___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, IRS Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 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
333-33331 ENTERGY LONDON INVESTMENTS PLC N/A
(England and Wales)
Templar House
81-87 High Holborn
London WC1V 6NU England
Telephone 011-44-171-242-9050
___________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
Entergy Corporation Common Stock, $0.01 Par Value - 245,880,306 New York Stock Exchange, Inc.
Shares outstanding at February 27, 1998 Chicago Stock Exchange Inc.
Pacific Exchange Inc.
Entergy Arkansas Capital I 8-1/2% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value:
$4.40 Dividend Series New York Stock Exchange, Inc.
$4.52 Dividend Series New York Stock Exchange, Inc.
$5.08 Dividend Series New York Stock Exchange, Inc.
$8.80 Dividend Series New York Stock Exchange, Inc.
Adjustable Rate Series B (Depository Receipts) New York Stock Exchange, Inc.
Preference Stock, Cumulative, without Par Value New York Stock Exchange, Inc.
$1.75 Dividend Series
Entergy Gulf States Capital I 8.75% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Entergy Louisiana Capital I 9% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Entergy London Capital, L.P. 8-5/8% Cumulative Quarterly Income Preferred New York Stock Exchange, Inc.
Securities, Series A
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
Entergy Arkansas, Inc. Preferred Stock, Cumulative, $100 Par Value
Preferred Stock, Cumulative, $25 Par Value
Preferred Stock, Cumulative, $0.01 Par Value
Entergy Gulf States, Inc. Preferred Stock, Cumulative, $100 Par Value
Entergy Louisiana, Inc. Preferred Stock, Cumulative, $100 Par Value
Preferred Stock, Cumulative, $25 Par Value
Entergy Mississippi, Inc. Preferred Stock, Cumulative, $100 Par Value
Entergy New Orleans, Inc. Preferred Stock, Cumulative, $100 Par Value
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days. Yes X
No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrants' knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Entergy Corporation Common Stock, $0.01
Par Value, held by non-affiliates, was $7.1 billion based on the reported
last sale price of such stock on the New York Stock Exchange on February 27,
1998. Entergy Corporation is directly or indirectly the sole holder of the
common stock of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy
Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc.,
System Energy Resources, Inc., and Entergy London Investments plc.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Entergy Corporation to be filed in
connection with its Annual Meeting of Stockholders, to be held May 15,
1998, are incorporated by reference into Parts I and III hereof.
TABLE OF CONTENTS
Page
Number
Definitions i
Part I
Item 1. Business 1
Item 2. Properties 35
Item 3. Legal Proceedings 35
Item 4. Submission of Matters to a Vote of Security Holders 35
Directors and Executive Officers of Entergy Corporation 36
Part II
Item 5. Market for Registrants' Common Equity and Related
Stockholder Matters 41
Item 6. Selected Financial Data 42
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 43
Item 8. Financial Statements and Supplementary Data 44
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 223
Part III
Item 10. Directors and Executive Officers of the Registrants 223
Item 11. Executive Compensation 227
Item 12. Security Ownership of Certain Beneficial Owners and
Management 234
Item 13. Certain Relationships and Related Transactions 238
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 239
Signatures 240
Report of Independent Accountants on Financial Statement Schedules 249
Index to Financial Statement Schedules S-1
Exhibit Index E-1
This combined Form 10-K is separately filed by Entergy Corporation,
Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc., System Energy
Resources, Inc., and Entergy London Investments plc. Information contained
herein relating to any individual company is filed by such company on its
own behalf. Each company makes representations only as to itself and makes
no other representations whatsoever as to any other company.
This report should be read in its entirety. No one section of the
report deals with all aspects of the subject matter.
EXCHANGE RATES
For the convenience of the reader, this Form 10-K contains
translations of certain British pounds sterling (BPS) amounts into U.S.
dollars at specified rates, or, if not so specified, the noon buying rate
in New York City for cable transfers in BPS as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate")
on December 31, 1997 of $1.6454 = BPS1.00. No representation is made that
the BPS amounts have been, could have been or could be converted into U.S.
dollars at the rates indicated or at any other rates.
The following table sets out, for the periods indicated, certain
information concerning the exchange rates between BPS and U.S. dollars
based on the Noon Buying Rate in New York City for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve
Bank of New York.
Fiscal Year Ending (1) Period End Average(2) High Low
($ per BPS1.00)
March 31, 1994 1.49 1.50 1.57 1.48
March 31, 1995 1.62 1.57 1.64 1.51
March 31, 1996 1.53 1.56 1.61 1.51
Period from April 1, 1996 to 1.60 1.58 1.71 1.49
January 31, 1997
December 31, 1997 1.65 1.64 1.71 1.58
(1) London Electricity plc, the predecessor company of Entergy London
Investments plc (Entergy London), had a fiscal year ending March 31
and Entergy London, the successor company, has a fiscal year ending
December 31. Effective February 1, 1997, Entergy London acquired
London Electricity plc.
(2) The average of the Noon Buying Rates in effect on the last business
day of each month during the relevant period.
FORWARD LOOKING STATEMENTS
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,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, System Energy, Entergy London, 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 and notes are
defined below:
Abbreviation or Acronym Term
AFUDC Allowance for Funds Used During Construction
Algiers 15th Ward of the City of New Orleans, Louisiana
ALJ Administrative Law Judge
ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam Electric
Generating Station (nuclear), owned by Entergy Arkansas
APB Accounting Principles Board
APSC Arkansas Public Service Commission
Arkansas Cities and
Cooperatives Cities of Benton, North Little Rock, Prescott and
Osceola; the Conway Corporation, the West Memphis
Utilities Commission and the Farmers' Electric
Cooperative
Availability
Agreement Agreement, dated as of June 21, 1974, as amended, among
System Energy and Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans, and the
assignments thereof
BPS British pounds sterling
Cajun Cajun Electric Power Cooperative, Inc. (currently in
chapter 11 bankruptcy reorganization)
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
D.C. Circuit United States Court of Appeals for the District of
Columbia Circuit
DOE United States Department of Energy
domestic utility
companies Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New
Orleans, collectively
EMF Electromagnetic fields
EPA Environmental Protection Agency
EPAct Energy Policy Act of 1992
EPDC Entergy Power Development Corporation
EPMC Entergy Power Marketing Corp.
ETC Exempt telecommunications company under PUHCA
ETHC Entergy Technology Holding Company
EWG Exempt wholesale generator under PUHCA
Electricity Act Electricity Act 1989
Electricity Pool Wholesale electricity market in England and Wales
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 London Entergy London Investments plc, formerly Entergy Power
UK plc (including its wholly owned subsidiary, London
Electricity plc)
Entergy Louisiana Entergy Louisiana, Inc., formerly Louisiana Power &
Light Company
DEFINITIONS (Continued)
Abbreviation or Acronym Term
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.
Entergy Power Entergy Power, Inc.
Entergy Services Entergy Services, Inc.
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FUCO an exempt foreign utility company under PUHCA
G&R Mortgage Bonds General and Refunding Mortgage Bonds
Grand Gulf 1 and 2 Units 1 and 2 of Grand Gulf Steam Electric Generating
Station (nuclear), 90% owned by System Energy
GWH one million kilowatt-hours
Independence Independence Steam Electric Station (coal), owned 16%
by Entergy Arkansas, 25% by Entergy Mississippi, and
11% by Entergy Power
IRS Internal Revenue Service
KPL Kingsnorth Power Ltd.
KV kilovolt
KW kilowatt
KWH kilowatt-hour(s)
London Electricity London Electricity plc - a regional electric company
serving London, England, which was acquired by Entergy
London Investments plc effective February 1, 1997
LDEQ Louisiana Department of Environmental Quality
LPSC Louisiana Public Service Commission
MCF 1,000 cubic feet of gas
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
MGP Manufactured gas plant
MCEQ Mississippi Commission on Environmental Quality
MMC UK Monopolies and Mergers Commission
MPSC Mississippi Public Service Commission
MW Megawatt(s)
N/A Not applicable
Nelson Unit 6 Unit No. 6 (coal) of the Nelson Steam Electric
Generating Station, owned 70% by Entergy Gulf States
NISCO Nelson Industrial Steam Company
1991 NOPSI
Settlement Agreement, retroactive to October 4, 1991, among
Entergy New Orleans, the Council, and the Alliance for
Affordable Energy, Inc. (local consumer advocate
group), which settled certain Grand Gulf 1 prudence
issues and certain litigation related to the resolution
adopted by the Council on February 4, 1988, disallowing
Entergy New Orleans' recovery of $135 million of
previously deferred Grand Gulf 1-related costs
1994 NOPSI
Settlement Settlement effective January 1, 1995, between Entergy
New Orleans and the Council in which Entergy New
Orleans agreed to implement a permanent reduction in
electric and gas rates and resolve disputes with the
Council in the interpretation of the 1991 NOPSI
Settlement
DEFINITIONS (Concluded)
Abbreviation or Acronym Term
NPL Superfund National Priorities List
NRC Nuclear Regulatory Commission
PES License Public Electricity Supply License in the UK
PRP Potentially Responsible Party (a person or entity that
may be responsible for remediation of environmental
contamination)
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935, as amended
PURPA Public Utility Regulatory Policies Act of 1978
Rate Cap The level of Entergy Gulf States' retail electric base
rates in effect at December 31, 1993, for the Louisiana
retail jurisdiction, and the level of such rates in
effect prior to the settlement agreement with the PUCT
on July 21, 1994, for the Texas retail jurisdiction,
which may not be exceeded before December 31, 1998
Reallocation
Agreement 1981 Agreement, superseded in part by a June 13, 1985
decision of FERC, among Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy relating to the sale of capacity and
energy from Grand Gulf
REC Regional Electricity Company - UK
Regulator Director General of Electricity Supply for the UK
Ritchie 2 Unit 2 of the R. E. Ritchie Steam Electric Generating
Station (gas/oil)
River Bend River Bend Steam Electric Generating Station (nuclear)
RUS Rural Utility Services (formerly the Rural
Electrification Administration or "REA")
SCC Saltend Cogeneration Company
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards,
promulgated by the Financial Accounting Standards Board
SMEPA South Mississippi Electric Power Agency
System Agreement Agreement, effective January 1, 1983, as modified,
among the domestic utility companies relating to the
sharing of generating capacity and other power
resources
System Energy System Energy Resources, Inc.
System Fuels System Fuels, Inc.
UK The United Kingdom of Great Britain and Northern
Ireland
Unit Power Sales
Agreement Agreement, dated as of June 10, 1982, as amended and
approved by FERC, among Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy, relating to the sale of capacity and
energy from System Energy's share of Grand Gulf 1
Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam Electric
Generating Station, owned 90.7% by Entergy Louisiana.
The remaining 9.3% undivided interest is leased by
Entergy Louisiana.
White Bluff White Bluff Steam Electric Generating Station 57% owned
by Entergy Arkansas
PART I
Item 1. Business
BUSINESS OF ENTERGY
General
Entergy Corporation is a Delaware corporation which, through its
direct and indirect subsidiaries, engages in the domestic and foreign
electric utility business, other domestic and foreign energy-related
enterprises, and telecommunications-based businesses. It has no
significant assets other than the stock of its subsidiaries. Entergy
Corporation is registered as a public utility holding company under PUHCA.
As such, Entergy Corporation and its various direct and indirect
subsidiaries (with the exception of its EWG, FUCO, and ETC subsidiaries)
are subject to the broad regulatory provisions of PUHCA. PUHCA
historically limited the operations of registered holding companies to a
single, integrated public utility system and functionally related
activities. However, more recently, PUHCA has been amended or interpreted
to permit limited entry by registered public utility holding companies into
domestic and foreign electric generation ventures, foreign utility
ownership, telecommunications and information service businesses, and other
domestic energy related businesses.
Domestic Operations and Investments
Entergy Corporation has five wholly-owned domestic retail electric
utility subsidiaries: Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans. As of December
31, 1997, these utility companies provided retail electric service to
approximately 2.5 million customers primarily in portions of the states of
Arkansas, Louisiana, Mississippi, and Texas. In addition, Entergy Gulf
States furnishes natural gas utility service in and around Baton Rouge,
Louisiana, and Entergy New Orleans furnishes natural gas utility service in
New Orleans, Louisiana. The business of the domestic utility companies is
subject to seasonal fluctuations, with the peak sales period occurring
during the third quarter of each year. During 1997, the domestic utility
companies' combined retail electric sales as a percentage of total electric
sales were: residential - 26.5%; commercial - 20.3%; and industrial -
41.8%. Retail electric revenues from these sectors as a percentage of
total electric revenues were: residential - 35.1%; commercial - 24.4%; and
industrial - 31.2%. Sales to governmental and municipal sectors and to
nonaffiliated utilities accounted for the balance of energy sales. The
major industrial customers of the domestic utility companies are in the
chemical processing, petroleum refining, paper products, and food products
industries. The retail rates and services of Entergy's domestic retail
utility subsidiaries are regulated by state and/or local regulatory
authorities.
Entergy Corporation owns all of the common stock of Entergy Power, a
Delaware corporation and domestic power producer that owns 725 MW of fossil-
fueled generating assets located in Arkansas. Entergy Power markets
electric capacity and energy in the wholesale market. Entergy Corporation
also owns 100% of the voting stock of System Energy, an Arkansas
corporation that owns and leases an aggregate 90% undivided interest in
Grand Gulf. System Energy sells the capacity and energy from its interest
in Grand Gulf 1 at wholesale to its only customers, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (see
"CAPITAL REQUIREMENTS AND FUTURE FINANCING - Certain System Financial and
Support Agreements - Unit Power Sales Agreement," below). Both Entergy
Power's and System Energy's wholesale power sales are subject to the
jurisdiction of FERC.
Entergy Services, Inc., a Delaware corporation wholly-owned by Entergy
Corporation, provides general executive, advisory, administrative,
accounting, legal, engineering, and other services primarily to the
domestic utility subsidiaries of Entergy Corporation, but also to Entergy
Enterprises. Entergy Operations, a Delaware corporation, is also wholly-
owned by Entergy Corporation and provides nuclear management, operations
and maintenance services under contract for ANO, River Bend, Waterford 3,
and Grand Gulf 1, subject to the owner oversight of Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and System Energy, respectively.
Entergy Services and Entergy Operations provide their services to the
domestic utility companies, on an "at cost" basis, pursuant to service
agreements approved by the SEC under PUHCA.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans own 35%, 33%, 19%, and 13%, respectively, of the common stock
of System Fuels, a Louisiana corporation that implements and manages
certain programs to procure, deliver, and store fuel supplies for those
companies.
Entergy Gulf States has wholly-owned subsidiaries that (i) operate
intrastate gas pipelines in Louisiana used primarily to transport fuel to
two of Entergy Gulf States' generating stations; (ii) own the Lewis Creek
Station, a gas-fired generating plant, which is leased to and operated by
Entergy Gulf States; and (iii) own several miles of railroad track
constructed in Louisiana primarily for the purpose of transporting coal for
use as boiler fuel at Entergy Gulf States' Nelson Unit 6 generating
facility.
Entergy Enterprises, a wholly-owned nonutility subsidiary of Entergy
Corporation incorporated under Louisiana law, invests in and develops
energy-related projects and businesses. Entergy Enterprises, directly or
through subsidiaries, markets energy-related expertise, products, and
services to third parties and provides a variety of services to certain
nonutility companies owned by Entergy. Services provided to third-parties
include (i) energy management; (ii) management, operations and maintenance
services for fossil and nuclear generating plants; and (iii) energy
efficient lighting, heating, and cooling systems.
EPMC, a Delaware corporation, is a wholly-owned subsidiary of Entergy
Corporation that is in the business of marketing electricity, gas, other
generating fuels, and financial instruments to third parties. It has
received authority from the SEC to deal in a wide range of energy
commodities and related financial products.
ETHC, a wholly-owned subsidiary of Entergy Corporation, engages in a
variety of telecommunications and information based enterprises that are
exempt from regulation under PUHCA. ETHC has acquired security monitoring
firms operating primarily in North and South Carolina, Alabama, Florida,
Georgia, Mississippi, Louisiana, and Texas. ETHC participates with
Hyperion Telecommunications in a joint venture that operates three
Competitive Local Exchange Carriers (CLECs) in Little Rock, Arkansas;
Jackson, Mississippi; and Baton Rouge, Louisiana. These CLECs provide long
distance carrier access and local exchange services. ETHC also currently
operates 1,500 miles of fiber optic cable in Arkansas, Louisiana,
Mississippi, and Texas that provide long haul telecommunications to
wholesale telecommunication carriers. ETHC has made a limited investment
in a personal communication services company which will be located in the
southeastern United States.
Foreign Operations and Investments
Since 1993, Entergy Corporation has directly or indirectly acquired
interests in a number of foreign utility businesses. Entergy Corporation
owns indirectly all of the outstanding shares of Entergy London which was
incorporated as a public limited company under the laws of England and
Wales in October 1996. Entergy Corporation, through Entergy London, gained
effective control of London Electricity in February 1997. London
Electricity is Entergy London's sole asset. London Electricity is a
regional electric company that is principally engaged in the distribution
and supply of electricity to approximately 2 million customers in and
around London, England. London Electricity's retail service area currently
covers approximately 257 square miles in the central portion of
metropolitan London and includes commercial, residential, and industrial
customers. London Electricity also engages in other business activities,
including ownership of an interest in a 1,000 MW gas-fired combined cycle
generating station and several private electric distribution systems.
Entergy Corporation's indirect wholly-owned Australian subsidiary,
CitiPower, was acquired in 1996. CitiPower is principally engaged in the
electric distribution business in Melbourne, Australia, where it serves
approximately 242,000 customers. Entergy Corporation also indirectly owns
a 5% interest in Edesur, S.A., which is the retail electric distribution
company for about 1.9 million customers in the southern part of Buenos
Aires, Argentina.
EPDC, a wholly-owned subsidiary of Entergy Corporation, owns an
interest in the following foreign electric generation assets:
Investment Percent Ownership Status
Argentina - Costanera, 1,260 MW 6% operational
Argentina - Costanera expansion, 220 MW 10% operational
Chile - San Isidro, 370 MW 25% under construction
Pakistan - Hub River, 1,292 MW 5% operational
Peru - Edegel - 793 MW 21% operational
United Kingdom - Saltend, 1,200 MW 100% under construction
United Kingdom - Damhead Creek, 770 MW 100% in development
In addition, Entergy Corporation, through another wholly-owned
subsidiary, owns 92% of Nantong Entergy Heat & Power, which has a 24MW
facility under construction.
As of December 31, 1997, Entergy Corporation had a net investment of
$1.3 billion in equity capital in businesses other than the domestic
utility businesses. Entergy Corporation continues to seek opportunities to
expand its domestic and foreign businesses that are not regulated by
domestic state and local utility regulatory authorities. Entergy
Corporation's continued acquisition of and investments in certain foreign
and domestic businesses is subject to regulation (including the effect of
exemptive provisions) under PUHCA. Rule 53 under PUHCA limits the
aggregate investment by a registered public utility holding company in EWGs
and FUCOs without SEC approval to 50% of the holding company's consolidated
retained earnings averaged over a running four quarter period. Entergy's
aggregate investment in EWGs and FUCOs is such that no further EWG or FUCO
investments can be made with funds provided from securities issued by
Entergy unless SEC approval is obtained or Entergy's consolidated retained
earnings increase.
International operations are subject to the risks inherent in
conducting business abroad, including possible nationalization or
expropriation, price and currency exchange controls, limitations on foreign
participation in local energy-related enterprises, and other restrictions.
Changes in the relative value of currencies occur from time to time, and
may favorably or unfavorably affect the results of operations and
statements of cash flows of Entergy's non-U.S. businesses. In addition,
there are exchange control restrictions in certain countries relating to
the repatriation of earnings.
Selected Data
Selected customer and sales data for 1997 are summarized in the
following tables:
Customers as of
December 31, 1997
Area Served Electric Gas
(In thousands)
Entergy Arkansas Portions of Arkansas and Tennessee 620 -
Entergy Gulf States Portions of Texas and Louisiana 641 88
Entergy Louisiana Portions of Louisiana 623 -
Entergy Mississippi Portions of Mississippi 382 -
Entergy New Orleans City of New Orleans, except Algiers, which
is provided electric service by Entergy Louisiana 189 151
----- ---
Total domestic 2,455 239
customers
CitiPower Melbourne, Australia and surrounding suburbs 242 -
London Electricity Primarily the majority of metropolitan
London, England 1,995 -
----- ---
Total customers 4,692 239
===== ===
1997 - Selected Electric Energy Sales Data
Entergy Entergy Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Mississippi New Orleans Energy Total (a)
DOMESTIC (GWH)
Electric Department:
Sales to retail
customers 17,319 33,272 29,582 11,418 5,521 - 97,113
Sales for resale:
- Affiliates 9,557 414 104 1,918 316 9,735 -
- Others 6,828 1,503 805 412 160 - 9,707
------------------------------------------------------------------------------
Total 33,704 35,189 30,491 13,748 5,997 9,735 106,820
Steam Department:
- Sales to steam
products customer - 1,626 - - - - 1,626
------------------------------------------------------------------------------
TOTAL 33,704 36,815 30,491 13,748 5,997 9,735 108,446
==============================================================================
Average use per
residential customer
(KWH) 11,313 14,615 14,311 13,314 11,618 - 13,279
==============================================================================
(a) Includes the effect of intercompany eliminations.
FOREIGN
In 1997, Entergy London had 19,546 GWH of sales to its distribution
customers and 18,023 GWH of sales to its supply customers.
1997 - Selected Natural Gas Sales Data
Entergy New Orleans and Entergy Gulf States sold 16,754,253 and
6,944,026 MCF, respectively, of natural gas to retail customers in 1997.
Revenues from natural gas operations for each of the three years in the
period ended December 31, 1997, were not material for Entergy Gulf States.
See "INDUSTRY SEGMENTS" below for a description of Entergy New Orleans'
business segments.
See "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED FINANCIAL DATA -
FIVE-YEAR COMPARISON," and "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
OF ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY
MISSISSIPPI, ENTERGY NEW ORLEANS, SYSTEM ENERGY, and ENTERGY LONDON" which
follow each company's financial statements in this report, for further
information with respect to operating statistics.
Employees
As of January 31, 1998, Entergy had 17,288 employees as follows:
Full-time:
Entergy Corporation -
Entergy Arkansas 1,416
Entergy Gulf States 1,456
Entergy Louisiana 721
Entergy Mississippi 700
Entergy New Orleans 301
System Energy -
Entergy London 3,759
Entergy Operations 3,662
Entergy Services 3,131
Other subsidiaries 1,962
------
Total Full-time 17,108
Part-time 180
------
Total Entergy 17,288
======
Competition
Refer to Note 2 herein for a detailed discussion of competitive
challenges Entergy faces in the utility industry, including the filings of
the domestic utility companies with their respective state and local
regulatory authorities addressing transition to competition.
CAPITAL REQUIREMENTS AND FUTURE FINANCING
Construction expenditures for the domestic utility companies, System
Energy, and Entergy London, including environmental expenditures (which are
immaterial) and AFUDC, but excluding nuclear fuel, for the period 1998-2000
are estimated as follows:
1998 1999 2000 Total
(In Millions)
Entergy Arkansas $201 $156 $204 $561
Entergy Gulf States 150 145 147 442
Entergy Louisiana 107 90 86 283
Entergy Mississippi 70 48 49 167
Entergy New Orleans 21 16 15 52
System Energy 24 26 21 71
Entergy London 161 163 158 482
With the exception of Entergy Arkansas, no significant construction
costs are expected in connection with the domestic utility companies'
generating facilities. Projected construction expenditures for the
replacement of ANO 2's steam generators are included in Entergy Arkansas'
estimated figures above. See Note 9 for additional information. Actual
construction costs may vary from these estimates for a number of reasons,
including changes in load growth estimates, changes in environmental
regulations, modifications to nuclear units to meet regulatory
requirements, increasing costs of labor, equipment and materials, and cost
of capital. In addition to construction expenditure requirements, Entergy
must meet scheduled long-term debt and preferred stock maturities and cash
sinking fund requirements. See Notes 4, 5, 6, and 7 for further capital
requirements and financing information.
London Electricity's capital expenditures are primarily related to its
distribution business and include expenditures for load-related, non-load-
related and non-operational capital assets. Load-related capital
expenditures are largely required by new business growth. Customer
contributions are normally received when capital expenditures are made to
extend or upgrade service to customers (except to the extent that such
capital expenditures are made to enhance London Electricity's distribution
network generally). Non-load-related capital expenditures include asset
replacement which is expected to continue until at least the next decade.
Other non-load-related expenditures include system upgrade work that
provides for load growth and has the additional benefit of improving
network security and reliability. Non-operational capital expenditures are
for assets such as fixtures and equipment. London Electricity is required
to file five-year projections with the Regulator for capital expenditures
related to its regulated distribution network and annual updates of such
projections. The most recent projection was for the five-year period ended
March 31, 2000, and was filed in July 1997. This filing reflected London
Electricity's current projection of approximately $793 million
(approximately BPS482 million) for the five-year period, and expenditures
have thus far been substantially in accordance with the projection.
London Electricity is a member of the City of Greenwich Lewisham Rail
Link plc which will require expenditures of approximately $10 million
(approximately BPS6 million) in the next two years. London Electricity
maintains the distribution networks at Heathrow, Gatwick, and Stansted
airports for the British Airport Authority and expects to spend
approximately $59 million (approximately BPS36 million) on these networks
over the next six years.
In December 1997, SCC, a wholly-owned subsidiary of EPDC, entered into
a BPS646 million (approximately $1.07 billion) nonrecourse credit facility
with an international bank group for the construction of a 1,200 MW gas-
fired power plant in Hull, England. The power plant will sell power into
the UK power pool at prices established by the market. SCC entered into a
lump-sum contract with a major international contractor to build the power
plant. SCC has also entered into a series of contracts, including a long-
term ground lease for the site; a long-term gas supply agreement with take-
or-pay obligations, and a long-term steam and power supply agreement with
the industrial host. The total cost of this project currently is
estimated to be approximately $875 million and the project is expected
to be operational by January 2000.
In September 1997, EPDC acquired KPL for $67 million. KPL owns land
in Southeast England and certain rights to build a power station. The
acquisition of KPL was financed by borrowings under a BPS50 million ($82
million) credit facility with an international bank. In December 1997,
EPDC amended this credit facility and increased the amount of the revolver
to BPS100 million ($165 million). In early October 1997, EPDC announced
construction of a 770 MW combined cycle gas turbine merchant power plant
to be known as Damhead Creek on the KPL site. Construction is scheduled
to begin in late 1998, at an estimated cost of $625 million. The target
date for commercial operation is the second quarter of 2000. Financing
and other project requirements are currently in the final stages of
development.
Entergy Corporation's primary capital requirements are to invest
periodically in, or make loans to, its subsidiaries and to invest in new
enterprises. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
LIQUIDITY AND CAPITAL RESOURCES," and "BUSINESS OF ENTERGY" for additional
discussion of Entergy Corporation's current and future planned investments
in its subsidiaries and financial sources for such investments. The
principal sources of funds for Entergy Corporation are dividend
distributions from its subsidiaries, funds available under its bank credit
facilities, and funds received from its dividend reinvestment and stock
purchase plan. Certain events, such as the River Bend issues discussed in
Notes 2 and 9, could limit the amount of these distributions. Substantial
write-offs or charges resulting from adverse rulings in this matter could
adversely affect Entergy Gulf States' ability to pay dividends.
Certain System Financial and Support Agreements
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
The Unit Power Sales Agreement allocates capacity and energy from
System Energy's 90% ownership and leasehold interests in Grand Gulf 1 (and
the related costs) to Entergy Arkansas (36%), Entergy Louisiana (14%),
Entergy Mississippi (33%), and Entergy New Orleans (17%). Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans
make payments to System Energy for their respective entitlements of
capacity and energy on a full cost-of-service basis regardless of the
quantity of energy delivered, so long as Grand Gulf 1 remains in commercial
operation. Payments under the Unit Power Sales Agreement are System
Energy's only source of operating revenues. The financial condition of
System Energy depends upon the continued commercial operation of Grand Gulf
1 and the receipt of payments from Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans. Payments made by Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans
under the Unit Power Sales Agreement are generally recovered through rates.
In the case of Entergy Arkansas and Entergy Louisiana, payments are also
recovered through sales of electricity from their respective retained
shares of Grand Gulf 1. See Note 2 for further information regarding
retained shares.
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
The Availability Agreement among System Energy and Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans was entered
into in 1974 in connection with the financing by System Energy of Grand
Gulf. The Availability Agreement provided that System Energy would join in
the System Agreement on or before the date on which Grand Gulf 1 was placed
in commercial operation and would make available to Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans all
capacity and energy available from System Energy's share of Grand Gulf.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans also agreed severally to pay System Energy monthly for the
right to receive capacity and energy available from Grand Gulf in amounts
that (when added to any amounts received by System Energy under the Unit
Power Sales Agreement, or otherwise) would at least equal System Energy's
total operating expenses for Grand Gulf (including depreciation at a
specified rate) and interest charges. Under the Availability Agreement,
the sale of capacity and energy generated by Grand Gulf is governed by the
Unit Power Sales Agreement. The September 1989 write-off of System
Energy's investment in Grand Gulf 2, amounting to approximately $900
million, is being amortized for Availability Agreement purposes over 27
years rather than in the month the write-off was recognized on System
Energy's books. The allocation percentages under the Availability
Agreement are fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana
- - 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%.
The allocation percentages under the Availability Agreement remain in
effect and would govern payments made under such agreement in the event of
a shortfall of funds available to System Energy from other sources,
including payments by Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans to System Energy under the Unit Power
Sales Agreement.
System Energy has assigned its rights to payments and advances from
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans under the Availability Agreement as security for its first mortgage
bonds and reimbursement obligations to certain banks providing the letters
of credit in connection with the equity funding of the sale and leaseback
transactions described in Note 10 under "Sale and Leaseback Transactions -
Grand Gulf 1 Lease Obligations." In these assignments, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further
agreed that, in the event they were prohibited by governmental action from
making payments under the Availability Agreement (if, for example, FERC
reduced or disallowed such payments as constituting excessive rates), they
would then make subordinated advances to System Energy in the same amounts
and at the same times as the prohibited payments. System Energy would not
be allowed to repay these subordinated advances so long as it remained in
default under the related indebtedness or in other similar circumstances.
Each of the assignment agreements relating to the Availability
Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans shall make payments directly to System
Energy. However, if there is an event of default, Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans must make
those payments directly to the holders of indebtedness that are the
beneficiaries of such assignment agreements. The payments must be made pro
rata according to the amount of the respective obligations secured.
The obligations of Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans to make payments under the
Availability Agreement are subject to the receipt and continued
effectiveness of all necessary regulatory approvals. Sales of capacity and
energy under the Availability Agreement would require that the Availability
Agreement be submitted to FERC for approval with respect to the terms of
such sale. No such filing with FERC has been made because sales of
capacity and energy from Grand Gulf are being made pursuant to the Unit
Power Sales Agreement. Other aspects of the Availability Agreement,
including the obligations of Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans to make subordinated advances, are
subject to the PUHCA jurisdiction of the SEC, whose approval has been
obtained. If, for any reason, sales of capacity and energy are made in the
future pursuant to the Availability Agreement, the jurisdictional portions
of the Availability Agreement would be submitted to FERC for approval.
Since commercial operation of Grand Gulf 1 began, payments under the
Unit Power Sales Agreement to System Energy have exceeded the amounts
payable under the Availability Agreement, and no payments under the
Availability Agreement have ever been required. In the event such payments
were required, the ability of Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans to recover from their customers
amounts paid under the Availability Agreement, or under the assignments
thereof, would depend upon the outcome of rate proceedings before state and
local regulatory authorities. In view of the controversies that arose over
the allocation of capacity and energy from Grand Gulf 1 pursuant to the
Unit Power Sales Agreement, opposition to full recovery would be likely and
the outcome of such proceedings, should they occur, is not predictable.
The Availability Agreement may be terminated, amended, or modified by
mutual agreement of the parties thereto, upon obtaining the consent, if
required, of those holders of System Energy's indebtedness then outstanding
who are the beneficiaries of the assignments of the Availability Agreement.
Capital Funds Agreement (Entergy Corporation and System Energy)
System Energy and Entergy Corporation have entered into the Capital
Funds Agreement whereby Entergy Corporation has agreed to supply System
Energy with sufficient capital to (i) maintain System Energy's equity
capital at an amount equal to a minimum of 35% of its total capitalization
(excluding short-term debt) and (ii) permit the continued commercial
operation of Grand Gulf 1 and pay in full all indebtedness for borrowed
money of System Energy when due.
