_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification
Offices and Telephone Number No.
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
1-10764 ENTERGY ARKANSAS, INC. 71-0005900
(an Arkansas corporation)
425 West Capitol Avenue, 40th Floor
Little Rock, Arkansas 72201
Telephone (501) 377-4000
1-2703 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)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
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)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 529-5262
1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
_________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at July 31, 1997
Entergy Corporation ($0.01 par value) 241,269,934
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1997
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 3
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 6
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 12
Statements of Consolidated Income 15
Statements of Consolidated Cash Flows 16
Consolidated Balance Sheets 18
Selected Operating Results 20
Entergy Arkansas, Inc.:
Results of Operations 21
Statements of Income 22
Statements of Cash Flows 23
Balance Sheets 24
Selected Operating Results 26
Entergy Gulf States, Inc.:
Results of Operations 28
Statements of Income (Loss) 30
Statements of Cash Flows 31
Balance Sheets 32
Selected Operating Results 34
Entergy Louisiana, Inc.:
Results of Operations 35
Statements of Income 36
Statements of Cash Flows 37
Balance Sheets 38
Selected Operating Results 40
Entergy Mississippi, Inc.:
Results of Operations 41
Statements of Income 42
Statements of Cash Flows 43
Balance Sheets 44
Selected Operating Results 46
Entergy New Orleans, Inc.:
Results of Operations 48
Statements of Income 50
Statements of Cash Flows 51
Balance Sheets 52
Selected Operating Results 54
System Energy Resources, Inc.:
Results of Operations 55
Statements of Income 56
Statements of Cash Flows 57
Balance Sheets 58
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 60
Part II:
Item 1. Legal Proceedings 72
Item 4. Submission of Matters to a Vote of Security
Holders 73
Item 5. Other Information 74
Item 6. Exhibits and Reports on Form 8-K 75
Experts 76
Signature 77
This combined Quarterly Report on Form 10-Q 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 combined Quarterly Report on Form 10-Q
supplements and updates the Annual Report on Form 10-K for the
calendar year ended December 31, 1996, and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, filed by the
individual registrants with the SEC and should be read in conjunction
therewith.
Investors are cautioned that forward-looking statements
contained herein with respect to the revenues, earnings, competitive
performance, or other prospects for the business of Entergy
Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New
Orleans, Inc., System Energy Resources, Inc. or their affiliated
companies may be influenced by factors that could cause actual
outcomes and results to be materially different than projected. Such
factors include, but are not limited to, the effects of weather, the
performance of generating units, fuel prices and availability,
regulatory decisions and the effects of changes in law, capital
spending requirements, the evolution of competition, changes in
accounting standards, and other factors.
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
Algiers 15th Ward of the City of New Orleans,
Louisiana
ALJ Administrative Law Judge
ANO Arkansas Nuclear One Plant
ANO 1 Unit No. 1 of ANO
ANO 2 Unit No. 2 of ANO
APSC Arkansas Public Service Commission
Cajun Cajun Electric Power Cooperative, Inc.
Capital Funds Agreement Agreement, dated as of June 21, 1974, as
amended, between System Energy and Entergy
Corporation, and the assignments thereof
CitiPower CitiPower Pty.
Council Council of the City of New Orleans,
Louisiana
domestic utility
companies Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans, collectively
Entergy Entergy Corporation and its various direct
and indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc., formerly Arkansas
Power & Light Company
Entergy Corporation Entergy Corporation, a Delaware corporation,
successor to Entergy Corporation, a Florida
corporation
Entergy Enterprises Entergy Enterprises, Inc.
Entergy Gulf States Entergy Gulf States, Inc., formerly Gulf
States Utilities Company (including wholly
owned subsidiaries - Varibus Corporation,
GSG&T, Inc., Prudential Oil & Gas, Inc., and
Southern Gulf Railway Company)
Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana
Power & Light Company
Entergy Mississippi Entergy Mississippi, Inc., formerly
Mississippi Power & Light Company
Entergy New Orleans Entergy New Orleans, Inc., formerly New
Orleans Public Service Inc.
Entergy Operations Entergy Operations, Inc., a subsidiary of
Entergy Corporation that has operating
responsibility for ANO, Grand Gulf 1, River
Bend, and Waterford 3
Entergy Services Entergy Services, Inc.
EPA U.S. Environmental Protection Agency
Abbreviation or Acronym Term
EPAct Energy Policy Act of 1992
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Form 10-K The combined Annual Report on Form 10-K for
the year ended December 31, 1996, of
Entergy, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System
Energy
Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant
ISES Independence Steam Electric Generating
Station
kWh Kilowatt-hour(s)
LPSC Louisiana Public Service Commission
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy on February 7, 1997
Merger The combination transaction, consummated on
December 31, 1993, by which Entergy Gulf
States became a subsidiary of Entergy
Corporation and Entergy Corporation became a
Delaware corporation
MPSC Mississippi Public Service Commission
NRC Nuclear Regulatory Commission
Owner Participant A corporation that, in connection with the
Waterford 3 sale and leaseback transactions,
has acquired a beneficial interest in a
trust, the Owner Trustee of which is the
owner and lessor of undivided interests in
Waterford 3
Owner Trustee Each institution and/or individual acting as
Owner Trustee under a trust agreement with
an Owner Participant in connection with the
Waterford 3 sale and leaseback transactions
PCBs Polychlorinated biphenyls
PUHCA Public Utility Holding Company Act of 1935,
as amended
PUCT Public Utility Commission of Texas
PURPA Public Utility Regulatory Policies Act
River Bend River Bend Nuclear Plant, owned 70% by
Entergy Gulf States
RUS Rural Utilities Service
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
as promulgated by the Financial Accounting
Standards Board
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash flow from operations for Entergy, the domestic utility
companies, and System Energy for the six months ended June 30, 1997,
and 1996 was as follows:
Six Months Six Months
Company Ended 6/30/97 Ended 6/30/96
(In Millions)
Entergy $ 840.2 $ 626.4
Entergy Arkansas $ 177.7 $ 157.8
Entergy Gulf States $ 213.5 $ 113.6
Entergy Louisiana $ 115.2 $ 155.9
Entergy Mississippi $ 87.6 $ 80.7
Entergy New Orleans $ 29.2 $ 15.0
System Energy $ 131.6 $ 129.3
The positive cash flow from operations for the domestic utility
companies results from continued efforts to streamline operations and
to reduce costs, as well as from collections under rate phase-in
plans that exceed current cash requirements for the related costs.
In the income statement, these revenue collections are offset by the
amortization of the previously deferred costs so that there is no
effect on net income. These phase-in plans will continue to
contribute to Entergy's cash position in the immediate future.
The Grand Gulf 1 phase-in plans will expire in 1998 for Entergy
Arkansas and Entergy Mississippi, and in 2001 for Entergy New
Orleans. Entergy Gulf States' phase-in plan for River Bend will
expire in 1998. However, Entergy Louisiana's phase-in plan for
Waterford 3 expired in June 1997. Competitive growth businesses had
a positive impact on Entergy's cash flow from operations. In
accordance with the purchase method of accounting, London
Electricity's results of operations are not included in Entergy's six
months ended June 30, 1996 Statements of Consolidated Cash Flows.
Financing Sources
As discussed in Note 8, the acquisition of London Electricity
for $2.1 billion was accomplished in February 1997. The acquisition
was financed with $1.7 billion of debt that is non-recourse to
Entergy Corporation, and $392 million of equity provided by Entergy
Corporation from available cash and borrowings under its $300 million
line of credit. Currently, Entergy is pursuing alternatives to
refinance a portion of this debt. Excluding the London Electricity
investment, cash from operations, supplemented by cash on hand, was
sufficient to meet substantially all investing and financing
requirements of the domestic utility companies and System Energy,
including capital expenditures, dividends, and debt and preferred
stock maturities for the six months ended June 30, 1997.
Entergy has been able to fund the capital requirements for its
domestic utility companies with cash from operations as discussed
above in "Cash Flows". Should additional cash be needed to fund
investments or to retire debt, the domestic utility companies and
System Energy each have the ability, subject to regulatory approval
and compliance with issuance tests, to issue debt or preferred
securities to meet such requirements. In addition, to the extent
market conditions and interest and dividend rates allow, the domestic
utility companies and System Energy will continue to refinance and/or
redeem higher cost debt and preferred stock prior to maturity. See
Note 4 herein for a discussion of the recent refinancing by Entergy
Louisiana. The domestic utility companies may continue to establish
special purpose trusts as financing subsidiaries for the purpose of
issuing preferred trust securities, such as those issued in 1996 by
Entergy Louisiana Capital I and Entergy Arkansas Capital I, and those
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
issued in January 1997 by Entergy Gulf States Capital I. Entergy
Corporation, the domestic utility companies, and System Energy also
have the ability to effect short-term borrowings. See Notes 4,
5, 6, 7, 9 and 10 in the Form 10-K for additional information on
Entergy's capital and refinancing requirements in 1997-2001.
As of June 30, 1997, Entergy Corporation had $225 million
outstanding under its $300 million bank credit facility, representing
the remaining balance of the amount used for the acquisition of
London Electricity in February 1997. In addition, Entergy Technology
Holding Company (ETHC) had $61 million outstanding under its $250
million bank line of credit as of June 30, 1997. See Note 4 to the
Form 10-K for information on the domestic utility companies' and
System Energy's short-term borrowing authorizations and bank lines of
credit.
Financing Uses
Productive investment by Entergy Corporation is integral to
enhancing the long-term value of its common stock. Entergy
Corporation has been expanding its investments in business
opportunities overseas as well as in the United States. As of June
30, 1997, Entergy Corporation had acquired or participated in foreign
electric ventures in Australia, Argentina, Chile, Pakistan, Peru, and
the United Kingdom, and had acquired several telecommunications-based
businesses in the United States. As of June 30, 1997, Entergy
Corporation had a net investment of $1.3 billion in equity capital in
competitive growth businesses. See Note 8 for a discussion of
Entergy Corporation's acquisition of London Electricity on February
7, 1997.
To make capital investments, fund its subsidiaries, and pay
dividends, Entergy Corporation will utilize internally generated
funds, cash on hand, funds available under its $300 million bank
credit facility, funds received from its dividend reinvestment and
stock purchase plan, and bank financings as required. See Note 3
herein for information regarding proceeds from the issuance of common
stock under Entergy's dividend reinvestment and stock purchase plan
during the six months ended June 30, 1997. See Note 9 in the Form 10-
K for a discussion of capital requirements. Entergy Corporation
receives funds through dividend payments from its subsidiaries.
During the six months ended June 30, 1997, such dividend payments
from subsidiaries totaled $175.9 million. In order to improve its
capital structure, Entergy Gulf States has not paid common stock
dividends since the third quarter of 1994. During the six months
ended June 30, 1997, Entergy Corporation paid $212.1 million of
common stock dividends. Declarations of dividends on common stock
are made at the discretion of Entergy Corporation's Board of
Directors. Management will not recommend future changes in dividends
to the Board unless warranted by economic circumstances and the then
current business environment. See Note 8 in the Form 10-K for
information on dividend restrictions.
Entergy Corporation and Entergy Gulf States
See Notes 1 and 2 regarding River Bend and Cajun litigation. An
adverse ruling regarding River Bend could result in up to
approximately $273 million of potential write-offs (net of tax) and
up to $215 million in refunds of previously collected revenue. Such
write-offs and charges could result in substantial net losses being
reported in the future by Entergy Gulf States, with resulting adverse
adjustments to the common equity of Entergy Corporation and Entergy
Gulf States. Adverse resolution of these matters could negatively
affect Entergy Gulf States' ability to obtain financing, which could
in turn affect Entergy Gulf States' liquidity and ability to resume
paying common stock dividends.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Entergy Corporation and System Energy
Under the Capital Funds Agreement, Entergy Corporation has
agreed to supply to System Energy sufficient capital to maintain
System Energy's equity capital at a minimum of 35% of its total
capitalization (excluding short-term debt), to permit the continued
commercial operation of Grand Gulf 1, and to pay in full all
indebtedness for borrowed money of System Energy when due under any
circumstances. In addition, under supplements to the Capital Funds
Agreement assigning System Energy's rights thereunder as security for
specific debt of System Energy, Entergy Corporation has agreed to
make cash capital contributions, if required, to enable System Energy
to make payments on such debt when due. The Capital Funds Agreement
may be terminated by the parties thereto, subject to the consent of
certain creditors.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, including
"Open Access Transmission", "Municipalization", "Industry
Consolidation", "Functional Unbundling", and "Effects of Alternate
Energy Sources on Retail Electric Sales to Industrial and Large
Commercial Customers" for a discussion of the increasing competitive
pressures facing Entergy and the electric utility industry. See "ANO
Matters", and "Property Tax Exemptions" in the Form 10-K for a
discussion of other significant issues affecting Entergy. Set forth
below are recent developments to the Form 10-K disclosure for the
sections presented.
Competition and Industry Challenges
Transition to Competition Filings
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and Note 2
herein for a discussion of the domestic utility companies' filings
with their respective state and local regulators concerning the
transition to competition. Entergy Gulf States made a supplemental
filing with the PUCT on April 4, 1997, outlining a comprehensive
market reform proposal calling for the establishment of retail
competition, service quality standards, a regional power exchange,
and an independent system operator. Entergy Gulf States requested
from the PUCT a reciprocal commitment ensuring the full recovery of
prudently incurred investments previously approved by regulators.
The PUCT has scheduled hearings on the transition to competition
beginning in October 1997.
The MPSC conducted hearings in April 1997 on various transition
to competition issues, including the recoverability of stranded
costs, the potential for cost shifting, and electric supply
reliability. In early July the MPSC issued an order directing the
MPSC Staff to submit a report by November 1, 1997, outlining a plan
for restructuring the electric utility industry in Mississippi.
Entergy Arkansas filed a supplement to its transition to
competition plan with the APSC on May 1, 1997. This filing is
similar to the supplemental filing made by Entergy Gulf States as
discussed above. See Note 2 for additional information regarding
this filing.
In October 1996, Entergy Gulf States and Entergy Louisiana filed
proposals with the LPSC designed to achieve an orderly transition to
retail electric competition in Louisiana, while protecting certain
classes of ratepayers from bearing the burden of cost shifting. See
Note 2 for additional information regarding this filing. Hearings on
these proposals have been delayed until 1998.
In February 1997, the LPSC ruled that certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals would be
addressed in those companies' existing rate dockets, and that certain
other issues would be addressed in an ongoing generic regulatory
proceeding examining electric industry restructuring. In July 1997,
Entergy Gulf States and Entergy Louisiana filed supplemental
testimony on asset securitization, market price projections, and
potential strandable cost quantification in response to the issues
identified by the LPSC.
The Council established two new dockets in March 1997 regarding
electric and gas utility service competition in the City of New
Orleans. One docket will address competitive issues, including the
advisability of implementing competition, recoverability and
measurement of stranded costs, maximization of consumer savings from
competition and minimization of cost shifting, and potential
conflicts among federal, state, and local regulators, as such issues
relate to electric and gas service currently being provided to New
Orleans customers by Entergy New Orleans. The second docket will
address the same issues related to the provision of electric service
to Algiers customers by Entergy Louisiana. A procedural schedule was
established which required comments to
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
be filed in April 1997 and set hearings for May, July and October
1997. Entergy New Orleans intends to file a specific transition to
competition plan following these hearings.
Retail and Wholesale Rate Issues
See Note 2 to the Form 10-K for a discussion of the ongoing
trend of regulator mandated rate reductions as well as incentive and
performance-based regulation and filings made with state and local
regulators regarding an orderly transition to a more competitive
market for electricity. See Note 2 herein for a discussion of rate
reductions implemented at Entergy Louisiana and Entergy New Orleans
during the current period.
On July 14, 1997, Entergy Services filed with the FERC its
wholesale transmission open access compliance tariff incorporating
the requirements of FERC Order No. 888-A.
Legislative Activity
A number of bills recently have been introduced in the U. S.
Congress calling for deregulation of the electric power industry.
Included in these proposals are some that would amend or repeal PUHCA
and/or PURPA. These bills generally have provisions that would give
consumers the ability to choose their own electricity service
provider.
Entergy Gulf States was an active participant in discussions
aimed at developing legislation related to electric utility industry
restructuring and competition by the Texas Legislature before it
adjourned June 2, 1997. No legislation was passed in Texas during
the recent session and the legislature will not convene again until
January 1999, by which time Entergy Gulf States believes the PUCT
will have acted on its transition to competition filing.
The Arkansas Senate has passed a resolution requesting a study
of the impact of competition in the electric utility industry on the
citizens of Arkansas, the electric utility industry, and the
regulatory authority of the APSC. This study is scheduled to begin
no later than December 1, 1997.
Competitive Growth Businesses
Entergy Corporation seeks opportunities to expand its domestic
and foreign businesses that are not regulated by domestic state and
local utility regulatory authorities. Such business ventures
currently include power development and operations and retail
services related to the utility business. Refer to "MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES"
for a discussion of Entergy Corporation's 1997 investments in
competitive growth businesses. These investments may involve a
greater risk than domestic regulated utility enterprises. For the
six months ended June 30, 1997, Entergy Corporation's competitive
growth businesses increased consolidated net income by approximately
$49 million.
Entergy Nuclear, Inc. (Entergy Nuclear) began providing
management and operations services in February 1997 for an initial
period of up to one year to Maine Yankee Atomic Power Company (Maine
Yankee) at the Maine Yankee nuclear plant. The creation of Entergy
Nuclear and its undertaking with Maine Yankee are authorized by
existing SEC orders previously granted to Entergy Enterprises.
Entergy Corporation has an
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
application pending at the SEC to create a different structure under
which Entergy Nuclear would engage in this business for other nuclear
utilities.
On August 6, 1997, the board of directors of Maine Yankee
announced the permanent closure of the nuclear plant based on
economic concerns and uncertainty about the operation of the plant.
Entergy Nuclear will honor its short-term contract to provide
management services to Maine Yankee to prepare for decommissioning
through September 30, 1997 and, at the option of Maine Yankee,
through March 31, 1998.
As of June 30, 1997, Entergy Corporation controlled 100% of the
common shares of London Electricity. For additional information
related to this acquisition, see Note 8 herein. Through London
Electricity, Entergy expects to gain valuable experience in the
deregulated United Kingdom electricity market to apply to the
anticipated deregulated electricity market in the United States.
London Electricity has already experienced seven years of a partially
competitive supply environment and expects to be in a fully
competitive supply market beginning April 1, 1998. In conjunction
with the acquisition of London Electricity, Entergy established an
international retail operations group to coordinate retail electric
operations in the United Kingdom, Australia, and Argentina.
