino, Mr.
McDonald, Mr. Packer and Ms. Shanks are participants in Entergy's
System Executive Continuity Plan, which provides severance pay and
benefits under specified circumstances following a change in control.
In the event a participant's employment is involuntarily terminated
without cause or if a participant terminates for good reason during
the change in control period, the participant will be entitled to:
o a cash severance payment equal to 1-3 times (depending on the
participant's System Management Level) base annual salary and target
award payable over a continuation period of 1-3 years (depending on
the participant's System Management Level);
o continued medical and dental insurance coverage for the
continuation period (subject to offset for any similar coverage
provided by the participant's new employer);
o immediate vesting of performance awards, based upon an assumed
achievement of applicable performance targets; and
o payment of a "gross-up" payment in respect of any excise taxes
the participant might incur.
Participants in the Continuity Plan are subject to post-
employment restrictive covenants, including noncompetition
provisions, which run for two years for executive officers, but
extend to three years if permissible under applicable law.
Personnel Committee Interlocks and Insider Participation
The compensation of Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy executive officers was set by the Personnel Committee of
Entergy Corporation's Board of Directors, composed solely of Directors
of Entergy Corporation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Entergy Corporation owns 100% of the outstanding common stock of
registrants Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy. The
information with respect to persons known by Entergy Corporation to be
beneficial owners of more than 5% of Entergy Corporation's outstanding
common stock is included under the heading "Stockholders Who Own at
Least Five Percent" in the Proxy Statement, which information is
incorporated herein by reference. The registrants know of no
contractual arrangements that may, at a subsequent date, result in a
change in control of any of the registrants.
As of December 31, 2001, the directors, the Named Executive
Officers, and the directors and officers as a group for Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy,
respectively, beneficially owned directly or indirectly common stock
of Entergy Corporation as indicated:
Entergy Corporation Entergy Corporation
Common Stock Stock Equivalent Units (e)
Amount and Nature of
Beneficial Ownership(a)
Sole Voting
and Other
Investment Beneficial
Name Power Ownership(d)
Entergy Corporation
Maureen S. Bateman* 900 - 800
W. Frank Blount* 7,434 - 8,000
George W. Davis* 2,100 - 2,400
Simon D. deBree* 140 - -
Claiborne P. Deming* (c) - -
Norman C. Francis* 3,100 - 5,600
Frank F. Gallaher** 8,091 54,667 47,041
Donald C. Hintz** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard*** 13,065 585,600 -
Robert v.d. Luft* 22,672 214,166 7,200
Kathleen A. Murphy* 1,900 (b) - 800
Paul W. Murrill* 2,722 - 8,000
James R. Nichols* 9,757 - 8,000
William A. Percy, II* 1,150 - 800
Dennis H. Reilley* 600 - 1,600
Wm. Clifford Smith* 10,400 - 8,000
Bismark A. Steinhagen* 10,247 - 8,000
C. John Wilder** 9,234 140,199 53,693
All directors and executive
officers 153,136 1,776,548 265,462
Entergy Corporation Entergy Corporation
Common Stock Stock Equivalent Units (e)
Amount and Nature of
Beneficial Ownership(a)
Sole Voting
and Other
Investment Beneficial
Name Power Ownership(d)
Entergy Arkansas
Donald C Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
Hugh T. McDonald*** 3,728 21,166 877
Richard J. Smith* 307 66,665 229
C. John Wilder*** 9,234 140,199 53,693
All directors and executive
officers 84,065 1,587,548 207,142
Entergy Gulf States
E. Renae Conley*** 1,148 29,866 10,299
Joseph F. Domino*** 10,142 33,253 6,043
Donald C. Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
Richard J. Smith* 307 66,665 229
C. John Wilder*** 9,234 140,199 53,693
All directors and executive
officers 112,560 1,698,119 231,160
Entergy Louisiana
E. Renae Conley*** 1,148 29,866 10,299
Donald C. Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
Richard J. Smith* 307 66,665 229
C. John Wilder*** 9,234 140,199 53,693
All directors and executive
officers 102,296 1,658,733 224,852
Entergy Mississippi
Donald C. Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
Carolyn C. Shanks*** 3,960 15,284 1,556
Richard J. Smith* 307 66,665 229
C. John Wilder*** 9,234 140,199 53,693
All directors and executive
officers 89,380 1,587,566 210,308
Entergy Corporation Entergy Corporation
Common Stock Stock Equivalent Units (e)
Amount and Nature of
Beneficial Ownership(a)
Sole Voting
and Other
Investment Beneficial
Name Power Ownership(d)
Entergy New Orleans
Donald C. Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
Daniel F. Packer*** 3,423 35,016 3,007
Richard J. Smith* 307 66,665 229
C. John Wilder*** 9,234 140,199 53,693
All directors and executive
officers 86,428 1,610,289 209,269
System Energy
Donald C. Hintz*** 3,715 414,499 26,861
Jerry D. Jackson** 23,447 138,333 25,721
J. Wayne Leonard** 13,065 585,600 -
C. John Wilder*** 9,234 140,199 53,693
Jerry W. Yelverton*** 8,779 57,766 987
All directors and executive
officers 75,073 1,435,639 136,299
* Director of the respective Company
** Named Executive Officer of the respective Company
*** Director and Named Executive Officer of the respective Company
(a) Based on information furnished by the respective individuals.
Except as noted, each individual has sole voting and investment power.
The number of shares of Entergy Corporation common stock owned by each
individual and by all directors and executive officers as a group does
not exceed one percent of the outstanding Entergy Corporation common
stock.
(b) Includes 1,000 shares for Ms. Murphy in which she has joint
ownership.
(c) Mr. Deming was elected to the Board on January 25, 2002 and now
owns 50 shares.
(d) Other Beneficial Ownership includes, for the Named Executive
Officers, shares of Entergy Corporation common stock that may be
acquired within 60 days after December 31, 2001, in the form of
unexercised stock options awarded pursuant to the Equity Ownership
Plan.
(e) Represents the balances of stock equivalent units each executive
holds under the Executive Annual Incentive Plan Deferral Program and
the Defined Contribution Restoration Plan. These units will be paid
out in a combination of Entergy Corporation Common Stock and cash
based on the value of Entergy Corporation Common Stock on the date of
payout. The deferral period is determined by the individual and is at
least two years from the award of the bonus up until retirement for
the Executive Annual Incentive Plan and at retirement for the Defined
Contribution Restoration Plan. For Directors of Entergy Corporation
the units are part of the Service Award for Directors. All non-
employee directors are credited with 800 units for each year of
service on the Board up to a maximum of 10 years.
Item 13. Certain Relationships and Related Transactions
During 2001, T. Baker Smith & Son, Inc. performed land-surveying
services for, and received payments of approximately $105,229 from
Entergy companies. Mr. Wm. Clifford Smith, a director of Entergy
Corporation, is President of T. Baker Smith & Son, Inc. Mr. Smith's
children own 100% of the voting stock of T. Baker Smith & Son, Inc.
See Item 10, "Directors and Executive Officers of the
Registrants," for information on certain relationships and
transactions required to be reported under this item.
Other than as provided under applicable corporate laws, Entergy
does not have policies whereby transactions involving executive
officers and directors are approved by a majority of disinterested
directors. However, pursuant to the Entergy Corporation Code of
Conduct, transactions involving an Entergy company and its executive
officers must have prior approval by the next higher reporting level
of that individual, and transactions involving an Entergy company and
its directors must be reported to the secretary of the appropriate
Entergy company.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a)1. Financial Statements and Independent Auditors' Reports for
Entergy, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy are listed in the Index to Financial Statements (see
pages 50 and 51)
(a)2. Financial Statement Schedules
Reports of Independent Accountants on Financial Statement
Schedules (see page 257)
Financial Statement Schedules are listed in the Index to
Financial Statement Schedules (see page S-1)
(a)3. Exhibits
Exhibits for Entergy, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy are listed in the Exhibit Index (see page E-
1). Each management contract or compensatory plan or
arrangement required to be filed as an exhibit hereto is
identified as such by footnote in the Exhibit Index.
(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 August 13, 2001, was filed
with the SEC on August 13, 2001, reporting information under
Item 4. "Changes in Registrant's Certifying Accountant" and
Item 7. "Financial Statements, Pro Forma Financial Statements
and Exhibits".
Entergy Corporation and Entergy Arkansas
A Current Report on Form 8-K, dated December 10, 2001, was
filed with the SEC on December 10, 2001, reporting information
under Item 5. "Other Information".
Entergy Corporation
A Current Report on Form 8-K, dated January 8, 2002, was filed
with the SEC on January 8, 2002, 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 January 31, 2002, was filed
with the SEC on January 31, 2002, reporting information under
Item 7. "Financial Statements, Pro Forma Financial Statements
and Exhibits" and Item 9. "Regulation FD Disclosure".
ENTERGY CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY CORPORATION
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
J. Wayne Leonard (Chief Executive Officer and Director;
Principal Executive Officer); Robert v.d. Luft (Chairman
of the Board and Director); C. John Wilder (Executive
Vice President and Chief Financial Officer; Principal
Financial Officer); Maureen S. Bateman, W. Frank Blount,
George W. Davis, Simon deBee, Norman C. Francis,
Kathleen A. Murphy, Paul W. Murrill, James R. Nichols,
William A. Percy, II, Dennis H. Reilley, Wm. Clifford
Smith, and Bismark A. Steinhagen (Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
ENTERGY ARKANSAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY ARKANSAS, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
Hugh T. McDonald (Chairman of the Board, President, Chief
Executive Officer, and Director; Principal Executive
Officer); C. John Wilder (Executive Vice President, Chief
Financial Officer, and Director; Principal Financial
Officer); Donald C. Hintz and Richard J. Smith
(Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
ENTERGY GULF STATES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY GULF STATES, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
Joseph F. Domino (Chairman of the Board, President, Chief
Executive Officer-Texas, and Director; Principal Executive
Officer); E. Renae Conley (President, Chief Executive
Officer-Louisiana, and Director; Principal Executive
Officer); C. John Wilder (Executive Vice President, Chief
Financial Officer, and Director; Principal Financial Officer);
Donald C. Hintz and Richard J. Smith (Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
ENTERGY LOUISIANA, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY LOUISIANA, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
E. Renae Conley (Chairman of the Board, President, Chief
Executive Officer, and Director; Principal Executive
Officer); C. John Wilder (Executive Vice President, Chief
Financial Officer, and Director; Principal Financial
Officer); Donald C. Hintz and Richard J. Smith
(Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
ENTERGY MISSISSIPPI, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY MISSISSIPPI, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
Carolyn C. Shanks (Chairman of the Board, President,
Chief Executive Officer, and Director; Principal
Executive Officer); C. John Wilder (Executive Vice
President, Chief Financial Officer, and Director;
Principal Financial Officer); Donald C. Hintz and Richard
J. Smith (Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
ENTERGY NEW ORLEANS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY NEW ORLEANS, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
Daniel F. Packer (Chairman of the Board, President, Chief
Executive Officer, and Director; Principal Executive
Officer); C. John Wilder (Executive Vice President, Chief
Financial Officer, and Director; Principal Financial
Officer); Donald C. Hintz and Richard J. Smith
(Directors).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
SYSTEM ENERGY RESOURCES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
SYSTEM ENERGY RESOURCES, INC.
By /s/ Nathan E. Langston
Nathan E. Langston, Senior Vice President
and Chief Accounting Officer
Date: March 14, 2002
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Nathan E. Langston
Nathan E. Langston Senior Vice President and March 14, 2002
Chief Accounting Officer
(Principal Accounting Officer)
Jerry W. Yelverton (Chairman of the Board, President,
Chief Executive Officer, and Director; Principal
Executive Officer); C. John Wilder (Executive Vice
President, Chief Financial Officer, and Director;
Principal Financial Officer); and Donald C. Hintz
(Director).