Entergy Corporation has entered into various supplements to the
Capital Funds Agreement, and System Energy has assigned its rights under
such supplements as security for its first mortgage bonds and for
reimbursement obligations to certain banks providing letters of credit in
connection with the equity funding of the sale and leaseback transactions
described in Note 10 under "Sale and Leaseback Transactions - Grand Gulf 1
Lease Obligations." Each such supplement provides that permitted
indebtedness for borrowed money incurred by System Energy in connection
with the financing of Grand Gulf may be secured by System Energy's rights
under the Capital Funds Agreement on a pro rata basis (except for the
Specific Payments, as defined below). In addition, in the supplements to
the Capital Funds Agreement relating to the specific indebtedness being
secured, Entergy Corporation has agreed to make cash capital contributions
directly to System Energy sufficient to enable System Energy to make
payments when due on such indebtedness (Specific Payments). However, if
there is an event of default, Entergy Corporation must make those payments
directly to the holders of indebtedness benefiting from the supplemental
agreements. The payments (other than the Specific Payments) must be made
pro rata according to the amount of the respective obligations benefiting
from the supplemental agreements.
The Capital Funds Agreement may be terminated, amended, or modified by
mutual agreement of the parties thereto, upon obtaining the consent, if
required, of those holders of System Energy's indebtedness then outstanding
who have received the assignments of the Capital Funds Agreement.
RATE MATTERS AND REGULATION
Rate Matters
The domestic utility companies' retail rates are regulated by state
and/or local regulatory authorities, as described below. FERC regulates
their wholesale rates (including intrasystem sales pursuant to the System
Agreement) and interstate transmission of electricity, as well as rates for
System Energy's sales of capacity and energy from Grand Gulf 1 to Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans
pursuant to the Unit Power Sales Agreement.
Wholesale Rate Matters
System Energy
As described above under "CAPITAL REQUIREMENTS AND FUTURE FINANCING -
Certain System Financial and Support Agreements," System Energy recovers
costs related to its interest in Grand Gulf 1 through rates charged to
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans for capacity and energy under the Unit Power Sales Agreement.
On December 12, 1995, System Energy implemented a $65.5 million rate
increase, subject to refund. Refer to Note 2 for a discussion of the rate
increase request filed by System Energy with FERC.
System Agreement (Energy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
The domestic utility companies engage in the coordinated planning,
construction, and operation of generation and transmission facilities
pursuant to the terms of the System Agreement as described under "PROPERTY
- - Generating Stations," below.
In connection with the Merger, FERC approved certain rate schedule
changes to integrate Entergy Gulf States into the System Agreement.
Certain commitments were also adopted to assure that the ratepayers of
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans will not be allocated higher costs. Such commitments included:
(i) a tracking mechanism to protect these companies from certain unexpected
increases in fuel costs; (ii) the exclusion of Entergy Gulf States from the
distribution of profits from power sales contracts entered into prior to
the Merger; (iii) a methodology to estimate the cost of capital in future
FERC proceedings; and (iv) a stipulation that these companies be insulated
from certain direct effects on capacity equalization payments if Entergy
Gulf States were to acquire Cajun's 30% share in River Bend, which it
acquired on December 23, 1997. See "Regulation - Other Regulation and
Litigation" for information on appeals of FERC Merger orders and related
pending rate schedule changes and "Cajun-River Bend Litigation" in Note 9
herein for a discussion of the transfer of Cajun's 30% share in River Bend
to Entergy Gulf States.
In approving the Merger, FERC also initiated a new proceeding to
consider whether the System Agreement permits certain out-of-service
generating units to be included in reserve equalization calculations under
Service Schedule MSS-1 of that agreement. The LPSC and the MPSC submitted
testimony in this proceeding seeking retroactive refunds for Entergy
Louisiana and Entergy Mississippi (estimated at $22.6 million and $13.2
million, respectively). The FERC staff subsequently submitted testimony
concluding that Entergy's treatment was reasonable. However, because it
concluded that Entergy's treatment violated the tariff, the FERC staff
maintained that refunds of approximately $7.2 million should be ordered.
On March 3, 1995, a FERC ALJ issued an opinion holding that the practice of
including the out-of-service units in the reserve equalization calculations
during the period 1987 through 1993 was not permitted by Service Schedule
MSS-1 and, therefore, constituted a violation of the System Agreement.
However, the ALJ found that the violation was in good faith and had
benefited the customers of Entergy as a whole. Accordingly, the ALJ
recommended that no retroactive refunds should be ordered. The ALJ also
held that the System Agreement should be amended to allow out-of-service
units to be included in reserve equalization as proposed in an offer of
settlement filed by Entergy on February 16, 1994. On August 5, 1997, the
FERC issued an Opinion and Order affirming the initial decision of the ALJ.
On September 3, 1997, the LPSC and the MPSC filed a request for rehearing
of FERC's August 5, 1997 decision. On February 3, 1998, FERC denied the
request for rehearing.
On March 14, 1995, the LPSC filed a complaint with FERC alleging that
the System Agreement results in unjust and unreasonable rates and requested
FERC to modify the System Agreement to exclude curtailable load from the
cost allocation determination and to permit Entergy's domestic utility
companies that engage in real-time pricing at the retail level to be
assessed only the marginal cost for energy sold among the domestic utility
companies. In May 1995, the LPSC amended its original complaint to request
an additional System Agreement modification to allocate costs on the basis
of a four-month coincident peak methodology. On August 5, 1996, FERC
dismissed the LPSC's complaint and amended complaint, finding the LPSC's
claim that the System Agreement is unjust and unreasonable to be without
merit. The FERC confirmed this finding in a September 12, 1997 order
denying the LPSC's request for rehearing. The LPSC has appealed FERC's
dismissal of its complaint to the D. C. Circuit.
Open Access Transmission (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
On August 2, 1991, Entergy Services, as agent for Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy
Power, submitted to FERC (i) proposed tariffs that, subject to certain
conditions, would provide to electric utilities "open access" to Entergy's
integrated transmission system, and (ii) rate schedules providing for sales
of wholesale power at market-based rates. FERC approved the filing in
August 1992, and various parties filed appeals with the D.C. Circuit. The
case was remanded to FERC in July 1994 for further proceedings. On October
31, 1994, Entergy Services, as agent for Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans,
filed revised transmission tariffs. On January 6, 1995, FERC made the
transmission tariffs effective, subject to refund, and ordered an
investigation of Entergy Power's market pricing authority, thereby making
Entergy Power's market price rate schedules subject to refund. An order in
the market price rate investigation is expected in 1998, but Entergy
expects that no refunds will be required.
On March 29, 1995, FERC issued a supplemental notice of proposed
rulemaking (Mega-NOPR) which would require public utilities to provide non-
discriminatory open access transmission service to wholesale customers and
which would also provide guidance on the recovery of wholesale and retail
stranded costs. Under the proposal, public utilities would be required to
file transmission tariffs for both point-to-point and network service.
Model transmission tariffs were included in the proposal. In September
1995 and January 1996, Entergy Services filed offers of partial settlement
accepting certain provisions of the transmission tariffs contained in the
Mega-NOPR and resolving certain rate issues. Hearings relating to Entergy
Services' open access tariffs concluded on February 22, 1996, and an
initial decision was issued by the ALJ on May 21, 1996. The initial
decision and offers of partial settlement are now pending before FERC
awaiting a final decision.
In August 1995, EPMC filed an application for permission to make
market-based sales. On December 13, 1995, Entergy Services filed revised
transmission tariffs in a separate proceeding proposing terms and
conditions for open access transmission service that are substantially
identical to the terms and conditions contained in the Mega-NOPR
transmission tariffs with rates to be the same as those determined in the
pending proceeding. On February 14, 1996, FERC accepted for filing the
revised transmission tariffs subject to the outcome of the pending
proceeding and conditionally accepted EPMC's application for market-based
sales. Subsequently, FERC accepted EPMC's application without condition.
In April 1996 FERC issued its final rule (Order No. 888) on open
access, nondiscriminatory transmission, and stranded costs, and a companion
final rule (Order No. 889) relating to codes of conduct and the mechanism
by which the open access transactions were to be made. In July 1996, in
response to this FERC order, Entergy Services filed, on behalf of the
domestic utility companies, its open access pro forma tariff. This tariff,
which supersedes the tariffs previously filed, is currently pending before
FERC with respect to the rates for transmission service. The rates set
forth in the July 1996 tariff are subject to the outcome of FERC action on
the May 21, 1996 initial decision and the offers of partial settlement. On
January 29, 1997, FERC accepted the non-rate terms and conditions of the
July 1996 tariff, subject to limited modifications.
In a March 1997 order (Order No. 888-A), FERC directed public
utilities to file revised tariffs to reflect changes resulting from
rehearing of Order No. 888. On July 14, 1997, Entergy Services filed with
the FERC its wholesale transmission access compliance tariff incorporating
the requirements of FERC Order No. 888-A. The filing supersedes the July
1996 tariff and the rates remain subject to the outcome of FERC action on
the May 21, 1996 initial decision and the offers of partial settlement.
Retail Rate Matters
General (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
Certain costs related to Grand Gulf 1, Waterford 3, and River Bend
were phased into retail rates over a period of years in order to avoid the
"rate shock" associated with increasing rates to reflect all such costs at
once. The deferral period in which costs are incurred but not currently
recovered has expired for all of these programs, and Entergy Arkansas,
Entergy Gulf States, Entergy Mississippi, and Entergy New Orleans are now
recovering those costs that were previously deferred. Entergy Louisiana
has fully recovered the deferred Waterford 3 costs. Entergy Gulf States
has pending several rate proceedings and some rate relief has been
received. Rate proceedings and appeals relating to these issues are
discussed in "Entergy Gulf States" below.
The retail regulatory philosophy is shifting in some jurisdictions
from traditional cost-of-service regulation to incentive-rate regulation.
Management believes incentive and performance-based rate plans encourage
efficiencies and productivity while permitting utilities and their
customers to share in the resulting benefits. As a means of minimizing the
need for retail rate increases, Entergy is committed to containing costs to
the greatest degree practicable. Entergy Mississippi and Entergy Louisiana
have implemented incentive rate plans. Recognizing that many industrial
customers have energy alternatives, Entergy continues to work with these
customers to address their needs. In certain cases, competitive prices are
negotiated using variable-rate designs.
The domestic utility companies have initiated proceedings with state
and local regulators regarding an orderly transition to a more competitive
market for electricity. See "MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," for a discussion of the
transition to competition filings made by Entergy Mississippi, Entergy Gulf
States, Entergy Louisiana, Entergy New Orleans and Entergy Arkansas with
their state and local regulators.
Entergy Arkansas
Rate Freeze
In connection with the settlement of various issues related to the
Merger, Entergy Arkansas agreed that it would not, except in response to
certain circumstances that are largely out of its control, request any
general retail rate increase to take effect before November 3, 1998. See
Note 2 for a discussion of the rate freeze as well as other aspects of the
settlement agreement between Entergy Arkansas and the APSC.
Recovery of Grand Gulf 1 Costs
Under the settlement agreement entered into with the APSC in 1985 and
amended in 1988, Entergy Arkansas agreed to forego recovery of a portion of
its Grand Gulf l-related costs, recover a portion of such costs currently,
and defer a portion of such costs for future recovery. In the future,
Entergy Arkansas will recover 78% of its allocated share of Grand Gulf 1
costs, but will not recover the remaining 22%. Deferrals ceased in l990,
and Entergy Arkansas is recovering a portion of the previously deferred
costs each year through l998. As of December 31, l997, the balance of
deferred costs was $75 million. Entergy Arkansas is permitted to recover
on a current basis the incremental costs of financing the unrecovered
deferrals.
Entergy Arkansas has the right to sell capacity and energy from its
retained share of Grand Gulf 1 to third parties and to sell such energy to
its retail customers at a price equal to Entergy Arkansas' avoided energy
cost. Proceeds of sales to third parties of Entergy Arkansas' retained
share of Grand Gulf l capacity and energy accrue to the benefit of Entergy
Corporation, as Entergy Arkansas' sole stockholder.
Fuel Adjustment Clause
In its October 1996 rate filing, Entergy Arkansas proposed an
alternative fuel adjustment clause, the Energy Cost Recovery Rider Energy
Cost Rate (ECR Rider ), which was approved by the APSC. Entergy Arkansas'
ECR Rider utilizes projected energy costs (i.e., fuel and purchased power
costs) for the coming calendar year to develop an Energy Cost Rate. The
Energy Cost Rate is revised annually and includes a true-up adjustment
reflecting the over-recovery or under-recovery of the energy cost for the
prior year. Under the ECR Rider, the nuclear refueling reserve fund
provision, which was no longer necessary due to the annual revision, was
eliminated. In addition, the nuclear incentive provision associated with
ANO was eliminated.
Entergy Gulf States
Rate Cap and Other Merger-Related Rate Agreements
In 1993, the LPSC and the PUCT approved separate regulatory proposals,
which included the implementation of a five-year Rate Cap on Entergy Gulf
States' retail electric base rates in the respective states, and provisions
for fuel and nonfuel savings created by the Merger to accrue to the benefit
of ratepayers. See Note 2 for a discussion of the Rate Cap as well as
other aspects of the settlement agreement between Entergy Gulf States and
the LPSC and the PUCT.
Recovery of River Bend Costs
Entergy Gulf States deferred approximately $369 million of River Bend
operating and purchased power costs, depreciation, and accrued carrying
charges, pursuant to a 1986 PUCT accounting order. Approximately $182
million of these costs are being amortized over a 20-year period, and the
remaining $187 million was written off in the first quarter of 1996 in
accordance with SFAS 121. Also, in accordance with a phase-in plan
approved by the LPSC, Entergy Gulf States deferred $294 million of its
River Bend costs related to the period February 1988 through February 1991.
See "River Bend Cost Deferrals" in Note 2 herein for a discussion of the
unamortized balances of these deferrals as of December 31, 1997.
Texas Jurisdiction - River Bend
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). As a result of the application of the company's long-lived
asset impairment policy, Entergy Gulf States wrote off Abeyed Deferrals
of $169 million, net of tax, effective January 1, 1996.
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.
On January 14, 1998, the commissioners of the PUCT voted by a 2 to
1 majority to disallow recovery of $1.4 billion of company-wide abeyed
plant costs. The Texas share of these costs, which is not currently in
rates, is approximately $624 million, based on 1988 costs and the
jurisdictional allocation included in current rates. The PUCT is
expected to enter an order pursuant to its vote, but has not yet done
so. As of December 31, 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 $252 million, respectively. See Note 2 for information
related to additional rulings by the PUCT and other retail rate
proceedings as well as the proposed agreement in principle between the
parties to the Entergy Gulf States rate proceedings in Texas.
NISCO Unrecovered Costs
In 1986, the PUCT ordered that the purchased power costs from NISCO in
excess of Entergy Gulf States' avoided costs be disallowed. The PUCT
disallowance resulted in approximately $12 million to $15 million of
unrecovered purchased power costs on an annual basis, which Entergy Gulf
States continued to expense as the costs were incurred. In April 1991, the
Texas Supreme Court, on the appeal of such order, ordered the PUCT to allow
Entergy Gulf States to recover purchased power payments in excess of its
avoided cost in future proceedings if Entergy Gulf States established to
the PUCT's satisfaction that the payments were reasonable and necessary
expenses.
In January 1992, Entergy Gulf States applied to the PUCT for a new
fixed fuel factor and requested a final reconciliation of fuel and
purchased power costs incurred between December 1, 1986 and September 30,
1991. Entergy Gulf States proposed to recover net under-recoveries and
interest (including under-recoveries related to NISCO) over a twelve-month
period. In June 1993, the PUCT concluded that the purchased power payments
made to NISCO in excess of Entergy Gulf States' avoided cost were not
reasonably incurred. In October 1993, Entergy Gulf States appealed the
PUCT's order to the Travis County District Court where the matter is still
pending. As of December 31, 1997, Entergy Gulf States had expensed $182
million of unrecovered purchased power costs and deferred revenue pending
the appeal to the District Court. No assurance can be given as to the
timing or outcome of the appeal.
Retail Rate Proceedings
In addition to the January 14, 1998 ruling discussed above in "Texas
Jurisdiction - River Bend," the PUCT upheld an ALJ's ruling disallowing
recovery of approximately $40 million of Entergy Services' affiliate costs
allocated to Entergy Gulf States in Texas. Entergy Services is responsible
for managing Entergy Gulf States' fossil generating plants and transmission
and distribution systems, as well as providing human resources, accounting,
and other necessary services to Entergy Gulf States and Entergy
Corporation's other electric utility subsidiaries. In another matter, the
PUCT also issued an order establishing service quality standards and rate
of return adjustments for Entergy Gulf States and its Texas retail service
territory. A portion of the adjustments will be retroactive and a portion
will be prospective. The PUCT will evaluate Entergy Gulf States' future
performance based on several criteria including feeder reliability, billing
error rates, customer call center performance, service installation
performance, line extension performance and street light replacements.
In March 1998, the parties to the Entergy Gulf States rate proceedings
in Texas reached an agreement in principle, subject to approval by the PUCT
and certain cities served by Entergy Gulf States, which would resolve all
of the pending rate issues. The proposed agreement in principle would
include a base rate reduction of $40 million on an annual basis, with a refund
retroactive to June 1, 1996; additionally it would provide for a
recovery of $25 million of deferred fuel costs; the base rates would remain
at the same level for the next four years after the reduction; a total
service quality credit of $9 million retroactive to June 1996; and the
recovery of a portion of the abeyed portion of River Bend such that at the
end of the four year rate freeze there will remain $125 million of net
plant related to that abeyed portion. Entergy Gulf States has established
reserves for the probable effects of this agreement in principle based on
management's estimates of the terms thereof. These reserves of
approximately $381 million (or $227 million net of taxes) were recorded in
the fourth quarter of 1997. The results of operations of Entergy Gulf
States for the year ended December 31, 1997, reflect corresponding charges
to operating revenues and other income (deductions) of $70 million and $311
million, respectively. The parties are working to finalize a definitive
agreement. Entergy Gulf States has agreed to implement the refunds and
rate reductions, subject to final approval of the agreement in principle.
Final approval of the agreement in principle would resolve all pending
regulatory issues. Refer to Note 2 for a discussion of other Entergy Gulf
States retail rate proceedings that were resolved during the past year
and/or are currently pending.
Fuel Recovery
Entergy Gulf States' Texas rate schedules include a fixed fuel factor
to recover fuel and purchased power costs not recovered in base rates. The
fixed factor may be revised every six months in accordance with a schedule
set by the PUCT. To the extent actual costs vary from the fixed factor,
refunds or surcharges are required or permitted. Fuel costs are also
subject to reconciliation proceedings every three years. Entergy Gulf
States' Louisiana electric rate schedules include a fuel adjustment clause
designed to recover the cost of fuel and purchased power costs, adjusted by
a surcharge (or credit) for deferred fuel expense arising from the monthly
reconciliation of actual fuel cost incurred with fuel revenues billed to
customers. See Note 2 for a discussion of the LPSC fuel cost reviews.
Entergy Gulf States' Louisiana gas rates include a purchased gas
adjustment to recover the cost of purchased gas.
Steam Customer Contract
In August 1996, Entergy Gulf States entered into agreements with its
only steam customer whereby a generating facility was leased to such
customer beginning in August 1997, the expiration date of the previous
contract. As a result of these arrangements, Entergy Gulf States' annual
revenues are expected to decrease by approximately $33 million, and its net
income is expected to be reduced by approximately $15 million annually.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS
AND KNOWN TRENDS," for a further discussion.
Entergy Louisiana
Recovery of Grand Gulf 1 Costs
In a series of LPSC orders, court decisions, and agreements from late
1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to
costs associated with Waterford 3 and Entergy Louisiana's share of capacity
and energy from Grand Gulf l, subject to certain terms and conditions.
With respect to Waterford 3, Entergy Louisiana was granted an increase
aggregating $170.9 million over the period 1985-1988, and Entergy Louisiana
agreed to permanently absorb, and not recover from retail ratepayers, $284
million of its investment in the unit and to defer $266 million of its
costs related to the years 1985-1988 to be recovered from April 1988
through June 1997.
With respect to Grand Gulf 1, Entergy Louisiana agreed to retain, and
not recover from retail ratepayers, approximately 2.52% of the costs of
Grand Gulf 1's capacity and energy. Non-fuel operation and maintenance
costs for Grand Gulf 1 are recovered through Entergy Louisiana's base
rates. Additionally, Entergy Louisiana is allowed to recover, through the
fuel adjustment clause, 4.6 cents per KWH for the energy related to its
retained portion of these costs. Alternatively, Entergy Louisiana may sell
such energy to nonaffiliated parties at prices above the fuel adjustment
clause recovery amount, subject to the LPSC's approval.
Performance-Based Formula Rate Plan
In June 1995, in conjunction with the LPSC's rate review, a
performance-based formula rate plan previously proposed by Entergy
Louisiana was approved with certain modifications. See Note 2 for a
discussion of Entergy Louisiana's performance-based formula rate plan.
Fuel Adjustment Clause
Entergy Louisiana's rate schedules include a fuel adjustment clause to
recover the cost of fuel and purchased power. The fuel adjustment also
includes a surcharge (or credit) for deferred fuel expense arising from the
monthly reconciliation of actual fuel cost incurred with fuel revenues
billed to customers.
Entergy Mississippi
Retail Rate Proceedings
Refer to Note 2 for a discussion of Entergy Mississippi's retail rate
proceedings that were resolved during the past year and/or are currently
pending.
Rate Freeze
In connection with the settlement of various issues related to the
Merger, Entergy Mississippi agreed that it will not, except in response to
certain circumstances that are largely beyond its control, request any
general retail rate increase to take effect before November 3, 1998. See
Note 2 for a discussion of the rate freeze and other aspects of the
settlement agreement between Entergy Mississippi and the MPSC.
Recovery of Grand Gulf 1 Costs
In September 1985, the MPSC granted Entergy Mississippi an annual base
rate increase of approximately $326.5 million in connection with its
allocated share of Grand Gulf 1 costs. The MPSC also provided for the
deferral of a portion of such costs that were incurred each year through
1992, and recovery of these deferrals over a period of six years ending in
1998. As of December 31, 1997, the uncollected balance of Entergy
Mississippi's deferred costs was approximately $127 million. Entergy
Mississippi is permitted to recover the carrying charges on all deferred
amounts on a current basis.
Formula Rate Plan
Under a formulary incentive-rate plan (Formula Rate Plan) effective
March 25, 1994, Entergy Mississippi's earned rate of return is calculated
automatically every 12 months and compared to and adjusted against a
benchmark rate of return (calculated under a separate formula within the
Formula Rate Plan). The Formula Rate Plan allows for periodic small
adjustments in rates based on a comparison of actual earned returns to
benchmark returns and upon certain performance factors. Refer to Note 2
for a discussion of the formula rate plan filing for the 1996 test year.
The formula rate plan filing for the 1997 test year will be filed in March
1998.
Fuel Adjustment Clause
In March 1997, Entergy Mississippi proposed an alternative fuel cost
recovery mechanism, the ECR Rider, which became effective May 1997.
Entergy Mississippi's ECR Rider utilizes projected energy costs (i.e., fuel
and purchased energy costs) for the coming calendar year to develop an
Energy Cost Rate. The Energy Cost Rate is revised annually and includes a
true-up adjustment reflecting the over-recovery or under-recovery of the
energy cost for the prior year.
Entergy New Orleans
Earnings Analysis Filings
Refer to Note 2 for a discussion of the Entergy New Orleans earnings
analysis filings that have been resolved during the past year and/or are
currently outstanding.
Recovery of Grand Gulf 1 Costs
Under Entergy New Orleans' various rate settlements with the Council
in 1986, 1988, and 1991, Entergy New Orleans agreed to absorb and not
recover from ratepayers a total of $96.2 million of its Grand Gulf 1 costs.
Entergy New Orleans was permitted to implement annual rate increases in
decreasing amounts each year through 1995, and to defer certain costs and
related carrying charges for recovery on a schedule extending from 1991
through 2001. As of December 31, 1997, the uncollected balance of Entergy
New Orleans' deferred costs was $99 million.
Fuel Adjustment Clause
Entergy New Orleans' electric rate schedules include a fuel adjustment
clause designed to recover the cost of fuel in the second prior month,
adjusted by a surcharge (or credit) for deferred fuel expense arising from
the monthly reconciliation of actual fuel incurred with fuel cost revenues
billed to customers. The adjustment also includes the difference between
nonfuel Grand Gulf 1 costs paid by Entergy New Orleans and the estimate of
such costs provided in Entergy New Orleans' Grand Gulf 1 rate settlements.
Entergy New Orleans' gas rate schedules include an adjustment to reflect
gas costs in excess of those collected in base rates, adjusted by a
surcharge (or credit) similar to that included in the electric fuel
adjustment clause.
Regulation
Federal Regulation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy)
PUHCA
Entergy Corporation and its various direct and indirect subsidiaries
(with the exception of its EWG, FUCO, and ETHC subsidiaries) are subject to
the broad regulatory provisions of PUHCA. Except with respect to
investments in certain domestic power projects, foreign utility company
projects, and telecommunication projects, PUHCA limits the operations of a
registered holding company system to a single, integrated public utility
system, plus certain additional systems and businesses, regulates certain
transactions among affiliates within a holding company system, and
regulates the acquisition and sale of securities and assets by registered
holding companies and their subsidiaries.
Entergy Corporation and other electric utility holding companies have
supported legislation in the United States Congress to repeal PUHCA and
transfer certain aspects of the oversight of public utility holding
companies from the SEC to FERC. Entergy believes that PUHCA inhibits its
ability to compete in the evolving electric energy marketplace and largely
duplicates the oversight activities already performed by FERC and state and
local regulators. In June 1995, the SEC adopted a report proposing options
for the repeal or significant modification of PUHCA. In 1997, the SEC
issued Rule 58 under PUHCA, which allows registered public utility holding
companies to enter a range of energy related businesses.
Federal Power Act
The domestic utility companies, System Energy, Entergy Power, and EPMC
are subject to the Federal Power Act as administered by FERC and the DOE.
The Federal Power Act provides for regulatory jurisdiction over the
licensing of certain hydroelectric projects, the transmission and wholesale
sale of electric energy in interstate commerce, and certain other
activities, including accounting policies and practices. Such regulation
includes jurisdiction over the rates charged by System Energy for capacity
and energy provided to Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans from Grand Gulf 1.
Entergy Arkansas holds a FERC license for two hydroelectric projects
(70 MW), which was renewed on July 2, 1980 and expires in February 2003.
Regulation of the Nuclear Power Industry (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
Regulation of Nuclear Power
Under the Atomic Energy Act of 1954 and the Energy Reorganization Act
of 1974, the operation of nuclear plants is heavily regulated by the NRC,
which has broad power to impose licensing and safety-related requirements.
In the event of non-compliance, the NRC has the authority to impose fines
or shut down a unit, or both, depending upon its assessment of the severity
of the situation, until compliance is achieved. Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, and System Energy, as owners of all or
portions of ANO, River Bend, Waterford 3, and Grand Gulf 1, respectively,
and Entergy Operations, as the licensee and operator of these units, are
subject to the jurisdiction of the NRC. Revised safety requirements
promulgated by the NRC have, in the past, necessitated substantial capital
expenditures at these nuclear plants, and additional such expenditures
could be required in the future. See "MANAGEMENT'S FINANCIAL DISCUSSION
AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," for a discussion of
Waterford 3's Systematic Assessment of License Performance (SALP) report
issued by the NRC on January 6,1997.
The nuclear power industry faces uncertainties with respect to the
cost and long-term availability of sites for disposal of spent nuclear fuel
and other radioactive waste, nuclear plant operations, the technological
and financial aspects of decommissioning plants at the end of their
licensed lives, and requirements relating to nuclear insurance. These
matters are briefly discussed below.
Regulation of Spent Fuel and Other High-Level Radioactive Waste
Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a
specified fee, to construct storage facilities for, and to dispose of, all
spent nuclear fuel and other high-level radioactive waste generated by
domestic nuclear power reactors. However, the DOE has not yet identified a
permanent storage repository and, as a result, future expenditures may be
required to increase spent fuel storage capacity at nuclear plant sites.
For further information concerning spent fuel disposal contracts with the
DOE, schedules for initial shipments of spent nuclear fuel, current on-site
storage capacity, and costs of providing additional on-site storage, see
Note 9.
Regulation of Low-Level Radioactive Waste
The availability and cost of disposal facilities for low-level
radioactive waste resulting from normal nuclear plant operations are
subject to a number of uncertainties. Under the Low-Level Radioactive
Waste Policy Act of 1980, as amended, each state is responsible for
disposal of waste originating in that state, and states may participate in
regional compacts to fulfill their responsibilities jointly. The States of
Arkansas and Louisiana participate in the Central Interstate Low Level
Radioactive Waste Compact (Central States Compact), and the State of
Mississippi participates in the Southeast Low Level Radioactive Waste
Compact (Southeast Compact). Two disposal sites are currently operating in
the United States, but only one site, the Barnwell Disposal Facility
(Barnwell) located in South Carolina and operated by the Southeast Compact,
is open to out-of-region generators. The availability of Barnwell provides
only temporary relief for low-level radioactive waste storage and does not
alleviate the need to develop new disposal capacity.
Both the Central States Compact and the Southeast Compact are working
to establish additional disposal sites. Entergy, along with other waste
generators, funds the development costs for new disposal facilities. To
date, Entergy's expenditures for the development of new disposal facilities
total approximately $50 million. During the fourth quarter of 1997,
Entergy Arkansas, Entergy Louisiana, and Entergy Gulf States expensed $17.4
million, $12.3 million, and $13.8 million, respectively, related to
previously deferred radioactive waste facility costs incurred in connection
with the Central States Compact. Future levels of expenditures are
difficult to predict. The current schedule for the site development in
both the Central States Compact and the Southeast Compact projects that the
new facilities will not be operational before 2001. Due to the political
nature of siting low-level radioactive waste disposal facilities, future
delays can be anticipated. Until long-term disposal facilities are
established, Entergy will seek continued access to existing facilities. If
such access is unavailable, Entergy will store low-level waste at its
nuclear plant sites.
Regulation of Nuclear Plant Decommissioning
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy are recovering from ratepayers portions of the estimated
decommissioning costs for ANO, River Bend, Waterford 3, and Grand Gulf 1,
respectively. These amounts are deposited in trust funds that, together
with the related earnings, can only be used for future decommissioning
costs. Estimated decommissioning costs are periodically reviewed and
updated to reflect inflation and changes in regulatory requirements and
technology, and applications are periodically made to appropriate
regulatory authorities to reflect in rates any future changes in projected
decommissioning costs. For additional information with respect to
decommissioning costs for ANO, River Bend, Waterford 3, and Grand Gulf 1,
see Note 9.
The EPAct requires all electric utilities (including Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, and System Energy) that purchased
uranium enrichment services from the DOE to contribute up to a total of
$150 million annually over approximately 15 years (adjusted for inflation,
up to a total of $2.25 billion) for decontamination and decommissioning of
enrichment facilities. In accordance with the EPAct, contributions to
decontamination and decommissioning funds are recovered through rates in
the same manner as other fuel costs. See Note 9 for the estimated annual
contributions by Entergy for decontamination and decommissioning fees.
Nuclear Insurance
The Price-Anderson Act limits public liability for a single nuclear
incident to approximately $8.92 billion. Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and System Energy have protection with respect
to this liability through a combination of private insurance and an
industry assessment program, as well as insurance for property damage,
costs of replacement power, and other risks relating to nuclear generating
units. For a discussion of insurance applicable to the nuclear programs of
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy, see Note 9.
Nuclear Operations
General (Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and System Energy)
Entergy Operations operates ANO, River Bend, Waterford 3, and Grand
Gulf 1, subject to the owner oversight of Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and System Energy, respectively. Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, System Energy, and the
Grand Gulf 1 co-owner, have retained their ownership interests in their
respective nuclear generating units. Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and System Energy have also retained their
associated capacity and energy entitlements, and pay directly or reimburse
Entergy Operations at cost for its operation of the units.
ANO Matters (Entergy Corporation and Entergy Arkansas)
See "ANO Matters" in Note 9 herein for a discussion of the replacement
of steam generators at ANO 2.
River Bend (Entergy Corporation and Entergy Gulf States)
In connection with the Merger, Entergy Gulf States filed two
applications with the NRC in January 1993 to amend the River Bend operating
license. The applications sought the NRC's consent to the Merger and to a
change in the licensed operator of the facility from Entergy Gulf States to
Entergy Operations. The NRC Staff issued the two license amendments for
River Bend, which were effective immediately upon consummation of the
Merger. On February 14, 1994, Cajun filed with the D.C. Circuit petitions
for review of the two license amendments for River Bend. In March 1995,
the D.C. Circuit ordered that the NRC order and license amendments be set
aside, and remanded the case to the NRC for further consideration.
Subsequently, the NRC affirmed its original findings and reissued the two
license amendments. Cajun and the Arkansas Cities and Cooperatives filed
petitions for review of those NRC orders with the D. C. Circuit. On May 8,
1997, the D.C. Circuit granted Cajun's motion to dismiss its appeal.
Arkansas Cities and Cooperatives' appeal has been briefed and remains
pending. The two license amendments are currently in full force and
effect.
State Regulation (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans)
General
Entergy Arkansas is subject to regulation by the APSC, which includes
the authority to set rates, determine reasonable and adequate service,
require proper accounting, control leasing, control the acquisition or sale
of any public utility plant or property constituting an operating unit or
system, set rates of depreciation, issue certificates of convenience and
necessity and certificates of environmental compatibility and public need,
and regulate the issuance and sale of certain securities.