In February 1997, Entergy Richmond Power Corporation, a wholly-
owned subsidiary of Entergy Power Development Corporation, sold its
50% interest in Richmond Power Enterprise LP (owner of a gas-fired
electric and steam generation facility), to a third party for $10
million, realizing an after tax gain of $2.7 million.
In February 1997, Entergy Corporation announced a joint venture
with Hyperion Telecommunications. It is expected that by the end of
1997, the joint venture (to be known as Entergy Hyperion
Telecommunications) will offer competitive telephone services
primarily to commercial customers in the metropolitan areas of Little
Rock, Arkansas, Jackson, Mississippi, and Baton Rouge, Louisiana.
In June 1997, Entergy Transener, S.A., a wholly-owned subsidiary
of Entergy Power Development Corporation, sold its interest in a
consortium that owned 65% of Transener S.A. for $27.5 million,
realizing an after-tax gain of $5.8 million.
During the second quarter of 1997, Entergy Pakistan Limited, a
wholly-owned subsidiary of Entergy Power Development Corporation,
sold 25% of its interest in Hub Power Company, Ltd. for $26.9
million, which resulted in an after-tax gain of $9.3 million.
During the second quarter of 1997, Entergy Power Chile, S.A., an
indirect wholly-owned subsidiary of Entergy Power Development
Corporation, purchased a 25% interest in the San Isidro project, a
370 MW gas-fired, combined cycle generating facility under
construction in Chile. Entergy Power Chile, S.A. is obligated to
fund up to $20 million for the cost of completing the plant,
scheduled for commercial operation in 1999. The other owner of the
project, which is also the developer, is Empresa Nacional de
Electricidad, S.A. (Endesa).
On July 1, 1997, Entergy Security acquired the Ranger American
group of companies for an aggregate purchase price of approximately
$60.8 million. Ranger American is a leading provider of electronic
security services in the largest cities in Texas and in Atlanta,
Georgia. This expansion increases Entergy Security's customer total
to approximately 140,000 and its annual revenues to more than $53
million. See Note 3 for details regarding the Entergy Corporation
common stock that was issued in connection with this acquisition.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K, and Note 8
herein, for a discussion of Entergy's major competitive growth
businesses.
Windfall Profits Tax
As a result of Parliamentary elections held on May 1, 1997, the
Labour Party gained control of the British government. On July 31,
1997, the British government enacted into law a one-time "windfall
profits tax" on privatized industries, including regional electric
utilities such as London Electricity. An initial examination of the
proposed tax indicates that London Electricity's assessment is
approximately 140 million British Pounds (approximately $229 million)
which will not be deductible for United Kingdom income tax purposes.
Payment of the tax is required in two equal installments, the first
to be due on December 1, 1997, and the second installment due a year
later. The government also decreased the corporate tax rate in the
United Kingdom from the current 33% to 31%, which will be effective
as of April 1, 1997. In accordance with SFAS 109, "Accounting
for Income Taxes", this reduction in United Kingdom income tax
rates will result in a one-time reduction in income tax expense of
approximately $65 million to adjust London Electricity's deferred
income tax liability to the new rate. Accordingly, the liability
for the windfall profits tax (with a corresponding charge against
income) and the reduction in London Electricity's deferred income
tax liability (with a corresponding reduction in income tax expense),
were recorded in July 1997.
Waterford 3 Refueling Outage
A scheduled 45-day refueling outage for the Waterford 3 nuclear
plant began on April 12, 1997. Additional work and two minor
incidents caused the outage to be extended from May 27 to mid-June.
On May 28, 1997, a start-up transformer at Waterford 3 failed due to
an internal fault. A replacement transformer was located and was
shipped to Waterford 3, where certain plant configuration changes
were made to facilitate its installation. After installation of the
replacement transformer, the plant was restarted on July 29, 1997.
Cajun - River Bend
The RUS entered into an agreement on February 11, 1997 for the
sale of Cajun's 30% interest in River Bend to PECO Energy Company
(PECO) pursuant to authorization granted in the Bankruptcy Court
Order of August 26, 1996. On July 10, 1997, PECO terminated this
agreement with the RUS. Under orders of the Bankruptcy Court, RUS
now has until mid-October 1997 to determine whether to sell the
Cajun interest to another purchaser, to retain it, or to transfer
it to Entergy Gulf States at no cost.
Labor Agreements
During April 1997, Entergy Gulf States and a union representing
1,000 employees in Texas and Louisiana signed a two-year labor
contract (expiring August 14, 1999). The contract stipulate that
there will be no layoffs in the next two years and wages will be
increased 3% in 1997 and 1998.
In early July 1997, Entergy Operations and the union
representing 317 employees at River Bend, and Entergy Mississippi and
the union representing 400 employees signed two-year labor contracts
which also stipulates that there will be no layoffs of covered
employees over the next two years and that wages will be
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
increased 3% over the next two years. These increases at Entergy
Mississippi are to be effective October 15, 1998, and October 15,
1999. The new contract will run from October 1998 to October 2000.
Deregulated Utility Operations
Entergy Gulf States discontinued regulatory accounting
principles in 1989 for its wholesale jurisdiction and steam
department, and in 1991 for the Louisiana deregulated portion of
River Bend. Operating income from these operations during the three
and six months ended June 30, 1997, was $4.6 million and $9.2
million, respectively, compared to $1.8 million and $8.0 million
during the comparable periods in 1996.
The increase in operating income from these deregulated
operations for the three and six months ended June 30, 1997 was
principally due to decreased steam products expenses, partially
offset by reduced wholesale jurisdiction revenues. The future impact
of the deregulated utility operations on Entergy's and Entergy Gulf
States' results of operations and financial position will depend on
future operating costs, future efficiency and availability of
generating units, and future market prices for energy over the
remaining life of the assets.
Accounting Issues
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note 1 in the Form 10-K for
a discussion of the impact of the adoption by Entergy of SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", effective January 1, 1996.
Continued Application of SFAS 71 - As a result of the EPAct, the
actions of regulatory bodies, and other factors, the electric utility
industry is moving toward a combination of competition and a modified
regulatory environment. The domestic utility companies' and System
Energy's financial statements currently reflect, for the most part,
assets and costs based on existing cost-based ratemaking regulations
in accordance with SFAS 71, "Accounting for the Effects of Certain
Types of Regulation" (SFAS 71). Continued applicability of SFAS 71
to the domestic utility companies' and System Energy's financial
statements requires that rates set by an independent regulator on a
cost-of-service basis be charged to and collected from customers.
In the event that all or a portion of a utility's operations
cease to meet those criteria for various reasons, including
deregulation, a change in the method of regulation, or a change in
the competitive environment for the utility's regulated services, the
utility is required to discontinue application of SFAS 71 for the
relevant portion of its operations by eliminating from the balance
sheet the effects of any actions of regulators recorded as regulatory
assets and liabilities. Discontinuation of the application of SFAS
71 would have a material adverse impact on Entergy's financial
statements.
The SEC has expressed concern regarding the continuing
applicability of SFAS 71 to the financial statements of electric
utilities which either have been ordered by regulators to adopt
transition to competition plans, or as in a number of other states,
are in the process of participating with the state legislature and/or
regulators in the development of such plans. While such plans may
call for rate caps or decreases, they generally provide for recovery
of above market rate generating plant and other regulatory assets
(stranded costs). The SEC is concerned that portions of entities
subject to such plans may not meet the criteria for the continued
application of SFAS 71. The Emerging Issues Task Force of the FASB
(EITF) met in May and July of 1997 to address the issues of when such
an entity should discontinue the application of SFAS 71, and how SFAS
101 should be applied to a portion of an entity subject to such a
plan. As a result of these meetings, a consensus was reached
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
that SFAS 71 should be discontinued at a date no later than when the
details of the transition to competition plan for that portion of the
entity are known. Additionally, the EITF reached a consensus that
stranded costs which are to be recovered through cash flows derived
from another portion of the entity which continues to apply SFAS 71
should not be written off and considered regulatory assets of that
segment which will continue to apply SFAS 71.
The domestic utility companies' and System Energy's financial
statements continue to apply SFAS 71 for their regulated operations,
except for those portions of Entergy Gulf States' business described
in "Deregulated Utility Operations" above. Although discussions with
regulatory authorities regarding retail competition have occurred and
are expected to continue, no final transition to competition plan has
been adopted, and therefore, the regulated operations continue to
apply SFAS 71. See Note 1 to the Form 10-K for additional discussion
of Entergy's application of SFAS 71.
Accounting for Decommissioning Costs - In February 1996, the
FASB issued an exposure draft of a proposed SFAS addressing the
accounting for decommissioning costs of nuclear generating units as
well as liabilities related to the closure and removal of all long-
lived assets. See Note 1 for a discussion of proposed changes in the
accounting for decommissioning/closure costs and the potential impact
of these changes on Entergy.
Year 2000 Issues
Like many companies, Entergy is currently evaluating its
computer software and databases to determine the extent to which
modifications are required to prevent problems related to the year
2000, and the resources which will be required to make such
modifications. These problems could result in malfunctions in
certain software and databases with respect to dates on or after
January 1, 2000, unless corrected. Entergy is evaluating the cost
of making the necessary modifications required to correct any
"Year 2000" problems.
Financial Derivatives
Derivative instruments have been used by Entergy on a limited
basis. Entergy uses financial derivatives only to mitigate business
risks and not for speculative purposes. See Notes 7 and 9 to the
Form 10-K and Note 4 herein for additional information concerning
Entergy's derivative instruments outstanding as of December 31, 1996,
and June 30, 1997.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
On February 7, 1997, Entergy Corporation made unconditional its
offer to acquire London Electricity. In accordance with the purchase
method of accounting, the results of operations for the three and six
months ended June 30, 1996 of Entergy Corporation and subsidiaries
reported in the Statements of Consolidated Income and Cash Flows do
not include London Electricity's results of operations. Consolidated
net income for the three and six months ended June 30, 1997 includes
a positive effect due to the inclusion of London Electricity results
subsequent to February 1, 1997. See Note 8 for additional
information regarding London Electricity.
Net Income
Consolidated net income decreased for the three months ended
June 30, 1997 primarily due to a decrease in electric revenues and an
increase in other operation and maintenance expense, partially offset
by an increase in competitive growth business revenue and a decrease
in income tax expense. Consolidated net income increased for the six
months ended June 30, 1997 primarily due to the $174 million net of
tax write-off of River Bend rate deferrals in January 1996 pursuant
to SFAS 121. Excluding this item, net income would have decreased
$19.2 million for the six months ended June 30, 1997 primarily due to
a decrease in electric revenues and an increase in other operations
and maintenance expense, partially offset by an increase in
competitive growth business revenue and a decrease in income tax
expense.
The increase in competitive growth business revenues for the
three and six months ended June 30, 1997 was primarily due to the
inclusion of London Electricity revenues and increased earnings of
CitiPower. London Electricity contributed earnings of $9.4 million
or $0.04 per share for the three months ended June 30, 1997 and $25.0
million or $0.11 per share for the six months ended June 30, 1997 to
consolidated net income. CitiPower's net income increased primarily
due to favorable weather trends and due to restructuring charges that
were recorded in 1996.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues associated with
Entergy's domestic regulated operations for the three and six months
ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($14.8) ($37.8)
Rate riders (12.9) (17.4)
Fuel cost recovery (39.8) 23.1
Sales volume/weather (39.8) (36.0)
Other revenue (including unbilled) (42.6) (29.1)
Sales for resale (22.0) (35.8)
------- -------
Total ($171.9) ($133.0)
======= =======
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues of the domestic utility companies
and System Energy decreased for the three and six months ended June
30, 1997 primarily due to reductions in base revenues, the impact of
milder weather in the current period, reductions in other revenue,
and a decrease in sales for resale to non-associated utilities. Base
revenues decreased primarily due to rate reductions for Louisiana
retail customers, aggressive pricing strategies for targeted customer
segments, and a change in sales mix from residential and commercial
customers to industrial customers at Entergy Gulf States. The
decrease in other revenue is primarily due to the impact in 1996 of a
non-recurring adjustment to reserve for a potential refund associated
with a change in accounting for unbilled revenue in 1993, as well as
lower unbilled revenue in the current period. Unbilled revenues
decreased primarily due to milder weather in the current period. The
decrease in sales for resale to non-associated utilities is primarily
due to changes in generation requirements and availability among the
domestic utility companies. Fuel cost recovery decreased for the
three months ended June 30, 1997 primarily due to lower fuel prices
and milder weather, which caused a decrease in energy sales. Fuel
cost recovery increased for the six months ended June 30, 1997 due to
a PUCT order which approved recovery of under-recovered fuel expenses
at Entergy Gulf States. See Note 2 herein for further discussion.
Competitive growth business revenues increased for the three and
six months ended June 30, 1997 primarily due to the February 1997
acquisition of London Electricity. London Electricity generated
revenues of $463.2 million and $854.4 million for the three and six
months ended June 30, 1997, respectively.
Expenses
Operating expenses for the three months ended June 30, 1997 and
the portion of the six months ended June 1997 subsequent to
February 1 include the operating expenses of London Electricity,
which were not included in the prior year's financial statements.
Excluding the operating expenses of London Electricity, Entergy's
operating expenses for the three and six months ended June 30, 1997
are discussed below.
For the three months ended June 30, 1997, operating expenses
decreased by approximately $35.4 million primarily due to lower fuel
expenses, partially offset by an increase in other operations and
maintenance expense. Fuel expenses decreased primarily due to lower
fuel prices and a decrease in energy sales as a result of the milder
weather in the current period. The increase in other operations and
maintenance expense is primarily due to an increase in non-outage
related maintenance expense at Waterford 3 and an increase in
maintenance expense at certain fossil plants.
Operating expenses increased by approximately $32 million for
the six months ended June 30, 1997 primarily due to an increase in
depreciation, amortization and decommissioning expense and a decrease
in rate deferrals, partially offset by a decrease in fuel expenses.
The increase in depreciation, amortization, and decommissioning is
due to (i) additional depreciation recorded by System Energy
associated with the sale and leaseback in 1989 of a portion of Grand
Gulf 1 and (ii) plant additions and improvements. Rate deferrals
recorded in the first quarter of 1996 relate primarily to the LPSC-
approved rate deferral of the Waterford 3 property tax first imposed
in 1996. This tax is currently included in base rates. Fuel
expenses decreased primarily due to a decrease in energy sales as a
result of the milder weather in the current period and lower fuel
prices.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Other income increased for the six months ended June 30, 1997
primarily as a result of the 1996 write-off of River Bend rate
deferrals pursuant to SFAS 121. Excluding London Electricity,
interest on long-term debt decreased for the three and six months
ended June 30, 1997 due primarily to ongoing retirement and
refinancing of higher cost debt. Interest on debt associated with
the London Electricity acquisition more than offset this decrease.
Income tax expense decreased for the three months ended June 30, 1997
primarily due to lower pretax income.