By: /s/ Nathan E. Langston March 14, 2002
(Nathan E. Langston, Attorney-in-fact)
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENTS
We consent to the incorporation by reference in Post-Effective
Amendments No. 3 and 5A on Form S-8 and their related prospectuses to
Registration Statement No. 33-54298 on Form S-4, Registration
Statements No. 333-02503 and 333-22007 of Entergy Corporation on Form S-
3 and Registration Statements No. 333-75097, 333-55692, and 333-68950
of Entergy Corporation on Form S-8 of our report dated January 31,
2002, which report includes an explanatory paragraph regarding the
Corporation's change in 2001 in the method of accounting for derivative
instruments, appearing in this Annual Report on Form 10-K of Entergy
Corporation for the year ended December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-50289, 333-00103, 333-05045 and 333-39018 of Entergy Arkansas,
Inc. on Form S-3 of our report dated January 31, 2002, appearing in
this Annual Report on Form 10-K of Entergy Arkansas, Inc. for the year
ended December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-49739, 33-51181 and 333-60957 of Entergy Gulf States, Inc. on
Form S-3 and Registration Statement No. 333-17911 on Form S-2 of our
report dated January 31, 2002, appearing in this Annual Report on Form
10-K of Entergy Gulf States, Inc. for the year ended December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-46085, 33-39221, 33-50937, 333-00105, 333-01329, 333-03567 and
333-93683 of Entergy Louisiana, Inc. on Form S-3 of our report dated
January 31, 2002, appearing in this Annual Report on Form 10-K of
Entergy Louisiana, Inc. for the year ended December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-53004, 33-55826, 33-50507, 333-64023 and 333-53554 of Entergy
Mississippi, Inc. on Form S-3 of our report dated January 31, 2002,
appearing in this Annual Report on Form 10-K of Entergy Mississippi,
Inc. for the year ended December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-57926, 333-00255 and 333-95599 of Entergy New Orleans, Inc. on
Form S-3 of our report dated January 31, 2002, appearing in this Annual
Report on Form 10-K of Entergy New Orleans, Inc. for the year ended
December 31, 2001.
We consent to the incorporation by reference in Registration Statements
No. 33-47662, 33-61189, and 333-06717 of System Energy Resources, Inc.
on Form S-3 of our report dated January 31, 2002, appearing in this
Annual Report on Form 10-K of System Energy Resources, Inc. for the
year ended December 31, 2001.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 14, 2002
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Entergy Corporation:
We have audited the consolidated financial statements of Entergy
Corporation and the financial statements of Entergy Arkansas, Inc.,
Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy
Mississippi, Inc., Entergy New Orleans, Inc., and System Energy
Resources, Inc., as of December 31, 2001 and 2000, and for each of the
three years in the period ended December 31, 2001, and have issued our
reports thereon dated January 31, 2002, our report on the consolidated
financial statements of the Corporation includes an explanatory
paragraph regarding the Corporation's change in 2001 in the method of
accounting for derivative instruments; such financial statements and
reports are included in your 2001 Annual Report to Shareholders and
are included herein. Our audits also included the consolidated
financial statement schedules of Entergy Corporation and financial
statement schedules of Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., and System Energy Resources, Inc, listed in Item 14.
These financial statement schedules are the responsibility of the
Corporation's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
January 31, 2002
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page
I Financial Statements of Entergy Corporation:
Statements of Income - For the Years Ended December 31,
2001, 2000, and 1999 S-2
Statements of Cash Flows - For the Years Ended
December 31, 2001, 2000, and 1999 S-3
Balance Sheets, December 31, 2001 and 2000 S-4
Statements of Retained Earnings, Comprehensive Income,
and Paid-In Capital for the Years Ended December 31,
2001, 2000, and 1999 S-5
II Valuation and Qualifying Accounts
2001, 2000 and 1999:
Entergy Corporation and Subsidiaries S-6
Entergy Arkansas, Inc. S-7
Entergy Gulf States, Inc. S-8
Entergy Louisiana, Inc. S-9
Entergy Mississippi, Inc. S-10
Entergy New Orleans, Inc. S-11
Schedules other than those listed above are omitted because they
are not required, not applicable, or the required information is shown
in the financial statements or notes thereto.
Columns have been omitted from schedules filed because the
information is not applicable.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
STATEMENTS OF INCOME
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
Income:
Equity in income of subsidiaries $801,155 $698,243 $651,977
Interest on temporary investments 18,889 12,273 5,703
-------- -------- --------
Total 820,044 710,516 657,680
-------- -------- --------
Expenses and Other Deductions:
Administrative and general expenses 45,525 25,146 85,815
Income taxes (credit) 9,787 (15,212) 12,524
Taxes other than income 825 661 739
Interest 37,711 20,627 6,143
-------- -------- --------
Total 93,848 31,222 105,221
-------- -------- --------
Net Income $726,196 $679,294 $552,459
======== ======== ========
See Entergy Corporation and Subsidiaries Notes to Financial
Statements in Part II, Item 8.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
STATEMENTS OF CASH FLOWS
Year to Date December 31,
2001 2000 1999
(In Thousands)
Operating Activities:
Net income $726,196 $679,294 $552,459
Noncash items included in net income:
Equity in earnings of subsidiaries (801,155) (698,243) (651,977)
Deferred income taxes 11,005 (9,014) (15,237)
Depreciation 1,391 962 1,438
Changes in working capital:
Receivables (1,804) 2,013 198
Payables 1,140 (13,822) 17,256
Other working capital accounts 489,997 98,489 (83,711)
Common stock dividends received from subsidiaries 440,300 314,300 532,300
Other (19,418) (11,694) 68,276
-------- -------- --------
Net cash flow provided by operating activities 847,652 362,285 421,002
-------- -------- --------
Investing Activities:
Investment in subsidiaries (239,180) 194,665 237,121
Capital expenditures (103) (360) (604)
Changes in other temporary investments (4,782) - -
Other 897 (1,000) 9,328
-------- -------- --------
Net cash flow provided by (used in) investing activities (243,168) 193,305 245,845
-------- -------- --------
Financing Activities:
Changes in short-term borrowings (36,999) 267,000 (165,500)
Advances to subsidiaries 27,067 (32,833) (32,261)
Common stock dividends paid (269,122) (271,019) (291,483)
Repurchase of common stock (36,895) (550,206) (245,004)
Notes receivable to/from associated companies (368,992) - -
Issuance of common stock 64,345 41,908 15,320
-------- -------- --------
Net cash flow used in financing activities (620,596) (545,150) (718,928)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (16,112) 10,440 (52,081)
Cash and cash equivalents at beginning of period 26,933 16,493 68,574
-------- -------- --------
Cash and cash equivalents at end of period $10,821 $26,933 $16,493
======== ======== ========
See Entergy Corporation and Subsidiaries Notes to Financial Statements
in Part II, Item 8.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
BALANCE SHEETS
December 31,
2001 2000
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Temporary cash investments - at cost,
which approximates market $10,821 $26,933
---------- ----------
Total cash and cash equivalents 10,821 26,933
Other temporary investments 4,782 -
Notes receivable - associated companies 368,992 -
Accounts receivable - associated companies 4,915 20,932
Other 2,517 2,012
---------- ----------
Total 392,027 49,877
---------- ----------
Investment in Wholly-owned Subsidiaries 7,860,109 7,310,589
Deferred Debits and Other Assets 98,488 154,658
---------- ----------
Total $8,350,624 $7,515,124
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $350,001 $387,000
Accounts payable:
Associated companies 13,618 2,206
Other 5,105 3,964
Taxes accrued 215,368 13,123
Other current liabilities 7,861 10,542
---------- ----------
Total 591,953 416,835
---------- ----------
Deferred Credits and Noncurrent Liabilities 302,651 93,588
---------- ----------
Shareholders' Equity:
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 4,662,704 4,660,483
Retained earnings 3,638,448 3,190,640
Accumulated other comprehensive loss (88,794) (73,998)
Less cost of treasury stock (27,441,384 shares in
2001 and 28,490,031 shares in 2000 758,820 774,905
---------- ----------
Total common shareholders' equity 7,456,020 7,004,701
---------- ----------
Total $8,350,624 $7,515,124
========== ==========
See Entergy Corporation and Subsidiaries Notes to
Financial Statements in Part II, Item 8.
ENTERGY CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND
PAID-IN CAPITAL
For the Years Ended December 31,
2001 2000 1999
(In Thousands)
RETAINED EARNINGS
Retained Earnings - Beginning of period $3,190,639 $2,786,467 $2,526,888
Add - Earnings applicable to common stock 726,196 $726,196 679,294 $679,294 552,459 $552,459
Deduct:
Dividends declared on common stock 278,342 275,929 294,352
Capital stock and other expenses 45 (807) (1,472)
---------- ---------- ----------
Total 278,387 275,122 292,880
---------- ---------- ----------
Retained Earnings - End of period $3,638,448 $3,190,639 $2,786,467
========== ========== ==========
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Net of tax):
Balance at beginning of period ($75,033) ($73,805) ($46,739)
Cumulative effect to January 1, 2001 of
accounting change regarding fair value
of derivative instruments (18,021) - -
Net derivative instrument fair value changes
arising during the period 48 48 - - - -
Foreign currency translation adjustments 4,615 4,615 (5,216) (5,216) (22,043) (22,043)
Net unrealized investment gains (losses) (403) (403) 3,988 3,988 (5,023) (5,023)
-------- -------- --------
Balance at end of period:
Accumulated derivative instrument fair
value changes (17,973) - -
Other accumulated comprehensive income
(loss) items (70,821) (75,033) (73,805)
-------- -------- --------
Total ($88,794) ($75,033) ($73,805)
======== -------- ======== -------- ======== --------
Comprehensive Income $730,456 $678,066 $525,393
======== ======== ========
PAID-IN CAPITAL
Paid-in Capital - Beginning of period $4,660,483 $4,636,163 $4,630,609
Add:
Common stock issuances related to
stock plans 2,221 24,320 5,554
---------- ---------- ----------
Paid-in Capital - End of period $4,662,704 $4,660,483 $4,636,163
========== ========== ==========
See Entergy Corporation and Subsidiaries Notes to Financial
Statements in Part II, Item 8.