Entergy Gulf States is subject to the jurisdiction of the municipal
authorities of incorporated cities in Texas as to retail rates and service
within their boundaries, with appellate jurisdiction over such matters
residing in the PUCT. Entergy Gulf States is also subject to regulation by
the PUCT as to retail rates and service in rural areas, certification of
new generating plants, and extensions of service into new areas. Entergy
Gulf States is subject to regulation by the LPSC as to electric and gas
service, rates and charges, certification of generating facilities and
power or capacity purchase contracts, depreciation, accounting, and other
matters.
Entergy Louisiana is subject to regulation by the LPSC as to electric
service, rates and charges, certification of generating facilities and
power or capacity purchase contracts, depreciation, accounting, and other
matters. Entergy Louisiana is also subject to the jurisdiction of the
Council with respect to such matters within Algiers.
Entergy Mississippi is subject to regulation as to service, service
areas, facilities, and retail rates by the MPSC. Entergy Mississippi is
also subject to regulation by the APSC as to the certificate of
environmental compatibility and public need for the Independence Station.
Entergy New Orleans is subject to regulation by the Council as to
electric and gas service, rates and charges, standards of service,
depreciation, accounting, issuance of certain securities, and other
matters.
Franchises
Entergy Arkansas holds exclusive franchises to provide electric
service in approximately 300 incorporated cities and towns in Arkansas.
These franchises are unlimited in duration and continue until such a time
when the municipalities purchase the utility property. In Arkansas,
franchises are considered to be contracts and, therefore, are terminable
upon breach of the contract.
Entergy Gulf States holds non-exclusive franchises, permits, or
certificates of convenience and necessity to provide electric and gas
service in approximately 55 incorporated municipalities in Louisiana and
approximately 63 incorporated municipalities in Texas. Entergy Gulf States
typically is granted 50-year franchises in Texas and 60-year franchises in
Louisiana. Entergy Gulf States' current electric franchises will expire
during 2007 - 2036 in Texas and during 2015 - 2046 in Louisiana. The
natural gas franchise in the City of Baton Rouge will expire in 2015. In
addition, Entergy Gulf States has received from the PUCT a certificate of
convenience and necessity to provide electric service to areas within 21
counties in eastern Texas.
Entergy Louisiana holds non-exclusive franchises to provide electric
service in approximately 116 incorporated municipalities. Most of these
franchises have 25-year terms, although six municipalities have granted
Entergy Louisiana 60-year franchises. Entergy Louisiana also supplies
electric service in approximately 353 unincorporated communities, all of
which are located in parishes in which Entergy Louisiana holds non-
exclusive franchises.
Entergy Mississippi has received from the MPSC certificates of public
convenience and necessity to provide electric service to areas within 45
counties, including a number of municipalities, in western Mississippi.
Under Mississippi statutory law, such certificates are exclusive. Entergy
Mississippi may continue to serve in such municipalities upon payment of a
statutory franchise fee, regardless of whether an original municipal
franchise is still in existence.
Entergy New Orleans provides electric and gas service in the City of
New Orleans pursuant to city ordinances, which state, among other things,
that the City has a continuing option to purchase Entergy New Orleans'
electric and gas utility properties.
The business of System Energy is limited to wholesale power sales and
has no distribution franchises.
Regulation under the Electricity Act (Entergy London)
The Regulator
The principal legislation governing the structure and regulation of
the electricity industry in Great Britain is the Electricity Act. The
Electricity Act established the industry structure to enable privatization
of the UK electric system. The Electricity Act also created the office of
the Regulator, who is appointed by the Secretary of State for Trade and
Industry. The present Regulator, Professor Stephen Littlechild, was
appointed for a five year term ending on August 31, 1999.
The Regulator's functions include, among other things, granting
licenses to generate, transmit, distribute or supply electricity; proposing
modifications to licenses and making license modification references to the
MMC; enforcing compliance with license conditions; advising the Secretary
of State for Trade and Industry relating to the approval of each non-fossil
fuel source; calculating the Fossil Fuel Levy rate and collecting the levy;
resolving certain disputes between electricity licensees and customers; and
setting standards of performance for electricity licensees.
The Regulator exercises concurrently with the Director General of Fair
Trading certain functions relating to monopoly situations under the Fair
Trading Act 1973 and certain functions relating to activities that have, or
are intended or likely to have, the effect of restricting, distorting or
preventing competition in the generation, transmission or supply of
electricity under the Competition Act 1980.
The Electricity Act requires the Regulator and the Secretary of State
to exercise their functions to ensure that all reasonable demands for
electricity are satisfied; to assure that license holders are able to
finance their licensed activities; and to promote competition in the
generation and supply of electricity. Subject to these duties, the
Secretary of State and the Regulator are required to exercise their
functions in a manner calculated to protect the interests of consumers of
electricity in respect of price, continuity of supply, and the quality of
electricity supply services; to promote efficiency and economy on the part
of licensed electricity suppliers and the efficient use of electricity
supplied to consumers; to promote research and development by persons
authorized to generate, transmit or supply electricity; to protect the
public from the dangers arising from the generation, transmission or supply
of electricity, and to act for the protection of the health and safety of
workers in the electricity industry. The Secretary of State and the
Regulator also have a duty to consider the environmental activities
connected with the generation, transmission, distribution or supply of
electricity. The Secretary of State and the Regulator have a duty to
consider, in particular, the interests of consumers in rural areas in
respect of prices and other terms of supply. With regard to the quality of
electricity supply services, they also have a duty to consider in
particular the interests of those who are disabled or of pensionable age.
PES License
London Electricity has a PES license for its franchise area and is
required to supply electricity upon request to any premises in that area,
except in specified circumstances. Like all PES license holders, it may
not discriminate between its own supply business and other users of its
distribution system. The PES license also prohibits cross-subsidization
among the various regulated businesses. PES license holders, including
London Electricity, are subject to separate price controls on the amounts
they may charge for the supply of electricity to Franchise Supply
Customers. A PES license also requires a licensee, including London
Electricity, to procure electricity at the best price reasonably obtainable
from all available sources, including London Electricity.
In England and Wales, each PES license limits the extent of the
generation capacity in which the relevant REC may hold an interest without
the prior consent of the Regulator ("own-generation limits"). In the case
of London Electricity, the own-generation limit is fixed at 700 MW. After
taking into account London Electricity's current ownership interest in a
generation facility, the amount of additional generation investment which
could be made by London Electricity is 565 MW. Investments by affiliates
of Entergy in generating assets in the UK would be counted towards this own-
generation limit under London Electricity's PES license. London
Electricity has applied for and has been granted by the Regulator an
exception from the own-generation limit, subject to certain conditions, for
EPDC investments in the SCC and KPL projects. The most significant of
these conditions, to which London Electricity has agreed, is that
generating capacity from these projects will not be acquired by London
Electricity for purposes of its supply business.
Second Tier Supply Licenses
Other than a PES license holder in its franchise area and subject to
certain other exceptions, a supplier of electricity to premises in Great
Britain must possess a second tier supply license. Subject to certain
restrictions, second tier licensees may compete for the supply of
electricity with one another and with the PES license holder in the
relevant area. There are currently 34 second tier supply license holders
for England and Wales.
Modifications to Licenses
Following the acquisition of London Electricity by Entergy London,
London Electricity's PES License was modified during October 1997 to
provide that, with a few minor exceptions, the only business activities
which London Electricity is permitted to undertake directly are its first
tier and second tier supply businesses and its distribution business.
These modifications by the Regulator are intended to place financial
protections around the licensed activities of London Electricity as a
safeguard against financial pressures which might affect its ability to
continue to finance its statutory and licensed functions, including
necessary investment in its distribution businesses. Among other things,
the modifications restrict the businesses in which London Electricity can
participate, other than the licensed businesses, and regulates dealings
between London Electricity and other companies (particularly affiliated
companies). The modifications also require London Electricity to secure
that it has sufficient management and financial resources to conduct its
licensed businesses, give the Regulator an annual certificate of the
adequacy of its financial resources, and maintain an investment grade
rating for its debt as defined by Moody's and Standard & Poor's.
Term and Revocation of Licenses
London Electricity's PES license will continue in effect until at
least 2025 unless revoked. Under ordinary circumstances, the license may
not be revoked except on 25 years' prior notice, which notice may not be
given until 2000. Otherwise, the Secretary of State may revoke a PES
license by not less than 30 days' notice in writing to the licensee in
certain specified circumstances, including, among other things, the failure
to comply with a final order of the Regulator or the insolvency of the
licensee.
Other Regulatory Matters ( Entergy London)
On June 30, 1997, the UK government announced a review of the
regulatory framework governing the utilities, including electricity supply
and distribution. This review is currently being undertaken.
In October 1997, the UK government asked the Regulator to review
electricity trading arrangements. This review is focusing on the wholesale
electricity market in England and Wales and covers existing trading
arrangements within the Electricity Pool, trading arrangements outside the
Electricity Pool, and price setting mechanisms.
Environmental Regulation
General
In the areas of air quality, water quality, control of toxic
substances and hazardous and solid wastes, and other environmental matters,
the facilities and operations of Entergy are subject to regulation by
various governmental authorities. Entergy believes that its affected
subsidiaries are in substantial compliance with environmental regulations
currently applicable to their respective facilities and operations.
Because environmental regulations are subject to change, future compliance
costs cannot be precisely estimated. However, management currently
estimates that future capital expenditures for environmental compliance
purposes, including those discussed under "Clean Air Legislation," below,
will not be material for Entergy as a whole, or for any of its reporting
subsidiaries.
Clean Air Legislation
The Clean Air Act Amendments of 1990 (the Act) established the
following three programs that affect Entergy's fossil-fueled generation
now or may affect it in the future: (i) an acid rain program for control of
sulfur dioxide (SO2) and nitrogen oxides (NOx); (ii) an ozone nonattainment
area program for control of NOx and volatile organic compounds; and (iii)
an operating permits program for administration and enforcement of these
and other Act programs.
Under the acid rain program, no additional control equipment is
expected to be required by Entergy to control SO2. The Act provides
"allowances" to most of the affected Entergy generating units for emissions
based upon past emission levels and operating characteristics. Each
allowance is an entitlement to emit one ton of SO2 per year. Under the
Act, utilities are or will be required to possess allowances for SO2
emissions from affected generating units. All Entergy fossil-fueled
generating units are classified as "Phase II" units under the Act and are
subject to SO2 allowance requirements beginning in the year 2000. Based on
operating history, the domestic utility companies have been allocated more
allowances than are currently necessary for normal operations. Management
believes that it will be able to operate the domestic utility companies'
generating units efficiently without installing scrubbers or purchasing
allowances from outside sources, and that one or more of the domestic
utility companies may have excess allowances.
Control equipment may eventually be required for certain of the
domestic utility companies' generating units to achieve NOx reductions due
to the ozone nonattainment status of the areas served by Entergy Gulf
States in and around Beaumont and Houston, Texas. Texas environmental
authorities are studying the causes of ozone pollution and have deferred
NOx controls on power plants until at least 1999. If Texas decides to
regulate NOx, the aggregate cost of such control equipment for the affected
Entergy Gulf States plants is estimated to be $1.5 million through the year
2000. It is expected that Texas, in conjunction with the EPA, will publish
future control strategies during 1998 and 1999. Depending on the
strategies developed by Texas, additional costs may be incurred between
2000 and 2007, but these costs cannot be reasonably estimated until the
strategies have been published.
Other Environmental Matters
The provisions of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (CERCLA), authorize the
EPA and, indirectly, the states, to require generators and certain
transporters of certain hazardous substances released from or at a site,
and the owners or operators of any such site, to cleanup the site or
reimburse such clean-up costs. CERCLA has been interpreted to impose joint
and several liability on responsible parties. Entergy's domestic utility
companies have sent waste materials to various disposal sites over the
years. Also, certain operating procedures and maintenance practices
employed by Entergy's domestic utility companies, which historically were
not subject to regulation, now are regulated by environmental laws. Some
of these sites have been the subject of governmental action under CERCLA,
as a result of which the domestic utility companies have become involved
with site clean-up activities. They have participated to various degrees in
accordance with their respective potential liabilities in such site clean-
ups and have developed experience with clean-up costs. The domestic
utility companies have established reserves for such environmental clean-
up/restoration activities. In the aggregate, the cost of such remediation
is not considered material to Entergy or to any of its reporting
subsidiaries.
Entergy Arkansas
Entergy Arkansas has received notices from time to time from the EPA,
the Arkansas Department of Pollution Control & Ecology (ADPC&E), and others
alleging that Entergy Arkansas, along with others, may be a PRP for clean-
up costs associated with various sites in Arkansas. Most of these sites
are neither owned nor operated by any Entergy company. Contaminants at the
sites include polychlorinated biphenyls (PCBs), lead, and other hazardous
substances.
At the EPA's request, Entergy Arkansas voluntarily performed
stabilization activities at the Benton Salvage site in Saline County,
Arkansas. While the EPA has not named PRPs for this site, Entergy Arkansas
has attempted to negotiate a settlement with the EPA. Entergy Arkansas and
the EPA were unable to reach an agreement satisfactory to both parties.
EPA initiated its own clean-up of the site in October 1996. Entergy
Arkansas does not believe that its potential liability, if any, with
respect to this site will be material.
In May 1995, Entergy Arkansas was named as a defendant in a suit
brought by Reynolds Metals Company (Reynolds) in the U.S. District Court
for the Eastern District of Arkansas, seeking to recover a share of the
costs associated with the clean-up of hazardous substances at Reynolds
former Patterson plant site. Reynolds alleged that it spent $11.2 million
to clean up the site, and that the site was contaminated with PCBs for
which Entergy Arkansas bore some responsibility. In July 1997, the Court
granted Entergy Arkansas' Motion for Summary Judgment and dismissed
Reynolds lawsuit.
Entergy Arkansas entered into a Consent Administrative Order, dated
February 21, 1991, with the ADPC&E that named Entergy Arkansas as a PRP for
the initial stabilization associated with contamination at the Utilities
Services, Inc. state Superfund site located near Rison, Arkansas. This
site was found to have soil contaminated by PCBs and pentachlorophenol (a
wood preservative). Containers and drums that contained PCBs and other
hazardous substances were found at the site. Entergy Arkansas' share of
total remediation costs is estimated not to exceed $5.0 million. Entergy
Arkansas is attempting to identify and notify other PRPs with respect to
this site. Entergy Arkansas has received assurances that the ADPC&E will
use its enforcement authority to allocate remediation expenses among
Entergy Arkansas and any other PRPs that can be identified. Approximately
20 PRPs have been identified to date. Entergy Arkansas has performed the
activities necessary to stabilize the site, at a cost of approximately
$400,000.
Entergy Gulf States
Entergy Gulf States has been designated by the EPA as a 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 these sites. Several class action and other suits have been
filed in state and federal courts seeking relief from Entergy Gulf States
and others for damages caused by the disposal of hazardous waste and for
asbestos-related disease allegedly resulting from exposure on Entergy Gulf
States premises (see "Other Regulation and Litigation" below). As of
December 31, 1997, a remaining recorded liability of $23.8 million existed
relating to the clean-up of seven sites at which Entergy Gulf States has
been designated as a PRP.
In 1971, Entergy Gulf States purchased property near its Sabine
generating station, known as the Bailey site, for possible expansion of
cooling water facilities. Entergy Gulf States sold the property in 1984.
In October 1984, an abandoned waste site on the property was included on
the NPL by the EPA. Entergy Gulf States negotiated with the EPA and is a
member of a task force with other PRPs for the voluntary clean-up of the
waste site. A consent decree has been signed by all PRPs for the voluntary
clean-up of the Bailey site. On-site remediation was completed during
1997. Total remediation costs are currently expected to be approximately
$33 million; however, federal and state agencies are still examining
potential liabilities associated with natural resource damage. Entergy
Gulf States is expected to be responsible for 2.26% of the estimated clean-
up cost, but Entergy Gulf States does not expect that its remaining
responsibility with respect to this site will be material after allowance
for its existing provision for clean-up in the amount of $300,000.
Entergy Gulf States is currently involved in a multi-phased remedial
investigation of an abandoned MGP site, known as the Lake Charles Service
Center, located in Lake Charles, Louisiana, which is thought to have
operated as an MGP from approximately 1916 to 1931. Coal tar, a by-product
of the distillation process employed at MGPs, was apparently routed to a
portion of the property for disposal. The same area has also been used as
a landfill. Under an order, which is currently stayed, issued by the LDEQ,
Entergy Gulf States was required to investigate and, if necessary, take
remedial action at the site. Preliminary estimates of remediation costs
are approximately $20 million. On February 13, 1995, the EPA published a
proposed rule adding the Lake Charles Service Center to the NPL. Another
PRP has been identified that may have had a role in the ownership and
operation of the MGP. Negotiations with that company for joint
participation and possible remedial action are ongoing. Entergy Gulf
States has signed an Administrative Order on Consent negotiated with the
EPA. Entergy Gulf States does not presently expect that its ultimate
responsibility for this site will materially exceed its existing clean-up
provision of $20 million.
Entergy Gulf States is currently involved in an initial investigation
of an MGP site, known as the Old Jennings Ice Plant, located in Jennings,
Louisiana. The MGP site is believed to have operated from approximately
1909 to 1926, and is now occupied by an electrical substation and used for
storage of transmission and distribution equipment. In July 1996, a
petroleum-like substance was discovered on the surface soil, and
notification was made to the LDEQ. The LDEQ was aware of this site based
upon a survey performed by an environmental consultant for the EPA.
Entergy Gulf States obtained the services of an environmental consultant to
collect core samples and to perform a search of historical records to
determine what activities occurred at Jennings. Results of the core
sampling, which found limited amounts of contamination on-site, were
submitted to the LDEQ. Entergy Gulf States is awaiting the LDEQ's comment
on the submission, and does not expect that its ultimate financial
responsibility with respect to this site will be material. The amount of
its existing provision for clean-up is $500,000.
Entergy Gulf States, along with Entergy Louisiana, has been named as a
PRP for an abandoned waste oil recycling plant site in Livingston Parish,
Louisiana, known as Combustion, Inc., which is included on the NPL.
Entergy Gulf States has settled its alleged involvement in the Combustion
Inc. site in a court approved settlement involving a payment of $161,000.
Entergy Gulf States has also agreed to pay a portion of any future clean-up
costs related to residual ground water, but does not expect that any such
costs will be incurred.
Entergy Gulf States, along with Entergy Arkansas and Entergy
Louisiana, has been notified of its potential liability with respect to the
Benton Salvage site located in Saline County, Arkansas. Although Entergy
Gulf States and Entergy Louisiana have had minor involvement in the Benton
Salvage site, no remediation is expected to be required of these companies.
See "Entergy Arkansas" above for a discussion of the Benton Salvage site.
Entergy Louisiana, Entergy New Orleans, and System Energy
Entergy Louisiana, Entergy New Orleans, and System Energy have
received notices from the EPA and/or the states of Louisiana and
Mississippi that one or more of them may be a PRP for the following
disposal sites that are neither owned nor operated by any Entergy
subsidiary:
- Entergy Louisiana, along with Entergy Arkansas and Entergy Gulf
States, was notified in 1990 of its potential liability relating to the
Benton Salvage site located in Saline County, Arkansas. Although Entergy
Gulf States and Entergy Louisiana have been involved in the Benton Salvage
site, their contributions are considered minor. Therefore, no remediation
action is required by these companies. See "Entergy Arkansas" above for a
discussion of the Benton Salvage site.
- The MCEQ issued an order on October 13, 1997 ordering Entergy
Louisiana to implement a remedial action work plan that had been prepared
by a PRP committee for Disposal Systems, Inc. sites at Fifth Street (Clay
Point) and Lee Street in Biloxi, Mississippi, and at Woolmarket,
Mississippi. Entergy Louisiana filed a petition with the MCEQ denying that
it had sent any wastes to the Lee Street or Woolmarket sites and alleging
that wastes that had been transported by its contractor to Clay Point are
not pollutants within the meaning of the Mississippi statutes or
regulations, that any wastes at that site had been cleaned up under a
consent decree between the EPA and the PRPs, approved by the U. S. District
Court for the Southern District of Mississippi, Southern Division, and had
been stored at a warehouse on the site, and, further, that the State of
Mississippi has no jurisdiction in view of the consent decree of the
federal court. The petition further requested a hearing before the MCEQ.
No hearing date has been set. A PRP committee is attempting to draft a
settlement proposal for all of the PRPs on sharing clean-up costs. The MCEQ
issued a similar order on the same date to Entergy Louisiana's contractors,
Ebasco Services, Inc., which Entergy Louisiana has agreed to defend and
indemnify. The MCEQ issued a similar order on the same date to Bechtel
Power, the contractor for System Energy on the Grand Gulf plant. System
Energy was not named as a defendant in the order. Bechtel has filed a
petition asking for a hearing. Entergy Louisiana's remediation costs at
the site are not expected to be material.
- From 1992 to 1994, Entergy Louisiana performed site assessments and
remedial activities at three retired power plants, known as the Homer,
Jonesboro, and Thibodaux municipal sites, previously owned and operated by
Louisiana municipalities. Entergy Louisiana purchased power plants at
these sites as part of the acquisition of municipal electric systems. The
site assessments indicated some subsurface contamination from fuel oil.
Remediation of the Homer and Jonesboro sites has been completed at an
aggregate cost of approximately $180,000, and remediation of the Thibodaux
site is expected to continue through 2000. The cost incurred through
December 31, 1997 for the Thibodaux site is $305,000, and future costs are
not expected to exceed the existing provision of $530,000.
Entergy Louisiana and Entergy New Orleans have been named by the EPA
as PRPs for associated clean-up costs for certain Louisiana disposal sites.
Such sites include Combustion Inc., an abandoned waste oil recycling plant
site located in Livingston Parish (involving at least 70 PRPs, including
Entergy Gulf States, but not Entergy New Orleans), and the Dutchtown site
(also included on the NPL and involving 57 PRPs). Entergy Louisiana has
settled its alleged involvement in the Combustion Inc. site in a court
approved settlement for a payment of $225,000. Entergy Louisiana has also
agreed to pay a portion of any future clean-up costs related to residual
ground water, but does not expect that any such costs will be incurred.
With respect to the Dutchtown site, Entergy New Orleans believes it has no
liability because the material it sent to this site was not a hazardous
substance.
During 1993, the LDEQ issued new rules for solid waste regulation,
including regulation of waste water impoundments. Entergy Louisiana has
determined that certain of its power plant waste water impoundments were
affected by these regulations and has chosen to upgrade or close them. As
a result, a remaining recorded liability in the amount of $6.7 million
existed at December 31, 1997 for waste water upgrades and closures.
Completion of this work is awaiting the LDEQ's approval. Cumulative
expenditures relating to the upgrades and closures of waste water
impoundments are $7.1 million as of December 31, 1997.
UK Environmental Regulation (Entergy London)
London Electricity's businesses are subject to numerous regulatory
requirements with respect to the protection of the environment. The
Electricity Act obligates the UK Secretary of State for Trade and Industry
(the "Secretary of State") to consider the effect of electricity
generation, transmission, and supply activities upon the environment in
approving applications for the construction of generating facilities and
the location of overhead power lines. The Electricity Act requires London
Electricity to have regard to the desirability of preserving natural beauty
and the conservation of natural and man-made features of particular
interest when it formulates proposals for development of certain of its
activities. London Electricity mitigates the effects of its proposals on
natural and man-made features and is required to carry out an environmental
assessment before laying cables, constructing overhead lines, or carrying
out any other development in connection with its licensed activities.
London Electricity also has produced an Environmental Policy Statement that
sets forth its plans for compliance with its environmental obligations
under the Electricity Act.
The Environmental Protection Act 1990 addresses waste management
issues and imposes certain obligations and duties on companies that handle
and dispose of waste. Some of London Electricity's distribution activities
produce waste, but London Electricity believes that it is in compliance
with the applicable standards.
Possible adverse health effects of EMFs from various sources,
including transmission and distribution lines, have been the subject of a
number of studies and increasing public discussion. The scientific research
currently is inconclusive as to whether EMFs cause adverse health effects.
The only UK standards for exposure to power frequency EMFs are those
promulgated by the National Radiological Protection Board and relate to the
levels above which non-reversible physiological effects may be observed.
London Electricity fully complies with these standards. However, the
possibility exists that passage of legislation and change of regulatory
standards could require measures to mitigate EMFs, with resulting increases
in capital and operating costs. In addition, the potential exists for
public liability with respect to lawsuits brought by plaintiffs alleging
damages caused by EMFs.
London Electricity has approximately 677 miles of oil-filled
underground cables that operate at 33kV and 132kV. These cables generally
supply substantial amounts of electricity to large substations in urban
areas and to large customers. The majority of these cables are between 30
and 50 years old. London Electricity operates these cables in accordance
with the "Environment Agency and Electricity Companies (in England and
Wales) Operating Code on the Management of Fluid-Filled Cables," monitoring
and repairing both gradual and substantial leaks, which arise through age
deterioration and third party damage. London Electricity has a program to
minimize oil leakage and reduce the possibility of pollution to
watercourses and ground water. This program includes a plan for gradual
replacement of these cables with more modern solid cables. London
Electricity believes that the existing monitoring systems and planned
replacement program are sufficient to avoid major environmental incidents
or unnecessary replacement expenditures. London Electricity could incur
significant expenditures if it were required to replace all or
substantially all of its fluid-filled cables, other than in the ordinary
course of business, pursuant to new or existing legislation.
Other Regulation and Litigation
Merger (Entergy Corporation and Entergy Gulf States)
In July and August 1992, applications were filed with FERC, the LPSC,
the PUCT, and the SEC under PUHCA, seeking authorization of various aspects
of the Merger. In January 1993, Entergy Gulf States filed two applications
with the NRC seeking approval of the change in ownership of Entergy Gulf
States and an amendment to the operating license for River Bend to reflect
its operation by Entergy Operations. All regulatory approvals were
obtained in 1993 and the Merger was consummated on December 31, 1993.
FERC's orders approving the Merger were appealed to the D.C. Circuit
by Entergy Services, the City of New Orleans, the Arkansas Electric Energy
Consumers (AEEC), the APSC, Cajun, the MPSC, the American Forest and Paper
Association, the State of Mississippi, the City of Benton and other cities,
and Occidental Chemical Corporation (Occidental). Entergy Services sought
review of FERC's deletion of a 40% cap on the amount of fuel savings
Entergy Gulf States may be required to transfer to other Entergy domestic
utility companies under a tracking mechanism designed to protect the other
companies from certain unexpected increases in fuel costs. The other
parties sought to overturn FERC's decisions on various grounds, including
issues as to whether FERC appropriately conditioned the Merger to protect
various interested parties from alleged harm and FERC's reliance on
Entergy's transmission tariff to mitigate any potential anticompetitive
impacts of the Merger. On November 18, 1994, the D.C. Circuit denied
motions filed by Cajun, Occidental, and AEEC for a remand to FERC and a
partial summary grant of the petitions for review. At the same time, the
D.C. Circuit ordered that the cases be held in abeyance pending FERC's
issuance of (i) a final order on remand in the proceedings on Entergy's
transmission tariff (see discussion of tariff case in "RATE MATTERS AND
REGULATION - Rate Matters - Wholesale Rate Matters - Open Access
Transmission" above), and (ii) a final order on competition issues in the
proceedings on the Merger.
On December 30, 1993, Entergy Services submitted to FERC tariff
revisions to comply with FERC's order dated December 15, 1993, approving
the Merger. On February 4, 1994, the APSC and AEEC filed with FERC a joint
protest, alleging that Entergy should be required to insulate the
ratepayers of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans from all litigation liabilities related to Entergy Gulf
States' River Bend nuclear facility. In a May 17, 1994, order on
rehearing, FERC addressed Entergy's commitment to insulate the customers of
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans against liability resulting from certain litigation involving River
Bend. In response to FERC's clarification of Entergy's commitment, Entergy
Services filed a new compliance filing on June 16, 1994. The APSC and AEEC
subsequently filed protests questioning the adequacy of Entergy's June 16,
1994, compliance filing. FERC has not yet acted on the compliance filings.
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans are defendants in numerous lawsuits that
have been filed by former employees asserting that they were wrongfully
terminated and/or discriminated against due to age, race, and/or sex.
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans are vigorously defending these suits and
deny any liability to the plaintiffs. However, no assurance can be given
as to the outcome of these cases, and an adverse outcome in one or more
cases could have a material adverse financial effect on any of the Entergy
defendants. See "Employment Litigation" in Note 9 for information
regarding these lawsuits.
Asbestos and Hazardous Waste Suits
(Entergy Gulf States and Entergy Louisiana)
A number of plaintiffs who allegedly suffered damage or injury, or are
survivors of persons who died, allegedly as a result of exposure to
"hazardous toxic waste" that emanated from a site in Livingston Parish,
Louisiana, sued Entergy Gulf States and approximately 70 other defendants,
including Entergy Louisiana, in 17 suits filed in the Livingston Parish
District Court. The plaintiffs alleged that the defendants generated,
transported, or participated in the storage of such wastes at the facility,
which was previously operated as a waste oil recycling facility. These
suits, and three federal suits in three states other than Louisiana
involving issues arising from the same facility, were consolidated in the
U.S. District Court for the Middle District of Louisiana. Entergy Gulf
States and Entergy Louisiana have settled all claims against them in the
suits and the settlements were approved by court order on February 7, 1996
and June 4, 1997, respectively. Entergy Gulf States' and Entergy
Louisiana's shares of the settlements of these cases is not material to
their financial position or results of operations.
(Entergy Gulf States)
A total of 25 suits have been filed on behalf of approximately 1,200
plaintiffs in state and federal courts in Jefferson and Orange Counties,
Texas. These suits seek relief from Entergy Gulf States as well as
numerous other defendants for damages caused to the plaintiffs or others by
the alleged exposure to hazardous waste and asbestos on the defendants'
premises. The plaintiffs in some of these suits are also suing Entergy Gulf
States and all other defendants on a conspiracy claim. There are ten
asbestos-related lawsuits filed in the District Court of Calcasieu Parish
in Lake Charles, Louisiana, on behalf of approximately fifteen plaintiffs
naming numerous defendants including Entergy Gulf States. The suits allege
that each plaintiff contracted an asbestos-related disease from exposure to
asbestos insulation products on the premises of the defendants. A total of
eighteen lawsuits have been filed in Louisiana on behalf of 24 plaintiffs
in state courts in East Baton Rouge, Iberville, and Ascension Parishes.
These suits seek relief from Entergy Gulf States and numerous other
defendants for damages caused to the plaintiffs or others by alleged
exposure to hazardous waste and asbestos on the defendants' premises. It
is not known yet how many of the plaintiffs in any of the foregoing cases
worked on Entergy Gulf States' premises. Settlements with approximately
800 of the Jefferson County plaintiffs and with approximately 100 of the
Calcasieu Parish plaintiffs are in the process of being consummated.
Entergy Gulf States' share of the settlements of these cases is not
material to its financial position or results of operations.
Cajun - River Bend Litigation (Entergy Corporation and Entergy Gulf States)
See "Cajun - River Bend Litigation" in Note 9 herein for a discussion
of this litigation.
Cajun - Transmission Service (Entergy Corporation and Entergy Gulf States)
See "Cajun - River Bend Litigation" in Note 9 herein for a discussion
of this litigation.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun-Coal Contracts" in Note 9 herein for a discussion of this
litigation.
Service Area Dispute (Entergy Corporation and Entergy Mississippi)
In October 1994, twelve Mississippi cities filed a complaint in state
court against Entergy Mississippi and eight electric power associations
seeking a judgment declaring unconstitutional certain Mississippi statutes
relating to the acquisition by a municipality of facilities and certificate
rights of a utility serving in the municipality. The suit requests that
the court declare unconstitutional certain 1987 amendments to the
Mississippi Public Utilities Act that require that the MPSC cancel a
utility's certificate to serve in the municipality before a municipality
may acquire a utility's facilities located in the municipality. The suit
also requests that the court find that Mississippi municipalities can serve
any consumer in the boundaries of the municipality and within one mile
thereof. Entergy Mississippi and the other defendants filed motions to
dismiss, which were granted in October 1995. The plaintiffs appealed the
dismissal to the Mississippi Supreme Court. In September 1997, the
Mississippi Supreme Court affirmed the decision of the lower court finding
in favor of Entergy Mississippi and dismissing the municipalities'
complaint. A petition for rehearing filed by the municipalities was denied
by the Mississippi Supreme Court in November 1997.
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), where Waterford 3 is located, have
disputed use taxes on nuclear fuel paid under protest by Entergy Louisiana,
and lease tax issues pertaining to fuel financing arrangements. In May
1997, the Parish and Entergy Louisiana settled all pending use and lease
tax litigation. This settlement includes the return to Entergy Louisiana
of tax payments made under protest and the dismissal of nuclear fuel
related suits against Entergy Louisiana and/or the fuel lessors.