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands, Except Share Data)
Operating Revenues:
Electric $1,502,742 $1,674,610 $2,954,667 $3,087,678
Natural gas 23,025 28,991 80,521 86,464
Steam products 12,872 15,214 23,961 30,792
Competitive growth businesses 639,451 134,862 1,164,694 247,735
---------- ---------- ---------- ----------
Total 2,178,090 1,853,677 4,223,843 3,452,669
---------- ---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 339,778 405,549 738,520 781,313
Purchased power 469,726 189,153 890,688 347,310
Nuclear refueling outage expenses 13,172 13,739 30,408 27,948
Other operation and maintenance 512,830 380,085 938,917 733,297
Depreciation, amortization, and decommissioning 241,286 195,100 469,315 389,667
Taxes other than income taxes 90,205 89,942 183,196 178,913
Rate deferrals (7,909) (11,273) (17,484) (31,075)
Amortization of rate deferrals 85,115 90,213 184,178 181,724
---------- ---------- ---------- ----------
Total 1,744,203 1,352,508 3,417,738 2,609,097
---------- ---------- ---------- ----------
Operating Income 433,887 501,169 806,105 843,572
---------- ---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 3,035 2,796 6,068 5,354
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net 29,224 12,682 46,617 23,461
---------- ---------- ---------- ----------
Total 32,259 15,478 52,685 (165,683)
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt 205,310 174,704 390,800 347,547
Other interest - net 11,148 10,098 23,053 21,945
Distributions on preferred securities of subsidiaries 4,710 - 8,882 -
Allowance for borrowed funds used
during construction (2,440) (2,329) (4,877) (4,467)
---------- ---------- ---------- ----------
Total 218,728 182,473 417,858 365,025
---------- ---------- ---------- ----------
Income Before Income Taxes 247,418 334,174 440,932 312,864
Income Taxes 88,839 127,473 155,868 175,153
---------- ---------- ---------- ----------
Net Income 158,579 206,701 285,064 137,711
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 12,303 18,378 29,026 36,459
---------- ---------- ---------- ----------
Earnings Applicable to Common Stock $146,276 $188,323 $256,038 $101,252
========== ========== ========== ==========
Earnings per average common share $0.61 $0.83 $1.08 $0.44
Dividends declared per common share $0.45 - $0.90 $0.90
Average number of common shares outstanding 238,577,894 228,036,032 236,865,266 227,908,318
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $285,064 $137,711
Noncash items included in net income:
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals/excess capacity-net 223,311 210,399
Depreciation, amortization, and decommissioning 469,315 390,038
Deferred income taxes and investment tax credits (70,123) (49,738)
Allowance for equity funds used during
construction (5,475) (5,354)
Changes in working capital:
Receivables 8,750 (101,595)
Fuel inventory 37,965 7,348
Accounts payable (23,891) 7,740
Taxes accrued 106,367 63,797
Interest accrued 868 (6,238)
Other working capital accounts (98,449) (132,057)
Decommissioning trust contributions (41,757) (26,157)
Other (51,731) (64,015)
----------- -----------
Net cash flow provided by operating activities 840,214 626,377
----------- -----------
Investing Activities:
Construction/capital expenditures (296,817) (285,411)
Allowance for equity funds used during construction 5,475 5,354
Nuclear fuel purchases (52,323) (73,782)
Proceeds from sale/leaseback of nuclear fuel 79,512 54,241
Acquisition of London Electricity, net of cash
acquired (1,980,631) -
Acquisition of CitiPower - (1,156,112)
Investment in nonregulated/nonutility properties 78,537 (6,426)
Other (20,767) (20,752)
----------- -----------
Net cash flow used in investing activities (2,187,014) (1,482,888)
----------- -----------
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Financing Activities:
Proceeds from the issuance of:
General and refunding mortgage bonds 64,827 39,608
First mortgage bonds 84,064 198,250
Bank notes and other long-term debt 1,691,201 947,443
Preferred securities of subsidiaries trust 82,323 -
Common stock 166,870 -
Retirement of:
First mortgage bonds (192,504) (357,016)
General and refunding mortgage bonds (634) (30,000)
Other long-term debt (21,160) (93,373)
Redemption of preferred stock (103,867) (25,580)
Changes in short-term borrowings - net 113,104 225,025
Preferred stock dividends paid (27,275) (36,365)
Common stock dividends paid (212,141) (199,493)
---------- ---------
Net cash flow provided by financing activities 1,644,808 668,499
---------- ---------
Effect of exchange rates on cash and cash equivalents 809 73
---------- ---------
Net increase (decrease) in cash and cash equivalents 298,817 (187,939)
Cash and cash equivalents at beginning of period 388,703 533,590
---------- ---------
Cash and cash equivalents at end of period $687,520 $345,651
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $256,899 $354,051
Income taxes $81,165 $159,719
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $6,268 ($11,103)
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $92,263 $34,807
Temporary cash investments - at cost,
which approximates market 595,257 346,782
Special deposits - 7,114
----------- -----------
Total cash and cash equivalents 687,520 388,703
Notes receivable 8,708 1,384
Accounts receivable:
Customer (less allowance for doubtful accounts of
$17.2 million in 1997 and $9.2 million in 1996) 534,148 324,687
Other 181,641 99,066
Accrued unbilled revenues 478,558 351,429
Deferred fuel 123,720 122,184
Fuel inventory 101,638 139,603
Materials and supplies - at average cost 370,259 339,622
Rate deferrals 369,289 444,543
Prepayments and other 216,618 151,312
----------- -----------
Total 3,072,099 2,362,533
----------- -----------
Other Property and Investments:
Decommissioning trust funds 399,719 357,962
Non-regulated investments 489,608 513,058
Other 82,411 59,053
----------- -----------
Total 971,738 930,073
Utility Plant:
Electric 25,189,766 22,811,164
Plant acquisition adjustment - Entergy Gulf States 447,293 455,425
Electric plant under leases 674,049 679,991
Property under capital leases - electric 142,109 147,277
Natural gas 175,081 168,143
Steam products 81,743 81,743
Construction work in progress 472,444 401,676
Nuclear fuel under capital leases 274,587 250,651
Nuclear fuel 60,719 112,625
----------- -----------
Total 27,517,791 25,108,695
Less - accumulated depreciation and amortization 9,286,199 8,885,572
----------- -----------
Utility plant - net 18,231,592 16,223,123
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 251,437 399,493
SFAS 109 regulatory asset - net 1,195,931 1,196,041
Unamortized loss on reacquired debt 207,481 217,664
Other regulatory assets 460,742 435,652
Long-term receivables 212,224 216,082
CitiPower license (net of $23.3 million of amortization) 563,641 606,214
London Electricity license (net of $16.3 million of
amortization) 1,552,542 -
Other 263,570 379,419
----------- -----------
Total 4,707,568 3,450,565
----------- -----------
TOTAL $26,982,997 $22,966,294
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $387,630 $345,620
Notes payable 400,468 20,686
Accounts payable 746,602 554,558
Customer deposits 180,128 155,534
Taxes accrued 340,776 180,340
Accumulated deferred income taxes 54,276 78,010
Interest accrued 206,732 203,425
Dividends declared 8,259 8,950
Obligations under capital leases 152,206 151,287
Other 139,651 184,157
----------- -----------
Total 2,616,728 1,882,567
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,733,064 3,770,760
Accumulated deferred investment tax credits 598,221 607,641
Obligations under capital leases 260,922 247,360
Other 1,502,279 1,298,306
----------- -----------
Total 7,094,486 5,924,067
----------- -----------
Long-term debt 9,524,296 7,590,804
Subsidiaries' preferred stock with sinking fund 196,237 216,986
Subsidiary's preference stock 150,000 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 130,000
Shareholders' Equity:
Subsidiaries' preferred stock without sinking fund 345,954 430,955
Common stock, $.01 par value, authorized 500,000,000
shares; issued 240,664,720 shares in 1997 and
234,456,457 shares in 1996 2,407 2,345
Paid-in capital 4,477,900 4,320,591
Retained earnings 2,384,923 2,341,703
Cumulative foreign currency translation adjustment 10,203 21,725
Less - treasury stock (1,123,923 shares in 1997 and
1,496,118 shares in 1996) 35,137 45,449
----------- -----------
Total 7,186,250 7,071,870
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $26,982,997 $22,966,294
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 454.3 $ 516.5 ($62.2) (12)
Commercial 362.4 380.1 (17.7) (5)
Industrial 477.0 497.0 (20.0) (4)
Governmental 40.4 41.2 (0.8) (2)
---------------------------------
Total retail 1,334.1 1,434.8 (100.7) (7)
Sales for resale 81.0 103.4 (22.4) (22)
Other 87.6 136.4 (48.8) (36)
---------------------------------
Total $ 1,502.7 $ 1,674.6 ($171.9) (10)
=================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 5,531 6,305 (774) (12)
Commercial 4,952 5,084 (132) (3)
Industrial 11,239 10,984 255 2
Governmental 598 591 7 1
---------------------------------
Total retail 22,320 22,964 (644) (3)
Sales for resale 1,828 3,235 (1,407) (43)
---------------------------------
Total 24,148 26,199 (2,051) (8)
=================================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Domestic Electric Operating
Revenues:
Residential $ 956.4 $ 1,023.5 ($67.1) (7)
Commercial 730.7 734.6 (3.9) (1)
Industrial 973.9 957.3 16.6 2
Governmental 82.0 80.0 2.0 3
---------------------------------
Total retail 2,743.0 2,795.4 (52.4) (2)
Sales for resale 157.6 193.6 (36.0) (19)
Other 54.1 98.7 (44.6) (45)
---------------------------------
Total $ 2,954.7 $ 3,087.7 ($133.0) (4)
=================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 11,931 12,972 (1,041) (8)
Commercial 9,847 9,877 (30) -
Industrial 22,135 21,429 706 3
Governmental 1,193 1,147 46 4
---------------------------------
Total retail 45,106 45,425 (319) (1)
Sales for resale 4,253 5,809 (1,556) (27)
---------------------------------
Total 49,359 51,234 (1,875) (4)
=================================
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 as a result of decreased electric operating revenues, partially
offset by lower income taxes.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($0.7) $0.2
Rate riders (1.8) (0.4)
Fuel cost recovery (0.6) 3.2
Sales volume/weather (13.9) (14.7)
Other revenue (including unbilled) (6.3) (16.3)
Sales for resale (21.1) (24.7)
------ ------
Total ($44.4) ($52.7)
====== ======
Electric operating revenues decreased for the three and six
months ended June 30, 1997 primarily as a result of decreased retail
energy sales, sales for resale, and other revenues primarily due to
milder weather conditions during the current periods. The decrease
in sales for resale resulted from changes in the generation
requirements and availability among the domestic utility companies
and decreased sales to non-associated companies. Other revenues
decreased as a result of decreased unbilled revenues primarily due to
milder weather conditions in the current periods.
Expenses
Operating expenses decreased for the three and six months ended
June 30, 1997 primarily due to a decrease in fuel and purchased power
expenses. This decrease is due to lower fuel costs and reduced sales
caused by milder weather conditions in the current periods.
Other
Miscellaneous other income - net decreased for the three and six
months ended June 30, 1997 due to reduced Grand Gulf 1 carrying
charges as a result of a decline in the deferral balance which does
not impact net income. Income tax expense decreased for the three
and six months ended June 30, 1997 because of lower pretax income.
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues $423,619 $467,990 $798,350 $851,071
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 62,754 66,475 129,347 131,675
Purchased power 109,120 121,631 203,854 220,256
Nuclear refueling outage expenses 5,367 7,541 12,266 15,083
Other operation and maintenance 86,085 85,871 171,801 169,136
Depreciation, amortization, and decommissioning 41,335 40,786 82,784 81,816
Taxes other than income taxes 9,101 10,425 18,529 19,443
Amortization of rate deferrals 28,984 30,024 68,005 66,470
-------- -------- -------- --------
Total 342,746 362,753 686,586 703,879
-------- -------- -------- --------
Operating Income 80,873 105,237 111,764 147,192
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 1,445 1,061 2,888 2,151
Miscellaneous - net 5,090 7,891 10,414 16,130
-------- -------- -------- --------
Total 6,535 8,952 13,302 18,281
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 23,777 24,932 48,227 49,767
Other interest - net 971 1,260 1,900 2,287
Distributions on preferred securities 1,275 - 2,550 -
of subsidiary
Allowance for borrowed funds used
during construction (869) (634) (1,737) (1,299)
-------- -------- -------- --------
Total 25,154 25,558 50,940 50,755
-------- -------- -------- --------
Income Before Income Taxes 62,254 88,631 74,126 114,718
Income Taxes 24,169 32,919 26,193 39,738
-------- -------- -------- --------
Net Income 38,085 55,712 47,933 74,980
Preferred Stock Dividend Requirements
and Other 2,798 4,426 5,630 8,884
-------- -------- -------- --------
Earnings Applicable to Common Stock $35,287 $51,286 $42,303 $66,096
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $47,933 $74,980
Noncash items included in net income:
Change in rate deferrals/excess capacity-net 81,151 69,808
Depreciation, amortization, and decommissioning 82,784 81,816
Deferred income taxes and investment tax credits (30,693) (28,555)
Allowance for equity funds used during construction (2,888) (2,151)
Changes in working capital:
Receivables 29,939 (28,948)
Fuel inventory 29,293 23
Accounts payable (22,365) (7,352)
Taxes accrued 11,613 15,028
Interest accrued 622 (3,500)
Other working capital accounts (33,731) 2,254
Decommissioning trust contributions (7,869) (7,530)
Provision for estimated losses and reserves 5,383 2,362
Other (13,509) (10,471)
-------- --------
Net cash flow provided by operating activities 177,663 157,764
-------- --------
Investing Activities:
Construction expenditures (61,664) (67,212)
Allowance for equity funds used during construction 2,888 2,151
Nuclear fuel purchases (36,532) (26,049)
Proceeds from sale/leaseback of nuclear fuel 36,553 25,437
-------- --------
Net cash flow used in investing activities (58,755) (65,673)
-------- --------
Financing Activities:
Proceeds from issuance of first mortgage bonds 84,064 84,256
Retirement of first mortgage bonds (117,587) (112,807)
Redemption of preferred stock - (4,000)
Dividends paid:
Common stock (31,400) (15,300)
Preferred stock (5,729) (8,983)
-------- --------
Net cash flow used in financing activities (70,652) (56,834)
-------- --------
Net increase in cash and cash equivalents 48,256 35,257
Cash and cash equivalents at beginning of period 43,857 11,798
-------- --------
Cash and cash equivalents at end of period $92,113 $47,055
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $41,995 $49,169
Income taxes $40,864 $56,452
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $5,817 ($7,482)
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $11,772 $5,117
Temporary cash investments - at cost,
which approximates market:
Associated companies 23,184 17,462
Other 57,157 21,278
---------- ----------
Total cash and cash equivalents 92,113 43,857
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.3 million in 1997 and 1996) 54,353 71,144
Associated companies 29,592 45,303
Other 1,215 5,862
Accrued unbilled revenues 111,974 104,764
Fuel inventory - at average cost 28,026 57,319
Materials and supplies - at average cost 82,927 72,976
Rate deferrals 120,706 153,141
Deferred excess capacity 4,424 9,005
Deferred nuclear refueling outage costs 37,977 24,534
Prepayments and other 7,000 7,491
---------- ----------
Total 570,307 595,396
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,211 11,211
Decommissioning trust fund 221,374 203,274
Other - at cost (less accumulated depreciation) 3,887 5,058
---------- ----------
Total 236,472 219,543
---------- ----------
Utility Plant:
Electric 4,610,523 4,578,728
Property under capital leases 56,613 57,869
Construction work in progress 116,834 83,524
Nuclear fuel under capital lease 95,040 79,103
Nuclear fuel - 27,500
---------- ----------
Total 4,879,010 4,826,724
Less - accumulated depreciation and amortization 2,057,738 1,976,204
---------- ----------
Utility plant - net 2,821,272 2,850,520
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 31,114 75,249
SFAS 109 regulatory asset - net 250,225 244,767
Unamortized loss on reacquired debt 55,647 56,664
Other regulatory assets 94,432 80,257
Other 31,031 31,421
---------- ----------
Total 462,449 488,358
---------- ----------
TOTAL $4,090,500 $4,153,817
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $17,465 $32,465
Notes payable 667 667
Accounts payable:
Associated companies 47,583 91,205
Other 91,346 97,589
Customer deposits 23,917 21,800
Taxes accrued 65,807 54,194
Accumulated deferred income taxes 58,889 70,506
Interest accrued 28,247 27,625
Co-owner advances 18,819 33,873
Deferred fuel cost 12,995 6,955
Obligations under capital leases 53,086 53,012
Other 14,036 17,967
---------- ----------
Total 432,857 507,858
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 778,092 785,994
Accumulated deferred investment tax credits 106,103 108,307
Obligations under capital leases 98,567 83,940
Other 128,099 113,998
---------- ----------
Total 1,110,861 1,092,239
---------- ----------
Long-term debt 1,241,548 1,255,388
Preferred stock with sinking fund 36,027 40,027
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 470 470
Paid-in capital 590,169 590,169
Retained earnings 502,218 491,316
---------- ----------
Total 1,209,207 1,198,305
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,090,500 $4,153,817
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 105.2 $ 118.3 ($13.1) (11)
Commercial 75.9 77.3 (1.4) (2)
Industrial 84.2 87.3 (3.1) (4)
Governmental 4.6 4.1 0.5 12
-----------------------------
Total retail 269.9 287.0 (17.1) (6)
Sales for resale
Associated companies 61.6 75.6 (14.0) (19)
Non-associated companies 51.0 58.1 (7.1) (12)
Other 41.1 47.3 (6.2) (13)
-----------------------------
Total $ 423.6 $ 468.0 ($44.4) (9)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,091 1,274 (183) (14)
Commercial 972 1,038 (66) (6)
Industrial 1,541 1,567 (26) (2)
Governmental 57 57 0 -
-----------------------------
Total retail 3,661 3,936 (275) (7)
Sales for resale
Associated companies 2,906 3,113 (207) (7)
Non-associated companies 1,515 2,034 (519) (26)
-----------------------------
Total 8,082 9,083 (1,001) (11)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 236.6 $ 250.5 ($13.9) (6)
Commercial 148.5 147.9 0.6 -
Industrial 165.8 165.0 0.8 -
Governmental 8.9 8.2 0.7 9
-----------------------------
Total retail 559.8 571.6 (11.8) (2)
Sales for resale
Associated companies 122.4 135.4 (13.0) (10)
Non-associated companies 95.2 106.9 (11.7) (11)
Other 21.0 37.2 (16.2) (44)
-----------------------------
Total $ 798.4 $ 851.1 ($52.7) (6)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,609 2,845 (236) (8)
Commercial 1,980 2,034 (54) (3)
Industrial 3,111 3,092 19 1
Governmental 117 113 4 4
-----------------------------
Total retail 7,817 8,084 (267) (3)
Sales for resale
Associated companies 5,880 5,767 113 2
Non-associated companies 3,011 3,708 (697) (19)
-----------------------------
Total 16,708 17,559 (851) (5)
=============================
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three months ended June 30, 1997
primarily due to decreased electric operating revenues, partially
offset by a decrease in interest on long-term debt and income taxes.
Net income increased for the six months ended June 30, 1997
primarily due to the $174 million net of tax write-off of River Bend
rate deferrals required by the adoption of SFAS 121 in the first
quarter of 1996. Excluding the effect of the write-off, net income
for the six months ended June 30, 1997 would have decreased
approximately $10.4 million due to decreased electric operating
revenues. The decrease in net income is partially offset by reduced
other operation and maintenance expense and interest on long-term
debt.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($9.6) ($26.5)
Fuel cost recovery (0.4) 22.0
Sales volume/weather (2.7) 3.8
Other revenue (including unbilled) (24.3) (7.2)
Sales for resale (8.8) (15.9)
------ ------
Total ($45.8) ($23.8)
====== ======
Electric operating revenues decreased for the three months ended
June 30, 1997 as a result of decreased other revenue, base revenues,
and sales for resale. The decrease in other revenue is primarily due
to the impact in 1996 of a non-recurring adjustment to reserve for a
potential refund associated with a change in accounting for unbilled
revenue in 1993 as well as lower unbilled revenue. Excluding the non-
recurring adjustment, unbilled revenue decreased due to the change in
generation for the three months ended June 30, 1997 as compared to
the change in generation for the three months ended June 30, 1996.
Base revenues decreased primarily due to aggressive pricing
strategies for targeted customer segments and a change in the sales
mix from residential and commercial customers to industrial customers
primarily due to the impact of milder weather. Sales for resale
decreased primarily due to changes in generation requirements for non-
associated customers.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues decreased for the six months ended
June 30, 1997 as a result of decreased base revenue, other revenue,
and sales for resale, partially offset by an increase in fuel
adjustment revenue. Base revenues decreased primarily due to rate
reductions implemented for Louisiana retail customers in February
1997, aggressive pricing strategies for targeted customer segments,
and a change in the sales mix from residential and commercial
customers to industrial customers primarily due to the impact of
milder weather. Sales for resale decreased primarily due to changes
in generation requirements for non-associated customers. The
decrease in other revenue is primarily due to unbilled revenue, which
decreased due to the change in generation for the three months ended
June 30, 1997 as compared to the change in generation for the three
months ended June 30, 1996. Fuel adjustment revenues increased due
to a PUCT order which approved recovery of under-recovered fuel
expenses. See Note 2 herein for further discussion.
Gas operating revenues increased for the six months ended June
30, 1997 due to an increase in the fixed fuel factor granted by the
LPSC. This increase permits recovery of previously deferred gas
costs.
Steam operating revenues decreased for the three and six months
ended June 30, 1997 due to increased customer requirements in 1996.