ENTERGY CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $9,947 $12,762 $3,454 $19,255
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(108,351) $45,714 $140,900 $(203,537)
Injuries and damages (Note 2) 35,135 20,334 26,084 29,385
Environmental 37,183 7,442 9,823 34,802
-------- ------- -------- ---------
Total $(36,033) $73,490 $176,807 $(139,350)
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $9,507 $17,550 $17,110 $9,947
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(33,267) $66,866 $141,950 $(108,351)
Injuries and damages (Note 2) 34,309 16,785 15,959 35,135
Environmental 37,793 9,084 9,694 37,183
-------- ------- -------- ---------
Total $38,835 $92,735 $167,603 $(36,033)
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $10,300 $19,349 $20,142 $9,507
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(14,846) $35,208 $53,629 $(33,267)
Injuries and damages (Note 2) 28,162 25,162 19,015 34,309
Environmental 35,857 11,344 9,408 37,793
-------- ------- -------- ---------
Total $49,173 $71,714 $82,052 $38,835
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries
of amounts previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY ARKANSAS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,667 $- $- $1,667
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(80,297) $16,155 $114,573 $(178,715)
Injuries and damages (Note 2) 3,152 2,367 2,629 2,890
Environmental 7,136 2,181 2,407 6,910
-------- ------- -------- ---------
Total $(70,009) $20,703 $119,609 $(168,915)
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,768 $3,840 $3,941 $1,667
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $858 $35,521 $116,676 $(80,297)
Injuries and damages (Note 2) 3,253 1,322 1,423 3,152
Environmental 4,934 4,082 1,880 7,136
-------- ------- -------- ---------
Total $9,045 $40,925 $119,979 $(70,009)
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,753 $4,175 $4,160 $1,768
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $7,600 $18,306 $25,048 $858
Injuries and damages (Note 2) 4,618 2,502 3,867 3,253
Environmental 4,894 3,132 3,092 4,934
-------- ------- -------- ---------
Total $17,112 $23,940 $32,007 $9,045
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY GULF STATES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $2,131 $- $- $2,131
======== ======= ======== =========
Accumulated Provisions
Not Deducted from Assets--
Property insurance $(5,698) $4,485 $7,508 $(8,721)
Injuries and damages (Note 2) 9,406 5,266 7,899 6,773
Environmental 20,671 2,306 4,261 18,716
-------- ------- -------- ---------
Total $24,379 $12,057 $19,668 $16,768
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,828 $4,757 $4,454 $2,131
======== ======= ======== =========
Accumulated Provisions
Not Deducted from Assets--
Property insurance $(3,452) $4,486 $6,732 $(5,698)
Injuries and damages (Note 2) 8,684 6,538 5,816 9,406
Environmental 24,445 1,844 5,618 20,671
-------- ------- -------- ---------
Total $29,677 $12,868 $18,166 $24,379
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,735 $4,271 $4,178 $1,828
======== ======= ======== =========
Accumulated Provisions
Not Deducted from Assets--
Property insurance $(4,184) $4,486 $3,754 $(3,452)
Injuries and damages (Note 2) 4,759 9,810 5,885 8,684
Environmental 22,309 4,187 2,051 24,445
-------- ------- -------- ---------
Total $22,884 $18,483 $11,690 $29,677
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY LOUISIANA, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,771 $- $- $1,771
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(27,040) $11,900 $11,435 $(26,575)
Injuries and damages (Note 2) 11,583 3,674 5,428 9,829
Environmental 7,793 2,051 1,717 8,127
-------- ------- -------- ---------
Total $(7,664) $17,625 $18,580 $(8,619)
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,615 $4,603 $4,447 $1,771
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(24,089) $11,900 $14,851 $(27,040)
Injuries and damages (Note 2) 12,452 3,889 4,758 11,583
Environmental 7,022 2,132 1,361 7,793
-------- ------- -------- ---------
Total $(4,615) $17,921 $20,970 $(7,664)
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,164 $4,797 $4,346 $1,615
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(17,825) $6,680 $12,944 $(24,089)
Injuries and damages (Note 2) 13,124 7,038 7,710 12,452
Environmental 7,236 1,059 1,273 7,022
-------- ------- -------- ---------
Total $2,535 $14,777 $21,927 $(4,615)
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries
of amounts previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY MISSISSIPPI, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,044 $- $- $1,044
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(4,765) $13,124 $7,080 $1,279
Injuries and damages (Note 2) 6,694 8,196 8,584 6,306
Environmental 511 581 605 487
-------- ------- -------- ---------
Total $2,440 $21,901 $16,269 $8,072
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $886 $2,635 $2,477 $1,044
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(16,356) $14,956 $3,365 $(4,765)
Injuries and damages (Note 2) 6,849 1,579 1,734 6,694
Environmental 594 418 501 511
-------- ------- -------- ---------
Total $(8,913) $16,953 $5,600 $2,440
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,217 $2,106 $2,437 $886
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $(11,543) $5,736 $10,549 $(16,356)
Injuries and damages (Note 2) 3,796 2,950 (103) 6,849
Environmental 704 895 1,005 594
-------- ------- -------- ---------
Total $(7,043) $9,581 $11,451 $(8,913)
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY NEW ORLEANS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 2001
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $770 $4,918 $3,454 $2,234
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $9,449 $50 $304 $9,195
Injuries and damages (Note 2) 4,300 831 1,544 3,587
Environmental 1,072 323 833 562
-------- ------- -------- ---------
Total $14,821 $1,204 $2,681 $13,344
======== ======= ======== =========
Year ended December 31, 2000
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $846 $1,715 $1,791 $770
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $9,772 $3 $326 $9,449
Injuries and damages (Note 2) 3,071 3,457 2,228 4,300
Environmental 798 608 334 1,072
-------- ------- -------- ---------
Total $13,641 $4,068 $2,888 $14,821
======== ======= ======== =========
Year ended December 31, 1999
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $761 $1,936 $1,851 $846
======== ======= ======== =========
Accumulated Provisions Not
Deducted from Assets:
Property insurance $11,106 $- $1,334 $9,772
Injuries and damages (Note 2) 1,865 2,862 1,656 3,071
Environmental 714 2,071 1,987 798
-------- ------- -------- ---------
Total $13,685 $4,933 $4,977 $13,641
======== ======= ======== =========
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
EXHIBIT INDEX
The following exhibits indicated by an asterisk preceding the
exhibit number are filed herewith. The balance of the exhibits
have heretofore been filed with the SEC, respectively, as the
exhibits and in the file numbers indicated and are incorporated
herein by reference. The exhibits marked with a (+) are
management contracts or compensatory plans or arrangements
required to be filed herewith and required to be identified as
such by Item 14 of Form 10-K. Reference is made to a duplicate
list of exhibits being filed as a part of this Form 10-K, which
list, prepared in accordance with Item 102 of Regulation S-T of
the SEC, immediately precedes the exhibits being physically filed
with this Form 10-K.
(3) (i) Articles of Incorporation
Entergy Corporation
(a) 1 -- Certificate of Incorporation of Entergy
Corporation dated December 31, 1993 (A-1(a) to Rule 24
Certificate in 70-8059).
System Energy
(b) 1 -- Amended and Restated Articles of Incorporation of
System Energy and amendments thereto through April 28,
1989 (A-1(a) to Form U-1 in 70-5399).
Entergy Arkansas
(c) 1 -- Amended and Restated Articles of Incorporation of
Entergy Arkansas effective November 12, 1999 (3(i)(c)1 to
Form 10-K for the year ended December 31, 1999 in 1-
10764).
Entergy Gulf States
(d) 1 -- Restated Articles of Incorporation of Entergy Gulf
States effective November 17, 1999 (3(i)(d)1 to Form 10-K
for the year ended December 31, 1999 in 1-27031).
Entergy Louisiana
(e) 1 -- Amended and Restated Articles of Incorporation of
Entergy Louisiana effective November 15, 1999 (3(a) to
Form S-3 in 333-93683).
Entergy Mississippi
(f) 1 -- Amended and Restated Articles of Incorporation of
Entergy Mississippi effective November 12, 1999 (3(i)(f)1
to Form 10-K for the year ended December 31, 1999 in 0-
320).
Entergy New Orleans
(g) 1 -- Amended and Restated Articles of Incorporation of
Entergy New Orleans effective November 15, 1999 (3(a) to
Form S-3 in 333-95599).
(3) (ii) By-Laws
(a) -- By-Laws of Entergy Corporation as amended January
29, 1999, and as presently in effect (4.2 to Form S-8 in
File No. 333-75097).
(b) -- By-Laws of System Energy effective July 6, 1998,
and as presently in effect (3(f) to Form 10-Q for the
quarter ended June 30, 1998 in 1-9067).
(c) -- By-Laws of Entergy Arkansas effective November 26,
1999, and as presently in effect (3(ii)(c) to Form 10-K
for the year ended December 31, 1999 in 1-10764).
(d) -- By-Laws of Entergy Gulf States effective November
26, 1999, and as presently in effect (3(ii)(d) to Form 10-
K for the year ended December 31, 19991-27031).
(e) -- By-Laws of Entergy Louisiana effective November
26, 1999, and as presently in effect (3(b) to Form S-3 in
File No. 333-93683).
(f) -- By-Laws of Entergy Mississippi effective November
26, 1999, and as presently in effect (3(ii)(f) to Form 10-
K for the year ended December 31, 1999 in 0-320).
(g) -- By-Laws of Entergy New Orleans effective November
30, 1999, and as presently in effect (3(b) to Form S-3 in
File No. 333-95599).
(4) Instruments Defining Rights of Security Holders,
Including Indentures
Entergy Corporation
(a) 1 -- See (4)(b) through (4)(g) below for instruments
defining the rights of holders of long-term debt of
System Energy, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi and Entergy New
Orleans.
(a) 2 -- 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 (4(a) to Form 10-Q for the
quarter ended June 30, 2001 in 1-11299).
(a) 3 -- Assumption Agreement, dated July 12, 2001, among
First Union National Bank, as Additional Lender, Entergy
and Citibank N.A., as Agent (5(a) to Rule 24 Certificate
dated November 6, 2001 in 70-9749).
System Energy
(b) 1 -- Mortgage and Deed of Trust, dated as of June 15,
1977, as amended by twenty-one Supplemental Indentures
(A-1 in 70-5890 (Mortgage); B and C to Rule 24
Certificate in 70-5890 (First); B to Rule 24 Certificate
in 70-6259 (Second); 20(a)-5 to Form 10-Q for the quarter
ended June 30, 1981 in 1-3517 (Third); A-1(e)-1 to
Rule 24 Certificate in 70-6985 (Fourth); B to Rule 24
Certificate in 70-7021 (Fifth); B to Rule 24 Certificate
in 70-7021 (Sixth); A-3(b) to Rule 24 Certificate in
70-7026 (Seventh); A-3(b) to Rule 24 Certificate in
70-7158 (Eighth); B to Rule 24 Certificate in 70-7123
(Ninth); B-1 to Rule 24 Certificate in 70-7272 (Tenth);
B-2 to Rule 24 Certificate in 70-7272 (Eleventh); B-3 to
Rule 24 Certificate in 70-7272 (Twelfth); B-1 to Rule 24
Certificate in 70-7382 (Thirteenth); B-2 to Rule 24
Certificate in 70-7382 (Fourteenth); A-2(c) to Rule 24
Certificate in 70-7946 (Fifteenth); A-2(c) to Rule 24
Certificate in 70-7946 (Sixteenth); A-2(d) to Rule 24
Certificate in 70-7946 (Seventeenth); A-2(e) to Rule 24
Certificate dated May 4, 1993 in 70-7946 (Eighteenth); A-
2(g) to Rule 24 Certificate dated May 6, 1994 in 70-7946
(Nineteenth); A-2(a)(1) to Rule 24 Certificate dated
August 8, 1996 in 70-8511 (Twentieth); and A-2(a)(2) to
Rule 24 Certificate dated August 8, 1996 in 70-8511
(Twenty-first)).
(b) 2 -- Facility Lease No. 1, dated as of December 1,
1988, between Meridian Trust Company and Stephen M. Carta
(Steven Kaba, successor), as Owner Trustees, and System
Energy (B-2(c)(1) to Rule 24 Certificate dated January 9,
1989 in 70-7561), as supplemented by Lease Supplement No.
1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24
Certificate dated April 21, 1989 in 70-7561) and Lease
Supplement No. 2 dated as of January 1, 1994 (B-3(d) to
Rule 24 Certificate dated January 31, 1994 in 70-8215).
(b) 3 -- Facility Lease No. 2, dated as of December 1, 1988
between Meridian Trust Company and Stephen M. Carta
(Steven Kaba, successor), as Owner Trustees, and System
Energy (B-2(c)(2) to Rule 24 Certificate dated January 9,
1989 in 70-7561), as supplemented by Lease Supplement No.
1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24
Certificate dated April 21, 1989 in 70-7561) and Lease
Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule
24 Certificate dated January 31, 1994 in 70-8215).
Entergy Arkansas
(c) 1 -- Mortgage and Deed of Trust, dated as of
October 1, 1944, as amended by fifty-six Supplemental
Indentures (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121
(First); 7(c) in 2-7605 (Second); 7(d) in 2-8100 (Third);
7(a)-4 in 2-8482 (Fourth); 7(a)-5 in 2-9149 (Fifth);
4(a)-6 in 2-9789 (Sixth); 4(a)-7 in 2-10261 (Seventh);
4(a)-8 in 2-11043 (Eighth); 2(b)-9 in 2-11468 (Ninth);
2(b)-10 in 2-15767 (Tenth); D in 70-3952 (Eleventh); D in
70-4099 (Twelfth); 4(d) in 2-23185 (Thirteenth); 2(c) in
2-24414 (Fourteenth); 2(c) in 2-25913 (Fifteenth); 2(c)
in 2-28869 (Sixteenth); 2(d) in 2-28869 (Seventeenth);
2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646
(Nineteenth); 2(c) in 2-39253 (Twentieth); 2(c) in
2-41080 (Twenty-first); C-1 to Rule 24 Certificate in
70-5151 (Twenty-second); C-1 to Rule 24 Certificate in
70-5257 (Twenty-third); C to Rule 24 Certificate in
70-5343 (Twenty-fourth); C-1 to Rule 24 Certificate in
70-5404 (Twenty-fifth); C to Rule 24 Certificate in
70-5502 (Twenty-sixth); C-1 to Rule 24 Certificate in
70-5556 (Twenty-seventh); C-1 to Rule 24 Certificate in
70-5693 (Twenty-eighth); C-1 to Rule 24 Certificate in
70-6078 (Twenty-ninth); C-1 to Rule 24 Certificate in
70-6174 (Thirtieth); C-1 to Rule 24 Certificate in
70-6246 (Thirty-first); C-1 to Rule 24 Certificate in
70-6498 (Thirty-second); A-4b-2 to Rule 24 Certificate in
70-6326 (Thirty-third); C-1 to Rule 24 Certificate in
70-6607 (Thirty-fourth); C-1 to Rule 24 Certificate in
70-6650 (Thirty-fifth); C-1 to Rule 24 Certificate dated
December 1, 1982 in 70-6774 (Thirty-sixth); C-1 to
Rule 24 Certificate dated February 17, 1983 in 70-6774
(Thirty-seventh); A-2(a) to Rule 24 Certificate dated
December 5, 1984 in 70-6858 (Thirty-eighth); A-3(a) to
Rule 24 Certificate in 70-7127 (Thirty-ninth); A-7 to
Rule 24 Certificate in 70-7068 (Fortieth); A-8(b) to
Rule 24 Certificate dated July 6, 1989 in 70-7346
(Forty-first); A-8(c) to Rule 24 Certificate dated
February 1, 1990 in 70-7346 (Forty-second); 4 to Form
10-Q for the quarter ended September 30, 1990 in 1-10764
(Forty-third); A-2(a) to Rule 24 Certificate dated
November 30, 1990 in 70-7802 (Forty-fourth); A-2(b) to
Rule 24 Certificate dated January 24, 1991 in 70-7802
(Forty-fifth); 4(d)(2) in 33-54298 (Forty-sixth); 4(c)(2)
to Form 10-K for the year ended December 31, 1992 in 1-
10764 (Forty-seventh); 4(b) to Form 10-Q for the quarter
ended June 30, 1993 in 1-10764 (Forty-eighth); 4(c) to
Form 10-Q for the quarter ended June 30, 1993 in 1-10764
(Forty-ninth); 4(b) to Form 10-Q for the quarter ended
September 30, 1993 in 1-10764 (Fiftieth); 4(c) to Form 10-
Q for the quarter ended September 30, 1993 in 1-10764
(Fifty-first); 4(a) to Form 10-Q for the quarter ended
June 30, 1994 in 1-10764 (Fifty-second); C-2 to Form U5S
for the year ended December 31, 1995 (Fifty-third); C-
2(a) to Form U5S for the year ended December 31, 1996
(Fifty-fourth); 4(a) to Form 10-Q for the quarter ended
March 31, 2000 in 1-10764 (Fifty-fifth); and 4(a) to Form
10-Q for the quarter ended September 30, 2001 in 1-10764
(Fifty-sixth)).