Since 1990, Entergy Louisiana and the state tax authority have
disputed state use tax paid under protest on nuclear fuel ($8.8 million at
December 31, 1997) by Entergy Louisiana. The fuel was purchased for
Waterford 3. Entergy Louisiana has filed lawsuits to recover these taxes,
and certain of these suits involve additional legal issues related to an
exemption for boiler fuel. The suits regarding these disputes have been
consolidated for trial, but a trial date has not been set.
Catalyst Technologies, Inc. (Entergy Corporation)
In June 1993, Catalyst Technologies, Inc. (CTI) filed a petition in
the Civil District Court for the Parish of Orleans, Louisiana (CDC),
against Electec, Inc., now named Entergy Enterprises, Inc. (EEI), which is
a wholly-owned non-utility subsidiary of Entergy Corporation. The petition
alleged, among other things, breach of contract, and breach of the
obligation of good-faith and fair dealing. On August 8, 1997, a jury in
the CDC returned a verdict against EEI in the amount of $346 million plus
interest of approximately $118 million. On November 15, 1997, the trial
judge entered a judgment notwithstanding the verdict in the CTI lawsuit.
Finding as a matter of law that the jury's verdict was incorrect, the judge
ruled that no contract ever existed between CTI and Entergy Enterprises,
and that the verdict was contrary to the law and the evidence. CTI has
appealed this ruling to the Louisiana Court of Appeal for the Fourth
Circuit. No date for the filing of appellate briefs or oral argument has
been set.
On September 30, 1997, CTI filed another lawsuit against Entergy
Corporation, Entergy Services, Entergy Enterprises and certain individuals
who are, or at one time were, directors of those corporations. The suit
claims, among other things, that CTI suffered damages as a result of
actions on the part of Entergy that allegedly caused the individual
defendants to breach their fiduciary duties owed to Entergy Enterprises
and, indirectly, to CTI as Entergy Enterprises' judgment creditor. After
the decision of the trial judge in the original CTI suit, CTI voluntarily
moved to dismiss this proceeding, and it was dismissed without prejudice on
January 16, 1998.
Union Pacific Railroad (Entergy Corporation and Entergy Arkansas)
In October 1997, Entergy Arkansas and Entergy Services filed a civil
suit against Union Pacific Railroad Company (Union Pacific) in the United
States District Court for the Middle District of Louisiana. This suit,
which seeks damages and the termination of coal shipping contracts with
Union Pacific, maintains that Union Pacific has failed to meet its
contractual obligations to ship coal to Entergy Arkansas' two large coal-
fired plants and that such failure has impaired Entergy Arkansas' ability
to generate and sell electricity from these plants.
EARNINGS RATIOS OF DOMESTIC UTILITY COMPANIES, SYSTEM ENERGY, AND
ENTERGY LONDON
The domestic utility companies', System Energy's, and Entergy London's
ratios of earnings to fixed charges and ratios of earnings to combined
fixed charges and preferred dividends pursuant to Item 503 of SEC
Regulation S-K are as follows:
Ratios of Earnings to Fixed Charges
Years Ended December 31,
1993 1994 1995 1996 1997
Entergy Arkansas 3.11(b) 2.32 2.56 2.93 2.54
Entergy Gulf States 1.54 (c)- 1.86 1.47 1.42
Entergy Louisiana 3.06 2.91 3.18 3.16 2.74
Entergy Mississippi 3.79(b) 2.12 2.92 3.40 2.98
Entergy New Orleans 4.68(b) 1.91 3.93 3.51 2.70
System Energy 1.87 1.23 2.07 2.21 2.31
Entergy London N/A N/A N/A N/A (d)-
Ratios of Earnings to Combined Fixed
Charges and Preferred Dividends
Years Ended December 31,
1993 1994 1995 1996 1997
Entergy Arkansas 2.54(b) 1.97 2.12 2.44 2.24
Entergy Gulf States(a) 1.21 (c)- 1.54 1.19 1.23
Entergy Louisiana 2.39 2.43 2.60 2.64 2.36
Entergy Mississippi 3.08(b) 1.81 2.51 2.95 2.69
Entergy New Orleans 4.12(b) 1.73 3.56 3.22 2.44
(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 approximately
$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.
(d) As a result of the windfall profits tax of $234 million, earnings for
the twelve months ended December 31, 1997, for Entergy London were
insufficient to cover fixed charges by $204 million.
INDUSTRY SEGMENTS
Entergy New Orleans
Narrative Description of Entergy New Orleans Industry Segments
Electric Service
Entergy New Orleans supplied retail electric service to approximately
189,000 customers as of December 31, 1997. During 1997, 39% of electric
operating revenues was derived from residential sales, 38% from commercial
sales, 7% from industrial sales, and 16% from sales to governmental and
municipal customers.
Natural Gas Service
Entergy New Orleans supplied retail natural gas service to
approximately 151,000 customers as of December 31, 1997. During 1997, 55%
of gas operating revenues was derived from residential sales, 19% from
commercial sales, 11% from industrial sales, and 15% from sales to
governmental and municipal customers. (See "FUEL SUPPLY - Natural Gas
Purchased for Resale.")
Selected Financial Information Relating to Industry Segments
For selected financial information relating to Entergy New Orleans'
industry segments, see Entergy New Orleans' financial statements and Note
15.
Entergy Gulf States
For the year ended December 31, 1997, 96% of Entergy Gulf States'
operating revenues was derived from the electric utility business. Of the
remaining operating revenues, 2% was derived from the steam business and 2%
from the natural gas business.
Entergy London
Entergy London's distribution and supply businesses both served
approximately 2.0 million customers as of December 31, 1997. During 1997,
operating revenues derived from the distribution and supply business were
22% and 74%, respectively. The remaining 4% of operating revenues was
derived from Entergy London's investment in private distribution networks,
electricity contracting services, and investments in generating assets.
PROPERTY
Generating Stations
The total capability of Entergy's owned and leased generating stations
as of December 31, 1997, by company and by fuel type, is indicated below:
Owned and Leased Capability MW(1)
Gas
Turbine
and
Internal
Company Total Fossil Nuclear Combustion Hydro
Entergy Arkansas 4,373 (2) 2,379 1,694 230 (4) 70
Entergy Gulf States 6,854 (2) 5,843 936 75 -
Entergy Louisiana 5,423 (2) 4,329 1,075 19 -
Entergy Mississippi 3,063 (2) 3,052 - 11 -
Entergy New Orleans 934 (2) 918 - 16 -
System Energy 1,080 - 1,080 - -
-------------------------------------------------
Total 21,727 (3) 16,521 (3) 4,785 351 70
=================================================
(1) "Owned and Leased Capability" is the dependable load carrying
capability as demonstrated under actual operating conditions based on
the primary fuel (assuming no curtailments) that each station was
designed to utilize.
(2) Excludes the capacity of fossil-fueled generating stations placed on
extended reserve as follows: Entergy Arkansas - 506 MW; Entergy Gulf
States - 405 MW; Entergy Louisiana - 157 MW; Entergy Mississippi - 73
MW; Entergy New Orleans - 143 MW. Generating stations that are not
expected to be utilized in the near-term to meet load requirements are
placed in extended reserve shutdown in order to minimize operating
expenses.
(3) Excludes net capability of generating facilities owned by Entergy
Power, which owns 725 MW of fossil-fueled capacity.
(4) Includes 188 MW of capacity leased by Entergy Arkansas through 1999.
Load and capacity projections are reviewed periodically to assess the
need and timing of additional generating capacity and of interconnections
in light of the availability of power, the location of new loads, and
maximum economy to Entergy. Domestically, based on load and capability
projections and bulk power availability, Entergy has no current plans to
install new generating capacity. When new generation resources are needed,
Entergy expects to meet this need by means other than construction of new
base load generating capacity. Entergy expects to meet future capacity
needs by, among other things, purchasing power in the wholesale power
market and/or removing generating stations from extended reserve shutdown.
Under the terms of the System Agreement, certain generating capacity
and other power resources are shared among the domestic utility companies.
The System Agreement provides, among other things, that parties having
generating reserves greater than their load requirements (long companies)
shall receive payments from those parties having deficiencies in generating
reserves (short companies) and an amount sufficient to cover certain of the
long companies' costs, including operating expenses, fixed charges on debt,
dividend requirements on preferred and preference stock, and a fair rate of
return on common equity investment. Under the System Agreement, these
charges are based on costs associated with the long companies' steam
electric generating units fueled by oil or gas. In addition, for all
energy exchanged among the domestic utility companies under the System
Agreement, the short companies are required to pay the cost of fuel
consumed in generating such energy plus a charge to cover other associated
costs (see "RATE MATTERS AND REGULATION - Rate Matters - Wholesale Rate
Matters - System Agreement," above, for a discussion of FERC proceedings
relating to the System Agreement).
Entergy's domestic business is subject to seasonal fluctuations, with
the peak period occurring in the summer months. The 1997 peak demand of
19,545 MW occurred on August 19, 1997. The total operational system
capability at the time of peak was 21,446 MW. This gives a reserve margin
at the time of the peak of approximately 8.9%. This does not include
capacity owned by Entergy Power. London Electricity and CitiPower both
normally have peak activity in their winter months.
Interconnections
The electric generating facilities of Entergy's domestic utility
companies consist principally of steam-electric production facilities
strategically located with reference to availability of fuel, protection of
local loads, and other controlling economic factors. These are
interconnected by a transmission system operating at various voltages up to
500 kV. Generally, with the exception of Grand Gulf 1, Entergy Power's
capacity and a small portion of Entergy Mississippi's capacity, operating
facilities or interests therein are owned by the domestic utility company
serving the area in which the facilities are located. All of Entergy's
generating facilities are centrally dispatched and operated in order to
obtain low cost sources of energy with a minimum of investment and
efficient use of plant.
In addition to the many neighboring utilities with which the domestic
utility companies interconnect, the domestic utility companies are members
of the Southeastern Electric Reliability Council, the primary purpose of
which is to ensure the reliability and adequacy of the electric bulk power
supply in the southeast region of the United States. The Southeastern
Electric Reliability Council is a member of the North American Electric
Reliability Council.
Gas Property
As of December 31, 1997, Entergy New Orleans distributed and
transported natural gas for distribution solely within the limits of the
City of New Orleans through a total of 1487 miles of gas distribution mains
and 62 miles of gas transmission pipelines. Koch Gateway Pipeline Company
is a principal supplier of natural gas to Entergy New Orleans, delivering
to six of Entergy New Orleans' thirteen delivery points.
As of December 31, 1997, the gas properties of Entergy Gulf States
were not material to Entergy Gulf States.
Titles
Entergy's generating stations are generally located on properties
owned in fee simple. The greater portion of the transmission and
distribution lines of the domestic utility companies have been constructed
over property of private owners pursuant to easements or on public highways
and streets pursuant to appropriate franchises, and pursuant to statute in
the case of Entergy London. The rights of such company in the property on
which its facilities are located are considered by each such company to be
adequate for its use in the conduct of its business. Minor defects and
irregularities customarily found in properties of like size and character
exist, but such defects and irregularities do not materially impair the use
of the properties affected thereby. The domestic utility companies
generally have the right of eminent domain, whereby they may, if necessary,
perfect or secure titles to, or easements or servitudes on, privately held
lands used in or reasonable necessary for their utility operations.
Substantially all the physical properties owned by each domestic
utility company, and System Energy, are subject to the lien of mortgages
securing the first mortgage bonds of such company. The Lewis Creek
generating station is owned by GSG&T, Inc., a subsidiary of Entergy Gulf
States, and is not subject to the lien of the Entergy Gulf States mortgage
securing the first mortgage bonds of Entergy Gulf States, but is leased to
and operated by Entergy Gulf States. In the case of Entergy Louisiana,
certain properties are also subject to the lien of a second mortgage
securing other obligations of Entergy Louisiana. In the case of Entergy
Mississippi, substantially all of its properties and assets are also
subject to the second mortgage lien of its general and refunding mortgage
bond indenture.
FUEL SUPPLY
The sources of generation and average fuel cost per KWH for the
domestic utility companies and System Energy for the years 1995-1997 were:
Natural Gas Fuel Oil Nuclear Fuel Coal
% Cents % Cents % Cents % Cents
of per of per of Per of Per
Year Gen KWH Gen KWH Gen KWH Gen KWH
1997 39 2.97 4 3.11 41 .54 16 1.73
1996 42 2.99 1 3.03 41 .56 16 1.73
1995 50 1.99 - - 35 .60 15 1.73
Actual 1997 and projected 1998 sources of generation for the domestic
utility companies and System Energy are:
Natural Gas Fuel Oil Nuclear Coal
1997 1998 1997 1998 1997 1998 1997 1998
Entergy Arkansas 5% 8% - - 62% 51% 32% 40%
Entergy Gulf States 65% 64% - - 19% 21% 16% 15%
Entergy Louisiana 63% 47% 1% - 36% 53% - -
Entergy Mississippi 38% 69% 33% - - - 29% 31%
Entergy New Orleans 89% 100% 11% - - - - -
System Energy - - - - 100%(a) 100%(a) - -
Total 39% 40% 4% - 41% 41% 16% 19%
(a)Capacity and energy from System Energy's interest in Grand Gulf 1 is
allocated as follows: Entergy Arkansas - 36%; Entergy Louisiana - 14%;
Entergy Mississippi - 33%; and Entergy New Orleans - 17%.
The balance of generation, which was immaterial, was provided by
hydroelectric power.
Natural Gas
The domestic utility companies have long-term firm and short-term
interruptible gas contracts. Long-term firm contracts comprise less than
30% of the domestic utility companies' total requirements but can be called
upon, if necessary, to satisfy a significant percentage of the domestic
utility companies' needs. Additional gas requirements are satisfied by
short-term contracts and spot-market purchases. Entergy Gulf States has a
transportation service agreement with a gas supplier that provides flexible
natural gas service to certain generating stations by using such supplier's
pipeline and gas storage facility.
Many factors, including wellhead deliverability, storage and pipeline
capacity, and demand requirements of end users, influence the availability
and price of natural gas supplies for power plants. Demand is tied to
weather conditions as well as to the prices of other energy sources.
Supplies of natural gas are expected to be adequate in 1998. However,
pursuant to federal and state regulations, gas supplies to power plants may
be interrupted during periods of shortage. To the extent natural gas
supplies may be disrupted, the domestic utility companies will use
alternate fuels, such as oil, or rely on coal and nuclear generation.
Coal
Entergy Arkansas has long-term contracts with suppliers for the supply
of low-sulfur coal from mines in the State of Wyoming for White Bluff and
Independence. These contracts, which expire in 2002 and 2011, provide for
approximately 85% of Entergy Arkansas' expected annual coal requirements
through 2002. Additional requirements are satisfied by annual spot market
purchases. Entergy Gulf States has a contract for a supply of low-sulfur
Wyoming coal for Nelson Unit 6, which should be sufficient to satisfy its
fuel requirements for that unit through 2010. Cajun has advised Entergy
Gulf States that Cajun has contracts that should provide an adequate supply
of coal until 1999 for the operation of Big Cajun 2, Unit 3.
Nuclear Fuel
The nuclear fuel cycle involves the mining and milling of uranium ore
to produce a concentrate, the conversion of the concentrate to uranium
hexafluoride gas, enrichment of that gas, fabrication of nuclear fuel
assemblies for use in fueling nuclear reactors, and disposal of the spent
fuel.
System Fuels is responsible for contracts to acquire nuclear material
to be used in fueling Entergy Arkansas', Entergy Louisiana's, and System
Energy's nuclear units and maintaining inventories of such materials during
the various stages of processing. Each of these companies contracts for
the fabrication of its own nuclear fuel and purchases the required enriched
uranium hexafluoride from System Fuels. The requirements for Entergy Gulf
States' River Bend plant are covered by contracts made by Entergy Gulf
States. Entergy Operations acts as agent for System Fuels and Entergy Gulf
States in negotiating and/or administering nuclear fuel contracts.
Based upon currently planned fuel cycles, Entergy's nuclear units have
existing contracts and inventory to provide adequate materials and
services. Current contracts for uranium concentrate and conversion of the
concentrate to uranium hexafluoride will provide a significant percentage
of these materials and services through termination dates ranging from 1998-
2002. Additional materials and services required beyond these dates are
expected to be available for the foreseeable future.
Current contracts for enrichment will provide a significant percentage
of these materials and services through approximately 2002. Current
fabrication contracts will provide a significant percentage of these
materials and services for termination dates ranging from 2000-2002. The
Nuclear Waste Policy Act of 1982 provides for the disposal of spent nuclear
fuel or high level waste by the DOE. See Note 9, COMMITMENTS AND
CONTINGENCIES, Spent Nuclear Fuel and Decommissioning Costs for additional
discussion of spent nuclear fuel disposal.
Entergy will enter into additional arrangements to acquire nuclear
fuel beyond the dates shown above. Except as noted above, Entergy cannot
predict the ultimate cost of such arrangements.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy have made arrangements to lease nuclear fuel and related equipment
and services. The lessors finance the acquisition and ownership of nuclear
fuel through credit agreements and the issuance of notes. These agreements
are subject to annual renewal with, in Entergy Louisiana's and Entergy Gulf
States' case, the consent of the lenders. See Note 10 for further
discussion of nuclear fuel leases.
Entergy Gulf States received nuclear fuel as part of the settlement of
the Cajun litigation. This nuclear fuel is currently owned by Entergy Gulf
States and is not under lease.
Natural Gas Purchased for Resale
Entergy New Orleans has several suppliers of natural gas for resale.
Its system is interconnected with three interstate and three intrastate
pipelines. Presently, Entergy New Orleans' primary suppliers are Koch
Energy Trading Company (KET), an interstate gas marketer, Bridgeline and
Pontchartrain via Louisiana Gas Services (LGS). Entergy New Orleans has a
"no-notice" service gas purchase contract with KET. The KET gas supply is
transported to Entergy New Orleans pursuant to a transportation service
agreement with Koch Gateway Pipeline Company (KGPC). This service is
subject to FERC-approved rates. Entergy New Orleans has firm contracts
with its two intrastate suppliers and also makes interruptible spot market
purchases. In recent years, natural gas deliveries have been subject
primarily to weather-related curtailments. However, Entergy New Orleans
has experienced no such curtailments.
After the implementation of FERC-mandated interstate pipeline
restructuring in 1993, curtailments of interstate gas supply could occur if
Entergy New Orleans' suppliers failed to perform their obligations to
deliver gas under their supply agreements. KGPC could curtail
transportation capacity only in the event of pipeline system constraints.
Based on the current supply of natural gas, and absent extreme weather-
related curtailments, Entergy New Orleans does not anticipate any
interruptions in natural gas deliveries to its customers.
Entergy Gulf States purchases natural gas for resale under an
agreement with Mid Louisiana Gas Company. Abandonment of service by the
present supplier would be subject to abandonment proceedings by FERC.
Research
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans are members of the Electric Power
Research Institute (EPRI). EPRI conducts a broad range of research in
major technical fields related to the electric utility industry. Entergy
participates in various EPRI projects based on Entergy's needs and
available resources. During each of the years 1997, 1996, and 1995,
Entergy contributed approximately $9 million for EPRI and other research
programs.
Item 2. Properties
Refer to Item 1. "Business - PROPERTY," for information regarding the
properties of the registrants.
Item 3. Legal Proceedings
Refer to Item 1. "Business - RATE MATTERS AND REGULATION," for details
of the registrants' material rate proceedings, environmental regulation and
proceedings, and other regulatory proceedings and litigation that are
pending or that terminated in the fourth quarter of 1997.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1997, no matters were submitted to a vote
of the security holders of Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy, or Entergy London.
DIRECTORS AND EXECUTIVE OFFICERS OF ENTERGY CORPORATION
Directors
Information required by this item concerning directors of Entergy
Corporation is set forth under the heading "Proposal 1--Election of
Directors" contained in the Proxy Statement of Entergy Corporation, (the
"Proxy Statement"), to be filed in connection with its Annual Meeting of
Stockholders to be held May 15, 1998, ("Annual Meeting"), and is
incorporated herein by reference. Information required by this item
concerning officers and directors of the remaining registrants is reported
in Part III of this document.
Executive Officers
Name Age Position Period
Edwin Lupberger (a) 61 Chairman of the Board, Chief 1985-Present
Executive Officer, and Director of
Entergy Corporation
Chairman of the Board and Chief 1993-Present
Executive Officer of Entergy
Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Chairman of the Board, Chief 1994-Present
Executive Officer, and Director of
Entergy Gulf States
Chairman of the Board and Director of 1996-Present
Entergy Integrated Solutions, Inc.
Chairman of the Board of System 1986-Present
Energy and Entergy Enterprises
Chairman of the Board of Entergy 1990-Present
Operations
Chairman of the Board of Entergy 1985-Present
Services
Chief Executive Officer of Entergy 1991-Present
Services
Chief Executive Officer of Entergy 1993-Present
Power, EPDC, and Entergy-Richmond
Power Corporation
Chief Executive Officer of Entergy 1994-Present
Pakistan, Ltd. and Entergy Power
Asia, Ltd.
Chief Executive Officer of EP Edegel, 1995-Present
Inc., Entergy Power Holding II,
Ltd., EPMC, Entergy Power Operations
Corporation, Entergy Power
Operations Holdings, Ltd., Entergy
Power Operations Pakistan LDC,
Entergy Victoria LDC, Entergy
Victoria Holdings LDC, EPG Cayman
Holding I, EPG Cayman Holding II,
Entergy Power CBA Holding, Ltd., and
Entergy Power Edesur Holding, Ltd.
Chief Executive Officer of Entergy 1995-1997
Power Development International
Corporation
Chief Executive Officer of Entergy 1996-Present
Power International Holdings
Corporation and Entergy Mexico Ltd.
Chief Executive Officer of Entergy 1997-Present
London Limited, Entergy London, and
Entergy Power Chile, Inc.
President of Entergy Corporation 1995-Present
President of Entergy Services and 1994-Present
Entergy Enterprises
General Manager of Entergy Power 1997-Present
Chile, S.A.
Director and Chairman of the Board of 1997-Present
Entergy Nuclear, Inc., Entergy
Technology Company, ETHC, Entergy
London Limited and Entergy London
Director of Entergy Arkansas, Entergy 1986-Present
Louisiana, Entergy Mississippi,
Entergy New Orleans, and System
Energy
Director of Entergy Operations and 1994-Present
Entergy Services
Director of Entergy Enterprises 1984-Present
Chief Executive Officer of Entergy 1995-1996
Edegel I, Inc., Entergy Power
Holding I, Ltd., and Entergy
Yacyreta I, Inc.
Chairman of the Board of Entergy 1990-1993
Power
Chief Executive Officer of Entergy 1991-1994
Enterprises
Jerry L. Maulden 61 Vice Chairman of Entergy Corporation 1995-Present
Vice Chairman and Chief Operating 1993-Present
Officer of Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy
New Orleans
Vice Chairman of Entergy Services 1992-Present
Director of Entergy Arkansas 1979-Present
Director of Entergy Gulf States 1993-Present
Director of Entergy Louisiana and 1991-Present
Entergy New Orleans
Director of Entergy Mississippi 1988-Present
Director of Entergy Operations 1990-Present
Director of System Energy 1987-Present
Director of Entergy Services 1979-Present
Director of Entergy Nuclear, Inc. 1997-Present
Chairman of the Board of Entergy 1989-1993
Arkansas
Chairman of the Board and Chief 1991-1993
Executive Officer of Entergy
Louisiana and Entergy New Orleans
Chairman of the Board and Chief 1989-1993
Executive Officer of Entergy
Mississippi
Chief Executive Officer of Entergy 1979-1993
Arkansas
President and Chief Operating Officer 1993-1995
of Entergy Corporation
Group President, System Executive - 1991-1993
Transmission, Distribution, and
Customer Service of Entergy
Corporation
Jerry D. Jackson 53 Chief Administrative Officer of 1997-Present
Entergy Corporation, Entergy
Services, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New
Orleans
Executive Vice President - External 1994-Present
Affairs of Entergy Corporation and
Entergy Services
Executive Vice President - External 1995-Present
Affairs of Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana,
Entergy Mississippi, and Entergy New
Orleans
Director of Entergy Arkansas, Entergy 1992-Present
Louisiana, Entergy Mississippi, and
Entergy New Orleans
Director of Entergy Gulf States 1994-Present
Director of Entergy Services 1990-Present
Director of Entergy Enterprises 1996-Present
Executive Vice President of Marketing 1994-1995
of Entergy Corporation
Executive Vice President - Marketing 1995-1995
of Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Executive Vice President - Marketing 1994-1995
of Entergy Services
President and Chief Administrative 1992-1994
Officer of Entergy Services
Executive Vice President - Finance 1990-1994
and External Affairs of Entergy
Corporation
Executive Vice President - Finance 1992-1994
and External Affairs and Secretary
of Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and
Entergy New Orleans
Executive Vice President - Finance 1993-1994
and External Affairs of Entergy Gulf
States
Secretary of Entergy Corporation 1991-1994
Secretary of Entergy Gulf States 1994-1995
Director of System Energy 1993-1995
Donald C. Hintz 55 Group President and Chief Nuclear 1997-Present
Operating Officer of Entergy
Corporation, Entergy Services,
Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana
Executive Vice President and Chief 1994-1997
Nuclear Officer of Entergy
Corporation
Executive Vice President - Nuclear of 1994-1997
Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana
Executive Vice President of Nuclear 1996-1997
of Entergy Services
Chief Executive Officer and President 1992-Present
of System Energy and Entergy
Operations
Director of Entergy Arkansas, Entergy 1992-Present
Louisiana, Entergy Mississippi,
System Energy, System Fuels, and
Entergy Services
Director of Entergy Gulf States 1993-Present
Director of Entergy Operations 1990-Present
Director of GSG&T, Prudential Oil & 1994-Present
Gas, Southern Gulf Railway, and
Varibus Corporation
Senior Vice President and Chief 1993-1994
Nuclear Officer of Entergy
Corporation
Senior Vice President - Nuclear of 1990-1994
Entergy Arkansas
Senior Vice President - Nuclear of 1993-1994
Entergy Gulf States
Senior Vice President - Nuclear of 1992-1994
Entergy Louisiana
Director of Entergy New Orleans 1992-1994
Chief Executive Officer, President, 1997-Present
and Director of Entergy Nuclear,
Inc.
Gerald D. McInvale 54 Vice Chairman and Chief Financial 1997-1997
Officer of Entergy Corporation
Executive Vice President and Chief 1995-1997
Financial Officer of Entergy
Corporation, Entergy Services,
Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
System Energy, Entergy Enterprises,
Entergy Operations, System Fuels
Inc., Entergy Integrated Solutions,
Inc., GSG&T, Prudential Oil & Gas,
Southern Gulf Railway, and Varibus
Corporation
Executive Vice President, Chief 1996-1997
Financial Officer, and Director of
ETHC
Executive Vice President and Chief 1996-1997
Financial Officer of Entergy
Operations Services, Inc.
Senior Vice President, Treasurer, and 1994-1997
Director of Entergy Pakistan, Ltd.
and Entergy Power Asia, Ltd.
Senior Vice President, Treasurer, and 1993-1997
Director of EPDC and Entergy-
Richmond Power Corporation
Senior Vice President, Treasurer, and 1995-1997
Director of EP Edegel, Inc., Entergy
Power Development International
Corporation, Entergy Power Holding
II, Ltd., EPMC, Entergy Power
Operations Corporation, Entergy
Power Operations Holdings, Ltd.,
Entergy Power Operations Pakistan
LDC, Entergy Victoria LDC, Entergy
Victoria Holdings LDC, EPG Cayman
Holding I, EPG Cayman Holding II,
Entergy Power CBA Holding, Ltd., and
Entergy Power Edesur Holding, Ltd.
Senior Vice President, Treasurer, and 1996-1997
Director of Entergy Power
International Holdings Corporation
Senior Vice President, Treasurer, and 1993-1997
Director of Entergy Power
Senior Vice President and Director of 1996-1997
Entergy Mexico Ltd.
Senior Vice President and Treasurer 1996-1997
of Entergy Power Peru, S.A.
Director of Entergy Arkansas, Entergy 1995-1997
Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New
Orleans, Entergy Services, System
Energy, Entergy Operations, GSG&T,
Prudential Oil & Gas, Southern Gulf
Railway, and Varibus Corporation
Director of System Fuels 1992-1997
Director of Entergy Integrated 1993-1997
Solutions, Inc.
Director of Entergy Power 1996-1997
International Corporation
Senior Vice President, Treasurer, and 1995-1996
Director of Entergy Edegel I, Inc.,
Entergy Power Holding I, Ltd., and
Entergy Yacyreta I, Inc.
Chairman of the Board of Entergy 1994-1995
Integrated Solutions, Inc.
Senior Vice President and Chief 1991-1995
Financial Officer of Entergy
Corporation, Entergy Arkansas,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
System Energy, Entergy Operations,
Entergy Services, and Entergy
Enterprises
Senior Vice President and Chief 1993-1995
Financial Officer of Entergy Gulf
States
Senior Vice President and Chief 1994-1995
Financial Officer of System Fuels
Director and Acting Chief Operating 1994-1995
Officer of Entergy Enterprises
Treasurer of Entergy Enterprises 1992-1996
Michael G. Thompson 57 Senior Vice President and General 1992-Present
Counsel of Entergy Corporation and
Entergy Services
Senior Vice President, General 1995-Present
Counsel, and Secretary of Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans
Senior Vice President - Law and 1992-Present
Secretary of Entergy Enterprises
Senior Vice President, Secretary, and 1994-Present
Director of Entergy Pakistan, Ltd.
and Entergy Power Asia, Ltd.
Senior Vice President, Secretary, and 1994-Present
Director of EPMC, Entergy Power
Operations Holdings, Ltd., and EP
Edegel, Inc.
Senior Vice President, Secretary, and 1995-1997
Director of Entergy Power
Development International
Corporation
Senior Vice President, Secretary, and 1995-Present
Director of Entergy Power Holding
II, Ltd., Entergy Power Operations
Corporation, and Entergy Power
Operations Pakistan LDC
Senior Vice President, Secretary, and 1996-Present
Director of Entergy Victoria LDC,
Entergy Victoria Holdings LDC, EPG
Cayman Holding I, EPG Cayman Holding
II, Entergy Power CBA Holding, Ltd.,
and Entergy Power Edesur Holding,
Ltd.
Senior Vice President, Secretary, and 1996-Present
Director of Entergy Power
International Holdings Corporation
Senior Vice President and Secretary 1997-Present
of Entergy London, Entergy London
Limited, Entergy Nuclear, Inc.,
Entergy Technology Company, ETHC,
and Entergy Power Generation Corporation
Senior Vice President, Secretary, and 1997-Present
Director of Entergy Electric Asia,
Ltd., Entergy Power Kingsnorth
Ltd., and Entergy Power Chile, Inc.
Manager, Secretary, and Director of 1997-Present
Entergy Power Chile, S.A.
Director of Entergy Power Peru, S.A. 1997-Present
Senior Vice President, Secretary, and 1992-Present
Director of EPDC
Senior Vice President, Secretary and 1992-1997
Director of Entergy-Richmond Power
Corporation
Vice President, Secretary, and 1994-Present
Director of Entergy Power
Vice President of Entergy Integrated 1994-Present
Solutions, Inc.
Secretary of Entergy Integrated 1993-Present
Solutions, Inc.
Director of ETHC and Entergy 1997-Present
Technology Company
Secretary of Entergy Corporation 1994-Present
Director of Entergy Integrated 1992-1996
Solutions, Inc.
Director of Entergy Operations 1996-Present
Services, Inc., and Entergy Power
Generation Corporation
Secretary of Entergy Services 1996-Present
Senior Vice President, Chief Legal 1993-1994
Officer, Director, and Secretary of
Entergy Power
Assistant Secretary of Entergy 1993-1994
Corporation
S. M. Henry Brown, Jr. 59 Vice President - Federal Governmental 1989-Present
Affairs of Entergy Corporation and
Entergy Services
William J. Regan, Jr. 51 Vice President of Entergy Services 1995-Present
Vice President and Treasurer of 1995-1998
Entergy Corporation, Entergy
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
System Energy, Entergy Operations,
Entergy Services, System Fuels Inc.,
GSG&T, Prudential Oil & Gas,
Southern Gulf Railway, and Varibus
Corporation
Vice President and Treasurer of ETHC, 1996-1998
Entergy Operations Services, Inc.,
and Entergy Enterprises
Vice President and Treasurer of 1997-1998
Entergy Nuclear, Inc., Entergy
Technology Company, and Entergy
Integrated Solutions, Inc.
Vice President and Treasurer of 1997-1998
Entergy Electric Asia, Ltd.
Vice President and Treasurer of 1997-Present
Entergy Power Chile, Inc., Entergy Power
International Holdings Corporation,
Entergy Power Kingsnorth Ltd.,
Entergy Pakistan, Ltd., EP Edegel,
Inc., Entergy Power Chile, S.A.,
Entergy Power Asia, Inc. and Entergy
Power Generation Corporation
Vice President and Treasurer of 1996-Present
EPDC, EPMC, Entergy Power Operations
Corporation, Entergy Power, and
Entergy- Richmond Power Corporation
Treasurer of Entergy London Limited 1997-Present
and Entergy London
Treasurer of Entergy Mexico Ltd. 1996-Present
Senior Vice President and Corporate 1989-1995
Treasurer of United Services
Automobile Association
Louis E. Buck, Jr. 49 Vice President and Chief Accounting 1995-Present
Officer and Assistant Secretary of
Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans,
System Energy, Entergy Operations,
and Entergy Services
Audit Controller of Entergy London 1997-Present
and Entergy London Limited
Assistant Secretary of Entergy 1995-Present
Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
Entergy Operations, and Entergy
Services
Director of Entergy Operations 1996-Present
Services, Inc.