Expenses
Fuel expenses, depreciation, amortization, and decommissioning
expenses, and amortization of rate deferrals increased for the three
and six months ended June 30, 1997. Fuel expenses increased
primarily due to a PUCT order which approved recovery of previously
under-recovered fuel expenses, as discussed above in "Revenues and
Sales". Depreciation, amortization and decommissioning expenses
increased primarily due to the purchase of meters and transformers
and additions to lines and substations. Amortization of rate
deferrals increased based on the LPSC-approved River Bend phase-in-
plan. These increases were partially offset by decreased other
operation and maintenance expenses and decreased purchased power
expenses. The decrease in other operation and maintenance expenses
is primarily due to a decrease in the reserve for Cajun's unpaid
portion of River Bend related costs which is reflected in long-term
receivables. Payments into the registry of the District Court for
Entergy Gulf States' portion of expenses for Big Cajun 2, Unit 3, are
expected to be recovered during 1997 as a part of the settlement of
the disputes between Cajun and Entergy. See Note 1 herein for
further discussion. Purchased power decreased due to decreased
energy requirements and lower energy prices.
Other
Other income increased for the six months ended June 30, 1997,
primarily due to the write-off of River Bend rate deferrals required
by the adoption of SFAS 121 in the first quarter of 1996. Interest
charges decreased for the three and six months ended June 30, 1997
due to the retirement of certain high cost long-term debt. Income
taxes decreased for the three months ended June 30, 1997 due to lower
pretax income. Income taxes increased for the six months ended June
30, 1997 due to higher pretax income.
ENTERGY GULF STATES, INC.
STATEMENTS OF INCOME (LOSS)
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues:
Electric $457,739 $503,490 $905,877 $929,667
Natural gas 5,810 6,863 27,911 21,739
Steam products 12,872 15,214 23,961 30,792
-------- -------- -------- --------
Total 476,421 525,567 957,749 982,198
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 138,692 125,057 259,084 242,466
Purchased power 66,428 86,760 145,769 154,594
Nuclear refueling outage expenses 2,573 2,572 5,218 4,932
Other operation and maintenance 92,182 97,730 175,444 194,471
Depreciation, amortization, and decommissioning 53,833 51,504 106,801 102,755
Taxes other than income taxes 26,803 25,205 56,010 51,539
Amortization of rate deferrals 20,267 18,319 40,766 35,963
-------- -------- -------- --------
Total 400,778 407,147 789,092 786,720
-------- -------- -------- --------
Operating Income 75,643 118,420 168,657 195,478
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 726 739 1,451 1,232
Write-off of River Bend rate deferrals - - - (194,498)
Miscellaneous - net 4,488 5,690 8,589 10,630
-------- -------- -------- --------
Total 5,214 6,429 10,040 (182,636)
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 41,755 46,476 83,741 92,964
Other interest - net 978 959 3,716 1,909
Distributions on preferred securities of 1,860 - 3,182 -
subsidiary
Allowance for borrowed funds used
during construction (620) (628) (1,239) (1,056)
-------- -------- -------- --------
Total 43,973 46,807 89,400 93,817
-------- -------- -------- --------
Income (Loss) Before Income Taxes 36,884 78,042 89,297 (80,975)
Income Taxes 9,856 30,902 29,734 24,142
-------- -------- -------- --------
Net Income (Loss) 27,028 47,140 59,563 (105,117)
Preferred and Preference Stock
Dividend Requirements and Other 4,995 7,066 13,938 14,285
-------- -------- -------- ---------
Earnings (Loss) Applicable to Common Stock $22,033 $40,074 $45,625 ($119,402)
======== ======== ======== =========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income (loss) $59,563 ($105,117)
Noncash items included in net income (loss):
Write-off of River Bend rate deferrals - 194,498
Change in rate deferrals 40,549 35,963
Depreciation, amortization, and decommissioning 106,801 102,755
Deferred income taxes and investment tax credits (1,887) 23,368
Allowance for equity funds used during construction (1,451) (1,232)
Changes in working capital:
Receivables (35,261) (17,731)
Fuel inventory 3,889 (4,962)
Accounts payable 17,673 6,912
Taxes accrued 26,282 1,869
Interest accrued (1,218) (16,162)
Deferred fuel (205) (48,671)
Other working capital accounts 12,274 (31,198)
Decommissioning trust contributions (3,227) (2,961)
Provision for estimated losses and reserves (17,021) (8,222)
Other 6,752 (15,525)
-------- ----------
Net cash flow provided by operating activities 213,513 113,584
-------- ----------
Investing Activities:
Construction expenditures (59,558) (84,521)
Allowance for equity funds used during construction 1,451 1,232
Nuclear fuel purchases - (21,580)
Proceeds from sale/leaseback of nuclear fuel - 23,375
--------- -----------
Net cash flow used in investing activities (58,107) (81,494)
--------- -----------
Financing Activities:
Proceeds from the issuance of:
Long-term debt - 780
Preferred securities of subsidiary trust 82,323 -
Retirement of:
First mortgage bonds (46,917) (65,959)
Other long-term debt (425) (425)
Redemption of preferred and preference stock (89,367) (4,204)
Dividends paid on preferred and preference stock (11,936) (14,198)
--------- -----------
Net cash flow used in financing activities (66,322) (84,006)
--------- -----------
Net increase (decrease) in cash and cash equivalents 89,084 (51,916)
Cash and cash equivalents at beginning of period 122,406 234,604
--------- -----------
Cash and cash equivalents at end of period $211,490 $182,688
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $83,269 $105,598
Income taxes $1,158 $70
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $859 ($752)
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $16,467 $6,573
Temporary cash investments - at cost,
which approximates market:
Associated companies 51,689 45,234
Other 143,334 70,599
---------- ----------
Total cash and cash equivalents 211,490 122,406
Accounts receivable:
Customer (less allowance for doubtful accounts
of $2.0 million in 1997 and 1996) 97,230 87,883
Associated companies 7,083 2,777
Other 40,834 30,758
Accrued unbilled revenues 86,883 75,351
Deferred fuel costs 99,708 99,503
Accumulated deferred income taxes 60,059 56,714
Fuel inventory - at average cost 41,120 45,009
Materials and supplies - at average cost 91,077 86,157
Rate deferrals 69,938 105,456
Prepayments and other 19,312 16,321
---------- ----------
Total 824,734 728,335
---------- ----------
Other Property and Investments:
Decommissioning trust fund 47,119 41,983
Other - at cost (less accumulated depreciation) 38,652 38,358
---------- ----------
Total 85,771 80,341
---------- ----------
Utility Plant:
Electric 7,164,941 7,112,021
Natural Gas 47,005 45,443
Steam products 81,743 81,743
Property under capital leases 71,422 72,800
Construction work in progress 110,326 112,137
Nuclear fuel under capital lease 41,631 49,833
---------- ----------
Total 7,517,068 7,473,977
Less - accumulated depreciation and amortization 2,940,806 2,846,083
---------- ----------
Utility plant - net 4,576,262 4,627,894
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 102,948 120,158
SFAS 109 regulatory asset - net 383,163 372,817
Unamortized loss on reacquired debt 51,380 54,761
Other regulatory assets 40,884 45,139
Long-term receivables 212,225 216,082
Other 197,970 185,921
---------- ----------
Total 988,570 994,878
---------- ----------
TOTAL $6,475,337 $6,431,448
============ ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $150,865 $160,865
Accounts payable:
Associated companies 53,636 55,630
Other 105,208 85,541
Customer deposits 29,026 25,572
Taxes accrued 62,429 36,147
Interest accrued 48,433 49,651
Nuclear refueling reserve 19,488 12,354
Obligations under capital leases 39,639 39,110
Other 27,783 18,186
---------- ----------
Total 536,507 483,056
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,225,525 1,200,935
Accumulated deferred investment tax credits 217,667 219,188
Obligations under capital leases 69,225 83,524
Deferred River Bend finance charges 21,509 33,688
Other 526,800 539,752
---------- ----------
Total 2,060,726 2,077,087
---------- ----------
Long-term debt 1,878,048 1,915,346
Preferred stock with sinking fund 75,210 77,459
Preference stock 150,000 150,000
Company - obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 -
Shareholders' Equity:
Preferred stock without sinking fund 51,444 136,444
Common stock, no par value, authorized
200,000,000 shares; issued and outstanding
100 shares 114,055 114,055
Paid-in capital 1,152,575 1,152,689
Retained earnings 371,772 325,312
---------- ----------
Total 1,689,846 1,728,500
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $6,475,337 $6,431,448
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease %
(In Millions)
Electric Operating Revenues:
Residential $ 133.5 $ 141.9 ($ 8.4) (6)
Commercial 107.0 109.4 (2.4) (2)
Industrial 176.9 177.0 (0.1) -
Governmental 8.5 7.8 0.7 9
-----------------------------
Total retail 425.9 436.1 (10.2) (2)
Sales for resale
Associated companies 4.3 2.8 1.5 54
Non-associated companies 10.8 21.1 (10.3) (49)
Other 16.7 43.5 (26.8) (62)
-----------------------------
Total $ 457.7 $ 503.5 ($ 45.8) (9)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,644 1,821 (177) (10)
Commercial 1,530 1,556 (26) (2)
Industrial 4,555 4,163 392 9
Governmental 114 110 4 4
-----------------------------
Total retail 7,843 7,650 193 3
Sales for resale
Associated companies 152 84 68 81
Non-associated companies 489 678 (189) (28)
-----------------------------
Total 8,484 8,412 72 1
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease %
(In Millions)
Electric Operating Revenues:
Residential $ 267.1 $ 276.6 ($ 9.5) (3)
Commercial 212.3 211.9 0.4 -
Industrial 354.9 337.6 17.3 5
Governmental 16.5 14.8 1.7 11
-----------------------------
Total retail 850.8 840.9 9.9 1
Sales for resale
Associated companies 5.5 5.5 - -
Non-associated companies 24.3 40.2 (15.9) (40)
Other 25.3 43.1 (17.8) (41)
-----------------------------
Total $ 905.9 $ 929.7 ($ 23.8) (3)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,437 3,645 (208) (6)
Commercial 3,018 3,018 - -
Industrial 8,720 8,064 656 8
Governmental 228 203 25 12
-----------------------------
Total retail 15,403 14,930 473 3
Sales for resale
Associated companies 199 140 59 42
Non-associated companies 1,152 1,178 (26) (2)
-----------------------------
Total 16,754 16,248 506 3
=============================
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 due primarily to decreased electric operating revenues and
increased other operation and maintenance expenses. These factors
were partially offset by a decrease in income taxes.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($0.2) ($5.9)
Fuel cost recovery (23.3) (0.9)
Sales volume/weather (15.3) (17.5)
Other revenue (including unbilled) (5.1) (0.9)
Sales for resale (1.7) (4.2)
------ ------
Total ($45.6) ($29.4)
====== ======
Electric operating revenues decreased for the three months ended
June 30, 1997 primarily due to lower fuel adjustment revenues, which
do not affect net income, and lower sales volume. Fuel adjustment
revenues decreased due to lower fuel prices and reduced generation,
as described below in "Expenses". Sales volume decreased due to
milder weather during the current period.
Electric operating revenues decreased for the six months ended
June 30, 1997 primarily due to lower sales volume and due to a
decrease in base revenues. Sales volume decreased due to milder
weather during the current period. Base revenues decreased due to a
base rate reduction that became effective in the third quarter of
1996.
Expenses
Fuel expenses decreased for the three and six months ended June
30, 1997. This decrease was partially offset by increases in
purchased power, other operation and maintenance expenses, and the
impact of 1996 rate deferrals. Fuel expense decreased due to lower
fuel prices and due to reduced generation resulting from the extended
refueling outage at the Waterford 3 nuclear plant. Purchased power
increased during the period due to shifting generation requirements
as a result of the refueling outage at Waterford 3. Other operation
and maintenance expenses increased due to non-refueling outage
related contract work and maintenance performed at Waterford 3.
Waterford 3 property taxes recorded in 1996 were offset by the
recording of the LPSC-approved rate deferral for these taxes.
Other
Income taxes decreased for the three and six months ended June
30, 1997 due to lower pretax income.
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues $412,263 $457,847 $846,246 $875,614
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 61,063 100,662 173,979 191,342
Purchased power 114,557 100,062 210,753 200,937
Nuclear refueling outage expenses 1,324 3,933 5,299 7,933
Other operation and maintenance 82,301 70,907 156,386 136,677
Depreciation, amortization, and decommissioning 41,095 41,931 85,466 83,672
Taxes other than income taxes 17,581 18,246 35,820 37,980
Rate deferrals - (4,516) - (11,375)
Amortization of rate deferrals 6,431 6,886 12,752 13,546
-------- -------- -------- --------
Total 324,352 338,111 680,455 660,712
-------- -------- -------- --------
Operating Income 87,911 119,736 165,791 214,902
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 219 249 437 526
Miscellaneous - net (276) 442 (917) 728
-------- -------- -------- --------
Total (57) 691 (480) 1,254
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 30,007 31,062 60,090 61,779
Other interest - net 1,276 2,163 3,211 4,499
Distributions on preferred securities of subsidiary 1,575 - 3,150 -
Allowance for borrowed funds used
during construction (378) (423) (756) (831)
-------- -------- -------- --------
Total 32,480 32,802 65,695 65,447
-------- -------- -------- --------
Income Before Income Taxes 55,374 87,625 99,616 150,709
Income Taxes 22,767 32,240 40,837 54,794
-------- -------- -------- --------
Net Income 32,607 55,385 58,779 95,915
Preferred Stock Dividend Requirements
and Other 3,254 5,253 6,846 10,168
-------- -------- -------- --------
Earnings Applicable to Common Stock $29,353 $50,132 $51,933 $85,747
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $58,779 $95,915
Noncash items included in net income:
Change in rate deferrals 5,749 13,546
Depreciation, amortization, and decommissioning 85,466 83,672
Deferred income taxes and investment tax credits 1,343 (12,206)
Allowance for equity funds used during construction (437) (526)
Changes in working capital:
Receivables (11,709) (25,733)
Accounts payable (11,107) 3,694
Taxes accrued 12,737 40,291
Interest accrued (10,083) (5,901)
Other working capital accounts (21,691) (14,593)
Decommissioning trust contributions (6,590) (6,593)
Provision for estimated losses and reserves 3,951 836
Other 8,836 (16,520)
-------- --------
Net cash flow provided by operating activities 115,244 155,882
-------- --------
Investing Activities:
Construction expenditures (36,173) (53,592)
Allowance for equity funds used during construction
437 526
Nuclear fuel purchases (42,920) -
Proceeds from sale/leaseback of nuclear fuel 42,920 -
-------- --------
Net cash flow used in investing activities (35,736) (53,066)
-------- --------
Financing Activities:
Proceeds from the issuance of first mortgage bonds - 113,994
Retirement of:
First mortgage bonds (16,000) (130,000)
Other long-term debt (194) (233)
Redemption of preferred stock (7,500) (7,500)
Changes in short-term borrowings - net 13,049 (27,386)
Dividends paid:
Common stock (51,500) (50,200)
Preferred stock (6,744) (10,072)
-------- ---------
Net cash flow used in financing activities (68,889) (111,397)
-------- ---------
Net increase (decrease) in cash and cash equivalents 10,619 (8,581)
Cash and cash equivalents at beginning of period 23,746 34,370
-------- --------
Cash and cash equivalents at end of period $34,365 $25,789
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $68,469 $68,870
Income taxes $17,805 $48,729
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $633 ($1,814)
See Notes to Financial Statements.
ENTERGY LOUISIANA INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $11,837 $1,804
Temporary cash investments - at cost,
which approximates market 22,528 21,942
---------- ----------
Total cash and cash equivalents 34,365 23,746
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 76,314 73,823
Associated companies 14,415 11,606
Other 6,828 7,053
Accrued unbilled revenues 70,513 63,879
Deferred fuel costs 28,453 18,347
Accumulated deferred income taxes - 1,465
Materials and supplies - at average cost 82,119 78,449
Rate deferrals - 5,749
Deferred nuclear refueling outage costs 34,006 5,300
Prepaid income tax 4,808 24,651
Prepayments and other 12,479 10,234
---------- ----------
Total 364,300 324,302
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 58,855 50,481
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 95,610 87,236
Utility Plant:
Electric 5,009,817 4,997,456
Property under capital leases 232,582 232,582
Construction work in progress 77,994 56,180
Nuclear fuel under capital lease 72,415 38,157
Nuclear fuel 3,067 34,191
---------- ----------
Total 5,395,875 5,358,566
Less - accumulated depreciation and amortization 1,960,778 1,881,847
---------- ----------
Utility plant - net 3,435,097 3,476,719
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 287,009 295,836
Unamortized loss on reacquired debt 35,510 37,552
Other regulatory assets 24,087 30,320
Other 27,389 27,313
---------- ----------
Total 373,995 391,021
---------- ----------
TOTAL $4,269,002 $4,279,278
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $53,300 $34,275
Notes payable - associated companies 44,115 31,066
Accounts payable:
Associated companies 52,586 73,389
Other 66,561 89,550
Customer deposits 60,419 59,070
Taxes accrued 20,127 7,390
Accumulated deferred income taxes 8,045 -
Interest accrued 39,166 49,249
Dividends declared 3,252 3,489
Obligations under capital leases 28,000 28,000
Other 6,784 4,940
---------- ----------
Total 382,355 380,418
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 820,486 831,093
Accumulated deferred investment tax credits 137,088 139,899
Obligations under capital leases 44,415 10,156
Deferred interest - Waterford 3 lease obligation 17,302 16,809
Other 122,804 114,665
---------- ----------
Total 1,142,095 1,112,622
---------- ----------
Long-term debt 1,338,276 1,373,233
Preferred stock with sinking fund 85,000 92,500
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 1,088,900 1,088,900
Capital stock expense and other (2,321) (2,659)
Retained earnings 64,197 63,764
----------- -----------
Total 1,251,276 1,250,505
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,269,002 $4,279,278
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 119.5 $ 139.9 ($ 20.4) (15)
Commercial 85.1 90.5 (5.4) (6)
Industrial 169.7 182.5 (12.8) (7)
Governmental 8.1 8.3 (0.2) (2)
-----------------------------
Total retail 382.4 421.2 (38.8) (9)
Sales for resale
Associated companies 0.5 0.5 0.0 -
Non-associated companies 13.2 14.9 (1.7) (11)
Other 16.1 21.2 (5.1) (24)
-----------------------------
Total $ 412.2 $ 457.8 ($45.6) (10)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,581 1,787 (206) (12)
Commercial 1,127 1,156 (29) (3)
Industrial 4,268 4,400 (132) (3)
Governmental 110 110 0 -
-----------------------------
Total retail 7,086 7,453 (367) (5)
Sales for resale
Associated companies 19 15 4 27
Non-associated companies 220 280 (60) (21)
-----------------------------
Total 7,325 7,748 (423) (5)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 252.8 $ 275.2 ($ 22.4) (8)
Commercial 174.6 176.5 (1.9) (1)
Industrial 357.8 358.1 (0.3) -
Governmental 17.1 16.8 0.3 2
-----------------------------
Total retail 802.3 826.6 (24.3) (3)
Sales for resale
Associated companies 0.8 0.7 0.1 14
Non-associated companies 25.1 29.4 (4.3) (15)
Other 18.0 18.9 (0.9) (5)
-----------------------------
Total $ 846.2 $ 875.6 ($29.4) (3)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,304 3,613 (309) (9)
Commercial 2,230 2,248 (18) (1)
Industrial 8,593 8,613 (20) -
Governmental 229 225 4 2
-----------------------------
Total retail 14,356 14,699 (343) (2)
Sales for resale
Associated companies 26 18 8 44
Non-associated companies 360 513 (153) (30)
-----------------------------
Total 14,742 15,230 (488) (3)
=============================
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 primarily due to a decrease in revenues and an increase in other
operation and maintenance expenses, partially offset by a decrease in
income tax expense.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.0) ($1.3)
Grand Gulf rate rider (11.1) (17.0)
Fuel cost recovery (6.8) 1.3
Sales volume/weather (4.2) (4.2)
Other revenue (including unbilled) (7.1) (9.8)
Sales for resale (4.4) (7.2)
------ ------
Total ($34.6) ($38.2)
====== ======
Electric operating revenues decreased for the three and the six
months ended June 30, 1997 due to decreases in the Grand Gulf 1 rate
rider revenues, other revenue, and sales for resale. Revenue from
the Grand Gulf 1 rate rider does not affect net income. In
connection with an annual MPSC review, in October 1996, Entergy
Mississippi's Grand Gulf 1 rate rider was decreased based on the
estimate of costs over the next year. Therefore, Grand Gulf 1 rate
rider revenues for the three and six months ended June 30, 1997 were
lower than revenues for the same period in 1996. The decrease in
other revenue is due to the impact of milder weather on unbilled
revenue. Sales for resale decreased as a result of reductions in
sales to both associated and non-associated companies due to changes
in the generation requirements and availability among domestic
utility companies.