(c) 2 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities between Entergy
Arkansas and Bank of New York (as Trustee), dated as of
August 1, 1996 (filed as Exhibit A-1(a) to Rule 24
Certificate dated August 26, 1996 in 70-8723).
(c) 3 -- Amended and Restated Trust Agreement of
Entergy Arkansas Capital I, dated as of August 14, 1996
(filed as Exhibit A-3(a) to Rule 24 Certificate dated
August 26, 1996 in 70-8723).
(c) 4 -- Guarantee Agreement between Entergy Arkansas
(as Guarantor) and The Bank of New York (as Trustee),
dated as of August 14, 1996, with respect to Entergy
Arkansas Capital I's obligations on its 8 1/2% Cumulative
Quarterly Income Preferred Securities, Series A (filed as
Exhibit A-4(a) to Rule 24 Certificate dated August 26,
1996 in 70-8723).
Entergy Gulf States
(d) 1 -- Indenture of Mortgage, dated September 1, 1926, as
amended by certain Supplemental Indentures (B-a-I-1 in
Registration No. 2-2449 (Mortgage); 7-A-9 in Registration
No. 2-6893 (Seventh); B to Form 8-K dated September 1,
1959 (Eighteenth); B to Form 8-K dated February 1, 1966
(Twenty-second); B to Form 8-K dated March 1, 1967
(Twenty-third); C to Form 8-K dated March 1, 1968 (Twenty-
fourth); B to Form 8-K dated November 1, 1968 (Twenty-
fifth); B to Form 8-K dated April 1, 1969 (Twenty-sixth);
2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4-2 to
Form 10-K for the year ended December 31, 1984 in 1-27031
(Forty-eighth); 4-2 to Form 10-K for the year ended
December 31, 1988 in 1-27031 (Fifty-second); 4 to Form 10-
K for the year ended December 31, 1991 in 1-27031 (Fifty-
third); 4 to Form 8-K dated July 29, 1992 in 1-27031
(Fifth-fourth); 4 to Form 10-K dated December 31, 1992
in 1-27031 (Fifty-fifth); 4 to Form 10-Q for the quarter
ended March 31, 1993 in 1-27031 (Fifty-sixth); 4-2 to
Amendment No. 9 to Registration No. 2-76551 (Fifty-
seventh); 4(b) to Form 10-Q for the quarter ended March
31,1999 in 1-27031 (Fifty-eighth); A-2(a) to Rule 24
Certificate dated June 23, 2000 in 70-8721 (Fifty-ninth);
and A-2(a) to Rule 24 Certificate dated September 10,
2001 in 70-9751 (Sixtieth)).
(d) 2 -- Indenture, dated March 21, 1939, accepting
resignation of The Chase National Bank of the City of New
York as trustee and appointing Central Hanover Bank and
Trust Company as successor trustee (B-a-1-6 in
Registration No. 2-4076).
(d) 3 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities, dated as of
January 15, 1997 (A-11(a) to Rule 24 Certificate dated
February 6, 1997 in 70-8721).
(d) 4 -- Amended and Restated Trust Agreement of Entergy
Gulf States Capital I dated January 28, 1997 of Series A
Preferred Securities (A-13(a) to Rule 24 Certificate
dated February 6, 1997 in 70-8721).
(d) 5 -- Guarantee Agreement between Entergy Gulf States,
Inc. (as Guarantor) and The Bank of New York (as Trustee)
dated as of January 28, 1997 with respect to Entergy Gulf
States Capital I's obligation on its 8.75% Cumulative
Quarterly Income Preferred Securities, Series A (A-14(a)
to Rule 24 Certificate dated February 6, 1997 in 70-
8721).
Entergy Louisiana
(e) 1 -- Mortgage and Deed of Trust, dated as of April 1,
1944, as amended by fifty-five Supplemental Indentures
(7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); 7(c)
in 2-8636 (Second); 4(b)-3 in 2-10412 (Third); 4(b)-4 in
2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862
(Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429
(Eighth); 4(c)-9 in 2-25801 (Ninth); 4(c)-10 in 2-26911
(Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659
(Twelfth); C to Rule 24 Certificate in 70-4793
(Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 2(b)-2 in
2-39437 (Fifteenth); 2(b)-2 in 2-42523 (Sixteenth); C to
Rule 24 Certificate in 70-5242 (Seventeenth); C to
Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to
Rule 24 Certificate in 70-5449 (Nineteenth); C-1 to
Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to
Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to
Rule 24 Certificate in 70-5711 (Twenty-second); C-1 to
Rule 24 Certificate in 70-5919 (Twenty-third); C-1 to
Rule 24 Certificate in 70-6102 (Twenty-fourth); C-1 to
Rule 24 Certificate in 70-6169 (Twenty-fifth); C-1 to
Rule 24 Certificate in 70-6278 (Twenty-sixth); C-1 to
Rule 24 Certificate in 70-6355 (Twenty-seventh); C-1 to
Rule 24 Certificate in 70-6508 (Twenty-eighth); C-1 to
Rule 24 Certificate in 70-6556 (Twenty-ninth); C-1 to
Rule 24 Certificate in 70-6635 (Thirtieth); C-1 to
Rule 24 Certificate in 70-6834 (Thirty-first); C-1 to
Rule 24 Certificate in 70-6886 (Thirty-second); C-1 to
Rule 24 Certificate in 70-6993 (Thirty-third); C-2 to
Rule 24 Certificate in 70-6993 (Thirty-fourth); C-3 to
Rule 24 Certificate in 70-6993 (Thirty-fifth); A-2(a) to
Rule 24 Certificate in 70-7166 (Thirty-sixth); A-2(a) in
70-7226 (Thirty-seventh); C-1 to Rule 24 Certificate in
70-7270 (Thirty-eighth); 4(a) to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988 in 1-8474
(Thirty-ninth); A-2(b) to Rule 24 Certificate in 70-7553
(Fortieth); A-2(d) to Rule 24 Certificate in 70-7553
(Forty-first); A-3(a) to Rule 24 Certificate in 70-7822
(Forty-second); A-3(b) to Rule 24 Certificate in 70-7822
(Forty-third); A-2(b) to Rule 24 Certificate in 70-7822
(Forty-fourth); A-3(c) to Rule 24 Certificate in 70-7822
(Forty-fifth); A-2(c) to Rule 24 Certificate dated April
7, 1993 in 70-7822 (Forty-sixth); A-3(d) to Rule 24
Certificate dated June 4, 1993 in 70-7822 (Forth-
seventh); A-3(e) to Rule 24 Certificate dated December
21, 1993 in 70-7822 (Forty-eighth); A-3(f) to Rule 24
Certificate dated August 1, 1994 in 70-7822 (Forty-
ninth); A-4(c) to Rule 24 Certificate dated September 28,
1994 in 70-7653 (Fiftieth); A-2(a) to Rule 24 Certificate
dated April 4, 1996 in 70-8487 (Fifty-first); A-2(a) to
Rule 24 Certificate dated April 3, 1998 in 70-9141 (Fifty-
second); A-2(b) to Rule 24 Certificate dated April 9,
1999 in 70-9141 (Fifty-third); A-3(a) to Rule 24
Certificate dated July 6, 1999 in 70-9141 (Fifty-fourth);
and A-2(c) to Rule 24 Certificate dated June 2, 2000 in
70-9141 (Fifty-fifth)).
(e) 2 -- Facility Lease No. 1, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-1 in Registration
No. 33-30660).
(e) 3 -- Facility Lease No. 2, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-2 in Registration
No. 33-30660).
(e) 4 -- Facility Lease No. 3, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-3 in Registration
No. 33-30660).
(e) 5 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities, dated as of July
1, 1996 (A-14(a) to Rule 24 Certificate dated July 25,
1996 in 70-8487).
(e) 6 -- Amended and Restated Trust Agreement of Entergy
Louisiana Capital I dated July 16, 1996 of Series A
Preferred Securities (A-16(a) to Rule 24 Certificate
dated July 25, 1996 in 70-8487).
(e) 7 -- Guarantee Agreement between Entergy Louisiana,
Inc. (as Guarantor) and The Bank of New York (as Trustee)
dated as of July 16, 1996 with respect to Entergy
Louisiana Capital I's obligation on its 9% Cumulative
Quarterly Income Preferred Securities, Series A (A-19(a)
to Rule 24 Certificate dated July 25, 1996 in 70-8487).
Entergy Mississippi
(f) 1 -- Mortgage and Deed of Trust, dated as of
February 1, 1988, as amended by sixteen Supplemental
Indentures (A-2(a)-2 to Rule 24 Certificate in 70-7461
(Mortgage); A-2(b)-2 in 70-7461 (First); A-5(b) to
Rule 24 Certificate in 70-7419 (Second); A-4(b) to
Rule 24 Certificate in 70-7554 (Third); A-1(b)-1 to Rule
24 Certificate in 70-7737 (Fourth); A-2(b) to Rule 24
Certificate dated November 24, 1992 in 70-7914 (Fifth);
A-2(e) to Rule 24 Certificate dated January 22, 1993 in
70-7914 (Sixth); A-2(g) to Form U-1 in 70-7914 (Seventh);
A-2(i) to Rule 24 Certificate dated November 10, 1993 in
70-7914 (Eighth); A-2(j) to Rule 24 Certificate dated
July 22, 1994 in 70-7914 (Ninth); (A-2(l) to Rule 24
Certificate dated April 21, 1995 in 70-7914 (Tenth); A-
2(a) to Rule 24 Certificate dated June 27, 1997 in 70-
8719 (Eleventh); A-2(b) to Rule 24 Certificate dated
April 16, 1998 in 70-8719 (Twelfth); A-2(c) to Rule 24
Certificate dated May 12, 1999 in 70-8719 (Thirteenth); A-
3(a) to Rule 24 Certificate dated June 8, 1999 in 70-8719
(Fourteenth); A-2(d) to Rule 24 Certificate dated
February 24, 2000 in 70-8719 (Fifteenth); and A-2(a) to
Rule 24 Certificate dated February 9, 2001 in 70-9757
(Sixteenth)).
Entergy New Orleans
(g) 1 -- Mortgage and Deed of Trust, dated as of May 1,
1987, as amended by nine Supplemental Indentures (A-2(c)
to Rule 24 Certificate in 70-7350 (Mortgage); A-5(b) to
Rule 24 Certificate in 70-7350 (First); A-4(b) to Rule 24
Certificate in 70-7448 (Second); 4(f)4 to Form 10-K for
the year ended December 31, 1992 in 0-5807 (Third); 4(a)
to Form 10-Q for the quarter ended September 30, 1993 in
0-5807 (Fourth); 4(a) to Form 8-K dated April 26, 1995 in
0-5807 (Fifth); 4(a) to Form 8-K dated March 22, 1996 in
0-5807 (Sixth); 4(b) to Form 10-Q for the quarter ended
June 30, 1998 in 0-5807 (Seventh); 4(d) to Form 10-Q for
the quarter ended June 30, 2000 in 0-5807 (Eighth); and C-
5(a) to Form U5S for the year ended December 31, 2000
(Ninth)).
(10) Material Contracts
Entergy Corporation
(a) 1 -- Agreement, dated April 23, 1982, among certain
System companies, relating to System Planning and
Development and Intra-System Transactions (10(a)1 to
Form 10-K for the year ended December 31, 1982 in
1-3517).
(a) 2 -- Middle South Utilities (now Entergy Corporation)
System Agency Agreement, dated December 11, 1970 (5(a)-2
in 2-41080).