Assistant Secretary of Entergy 1996-Present
Corporation and System Energy
Vice President and Chief Operating 1997-Present
Officer of Entergy International
Holdings Ltd., LLC, Entergy
International Ltd., LLC, Entergy
International Investments No. 1 LLC,
and Entergy International
Investments No. 2 LLC
Vice President and Chief Financial 1992-1995
Officer of North Carolina Electric
Membership Corporation
Michael B. Bemis (b) 50 Director and President of Entergy 1997-Present
London, Entergy London Limited,
London Electricity and CitiPower
Executive Vice President - 1997-Present
International Retail Operations of
Entergy Corporation and Entergy
Services
Executive Vice President - Retail 1992-1997
Services and Director of Entergy
Arkansas, Entergy Louisiana, and
Entergy Mississippi
Executive Vice President - Retail 1996-1997
Services of Entergy Corporation
Executive Vice President - Retail 1993-1997
Services of Entergy Gulf States
Executive Vice President - Retail 1992-1997
Services of Entergy New Orleans
Director of Entergy Gulf States 1994-1997
Director of Entergy New Orleans 1992-1994
Director of System Fuels 1992-1997
Director of Varibus Corporation, 1994-1997
Prudential Oil & Gas, Inc., GSG&T,
and Southern Gulf Railway Company
Director of Entergy Services and 1996-Present
Entergy Integrated Solutions, Inc.
Director of Entergy Enterprises 1996-1997
Frank F. Gallaher 52 Group President and Chief Utility 1997-Present
Operating Officer of Entergy
Corporation and Entergy Services
Director, Group President and Chief 1997-Present
Utility Operating Officer of Entergy
Arkansas, Entergy Louisiana, and Entergy
Mississippi
Group President and Chief Utility 1997-Present
Operating Officer of Entergy New Orleans
Group President and Chief Utility 1997-Present
Operating Officer of Entergy Gulf
States
Executive Vice President of 1996-1997
Operations of Entergy Corporation
Chairman of the Board of System Fuels 1992-Present
Chairman of the Board and Director of 1993-Present
Varibus Corporation, Prudential Oil
& Gas, Inc., GSG&T, and Southern
Gulf Railway Company
Chairman of the Board and Director of 1996-Present
Entergy Operations Services, Inc.
Executive Vice President - Operations 1993-1997
of Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi,
Entergy New Orleans, and Entergy
Services
President of Entergy Gulf States 1994-1996
Director of Entergy Gulf States 1993-Present
Director of Entergy Services and 1992-Present
System Fuels
Senior Vice President - Fossil 1992-1993
Operations of Entergy Arkansas,
Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans,
and Entergy Services
Naomi A. Nakagama 32 Senior Vice President-Finance and Treasurer 1998-Present
of Entergy Corporation
Senior Vice President and Treasurer of 1998-Present
Entergy Enterprises and Entergy
Integrated Solutions, Inc.
Vice President, Treasurer and Director 1998-Present
of Entergy Electric Asia, Ltd.
Vice President and Sector Manager of 1990-1997
Banque Nationale de Paris (financial
institution)
(a) Mr. Lupberger is a director of First Commerce Corporation, New
Orleans, LA, International Shipholding Corporation, New Orleans,
LA, and First National Bank of Commerce, New Orleans, LA.
(b) Mr. Bemis is an advisory director of Deposit Guaranty National
Bank, Jackson, MS.
Each officer of Entergy Corporation is elected yearly by the Board of
Directors.
Directorships shown in footnotes (a) and (b) above are generally
limited to entities subject to Section 12 or 15(d) of the Securities and
Exchange Act of 1934 or to the Investment Company Act of 1940.
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters
Entergy Corporation
The shares of Entergy Corporation's common stock are listed on the New
York Stock, Chicago Stock, and Pacific Exchanges.
The high and low prices of Entergy Corporation's common stock for each
quarterly period in 1997 and 1996 were as follows:
1997 1996
High Low High Low
(In Dollars)
First 28 3/8 24 30 3/8 26 3/8
Second 27 1/2 22 3/8 28 1/2 25 1/4
Third 28 24 1/16 28 5/8 24 7/8
Fourth 30 1/4 23 29 26 3/4
Dividends of 45 cents per share were paid on Entergy Corporation's
common stock in each of the quarters of 1997 and 1996.
As of February 28, 1998, there were 88,685 stockholders of record
of Entergy Corporation.
For information with respect to Entergy Corporation's future ability
to pay dividends, refer to Note 8, "DIVIDEND RESTRICTIONS." In addition to
the restrictions described in Note 8, PUHCA provides that, without approval
of the SEC, the unrestricted, undistributed retained earnings of any
Entergy Corporation subsidiary are not available for distribution to
Entergy Corporation's common stockholders until such earnings are made
available to Entergy Corporation through the declaration of dividends by
such subsidiaries.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Energy, and Entergy London
There is no market for the common stock of Entergy Corporation's
wholly owned subsidiaries. Cash dividends on common stock paid by the
subsidiaries to Entergy Corporation during 1997 and 1996, were as follows:
1997 1996
(In Millions)
Entergy Arkansas $128.6 $142.8
Entergy Gulf States $ 77.2 --
Entergy Louisiana $145.4 $179.2
Entergy Mississippi $ 59.2 $ 79.9
Entergy New Orleans $ 26.0 $ 34.0
System Energy $113.8 $112.5
Entergy London -- --
Entergy S.A. -- $ 0.7
Entergy Transener S.A. -- $ 1.7
Entergy Argentina S.A. -- $ 0.3
Entergy Argentina S.A. Ltd. -- $ 3.1
In January and February 1998, Entergy Corporation received common
stock dividend payments from its subsidiaries totaling $103.9 million.
For information with respect to restrictions that limit the ability of
System Energy, the domestic utility companies and Entergy London to pay
dividends, see Note 8. In order to improve its capital structure, Entergy
Gulf States ceased paying common stock dividends after the third quarter
of 1994. However, such dividends were resumed in the third quarter
of 1997. (See "Management's Financial Discussion and Analysis - Liquidity
and Capital Resources.")
Item 6. Selected Financial Data
Entergy Corporation.. Refer to information under the heading "ENTERGY
CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA - FIVE-YEAR
COMPARISON."
Entergy Arkansas. Refer to information under the heading "ENTERGY
ARKANSAS, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
Entergy Gulf States. Refer to information under the heading "ENTERGY
GULF STATES, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
Entergy Louisiana. Refer to information under the heading "ENTERGY
LOUISIANA, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
Entergy Mississippi. Refer to information under the heading "ENTERGY
MISSISSIPPI, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
Entergy New Orleans. Refer to information under the heading "ENTERGY
NEW ORLEANS, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
System Energy. Refer to information under the heading "SYSTEM ENERGY
RESOURCES, INC. SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON."
Entergy London (Successor Company). Refer to information under the
headings "ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY SELECTED FINANCIAL
DATA" AND "LONDON ELECTRICITY PLC AND SUBSIDIARIES SELECTED FINANCIAL DATA
- - FOUR-YEAR COMPARISON."
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Entergy Corporation and Subsidiaries. Refer to information under the
heading "ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES," " - SIGNIFICANT
FACTORS AND KNOWN TRENDS," and "- RESULTS OF OPERATIONS."
Entergy Arkansas. Refer to information under the heading "ENTERGY
ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF
OPERATIONS."
Entergy Gulf States. Refer to information under the heading "ENTERGY
GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS
OF OPERATIONS."
Entergy Louisiana. Refer to information under the heading "ENTERGY
LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF
OPERATIONS."
Entergy Mississippi. Refer to information under the heading "ENTERGY
MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS
OF OPERATIONS."
Entergy New Orleans. Refer to information under the heading "ENTERGY
NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS
OF OPERATIONS."
System Energy. Refer to information under the heading "SYSTEM ENERGY
RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF
OPERATIONS."
Entergy London (Successor Company). Refer to information under the
headings "ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY MANAGEMENT'S
FINANCIAL DISCUSSION AND ANALYSIS - RESULTS OF OPERATIONS" AND "LONDON
ELECTRICITY PLC AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - RESULTS OF OPERATIONS."
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Entergy Corporation and Subsidiaries. Refer to information under the
heading "ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL
DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS."
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Entergy Corporation and Subsidiaries:
Report of Management 46
Audit Committee Chairperson's Letter 47
Management's Financial Discussion and Analysis 48
Report of Independent Accountants 62
Management's Financial Discussion and Analysis 63
Statements of Consolidated Income For the Years Ended December 31, 67
1997, 1996, and 1995
Statements of Consolidated Cash Flows For the Years Ended December 68
31, 1997, 1996, and 1995
Consolidated Balance Sheets, December 31, 1997 and 1996 70
Statements of Consolidated Retained Earnings and Paid-In Capital 72
for the Years Ended December 31, 1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 73
Entergy Arkansas, Inc.:
Report of Independent Accountants 75
Management's Financial Discussion and Analysis 76
Statements of Income For the Years Ended December 31, 1997, 1996, 78
and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 79
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 80
Statements of Retained Earnings for the Years Ended December 31, 82
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 83
Entergy Gulf States, Inc.:
Report of Independent Accountants 85
Management's Financial Discussion and Analysis 86
Statements of Income (Loss) For the Years Ended December 31, 1997, 88
1996, and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 89
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 90
Statements of Retained Earnings for the Years Ended December 31, 92
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 93
Entergy Louisiana, Inc.:
Report of Independent Accountants 95
Management's Financial Discussion and Analysis 96
Statements of Income For the Years Ended December 31, 1997, 1996, 98
and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 99
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 100
Statements of Retained Earnings for the Years Ended December 31, 102
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 103
Entergy Mississippi, Inc.:
Report of Independent Accountants 105
Management's Financial Discussion and Analysis 106
Statements of Income For the Years Ended December 31, 1997, 1996, 108
and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 109
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 110
Statements of Retained Earnings for the Years Ended December 31, 112
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 113
Entergy New Orleans, Inc.:
Report of Independent Accountants 115
Management's Financial Discussion and Analysis 116
Statements of Income For the Years Ended December 31, 1997, 1996, 118
and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 119
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 120
Statements of Retained Earnings for the Years Ended December 31, 122
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 123
System Energy Resources, Inc.:
Report of Independent Accountants 124
Management's Financial Discussion and Analysis 125
Statements of Income For the Years Ended December 31, 1997, 1996, 126
and 1995
Statements of Cash Flows For the Years Ended December 31, 1997, 127
1996, and 1995
Balance Sheets, December 31, 1997 and 1996 128
Statements of Retained Earnings for the Years Ended December 31, 130
1997, 1996, and 1995
Selected Financial Data - Five-Year Comparison 131
Entergy London Investments plc and Subsidiary (Successor Company):
Report of Independent Accountants 132
Management's Financial Discussion and Analysis 133
Consolidated Statement of Loss For the Year Ended December 31, 1997 138
Consolidated Statement of Cash Flows For the Year Ended December 139
31, 1997
Consolidated Balance Sheet, December 31, 1997 140
Consolidated Statement of Changes in Shareholder's Equity for the 142
Year Ended December 31, 1997
Selected Financial Data 143
Notes to Financial Statements for Entergy Corporation and 144
Subsidiaries
London Electricity plc (Predecessor Company):
Report of Independent Accountants 201
Management's Financial Discussion and Analysis 202
Consolidated Statement of Operations For the Period from April 1, 206
1996 to January 31, 1997 and the Year Ended March 31, 1996
Consolidated Statement of Cash Flows For the Period from April 1, 207
1996 to January 31, 1997 and the Year Ended March 31, 1996
Consolidated Balance Sheet, March 31, 1996 208
Consolidated Statement of Changes in Shareholder's Equity for the 210
Period from April 1, 1996 to January 31, 1997 and the Year Ended
March 31, 1996
Selected Financial Data - Four-Year Comparison 211
Notes to Financial Statements 212
ENTERGY CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
The management of Entergy Corporation and subsidiaries has prepared
and is responsible for the financial statements and related financial
information included herein. The financial statements are based on
generally accepted accounting principles in the United States. Financial
information included elsewhere in this report is consistent with the
financial statements.
To meet its responsibilities with respect to financial information,
management maintains and enforces a system of internal accounting controls
that is designed to provide reasonable assurance, on a cost-effective
basis, as to the integrity, objectivity, and reliability of the financial
records, and as to the protection of assets. This system includes
communication through written policies and procedures, an employee Code of
Conduct, and an organizational structure that provides for appropriate
division of responsibility and the training of personnel. This system is
also tested by a comprehensive internal audit program.
The independent public accountants provide an objective assessment of
the degree to which management meets its responsibility for fairness of
financial reporting. They regularly evaluate the system of internal
accounting controls and perform such tests and other procedures as they
deem necessary to reach and express an opinion on the fairness of the
financial statements.
Management believes that these policies and procedures provide
reasonable assurance that its operations are carried out with a high
standard of business conduct.
/s/ Ed Lupberger /s/ Louis E. Buck
ED LUPBERGER LOUIS E. BUCK
Chairman of the Board and Chief Vice President, Chief Accounting
Executive Officer of Entergy Officer and Assistant Secretary
Corporation, Entergy Arkansas, (Principal Accounting Officer)
Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans,
and Entergy London
/s/ Donald C. Hintz
DONALD C. HINTZ
President and Chief Executive Officer of System Energy
ENTERGY CORPORATION AND SUBSIDIARIES
AUDIT COMMITTEE CHAIRPERSON'S LETTER
The Entergy Corporation Board of Directors' Audit Committee is
comprised of five directors who are not officers of Entergy Corporation:
Dr. Paul W. Murrill, Chairperson, Lucie J. Fjeldstad, James R. Nichols,
Eugene H. Owen, and Bismark A. Steinhagen. The committee held three
meetings during 1997.
The Audit Committee oversees Entergy Corporation's financial reporting
process on behalf of the Board of Directors and provides reasonable
assurance to the Board that sufficient operating, accounting, and financial
controls are in existence and are adequately reviewed by programs of
internal and external audits.
The Audit Committee discussed with Entergy's internal auditors and the
independent public accountants (Coopers & Lybrand L.L.P.) the overall scope
and specific plans for their respective audits, as well as Entergy
Corporation's financial statements and the adequacy of Entergy
Corporation's internal controls. The committee met, together and
separately, with Entergy's internal auditors and independent public
accountants, without management present, to discuss the results of their
audits, their evaluation of Entergy Corporation's internal controls, and
the overall quality of Entergy Corporation's financial reporting. The
meetings were designed to facilitate and encourage private communication
between the committee and the internal auditors and independent public
accountants.
/s/ Dr. Paul W. Murrill
DR. PAUL W. MURRILL
Chairperson, Audit Committee
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Net cash flow from operations for Entergy, the domestic utility
companies and System Energy for the years ended December 31, 1997, 1996,
and 1995, and for Entergy London for the year ended December 31, 1997, was
as follows:
1997 1996 1995
(In Millions)
Entergy $1,725 $1,528 $1,504
Entergy Arkansas $ 434 $ 377 $ 338
Entergy Gulf States $ 466 $ 322 $ 401
Entergy Louisiana $ 341 $ 352 $ 385
Entergy Mississippi $ 159 $ 182 $ 185
Entergy New Orleans $ 49 $ 44 $ 99
System Energy $ 278 $ 287 $ 96
Entergy London $ 51 N/A N/A
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
previously deferred costs; thus, there is no effect on net income. These
phase-in plans will continue to contribute to Entergy's cash position in
the immediate future. Specifically, the Grand Gulf 1 phase-in plans will
expire in September 1998 for Entergy Arkansas and Entergy Mississippi, and
in 2001 for Entergy New Orleans. Entergy Gulf States' phase-in plan for
River Bend expired in February 1998, and Entergy Louisiana's phase-in plan
for Waterford 3 expired in June 1997. Competitive growth businesses
contributed $104 million to Entergy Corporation's cash flow from operations
in 1997. In accordance with the purchase method of accounting, London
Electricity's results of operations are not included in Entergy Corporation
and Subsidiaries' Statements of Consolidated Cash Flows prior to February
1, 1997, the effective date of the acquisition of London Electricity.
Financing Sources
As discussed in Note 13, Entergy London acquired London Electricity
for $2.1 billion 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. Entergy London
refinanced a portion of this debt during the fourth quarter of 1997 through
the issuance of $300 million of quarterly income preferred securities.
Subsequent to the refinancing, the debt is now an obligation of Entergy
UK Limited, an indirect, wholly-owned subsidiary of Entergy Corporation.
However, the obligation is reflected in the financial statements of Entergy
London, because the facility is guaranteed by Entergy London, Entergy UK
Limited's indirect, wholly-owned subsidiary. Entergy London recognizes
the interest expense associated with this debt in its financial statements,
with a credit to shareholder's equity for the same amount. This credit
to shareholder's equity offsets dividends as they are declared from Entergy
London to Entergy UK Limited. These dividends are the funding mechanism
for Entergy UK Limited to service this debt. Management intends to
declare future dividends from Entergy London to enable Entergy UK Limited
to continue to service this debt.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
London Electricity is Entergy London's sole investment and only asset.
Entergy London is therefore dependent upon dividends from London
Electricity for all of its cash flow. In addition to London Electricity's
cash flow from operations, Entergy London has other primary sources of
liquidity including London Electricity's several uncommitted credit lines
provided by banking institutions, and London Electricity's commercial paper
program. In addition, London Electricity intends to use availability under
existing facilities, or replacements thereof, to finance its remaining
payment of windfall profits taxes in December 1998, which will total
approximately $117 million (approximately BPS70 million).
Management believes that cash flow from operations, together with
Entergy London's existing sources of credit and the restructuring of its
credit facilities in November 1997, will result in sufficient financial
resources being available to meet Entergy London's projected capital needs
and other expenditure requirements for the foreseeable future. London
Electricity has represented to the Regulator, in connection with its PES
license, that it will use all reasonable endeavors to maintain an
investment grade rating on its long-term debt.
Entergy Mississippi issued a series of general and refunding mortgage
bonds in June 1997 totaling $65 million, the proceeds of which were used to
meet a scheduled July 1, 1997 debt maturity. Excluding the London
Electricity investment and the Entergy Mississippi bond issuance, cash from
operations, supplemented by cash on hand, was sufficient to meet
substantially all investing and financing requirements of the domestic
utility companies, System Energy, and Entergy London, including capital
expenditures, dividends, and debt/preferred stock maturities during 1997.
Entergy's domestic utility companies other than Entergy Mississippi
have been able to fund their capital requirements with cash from operations
as discussed above in "Cash Flow." 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, System
Energy, and Entergy London will continue to refinance and/or redeem higher
cost debt and preferred stock prior to maturity. See Note 10 for a
discussion of the refinancing by Entergy Louisiana. Entergy's domestic
utility companies and Entergy London may continue to establish special
purpose trusts or limited partnerships as financing subsidiaries for the
purpose of issuing quarterly income preferred securities, such as those
issued in 1996 by Entergy Louisiana Capital I and Entergy Arkansas Capital
I, and those issued in 1997 by Entergy Gulf States Capital I and Entergy
London Capital L.P. Entergy Corporation, the domestic utility companies,
System Energy, and Entergy London also have the ability to effect short-
term borrowings. See Notes 4, 5, 6, 7, and 9 for additional information on
Entergy's capital and refinancing requirements in 1998-2002 and available
lines of credit.
Financing Uses
Management believes that productive investment by Entergy is integral
to enhancing the long-term value of its common stock. Entergy has been
expanding its investments in business opportunities overseas as well as in
the United States. As of December 31, 1997, Entergy had acquired or
participated in foreign electric ventures in Australia, Argentina, Chile,
China, Pakistan, Peru, and the UK and had acquired several
telecommunications-based businesses in the United States. The ability of
Entergy Corporation to provide additional capital to exempt wholesale
generators or foreign utility companies currently is subject to the SEC's
regulations under PUHCA. Absent SEC approval, these regulations limit the
aggregate amount that Entergy may invest in foreign utility companies and
exempt wholesale generators to 50% of consolidated retained earnings at the
time an investment is made. As of November 1997, Entergy Corporation no
longer had capacity to make additional investments under these regulations
without SEC approval. Entergy has applied to the SEC to obtain additional
authority to make such investments, and is also exploring means of raising
capital for other foreign investments in a manner not inconsistent with
these regulations. As of December 31, 1997, Entergy Corporation had a net
investment of $1.3 billion in equity capital in competitive growth
businesses. See Note 13 for a discussion of Entergy London's acquisition
of London Electricity effective February 1, 1997.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
To make capital investments, fund its subsidiaries, and pay dividends,
Entergy Corporation will utilize internally generated funds, cash on hand,
funds available under its bank credit facilities, funds received from its
dividend reinvestment and stock purchase plan, and bank financings, as
required. See Note 5 for information regarding proceeds from the issuance
of common stock under Entergy Corporation's dividend reinvestment and stock
purchase plan during 1997. See Note 9 for a discussion of capital
requirements. Entergy Corporation receives funds through dividend payments
from its subsidiaries. During 1997, such dividend payments from
subsidiaries totaled $550.2 million. Entergy Gulf States resumed paying
common stock dividends in the third quarter of 1997. In 1997, Entergy
Corporation paid $438 million of cash dividends on its common stock.
Declarations of dividends on Entergy's common stock are made at the
discretion of its Board of Directors. See Note 8 for information on
dividend restrictions.
Entergy London's primary need for liquidity is to pay interest on its
debt, and management believes that it will receive sufficient dividends
from London Electricity to make such payments. Entergy London believes
that London Electricity will be able to distribute all cash flow generated
in excess of amounts necessary for London Electricity to conduct its
business in compliance with its PES License.
Entergy Corporation and Entergy Gulf States
See Notes 2 and 9 regarding River Bend and Cajun litigation. During
the fourth quarter of 1997, Entergy Gulf States established reserves of
$381 million ($227 million net of tax) for the probable effects of the
agreement in principle as discussed in Note 2. Final resolution of these
matters could negatively affect Entergy Gulf States' ability to obtain
financing, which in turn could affect Entergy Gulf States' liquidity and
ability to pay common stock dividends to Entergy Corporation. See Note 2
for information related to the proposed agreement in principle between the
parties to the Entergy Gulf States rate proceedings in Texas.
Entergy Corporation and System Energy
Under the Capital Funds Agreement, Entergy Corporation has agreed to
supply System Energy with 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. 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 committed 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 consent of certain creditors.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Domestic Competition and Industry Challenges
The electric utility industry traditionally has operated as a
regulated monopoly in which there was little opportunity for direct
competition in the provision of electric service. The industry is now
undergoing a transition to an environment of increased retail and wholesale
competition. The causes of the movement toward competition are numerous
and complex. They include legislative and regulatory changes,
technological advances, consumer demands, relative cost and availability of
natural gas and other fuels, environmental regulations, and other factors.
The increasingly competitive environment presents opportunities to compete
for new customers, as well as the risk of loss of existing customers. The
following issues have been identified by Entergy as its major competitive
challenges.
Open Access Transmission
In response to FERC Order No. 888, which was issued in 1996 and
requires that all public utilities subject to FERC jurisdiction provide
comparable wholesale transmission access through the filing of a single
open access tariff, Entergy Services filed on behalf of the domestic
utility companies a request for clarification and rehearing of the
following four issues: (i) the special nature and treatment of stranded
nuclear decommissioning costs; (ii) the reciprocity rules applicable to
rural electric cooperatives; (iii) the functional unbundling requirements
for registered holding companies; and (iv) the nature of network service.
The request for rehearing remains pending.
FERC also issued Order No. 889 in 1996, prescribing the requirements
and procedures for the implementation and maintenance of an open access
same-time information system by each public utility. In addition, FERC
issued a notice of proposed rulemaking concerning capacity reservation
tariffs as the next phase of its efforts to promote wholesale competition.
In July 1996, Entergy Services filed an open access pro forma tariff on
behalf of the domestic utility companies.
In September 1996, FERC issued an order revising the original
requirement that open access same-time information service sites and
standards of conduct be in place for all transmission providers by November
1, 1996. FERC scheduled the operation of open access same-time information
service sites to begin on a test basis in December 1996, with full
commercial operation and compliance with the standards of conduct beginning
in January 1997. In January 1997, Entergy Services filed its standards of
conduct with FERC and an open access same-time information site was
established. In July 1997, Entergy Services filed its wholesale
transmission open access compliance tariff incorporating the requirements
of FERC Order No. 888-A.
Transition to Competition Filings
Entergy has initiated discussions with its state and local regulators
regarding an orderly transition to a more competitive market for
electricity. As discussed in more detail in Note 2, each of the domestic
utility companies made filings in 1996 or 1997 with their respective state
or local regulators concerning the transition to competition. These
filings called for the accelerated recovery of the companies' nuclear
investment and nuclear-related purchase obligations over a seven-year
period and for the protection of certain classes of ratepayers from
possibly unfairly bearing the burden of cost shifting which may result from
competition. The majority of the domestic utility companies' current net
investment in nuclear generation shown in Note 1 was included in the
proposals for accelerated recovery filed with state and local regulators.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Retail and Wholesale Rate Issues
The retail regulatory philosophy is shifting in some jurisdictions
from traditional cost-of-service regulation to incentive-rate regulation.
Incentive and performance-based rate plans encourage efficiencies and
productivity while permitting utilities and their customers to share in the
results. Entergy Mississippi and Entergy Louisiana have implemented
incentive-rate plans, although Entergy Louisiana's plan has now expired.
Several of the domestic utility companies have recently been ordered
to grant base rate reductions and have refunded or credited customers for
previous overcollections of rates. The continuing pattern of rate
reductions reflects both lower costs of service ordered by regulators and
the competitive environment in which the domestic utilities operate. See
Note 2 for additional discussion of rate reductions and incentive-rate
regulation, as well as a proposed System Energy rate increase.
Legislative Activity
Retail wheeling is the transmission and/or distribution by an electric
utility of energy produced by another entity over the utility's
transmission and distribution system to a retail customer in the electric
utility's area of service. California, Rhode Island, New Hampshire,
Massachusetts, Montana, Oklahoma, Illinois, and Pennsylvania, among others,
have begun the restructuring of the utility industry within their
respective states. Most other states have initiated studies of industry
restructuring. Included in many of these restructuring plans and studies
are provisions or proposals allowing utilities to have a reasonable
opportunity to recover investments in utility plant that have previously
been determined to be prudently incurred. However, some states have not
allowed full recovery of such investments. Within the areas served by the
domestic utility companies, formal proceedings to study retail
competition/industry restructuring are being conducted by the LPSC, the
MPSC, the PUCT, and the Council.
A number of bills have been introduced in the U.S. Congress calling
for deregulation of the electric power industry. Included among these 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. The Energy and Power Subcommittee of the
Commerce Committee of the U.S. House of Representatives held hearings on
this issue in October 1997, at which it was agreed that a consensus
approach to electricity deregulation was needed. However, no agreement
has been reached as to a specific approach.
Entergy Gulf States was an active participant in discussions aimed at
developing legislation relating to electric utility industry restructuring
and competition in the Texas Legislature. However, no such legislation was
passed before the Legislature adjourned in June 1997. The legislature will
not reconvene until January 1999, by which time Entergy Gulf States expects
that the PUCT will have acted on the transition to competition filing of
Entergy Gulf States.
The Arkansas Senate has passed a resolution requesting a study of the
impact of electric utility industry competition on the citizens of
Arkansas, the electric utility industry, and the regulatory authority of
the APSC. This study, to be performed by a joint legislative committee of
the Arkansas General Assembly, began in December 1997, and is expected to
conclude prior to the 1999 legislative session.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
The SEC issued Rule 58 under PUHCA, which became effective on March
22, 1997, permitting registered public utility holding companies such as
Entergy to enter into an array of energy-related businesses for which
specific approval had previously been required. These businesses include,
among other things, management, operations and maintenance contracting for
energy-related facilities, energy efficiency contracting, and the sale and
servicing of a range of electric appliances and equipment. EPMC and
Entergy Holdings, Inc., wholly-owned subsidiaries of Entergy, now operate
pursuant to Rule 58. EPMC terminated its EWG status shortly after Rule 58
became effective.
Municipalization
In some areas of the country, municipalities whose residents are
served at retail by investor-owned utilities are exploring the possibility
of establishing new electric distribution systems, or extending existing
ones. In some cases, municipalities are also seeking new delivery points
in order to serve retail customers, especially large industrial customers,
that currently receive service from an investor-owned utility. Where
successful, the establishment of a municipal system or the acquisition by
a municipal system of a utility's customers could result in the utility's
inability to recover costs that it has incurred for the purpose of serving
those customers.
Industry Consolidation
Another factor in the transition to competition nationwide is the
continuing and accelerating trend of utility mergers and joint ventures.
A significant trend over the last several years has been the combination
of electric utilities and gas pipeline and/or distribution companies.
Such mergers and joint ventures for the same purpose are expected to
continue.
Functional Unbundling
An additional trend is the unbundling of traditional utility
functions. In some areas of the country, utilities have either sold or
are attempting to sell all or a substantial portion of their generation
assets and will become, in large part, suppliers of transmission and/or
distribution services only.
Effects of Alternate Energy Sources on Retail Electric Sales to Industrial
and Large Commercial Customers
Many industrial and large commercial customers of the domestic utility
companies have energy intensive needs. These customers are exploring
available energy alternatives such as fuel switching, cogeneration, self-
generation, production shifting, and efficiency measures in an effort to
reduce their energy costs. To the extent that customers avail themselves
of these options, the domestic utility companies may suffer a loss of load.
Recognizing the options that customers might pursue, the domestic
utility companies, in particular, Entergy Gulf States and Entergy
Louisiana, have negotiated electric service contracts with large industrial
and commercial customers for the purpose of retaining the load represented
by these customers. Electric service under such agreements may be provided
at tariffed rates lower than would otherwise be applicable. While the
results of operations of the domestic utility companies have not thus far
been materially adversely affected as a result of the negotiation of retail
electric service agreements with industrial and large commercial customers,
this has been due in large measure to the utilities' success in reducing
costs, overall load growth, increasing sales to all customer classes, and
the regulatory treatment accorded to negotiated electric service
agreements. In view of the likelihood of increased competition in the
electric utility business in the future, there can be no assurance that
at risk industrial and large commercial customers will continue to be
retained by the domestic utility companies.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
In 1995, Entergy Louisiana received separate notices from two large
industrial customers that they were proceeding with proposed cogeneration
projects for the purpose of fulfilling their future electric energy needs.
In 1997, net income decreased by approximately $6 million and sales
declined by 1,662 megawatt hours from the prior year, as a result of these
customers proceeding with their proposed cogeneration projects. These
customers will continue to purchase energy from Entergy Louisiana, but at a
reduced level.
Change in Contract with Steam Customer
In 1996, Entergy Gulf States entered into agreements concerning a
steam generating station that historically had been dedicated to providing
steam and cogenerated electricity for a large industrial customer. Under
these agreements, the generating facility was leased to the customer, but
Entergy Gulf States continues to operate the facility. The customer is
spending approximately $190 million to make major improvements to the
facility, including a new 150 MW gas turbine generator. As a result of
these agreements, which were entered into with the expectation that the
customer otherwise would terminate its contracts with Entergy Gulf States
and construct its own generating facilities, Entergy Gulf States' revenues
from this customer are being reduced by approximately $33 million annually
from the 1996 level of revenues, beginning in August 1997, and Entergy Gulf
States' net income is being reduced by approximately $15 million annually.
Revenue from this customer amounted to $44 million and $59 million in 1997
and 1996, respectively.
Domestic and Foreign Competitive Growth Businesses
Entergy Corporation seeks opportunities to expand its foreign
businesses and its domestic businesses that are not regulated by state and
local 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 domestic and foreign nonregulated businesses. These
investments may involve a greater risk than domestically regulated utility
enterprises. In 1997, Entergy Corporation's competitive growth businesses
reduced consolidated net income by approximately $139 million principally
due to the impact of a windfall profits tax in the UK, which was partially
offset by a reduction in the UK corporation tax rate, as discussed in more
detail below in "Windfall Profits Tax". Excluding the impact of these
and other non-recurring items, the competitive growth businesses
contributed $51 million to consolidated net income during 1997.
In an effort to expand into new energy-related businesses, Entergy has
begun to commercialize the fiber optic telecommunications network that
connects its facilities and supports its internal business needs. Entergy
provides long-haul fiber optic capacity to major telecommunications
carriers which, in turn, market that service to third parties. The
Telecommunications Act of 1996 permits a company such as Entergy to market
such a service, subject to state and local regulatory approval. This law
contains an exemption from PUHCA that will permit registered utility
holding companies to form and capitalize subsidiaries to engage in
telephone, telecommunications, and information service businesses without
SEC approval. However, the law requires that such telecommunications
subsidiaries file for exemption from regulation with the Federal
Communications Commission, and that they not engage in transactions with
utility affiliates within their holding company systems or acquire utility
affiliates' rate-based property without state or local regulatory approval.