Expenses
Fuel expenses decreased for the three and six months ended June
30, 1997 due to the lower cost of purchased power and lower fuel
requirements resulting from decreased energy sales. Other operation
and maintenance expenses increased as a result of higher contract
work and materials and supplies related to maintenance and plant
outage expenses for the three and six months ended June 30, 1997.
Rate deferrals reducing operating expenses in 1996 and 1997
represent the deferral of Entergy Mississippi's portion of the
proposed System Energy rate increase. See Note 2 for a further
discussion.
Other
Income tax expense for the three and six months ended June 30,
1997 decreased because of lower pretax income.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues $212,892 $247,479 $413,220 $451,381
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 26,526 48,080 66,549 87,826
Purchased power 76,215 68,732 146,574 136,044
Other operation and maintenance 33,457 28,828 63,477 56,477
Depreciation and amortization 10,682 10,052 21,381 20,079
Taxes other than income taxes 11,077 11,148 21,413 20,733
Rate deferrals (6,289) (5,372) (13,903) (12,523)
Amortization of rate deferrals 20,829 28,728 44,640 54,992
-------- -------- -------- --------
Total 172,497 190,196 350,131 363,628
-------- -------- -------- --------
Operating Income 40,395 57,283 63,089 87,753
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 286 370 572 643
Miscellaneous - net 563 847 251 769
-------- -------- -------- --------
Total 849 1,217 823 1,412
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 10,790 11,517 21,413 22,556
Other interest - net 987 935 2,323 1,874
Allowance for borrowed funds used
during construction (231) (297) (462) (521)
-------- -------- -------- --------
Total 11,546 12,155 23,274 23,909
-------- -------- -------- --------
Income Before Income Taxes 29,698 46,345 40,638 65,256
Income Taxes 10,299 16,527 12,887 22,513
-------- -------- -------- --------
Net Income 19,399 29,818 27,751 42,743
Preferred Stock Dividend Requirements
and Other 1,014 1,392 2,129 2,640
-------- -------- -------- --------
Earnings Applicable to Common Stock $18,385 $28,426 $25,622 $40,103
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $27,751 $42,743
Noncash items included in net income:
Change in rate deferrals 71,422 62,928
Depreciation and amortization 21,381 20,079
Deferred income taxes and investment tax credits (13,203) (15,472)
Allowance for equity funds used during
construction (572) (643)
Changes in working capital:
Receivables 6,893 (25,853)
Fuel inventory 2,112 1,752
Accounts payable (2,733) 15,136
Taxes accrued 18,235 1,132
Interest accrued (2,204) (2,646)
Other working capital accounts (2,896) 2,985
Change in other regulatory assets (39,006) (19,431)
Other 443 (1,974)
-------- --------
Net cash flow provided by operating activities 87,623 80,736
-------- --------
Investing Activities:
Construction expenditures (25,426) (42,256)
Allowance for equity funds used during construction 572 643
-------- --------
Net cash flow used in investing activities (24,854) (41,613)
-------- --------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds 64,827 -
Retirement of:
First mortgage bonds - (25,000)
Other long-term debt (15) (15)
Redemption of preferred stock (7,000) (9,876)
Changes in short-term borrowings - net (50,253) 2,209
Dividends paid:
Common stock (19,600) (17,000)
Preferred stock (2,142) (2,630)
-------- --------
Net cash flow used in financing activities (14,183) (52,312)
-------- --------
Net increase (decrease) in cash and cash equivalents 48,586 ($13,189)
Cash and cash equivalents at beginning of period 9,498 16,945
-------- --------
Cash and cash equivalents at end of period $58,084 $3,756
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $24,864 $25,928
Income taxes (refund) ($7,039) $23,973
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $6,699 $2,384
Special deposits - 7,114
Temporary cash investments - at cost,
which approximates market 51,385 -
---------- ----------
Total cash and cash equivalents 58,084 9,498
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.4 million in 1997 and 1996) 31,639 44,809
Associated companies 5,311 4,382
Other 1,769 2,014
Accrued unbilled revenues 54,977 49,383
Fuel inventory - at average cost 4,549 6,661
Materials and supplies - at average cost 20,445 17,567
Rate deferrals 140,807 142,504
Prepayments and other 8,647 7,434
---------- ----------
Total 326,228 284,252
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,850 7,923
---------- ----------
Total 13,381 13,454
---------- ----------
Utility Plant:
Electric 1,650,394 1,633,484
Construction work in progress 52,410 47,373
---------- ----------
Total 1,702,804 1,680,857
Less - accumulated depreciation and amortization 652,362 635,754
---------- ----------
Utility plant - net 1,050,442 1,045,103
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 34,863 104,588
SFAS 109 regulatory asset - net 16,781 11,813
Unamortized loss on reacquired debt 8,829 9,254
Other regulatory assets 85,315 46,309
Other 6,434 6,693
---------- ----------
Total 152,222 178,657
---------- ----------
TOTAL $1,542,273 $1,521,466
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $96,000 $96,015
Notes payable - associated companies - 50,253
Accounts payable:
Associated companies 30,613 32,878
Other 23,233 23,701
Customer deposits 27,145 26,258
Taxes accrued 44,717 26,482
Accumulated deferred income taxes 57,985 58,634
Interest accrued 18,705 20,909
Other 3,259 3,065
---------- ----------
Total 301,657 338,195
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 244,588 249,522
Accumulated deferred investment tax credits 24,669 25,422
Other 18,333 19,445
---------- ----------
Total 287,590 294,389
---------- ----------
Long-term debt 464,075 399,054
Preferred stock with sinking fund - 7,000
Shareholder's Equity:
Preferred stock without sinking fund 57,881 57,881
Common stock, no par value, authorized
15,000,000 shares; issued and outstanding
8,666,357 shares 199,326 199,326
Capital stock expense and other (42) (143)
Retained earnings 231,786 225,764
----------- ----------
Total 488,951 482,828
----------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $1,542,273 $1,521,466
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 68.7 $ 82.7 ($ 14.0) (17)
Commercial 61.9 66.7 (4.8) (7)
Industrial 40.5 44.0 (3.5) (8)
Governmental 6.4 7.1 (0.7) (10)
-----------------------------
Total retail 177.5 200.5 (23.0) (11)
Sales for resale
Associated companies 10.7 13.2 (2.5) (19)
Non-associated companies 4.3 6.4 (2.1) (33)
Other 20.4 27.4 (7.0) (26)
-----------------------------
Total $ 212.9 $ 247.5 ($ 34.6) (14)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 830 972 (142) (15)
Commercial 834 831 3 -
Industrial 750 735 15 2
Governmental 77 83 (6) (7)
-----------------------------
Total retail 2,491 2,621 (130) (5)
Sales for resale
Associated companies 233 301 (68) (23)
Non-associated companies 81 168 (87) (52)
-----------------------------
Total 2,805 3,090 (285) (9)
=============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 143.9 $ 160.2 ($ 16.3) (10)
Commercial 126.4 129.0 (2.6) (2)
Industrial 83.5 84.8 (1.3) (2)
Governmental 13.1 14.0 (0.9) (6)
-----------------------------
Total retail 366.9 388.0 (21.1) (5)
Sales for resale
Associated companies 21.7 26.8 (5.1) (19)
Non-associated companies 9.4 11.7 (2.3) (20)
Other 15.2 24.9 (9.7) (39)
-----------------------------
Total $ 413.2 $ 451.4 ($ 38.2) (8)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,821 2,027 (206) (10)
Commercial 1,653 1,608 45 3
Industrial 1,473 1,429 44 3
Governmental 157 164 (7) (4)
-----------------------------
Total retail 5,104 5,228 (124) (2)
Sales for resale
Associated companies 430 570 (140) (25)
Non-associated companies 183 284 (101) (36)
-----------------------------
Total 5,717 6,082 (365) (6)
=============================
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and six months ended June 30,
1997 due to a decrease in electric and gas operating revenues and an
increase in taxes other than income taxes, partially offset by a
decrease in income tax expense.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues and Sales," "Expenses,"
and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1997 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.3) ($4.3)
Fuel cost recovery (8.8) (2.5)
Sales volume/weather (3.7) (3.4)
Other revenue (including unbilled) (1.0) (0.9)
Sales for resale 3.7 2.9
------ -----
Total ($13.1) ($8.2)
====== =====
Electric operating revenues decreased for the three and six
months ended June 30, 1997 as a result of a decrease in base
revenues, fuel adjustment revenues, and sales volume, partially
offset by an increase in sales for resale. Fuel adjustment revenues
decreased because of lower gas prices. Base revenues decreased due
to rate reductions implemented during the current period. Sales
volume decreased due to milder weather during the current periods.
The increase in sales for resale is the result of an increase in
electric sales to associated companies primarily due to changes in
the generation requirements and availability among the domestic
utility companies.
Gas operating revenues decreased for the three and six months
ended June 30, 1997 due to a lower unit purchase price for gas
purchased for resale and a reduction in sales. Milder weather in the
current period is primarily responsible for the reduction in sales.
Expenses
Operating expenses decreased for the three and six months ended
June 30, 1997 because of a decrease in fuel and purchased power
expenses partially offset by an increase in taxes other than income
taxes and the amortization of rate deferrals. The decrease in fuel
and purchased power expenses is the result of lower gas prices. Also
contributing to the change in fuel and purchased power expenses are
the lower generation requirements due to the decrease in electric
sales. Taxes other than income taxes increased because of higher
franchise taxes resulting from a December 1996 Council order
increasing Entergy New Orleans' annual franchise fee from 2.5% to 5%
of gross revenues. The increase in the amortization of rate
deferrals in the three and six
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
months ended June 30, 1997 is primarily a result of increased over-
recovery of Grand Gulf 1 related costs in 1997 compared to 1996.
Other
Income tax expense decreased for the three and six months ended
June 30, 1997 due to lower pretax income.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues:
Electric $92,588 $105,701 $182,149 $190,384
Natural gas 17,215 22,128 52,610 64,725
-------- -------- -------- --------
Total 109,803 127,829 234,759 255,109
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 25,658 31,584 68,440 73,020
Purchased power 36,382 41,302 72,964 80,041
Other operation and maintenance 17,427 19,065 32,682 35,489
Depreciation and amortization 5,398 5,011 10,591 9,982
Taxes other than income taxes 8,606 6,757 17,492 13,620
Rate deferrals (1,620) (1,384) (3,581) (2,785)
Amortization of rate deferrals 8,552 5,886 18,016 10,382
-------- -------- -------- --------
Total 100,403 108,221 216,604 219,749
-------- -------- -------- --------
Operating Income 9,400 19,608 18,155 35,360
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 80 81 160 155
Miscellaneous - net (11) 288 20 1,062
-------- -------- -------- --------
Total 69 369 180 1,217
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 3,436 3,953 7,059 8,012
Other interest - net 288 320 579 602
Allowance for borrowed funds used
during construction (63) (63) (126) (122)
-------- -------- -------- --------
Total 3,661 4,210 7,512 8,492
-------- -------- -------- --------
Income Before Income Taxes 5,808 15,767 10,823 28,085
Income Taxes 2,770 5,407 4,967 9,690
-------- -------- -------- --------
Net Income 3,038 10,360 5,856 18,395
Preferred Stock Dividend Requirements
and Other 241 241 482 482
-------- -------- -------- --------
Earnings Applicable to Common Stock $2,797 $10,119 $5,374 $17,913
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $5,856 $18,395
Noncash items included in net income:
Change in rate deferrals 16,839 15,972
Depreciation and amortization 10,591 9,982
Deferred income taxes and investment tax credits (4,964) 1,167
Allowance for equity funds used during (160) (155)
construction
Changes in working capital:
Receivables 3,129 1,102
Accounts payable 6,217 (3,571)
Taxes accrued 5,471 2,295
Interest accrued (631) (501)
Other working capital accounts (9,265) (19,728)
Other (3,924) (9,992)
------- -------
Net cash flow provided by operating activities 29,159 14,966
------- -------
Investing Activities:
Construction expenditures (3,909) (17,991)
Allowance for equity funds used during construction 160 155
------- --------
Net cash flow used in investing activities (3,749) (17,836)
------- --------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds - 39,608
Retirement of:
First mortgage bonds (12,000) (23,250)
General and refunding mortgage bonds - (30,000)
Dividends paid:
Common stock (14,700) (18,900)
Preferred stock (724) (482)
-------- --------
Net cash flow used in financing activities (27,424) (33,024)
-------- --------
Net decrease in cash and cash equivalents (2,014) (35,894)
Cash and cash equivalents at beginning of period 17,510 49,746
-------- --------
Cash and cash equivalents at end of period $15,496 $13,852
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $7,969 $8,698
Income taxes - net $4,928 $6,299
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $2,082 $1,015
Temporary cash investments - at cost,
which approximates market:
Associated companies 3,871 7,435
Other 9,543 9,060
-------- --------
Total cash and cash equivalents 15,496 17,510
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1997 and 1996) 22,049 27,430
Associated companies 1,223 714
Other 2,881 1,764
Accrued unbilled revenues 17,690 17,064
Deferred electric fuel and resale gas costs 5,486 7,290
Materials and supplies - at average cost 13,065 9,904
Rate deferrals 37,838 37,692
Prepayments and other 10,813 7,157
-------- --------
Total 126,541 126,525
-------- --------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
Utility Plant:
Electric 511,432 503,061
Natural gas 128,076 122,700
Construction work in progress 8,184 18,247
-------- --------
Total 647,692 644,008
Less - accumulated depreciation and amortization 356,851 347,790
-------- --------
Utility plant - net 290,841 296,218
-------- --------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 82,513 99,498
SFAS 109 regulatory asset - net 4,242 6,051
Unamortized loss on reacquired debt 1,530 1,647
Other regulatory assets 18,313 15,908
Other 884 890
-------- --------
Total 107,482 123,994
-------- --------
TOTAL $528,123 $549,996
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Currently maturing long-term debt $ - $12,000
Accounts payable:
Associated companies 12,780 18,757
Other 26,324 14,130
Customer deposits 19,169 18,974
Taxes accrued 6,675 1,204
Accumulated deferred income taxes 5,506 5,584
Interest accrued 4,694 5,325
Provision for rate refund 15,149 19,465
Other 1,390 1,521
-------- --------
Total 91,687 96,960
-------- --------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 67,227 72,895
Accumulated deferred investment tax credits 7,691 7,984
Accumulated provision for property insurance 15,666 15,666
Other 23,367 24,713
-------- --------
Total 113,951 121,258
-------- --------
Long-term debt 168,920 168,888
Shareholders' Equity:
Preferred stock without sinking fund 19,780 19,780
Common Shareholder's Equity:
Common stock, $4 par value, authorized
10,000,000 shares; issued and outstanding
8,435,900 shares 33,744 33,744
Paid-in capital 36,294 36,294
Retained earnings subsequent to the elimination of
the accumulated deficit on November 30, 1988 63,747 73,072
-------- --------
Total 153,565 162,890
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $528,123 $549,996
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 27.2 $ 33.8 ($ 6.6) (20)
Commercial 32.6 36.1 (3.5) (10)
Industrial 5.7 6.2 (0.5) (8)
Governmental 12.9 13.9 (1.0) (7)
----------------------------
Total retail 78.4 90.0 (11.6) (13)
Sales for resale
Associated companies 5.1 0.4 4.7 1175
Non-associated companies 1.9 2.9 (1.0) (34)
Other 7.2 12.4 (5.2) (42)
----------------------------
Total $ 92.6 $ 105.7 ($ 13.1) (12)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 386 451 (65) (14)
Commercial 488 504 (16) (3)
Industrial 125 120 5 4
Governmental 239 230 9 4
----------------------------
Total retail 1,238 1,305 (67) (5)
Sales for resale
Associated companies 178 14 164 1171
Non-associated companies 38 74 (36) (49)
----------------------------
Total 1,454 1,393 61 4
============================
Six Months Ended Increase/
Description 1997 1996 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 55.9 $ 65.5 ($ 9.6) (15)
Commercial 68.9 69.3 (0.4) (1)
Industrial 11.9 11.8 0.1 1
Governmental 26.5 26.1 0.4 2
----------------------------
Total retail 163.2 172.7 (9.5) (6)
Sales for resale
Associated companies 7.0 2.3 4.7 204
Non-associated companies 3.6 5.4 (1.8) (33)
Other 8.4 10.0 (1.6) (16)
----------------------------
Total $ 182.2 $ 190.4 ($ 8.2) (4)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 760 842 (82) (10)
Commercial 966 969 (3) -
Industrial 239 231 8 3
Governmental 460 442 18 4
----------------------------
Total retail 2,425 2,484 (59) (2)
Sales for resale
Associated companies 225 59 166 281
Non-associated companies 61 126 (65) (52)
----------------------------
Total 2,711 2,669 42 2
============================
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income for the three and six months ended June 30, 1997
increased slightly primarily as a result of lower interest charges
and income tax expense, partially offset by increased nuclear
refueling outage expenses and depreciation, amortization, and
decommissioning expenses.