(a) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated
December 11, 1970 (5(a)-4 in 2-41080).
(a) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a)-4 in 2-41080).
(a) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(a) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-41080).
(a) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (5(a)-6 in 2-43175).
(a) 8 -- Amendment, dated April 27, 1984, to Service
Agreement with Entergy Services (10(a)-7 to Form 10-K for
the year ended December 31, 1984, in 1-3517).
(a) 9 -- Amendment, dated August 1, 1988, to Service
Agreement with Entergy Services (10(a)-8 to Form 10-K for
the year ended December 31, 1988, in 1-3517).
(a) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(a)-9 to Form 10-K for
the year ended December 31, 1990, in 1-3517).
(a) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 for the year
ended December 31, 1994 in 1-3517).
*(a) 12-- Amendment, dated January 1, 2000, to Service
Agreement with Entergy Services.
*(a) 13-- Amendment, dated January 1, 2001, to Service
Agreement with Entergy Services.
(a) 14-- Availability Agreement, dated June 21, 1974, among
System Energy and certain other System companies (B to
Rule 24 Certificate dated June 24, 1974 in 70-5399).
(a) 15-- First Amendment to Availability Agreement, dated
as of June 30, 1977 (B to Rule 24 Certificate dated
June 24, 1977 in 70-5399).
(a) 16-- Second Amendment to Availability Agreement, dated
as of June 15, 1981 (E to Rule 24 Certificate dated
July 1, 1981 in 70-6592).
(a) 17-- Third Amendment to Availability Agreement, dated
as of June 28, 1984 (B-13(a) to Rule 24 Certificate dated
July 6, 1984 in 70-6985).
(a) 18-- Fourth Amendment to Availability Agreement, dated
as of June 1, 1989 (A to Rule 24 Certificate dated
June 8, 1989 in 70-5399).
(a) 19-- Eighteenth Assignment of Availability Agreement,
Consent and Agreement, dated as of September 1, 1986,
with United States Trust Company of New York and
Gerard F. Ganey, as Trustees (C-2 to Rule 24 Certificate
dated October 1, 1986 in 70-7272).
(a) 20-- Nineteenth Assignment of Availability Agreement,
Consent and Agreement, dated as of September 1, 1986,
with United States Trust Company of New York and
Gerard F. Ganey, as Trustees (C-3 to Rule 24 Certificate
dated October 1, 1986 in 70-7272).
(a) 21-- Twenty-sixth Assignment of Availability Agreement,
Consent and Agreement, dated as of October 1, 1992, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (B-2(c) to Rule 24 Certificate dated
November 2, 1992 in 70-7946).
(a) 22-- Twenty-seventh Assignment of Availability
Agreement, Consent and Agreement, dated as of April 1,
1993, with United States Trust Company of New York and
Gerard F. Ganey as Trustees (B-2(d) to Rule 24
Certificate dated May 4, 1993 in 70-7946).
(a) 23-- Twenty-ninth Assignment of Availability Agreement,
Consent and Agreement, dated as of April 1, 1994, with
United States Trust Company of New York and Gerard F.
Ganey as Trustees (B-2(f) to Rule 24 Certificate dated
May 6, 1994 in 70-7946).
(a) 24-- Thirtieth Assignment of Availability Agreement,
Consent and Agreement, dated as of August 1, 1996, among
System Energy, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi and Entergy New Orleans, and United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-2(a) to Rule 24 Certificate dated August 8,
1996 in 70-8511).
(a) 25-- Thirty-first Assignment of Availability Agreement,
Consent and Agreement, dated as of August 1, 1996, among
System Energy, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans, and United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-2(b) to Rule 24 Certificate dated August 8,
1996 in 70-8511).
(a) 26-- Thirty-second Assignment of Availability
Agreement, Consent and Agreement, dated as of December
27, 1996, among System Energy, Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans,
and The Chase Manhattan Bank (B-2(a) to Rule 24
Certificate dated January 13, 1997 in 70-7561).
(a) 27-- Thirty-third Assignment of Availability Agreement,
Consent and Agreement, dated as of December 20, 1999,
among System Energy, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans, and The
Chase Manhattan Bank (B-2(b) to Rule 24 Certificate dated
March 3, 2000 in 70-7561).
(a) 28-- Capital Funds Agreement, dated June 21, 1974,
between Entergy Corporation and System Energy (C to
Rule 24 Certificate dated June 24, 1974 in 70-5399).
(a) 29-- First Amendment to Capital Funds Agreement, dated
as of June 1, 1989 (B to Rule 24 Certificate dated
June 8, 1989 in 70-5399).
(a) 30-- Eighteenth Supplementary Capital Funds Agreement
and Assignment, dated as of September 1, 1986, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (D-2 to Rule 24 Certificate dated
October 1, 1986 in 70-7272).
(a) 31-- Nineteenth Supplementary Capital Funds Agreement
and Assignment, dated as of September 1, 1986, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (D-3 to Rule 24 Certificate dated
October 1, 1986 in 70-7272).
(a) 32-- Twenty-sixth Supplementary Capital Funds Agreement
and Assignment, dated as of October 1, 1992, with United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-3(c) to Rule 24 Certificate dated November 2,
1992 in 70-7946).
(a) 33-- Twenty-seventh Supplementary Capital Funds
Agreement and Assignment, dated as of April 1, 1993, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (B-3(d) to Rule 24 Certificate dated
May 4, 1993 in 70-7946).
(a) 34-- Twenty-ninth Supplementary Capital Funds Agreement
and Assignment, dated as of April 1, 1994, with United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-3(f) to Rule 24 Certificate dated May 6, 1994
in 70-7946).
(a) 35-- Thirtieth Supplementary Capital Funds Agreement
and Assignment, dated as of August 1, 1996, among Entergy
Corporation, System Energy and United States Trust
Company of New York and Gerard F. Ganey, as Trustees (B-
3(a) to Rule 24 Certificate dated August 8, 1996 in 70-
8511).
(a) 36-- Thirty-first Supplementary Capital Funds Agreement
and Assignment, dated as of August 1, 1996, among Entergy
Corporation, System Energy and United States Trust
Company of New York and Gerard F. Ganey, as Trustees (B-
3(b) to Rule 24 Certificate dated August 8, 1996 in 70-
8511).
(a) 37-- Thirty-second Supplementary Capital Funds
Agreement and Assignment, dated as of December 27, 1996,
among Entergy Corporation, System Energy and The Chase
Manhattan Bank (B-1(a) to Rule 24 Certificate dated
January 13, 1997 in 70-7561).
(a) 38-- Thirty-third Supplementary Capital Funds Agreement
and Assignment, dated as of December 20, 1999, among
Entergy Corporation, System Energy and The Chase
Manhattan Bank (B-3(b) to Rule 24 Certificate dated March
3, 2000 in 70-7561).
(a) 39-- First Amendment to Supplementary Capital Funds
Agreements and Assignments, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy, Deposit
Guaranty National Bank, United States Trust Company of
New York and Gerard F. Ganey (C to Rule 24 Certificate
dated June 8, 1989 in 70-7026).
(a) 40-- First Amendment to Supplementary Capital Funds
Agreements and Assignments, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy, United
States Trust Company of New York and Gerard F. Ganey (C
to Rule 24 Certificate dated June 8, 1989 in 70-7123).
(a) 41-- First Amendment to Supplementary Capital Funds
Agreement and Assignment, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy and
Chemical Bank (C to Rule 24 Certificate dated June 8,
1989 in 70-7561).
(a) 42-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(a) 43-- Joint Construction, Acquisition and Ownership
Agreement, dated as of May 1, 1980, between System Energy
and SMEPA (B-1(a) in 70-6337), as amended by Amendment
No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and
Amendment No. 2, dated as of October 31, 1980 (1 to Rule
24 Certificate dated October 30, 1981 in 70-6337).
(a) 44-- Operating Agreement dated as of May 1, 1980,
between System Energy and SMEPA (B(2)(a) in 70-6337).
(a) 45-- Assignment, Assumption and Further Agreement
No. 1, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(1) to Rule 24 Certificate dated January 9, 1989
in 70-7561).
(a) 46-- Assignment, Assumption and Further Agreement
No. 2, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(2) to Rule 24 Certificate dated January 9, 1989
in 70-7561).
(a) 47-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B(3)(a) in 70-6337).
(a) 48-- Grand Gulf Unit No. 2 Supplementary Agreement,
dated as of February 7, 1986, between System Energy and
SMEPA (10(aaa) in 33-4033).
(a) 49-- Compromise and Settlement Agreement, dated June 4,
1982, between Texaco, Inc. and Entergy Louisiana (28(a)
to Form 8-K dated June 4, 1982 in 1-3517).
(a) 50-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a)-39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(a) 51-- First Amendment to Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(a) 52-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(a) 53-- Middle South Utilities Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(a) 54-- First Amendment, dated January 1, 1990, to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(a) 55-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(a) 56-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(a) 57-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(a) 58-- Guaranty Agreement between Entergy Corporation and
Entergy Arkansas, dated as of September 20, 1990 (B-1(a)
to Rule 24 Certificate dated September 27, 1990 in
70-7757).
(a) 59-- Guarantee Agreement between Entergy Corporation
and Entergy Louisiana, dated as of September 20, 1990
(B-2(a) to Rule 24 Certificate dated September 27, 1990
in 70-7757).
(a) 60-- Guarantee Agreement between Entergy Corporation
and System Energy, dated as of September 20, 1990 (B-3(a)
to Rule 24 Certificate dated September 27, 1990 in 70-
7757).
(a) 61-- Loan Agreement between Entergy Operations and
Entergy Corporation, dated as of September 20, 1990
(B-12(b) to Rule 24 Certificate dated June 15, 1990 in
70-7679).
(a) 62-- Loan Agreement between Entergy Power and Entergy
Corporation, dated as of August 28, 1990 (A-4(b) to Rule
24 Certificate dated September 6, 1990 in 70-7684).
(a) 63-- Loan Agreement between Entergy Corporation and
Entergy Systems and Service, Inc., dated as of
December 29, 1992 (A-4(b) to Rule 24 Certificate in
70-7947).
*+(a)64--Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries.
*+(a)65--Entergy Corporation Executive Annual Incentive Plan.
+(a) 66-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate dated May 24,
1991 in 70-7831).
+(a) 67-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a) 71 to Form 10-
K for the year ended December 31, 1992 in 1-3517).
+(a) 68-- 1998 Equity Ownership Plan of Entergy Corporation
and Subsidiaries (Filed with the Proxy Statement dated
March 30, 1998).
*+(a)69--Amendments, effective June 13, 2000 and December 7,
2001, to the 1998 Equity Ownership Plan of Entergy
Corporation and Subsidiaries.
*+(a)70--Supplemental Retirement Plan of Entergy Corporation and
Subsidiaries, as amended effective January 1, 2000.
*+(a)71--Amendment, effective December 28, 2001, to the
Supplemental Retirement Plan of Entergy Corporation and
Subsidiaries.
*+(a)72--Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries, as amended effective
January 1, 2000.
*+(a)73--Amendment, effective December 28, 2001, to the Defined
Contribution Restoration Plan of Entergy Corporation and
Subsidiaries.
*+(a)74--Executive Disability Plan of Entergy Corporation and
Subsidiaries.
*+(a)75--Executive Deferred Compensation Plan of Entergy
Corporation and Subsidiaries, as amended effective
January 1, 2000.
*+(a)76--Amendment, effective December 7, 2001, to the Executive
Deferred Compensation Plan of Entergy Corporation and
Subsidiaries.
*+(a)77--Equity Awards Plan of Entergy Corporation and
Subsidiaries, effective as of August 31, 2000.
*+(a)78--Amendment, effective December 7, 2001, to the Equity
Awards Plan of Entergy Corporation and Subsidiaries.
*+(a)79--System Executive Continuity Plan of Entergy Corporation
and Subsidiaries, effective as of March 1, 2000.
*+(a)80--Post-Retirement Plan of Entergy Corporation and
Subsidiaries, as amended effective January 1, 2000.
*+(a)81--Amendment, effective December 28, 2001, to the Post-
Retirement Plan of Entergy Corporation and Subsidiaries.
*+(a)82--Pension Equalization Plan of Entergy Corporation and
Subsidiaries, as amended effective January 1, 2000.
*+(a)83- Amendment, effective December 28, 2001, to the Pension
Equalization Plan of Entergy Corporation and
Subsidiaries.
*+(a)84--Service Recognition Program for Non-Employee Outside
Directors of Entergy Corporation and Subsidiaries,
effective January 1, 2000.
+(a) 85-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries, as amended (10(a) 74 to
Form 10-K for the year ended December 31, 1992 in 1-
3517).