EPMC, which was created in 1995 to become a buyer and seller of
electric energy and generating fuels, operates pursuant to Rule 58 under
PUHCA. In February 1996, FERC approved sales of electricity by EPMC at
market-based rates. Such approval allows EPMC to provide wholesale
customers with a variety of services, including physical trading. An
application before the SEC seeking additional authority for EPMC to
purchase and sell derivative contracts relating to electricity, gas, and
fuels was approved in January 1998.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
On December 18, 1996, Entergy made a formal cash offer to acquire
London Electricity for $2.1 billion. London Electricity is an REC serving
approximately two million customers in the metropolitan area of London,
England. The offer was approved by authorities in the UK and was made
unconditional on February 7, 1997. Entergy subsequently gained control of
100% of the common shares of London Electricity. 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,
which has since been refinanced (see Note 7). Entergy has accounted for
the transaction as a purchase and accordingly has included the results of
London Electricity in its consolidated results of operations effective
February 1, 1997.
Through its London Electricity acquisition, Entergy expects to gain
valuable experience in the deregulated UK electricity market, in
anticipation of the deregulation of the 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 in late 1998. In conjunction with the
acquisition of London Electricity, Entergy established an international
retail operations group to coordinate retail electric operations in the UK,
Australia, and Argentina.
In September 1997, EPDC acquired KPL for $67 million. KPL owns land
in Southeast England and certain rights to build a power station. The
acquisition of KPL was financed by borrowings under a BPS50 million ($82
million) credit facility with an international bank, which has since been
increased to BPS100 million ($165 million). In early October 1997, EPDC
announced construction of a 770 MW combined cycle gas turbine merchant
power plant on the KPL site to be known as Damhead Creek. Construction is
scheduled to begin in April 1998, at an estimated cost of $625 million.
The target date for commercial operation is the second quarter of 2000.
Financing and other project requirements are currently in the final stages
of development
In December 1997, SCC, a wholly-owned subsidiary of EPDC, entered into
a BPS646 million ($1.07 billion) nonrecourse credit facility with an
international bank group for the construction of 1,200 MW gas-fired power
plant in Hull, England. The power plant will sell power into the UK power
pool at prices established by the market. SCC entered into a lump-sum
contract to build the power plant with a major international contractor.
SCC has also entered into a series of contracts including a long-term
ground lease for the site, a long-term gas supply agreement including take-
or-pay obligations, and a long-term power supply with the industrial host.
In connection with an equity contribution obligation to SCC, EPDC provided
a BPS48 million ($79 million) letter of credit under a BPS100 million ($165
million) revolving credit facility. Entergy Corporation has issued a $170
million guaranty of EPDC's obligations under the revolving credit facility.
The total cost of this project currently is estimated to be approximately
$875 million and the project is expected to be operational by January 2000.
In 1997, Entergy continued to expand and diversify its domestic and
foreign businesses. Such efforts included the formation of a joint venture
(Entergy Hyperion Telecommunications) to offer competitive local access
telephone services to business customers in the metropolitan areas of
Little Rock, Arkansas, Jackson, Mississippi, and Baton Rouge, Louisiana.
Entergy Nuclear, Inc., a wholly-owned subsidiary of Entergy Enterprises,
entered into an agreement to provide management services for initial
decommissioning activities (through September 30, 1998) at the Maine Yankee
nuclear plant, owned by the Maine Yankee Atomic Power Company, whose board
of directors announced in August 1997 the permanent closure of the plant.
Entergy also continued its expansion into the electronic security
service field in 1997 through the acquisition by Entergy Security Company
(a wholly-owned subsidiary of ETHC) of the Ranger American group of
companies, a leading provider of electronic security services in the
largest cities in Texas and in Atlanta, Georgia, which has approximately
140,000 customers and annual revenues of approximately $53 million. The
aggregate purchase price (comprised of Entergy common stock and cash) was
approximately $61 million.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
As a part of its efforts to reposition itself in the evolving
international power market, Entergy sold all or part of its interests in
various power development projects for proceeds of $64 million, realizing
after-tax gains of $17.6 million. Entergy Power Chile, S.A., an indirect
wholly-owned subsidiary of Entergy Power purchased a 25% interest in the
San Isidro project, a 370 MW gas-fired, combined cycle generating facility
under construction in Chile. Entergy also announced in 1997 that, through
a joint venture entered into by a subsidiary, it commenced construction of
a 24 MW cogeneration plant in Nantong, China.
Foreign Distribution and Supply
On April 1, 1995, 1996, and 1997 certain reductions in London
Electricity's allowed distribution revenues were made by the Regulator.
Such allowed distribution revenues were reduced by 14% and 11% on April 1,
1995 and April 1, 1996, respectively, following reviews by the Regulator.
On April 1, 1997, London Electricity's allowed distribution revenues were
further decreased by 3%, with further annual reductions of 3% to occur on
April 1, 1998 and 1999. London Electricity is pursuing a number of cost
efficiency initiatives in an attempt to partially offset the expected price
decreases. Such efficiencies will include voluntary early retirement
programs, work force reductions, and labor cost realignment, and are
expected to generate substantial cost savings when fully implemented by
fiscal year 2001. The one-time cost of such savings will be approximately
$58 million, which has been provided for by London Electricity.
At present, London Electricity has an exclusive right in its franchise
area to supply electricity to customers with demand of less than 100 KW.
In late 1998, this segment of the supply business will become open to
competition, subject to a six-month transition period. See Note 2 for
additional information related to expanded competition in the supply
business and London Electricity's expected expenditures in preparation for
full competition in supply by June 1999 and the Regulator's proposals
regarding recovery of such costs.
On July 1 in each of the years 1997 through 2000 certain adjustments
to Entergy's Australian subsidiary's (CitiPower's) allowed distribution
revenues have been made by CitiPower's regulator. Such distribution
revenues have been and will be adjusted by 1% less than the change in the
consumer price index for each of the respective years. CitiPower has
implemented certain cost efficiency and marketing initiatives to mitigate
the impact of such revenue adjustments.
At present, CitiPower has an exclusive right in its franchise area to
supply electricity to customers with annual usage of less than 750 MWH. In
July 1998 and January 2001, CitiPower customers with annual usage of
between 160 MWH to 750 MWH and less than 160 MWH, respectively, will become
open to supply business competition.
Retail prices for CitiPower non-franchise supply customers are subject
to competitive market forces and are not regulated except for network
tariffs, which are based on a maximum average charge incorporating annual
price changes of 1.5% less than the change in the consumer price index plus
full recovery of transmission charges. These controls will apply through
the year 2000.
The London Electricity and CitiPower supply businesses generally
involve entering into fixed price contracts to supply electricity to
customers who have become subject to competition. The electricity is
obtained primarily by purchases on a spot basis in which prices can be
volatile. London Electricity and CitiPower are exposed to risks arising
from differences between the fixed prices at which they sell electricity
and the fluctuating prices at which electricity is purchased unless such
exposure can be effectively hedged. This risk will be extended to
additional supply business customers as described above as they become
subject to competition.
To mitigate its exposure to volatility, London Electricity utilizes
contracts for differences ("CFDs") and power purchase contracts with
certain UK generators to fix the price of electricity for a contracted
quantity over a specific period of time. As of December 31, 1997, London
Electricity had outstanding CFDs and power purchase contracts for
approximately 40,000 GWH of electricity. These include a long term power
purchase contract with an affiliate, which is based on 27.5% of the
affiliate's capacity from its 1000 MW facility through the year 2010.
London Electricity's sales volumes were approximately 18,000 GWH for 1997.
Management's estimate of the fair value of London Electricity's CFDs
outstanding at December 31, 1997 is that fair value approximates contract
value.
In accordance with the debt covenants included in the financing
provisions of the CitiPower acquisition, CitiPower must hedge at least 80%
of its energy purchases. CitiPower's current strategy is to hedge
approximately 100% of its forecasted energy purchases through energy
trading swaps entered into with certain generators. At December 31, 1997
CitiPower has outstanding energy trading swaps totaling a notional amount
of 38,372 MW of average daily load of electricity. These contracts mature
through the year 2000. Management's estimate of the fair value of such
swaps outstanding at December 31, 1997 is a net liability of approximately
$86.1 million.
The potential exists for additional distribution price reductions in
both the UK and Australia. Cost efficiency initiatives may not result in
sufficient savings to offset price reductions. Price reductions are
mitigated by the inclusion of the general index for inflation in the
determination of allowed revenues.
Windfall Profits Tax
As a result of Parliamentary elections held on May 1, 1997, the Labour
Party gained control of the UK Government. On July 31, 1997, the British
government enacted a one-time "windfall profits tax" on privatized
industries, including regional electric utilities such as London
Electricity. London Electricity's windfall profits tax liability is
approximately BPS140 million (approximately $234 million), which will not
be deductible for UK corporation tax purposes. Payment of the tax is
required in two equal installments, the first of which was paid on December
1, 1997, and the second due on December 1, 1998.
The UK Government also decreased the UK corporation tax rate from 33%
to 31%, effective April 1, 1997. In accordance with SFAS 109, "Accounting
for Income Taxes", this reduction resulted in a one-time reduction in
income tax expense of approximately BPS38 million (approximately $65
million).The liability for the windfall profits tax (with a corresponding
increase in income tax expense) 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
On January 6, 1997, Waterford 3 received from the NRC its SALP report
for the period April 29, 1995 through November 30, 1996. During this
period, observed performance declined from the previous SALP report, and
three of the four functional areas received lower ratings. Waterford 3
personnel are meeting with NRC personnel periodically, and significant
Waterford 3 management changes have been effected in order to address these
matters. Additionally, Waterford 3 has instituted a multi-year program to
improve performance and is incurring additional costs in doing so.
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 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
On October 7, 1997, the RUS elected not to become the transferee of
Cajun's 30% interest in River Bend. Accordingly, under the terms of the
Cajun Settlement, Cajun's interest in River Bend was transferred by Cajun's
Trustee in Bankruptcy to Entergy Gulf States on December 23, 1997. As a
result, Entergy Gulf States recorded this 30% interest at $139 million
based on management's estimate of the fair value of the asset at the time
of transfer. Entergy Gulf States recorded a corresponding gain of $139
million in its results of operations in 1997 to reflect this transfer.
This portion of River Bend will not be subject to cost of service
regulation. In connection with the transfer, Cajun established a trust
fund in the amount of $132 million to satisfy its obligation for
decommissioning its 30% share of the plant. See Note 9 for additional
information.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Labor Agreements
In 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 stipulates that no layoffs will occur in
the next two years and wages will be increased 3% per year in 1997 and
1998.
In July 1997, Entergy Operations and the union representing 317
employees at River Bend and Entergy Mississippi and the union representing
400 of its employees signed two-year labor contracts for the period from
October 1998 to October 2000 which stipulate that no layoffs of covered
employees will occur over the next two years and that wages will be
increased 3% in each of the next two years.
Deregulated Utility Operations
Entergy Gulf States discontinued regulatory accounting principles for
its wholesale jurisdiction and steam department and the Louisiana
deregulated portion of River Bend during 1989 and 1991, respectively. The
operating income from these operations was $19.7 million in 1997, $13.9
million in 1996, and $1.2 million in 1995.
The increase in 1997 net income from deregulated operations was
primarily due to decreased steam department expenses, partially offset by
reduced wholesale jurisdiction revenues. The increase in 1996 net income
from such operations was principally due to increased revenues, partially
offset by increased depreciation. The future impact of the deregulated
utility operations on Entergy and Entergy Gulf States' results of
operations and financial position will depend on future operating costs,
the efficiency and availability of generating units, the future market for
energy over the remaining life of the assets, the operation of the steam
generating station leased to a large industrial customer described above in
"Change in Contract with Steam Customer", and the recoverability through
nonregulated power sales of the $139 million of net book value of the 30%
of River Bend previously owned by Cajun. See "Cajun - River Bend" above.
Property Tax Exemptions
Waterford 3's local property tax exemptions expired in December 1995.
In a March 1996 LPSC order, Entergy Louisiana was permitted to defer
recovery of the estimated Waterford 3 property tax from January 1996
through June 1996. The order allowed the recovery of the property tax
beginning in July 1996 and for recovery, from July 1996 through June 1997,
of the related deferral. Entergy Louisiana paid property taxes of $18.9
million on Waterford 3 in 1997.
River Bend's local property tax exemptions expired in December 1996.
The 1997 property tax was approximately $12.9 million. The portion of the
property tax related to the Texas jurisdiction was included in the rate
proceeding filed with the PUCT in November 1996 and in the fourth required
Merger-related earnings review filed with the LPSC in May 1997.
Accounting Issues
Continued Application of SFAS 71
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 for the foreseeable
future.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
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 could have a material
adverse impact on Entergy's financial statements.
The SEC has expressed concern regarding the continued applicability of
SFAS 71 to the financial statements of electric utilities that have been
ordered by regulators to adopt transition to competition plans or are in
the process of participating with the state legislatures 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 investments in
uneconomic or noncompetitive generating plants and other regulatory assets
(together defined as 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.
During 1997, EITF 97-4: "Deregulation of the Pricing of Electricity -
Issues Related to the Application of FASB Statements No. 71 and 101" was
issued, specifying that SFAS 71 should be discontinued at a date no later
than when the details of the transition to competition plan for all or a
portion of the entity subject to such plan are known. However, other
factors could cause the discontinuation of SFAS 71 before that date.
Additionally, EITF 97-4 promulgates that regulatory assets to be recovered
through cash flows derived from another portion of the entity which
continues to apply SFAS 71 should not be written off; rather, they should
be considered regulatory assets of the 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, definitive outcomes have not yet been determined;
therefore, the regulated operations continue to apply SFAS 71. See Note 1
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 9 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, databases, embedded microprocessors, suppliers, and other
constituent relationships 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 applications,
databases, computer equipment, and supplier performance with respect to
dates on or after January 1, 2000, unless corrected. Entergy has been
working on the above mentioned modifications and contingencies throughout
most of 1997, and will continue these efforts throughout 1998 and into
1999. Preliminary estimates of the total costs to be incurred by
Entergy's global enterprises in 1998 through mid-2000 are approximately
$95 million. Maintenance or modification costs will be expensed as
incurred, while the costs of new software will be capitalized and
amortized over the software's useful life in accordance with EITF 96-14:
"Accounting for the Costs Associated with Modifying Computer Software
for the Year 2000."
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Market Risks
Entergy uses derivative instruments to manage the interest rate risk
associated with certain of its variable rate credit facilities, the
currency exchange rate risk for interest payments associated with its
Entergy London Perpetual Junior Subordinated Debentures (Debentures), and
the commodity price risk associated with its foreign electricity supply and
domestic energy marketing businesses.
Entergy uses interest rate swaps to reduce the impact of interest rate
changes on its CitiPower and Entergy London variable rate credit
facilities. The interest rate swap agreements involve the exchange of
floating rate interest payments for fixed rate interest payments over the
life of the agreements. As of December 31, 1997, 77% of the outstanding
variable interest rate borrowings on these credit facilities were converted
to fixed interest rates through interest rate swaps. The potential loss in
fair value from these positions resulting from a hypothetical 10% adverse
movement in base interest rates is estimated at $29 million as of December
31, 1997. See Note 7 for further discussion of these swaps.
Entergy London's cash flows are predominately denominated in BPS.
Entergy London has entered a U.S. dollar denominated obligation through
issuance of the Perpetual Junior Subordinate Debentures (Debentures). To
hedge currency exposure on the Debentures, Entergy London has entered
foreign currency swap agreements to fix the British pound sterling
equivalent which will be required to service interest on the Debentures for
the next seven years. See Note 6 for further discussion of these swaps.
Entergy's UK and Australian electricity supply businesses utilize
fixed price contracts to supply electricity to their customers. The
electricity is obtained primarily by purchases from the spot market.
Because the price of electricity purchased from the market can be volatile,
Entergy's UK and Australian electricity supply businesses are exposed to
risks arising from differences between the fixed prices at which they sell
electricity and the fluctuating prices at which they purchase electricity.
To mitigate exposure to volatility, Entergy's UK and Australian electricity
supply businesses utilize contracts for differences (CFDs) and energy
trading swaps to fix the price of their electricity purchases. The
potential loss in fair value of these CFDs and energy trading swaps
resulting from a hypothetical 10% adverse movement in future electricity
prices is estimated at $103 million. Management, however, believes that
any loss actually realized would be substantially offset by the effects of
electricity price movements on the respective underlying hedged
electricity supply contracts. See Note 9 for further discussion of the
CFDs and energy trading swaps.
Entergy's domestic energy and natural gas marketing business enters
into sales and purchases of electricity and natural gas for delivery up to
twelve months into the future. Because the market prices of electricity
and natural gas can be volatile, Entergy's domestic energy and natural gas
marketing business is exposed to risk arising from differences between the
fixed prices in its commitments and fluctuating market prices. To mitigate
its exposure, Entergy's domestic energy and natural gas marketing business
enters into electricity and natural gas futures and option contracts. This
business utilizes a value-at-risk model to assess the market risk of its
derivative financial instruments. Value-at-risk represents the potential
losses for an instrument or portfolio from adverse changes in market
factors for a specified time period and confidence level. The value-at-
risk was estimated using historical simulation calculated on a daily basis
over a thirty-day period with a 95% confidence level and a holding period
of one business day. Based on these assumptions, the business's
value-at-risk as of December 31, 1997 was not material to Entergy.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Management's calculation of value-at-risk exposure represents an
estimate of reasonably possible net losses that would be recognized on its
portfolio of derivative financial instruments, assuming hypothetical
movements in future market rates, and is not necessarily indicative of
actual future results. It does not represent the maximum possible loss or
an expected loss that may occur, because actual future gains and losses
will differ from those estimated, based upon actual fluctuations in market
rates, operating exposures, and the timing thereof, and changes in the
portfolio of derivative financial instruments during the year.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy Corporation
We have audited the accompanying consolidated balance sheets of
Entergy Corporation and Subsidiaries as of December 31, 1997 and 1996, and
the related statements of consolidated income, retained earnings and paid
in capital and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Entergy Corporation and Subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, at
January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". Also, as discussed in Note 1 to
the consolidated financial statements, in 1996, one of the Corporation's
subsidiaries changed its method of accounting for incremental nuclear plant
outage maintenance costs.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
On February 7, 1997, Entergy Corporation, through its wholly-owned
subsidiary, Entergy London, made unconditional its offer to acquire 100%
ownership of London Electricity. In accordance with the purchase method of
accounting, the results of operations for 1996 and 1995 of Entergy
Corporation and Subsidiaries do not include London Electricity's results of
operations. Consolidated net income for 1997 reflects London Electricity's
results subsequent to February 1, 1997. See Note 13 for additional
information regarding London Electricity.
On January 5, 1996, Entergy Corporation finalized its acquisition of
CitiPower. In accordance with the purchase method of accounting, the
results of operations for 1995 of Entergy Corporation and Subsidiaries do
not include CitiPower's results of operations.
Net Income
Consolidated net income decreased in 1997 primarily due to the
recording of a one-time windfall profits tax at Entergy London, a reserve
for regulatory adjustments at Entergy Gulf States, the write-off of the
radioactive waste facility deferrals at Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana, and the reversal of the Cajun-River Bend
litigation accrual at Entergy Gulf States in September 1996. The decrease
in net income was partially offset by the one-time write-off of River Bend
rate deferrals pursuant to SFAS 121 at Entergy Gulf States in January 1996,
by the 1997 one-time reduction in income tax expense for London Electricity
due to a reduction in the UK corporation tax rate from 33% to 31%, and by
the Cajun litigation settlement at Entergy Gulf States in December 1997.
Excluding these items, net income would have decreased 8% due to a decrease
in the earnings from domestic regulated operations offset by increased
earnings from competitive growth businesses, primarily London Electricity.
Consolidated net income decreased in 1996 primarily due to the $174
million net of tax write-off of River Bend rate deferrals pursuant to SFAS
121 and the one-time recording in 1995 of the cumulative effect of the
change in accounting method for incremental nuclear refueling outage
maintenance costs at Entergy Arkansas. The effect of these items was
partially offset by the reversal of a Cajun-River Bend litigation accrual
at Entergy Gulf States. Excluding these items, net income would have
increased 17% due to decreased other operation and maintenance expenses for
domestic regulated operations as a result of restructuring programs and
ongoing efficiency improvement programs throughout Entergy.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON", following the
financial statements, for information on operating revenues by source and
KWH sales.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The changes in electric operating revenues for Entergy's domestic
utility companies for the twelve months ended December 31, 1997 and 1996
are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($189.1) ($117.5)
Rate riders (3.6) 1.8
Fuel cost recovery 90.1 382.3
Sales volume/weather 31.3 108.0
Other revenue (including unbilled) 147.3 (49.3)
Sales for resale (16.6) 37.6
----- ------
Total $59.4 $362.9
===== ======
Electric operating revenues for Entergy's domestic utility companies
increased slightly in 1997 as a result of increased other revenues, fuel
adjustment revenues, which do not affect net income, and higher sales
volume/weather. These increases were partially offset by a decrease in
base revenues and sales for resale to non-associated utilities. Other
revenue increased due to the gain on the Cajun Settlement for Cajun's 30%
interest in the property associated with River Bend. Fuel adjustment
revenues increased in 1997 due to a PUCT order that approved recovery of
$18.5 million of previously under-recovered fuel expenses by Entergy Gulf
States. Sales volume/weather increased primarily due to an increase in
sales to industrial customers, particularly, certain cogeneration customers
who purchased replacement electricity from Entergy Gulf States offset by a
decrease due to milder weather in 1997. Base rate revenues decreased
primarily due to the reserve for regulatory adjustments at Entergy Gulf
States, 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. Sales for resale to non-associated utilities decreased due to
changes in generation requirements and availability among the domestic
utility companies, primarily Entergy Arkansas and Entergy Gulf States.
During the fourth quarter of 1997, Entergy Gulf States established reserves
for potential regulatory adjustments based on management's estimates of the
financial effect of potential adverse rulings in connection with the River
Bend plant-related costs and pending rate proceedings in Texas. See Note 2
for further discussion of the PUCT order related to under-recovered fuel
expenses, the River Bend plant-related costs, and other pending rate
proceedings.
Electric operating revenues increased in 1996 as a result of higher
fuel adjustment revenues, which do not affect net income, and higher sales
volume, partially offset by rate reductions at the domestic utility
companies. The increase in sales volume was primarily the result of
increases in customers and in customer usage.
Gas operating revenues increased in 1996 due to higher unit purchase
prices for gas purchased for resale and colder than normal weather in the
first quarter of 1996.
Competitive growth business revenues increased by $2.3 billion in 1997
primarily due to the February 1997 acquisition of London Electricity by
Entergy London. London Electricity generated revenues of $1.8 billion
during the eleven months it is included in 1997 results of operations.
Also contributing to the increase in competitive growth business revenues
was an increase in revenue at EPMC of $427 million. After obtaining the
appropriate regulatory and board approvals, EPMC began trading in late May
1996. EPMC's increased revenues in 1997 are primarily due to full year of
trading in 1997 as compared to six months in 1996 coupled with an
aggressive marketing effort in 1997. These increases were offset by
increased power purchased for resale as discussed below. The increase of
$501 million in competitive growth business revenues in 1996 was due
primarily to the acquisition of CitiPower.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses for 1997 include Entergy London's operating
expenses of $1.7 billion for the year ended December 31, 1997, which were
not included in the prior year's financial statements. Operating expenses,
excluding Entergy London, increased primarily due to increases in nuclear
refueling outage expenses, depreciation, amortization, and decommissioning
expenses, increases in the amortization of rate deferrals, and increases in
power purchased for resale by EPMC. These increases in operating expenses
were partially offset by a decrease in other operation and maintenance
expenses. The increase in purchased power is primarily the result of a
higher level of power purchased for resale by EPMC. The increase in
nuclear refueling outage expenses is primarily due to the amortization of
previously deferred November 1996 outage expenses at System Energy, which
are now being amortized over an 18-month period that began in December
1996. Prior to this outage, such costs were expensed as incurred and no
such expenses were incurred in 1996. The increase in depreciation,
amortization, and decommissioning is primarily due to the reduction of the
regulatory asset established at System Energy to defer the depreciation
associated with the sale and leaseback in 1989 of a portion of Grand Gulf
1. An increase in plant additions and improvements also contributed to the
increase in depreciation, amortization, and decommissioning. The increase
in rate deferral amortization is primarily due to greater Grand Gulf 1 rate
deferral amortization at Entergy Arkansas and Entergy New Orleans, as
prescribed in the Grand Gulf 1 rate phase-in plan and, for Entergy
Arkansas, the December 1997 APSC Stipulation and Settlement Agreements.
The decrease in other operation and maintenance expenses was primarily due
to the Cajun litigation settlement at Entergy Gulf States in December 1997.
This decrease was partially offset by the write-off of the radioactive
waste facility deferrals at Entergy Arkansas, Entergy Gulf States, and
Entergy Louisiana.
Operating expenses for 1996 include the operating expenses of
CitiPower, which were not included in the 1995 financial statements.
Excluding the operating expenses of CitiPower, Entergy's operating expenses
increased in 1996. The following discussion excludes the impact of the
acquisition of CitiPower. In 1996, fuel and purchased power expenses
increased as a result of higher fuel costs and an increase in sales volume.
Other operation and maintenance expenses decreased in 1996 due to lower
payroll-related expenses, resulting from restructuring programs in addition
to ongoing operating efficiency improvement programs throughout Entergy.
Other regulatory credits reducing operating expenses in 1996 represent the
deferral of Waterford 3 local property taxes and the deferral of a portion
of the proposed System Energy rate increase at Entergy Mississippi and
Entergy New Orleans. Nuclear refueling outage expenses decreased primarily
due to the effect of deferring the nuclear refueling outage expenses at
Grand Gulf 1 in the fourth quarter of 1996 rather than recognizing those
expenses as incurred. The majority of the increase in decommissioning
costs and depreciation rates is reflected in the 1995 System Energy FERC
rate increase filing, subject to refund. See Note 2 for a discussion of
the proposed rate increase.
Other
Other income decreased in 1997 primarily due to the reserve for
regulatory adjustments at Entergy Gulf States, offset by interest income on
the Cajun Settlement in December 1997, the write-off of River Bend rate
deferrals pursuant to SFAS 121 at Entergy Gulf States in January 1996 and
the Cajun litigation reversal in 1996.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other income decreased in 1996 as a result of the write-off of River
Bend rate deferrals pursuant to SFAS 121, and a decrease in Grand Gulf 1
carrying charges at Entergy Arkansas due to a decline in the deferral
balance, partially offset by Entergy Gulf States' reversal of a Cajun-River
Bend litigation accrual. Interest on long-term debt, excluding Entergy
London, decreased in 1997 due primarily to ongoing retirement and
refinancing of higher cost debt. Distributions on preferred securities of
subsidiaries increased due to the issuance of Cumulative Income Preferred
Securities at Entergy Arkansas in August 1996, Entergy Louisiana in July
1996, at Entergy Gulf States in January 1997, and Entergy London in
November 1997.
Excluding CitiPower, interest on long-term debt decreased in 1996 due
primarily to ongoing retirement and refinancing of higher cost debt.
Borrowings by Entergy Corporation from a $300 million line of credit
related to the CitiPower investment contributed to the increase in other
interest-net in 1996.
Preferred dividend requirements decreased in 1997 and 1996 due to
stock redemption activities.
The effective income tax rates for 1997, 1996, and 1995 were 61.0%,
46.2%, and 37.5% respectively. The effective income tax rate was higher in
1997 primarily due to the one-time windfall profits tax at Entergy London
in 1997 and the tax effects of the Cajun litigation settlement and the 1996
SFAS 121 write-off at Entergy Gulf States, which included AFUDC which was
originally recorded net of its related income tax benefits. In 1996, the
effective income tax rate increased primarily due to higher state income
taxes, depreciation related taxes, and the SFAS 121 write-off at Entergy
Gulf States. For a further discussion of income taxes, see Note 3.