Significant factors affecting the results of operations and
causing variances between the three and six months ended June 30,
1997 and 1996 are discussed under "Revenues," "Expenses," and "Other"
below.
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 allocable
to its investment in Grand Gulf 1. Operating revenues remained
relatively unchanged for the three and six months ended June 30,
1997. See Note 2 herein for a discussion of System Energy's proposed
rate increase.
Expenses
Operating expenses increased for the three and six months ended
June 30, 1997 due to higher nuclear refueling outage expenses and
higher depreciation, amortization, and decommissioning expenses.
Nuclear refueling outage expenses increased due to costs that were
deferred from the November 1996 outage, which are now being amortized
over an 18 month period beginning December 1996. Prior to this
outage, such costs were expensed as incurred and none were incurred
during the six months ended June 30, 1996. The increase in
depreciation, amortization, and decommissioning expense is due to the
recognition of additional depreciation associated with the sale and
leaseback in 1989 of a portion of Grand Gulf 1, in accordance with
regulatory approval.
Other
Interest charges decreased for the three and six months ended
June 30, 1997 due to the refinancing of higher cost long-term debt in
1996. Income taxes decreased for the three and six months ended June
30, 1997 primarily due a decrease in pretax income and an increase in
the amortization of the deferred tax liability.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
(In Thousands) (In Thousands)
Operating Revenues $161,021 $160,369 $316,682 $316,793
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 12,441 12,171 24,458 25,011
Nuclear refueling outage expenses 3,907 - 7,624 -
Other operation and maintenance 28,407 26,591 48,797 48,332
Depreciation, amortization, and decommissioning 35,917 32,014 74,713 64,013
Taxes other than income taxes 6,781 6,699 13,206 13,605
-------- -------- -------- --------
Total 87,453 77,475 168,798 150,961
-------- -------- -------- --------
Operating Income 73,568 82,894 147,884 165,832
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 280 297 561 647
Miscellaneous - net 1,919 627 3,241 1,466
-------- -------- -------- --------
Total 2,199 924 3,802 2,113
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 31,103 37,021 61,861 74,974
Other interest - net 1,830 2,707 3,611 4,698
Allowance for borrowed funds used
during construction (279) (283) (557) (637)
-------- -------- -------- --------
Total 32,654 39,445 64,915 79,035
-------- -------- -------- --------
Income Before Income Taxes 43,113 44,373 86,771 88,910
Income Taxes 19,020 20,991 38,333 41,998
-------- -------- -------- --------
Net Income $24,093 $23,382 $48,438 $46,912
======== ======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
(In Thousands)
Operating Activities:
Net income $48,438 $46,912
Noncash items included in net income:
Depreciation, amortization, and decommissioning 74,713 64,013
Deferred income taxes and investment tax credits (23,444) (16,354)
Allowance for equity funds used during
construction (561) (647)
Changes in working capital:
Receivables (7,290) (2,835)
Accounts payable 5,297 (967)
Taxes accrued 8,374 17,497
Interest accrued 3,212 9,192
Other working capital accounts 6,353 (3,531)
Decommissioning trust contributions (6,315) (9,073)
FERC Settlement - refund obligation (2,199) (1,942)
Provision for estimated losses and reserves 20,699 23,932
Other 4,308 3,151
--------- --------
Net cash flow provided by operating activities 131,585 129,348
--------- --------
Investing Activities:
Construction expenditures (8,466) (3,624)
Allowance for equity funds used during construction 561 647
Nuclear fuel purchases (39) (1,135)
Proceeds from sale/leaseback of nuclear fuel 39 402
--------- --------
Net cash flow used in investing activities (7,905) (3,710)
--------- --------
Financing Activities:
Proceeds from the issuance of long term debt - 89,192
Retirement of long term debt - (92,700)
Changes in short-term borrowings - net - (2,990)
Common stock dividends paid (58,700) (46,300)
--------- --------
Net cash flow used in financing activities (58,700) (52,798)
--------- --------
Net increase in cash and cash equivalents 64,980 72,840
Cash and cash equivalents at beginning of period 92,315 240
--------- --------
Cash and cash equivalents at end of period $157,295 $73,080
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $57,634 $66,790
Income taxes $42,853 $30,944
Noncash investing and financing activities:
Change in unrealized depreciation of
decommissioning trust assets ($1,041) ($1,055)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $134 $26
Temporary cash investments - at cost,
which approximates market:
Associated companies 45,351 41,600
Other 111,810 50,689
---------- ----------
Total cash and cash equivalents 157,295 92,315
Accounts receivable:
Associated companies 77,807 71,337
Other 3,342 2,522
Materials and supplies - at average cost 65,965 66,302
Deferred nuclear refueling outage costs 16,498 24,005
Prepayments and other 5,976 4,929
---------- ----------
Total 326,883 261,410
---------- ----------
Other Property and Investments:
Decommissioning trust fund 72,372 62,223
---------- ----------
Utility Plant:
Electric 3,010,761 2,994,445
Electric plant under leases 441,467 447,409
Construction work in progress 39,454 41,362
Nuclear fuel under capital lease 65,501 83,558
---------- ----------
Total 3,557,183 3,566,774
Less - accumulated depreciation and amortization 1,032,062 974,472
---------- ----------
Utility plant - net 2,525,121 2,592,302
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 254,511 264,758
Unamortized loss on reacquired debt 54,585 57,785
Other regulatory assets 197,711 207,214
Other 14,880 15,601
---------- ----------
Total 521,687 545,358
---------- ----------
TOTAL $3,446,063 $3,461,293
========== ==========
See Notes to Financial Statements.
</TABEL>
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
1997 1996
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Currently maturing long-term debt $70,000 $10,000
Accounts payable:
Associated companies 25,665 18,245
Other 16,713 18,836
Taxes accrued 76,197 67,823
Interest accrued 37,407 34,195
Obligations under capital leases 28,000 28,000
Other 1,862 2,306
---------- ----------
Total 255,844 179,405
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 591,474 624,020
Accumulated deferred investment tax credits 101,909 103,647
Obligations under capital leases 37,501 55,558
FERC Settlement - refund obligation 50,640 52,839
Other 198,451 165,517
---------- ----------
Total 979,975 1,001,581
---------- ----------
Long-term debt 1,359,068 1,418,869
Common Shareholder's Equity:
Common stock, no par value, authorized
1,000,000 shares; issued and outstanding
789,350 shares 789,350 789,350
Retained earnings 61,826 72,088
---------- ----------
Total 851,176 861,438
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $3,446,063 $3,461,293
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Cajun - River Bend (Entergy Corporation and Entergy Gulf States)
Entergy Gulf States and Cajun, respectively, own 70% and 30%
undivided interests in River Bend (operated by Entergy Gulf States),
and 42% and 58% undivided interests in Big Cajun 2, Unit 3 (operated
by Cajun). These relationships have spawned a number of long-
standing disputes and claims between the parties. An agreement
setting forth terms for the resolution of all such disputes has been
reached by Entergy Gulf States, the Cajun bankruptcy trustee, and the
RUS, and was approved by the United States District Court for the
Middle District of Louisiana (District Court) on August 26, 1996
(Cajun Settlement). On September 6, 1996, the Committee of Unsecured
Creditors in the Cajun bankruptcy proceeding filed a Notice of Appeal
to the United States Court of Appeals for the Fifth Circuit (Fifth
Circuit), objecting that the order approving the settlement was
separate from the approval of a plan of reorganization and,
therefore, improper. On August 5, 1997, the Fifth Circuit ruled that
the District Court's order approving the settlement was proper.
Approvals by the appropriate regulatory agencies have been obtained.
The SEC and FERC have approved the transfer of certain Cajun
transmission assets to Entergy Gulf States. Management believes that
it is probable that the Cajun Settlement will be consummated prior to
the end of 1997. See Note 9 of the Form 10-K for additional
information regarding the Cajun litigation, Cajun's bankruptcy
proceedings, and related filings.
The Cajun Settlement includes, but is not limited to, the
following elements: (i) Cajun's interest in River Bend has been
turned over to the RUS, which has the option to retain the interest,
sell it to a third party, or transfer it to Entergy Gulf States at no
cost; (ii) Cajun will set aside a total of $125 million for its share
of the decommissioning costs of River Bend; (iii) Cajun will transfer
certain transmission assets to Entergy Gulf States; (iv) Cajun and
Entergy Gulf States will settle transmission disputes and release
each other from claims for payment under transmission arrangements,
as discussed under "Cajun - Transmission Service" below; (v) all
funds paid by Entergy Gulf States into the registry of the District
Court will be returned to Entergy Gulf States; (vi) Cajun will be
released from its unpaid past, present, and future liability for
River Bend costs and expenses; and (vii) all remaining litigation
between Cajun and Entergy Gulf States will be dismissed. Based on
the District Court's approval of the Cajun Settlement, a litigation
accrual established in 1994 for possible losses associated with the
Cajun-River Bend litigation was reversed in September 1996.
Cajun has not paid its full share of capital costs, operating
and maintenance expenses, and other costs for repairs and
improvements to River Bend since 1992. Cajun's unpaid portion of
River Bend operating and maintenance expenses (including nuclear
fuel) and capital costs for the six months ended June 30, 1997 was
approximately $23.9 million. The cumulative cost to Entergy Gulf
States resulting from Cajun's failure to pay its full share of River
Bend-related costs, reduced by the proceeds from the sale by Entergy
Gulf States of Cajun's share of River Bend power and payments into
the registry of the District Court for Entergy Gulf States' portion
of expenses for Big Cajun 2, Unit 3, was $4.8 million as of June 30,
1997. Cajun's unpaid portion of the River Bend related costs is
reflected in long-term receivables which is substantially reserved
for in other deferred credits. As discussed above, the Cajun
Settlement will conclude all disputes regarding the non-payment by
Cajun of River Bend operating and maintenance expenses. Cajun
continues to pay its share of decommissioning costs for River Bend.
The RUS entered into an agreement on February 11, 1997 for the
sale of Cajun's 30% interest in River Bend to PECO Energy Company
(PECO) pursuant to authorization granted in the Cajun Settlement.
On July 10, 1997, PECO terminated this agreement with the RUS and
announced that it would not go forward with the acquisition of the
Cajun River Bend interest.
Cajun - Transmission Service (Entergy Corporation and Entergy Gulf
States)
Entergy Gulf States and Cajun are parties to FERC proceedings
relating to transmission service charge disputes. As a result of the
proposed Cajun Settlement, FERC has dismissed or placed in abeyance
various proceedings pending before it, to which Cajun or the Cajun
bankruptcy trustee are parties, that would be resolved by the Cajun
Settlement. See Note 9 in the Form 10-K for additional information
regarding these FERC proceedings and FERC orders issued as a result
of such proceedings.
Under Entergy Gulf States' interpretation of a 1992 FERC order,
as modified by FERC's orders issued on August 3, 1995, and October 2,
1995, and as agreed to by the Cajun bankruptcy trustee, Cajun would
owe Entergy Gulf States approximately $73.1 million as of June 30,
1997. Entergy Gulf States further estimates that if it were to
prevail in its May 1992 motion for rehearing and on certain other
issues decided adversely to Entergy Gulf States in the February 1995,
August 1995, and October 1995 FERC orders, which Entergy Gulf States
has appealed, Cajun would owe Entergy Gulf States approximately
$163.8 million as of June 30, 1997. If Cajun were to prevail in its
May 1992 motion for rehearing to FERC, and if Entergy Gulf States
were not to prevail in its May 1992 motion for rehearing to FERC, and
if Cajun were to prevail in appealing FERC's August and October 1995
orders, Entergy Gulf States estimates it would owe Cajun
approximately $117.4 million as of June 30, 1997. The above amounts
are exclusive of a $7.3 million payment by Cajun on December 31,
1990, which the parties agreed to apply to the disputed transmission
service charges. Pending FERC's ruling on the May 1992 motions for
rehearing, Entergy Gulf States has continued to bill Cajun utilizing
the historical billing methodology and has recorded underpaid
transmission charges, including interest, in the amount of $147.6
million as of June 30, 1997. This amount is reflected in long-term
receivables with an offsetting reserve in other deferred credits.
FERC has determined that the collection of the pre-petition debt of
Cajun is an issue properly decided in the bankruptcy proceeding.
Refer to "Cajun - River Bend" above for a discussion of the Cajun
Settlement.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
On January 13, 1997, Entergy Gulf States filed a declaratory
judgment action in the U.S. Bankruptcy Court where the Cajun
bankruptcy is pending, seeking a ruling that Entergy Gulf States
would not be liable for damages to certain coal suppliers for Big
Cajun 2, Unit 3, if the Cajun bankruptcy trustee were to reject their
coal contracts as a part of a plan of reorganization in the
bankruptcy proceeding. In its pleading, Entergy Gulf States takes
the position that it is not a party to, and has no liability under,
those coal contracts.
On February 12, 1997, the coal suppliers and the Cajun
bankruptcy trustee filed a response in the declaratory judgment
action and made certain counterclaims and crossclaims. The coal
suppliers contend that Entergy Gulf States' declaratory judgment
action should be dismissed and, in the alternative, argue that Cajun
is Entergy Gulf States' agent in the procurement of coal for Big
Cajun 2, Unit 3, and that Entergy Gulf States is a party to and has
liability under the coal supply contracts. While Entergy Gulf States
believes that it has no obligation under these contracts, the
potential liability if Entergy Gulf States' position is not
sustained, could be materially adverse to Entergy Gulf States and
Entergy Corporation.
This matter, which has not been scheduled for a hearing, will be
strongly contested by Entergy Gulf States. However, at present there
is no basis upon which to predict the timing or outcome of this
litigation.
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
See Note 9 to the Form 10-K for information on the domestic
utility companies' and System Energy's construction expenditures
(excluding nuclear fuel), for the years 1997, 1998, and 1999 and long-
term debt and preferred stock maturities and cash sinking fund
requirements for the period 1997-1999.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
See Note 9 to the Form 10-K for information on nuclear
liability, property and replacement power insurance, related NRC
regulations, the disposal of spent nuclear fuel, other high-level
radioactive waste, and decommissioning costs associated with ANO,
River Bend, Waterford 3, and Grand Gulf 1.
The FASB issued an exposure draft of a proposed SFAS (which
proposed a 1997 effective date) in February 1996 regarding the
recognition, measurement and classification of decommissioning costs
for nuclear power plants. The proposed SFAS would require
measurement of the liability for closure and removal of long-lived
assets (including decommissioning) based on discounted future cash
flows. Those future cash flows should be determined by estimating
current costs and adjusting for inflation, efficiencies that may be
gained from experience with similar activities, and consideration of
reasonable future advances in technology.
After receiving comments on the exposure draft, the FASB has
decided that the effective date for the proposed SFAS will be later
than 1997, although a final effective date has not yet been
announced. If current electric utility industry accounting practices
with respect to nuclear decommissioning and other closure costs are
changed, annual provisions for such costs could increase, the
estimated cost for decommissioning/closure could be recorded as a
liability rather than as accumulated depreciation, and trust fund
income from decommissioning trusts could be reported as investment
income rather than as a reduction to decommissioning expense.
ANO Matters (Entergy Corporation and Entergy Arkansas)
Cracks in certain steam generator tubes at ANO 2 were discovered
and repaired during an outage in March 1992. Further inspections and
repairs were conducted at subsequent refueling and mid-cycle outages,
including the most recent refueling outage in May 1997. Turbine
modifications were installed in May 1997 to restore most of the
output lost due to steam generator fouling and tube plugging. The
unit may be approaching the current limit for the number of steam
generator tubes that can be plugged with the unit in operation. If
the established limit is reached during a future outage, it could
become necessary for Entergy Operations to insert sleeves in steam
generator tubes that were previously plugged. On October 25, 1996,
Entergy Corporation's Board of Directors authorized Entergy
Operations to negotiate a contract, with appropriate cancellation
provisions, for the fabrication and replacement of the steam
generators at ANO 2. Entergy estimates the cost of fabrication and
replacement of the steam generators to be approximately $150 million.
Entergy Operations has entered into letters of intent for the
fabrication and installation, which include a commitment for not
more than $7.7 million through August 1997. Contracts are expected
to be entered into in 1997. It is anticipated that the steam
generators will be installed during a planned refueling outage in
2000. Entergy Operations periodically meets with the NRC to discuss
the results of inspections of the steam generator tubes, as well as
the timing of future inspections.
Environmental Issues
(Entergy Arkansas)
In May 1995, Entergy Arkansas was named as a defendant in a suit
by Reynolds Metals Company (Reynolds), seeking to recover a share of
the costs associated with the clean-up of hazardous substances at a
site south of Arkadelphia, Arkansas. Reynolds alleges that it has
spent $11.2 million to clean-up the site, and that the site was
contaminated with PCBs for which Entergy Arkansas bears some
responsibility. Entergy Arkansas, voluntarily, at its expense,
completed remediation at a nearby substation site and believes that
it has no liability for contamination at that portion of the site
that is subject to the Reynolds suit and is contesting the lawsuit.
An August 1997 trial date has been tentatively scheduled. Regardless
of the outcome, Entergy Arkansas does not believe this matter will
have a materially adverse effect on its financial condition or
results of operations. See "Environmental Regulation" in Item 1 of
Part I of the Form 10-K for additional information on the PCB
contamination at the two former Reynolds plant sites in Arkansas to
which Entergy Arkansas had supplied power.
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially
responsible party (PRP) for the clean-up of certain hazardous waste
disposal sites. Entergy Gulf States is currently negotiating with the
EPA and state authorities regarding the clean-up of certain of these
sites. As of June 30, 1997, a remaining recorded liability of $19.8
million existed relating to the clean-up of the sites at which
Entergy Gulf States has been designated a PRP. See "Environmental
Regulation" in Item 1 of Part I of the Form 10-K for additional
discussion of the sites where Entergy Gulf States has been designated
as a PRP by the EPA and related litigation.