*+(a)86--Executive Income Security Plan of Gulf States Utilities
Company, as amended effective March 1, 1991.
*+(a)87--System Executive Retirement Plan of Entergy Corporation
and Subsidiaries, effective January 1, 2000.
*+(a)88--Amendment, effective December 28,. 2001, to the System
Executive Retirement Plan of Entergy Corporation and
Subsidiaries.
+(a)89 -- Retention Agreement effective October 27, 2000 between
J. Wayne Leonard and Entergy Corporation (10(a)81 to Form
10-K for the year ended December 31, 2000 in 1-11299).
+(a)90 -- Retention Agreement effective July 29, 2000 between
Frank F. Gallaher and Entergy Corporation (10(a)82 to
Form 10-K for the year ended December 31, 2000 in 1-
11299).
*+(a)91 -- Letter Agreement effective July 25, 2001 between
Jerry D. Jackson and Entergy Corporation.
+(a)92 -- Retention Agreement effective July 29, 2000 between
Donald C. Hintz and Entergy Corporation (10(a)85 to Form
10-K for the year ended December 31, 2000 in 1-11299).
+(a)93 -- Retention Agreement effective July 29, 2000 between
Michael G. Thompson and Entergy Corporation (10(a)86 to
Form 10-K for the year ended December 31, 2000 in 1-
11299).
+(a)94 -- Retention Agreement effective January 22, 2001
between Richard J. Smith and Entergy Services, Inc
(10(a)87 to Form 10-K for the year ended December 31,
2000 in 1-11299).
+(a)95 -- Retention Agreement effective July 29, 2000 between
Jerry W. Yelverton and Entergy Corporation (10(a)89 to
Form 10-K for the year ended December 31, 2000 in 1-
11299).
+(a)96 -- Retention Agreement effective July 29, 2000 between
C. John Wilder and Entergy Corporation (10(a)90 to Form
10-K for the year ended December 31, 2000 in 1-11299).
*+(a)97--Employment Agreement effective August 7, 2001 between
Curt L. Hebert and Entergy Corporation.
(a) 98-- Agreement of Limited Partnership of Entergy-Koch,
LP among EKLP, LLC, EK Holding I, LLC, EK Holding II, LLC
and Koch Energy, Inc. dated January 31, 2001 (10(a)94 to
Form 10-K/A for the year ended December 31, 2000 in 1-
11299).
System Energy
(b) 1 through
(b) 14-- See 10(a)-12 through 10(a)-25 above.
(b) 15 through
(b) 28-- See 10(a)-26 through 10(a)-39 above.
(b) 29-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(b) 30-- Joint Construction, Acquisition and Ownership
Agreement, dated as of May 1, 1980, between System Energy
and SMEPA (B-1(a) in 70-6337), as amended by Amendment
No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and
Amendment No. 2, dated as of October 31, 1980 (1 to
Rule 24 Certificate dated October 30, 1981 in 70-6337).
(b) 31-- Operating Agreement, dated as of May 1, 1980,
between System Energy and SMEPA (B(2)(a) in 70-6337).
(b) 32- Amended and Restated Installment Sale Agreement, dated
as of February 15, 1996, between System Energy and Claiborne
County, Mississippi (B-6(a) to Rule 24 Certificate dated
March 4, 1996 in 70-8511).
(b) 33-- Loan Agreement, dated as of October 15, 1998,
between System Energy and Mississippi Business Finance
Corporation (B-6(b) to Rule 24 Certificate dated November
12, 1998 in 70-8511).
(b) 34-- Loan Agreement, dated as of May 15, 1999, between
System Energy and Mississippi Business Finance
Corporation (B-6(c) to Rule 24 Certificate dated June 8,
1999 in 70-8511).
(b) 35-- Facility Lease No. 1, dated as of December 1,
1988, between Meridian Trust Company and Stephen M. Carta
(Stephen J. Kaba, successor), as Owner Trustees, and
System Energy (B-2(c)(1) to Rule 24 Certificate dated
January 9, 1989 in 70-7561), as supplemented by Lease
Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1)
to Rule 24 Certificate dated April 21, 1989 in 70-7561)
and Lease Supplement No. 2 dated as of January 1, 1994 (B-
3(d) to Rule 24 Certificate dated January 31, 1994 in 70-
8215).
(b) 36-- Facility Lease No. 2, dated as of December 1, 1988
between Meridian Trust Company and Stephen M. Carta
(Stephen J. Kaba, successor), as Owner Trustees, and
System Energy (B-2(c)(2) to Rule 24 Certificate dated
January 9, 1989 in 70-7561), as supplemented by Lease
Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2)
to Rule 24 Certificate dated April 21, 1989 in 70-7561)
and Lease Supplement No. 2 dated as of January 1, 1994 (B-
4(d) Rule 24 Certificate dated January 31, 1994 in 70-
8215).
(b) 37-- Assignment, Assumption and Further Agreement
No. 1, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(1) to Rule 24 Certificate dated January 9, 1989
in 70-7561).
(b) 38-- Assignment, Assumption and Further Agreement
No. 2, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(2) to Rule 24 Certificate dated January 9, 1989
in 70-7561).
(b) 39-- Collateral Trust Indenture, dated as of January 1,
1994, among System Energy, GG1B Funding Corporation and
Bankers Trust Company, as Trustee (A-3(e) to Rule 24
Certificate dated January 31, 1994 in 70-8215), as
supplemented by Supplemental Indenture No. 1 dated
January 1, 1994, (A-3(f) to Rule 24 Certificate dated
January 31, 1994 in 70-8215).
(b) 40-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B(3)(a) in 70-6337).
(b) 41-- Grand Gulf Unit No. 2 Supplementary Agreement,
dated as of February 7, 1986, between System Energy and
SMEPA (10(aaa) in 33-4033).
(b) 42-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a)-39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(b) 43-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(b) 44-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(b) 45-- Fuel Lease, dated as of February 24, 1989, between
River Fuel Funding Company #3, Inc. and System Energy
(B-1(b) to Rule 24 Certificate dated March 3, 1989 in
70-7604).
(b) 46-- System Energy's Consent, dated January 31, 1995,
pursuant to Fuel Lease, dated as of February 24, 1989,
between River Fuel Funding Company #3, Inc. and System
Energy (B-1(c) to Rule 24 Certificate dated February 13,
1995 in 70-7604).
(b) 47-- Sales Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (D to
Rule 24 Certificate dated June 26, 1974 in 70-5399).
(b) 48-- Service Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (E to
Rule 24 Certificate dated June 26, 1974 in 70-5399).
(b) 49-- Partial Termination Agreement, dated as of
December 1, 1986, between System Energy and Entergy
Mississippi (A-2 to Rule 24 Certificate dated January 8,
1987 in 70-5399).
(b) 50-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(b) 51-- First Amendment, dated January 1, 1990 to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(b) 52-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(b) 53-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(b) 54-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(b) 55-- Service Agreement with Entergy Services, dated as
of July 16, 1974, as amended (10(b)-43 to Form 10-K for
the year ended December 31, 1988 in 1-9067).
(b) 56-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(b)-45 to Form 10-K
for the year ended December 31, 1990 in 1-9067).
(b) 57-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a) -11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(b) 58-- Operating Agreement between Entergy Operations and
System Energy, dated as of June 6, 1990 (B-3(b) to Rule
24 Certificate dated June 15, 1990 in 70-7679).
(b) 59-- Guarantee Agreement between Entergy Corporation
and System Energy, dated as of September 20, 1990 (B-3(a)
to Rule 24 Certificate dated September 27, 1990 in
70-7757).
(b) 60-- Amended and Restated Reimbursement Agreement,
dated as of December 1, 1988 as amended and restated as
of December 20, 1999, among System Energy Resources,
Inc., The Bank of Tokyo-Mitsubishi, Ltd., as Funding Bank
and The Chase Manhattan Bank, as administrating bank,
Union Bank of California, N.A., as documentation agent,
and the Banks named therein, as Participating Banks (B-
1(b) to Rule 24 Certificate dated March 3, 2000 in 70-
7561).
Entergy Arkansas
(c) 1 -- Agreement, dated April 23, 1982, among Entergy
Arkansas and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982 in 1-3517).
(c) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)2 in 2-41080).
(c) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a)-4 in 2-41080).
(c) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(c) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(c) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-41080).
(c) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (5(a)- 6 in 2-43175).
(c) 8 -- Amendment, dated April 27, 1984, to Service
Agreement, with Entergy Services (10(a)- 7 to Form 10-K
for the year ended December 31, 1984 in 1-3517).
(c) 9 -- Amendment, dated August 1, 1988, to Service
Agreement with Entergy Services (10(c)- 8 to Form 10-K
for the year ended December 31, 1988 in 1-10764).
(c) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(c)-9 to Form 10-K for
the year ended December 31, 1990 in 1-10764).
(c) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(c) 12 through
(c) 25-- See 10(a)-12 through 10(a)-25 above.
(c) 26-- Agreement, dated August 20, 1954, between Entergy
Arkansas and the United States of America (SPA)(13(h) in
2-11467).
(c) 27-- Amendment, dated April 19, 1955, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-2 in 2-41080).
(c) 28-- Amendment, dated January 3, 1964, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-3 in 2-41080).
(c) 29-- Amendment, dated September 5, 1968, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-4 in 2-41080).
(c) 30-- Amendment, dated November 19, 1970, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-5 in 2-41080).
(c) 31-- Amendment, dated July 18, 1961, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-6 in 2-41080).
(c) 32-- Amendment, dated December 27, 1961, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-7 in 2-41080).
(c) 33-- Amendment, dated January 25, 1968, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-8 in 2-41080).
(c) 34-- Amendment, dated October 14, 1971, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-9 in 2-43175).
(c) 35-- Amendment, dated January 10, 1977, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-10 in 2-60233).
(c) 36-- Agreement, dated May 14, 1971, between Entergy
Arkansas and the United States of America (SPA) (5(e) in
2-41080).
(c) 37-- Amendment, dated January 10, 1977, to the United
States of America (SPA) Contract, dated May 14, 1971
(5(e)-1 in 2-60233).
(c) 38-- Contract, dated May 28, 1943, Amendment to
Contract, dated July 21, 1949, and Supplement to
Amendment to Contract, dated December 30, 1949, between
Entergy Arkansas and McKamie Gas Cleaning Company;
Agreements, dated as of September 30, 1965, between
Entergy Arkansas and former stockholders of McKamie Gas
Cleaning Company; and Letter Agreement, dated June 22,
1966, by Humble Oil & Refining Company accepted by
Entergy Arkansas on June 24, 1966 (5(k)-7 in 2-41080).
(c) 39-- Agreement, dated April 3, 1972, between Entergy
Services and Gulf United Nuclear Fuels Corporation
(5(l)-3 in 2-46152).
(c) 40-- Fuel Lease, dated as of December 22, 1988, between
River Fuel Trust #1 and Entergy Arkansas (B-1(b) to Rule
24 Certificate in 70-7571).
(c) 41-- White Bluff Operating Agreement, dated June 27,
1977, among Entergy Arkansas and Arkansas Electric
Cooperative Corporation and City Water and Light Plant of
the City of Jonesboro, Arkansas (B-2(a) to Rule 24
Certificate dated June 30, 1977 in 70-6009).
(c) 42-- White Bluff Ownership Agreement, dated June 27,
1977, among Entergy Arkansas and Arkansas Electric
Cooperative Corporation and City Water and Light Plant of
the City of Jonesboro, Arkansas (B-1(a) to Rule 24
Certificate dated June 30, 1977 in 70-6009).
(c) 43-- Agreement, dated June 29, 1979, between Entergy
Arkansas and City of Conway, Arkansas (5(r)-3 in
2-66235).
(c) 44-- Transmission Agreement, dated August 2, 1977,
between Entergy Arkansas and City Water and Light Plant
of the City of Jonesboro, Arkansas (5(r)-3 in 2-60233).
(c) 45-- Power Coordination, Interchange and Transmission
Service Agreement, dated as of June 27, 1977, between
Arkansas Electric Cooperative Corporation and Entergy
Arkansas (5(r)-4 in 2-60233).
(c) 46-- Independence Steam Electric Station Operating
Agreement, dated July 31, 1979, among Entergy Arkansas
and Arkansas Electric Cooperative Corporation and City
Water and Light Plant of the City of Jonesboro, Arkansas
and City of Conway, Arkansas (5(r)-6 in 2-66235).
(c) 47-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Operating Agreement
(10(c) 51 to Form 10-K for the year ended December 31,
1984 in 1-10764).
(c) 48-- Independence Steam Electric Station Ownership
Agreement, dated July 31, 1979, among Entergy Arkansas
and Arkansas Electric Cooperative Corporation and City
Water and Light Plant of the City of Jonesboro, Arkansas
and City of Conway, Arkansas (5(r)-7 in 2-66235).