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands, Except Share Data)
Operating Revenues:
Domestic electric $6,538,831 $6,450,940 $6,088,018
Natural gas 137,345 134,456 103,992
Steam products 43,664 59,143 49,295
Competitive growth businesses 2,841,881 533,118 31,767
---------- ---------- ----------
Total 9,561,721 7,177,657 6,273,072
---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 1,677,041 1,635,885 1,395,889
Purchased power 2,318,811 704,744 356,596
Nuclear refueling outage expenses 73,857 55,148 84,972
Other operation and maintenance 1,886,149 1,577,383 1,528,351
Depreciation, amortization, and decommissioning 980,008 790,948 695,865
Taxes other than income taxes 365,439 353,270 300,120
Other regulatory charges (credits) (18,545) (47,542) 29,311
Amortization of rate deferrals 421,803 414,969 378,776
---------- ---------- ----------
Total 7,704,563 5,484,805 4,769,880
---------- ---------- ----------
Operating Income 1,857,158 1,692,852 1,503,192
---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 10,057 9,951 9,629
Write-off of River Bend rate deferrals - (194,498) -
Miscellaneous - net (232,703) 123,452 45,127
---------- ---------- ----------
Total (222,646) (61,095) 54,756
---------- ---------- ----------
Interest Charges:
Interest on long-term debt 797,266 674,532 633,851
Other interest - net 51,624 49,053 33,749
Distributions on preferred securities of subsidiaries 21,319 4,797 -
Allowance for borrowed funds used
during construction (7,937) (8,347) (8,368)
---------- ---------- ----------
Total 862,272 720,035 659,232
---------- ---------- ----------
Income Before Income Taxes 772,240 911,722 898,716
Income Taxes 471,341 421,159 336,182
---------- ---------- ----------
Income before the Cumulative Effect
of Accounting Changes 300,899 490,563 562,534
Cumulative Effect of Accounting
Changes (net of income taxes) - - 35,415
---------- ---------- ----------
Net Income 300,899 490,563 597,949
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 53,216 70,536 77,969
---------- ---------- ----------
Earnings Applicable to Common Stock $247,683 $420,027 $519,980
========== ========== ==========
Earnings per average common share before
cumulative effect of accounting changes:
Basic and diluted $1.03 $1.83 $2.13
Earnings per average common share:
Basic and diluted $1.03 $1.83 $2.28
Dividends declared per common share $1.80 $1.80 $1.80
Average number of common shares outstanding:
Basic 240,207,539 229,084,241 227,669,970
Diluted 240,297,842 229,175,392 227,729,975
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $300,899 $490,563 $597,949
Noncash items included in net income:
Write-off of River Bend rate deferrals - 194,498 -
Cumulative effect of a change in accounting principle - - (35,415)
Gain on Cajun Settlement (246,022) - -
Reserve for regulatory adjustments 381,285 - -
Amortization of rate deferrals 421,803 414,969 378,776
Other regulatory charges (credits) (18,545) (47,542) 29,311
Depreciation, amortization, and decommissioning 980,008 790,948 695,865
Deferred income taxes and investment tax credits (252,955) 76,920 (31,006)
Allowance for equity funds used during construction (10,057) (9,951) (9,629)
Changes in working capital:
Receivables (99,411) (30,322) (30,550)
Fuel inventory 20,272 (17,220) (28,956)
Accounts payable 181,243 4,011 (19,124)
Taxes accrued 143,151 (27,488) 115,250
Interest accrued (9,849) 7,176 (194)
Other working capital accounts (130,715) (121,692) (85,454)
Changes in other regulatory assets 28,016 (85,051) (3,876)
Decommissioning trust contributions and realized change in trust (68,139) (52,204) (37,756)
assets
Proceeds from settlement of Cajun litigation 102,299 - -
Other 1,349 (59,566) (31,509)
---------- ---------- ----------
Net cash flow provided by operating activities 1,724,632 1,528,049 1,503,682
---------- ---------- ----------
Investing Activities:
Construction/capital expenditures (847,223) (571,890) (618,436)
Allowance for equity funds used during construction 10,057 9,951 9,629
Nuclear fuel purchases (89,237) (123,929) (207,501)
Proceeds from sale/leaseback of nuclear fuel 144,442 109,980 226,607
Acquisition of London Electricity, net of cash acquired (1,951,701) - -
Acquisition of CitiPower - (1,156,112) -
Acquisition of security companies (87,669) (83,000) -
Investment in other nonregulated/nonutility properties 1,322 - (172,814)
Proceeds from sale of Hub Power and Transener stock 54,153 26,955 -
Proceeds from sale of Independence 2 - 39,398 -
Other (17,288) (25,710) (28,982)
---------- ---------- ----------
Net cash flow used in investing activities (2,783,144) (1,774,357) (791,497)
---------- ---------- ----------
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Financing Activities
Proceeds from the issuance of:
General and refunding mortgage bonds 64,827 39,608 109,285
First mortgage bonds 129,564 431,906 -
Bank notes and other long-term debt 1,852,891 1,066,858 273,542
Preferred securities of subsidiary trusts and partnership 382,323 125,963 -
Common stock 305,379 118,087 -
Retirement of:
First mortgage bonds (402,692) (821,575) (225,800)
General and refunding mortgage bonds (7,622) (56,000) (69,200)
Other long-term debt (341,355) (145,110) (221,043)
Redemption of preferred stock (124,367) (157,503) (46,564)
Changes in short-term borrowings - net 142,025 (24,981) (126,200)
Preferred stock dividends paid (51,270) (70,536) (77,969)
Common stock dividends paid (438,183) (405,346) (408,553)
---------- ---------- ----------
Net cash flow provided by (used in) financing activities 1,511,520 101,371 (792,502)
---------- ---------- ----------
Effect of exchange rates on cash and cash equivalents (11,164) 50 -
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 441,844 (144,887) (80,317)
Cash and cash equivalents at beginning of period 388,703 533,590 613,907
---------- ---------- ----------
Cash and cash equivalents at end of period $830,547 $388,703 $533,590
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $858,871 $677,535 $626,531
Income taxes $390,238 $373,247 $285,738
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358 -
Change in unrealized appreciation of
decommissioning trust assets $30,951 $7,803 $16,614
Acquisition of nuclear fuel - $47,695 -
Treasury shares issued to acquire Ranger American $21,464 - -
Net assets acquired from Cajun settlement $319,056 - -
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $85,067 $34,807
Temporary cash investments - at cost,
which approximates market 700,431 346,782
Special deposits 45,049 7,114
----------- -----------
Total cash and cash equivalents 830,547 388,703
Notes receivable 8,157 1,384
Accounts receivable:
Customer (less allowance for doubtful accounts of
$31.7 million in 1997 and $9.2 million in 1996) 458,085 324,687
Other 225,523 99,066
Accrued unbilled revenues 580,194 351,429
Deferred fuel 150,596 122,184
Fuel inventory - at average cost 119,331 139,603
Materials and supplies - at average cost 367,870 339,622
Rate deferrals 259,628 444,543
Prepayments and other 171,391 151,312
----------- -----------
Total 3,171,322 2,362,533
----------- -----------
Other Property and Investments:
Decommissioning trust funds 589,050 357,962
Non-regulated investments 568,951 513,058
Other 225,818 59,053
----------- -----------
Total 1,383,819 930,073
----------- -----------
Utility Plant:
Electric 25,310,122 22,739,797
Plant acquisition adjustment - Entergy Gulf States 439,160 455,425
Electric plant under leases 674,483 679,991
Property under capital leases - electric 134,278 147,277
Natural gas 169,964 168,143
Steam products 82,289 81,743
Construction work in progress 565,667 401,676
Nuclear fuel under capital leases 269,011 250,651
Nuclear fuel 72,875 112,625
----------- -----------
Total 27,717,849 25,037,328
Less - accumulated depreciation and amortization 9,585,021 8,866,764
----------- -----------
Utility plant - net 18,132,828 16,170,564
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 162,602 399,493
SFAS 109 regulatory asset - net 1,174,187 1,196,041
Unamortized loss on reacquired debt 196,891 217,664
Other regulatory assets 466,780 477,942
Long-term receivables 36,984 216,082
CitiPower license (net of amortization of $25.6 million in 1997
and $15.6 million in 1996) 486,153 606,214
London Electricity license (net of $31.1 million of amortization) 1,327,312 -
Other 461,822 379,419
----------- -----------
Total 4,312,731 3,492,855
----------- -----------
TOTAL $27,000,700 $22,956,025
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $390,674 $345,620
Notes payable 428,964 20,686
Accounts payable 915,800 554,558
Customer deposits 178,162 155,534
Taxes accrued 359,996 180,340
Accumulated deferred income taxes 56,524 78,010
Interest accrued 214,763 203,425
Dividends declared 8,166 8,950
Obligations under capital leases 167,700 151,287
Other 81,303 184,157
----------- -----------
Total 2,802,052 1,882,567
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,567,052 3,760,491
Accumulated deferred investment tax credits 587,781 607,641
Obligations under capital leases 236,000 247,360
Other 1,857,514 1,298,306
----------- -----------
Total 7,248,347 5,913,798
----------- -----------
Long-term debt 9,068,325 7,590,804
Subsidiaries' preferred stock with sinking fund 185,005 216,986
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
Company-obligated redeemable preferred securities of subsidiary
partnership holding solely junior subordinated deferrable debentures 300,000 -
Shareholders' Equity:
Subsidiaries' preferred stock without sinking fund 338,455 430,955
Common stock, $.01 par value, authorized 500,000,000
shares; issued 246,149,198 shares in 1997 and 234,456,457
shares in 1996 2,461 2,345
Paid-in capital 4,613,572 4,320,591
Retained earnings 2,157,912 2,341,703
Cumulative foreign currency translation adjustment (69,817) 21,725
Less - treasury stock (306,852 shares in 1997 and
1,496,118 shares in 1996) 10,612 45,449
----------- -----------
Total 7,031,971 7,071,870
----------- -----------
Commitments and Contingencies (Notes 2, 9, and 10)
TOTAL $27,000,700 $22,956,025
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS AND
PAID-IN CAPITAL
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $2,341,703 $2,335,579 $2,223,739
Add:
Earnings applicable to common stock 247,683 420,027 519,980
Deduct:
Dividends declared on common stock 432,268 412,250 409,801
Capital stock and other expenses (794) 1,653 (1,661)
---------- ---------- ----------
Total 431,474 413,903 408,140
---------- ---------- ----------
Retained Earnings, December 31 $2,157,912 $2,341,703 $2,335,579
========== ========== ==========
Paid-in Capital, January 1 $4,320,591 $4,201,483 $4,202,134
Add:
Gain (loss) on reacquisition of
subsidiaries' preferred stock 273 1,795 (26)
Common stock issuances related to stock plans 292,870 117,560 (3,002)
---------- ---------- ----------
Total 293,143 119,355 (3,028)
---------- ---------- ----------
Deduct:
Capital stock discounts and other expenses 162 247 (2,377)
---------- ---------- ----------
Paid-in Capital, December 31 $4,613,572 $4,320,591 $4,201,483
========== ========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 (4) 1996 (3) 1995 1994 1993
(In Thousands, Except Per Share Amounts)
Operating revenues $ 9,561,721 $ 7,177,657 $ 6,273,072 $ 5,981,820 $ 4,475,224
Income before cumulative
effect of a change in
accounting principle $ 300,899 $ 490,563 $ 562,534 $ 423,559 $ 514,648
Earnings per share before
cumulative effect of accounting
changes
Basic $ 1.03 $ 1.83 $ 2.13 $ 1.49 $ 2.62
Diluted $ 1.03 $ 1.83 $ 2.13 $ 1.49 $ 2.62
Dividends declared per share $ 1.80 $ 1.80 $ 1.80 $ 1.80 $ 1.65
Return on average common equity 3.71% 6.41% 8.11% 5.31% 12.58%
Book value per share, year-end (2) $ 27.23 $ 28.51 $ 28.41 $ 27.93 $ 28.27
Total assets (2) $27,000,700 $22,956,025 $22,265,930 $ 22,621,874 $22,876,697
Long-term obligations (1)(2) $10,154,330 $ 8,335,150 $ 7,484,248 $ 7,817,366 $ 8,177,882
(1) Includes long-term debt (excluding currently maturing debt), preferred
and preference stock with sinking fund, preferred securities of
subsidiary trusts and partnership, and noncurrent capital lease
obligations.
(2) 1993 amounts include the effects of the Merger in accordance with the
purchase method of accounting for combinations.
(3) 1996 amounts include the effects of the CitiPower acquisition.
(4) 1997 amounts include the effects of the London Electricity acquisition
as of February 7, 1997 (see Note 13).
1997 1996 1995 1994 1993
Domestic Utility Electric (In Thousands)
Operating Revenues:
Residential $2,271,363 $2,277,647 $2,177,348 $2,127,820 $1,594,515
Commercial 1,581,878 1,573,251 1,491,818 1,500,462 1,071,070
Industrial 2,018,625 1,987,640 1,810,045 1,834,155 1,197,695
Governmental 171,773 169,287 154,032 159,840 136,471
--------------------------------------------------------------------
Total retail 6,043,639 6,007,825 5,633,243 5,622,277 3,999,751
Sales for resale 359,881 376,011 334,874 293,702 280,505
Other (1) 135,311 67,104 119,901 (123,569) 88,713
--------------------------------------------------------------------
Total $6,538,831 $6,450,940 $6,088,018 $5,792,410 $4,368,969
====================================================================
Billed Electric Energy
Sales (GWH):
Residential 28,286 28,303 27,704 26,231 18,946
Commercial 21,671 21,234 20,719 20,050 13,420
Industrial 44,649 44,340 42,260 41,030 24,889
Governmental 2,507 2,449 2,311 2,233 1,887
--------------------------------------------------------------------
Total retail 97,113 96,326 92,994 89,544 59,142
Sales for resale 9,707 10,583 10,471 7,908 8,291
--------------------------------------------------------------------
Total 106,820 106,909 103,465 97,452 67,433
====================================================================
(1) 1994 includes the effects of the FERC Settlement, the 1994 NOPSI
Settlement, and an Entergy Gulf States reserve for rate refund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy Arkansas, Inc.
We have audited the accompanying balance sheets of Entergy Arkansas,
Inc. (formerly Arkansas Power & Light Company) as of December 31, 1997 and
1996, and the related statements of income, retained earnings and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased in 1997 primarily due to decreases in electric
operating revenues and Grand Gulf 1 carrying charges, partially offset by
lower income taxes.
Net income decreased in 1996 due primarily to the one-time recording
of the cumulative effect of the change in accounting method in 1995 for
incremental nuclear refueling outage maintenance costs. Excluding the above
mentioned item, net income would have increased $21.1 million in 1996
primarily due to a decrease in other operation and maintenance expenses.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON," following the
financial statements, for information on operating revenues by source and
KWH sales.
The changes in electric operating revenues for the twelve months ended
December 31, 1997 and 1996 are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($8.1) ($10.1)
Rate riders 15.4 (5.3)
Fuel cost recovery 10.3 8.0
Sales volume/weather 5.9 19.5
Other revenue (including unbilled) (24.2) (7.1)
Sales for resale (27.0) 90.2
------ -----
Total ($27.7) $95.2
====== =====
Electric operating revenues decreased in 1997 due primarily to
decreases in sales for resale and other revenue, partially offset by an
increase in rate rider revenues and higher fuel adjustment revenues, which
do not affect net income. The decrease in sales for resale resulted from a
decrease in sales to associated companies primarily due to changes in
generation requirements and availability among the domestic utility
companies. Other revenue (primarily unbilled revenue) decreased primarily
as a result of the volume difference in the unbilled beginning of year
amount and due to the $10.6 million impact of a rate reduction implemented
in 1997 related to the transition to competition filing with the APSC. The
increase in rate rider revenues was due to an increase in Grand Gulf 1 rate
rider revenues as a result of warmer weather during the second half of the
year.
Electric operating revenues increased in 1996 due primarily to
increased sales for resale and higher sales volume. Sales for resale
increased due to an increase in sales to associated companies primarily due
to changes in generation requirements and availability among the domestic
utility companies. The increase in sales volume resulted from increased
customer usage, partially attributable to more severe weather as compared
to 1995.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses increased in 1997 primarily due to the recognition
of additional regulatory liabilities related to the APSC settlement
agreement and the write-off of previously deferred radioactive waste
facility costs, partially offset by a decrease in fuel and purchased power
expenses. The increase in the amortization of rate deferrals is due to an
increase in amortization prescribed in the Grand Gulf 1 rate phase-in plan
and the Stipulation and Settlement Agreement with the APSC. See Note 2 for
further discussion of the APSC agreement. Fuel and purchased power
expenses decreased primarily as a result of significantly lower prices.
Operating expenses increased in 1996 primarily due to an increase in
fuel and purchased power expenses, partially offset by reduced other
regulatory charges and decreased other operation and maintenance expenses.
The increase in fuel and purchased power expenses is largely due to an
increase in generation and purchases related to the increase in sales for
resale. The decrease in other operation and maintenance expenses resulted
from lower payroll expenses. Payroll expenses decreased as a result of
restructuring costs recorded in 1995 and the resulting decrease in
employees.
Other
Miscellaneous other income - net decreased in 1997 and 1996 due to
reduced Grand Gulf 1 carrying charges as a result of a decline in the
deferral balance which does not impact net income.
The effective income tax rates for 1997, 1996, and 1995 were 31.6%,
34.9%, and 34.5%, respectively. The decrease in 1997 is primarily due to
the impact of recording the tax benefit of Entergy Corporation's expenses
as prescribed by the tax allocation agreement. The effective income tax
rate for 1996 was relatively unchanged from 1995.
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues $1,715,714 $1,743,433 $1,648,233
---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 254,703 257,008 231,619
Purchased power 419,128 432,825 363,199
Nuclear refueling outage expenses 27,969 29,365 31,754
Other operation and maintenance 360,860 358,789 375,059
Depreciation, amortization, and decommissioning 166,652 167,878 162,087
Taxes other than income taxes 36,700 37,688 38,319
Other regulatory charges (credits) 29,686 18,096 60,227
Amortization of rate deferrals 153,141 131,634 114,102
---------- ---------- ----------
Total 1,448,839 1,433,283 1,376,366
---------- ---------- ----------
Operating Income 266,875 310,150 271,867
---------- ---------- ----------
Other Income:
Allowance for equity funds used
during construction 3,563 3,886 3,567
Miscellaneous - net 18,663 32,591 46,227
---------- ---------- ----------
Total 22,226 36,477 49,794
---------- ---------- ----------
Interest Charges:
Interest on long-term debt 95,122 98,531 106,853
Other interest - net 3,943 6,257 8,485
Distributions on preferred securities of subsidiary trust 5,100 1,927 -
Allowance for borrowed funds used
during construction (2,261) (2,330) (2,424)
---------- ---------- ----------
Total 101,904 104,385 112,914
---------- ---------- ----------
Income Before Income Taxes 187,197 242,242 208,747
Income Taxes 59,220 84,444 72,082
---------- ---------- ----------
Income before the Cumulative Effect
of Accounting Changes 127,977 157,798 136,665
Cumulative Effect of Accounting
Changes (net of income taxes) - - 35,415
---------- ---------- ----------
Net Income 127,977 157,798 172,080
Preferred Stock Dividend Requirements
and Other 10,988 16,110 18,093
---------- ---------- ----------
Earnings Applicable to Common Stock $116,989 $141,688 $153,987
========== ========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $127,977 $157,798 $172,080
Noncash items included in net income:
Cumulative effect of a change in accounting principle - - (35,415)
Amortization of rate deferrals 153,141 139,701 125,504
Other regulatory charges (credits), net 29,686 18,096 60,227
Depreciation, amortization, and decommissioning 166,652 167,878 162,087
Deferred income taxes and investment tax credits (77,814) (46,026) (33,882)
Allowance for equity funds used during construction (3,563) (3,886) (3,567)
Changes in working capital:
Receivables 9,099 (4,292) (39,209)
Fuel inventory 29,150 137 (22,895)
Accounts payable (25,451) (1,112) 55,732
Taxes accrued 23,133 14,035 (5,080)
Interest accrued 1,201 (2,615) (824)
Other working capital accounts (10,220) (7,529) (28,375)
Decommissioning trust contributions and realized
change in trust assets (24,956) (30,474) (30,568)
Provision for estimated losses and reserves 9,594 4,125 2,849
Other 26,111 (29,258) (40,306)
---------- ---------- ----------
Net cash flow provided by operating activities 433,740 376,578 338,358
---------- ---------- ----------
Investing Activities:
Construction expenditures (140,913) (145,529) (165,071)
Allowance for equity funds used during construction 3,563 3,886 3,567
Nuclear fuel purchases (59,104) (26,084) (41,219)
Proceeds from sale/leaseback of nuclear fuel 59,065 25,451 41,832
---------- ---------- ----------
Net cash flow used in investing activities (137,389) (142,276) (160,891)
---------- ---------- ----------
Financing Activities:
Proceeds from issuance of:
First mortgage bonds 84,064 84,256 -
Other long-term debt 45,500 - 118,662
Preferred securities of subsidiary trust - 58,168 -
Retirement of:
First mortgage bonds (117,587) (112,807) (25,800)
Other long-term debt - (1,700) (124,025)
Redemption of preferred stock (9,000) (69,624) (9,500)
Changes in short-term borrowings - net - - (34,000)
Dividends paid:
Common stock (128,600) (142,800) (153,400)
Preferred stock (11,194) (17,736) (18,362)
---------- ---------- ----------
Net cash flow used in financing activities (136,817) (202,243) (246,425)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 159,534 32,059 (68,958)
Cash and cash equivalents at beginning of period 43,857 11,798 80,756
---------- ---------- ----------
Cash and cash equivalents at end of period $203,391 $43,857 $11,798
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $101,839 $94,662 $102,851
Income taxes $111,394 $110,211 $113,080
Noncash investing and financing activities:
Capital lease obligations incurred - $16,358 -
Acquisition of nuclear fuel - $27,500 -
Change in unrealized appreciation of
decommissioning trust assets $22,343 $5,968 $9,128
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $6,076 $5,117
Temporary cash investments - at cost,
which approximates market:
Associated companies 41,389 17,462
Other 110,877 21,278
Special deposits 45,049 -
----------- -----------
Total cash and cash equivalents 203,391 43,857
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1997 and $2.3 million in 1996) 71,910 71,144
Associated companies 46,166 45,303
Other 10,282 5,862
Accrued unbilled revenues 89,616 104,764
Fuel inventory - at average cost 28,169 57,319
Materials and supplies - at average cost 79,692 72,976
Rate deferrals 75,249 153,141
Deferred nuclear refueling outage costs 24,335 24,534
Prepayments and other 8,647 16,496
----------- -----------
Total 637,457 595,396
----------- -----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,213 11,211
Decommissioning trust fund 250,573 203,274
Other - at cost (less accumulated depreciation) 4,939 5,058
----------- -----------
Total 266,725 219,543
----------- -----------
Utility Plant:
Electric 4,650,065 4,578,728
Property under capital leases 53,843 57,869
Construction work in progress 123,087 83,524
Nuclear fuel under capital lease 92,621 79,103
Nuclear fuel - 27,500
----------- -----------
Total 4,919,616 4,826,724
Less - accumulated depreciation and amortization 2,116,826 1,976,204
----------- -----------
Utility plant - net 2,802,790 2,850,520
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals - 75,249
SFAS 109 regulatory asset - net 252,712 244,767
Unamortized loss on reacquired debt 53,780 56,664
Other regulatory assets 79,461 80,257
Other 13,952 31,421
----------- -----------
Total 399,905 488,358
----------- -----------
TOTAL $4,106,877 $4,153,817
=========== ===========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $60,650 $32,465
Notes payable 667 667
Accounts payable:
Associated companies 59,438 91,205
Other 76,405 97,589
Customer deposits 23,437 21,800
Taxes accrued 77,327 54,194
Accumulated deferred income taxes 32,239 70,506
Interest accrued 28,826 27,625
Co-owner advances 7,666 33,873
Deferred fuel cost 16,244 6,955
Obligations under capital leases 62,623 53,012
Other 21,696 17,967
----------- -----------
Total 467,218 507,858
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 759,489 785,994
Accumulated deferred investment tax credits 103,899 108,307
Obligations under capital leases 83,841 83,940
Other 169,884 113,998
----------- -----------
Total 1,117,113 1,092,239
----------- -----------
Long-term debt 1,244,860 1,255,388
Preferred stock with sinking fund 31,027 40,027
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
Shareholder's 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
Additional Paid-in capital 590,134 590,169
Retained earnings 479,705 491,316
----------- -----------
Total 1,186,659 1,198,305
----------- -----------
Commitments and Contingencies (Notes 2, 9 and 10)
TOTAL $4,106,877 $4,153,817
=========== ===========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $491,316 $492,386 $491,799
Add:
Net income 127,977 157,798 172,080
Increase in investment in subsidiary - 42 -
-------- -------- --------
Total 127,977 157,840 172,080
-------- -------- --------
Deduct:
Dividends declared:
Preferred stock 10,988 16,110 18,093
Common stock 128,600 142,800 153,400
-------- -------- --------
Total 139,588 158,910 171,493
-------- -------- --------
Retained Earnings, December 31 (Note 8) $479,705 $491,316 $492,386
======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $1,715,714 $1,743,433 $1,648,233 $1,590,742 $1,591,568
Income before cumulative
effect of accounting changes $ 127,977 $ 157,798 $ 136,665 $ 142,263 $ 155,110
Total assets $4,106,877 $4,153,817 $4,204,415 $4,292,215 $4,334,105
Long-term obligations (1) $1,419,728 $1,439,355 $1,423,804 $1,446,940 $1,478,203
(1) Includes long-term debt (excluding currently maturing debt), preferred
stock with sinking fund, preferred securities of subsidiary trust, and
noncurrent capital lease obligations.
1997 1996 1995 1994 1993
(In Thousands)
Electric Operating Revenues:
Residential $551,821 $546,100 $542,862 $506,160 $528,734
Commercial 332,715 323,328 318,475 307,296 306,742
Industrial 372,083 364,943 362,854 338,988 336,856
Governmental 18,200 16,989 17,084 16,698 16,670
--------------------------------------------------------------------
Total retail 1,274,819 1,251,360 1,241,275 1,169,142 1,189,002
Sales for resale
Associated companies 213,845 248,211 178,885 212,314 175,784
Non-associated companies 215,249 207,887 195,844 182,920 203,696
Other 11,801 35,975 32,229 26,366 23,086
--------------------------------------------------------------------
Total $1,715,714 $1,743,433 $1,648,233 $1,590,742 $1,591,568
====================================================================
Billed Electric Energy
Sales (GWH):
Residential 5,988 6,023 5,868 5,522 5,680
Commercial 4,445 4,390 4,267 4,147 4,067
Industrial 6,647 6,487 6,314 5,941 5,690
Governmental 239 234 243 231 230
--------------------------------------------------------------------
Total retail 17,319 17,134 16,692 15,841 15,667
Sales for resale
Associated companies 9,557 10,471 8,386 10,591 8,307
Non-associated companies 6,828 6,720 5,066 4,906 5,643
--------------------------------------------------------------------
Total 33,704 34,325 30,144 31,338 29,617
====================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy Gulf States, Inc.
We have audited the accompanying balance sheets of Entergy Gulf
States, Inc. (formerly Gulf States Utilities Company) as of December 31,
1997 and 1996, and the related statements of income (loss), retained
earnings and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, at
January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of".
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased in 1997 due to (i) the $146 million net of tax
receipt of funds and property resulting from the settlement of the Cajun
litigation, and (ii) the 1996 net of tax write-off of $174 million of River
Bend rate deferrals required by the adoption of SFAS 121. These increases
were partially offset by (i) the 1997 $227 million net of tax reserve for
regulatory adjustments; (ii) the 1997 net of tax write-off of $7.4 million
of previously deferred radioactive waste facility costs; and (iii) the 1996
reversal of the Cajun-River Bend litigation accrual. Excluding the effects
of the settlement of the Cajun litigation, the 1997 and 1996 write-offs,
the reserve for regulatory adjustments, and the accrual reversal, net
income for 1997 would have increased approximately $11 million due to an
increase in electric operating revenues.
Net income decreased in 1996 primarily due to the write-off of rate
deferrals, offset by the reversal of the Cajun-River Bend litigation
accrual as discussed above. Excluding the River Bend rate deferrals and
the Cajun-River Bend litigation accrual, net income for 1996 would have
increased slightly due to an increase in electric operating revenues and a
decrease in other operation and maintenance expenses.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON", following the
financial statements, for information on operating revenues by source and
KWH sales.
The changes in electric operating revenues for the twelve months ended
December 31, 1997 and 1996 are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($103.8) ($60.3)
Fuel cost recovery 66.8 152.0
Sales volume/weather 46.2 65.1
Other revenue (including unbilled) 151.1 12.8
Sales for resale (24.8) (32.6)
------ ------
Total $135.5 $137.0
====== ======
Electric operating revenues increased in 1997 as a result of increased
other revenue, increased fuel adjustment revenues, which do not affect net
income, and increased sales volume. These increases were partially offset
by a decrease in base revenues and sales for resale. Other revenue
increased due to the gain on the Cajun Settlement for Cajun's 30% of
property associated with River Bend. Fuel adjustment revenues increased
due to a PUCT order that approved recovery of under-recovered fuel
expenses. Sales volume increased primarily due to an increase in sales to
industrial customers, in particular, certain cogeneration customers who
purchased electricity from Entergy Gulf States for less than their
production cost. Base revenues decreased in 1997 due to the reserve for
regulatory adjustments, the provision for rate reductions implemented for
Louisiana retail customers in November 1996 and February 1997, aggressive
pricing strategies for targeted customer segments, and a change in the
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
sales mix from residential customers to industrial customers. Sales for
resale decreased due to decreased sales to both associated and non-associated
companies. During the fourth quarter of 1997, Entergy Gulf States
established reserves for potential regulatory adjustments based on
management's estimates of the financial effect of potential adverse rulings
in connection with the River Bend plant-related costs and pending rate
proceedings in Texas. See Note 2 for further discussion of the PUCT order
related to under-recovered fuel expenses, the River Bend plant-related
costs, and other pending rate proceedings.
Gas operating revenues increased in 1997 due to an increase in the
fuel factor granted by the LPSC. This increase permits recovery of
previously deferred gas costs. The increase in gas operating revenues was
offset by a decrease in steam operating revenues due to a change in a
customer contract in 1997 and an increase in customer requirements in 1996.
Electric operating revenues increased in 1996 primarily due to
increased fuel adjustment revenues, which do not affect net income,
increased customers, and increased customer usage. These increases were
partially offset by rate reductions in effect for both Texas and Louisiana
retail customers and increased base revenues for 1995. Base revenues also
increased in 1995 as a result of rate refund reserves established in 1994,
which were subsequently reduced as a result of an amended PUCT order.
Sales for resale to associated companies decreased as a result of changes
in generation availability and requirements among the domestic utility
companies.
Gas operating revenues and steam operating revenues increased for 1996
primarily due to higher fuel prices and increased usage.
Expenses
Operating expenses increased slightly in 1997 due to increases in fuel
and purchased power expenses and in the amortization of rate deferrals,
partially offset by decreased other operation and maintenance expenses
resulting from the Cajun settlement. Fuel and purchased power expenses
increased due to increased gas usage and increased energy requirements
resulting from higher sales volume. Amortization of rate deferrals
increased based on the LPSC-approved River Bend phase-in plan. See Note 2
for further discussion. The decrease in other operation and maintenance
expenses was partially offset by the write-off of radioactive waste
facility costs.
Operating expenses increased in 1996 as a result of higher fuel
expenses, including purchased power, partially offset by lower other
operation and maintenance expenses. Fuel and purchase power expenses,
taken together, increased because of higher gas prices and increased energy
requirements resulting from higher sales volume. Other operation and
maintenance expenses decreased primarily due to lower payroll-related
expenses associated with restructuring programs accrued for in 1995.
Other
Other income decreased in 1997 due to the reserve for other regulatory
adjustments, partially offset by the 1997 settlement of the Cajun
litigation and the 1996 write-off of River Bend rate deferrals. Interest
expense decreased in 1997 due to the retirement of long-term debt.
Other income decreased in 1996 due to the write-off of River Bend
rate deferrals pursuant to the adoption of SFAS 121. See Note 2 for
further discussion. This decrease was partially offset by the Cajun-River
Bend litigation accrual reversal.
The effective income tax rates for 1997, 1996, and 1995 were 27.2%,
104.0%, and 35.3%, respectively. The decrease in the effective income tax
rate in 1997 is due to a decrease in regulatory operating reserves which
receive flow through treatment in 1997 and the $194.5 million River Bend
SFAS 121 write-off in 1996. The change in effective income tax rates in
1996 is primarily due to the River Bend SFAS 121 write-off of $194.5
million in January 1996.
ENTERGY GULF STATES, INC.
STATEMENTS OF INCOME (LOSS)
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues:
Electric $2,061,511 $1,925,988 $1,788,964
Natural gas 42,654 34,050 23,715
Steam products 43,664 59,143 49,295
---------- ---------- ----------
Total 2,147,829 2,019,181 1,861,974
---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 560,104 520,065 516,812
Purchased power 327,037 295,960 169,767
Nuclear refueling outage expenses 10,829 8,660 10,607
Other operation and maintenance 316,253 402,719 432,647
Depreciation, amortization, and decommissioning 214,644 206,070 202,224
Taxes other than income taxes 109,572 102,170 102,228
Other regulatory charges (credits) (26,611) (25,317) (24,359)
Amortization of rate deferrals 105,455 96,956 90,384
---------- ---------- ----------
Total 1,617,283 1,607,283 1,500,310
---------- ---------- ----------
Operating Income 530,546 411,898 361,664
---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 2,211 2,618 1,125
Write-off of River Bend rate deferrals - (194,498) -
Miscellaneous - net (272,135) 69,841 22,573
---------- ---------- ----------
Total (269,924) (122,039) 23,698
---------- ---------- ----------
Interest Charges:
Interest on long-term debt 163,146 181,071 191,341
Other interest - net 10,026 12,819 8,884
Distributions on preferred securities of subsidiary trust 6,901 - -
Allowance for borrowed funds used
during construction (1,829) (2,235) (1,026)
---------- ---------- ----------
Total 178,244 191,655 199,199
---------- ---------- ----------
Income Before Income Taxes 82,378 98,204 186,163
Income Taxes 22,402 102,091 63,244
---------- ---------- ----------
Net Income (Loss) 59,976 (3,887) 122,919
Preferred and Preference Stock
Dividend Requirements and Other 23,865 28,505 29,643
---------- ---------- ----------
Earnings (Loss) Applicable to Common Stock $36,111 ($32,392) $93,276
========== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income (loss) $59,976 ($3,887) $122,919
Noncash items included in net income (loss):
Write-off of River Bend rate deferrals - 194,498 -
Gain on Cajun Settlement (246,022) - -
Reserve for regulatory adjustments 381,285 - -
Amortization of rate deferrals 105,455 96,956 90,384
Other regulatory charges (credits) (26,611) (25,317) (24,359)
Depreciation, amortization, and decommissioning 214,644 206,070 202,224
Deferred income taxes and investment tax credits (52,486) 101,380 63,231
Allowance for equity funds used during construction (2,211) (2,618) (1,125)
Changes in working capital:
Receivables (19,679) 3,691 40,193
Fuel inventory 7,382 (12,868) (6,357)
Accounts payable 16,999 (26,706) (4,820)
Taxes accrued 12,171 (1,266) 24,935
Interest accrued (4,497) (7,186) 1,510
Reserve for rate refund - - (56,972)
Deferred fuel (46,254) (68,349) (24,840)
Other working capital accounts (11,765) (70,775) (16,079)
Decommissioning trust contributions and realized
change in trust assets (9,540) (7,436) (9,513)
Provision for estimated losses and reserves (5,852) (1,885) 10,119
Proceeds from settlement of Cajun litigation 102,299 - -
Other (8,970) (51,947) (10,696)
---------- ---------- ----------
Net cash flow provided by operating activities 466,324 322,355 400,754
---------- ---------- ----------
Investing Activities:
Construction expenditures (132,566) (154,993) (185,944)
Allowance for equity funds used during construction 2,211 2,618 1,125
Nuclear fuel purchases (25,522) (25,124) (1,425)
Proceeds from sale/leaseback of nuclear fuel 25,522 26,523 542
---------- ---------- ----------
Net cash flow used in investing activities (130,355) (150,976) (185,702)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of:
Long-term debt - 780 2,277
Preferred securities of subsidiary trust 82,323 - -
Retirement of:
First mortgage bonds (132,240) (195,417) -
Other long-term debt (50,865) (50,425) (50,425)
Redemption of preferred and preference stock (93,367) (10,179) (7,283)
Dividends paid:
Common stock (77,200) - -
Preferred and preference stock (21,862) (28,336) (29,661)
---------- ---------- ----------
Net cash flow used in financing activities (293,211) (283,577) (85,092)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 42,758 (112,198) 129,960
Cash and cash equivalents at beginning of period 122,406 234,604 104,644
---------- ---------- ----------
Cash and cash equivalents at end of period $165,164 $122,406 $234,604
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $167,642 $189,962 $187,918
Income taxes $50,477 $285 $208
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $3,939 $1,604 $2,121
Net assets acquired from Cajun settlement $319,056 - -
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $10,549 $6,573
Temporary cash investments - at cost,
which approximates market:
Associated companies 37,389 45,234
Other 117,226 70,599
---------- ----------
Total cash and cash equivalents 165,164 122,406
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1997 and $2.0 million in 1996) 99,762 87,883
Associated companies 9,024 2,777
Other 32,837 30,758
Accrued unbilled revenues 74,825 75,351
Deferred fuel costs 145,757 99,503
Accumulated deferred income taxes 22,093 56,714
Fuel inventory - at average cost 37,627 45,009
Materials and supplies - at average cost 104,690 86,157
Rate deferrals 21,749 105,456
Prepayments and other 21,680 16,321
---------- ----------
Total 735,208 728,335
---------- ----------
Other Property and Investments:
Decommissioning trust fund 187,462 41,983
Other - at cost (less accumulated depreciation) 176,953 38,358
---------- ----------
Total 364,415 80,341
---------- ----------
Utility Plant:
Electric 7,168,668 7,040,654
Natural Gas 47,656 45,443
Steam products 82,289 81,743
Property under capital leases 67,946 72,800
Construction work in progress 90,333 112,137
Nuclear fuel under capital lease 54,390 49,833
Nuclear fuel 23,051 -
---------- ----------
Total 7,534,333 7,402,610
Less - accumulated depreciation and amortization 2,996,147 2,827,275
---------- ----------
Utility plant - net 4,538,186 4,575,335
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 98,410 120,158
SFAS 109 regulatory asset - net 376,275 372,817
Unamortized loss on reacquired debt 48,417 54,761
Other regulatory assets 86,819 87,429
Long-term receivables 36,984 216,082
Other 203,923 185,921
---------- ----------
Total 850,828 1,037,168
---------- ----------
TOTAL $6,488,637 $6,421,179
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $190,890 $160,865
Accounts payable:
Associated companies 48,726 55,630
Other 109,444 85,541
Customer deposits 30,311 25,572
Taxes accrued 48,318 36,147
Interest accrued 45,154 49,651
Nuclear refueling reserve 3,386 12,354
Obligations under capital leases 30,280 39,110
Other 17,646 18,186
---------- ----------
Total 524,155 483,056
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,124,644 1,190,666
Accumulated deferred investment tax credits 215,438 219,188
Obligations under capital leases 92,055 83,524
Deferred River Bend finance charges 9,330 33,688
Other 914,079 539,752
---------- ----------
Total 2,355,546 2,066,818
---------- ----------
Long-term debt 1,702,719 1,915,346
Preferred stock with sinking fund 68,978 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 -
Shareholder's 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
Additional paid-in capital 1,152,575 1,152,689
Retained earnings 284,165 325,312
---------- ----------
Total 1,602,239 1,728,500
---------- ----------
Commitments and Contingencies (Notes 2, 9 and 10)
TOTAL $6,488,637 $6,421,179
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $325,312 $357,704 $264,626
Add:
Net income (loss) 59,976 (3,887) 122,919
Deduct:
Dividends declared:
Preferred and preference stock 21,862 28,336 29,482
Common stock 77,200 - -
Preferred and preference stock
redemption and other 2,061 169 359
-------- -------- --------
Total 101,123 28,505 29,841
-------- -------- --------
Retained Earnings, December 31 (Note 8) $284,165 $325,312 $357,704
======== ======== ========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $2,147,829 $2,019,181 $ 1,861,974 $1,797,365 $1,827,620
Net income (loss) $ 59,976 $ (3,887) $ 122,919 $ (82,755) $ 69,461
Total assets $6,488,637 $6,421,179 $ 6,861,058 $6,843,461 $7,137,351
Long-term obligations (1) $2,098,752 $2,226,329 $ 2,521,203 $2,689,042 $2,772,002
(1) Includes long-term debt (excluding currently maturing debt), preferred
and preference stock with sinking fund, preferred securities of
subsidiary trust, and noncurrent capital lease obligations.