(Entergy Louisiana)
During 1993, the Louisiana Department of Environmental Quality
issued new rules for solid waste regulation, including regulation of
wastewater impoundments. Entergy Louisiana has determined that
certain of its power plant waste water impoundments were affected by
these regulations and chose to upgrade or close them. A remaining
recorded liability in the amount of $6.7 million existed at June 30,
1997, for waste water upgrades and closures to be completed by the
end of 1997. Cumulative expenditures relating to the upgrades and
closures of waste water impoundments were $7.1 million as of June 30,
1997.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
transactions for the sale and leaseback of undivided interests
(aggregating approximately 9.3%) in Waterford 3. Upon the occurrence
of certain events, Entergy Louisiana may be obligated to pay amounts
sufficient to permit the Owner Participants to withdraw from the
lease transactions, and Entergy Louisiana may be required to assume
the outstanding bonds issued by the Owner Trustee to finance, in
part, its acquisition of the undivided interests in Waterford 3. See
Note 10 to the Form 10-K and Note 4 herein for further information.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement,
System Energy has agreed to a number of covenants relating to the
maintenance of certain capitalization and fixed charge coverage
ratios. System Energy agreed, during the term of the agreement, to
maintain its equity at not less than 33% of its adjusted
capitalization (defined in the agreement to include certain amounts
not included in capitalization for financial statement purposes). In
addition, System Energy must maintain, with respect to each fiscal
quarter during the term of the agreement, a ratio of adjusted net
income to interest expense (calculated, in each case, as specified in
the agreement) of at least 1.60 times earnings. System Energy was in
compliance with the above covenants at June 30, 1997. See Note 9 to
the Form 10-K for further information.
Employment Litigation
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See Note 9 to the Form 10-K for further information relating to
lawsuits filed by former employees asserting they were wrongfully
terminated and/or discriminated against on the basis of age, race,
and/or sex.
(Entergy Corporation and Entergy Arkansas)
Entergy Corporation and Entergy Arkansas are defendants in a
number of lawsuits filed in federal court on behalf of a total of
approximately 62 plaintiffs who claim they were illegally terminated
from their jobs due to discrimination on the basis of age or race.
The first of these lawsuits, originally involving 29 plaintiffs,
was tried before a jury beginning in April 1997. Settlements were
reached with two of the plaintiffs prior to the trial. On May 1,
1997, the jury rendered findings as to 22 of the plaintiffs
indicating that Entergy had no liability to them for discrimination.
The jury did find that Entergy had intentionally discriminated
against the remaining 5 plaintiffs on the basis of age. As a result,
these plaintiffs will be awarded damages equal to twice their back
pay plus lost future wages and attorneys' fees. A date for the next
phase of the case has not yet been set.
A trial date for another suit involving 18 plaintiffs,
originally scheduled for May 1997, has been continued with no new
date set. Another of the suits is set for trial in November 1997.
No trial dates have been set for the remaining cases.
(Entergy Corporation and Entergy Gulf States)
Entergy Corporation and Entergy Gulf States were defendants in a
lawsuit involving approximately 176 plaintiffs filed in state court
in Texas by former employees who claim that they lost their jobs as a
result of the Merger. The plaintiffs in these cases asserted various
claims, including discrimination on the basis of age, race, and/or
sex. The court made a preliminary ruling that each plaintiff's claim
should be tried separately. However, all of these claims were
settled before reaching trial in June 1997.
NOTE 2. RATE AND REGULATORY MATTERS
River Bend (Entergy Corporation and Entergy Gulf States)
In 1988, the PUCT granted Entergy Gulf States a permanent
increase in annual revenues of $59.9 million resulting from the
inclusion in rate base of approximately $1.6 billion of company-wide
River Bend plant investment and approximately $182 million of related
Texas retail jurisdiction deferred River Bend costs (Allowed
Deferrals). At the same time, the PUCT disallowed as imprudent $63.5
million of company-wide River Bend plant costs and placed in
abeyance, with no finding as to prudence, approximately $1.4 billion
of company-wide River Bend plant investment and approximately $157
million of Texas retail jurisdiction deferred River Bend operating
and carrying costs (Abeyed Deferrals).
The PUCT's order has been the subject of several appellate
proceedings, culminating in an appeal to the Texas Supreme Court
(Supreme Court). On January 31, 1997, the Supreme Court issued an
opinion reversing the PUCT's order and remanding the case to the PUCT
for further proceedings. The Supreme Court found that the PUCT had
prejudiced Entergy Gulf States' rights by attempting to defer a
ruling on the abeyed plant costs and incorrectly determined the
amount of federal income tax expense that should have been allowed in
rates. The Supreme Court ruled that the PUCT could choose either to
conduct hearings and take further evidence or to decide the case on
the original evidence. On February 18, 1997, the Texas Office of
Public Utility Counsel filed a motion for rehearing of the Supreme
Court's decision, arguing that the Supreme Court's remand should have
instructed the PUCT as to how the case should be dealt with on
remand. On July 31, 1997, the Supreme Court overruled the motion for
rehearing and issued its mandate that the case be returned to the
PUCT for further deliberations. No procedural schedule has yet been
issued by the PUCT concerning the case on remand.
As of June 30, 1997, the River Bend plant costs disallowed for
retail ratemaking purposes in Texas and the River Bend plant costs
held in abeyance totaled (net of taxes and depreciation)
approximately $12 million and $261 million, respectively. The
Allowed Deferrals were approximately $74 million, net of taxes and
amortization, as of June 30, 1997. Entergy Gulf States estimates it
has collected approximately $215 million of revenues as of June 30,
1997, as a result of the originally ordered rate treatment by the
PUCT of these deferred costs. If recovery of the Allowed Deferrals
is not upheld, future refunds could be required and future revenues
based upon the Allowed Deferrals could also be lost. However,
management believes that it is probable that the Allowed Deferrals
will continue to be recovered in rates.
As a result of the application of SFAS 121, Entergy Gulf States
wrote off Abeyed Deferrals of $169 million, net of tax, effective
January 1, 1996. In light of the continuing proceedings before the
PUCT and the courts (including the January 31, 1997 decision of the
Texas Supreme Court), Entergy Gulf States has made no write-offs or
reserves for the River Bend plant-related costs. At this time,
management and legal counsel are unable to predict the amount of the
abeyed and previously disallowed River Bend plant costs, if any, that
may ultimately be allowed in Entergy Gulf States' Texas retail rates.
In prior proceedings involving other utilities, the PUCT has
held that the original cost of nuclear power plants will be
recoverable in electric rates to the extent those costs were
prudently incurred. In another proceeding Entergy Gulf States has
previously filed with the PUCT a cost reconciliation study prepared
by Sandlin Associates, management consultants with expertise in the
cost analysis of nuclear power plants, which supports the
reasonableness of the River Bend costs held in abeyance by the PUCT.
This reconciliation study determined that approximately 82% of the
River Bend cost increase above the amount included by the PUCT in
rate base was a result of changes in federal nuclear safety
requirements, and provided other support for the remainder of the
abeyed amounts. In particular, there have been four other rate
proceedings in Texas involving nuclear power plants. Disallowed
investment in the plants ranged from 0% to 15%. Each case was
unique, and the disallowances in each were made for different
reasons. Appeals of two of these PUCT decisions are currently
pending. Based upon the PUCT's prior decisions, management believes
that River Bend construction costs were prudently incurred and that
it is reasonably possible that it will recover through rates, or
otherwise through means such as a deregulated asset plan, all or
substantially all of the abeyed River Bend plant costs. In the event
of an adverse ruling in this case, a net of tax write-off, as of June
30, 1997, of up to $273 million and up to $215 million in refunds of
previously collected revenue could be required.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
In October 1996, Entergy Arkansas filed a proposal with the APSC
designed to achieve an orderly transition to retail electric
competition in Arkansas. Entergy Arkansas supplemented its proposal
with a May 1, 1997 filing. The proposal includes a rate decrease
totaling $158 million over a two year period beginning January 1998
and provides for a universal service charge for customers that remain
connected to Entergy Arkansas' electric facilities but choose to
purchase their electricity from another source. Although these
proposals allow for the complete recovery of the remaining plant
investment associated with ANO 1, ANO 2, and Entergy Arkansas'
portion of Grand Gulf 1 as of December 31, 1995, over a seven year
period, the NRC operating licenses for these plants permit continued
operation until the years 2014, 2018, and 2022, respectively.
Hearings are expected to begin in September 1997.
Filings with the PUCT (Entergy Corporation and Entergy Gulf States)
In December 1995, Entergy Gulf States filed a petition with the
PUCT for reconciliation of fuel and purchased power expenses for the
period January 1, 1994, through June 30, 1995. Entergy Gulf States
believes that there was an under-recovered fuel balance, including
interest, of $22.4 million as of June 1995. Hearings were concluded
in October 1996, and in April 1997 the PUCT issued an order which
approved recovery of approximately $18.8 million of the under-
recovered fuel balance, including interest. In June 1997, the PUCT
issued a subsequent order based on a rehearing, which reduced the
approved recovery to $18.5 million.
In accordance with the Merger agreement, Entergy Gulf States
filed a rate proceeding with the PUCT in November 1996. In April
1996, certain cities served by Entergy Gulf States (Cities)
instituted investigations of the reasonableness of Entergy Gulf
States' rates. In May 1996, the Cities agreed to forego their
pending investigation based on the assurance that any rate decrease
ordered in the November 1996 filing will be retroactive to June 1,
1996, and will accrue interest until refunded. The agreement further
provides that no base rate increase will be retroactive. Subsequent
to the November 1996 filing, the Cities passed ordinances reducing
Entergy Gulf States' rates by $43.6 million. Entergy Gulf States has
appealed these ordinances to the PUCT, and these appeals have been
consolidated in the pending rate proceeding. Included in the
November 1996 filing was a proposal to achieve an orderly transition
to retail electric competition in Texas, similar to the filing
described below that Entergy Gulf States made with the LPSC. This
filing with the PUCT will be litigated in four phases as follows: (i)
fuel factor/fuel reconciliation phase, of which Entergy Gulf States
believes there was an under-recovered fuel balance of $41.4 million,
including interest, for the period July 1, 1995 through June 30,
1996; (ii) revenue requirement phase; (iii) cost allocation/rate
design phase; and (iv) competitive issues phase. Hearings on the
first two phases began in June and July 1997, respectively. No
assurance can be given as to the outcome of these hearings.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
On May 31, 1995, Entergy Gulf States filed its second required
post-Merger earnings analysis with the LPSC. Hearings on this review
were held in December 1995. On October 4, 1996, the LPSC issued an
order requiring a $33.3 million annual base rate reduction and a $9.6
million refund. One component of the rate reduction removes from
base rates approximately $13.4 million annually of costs that will be
recovered in the future through the fuel adjustment clause. On
October 23, 1996, Entergy Gulf States appealed the LPSC's order and
obtained an injunction to stay the order, except insofar as it
requires the $13.4 million reduction, which Entergy Gulf States
implemented in November 1996. In addition, pursuant to an October
1996 settlement with the LPSC, Entergy Gulf States will be allowed to
recover $8.1 million annually related to certain gas transportation
and storage facilities costs. This amount will be applied as an
offset against any refund that may be required by a final judgment in
Entergy Gulf States' appeal of the second post-Merger earnings review
order.
On May 31, 1996, Entergy Gulf States filed its third required
post-Merger earnings analysis with the LPSC. Based on this earnings
filing, on June 1, 1996, Entergy Gulf States implemented a $5.3
million annual rate reduction. Hearings on this filing concluded in
March 1997. An additional rate reduction may be required upon the
issuance by the LPSC of a final rate order which is expected by the
end of 1997.
On May 30, 1997, Entergy Gulf States filed its fourth post-
Merger earnings analysis with the LPSC. This filing showed a revenue
deficiency such that no rate reduction is warranted. Entergy Gulf
States' filing will be subject to further review by the LPSC.
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
In October 1996, Entergy Gulf States and Entergy Louisiana filed
proposals with the LPSC designed to achieve an orderly transition to
retail electric competition in Louisiana, while protecting certain
classes of ratepayers from bearing the burden of cost shifting. The
proposals do not increase rates for any customer class. However,
these proposals do provide for a universal service charge for
customers that remain connected to Entergy Gulf States' or Entergy
Louisiana's electric facilities but choose to purchase their
electricity from another source. In addition, the proposals include
a base rate freeze, which would be put into effect for seven years in
the Louisiana areas serviced by Entergy Gulf States and Entergy
Louisiana. Although these proposals allow for the complete recovery
of the remaining plant investment associated with River Bend, and
Waterford 3 as of December 31, 1995, over a seven year period, the
NRC operating licenses for these plants permit continued operation
until the years 2025 and 2024, respectively. Hearings on these
proposals have been delayed until 1998.
In February 1997, the LPSC identified certain issues embodied in
the Entergy Gulf States and Entergy Louisiana proposals that will be
addressed in those companies' existing rate dockets, and other issues
that will be addressed in an ongoing generic regulatory proceeding
examining electric industry restructuring.
On May 30, 1997, Entergy Louisiana filed its annual formula rate
plan with the LPSC for the 1996 test year. In conjunction with the
filing, Entergy Louisiana proposed to apply one half of the $59
million in 1996 overearnings to accelerate depreciation of the
Waterford 3 nuclear plant. In a June 10, 1997 order, the LPSC denied
Entergy Louisiana's motion and ordered the Company to implement a
prospective rate reduction. Entergy Louisiana implemented this rate
reduction on July 1, 1997.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
On March 15, 1997, Entergy Mississippi filed its annual earnings
review with the MPSC under its formula rate plan for the 1996 test
year. In April 1997, the MPSC issued an order approving a
prospective rate reduction of $11.2 million. This rate reduction
went into effect May 1, 1997.
Entergy Mississippi has initiated discussions with the MPSC
regarding an orderly transition to a more competitive market for
electricity. In August 1996, Entergy Mississippi filed a proposal
with the MPSC for a rate rider to assure recovery of all Grand Gulf
costs incurred to serve customers. The rider would maintain current
rates for electric service provided by Entergy Mississippi and would
apply to customers within Entergy Mississippi's service area who
obtain electricity in the future from a source other than Entergy
Mississippi. Entergy Mississippi designed this rider to assure that
commitments made under the current system of regulation are honored
and that cost burdens are not unfairly transferred from departing
customers to those who remain on the Entergy Mississippi system. On
August 22, 1996, the MPSC remanded this proposal and established a
generic docket to consider competition for retail electric service.
Hearings on this docket concluded in April 1997. The MPSC issued an
order in July 1997 calling for continued study of electric power
industry deregulation by the commission's staff, with a report due to
the MPSC by November 1, 1997.
Filings with the Council (Entergy Corporation and Entergy New
Orleans)
The Council issued a resolution in February 1997 indicating that
it will conduct an investigation of the justness and reasonableness
of Entergy New Orleans' allowed rate of return, base rates, and
adjustment clauses. The Council conducted hearings in April 1997 on
the issue of rate of return, and directed Entergy New Orleans to make
a cost of service and revenue requirement filing on May 1, 1997. In
April 1997, Entergy New Orleans proposed a $16 million prospective
rate reduction in order to resolve the disputed rate of return and
other issues raised in the first phase of the proceeding. The
proposed settlement would also postpone the cost of service and
revenue requirement filing until September 1997. A settlement
conference was held in June 1997 and Entergy New Orleans increased
the proposed rate reduction to $18 million. The Council accepted the
settlement offer and Entergy New Orleans implemented the $18 million
rate reduction (retroactive to May 1, 1997) in July 1997. A
procedural schedule has not been set with respect to the other
issues.
Proposed Rate Increase
(System Energy)
System Energy filed an application with FERC on May 12, 1995,
for a $65.5 million rate increase. The request seeks 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
includes 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 in the
Form 10-K with respect to Entergy Arkansas. On December 12, 1995,
System Energy implemented a $65.5 million rate increase, subject to
refund. Management has decided to record a reserve for a portion of
the rate increase. Hearings on System Energy's request began in
January 1996 and were completed in February 1996. On July 11, 1996,
the ALJ issued an initial decision in this proceeding that agreed
with certain of System Energy's proposals, including the change in
accounting for nuclear refueling outage costs, while rejecting a
proposed increase in return on common equity and recommending a
slight decrease. The ALJ also rejected the proposed change in the
decommissioning cost methodology. The decision of the ALJ is
preliminary and may be modified in the final decision from FERC which
is expected at any time. Management is unable to predict the final
outcome of the rate increase request or the amount of any refunds in
excess of reserves that may be required.
(Entergy Mississippi)
Entergy Mississippi's allocation of the proposed System Energy
wholesale rate increase is $21.6 million annually. In July 1995,
Entergy Mississippi filed a schedule with the MPSC that defers 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 will end after
the issuance of a final order by FERC. The final amount of the
deferred rate increase is to be amortized over 48 months beginning in
October 1998.
(Entergy New Orleans)
Entergy New Orleans' allocation of the proposed System Energy
wholesale rate increase is $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. The deferral began in
February 1996 and will end after the issuance of a final order by
FERC.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 1997, Entergy Corporation
issued 372,195 shares of common stock, reducing the amount held
as treasury stock by approximately $10 million. Entergy Corporation
issued these shares to meet the requirements of its various
stock plans. In addition, Entergy Corporation received proceeds
of $158.9 million from the issuance of 6,208,263 shares of common
stock under its dividend reinvestment and stock purchase plan during
the six months ended June 30, 1997.
On July 1, 1997, Entergy Corporation issued 813,161 shares of
common stock at a value of $21.5 million in connection with the
acquisition of the security monitoring company, Ranger American.
NOTE 4. LONG-TERM DEBT
(Entergy Corporation)
See Note 7 of the Form 10-K for a discussion of Entergy Power UK
plc's credit facility. Approximately 1.015 billion British Pounds
(1.67 billion US dollars) of variable rate borrowings were
outstanding under this facility as of June 30, 1997. The weighted
average interest rate on the borrowings outstanding as of June 30,
1997 was 7.92%.
Entergy Power UK plc (Entergy Power UK) entered into several
interest rate swaps to reduce the impact of interest rate changes on
its debt related to the London Electricity acquisition. The interest
rate swap agreements involve the exchange of floating rate interest
payments for fixed rate interest payments over the life of the
agreements. Entergy Power UK recognizes interest expense currently
based on the fixed rate of interest resulting from use of these swap
agreements. If the counterparties to an interest rate swap agreement
were to default on contractual payments, Entergy Power UK could be
exposed to increased costs related to replacing the original
agreement. However, Entergy Power UK does not anticipate
nonperformance by any counterparty to any interest rate swap in
effect at June 30, 1997. At June 30, 1997, Entergy Power UK was a
party to a notional amount of 600 million British Pounds of interest
rate swaps with maturity dates ranging from March 1999 to
September 2001.