(c) 49-- Amendment, dated December 28, 1979, to the
Independence Steam Electric Station Ownership Agreement
(5(r)-7(a) in 2-66235).
(c) 50-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Ownership Agreement
(10(c) 54 to Form 10-K for the year ended December 31,
1984 in 1-10764).
(c) 51-- Owner's Agreement, dated November 28, 1984, among
Entergy Arkansas, Entergy Mississippi, other co-owners of
the Independence Station (10(c) 55 to Form 10-K for the
year ended December 31, 1984 in 1-10764).
(c) 52-- Consent, Agreement and Assumption, dated December
4, 1984, among Entergy Arkansas, Entergy Mississippi,
other co-owners of the Independence Station and United
States Trust Company of New York, as Trustee (10(c) 56 to
Form 10-K for the year ended December 31, 1984 in
1-10764).
(c) 53-- Power Coordination, Interchange and Transmission
Service Agreement, dated as of July 31, 1979, between
Entergy Arkansas and City Water and Light Plant of the
City of Jonesboro, Arkansas (5(r)-8 in 2-66235).
(c) 54-- Power Coordination, Interchange and Transmission
Agreement, dated as of June 29, 1979, between City of
Conway, Arkansas and Entergy Arkansas (5(r)-9 in
2-66235).
(c) 55-- Agreement, dated June 21, 1979, between Entergy
Arkansas and Reeves E. Ritchie ((10)(b)-90 to Form 10-K
for the year ended December 31, 1980 in 1-10764).
(c) 56-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(c) 57-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(c) 58-- First Amendment to Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(c) 59-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(c) 60-- Contract For Disposal of Spent Nuclear Fuel and/or
High-Level Radioactive Waste, dated June 30, 1983, among
the DOE, System Fuels and Entergy Arkansas (10(b)-57 to
Form 10-K for the year ended December 31, 1983 in
1-10764).
(c) 61-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(c) 62-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(c) 63-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(c) 64-- Third Amendment dated January 1, 1994, to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(c) 65-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(c) 66-- Assignment of Coal Supply Agreement, dated
December 1, 1987, between System Fuels and Entergy
Arkansas (B to Rule 24 letter filing dated November 10,
1987 in 70-5964).
(c) 67-- Coal Supply Agreement, dated December 22, 1976,
between System Fuels and Antelope Coal Company (B-1 in
70-5964), as amended by First Amendment (A to Rule 24
Certificate in 70-5964); Second Amendment (A to Rule 24
letter filing dated December 16, 1983 in 70-5964); and
Third Amendment (A to Rule 24 letter filing dated
November 10, 1987 in 70-5964).
(c) 68-- Operating Agreement between Entergy Operations and
Entergy Arkansas, dated as of June 6, 1990 (B-1(b) to
Rule 24 Certificate dated June 15, 1990 in 70-7679).
(c) 69-- Guaranty Agreement between Entergy Corporation and
Entergy Arkansas, dated as of September 20, 1990 (B-1(a)
to Rule 24 Certificate dated September 27, 1990 in
70-7757).
(c) 70-- Agreement for Purchase and Sale of Independence
Unit 2 between Entergy Arkansas and Entergy Power, dated
as of August 28, 1990 (B-3(c) to Rule 24 Certificate
dated September 6, 1990 in 70-7684).
(c) 71-- Agreement for Purchase and Sale of Ritchie Unit 2
between Entergy Arkansas and Entergy Power, dated as of
August 28, 1990 (B-4(d) to Rule 24 Certificate dated
September 6, 1990 in 70-7684).
(c) 72-- Ritchie Steam Electric Station Unit No. 2
Operating Agreement between Entergy Arkansas and Entergy
Power, dated as of August 28, 1990 (B-5(a) to Rule 24
Certificate dated September 6, 1990 in 70-7684).
(c) 73-- Ritchie Steam Electric Station Unit No. 2
Ownership Agreement between Entergy Arkansas and Entergy
Power, dated as of August 28, 1990 (B-6(a) to Rule 24
Certificate dated September 6, 1990 in 70-7684).
(c) 74-- Power Coordination, Interchange and Transmission
Service Agreement between Entergy Power and Entergy
Arkansas, dated as of August 28, 1990 (10(c)-71 to Form
10-K for the year ended December 31, 1990 in 1-10764).
(c) 75-- Loan Agreement dated June 15, 1993, between
Entergy Arkansas and Independence Country, Arkansas (B-1
(a) to Rule 24 Certificate dated July 9, 1993 in 70-
8171).
(c) 76-- Loan Agreement dated June 15, 1994, between
Entergy Arkansas and Jefferson County, Arkansas (B-1(a)
to Rule 24 Certificate dated June 30, 1994 in 70-8405).
(c) 77-- Loan Agreement dated June 15, 1994, between
Entergy Arkansas and Pope County, Arkansas (B-1(b) to
Rule 24 Certificate in 70-8405).
(c) 78-- Loan Agreement dated November 15, 1995,
between Entergy Arkansas and Pope County, Arkansas (10(c)
96 to Form 10-K for the year ended December 31, 1995 in 1-
10764).
(c) 79-- Agreement as to Expenses and Liabilities
between Entergy Arkansas and Entergy Arkansas Capital I,
dated as of August 14, 1996 (4(j) to Form 10-Q for the
quarter ended September 30, 1996 in 1-10764).
(c) 80-- Loan Agreement dated December 1, 1997,
between Entergy Arkansas and Jefferson County, Arkansas
(10(c)100 to Form 10-K for the year ended December 31,
1997 in 1-10764).
*(c) 81-- Refunding Agreement, dated December 1, 2001,
between Entergy Arkansas and Pope Country, Arkansas.
Entergy Gulf States
(d) 1 -- Guaranty Agreement, dated July 1, 1976, between
Entergy Gulf States and American Bank and Trust Company
(C and D to Form 8-K dated August 6, 1976 in 1-27031).
(d) 2 -- Guaranty Agreement, dated August 1, 1992, between
Entergy Gulf States and Hibernia National Bank, relating
to Pollution Control Revenue Refunding Bonds of the
Industrial Development Board of the Parish of Calcasieu,
Inc. (Louisiana) (10-1 to Form 10-K for the year ended
December 31, 1992 in 1-27031).
(d) 3 -- Guaranty Agreement, dated January 1, 1993, between
Entergy Gulf States and Hancock Bank of Louisiana,
relating to Pollution Control Revenue Refunding Bonds of
the Parish of Pointe Coupee (Louisiana) (10-2 to Form 10-
K for the year ended December 31, 1992 in 1-27031).
(d) 4 -- Deposit Agreement, dated as of December 1, 1983
between Entergy Gulf States, Morgan Guaranty Trust Co. as
Depositary and the Holders of Depository Receipts,
relating to the Issue of 900,000 Depositary Preferred
Shares, each representing 1/2 share of Adjustable Rate
Cumulative Preferred Stock, Series E-$100 Par Value (4-17
to Form 10-K for the year ended December 31, 1983 in 1-
27031).
(d) 5 -- Agreement effective February 1, 1964, between
Sabine River Authority, State of Louisiana, and Sabine
River Authority of Texas, and Entergy Gulf States,
Central Louisiana Electric Company, Inc., and Louisiana
Power & Light Company, as supplemented (B to Form 8-K
dated May 6, 1964, A to Form 8-K dated October 5, 1967, A
to Form 8-K dated May 5, 1969, and A to Form 8-K dated
December 1, 1969 in 1-27031).
(d) 6 -- Joint Ownership Participation and Operating
Agreement regarding River Bend Unit 1 Nuclear Plant,
dated August 20, 1979, between Entergy Gulf States,
Cajun, and SRG&T; Power Interconnection Agreement with
Cajun, dated June 26, 1978, and approved by the REA on
August 16, 1979, between Entergy Gulf States and Cajun;
and Letter Agreement regarding CEPCO buybacks, dated
August 28, 1979, between Entergy Gulf States and Cajun
(2, 3, and 4, respectively, to Form 8-K dated September
7, 1979 in 1-27031).
(d) 7 -- Ground Lease, dated August 15, 1980, between
Statmont Associates Limited Partnership (Statmont) and
Entergy Gulf States, as amended (3 to Form 8-K dated
August 19, 1980 and A-3-b to Form 10-Q for the quarter
ended September 30, 1983 in 1-27031).
(d) 8 -- Lease and Sublease Agreement, dated August 15,
1980, between Statmont and Entergy Gulf States, as
amended (4 to Form 8-K dated August 19, 1980 and A-3-c to
Form 10-Q for the quarter ended September 30, 1983 in 1-
27031).
(d) 9 -- Lease Agreement, dated September 18, 1980, between
BLC Corporation and Entergy Gulf States (1 to Form 8-K
dated October 6, 1980 in 1-27031).
(d) 10-- Joint Ownership Participation and Operating
Agreement for Big Cajun, between Entergy Gulf States,
Cajun Electric Power Cooperative, Inc., and Sam Rayburn
G&T, Inc, dated November 14, 1980 (6 to Form 8-K dated
January 29, 1981 in 1-27031); Amendment No. 1, dated
December 12, 1980 (7 to Form 8-K dated January 29, 1981
in 1-27031); Amendment No. 2, dated December 29, 1980 (8
to Form 8-K dated January 29, 1981 in 1-27031).
(d) 11-- Agreement of Joint Ownership Participation between
SRMPA, SRG&T and Entergy Gulf States, dated June 6, 1980,
for Nelson Station, Coal Unit #6, as amended (8 to Form 8-
K dated June 11, 1980, A-2-b to Form 10-Q for the quarter
ended June 30, 1982; and 10-1 to Form 8-K dated February
19, 1988 in 1-27031).
(d) 12-- Agreements between Southern Company and Entergy
Gulf States, dated February 25, 1982, which cover the
construction of a 140-mile transmission line to connect
the two systems, purchase of power and use of
transmission facilities (10-31 to Form 10-K for the year
ended December 31, 1981 in 1-27031).
(d) 13-- Transmission Facilities Agreement between Entergy
Gulf States and Mississippi Power Company, dated February
28, 1982, and Amendment, dated May 12, 1982 (A-2-c to
Form 10-Q for the quarter ended March 31, 1982 in 1-
27031) and Amendment, dated December 6, 1983 (10-43 to
Form 10-K for the year ended December 31, 1983 in 1-
27031).
(d) 14-- First Amended Power Sales Agreement, dated
December 1, 1985 between Sabine River Authority, State of
Louisiana, and Sabine River Authority, State of Texas,
and Entergy Gulf States, Central Louisiana Electric Co.,
Inc., and Louisiana Power and Light Company (10-72 to
Form 10-K for the year ended December 31, 1985 in 1-
27031).
+(d) 15-- Deferred Compensation Plan for Directors of
Entergy Gulf States and Varibus Corporation, as amended
January 8, 1987, and effective January 1, 1987 (10-77 to
Form 10-K for the year ended December 31, 1986 in 1-
27031). Amendment dated December 4, 1991 (10-3 to
Amendment No. 8 in Registration No. 2-76551).
+(d) 16-- Trust Agreement for Deferred Payments to be made
by Entergy Gulf States pursuant to the Executive Income
Security Plan, by and between Entergy Gulf States and
Bankers Trust Company, effective November 1, 1986 (10-78
to Form 10-K for the year ended December 31, 1986 in 1-
27031).
+(d) 17-- Trust Agreement for Deferred Installments under
Entergy Gulf States' Management Incentive Compensation
Plan and Administrative Guidelines by and between Entergy
Gulf States and Bankers Trust Company, effective June 1,
1986 (10-79 to Form 10-K for the year ended December 31,
1986 in 1-27031).
+(d) 18-- Nonqualified Deferred Compensation Plan for
Officers, Nonemployee Directors and Designated Key
Employees, effective December 1, 1985, as amended,
continued and completely restated effective as of March
1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-
76551).
+(d) 19-- Trust Agreement for Entergy Gulf States'
Nonqualified Directors and Designated Key Employees by
and between Entergy Gulf States and First City Bank,
Texas-Beaumont, N.A. (now Texas Commerce Bank), effective
July 1, 1991 (10-4 to Form 10-K for the year ended
December 31, 1992 in 1-27031).
(d) 20-- Lease Agreement, dated as of June 29, 1987, among
GSG&T, Inc., and Entergy Gulf States related to the
leaseback of the Lewis Creek generating station (10-83 to
Form 10-K for the year ended December 31, 1988 in 1-
27031).