An Entergy subsidiary signed an agreement with several banks on
January 5, 1996, to obtain a revolving credit facility for the
acquisition of CitiPower. The subsidiary entered into several
interest rate swaps to reduce the impact of interest rate changes on
its debt related to the CitiPower acquisition. See Note 7 of the
Form 10-K for a discussion of the credit facility and the interest
rate swap agreements. The interest rate swap agreements involve the
exchange of floating rate interest payments for fixed rate interest
payments over the life of the agreements. Interest expense is
recognized currently based on the fixed rate of interest resulting
from use of these swap agreements.
Entergy enters into interest rate swaps as part of its overall
risk management strategy and does not hold or issue material amounts
of derivative financial instruments for trading purposes. Entergy
accounts for its interest rate swaps in accordance with the concepts
established in SFAS 80, "Accounting for Futures Contracts", and
various Emerging Issues Task Force pronouncements. If the interest
rate swaps were to be sold or terminated, any resulting gain or loss
would be deferred and amortized over the remaining life of the debt
instrument being hedged by the interest rate swaps. If the debt
instrument being hedged by the interest rate swaps was to be
extinguished, any resulting gain or loss attributable to the swaps
would be recognized in the period in which the debt was extinguished.
(Entergy Corporation and Entergy Louisiana)
Entergy Louisiana is the lessee of three separate undivided
interests in Unit 3 of the Waterford Steam Electric Generating
Station under three separate, but substantially identical, long-term
net leases. The lessors under such leases acquired the undivided
interests (aggregating approximately 9.3%) in Waterford 3 from
Entergy Louisiana in three separate sale-leaseback transactions that
occurred in 1989. Approximately 87.7% of the aggregate consideration
paid by the Lessors for their respective undivided interests was
provided to the Lessors from the issuance of Waterford 3 Secured
Lease Obligation Bonds (Initial Series Bonds) in 1989. As of June
30, 1997, the outstanding debt consisted of three series of bonds
with interest rates ranging from 10.30% to 10.67% and maturity dates
ranging from 2005 to 2017. In July 1997, Entergy Louisiana issued
$307,632,000 Waterford 3 Secured Lease Obligation Bonds, 8.09% Series
due 2017, to refinance the outstanding Initial Series Bonds.
Upon the occurrence of certain events, Entergy Louisiana may be
obligated to pay amounts sufficient to permit the Owner Participants
to withdraw from the lease transactions, and Entergy Louisiana may be
required to assume the outstanding bonds issued by the Owner Trustee
to finance, in part, its acquisition of the undivided interests in
Waterford 3. See Note 10 to the Form 10-K for further information.
(Entergy Mississippi)
On July 15, 1997, Entergy Mississippi retired $50 million of its
6.95% Series General and Refunding Bonds and $46 million of its
11.20% Series General and Refunding Bonds upon maturity.
(Entergy Gulf States)
On July 1, 1997, Entergy Gulf States retired, pursuant to
sinking fund requirements, $50 million of its 9.72% Series Debentures
due 1998.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On July 25, 1997, Entergy Corporation's Board of Directors
declared a common stock dividend of 45 cents per share payable on
September 1, 1997, to holders of record on August 13, 1997.
NOTE 6. RESTRUCTURING COSTS (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
In 1994 and 1995, Entergy implemented various restructuring
programs to reduce the number of employees and consolidate offices
and facilities. The programs were designed to reduce costs and
improve operating efficiencies. The restructuring liability
associated with these programs was $3.2 million as of December 31,
1996. Approximately $2.8 million of restructuring charges were
incurred through June 30, 1997, resulting in a remaining liability of
$.4 million. The restructuring charges primarily include employee
severance costs related to the expected termination of approximately
2,750 employees in various groups. As of June 30, 1997,
substantially all of these employees had either been terminated or
accepted voluntary separation packages under the restructuring plan.
In December 1996, Entergy recorded $21.3 million of
restructuring charges (of which $18 million was recorded by Entergy
Services) associated with the transition to competition.
Approximately $11.1 million of charges related to the transition to
competition were incurred through June 30, 1997, resulting in a
remaining liability of $10.2 million.
NOTE 7. ACCOUNTING ISSUES (Entergy Corporation)
New Accounting Standard - In March 1997, the FASB issued SFAS
128, "Earnings per Share", effective for financial statements for
periods ending after December 15, 1997. This statement will simplify
the computation of earnings per share for many companies by
eliminating calculation provisions which were required by the prior
earnings per share standard, Accounting Principles Board Opinion 15.
The adoption of SFAS 128 is not expected to have a material effect on
the calculation of earnings per share for Entergy Corporation.
In May and July, 1997, the EITF of the FASB met regarding EITF
Issues No. 97-4, "Deregulation of the Pricing of Electricity - Issues
Related to the Application of SFAS 71, "Accounting for the Effects of
Certain Types of Regulation", and SFAS 101, "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB Statement
No. 71". As a result of these meetings, a consensus was reached that
SFAS 71 should be discontinued at a date no later than when the
details of the transition to competition plan for that portion of the
entity are known. Additionally, the EITF reached a consensus that
stranded costs which are to be recovered through cash flows derived
from another portion of the entity which continues to apply SFAS 71
should not be written off and considered regulatory assets of that
segment which will continue to apply SFAS 71.
NOTE 8. ACQUISITION OF LONDON ELECTRICITY (Entergy Corporation)
On December 18, 1996, Entergy made a formal cash offer to
acquire London Electricity for $2.1 billion. London Electricity is a
regional electric company serving approximately two million customers
in the metropolitan area of London, England. The offer was approved
by authorities in the United Kingdom, and as of February 7, 1997, the
offer was made unconditional. Entergy, through a wholly owned
subsidiary, now controls 100% of the common shares of London
Electricity. Entergy has included the results of operations of
London Electricity in its results of operations beginning February 1,
1997, based on management's determination that effective control was
achieved on that date. The acquisition was financed with $1.7
billion of debt that is non-recourse to Entergy Corporation and $392
million of equity provided by Entergy Corporation from available cash
and borrowings under its $300 million line of credit.
The cost of the London Electricity license is being amortized on
a straight-line basis over a 40 year period beginning February 1,
1997. As of June 30, 1997, the unamortized balance of the license
was approximately $1.6 billion, which is based on a preliminary
purchase price allocation.
In accordance with the purchase method of accounting, the three
and six months ended June 30, 1997, results of operations for Entergy
Corporation reported in its Statements of Consolidated Income and
Cash Flows do not reflect London Electricity's results of operations
for any period prior to February 1, 1997. The pro forma combined
revenues, net income, and earnings per common share of Entergy
Corporation presented below give effect to the acquisition as if it
had occurred on January 1, 1997. This pro forma information is not
necessarily indicative of the results of operations that would have
occurred had the acquisition been consummated for the period for
which it is being given effect. The three and six months ended June
30, 1996 pro forma information is not available for comparative
purposes.
Six Months Ended
June 30, 1997
(In Thousands of U.S.
Dollars, Except Share Data)
Operating revenues $4,422,537
Net income $ 287,579
Earnings per average common share $ 1.09
On July 31, 1997, the British government enacted into law a one-
time "windfall profits tax" on privatized industries, including
regional electric utilities such as London Electricity. An initial
examination of the proposed tax indicates that London Electricity's
liability is approximately 140 million British Pounds (approximately
$229 million) which will not be deductible for United Kingdom income
tax purposes. Payment of the tax is required in two equal
installments, the first to be due on December 1, 1997, and the
second installment due a year later. The government also decreased
the corporate tax rate in the United Kingdom from the current 33% to
31%, which will be effective as of April 1, 1997. In accordance
with SFAS 109, "Accounting for Income Taxes", this reduction in
United Kingdom income tax rates will result in a one-time reduction
in income tax expense of approximately $65 million to adjust London
Electricity's deferred income tax liability to the new rate.
Accordingly, the liability for the windfall profits tax (with a
corresponding charge against income) and the reduction in London
Electricity's deferred income tax liability (with a corresponding
reduction in income tax expense), were recorded in July 1997.
__________________________________
In the opinion of Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy, the accompanying unaudited condensed
financial statements contain all adjustments (consisting primarily of
normal recurring accruals and reclassifying previously reported
amounts to conform to current classifications) necessary for a fair
statement of the results for the interim periods presented. However,
the business of Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans is subject to
seasonal fluctuations, with the peak period occurring during the
summer months. The results for the interim periods presented should
not be used as a basis for estimating results of operations for a
full year.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Employment Litigation (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans)
See "Employment Litigation" in Item 1 of Part I of the Form 10-K
for information relating to lawsuits filed by former employees
asserting they were wrongfully terminated and/or discriminated
against due to age, race, and/or sex. See "Employment Litigation" in
Note 1 herein for developments that have occurred since the filing of
the Form 10-K.
Federal Income Tax Audit (Entergy Corporation, Entergy Louisiana, and
System Energy)
In August 1994, Entergy received an IRS report covering the
federal income tax audit of Entergy Corporation and subsidiaries for
the years 1988 - 1990. The report asserted an $80 million tax
deficiency for the 1990 consolidated federal income tax returns
related primarily to the utilization of accelerated investment tax
credits associated with Waterford 3 and Grand Gulf. Changes to the
initial report, made in the IRS appeal process, reduced the
assessment to $58 million. In March 1997, Entergy Corporation
received notification that the IRS National Office had resolved the
audit in Entergy's favor and that no additional tax payments would be
due.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun - Coal Contracts" in Note 1 herein for developments
that have occurred since the filing of Form 10-K.
Taxes Paid Under Protest (Entergy Corporation and Entergy Louisiana)
Since the mid-1980's, Entergy Louisiana and the tax authorities
of St. Charles Parish, Louisiana (Parish), the parish in which
Waterford 3 is located, have disputed use taxes on nuclear fuel paid
under protest by Entergy Louisiana. Entergy Louisiana has been
successful in lawsuits in the Parish with regard to recovering these
taxes, plus interest, and also with regard to Parish lease tax issues
pertaining to fuel financing arrangements. In June 1995, Entergy
Louisiana received a favorable decision from the Louisiana Fifth
Circuit Court of Appeals that confirmed that no such use and lease
taxes are due. In May 1997, the Parish and Entergy Louisiana settled
all pending use and lease tax litigation. This settlement includes
returns to Entergy Louisiana of additional payments under protest on
nuclear fuel and the dismissal of nuclear fuel related suits against
Entergy Louisiana and/or the fuel lessors. The suits by Entergy
Louisiana with regard to state use tax paid under protest on nuclear
fuel are still pending.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was
held on May 9, 1997. The following matters were voted on and
received the specified number of votes for, abstentions, votes
withheld (against), and broker non-votes:
1. Election of Directors:
Votes Broker
Name of Nominee Votes For Abstentions Withheld Non-Votes
W. Frank Blount 204,019,263 N/A 1,723,668 N/A
John A. Cooper, Jr. 204,030,546 N/A 1,712,385 N/A
Lucie J. Fjeldstad 204,059,200 N/A 1,683,731 N/A
Norman C. Francis 203,945,806 N/A 1,797,125 N/A
Robert v. d. Luft 204,095,766 N/A 1,647,165 N/A
Edwin Lupberger 203,720,662 N/A 2,022,269 N/A
Kinnaird R. McKee 203,926,940 N/A 1,815,991 N/A
Paul W. Murrill 204,035,147 N/A 1,707,784 N/A
James R. Nichols 204,032,347 N/A 1,710,584 N/A
Eugene H. Owen 204,017,280 N/A 1,725,651 N/A
John N. Palmer, Sr. 204,119,836 N/A 1,623,095 N/A
Robert D. Pugh 203,939,504 N/A 1,803,427 N/A
Wm. Clifford Smith 204,044,210 N/A 1,698,721 N/A
Bismark A. Steinhagen 204,108,780 N/A 1,634,151 N/A
2. Appointment of independent public accountants, Coopers & Lybrand
L.L.P., for the year 1997: 202,841,564 votes for; 2,147,815 votes
against; 753,552 abstentions; and broker non-votes are not
applicable.
(Entergy Arkansas)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Arkansas: Frank F.
Gallaher, Donald C. Hintz, Jerry D. Jackson, R. Drake Keith, Edwin
Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
(Entergy Gulf States)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Gulf States: John J.
Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Karen
R. Johnson, Edwin Lupberger, Jerry L. Maulden, and Gerald D.
McInvale.
(Entergy Louisiana)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Louisiana: John J.
Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Edwin
Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
(Entergy Mississippi)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy Mississippi: Frank F.
Gallaher, Donald C. Hintz, Jerry D. Jackson, Edwin A. Lupberger,
Jerry L. Maulden, Gerald D. McInvale, and Donald E. Meiners.
(Entergy New Orleans)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of Entergy New Orleans: Frank F.
Gallaher, Jerry D. Jackson, Edwin A. Lupberger, Jerry L. Maulden,
Gerald D. McInvale, and Daniel F. Packer.
(System Energy)
A consent in lieu of the annual meeting of the common
stockholder was executed on May 27, 1997. The consent was signed on
behalf of Entergy Corporation, the holder of all issued and
outstanding shares of common stock. The common stockholder, by such
consent, elected the following individuals to serve as directors
constituting the Board of Directors of System Energy: Donald C.
Hintz, Edwin Lupberger, Jerry L. Maulden, and Gerald D. McInvale.
Item 5. Other Information
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy)
The domestic utility companies and System Energy have calculated
ratios of earnings to fixed charges and ratios of earnings to
combined fixed charges and preferred dividends pursuant to Item 503
of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, June 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 2.28 3.11(b) 2.32 2.56 2.93 2.63
Entergy Gulf States 1.72 1.54 .36(c) 1.86 1.47 2.32
Entergy Louisiana 2.79 3.06 2.91 3.18 3.16 2.82
Entergy Mississippi 2.37 3.79(b) 2.12 2.92 3.40 2.93
Entergy New Orleans 2.66 4.68(b) 1.91 3.93 3.51 2.73
System Energy 2.04 1.87 1.23 2.07 2.21 2.32
Ratios of Earnings to Combined Fixed Charges and
Preferred Dividends
Twelve Months Ended
December 31, June 30,
1992 1993 1994 1995 1996 1997
Entergy Arkansas 1.86 2.54(b) 1.97 2.12 2.44 2.27
Entergy Gulf States (a) 1.37 1.21 .29(c) 1.54 1.19 1.91
Entergy Louisiana 2.18 2.39 2.43 2.60 2.64 2.43
Entergy Mississippi 1.97 3.08(b) 1.81 2.51 2.94 2.57
Entergy New Orleans 2.36 4.12(b) 1.73 3.56 3.22 2.48
(a) "Preferred Dividends" in the case of Entergy Gulf States
also include dividends on preference stock.
(b) Earnings for the year ended December 31, 1993, include $81
million, $52 million, and $18 million for Entergy Arkansas,
Entergy Mississippi, and Entergy New Orleans, respectively,
related to the change in accounting principle to provide
for the accrual of estimated unbilled revenues.
(c) Earnings for the year ended December 31, 1994, for Entergy
Gulf States were not adequate to cover fixed charges and
combined fixed charges and preferred dividends by $144.8
million and $197.1 million, respectively.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
** 4(a) - Eleventh Supplemental Indenture, dated as of June 1,
1997, to Entergy Mississippi's Mortgage and Deed of
Trust, dated as of February 1, 1988 (filed as Exhibit
A-2(a) to Rule 24 Certificate dated June 27, 1997 in
File No. 70-8719).
4(b) - Credit Facility Agreement, dated as of December 17,
1996, for Entergy Power UK PLC and ABN Amro Bank, N.V.,
Bank of America International Limited, Union Bank of
Switzerland as amended by amendments 1, 2, and 3 dated
February 6, 1997, March 18, 1997, and June 30, 1997,
respectively.
23(a) - Consent of Sandlin Associates.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of June 30, 1997.
27(b) - Financial Data Schedule for Entergy Arkansas as of
June 30, 1997.
27(c) - Financial Data Schedule for Entergy Gulf States as of
June 30, 1997.
27(d) - Financial Data Schedule for Entergy Louisiana as of
June 30, 1997.
27(e) - Financial Data Schedule for Entergy Mississippi as of
June 30, 1997.
27(f) - Financial Data Schedule for Entergy New Orleans as of
June 30, 1997.
27(g) - Financial Data Schedule for System Energy as of June
30, 1997.
99(a) - Entergy Arkansas Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(b) - Entergy Gulf States Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(c) - Entergy Louisiana Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(d) - Entergy Mississippi Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 99(g) - Annual Reports on Form 10-K of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the fiscal year ended December
31, 1996, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
** 99(h) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy for the quarter ended March 31,
1997, portions of which are incorporated herein by
reference as described elsewhere in this document
(filed with the SEC in File Nos. 1-11299, 1-10764, 1-
2703, 1-8474, 0-320, 0-5807, and 1-9067,
respectively).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy
Corporation agrees to furnish to the Commission upon request any
instrument with respect to long-term debt that is not registered or
listed herein as an Exhibit because the total amount of securities
authorized under such agreement does not exceed ten percent of
Entergy Corporation and its subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended June 30, 1997, which list, prepared in accordance
with Item 102 of Regulation S-T of the SEC, immediately
precedes the exhibits being filed with this report on Form
10-Q for the quarter ended June 30, 1997.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy
A current report on Form 8-K, dated July 2, 1997, was
filed with the SEC on July 11, 1997, reporting
information under Item 5. "Other Events."
Entergy Louisiana
A current report on Form 8-K, dated June 26, 1997,
was filed with the SEC on July 14, 1997, reporting
information under Item 5. "Other Events" and Item 7.
" Financial Statements and Exhibits."
EXPERTS
The statements attributed to Sandlin Associates regarding the
analysis of River Bend construction costs of Entergy Gulf States in
Note 2 to Entergy Corporation and Subsidiaries Consolidated Financial
Statements, "Rate and Regulatory Matters," have been reviewed by such
firm and are included herein upon the authority of such firm as
experts.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized. The signature
for each undersigned company shall be deemed to relate only to
matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Louis E. Buck
Louis E. Buck
Vice President, Chief Accounting
Officer and Assistant Secretary
(For each Registrant and for each as
Principal Accounting Officer)
Date: August 8, 1997