(d) 21-- Nuclear Fuel Lease Agreement between Entergy Gulf
States and River Bend Fuel Services, Inc. to lease the
fuel for River Bend Unit 1, dated February 7, 1989 (10-64
to Form 10-K for the year ended December 31, 1988 in 1-
27031).
(d) 22-- Trust and Investment Management Agreement between
Entergy Gulf States and Morgan Guaranty and Trust Company
of New York (the "Decommissioning Trust Agreement) with
respect to decommissioning funds authorized to be
collected by Entergy Gulf States, dated March 15, 1989
(10-66 to Form 10-K for the year ended December 31, 1988
in 1-27031).
(d) 23-- Amendment No. 2 dated November 1, 1995 between
Entergy Gulf States and Mellon Bank to Decommissioning
Trust Agreement (10(d) 31 to Form 10-K for the year ended
December 31, 1995 in 1-27031).
(d) 24-- Partnership Agreement by and among Conoco Inc.,
and Entergy Gulf States, CITGO Petroleum Corporation and
Vista Chemical Company, dated April 28, 1988 (10-67 to
Form 10-K for the year ended December 31, 1988 in 1-
27031).
+(d) 25-- Gulf States Utilities Company Executive Continuity
Plan, dated January 18, 1991 (10-6 to Form 10-K for the
year ended December 31, 1990 in 1-27031).
+(d) 26-- Trust Agreement for Entergy Gulf States' Executive
Continuity Plan, by and between Entergy Gulf States and
First City Bank, Texas-Beaumont, N.A. (now Texas Commerce
Bank), effective May 20, 1991 (10-5 to Form 10-K for the
year ended December 31, 1992 in 1-27031).
+(d) 27-- Gulf States Utilities Board of Directors'
Retirement Plan, dated February 15, 1991 (10-8 to Form 10-
K for the year ended December 31, 1990 in 1-27031).
(d) 28-- Operating Agreement between Entergy Operations and
Entergy Gulf States, dated as of December 31, 1993 (B-
2(f) to Rule 24 Certificate in 70-8059).
(d) 29-- Guarantee Agreement between Entergy Corporation
and Entergy Gulf States, dated as of December 31, 1993 (B-
5(a) to Rule 24 Certificate in 70-8059).
(d) 30-- Service Agreement with Entergy Services, dated as
of December 31, 1993 (B-6(c) to Rule 24 Certificate in
70-8059).
(d) 31-- Third Amendment, dated January 1, 1994, to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(d) 32-- Agreement as to Expenses and Liabilities
between Entergy Gulf States and Entergy Gulf States
Capital I, dated as of January 28, 1997 (10(d)52 to Form
10-K for the year ended December 31, 1996 in 1-27031).
(d) 33-- Refunding Agreement dated as of May 1, 1998
between Entergy Gulf States and Parish of Iberville,
State of Louisiana (B-3(a) to Rule 24 Certificate dated
May 29, 1998 in 70-8721).
(d) 34-- Refunding Agreement dated as of May 1, 1998
between Entergy Gulf States and Industrial Development
Board of the Parish of Calcasieu, Inc. (B-3(b) to Rule 24
Certificate dated January 29, 1999 in 70-8721).
(d) 35-- Refunding Agreement (Series 1999-A) dated as of
September 1, 1999 between Entergy Gulf States and Parish
of West Feliciana, State of Louisiana (B-3(c) to Rule 24
Certificate dated October 8, 1999 in 70-8721).
(d) 36-- Refunding Agreement (Series 1999-B) dated as of
September 1, 1999 between Entergy Gulf States and Parish
of West Feliciana, State of Louisiana (B-3(d) to Rule 24
Certificate dated October 8, 1999 in 70-8721).
Entergy Louisiana
(e) 1 -- Agreement, dated April 23, 1982, among Entergy
Louisiana and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982, in 1-3517).
(e) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(e) 3 -- Amendment, dated as of February 10, 1971, to
Middle South Utilities System Agency Agreement, dated
December 11, 1970 (5(a)-4 in 2-41080).
(e) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(e) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(e) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-42523).
(e) 7 -- Amendment, dated as of January 1, 1972, to Service
Agreement with Entergy Services (4(a)-6 in 2-45916).
(e) 8 -- Amendment, dated as of April 27, 1984, to Service
Agreement with Entergy Services (10(a) 7 to Form 10-K for
the year ended December 31, 1984 in 1-3517).
(e) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(d)-8 to Form 10-K for
the year ended December 31, 1988 in 1-8474).
(e) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(d)-9 to Form 10-K for
the year ended December 31, 1990 in 1-8474).
(e) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(e) 12 through
(e) 25-- See 10(a)-12 through 10(a)-25 above.
(e) 26-- Fuel Lease, dated as of January 31, 1989, between
River Fuel Company #2, Inc., and Entergy Louisiana
(B-1(b) to Rule 24 Certificate in 70-7580).
(e) 27-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(e) 28-- Compromise and Settlement Agreement, dated June 4,
1982, between Texaco, Inc. and Entergy Louisiana (28(a)
to Form 8-K dated June 4, 1982 in 1-8474).
(e) 29-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(e) 30-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(e) 31-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(e) 32-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Tax Allocation Agreement, dated
April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(e) 33-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement, dated
January 1, 1990 (D-2 to Form U5S for the year ended
December 31, 1989).
(e) 34-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(e) 35-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(e) 36-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(e) 37-- Contract for Disposal of Spent Nuclear Fuel and/or
High-Level Radioactive Waste, dated February 2, 1984,
among DOE, System Fuels and Entergy Louisiana (10(d)33 to
Form 10-K for the year ended December 31, 1984 in
1-8474).
(e) 38-- Operating Agreement between Entergy Operations and
Entergy Louisiana, dated as of June 6, 1990 (B-2(c) to
Rule 24 Certificate dated June 15, 1990 in 70-7679).
(e) 39-- Guarantee Agreement between Entergy Corporation
and Entergy Louisiana, dated as of September 20, 1990
(B-2(a), to Rule 24 Certificate dated September 27, 1990
in 70-7757).
(e) 40-- Installment Sale Agreement, dated July 20, 1994,
between Entergy Louisiana and St. Charles Parish,
Louisiana (B-6(e) to Rule 24 Certificate dated August 1,
1994 in 70-7822).
(e) 41-- Installment Sale Agreement, dated November 1,
1995, between Entergy Louisiana and St. Charles Parish,
Louisiana (B-6(a) to Rule 24 Certificate dated December
19, 1995 in 70-8487).
(e) 42-- Refunding Agreement (Series 1999-A), dated as of
June 1, 1999, between Entergy Louisiana and Parish of St.
Charles, State of Louisiana (B-6(a) to Rule 24
Certificate dated July 6, 1999 in 70-9141).
(e) 43-- Refunding Agreement (Series 1999-B), dated as of
June 1, 1999, between Entergy Louisiana and Parish of St.
Charles, State of Louisiana (B-6(b) to Rule 24
Certificate dated July 6, 1999 in 70-9141).
(e) 44-- Refunding Agreement (Series 1999-C), dated as of
October 1, 1999, between Entergy Louisiana and Parish of
St. Charles, State of Louisiana (B-11(a) to Rule 24
Certificate dated October 15, 1999 in 70-9141).
(e) 45-- Agreement as to Expenses and Liabilities between
Entergy Louisiana, Inc. and Entergy Louisiana Capital I
dated July 16, 1996 (4(d) to Form 10-Q for the quarter
ended June 30, 1996 in 1-8474).
Entergy Mississippi
(f) 1 -- Agreement dated April 23, 1982, among Entergy
Mississippi and certain other System companies, relating
to System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982 in 1-3517).
(f) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(f) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a) 4 in 2-41080).
(f) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(f) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(f) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (D in 37-63).
(f) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (A to Notice, dated
October 14, 1971 in 37-63).
(f) 8 -- Amendment, dated April 27, 1984, to Service
Agreement with Entergy Services (10(a) 7 to Form 10-K for
the year ended December 31, 1984 in 1-3517).
(f) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(e) 8 to Form 10-K for
the year ended December 31, 1988 in 0-320).
(f) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(e) 9 to Form 10-K for
the year ended December 31, 1990 in 0-320).
(f) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(f) 12 through
(f) 25-- See 10(a)-12 - 10(a)-25above.
(f) 26-- Installment Sale Agreement, dated as of June 1,
1974, between Entergy Mississippi and Washington County,
Mississippi (B-2(a) to Rule 24 Certificate dated August
1, 1974 in 70-5504).
(f) 27-- Amended and Restated Installment Sale Agreement,
dated as of April 1, 1994, between Entergy Mississippi
and Warren County, Mississippi (B-6(a) to Rule 24
Certificate dated May 4, 1994 in 70-7914).
(f) 28-- Amended and Restated Installment Sale Agreement,
dated as of April 1, 1994, between Entergy Mississippi
and Washington County, Mississippi, (B-6(b) to Rule 24
Certificate dated May 4, 1994 in 70-7914).
(f) 29-- Refunding Agreement, dated as of May 1, 1999,
between Entergy Mississippi and Independence County,
Arkansas (B-6(a) to Rule 24 Certificate dated June 8,
1999 in 70-8719).
(f) 30-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B-3(a) in 70-6337).
(f) 31-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Operating Agreement
(10(c) 51 to Form 10-K for the year ended December 31,
1984 in 0-375).
(f) 32-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Ownership Agreement
(10(c) 54 to Form 10-K for the year ended December 31,
1984 in 0-375).
(f) 33-- Owners Agreement, dated November 28, 1984, among
Entergy Arkansas, Entergy Mississippi and other co-owners
of the Independence Station (10(c) 55 to Form 10-K for
the year ended December 31, 1984 in 0-375).
(f) 34-- Consent, Agreement and Assumption, dated December
4, 1984, among Entergy Arkansas, Entergy Mississippi,
other co-owners of the Independence Station and United
States Trust Company of New York, as Trustee (10(c) 56 to
Form 10-K for the year ended December 31, 1984 in 0-375).
(f) 35-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
+(f) 36-- Post-Retirement Plan (10(d) 24 to Form 10-K for
the year ended December 31, 1983 in 0-320).
(f) 37-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(f) 38-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(f) 39-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(f) 40-- Sales Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (D to Rule
24 Certificate dated June 26, 1974 in 70-5399).
(f) 41-- Service Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (E to Rule
24 Certificate dated June 26, 1974 in 70-5399).
(f) 42-- Partial Termination Agreement, dated as of
December 1, 1986, between System Energy and Entergy
Mississippi (A-2 to Rule 24 Certificate dated January 8,
1987 in 70-5399).
(f) 43-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(f) 44-- First Amendment dated January 1, 1990 to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Tax Allocation Agreement (D-2 to Form U5S
for the year ended December 31, 1989).
(f) 45-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(f) 46-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(f) 47-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
Entergy New Orleans
(g) 1 -- Agreement, dated April 23, 1982, among Entergy New
Orleans and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a)-1 to Form 10-K for the year ended
December 31, 1982 in 1-3517).
(g) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(g) 3 -- Amendment dated as of February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a)-4 in 2-41080).
(g) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(g) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(g) 6 -- Service Agreement with Entergy Services dated as
of April 1, 1963 (5(a)-5 in 2-42523).
(g) 7 -- Amendment, dated as of January 1, 1972, to Service
Agreement with Entergy Services (4(a)-6 in 2-45916).
(g) 8 -- Amendment, dated as of April 27, 1984, to Service
Agreement with Entergy Services (10(a)7 to Form 10-K for
the year ended December 31, 1984 in 1-3517).
(g) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(f)-8 to Form 10-K for
the year ended December 31, 1988 in 0-5807).
(g) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(f)-9 to Form 10-K for
the year ended December 31, 1990 in 0-5807).
(g) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for year ended December 31, 1994 in 1-3517).
(g) 12 through
(g) 25-- See 10(a)-12 - 10(a)-25 above.
(g) 26-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(g) 27-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982 in 1-3517).
(g) 28-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984 in 1-3517).
(g) 29-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(g) 30-- Transfer Agreement, dated as of June 28, 1983,
among the City of New Orleans, Entergy New Orleans and
Regional Transit Authority (2(a) to Form 8-K dated June
24, 1983 in 1-1319).
(g) 31-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(g) 32-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(g) 33-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(g) 34-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(g) 35-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(12) Statement Re Computation of Ratios
*(a) Entergy Arkansas's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(b) Entergy Gulf States' Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(c) Entergy Louisiana's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(d) Entergy Mississippi's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(e) Entergy New Orleans' Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(f) System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
*(21) Subsidiaries of the Registrants
(23) Consents of Experts and Counsel
*(a) The consent of Deloitte & Touche LLP is contained herein
at page 256.
*(24) Powers of Attorney
_________________
* Filed herewith.
+ Management contracts or compensatory plans or arrangements.