1997 1996 1995 1994 1993
(In Thousands)
Electric Operating Revenues:
Residential $624,862 $612,398 $573,566 $569,997 $585,799
Commercial 452,724 444,133 412,601 414,929 415,267
Industrial 740,418 685,178 604,688 626,047 650,230
Governmental 33,774 31,023 25,042 25,242 26,118
----------------------------------------------------------------
Total retail 1,851,778 1,772,732 1,615,897 1,636,215 1,677,414
Sales for resale
Associated companies 14,260 20,783 62,431 45,263 -
Non-associated companies 57,936 76,173 67,103 52,967 31,898
Other (1) 137,537 56,300 43,533 (15,244) 38,649
----------------------------------------------------------------
Total $2,061,511 $1,925,988 $1,788,964 $1,719,201 $1,747,961
================================================================
Billed Electric Energy
Sales (GWH):
Residential 8,178 8,035 7,699 7,351 7,192
Commercial 6,575 6,417 6,219 6,089 5,711
Industrial 18,038 16,661 15,393 15,026 14,294
Governmental 481 438 311 297 296
----------------------------------------------------------------
Total retail 33,272 31,551 29,622 28,763 27,493
Sales for resale
Associated companies 414 656 2,935 1,866 -
Non-associated companies 1,503 2,148 2,212 1,650 666
----------------------------------------------------------------
Total Electric Department 35,189 34,355 34,769 32,279 28,159
================================================================
(1) 1994 includes the effects of an Entergy Gulf States reserve for rate
refund.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy Louisiana, Inc.
We have audited the accompanying balance sheets of Entergy Louisiana,
Inc. (formerly Louisiana Power & Light Company) as of December 31, 1997 and
1996, and the related statements of income, retained earnings and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased in 1997 primarily due to a decrease in electric
operating revenues and an increase in other operation and maintenance
expenses, partially offset by lower income taxes.
Net income decreased in 1996 primarily due to a decrease in base rate
revenues, partially offset by decreases in other operation and maintenance
expenses and lower interest charges.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON", following the
financial statements, for information on operating revenues by source and
KWH sales.
The changes in electric operating revenues for the twelve months ended
December 31, 1997 and 1996 are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($26.9) ($36.4)
Fuel cost recovery 29.7 160.2
Sales volume/weather (23.8) 19.7
Other revenue (including unbilled) - 3.9
Sales for resale (4.6) 6.6
------ ------
Total ($25.6) $154.0
====== ======
Electric operating revenues decreased in 1997 primarily as a result of
a decrease in base revenues and lower sales volume, partially offset by
higher fuel adjustment revenues, which do not affect net income. Base
revenues decreased due to base rate reductions that became effective in the
third quarters of 1996 and 1997. Sales volume decreased because of milder
weather during the first half of 1997 and the loss of a large industrial
customer as well as substantially lower sales to another large industrial
customer in 1997 due to customer cogeneration. Fuel adjustment revenues
increased due to shifting generation requirements as a result of the
extended Waterford 3 refueling outage.
Electric operating revenues increased in 1996 due primarily to higher
fuel adjustment revenues, which do not affect net income, and to higher
sales volume, primarily due to modest growth in the number of customers.
These increases were partially offset by the impact of base rate reductions
ordered in the second quarters of 1995 and 1996, and by a settlement of
related rate issues during the fourth quarter of 1995.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses increased in 1997 primarily due to increases in
fuel and purchased power expenses and other operation and maintenance
expenses. Fuel and purchased power expenses increased primarily due to
shifting generation requirements resulting from the extended refueling
outage at the Waterford 3 nuclear plant, partially offset by lower fuel
prices. Other operation and maintenance expenses increased due primarily
to the write-off of previously deferred radioactive waste facility costs.
Also contributing to the increase in other operation and maintenance
expenses were nonfueling outage related contract work at Waterford 3 as
well as maintenance performed at Waterford 3 and expenses related to fire
damage sustained at the Little Gypsy fossil plant in September 1997.
Operating expenses increased in 1996 primarily due to increases in
fuel and purchased power expenses, higher depreciation, and higher taxes
other than income taxes. These increases were partially offset by a
decrease in other operation and maintenance expenses as a result of
restructuring charges recorded in 1995 and by the recording of rate
deferrals in 1996, as discussed below. The increase in fuel and purchased
power expenses is due to both higher gas costs and higher sales volume.
Depreciation expense increased due to capital improvements to transmission
lines and substations and due to an increase in the depreciation rate
associated with Waterford 3. Taxes other than income taxes increased
largely as a result of the expiration of Waterford 3's local property tax
exemption in December 1995. This increase was offset for the first six
months of 1996 by the recording of the LPSC-approved rate deferral for
these taxes as discussed in Note 2.
Other
Interest charges on long-term debt decreased for 1996 and 1997 due to
the retirement and refinancing of higher-cost long-term debt.
The effective income tax rates for 1997, 1996, and 1995 were 41.1%,
38.3%, and 36.8%, respectively. The increase in 1997 is primarily due to
decreased amortization of deferred income taxes on property fully
depreciated for income tax purposes. The effective income tax rate for
1996 was relatively unchanged from 1995.
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues $1,803,272 $1,828,867 $1,674,875
---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 429,823 419,331 300,015
Purchased power 413,532 403,322 351,583
Nuclear refueling outage expenses 18,634 15,885 17,675
Other operation and maintenance 318,856 297,667 311,535
Depreciation, amortization, and decommissioning 172,035 167,779 161,023
Taxes other than income taxes 71,558 72,329 55,867
Other regulatory charges (credits) 5,505 (3,752) -
Amortization of rate deferrals 5,749 19,860 28,422
---------- ---------- ----------
Total 1,435,692 1,392,421 1,226,120
---------- ---------- ----------
Operating Income 367,580 436,446 448,755
---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 1,149 862 1,950
Miscellaneous - net (517) 2,933 2,831
---------- ---------- ----------
Total 632 3,795 4,781
---------- ---------- ----------
Interest Charges:
Interest on long-term debt 116,715 122,604 129,691
Other interest - net 5,885 6,938 7,210
Distributions on preferred securities of subsidiary trust 6,300 2,870 -
Allowance for borrowed funds used
during construction (1,410) (1,493) (2,016)
---------- ---------- ----------
Total 127,490 130,919 134,885
---------- ---------- ----------
Income Before Income Taxes 240,722 309,322 318,651
Income Taxes 98,965 118,560 117,114
---------- ---------- ----------
Net Income 141,757 190,762 201,537
Preferred Stock Dividend Requirements
and Other 13,355 19,947 21,307
---------- ---------- ----------
Earnings Applicable to Common Stock $128,402 $170,815 $180,230
========== ========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $141,757 $190,762 $201,537
Noncash items included in net income:
Amortization of rate deferrals 5,749 19,860 28,422
Other regulatory charges (credits) 5,505 (3,752) -
Depreciation, amortization, and decommissioning 172,035 167,779 161,023
Deferred income taxes and investment tax credits (15,456) 18,809 2,450
Allowance for equity funds used during construction (1,149) (862) (1,950)
Changes in working capital:
Receivables 2,445 (4,889) (8,069)
Accounts payable 9,140 22,838 4,420
Taxes accrued 17,853 (11,222) 20,472
Interest accrued (14,678) 5,047 1,215
Other working capital accounts 19,329 (26,831) (16,993)
Decommissioning trust contributions and realized
change in trust assets (11,191) (11,620) (9,180)
Provision for estimated losses and reserves 3,986 3,240 (1,996)
Other 5,801 (17,488) 3,306
---------- ---------- ----------
Net cash flow provided by operating activities 341,126 351,671 384,657
---------- ---------- ----------
Investing Activities:
Construction expenditures (84,767) (103,187) (120,244)
Allowance for equity funds used during construction 1,149 862 1,950
Nuclear fuel purchases (43,332) - (44,707)
Proceeds from sale/leaseback of nuclear fuel 43,332 - 47,293
---------- ---------- ----------
Net cash flow used in investing activities (83,618) (102,325) (115,708)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of:
First mortgage bonds - 113,994 -
Other long-term debt - - 16,577
Preferred securities of subsidiary trust - 67,795 -
Retirement of:
First mortgage bonds (34,000) (130,000) (75,000)
Other long-term debt (288) (270) (308)
Redemption of preferred stock (7,500) (67,824) (11,256)
Changes in short-term borrowings - net (31,066) (45,393) 49,305
Dividends paid:
Common stock (145,400) (179,200) (221,500)
Preferred stock (13,251) (19,072) (21,115)
---------- ---------- ----------
Net cash flow used in financing activities (231,505) (259,970) (263,297)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 26,003 (10,624) 5,652
Cash and cash equivalents at beginning of period 23,746 34,370 28,718
---------- ---------- ----------
Cash and cash equivalents at end of period $49,749 $23,746 $34,370
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $132,199 $118,007 $128,485
Income taxes $68,323 $125,924 $96,066
Noncash investing and financing activities:
Acquisition of nuclear fuel $32,685
- -
Change in unrealized appreciation of
decommissioning trust assets $3,432 $301 $2,304
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $5,148 $1,804
Temporary cash investments - at cost,
which approximates market 44,601 21,942
---------- ----------
Total cash and cash equivalents 49,749 23,746
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.2 million in 1997 and $1.4 million in 1996) 69,566 73,823
Associated companies 15,035 11,606
Other 7,441 7,053
Accrued unbilled revenues 61,874 63,879
Deferred fuel costs - 18,347
Accumulated deferred income taxes 10,994 1,465
Materials and supplies - at average cost 82,850 78,449
Rate deferrals - 5,749
Deferred nuclear refueling outage costs 27,176 5,300
Prepaid income tax - 24,651
Prepayments and other 10,793 10,234
---------- ----------
Total 335,478 324,302
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 65,104 50,481
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 101,859 87,236
---------- ----------
Utility Plant:
Electric 5,058,130 4,997,456
Property under capital leases 233,513 232,582
Construction work in progress 52,632 56,180
Nuclear fuel under capital lease 57,811 38,157
Nuclear fuel 1,560 34,191
---------- ----------
Total 5,403,646 5,358,566
Less - accumulated depreciation and amortization 2,021,392 1,881,847
---------- ----------
Utility plant - net 3,382,254 3,476,719
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 278,234 295,836
Unamortized loss on reacquired debt 33,468 37,552
Other regulatory assets 29,991 30,320
Other 14,116 27,313
---------- ----------
Total 355,809 391,021
---------- ----------
TOTAL $4,175,400 $4,279,278
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $35,300 $34,275
Notes payable - associated companies - 31,066
Accounts payable:
Associated companies 43,508 73,389
Other 95,886 89,550
Customer deposits 55,331 59,070
Taxes accrued 25,243 7,390
Interest accrued 34,571 49,249
Dividends declared 3,253 3,489
Deferred fuel costs 3,268 -
Obligations under capital leases 29,232 28,000
Other 8,578 4,940
---------- ----------
Total 334,170 380,418
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 813,748 831,093
Accumulated deferred investment tax credits 134,276 139,899
Obligations under capital leases 28,579 10,156
Deferred interest - Waterford 3 lease obligation 17,799 16,809
Other 119,519 114,665
---------- ----------
Total 1,113,921 1,112,622
---------- ----------
Long-term debt 1,338,464 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
Shareholder's 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 46,766 63,764
---------- ----------
Total 1,233,845 1,250,505
---------- ----------
Commitments and Contingencies (Notes 2, 9 and 10)
TOTAL $4,175,400 $4,279,278
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $63,764 $72,150 $113,420
Add:
Net income 141,757 190,762 201,537
Deduct:
Dividends declared:
Preferred stock 13,016 17,412 20,775
Common stock 145,400 179,200 221,500
Capital stock expenses 339 2,536 532
-------- -------- --------
Total 158,755 199,148 242,807
-------- -------- --------
Retained Earnings, December 31 (Note 8) $46,766 $63,764 $72,150
======== ======== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $1,803,272 $ 1,828,867 $1,674,875 $1,710,415 $1,731,541
Net income $ 141,757 $ 190,762 $ 201,537 $ 213,839 $ 188,808
Total assets $4,175,400 $ 4,279,278 $4,331,523 $4,435,439 $4,463,998
Long-term obligations (1) $1,522,043 $ 1,545,889 $1,528,542 $1,530,558 $1,611,436
(1) Includes long-term debt (excluding currently maturing debt), preferred
stock with sinking fund, preferred securities of subsidiary trust, and
noncurrent capital lease obligations.
1997 1996 1995 1994 1993
(In Thousands)
Electric Operating Revenues:
Residential $606,173 $609,308 $583,373 $577,084 $572,738
Commercial 379,131 374,515 353,582 358,672 345,254
Industrial 708,356 727,505 641,196 659,061 652,574
Governmental 34,171 33,621 31,616 31,679 29,723
--------------------------------------------------------------------
Total retail 1,727,831 1,744,949 1,609,767 1,626,496 1,600,289
Sales for resale
Associated companies 3,817 5,065 1,178 352 4,849
Non-associated companies 55,345 58,685 48,987 36,928 46,414
Other 16,279 20,168 14,943 46,639 79,989
--------------------------------------------------------------------
Total $1,803,272 $1,828,867 $1,674,875 $1,710,415 $1,731,541
====================================================================
Billed Electric Energy
Sales (GWH):
Residential 7,826 7,893 7,855 7,449 7,368
Commercial 4,906 4,846 4,786 4,631 4,435
Industrial 16,390 17,647 16,971 16,561 15,914
Governmental 460 457 439 423 398
--------------------------------------------------------------------
Total retail 29,582 30,843 30,051 29,064 28,115
Sales for resale
Associated companies 104 143 44 10 112
Non-associated companies 805 982 1,293 776 1,213
--------------------------------------------------------------------
Total 30,491 31,968 31,388 29,850 29,440
====================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.
We have audited the accompanying balance sheets of Entergy
Mississippi, Inc. (formerly Mississippi Power & Light Company) as of
December 31, 1997 and 1996, and the related statements of income, retained
earnings and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased in 1997 as a result of a decrease in electric
operating revenues and an increase in other operation and maintenance
expenses, partially offset by lower income taxes.
Net income increased in 1996 primarily due to reduced other operation
and maintenance expenses, partially offset by higher income taxes.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON", following the
financial statements, for information on operating revenues by source and
KWH sales.
The changes in electric operating revenues for the twelve months ended
December 31, 1997 and 1996 are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($7.7) ($2.2)
Grand Gulf rate rider (19.0) 7.1
Fuel cost recovery (14.5) 33.6
Sales volume/weather 3.8 8.5
Other revenue (including unbilled) (1.6) (2.1)
Sales for resale 18.0 23.7
------ -----
Total ($21.0) $68.6
====== =====
Electric operating revenues decreased in 1997 primarily due to a
decrease in the Grand Gulf 1 rate rider and fuel adjustment revenues, which
do not affect net income, partially offset by an increase in sales for
resale. 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 1997 were lower than those in 1996. The decrease in fuel adjustment
revenues is due to an MPSC order, effective May 1, 1997, that changed fuel
recovery pricing to a fixed fuel factor. Sales for resale increased
because of an increase in sales to associated companies due to changes in
generation requirements and availability among the domestic utility
companies.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Electric operating revenues increased in 1996 primarily due to
increases in fuel adjustment revenues, the Grand Gulf 1 rate rider, sales
for resale, and higher sales volume. Fuel adjustment revenues increased in
response to higher fuel costs. In connection with an annual MPSC review,
in October 1995, Entergy Mississippi's Grand Gulf 1 rate rider was adjusted
upward as a result of its undercollection of Grand Gulf 1 costs. The fuel
adjustment clause and the Grand Gulf 1 rate rider do not affect net income.
Sales for resale increased because of an increase in sales to associated
companies due to changes in generation requirements and availability among
the domestic utility companies. The increase in sales volume is primarily
due to increased customer usage.
Expenses
Operating expenses increased in 1997 due to an increase in purchased
power expenses and other operation and maintenance expenses, partially
offset by decreases in fuel expense and net rate deferral activity. The
increase in purchased power expenses in 1997 compared to 1996 is due both
to the shift in use from higher priced fuel to lower priced purchased power
and to an increase in generation and purchases related to increases in
sales volume and sales for resale. The increase in other operation and
maintenance expenses is due to increases in contract labor and loss
reserves. Contract labor increased because of maintenance and plant outage
expenses in 1997. Loss reserves expense increased as a result of increased
litigation reserves.
The other regulatory credits reducing operating expenses in 1996 and
1997 principally represents the deferral of Entergy Mississippi's portion
of the proposed System Entergy rate increase. See Note 2 for further
discussion.
Operating expenses increased in 1996 due to an increase in fuel and
purchased power expenses, partially offset by a decrease in other operation
and maintenance expenses. Fuel and purchased power expenses increased as a
result of higher fuel costs and higher sales volume. Other operation and
maintenance expenses decreased as a result of lower payroll, contract work,
and materials and supplies expenses. Payroll expenses decreased due to
restructuring costs recorded in 1995 and the resulting decrease in
employees. Contract work and materials and supplies expenses decreased
because of the turbine repairs at some of Entergy Mississippi's generating
plants in 1995.
Other
The effective income tax rates for 1997, 1996, and 1995 were 28.6%,
34.2%, and 33.7% respectively. The decrease in 1997 is primarily due to
the impact of recording the tax benefit of Entergy Corporation's expenses
as prescribed by the tax allocation agreement. The effective income tax
rate for 1996 was relatively unchanged from 1995.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues $937,395 $958,430 $889,843
-------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses 199,880 207,116 163,198
Purchased power 285,447 272,812 240,519
Other operation and maintenance 129,812 122,628 144,183
Depreciation and amortization 43,300 40,313 38,197
Taxes other than income taxes 43,142 43,389 46,019
Other regulatory charges (credits) (20,731) (23,026) (6,965)
Amortization of rate deferrals 119,797 130,602 114,304
-------- -------- --------
Total 800,647 793,834 739,455
-------- -------- --------
Operating Income 136,748 164,596 150,388
-------- -------- --------
Other Income:
Allowance for equity funds used
during construction 543 1,143 950
Miscellaneous - net 919 1,662 3,036
-------- -------- --------
Total 1,462 2,805 3,986
-------- -------- --------
Interest Charges:
Interest on long-term debt 40,791 44,137 46,998
Other interest - net 4,483 3,870 4,638
Allowance for borrowed funds used
during construction (469) (923) (806)
-------- -------- --------
Total 44,805 47,084 50,830
-------- -------- --------
Income Before Income Taxes 93,405 120,317 103,544
Income Taxes 26,744 41,106 34,877
-------- -------- --------
Net Income 66,661 79,211 68,667
Preferred Stock Dividend Requirements
and Other 4,044 5,010 7,515
-------- -------- --------
Earnings Applicable to Common Stock $62,617 $74,201 $61,152
======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $66,661 $79,211 $68,667
Noncash items included in net income:
Amortization of rate deferrals 119,797 130,602 114,304
Other regulatory charges (credits) (20,731) (23,026) (6,965)
Depreciation and amortization 43,300 40,313 38,197
Deferred income taxes and investment tax credits (32,204) (32,887) (36,774)
Allowance for equity funds used during construction (543) (1,143) (950)
Changes in working capital:
Receivables 2,978 (4,123) (5,277)
Fuel inventory 3,275 20 (1,901)
Accounts payable (9,246) 88 15,553
Taxes accrued 5,832 (2,157) 7,818
Interest accrued (6,600) (925) 1,457
Other working capital accounts (12,283) 4,074 (21,108)
Other (1,150) (8,081) 11,922
---------- ---------- ----------
Net cash flow provided by operating activities 159,086 181,966 184,943
---------- ---------- ----------
Investing Activities:
Construction expenditures (50,334) (85,018) (79,146)
Allowance for equity funds used during construction 543 1,143 950
---------- ---------- ----------
Net cash flow used in investing activities (49,791) (83,875) (78,196)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds 64,827 - 79,480
Retirement of:
General and refunding mortgage bonds (96,000) (26,000) (45,000)
First mortgage bonds - (35,000) (20,000)
Other long-term debt (15) (15) (965)
Redemption of preferred stock (14,500) (9,876) (15,000)
Changes in short-term borrowings - net (3,091) 50,253 (30,000)
Dividends paid:
Common stock (59,200) (79,900) (61,700)
Preferred stock (3,998) (5,000) (6,215)
---------- ---------- ----------
Net cash flow used in financing activities (111,977) (105,538) (99,400)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (2,682) (7,447) 7,347
Cash and cash equivalents at beginning of period 9,498 16,945 9,598
---------- ---------- ----------
Cash and cash equivalents at end of period $6,816 $9,498 $16,945
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $50,194 $46,769 $48,617
Income taxes $51,598 $73,687 $67,746
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $6,816 $2,384
Special deposits - 7,114
---------- ----------
Total cash and cash equivalents 6,816 9,498
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1 million in 1997 and $1.4 million and 1996) 36,636 44,809
Associated companies 6,842 4,382
Other 4,139 2,014
Accrued unbilled revenues 49,993 49,383
Fuel inventory - at average cost 3,386 6,661
Materials and supplies - at average cost 17,657 17,567
Rate deferrals 127,295 142,504
Prepayments and other 17,537 7,434
---------- ----------
Total 270,301 284,252
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,757 7,923
---------- ----------
Total 13,288 13,454
---------- ----------
Utility Plant:
Electric 1,687,400 1,633,484
Construction work in progress 22,960 47,373
---------- ----------
Total 1,710,360 1,680,857
Less - accumulated depreciation and amortization 656,828 635,754
---------- ----------
Utility plant - net 1,053,532 1,045,103
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals - 104,588
SFAS 109 regulatory asset - net 22,993 11,813
Unamortized loss on reacquired debt 8,404 9,254
Other regulatory assets 64,827 46,309
Other 6,216 6,693
---------- ----------
Total 102,440 178,657
---------- ----------
TOTAL $1,439,561 $1,521,466
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $20 $96,015
Notes payable - associated companies 47,162 50,253
Accounts payable:
Associated companies 36,057 32,878
Other 11,276 23,701
Customer deposits 24,084 26,258
Taxes accrued 32,314 26,482
Accumulated deferred income taxes 44,277 58,634
Interest accrued 14,309 20,909
Other 2,806 3,065
---------- ----------
Total 212,305 338,195
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 244,464 249,522
Accumulated deferred investment tax credits 23,915 25,422
Other 15,892 19,445
---------- ----------
Total 284,271 294,389
---------- ----------
Long-term debt 464,156 399,054
Preferred stock with sinking fund - 7,000
Shareholder's Equity:
Preferred stock without sinking fund 50,381 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 (59) (143)
Retained earnings 229,181 225,764
---------- ----------
Total 478,829 482,828
---------- ----------
Commitments and Contingencies (Notes 2 and 9)
TOTAL $1,439,561 $1,521,466
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $225,764 $231,463 $232,011
Add:
Net income 66,661 79,211 68,667
Deduct:
Dividends declared:
Preferred stock 3,656 4,803 5,971
Common stock 59,200 79,900 61,700
Preferred stock expenses 388 207 1,544
-------- -------- --------
Total 63,244 84,910 69,215
-------- -------- --------
Retained Earnings, December 31 (Note 8) $229,181 $225,764 $231,463
======== ======== ========
See Notes to Financial Statements
ENTERGY MISSISSIPPI, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $ 937,395 $ 958,430 $ 889,843 $ 859,845 $ 883,818
Net Income $ 66,661 $ 79,211 $ 68,667 $ 48,779 $ 69,037
Total assets $1,439,561 $1,521,466 $1,581,983 $1,637,828 $1,681,992
Long-term obligations (1) $ 464,156 $ 406,054 $ 511,613 $ 507,555 $ 563,612
(1) Includes long-term debt (excluding currently maturing debt) and
preferred stock with sinking fund.
1997 1996 1995 1994 1993
(In Thousands)
Electric Operating Revenues:
Residential $342,818 $358,264 $336,194 $332,567 $341,620
Commercial 274,195 281,626 262,786 257,154 251,285
Industrial 173,152 185,351 178,466 184,637 182,060
Governmental 26,882 29,093 27,410 27,495 28,530
---------------------------------------------------
Total retail 817,047 854,334 804,856 801,853 803,495
Sales for resale
Associated companies 78,233 58,749 35,928 37,747 34,640
Non-associated companies 21,276 22,814 21,906 16,728 21,100
Other 20,839 22,533 27,153 3,517 24,583
---------------------------------------------------
Total $937,395 $958,430 $889,843 $859,845 $883,818
===================================================
Billed Electric Energy
Sales (GWH):
Residential 4,323 4,355 4,233 4,014 3,983
Commercial 3,673 3,508 3,368 3,151 2,928
Industrial 3,089 3,063 3,044 2,985 2,787
Governmental 333 346 336 330 336
---------------------------------------------------
Total retail 11,418 11,272 10,981 10,480 10,034
Sales for resale
Associated companies 1,918 1,368 959 1,079 758
Non-associated companies 412 521 692 512 670
---------------------------------------------------
Total 13,748 13,161 12,632 12,071 11,462
===================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
We have audited the accompanying balance sheets of Entergy New
Orleans, Inc. (formerly New Orleans Public Service Inc.) as of December 31,
1997 and 1996, and the related statements of income, retained earnings and
cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased in 1997 primarily due to an increase in taxes
other than income taxes, partially offset by lower income taxes.
Net income decreased in 1996 primarily due to the electric and gas
rate refund recorded in December 1996, based on the Council's review of
Entergy New Orleans' 1996 earnings. This decrease in net income was
partially offset by reduced other operation and maintenance expenses.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, are discussed under "Revenues and Sales", "Expenses", and "Other"
below.
Revenues and Sales
See "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON", following the
financial statements, for information on electric operating revenues by
source and KWH sales.
The changes in electric operating revenues for the twelve months
ended December 31, 1997 and 1996 are as follows:
Increase/(Decrease)
Description 1997 1996
(In Millions)
Change in base revenues ($13.6) ($8.5)
Fuel cost recovery (2.2) 28.5
Sales volume/weather (0.8) (4.8)
Other revenue (including unbilled) 16.7 (1.4)
Sales for resale 6.8 (0.5)
------ -----
Total $6.9 $13.3
====== =====
Electric operating revenues increased in 1997 primarily due to
increases in other revenue and sales for resale, partially offset by a
decrease in base revenues. Other revenue increased as a result of a rate
refund recorded in 1996. Sales for resale increased as a result of an
increase in electric sales to associated companies primarily due to
changes in generation requirements and availability among the domestic
utility companies. The decrease in base revenues is caused by 1996 and
1997 reductions in residential and commercial rates. Electric operating
revenues increased in 1996 primarily due to higher fuel adjustment
revenues, as a result of higher fuel prices, which do not affect net
income. This increase was partially offset by a rate refund recorded in
1996, as discussed in "Net Income" above, and lower sales attributable to
a significant reduction in electricity usage by a large industrial
customer.
Gas operating revenues decreased in 1997 primarily due to lower gas
prices. Gas operating revenues increased in 1996 primarily due to higher
gas prices. This increase was partially offset by the rate refund
recorded in 1996, as discussed in "Net Income" above.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses increased in 1997 due primarily to increases in
taxes other than income taxes and lower other regulatory credits. These
increases were partially offset by a decrease in total fuel expenses,
including purchased power and gas purchased for resale. 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 decrease in other
regulatory credits is primarily a result of the 1996 deferral of Entergy
New Orleans' portion of the proposed System Energy rate increase. See
Note 2 for further discussion. Fuel and purchased power expenses
decreased in 1997 primarily due to a shift from higher priced purchased
power to lower priced fuel.
Operating expenses increased in 1996 primarily due to higher fuel
expenses, including purchased power and gas purchased for resale and
increased amortization of rate deferrals, partially offset by an increase
in other regulatory credits and a decrease in other operation and
maintenance expenses. Fuel expenses, including gas purchased for resale,
increased as a result of significantly higher unit prices. Purchased
power increased due to changes in generation availability and requirements
among the domestic utility companies. Other regulatory credits increased
due to the deferral of a portion of the System Energy rate increase being
billed to Entergy New Orleans, as discussed in Note 2. Other operation
and maintenance expenses decreased primarily due to lower payroll expenses
as a result of restructuring and reduced regulatory commission expenses.
Other
The effective income tax rates for 1997, 1996, and 1995 were 44.0%,
37.7%, and 37.3%, respectively. The increase in 1997 is primarily due to
decreased amortization of deferred income taxes on property fully
depreciated for federal income tax purposes. The effective income tax
rate for 1996 was relatively unchanged from 1995.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues:
Electric $410,131 $403,254 $390,002
Natural gas 94,691 101,023 80,276
-------- -------- --------
Total 504,822 504,277 470,278
-------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 141,902 129,059 102,314
Purchased power 156,542 176,450 145,920
Other operation and maintenance 72,748 71,421 76,510
Depreciation and amortization 21,107 20,007 19,420
Taxes other than income taxes 38,964 27,388 27,805
Other regulatory charges (credits) (6,394) (13,543) (3,985)
Amortization of rate deferrals 37,662 35,917 31,564
-------- -------- --------
Total 462,531 446,699 399,548
-------- -------- --------
Operating Income 42,291 57,578 70,730
-------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 380 321 158
Miscellaneous - net (77) 1,146 1,639
-------- -------- --------
Total 303 1,467 1,797
-------- -------- --------
Interest Charges:
Interest on long-term debt 13,918 15,268 15,948
Other interest - net 1,369 1,036 1,853
Allowance for borrowed funds used
during construction (286) (252) (127)
-------- -------- --------
Total 15,001 16,052 17,674
-------- -------- --------
Income Before Income Taxes 27,593 42,993 54,853
Income Taxes 12,142 16,217 20,467
-------- -------- --------
Net Income 15,451 26,776 34,386
Preferred Stock Dividend Requirements
and Other 965 965 1,411
-------- -------- --------
Earnings Applicable to Common Stock $14,486 $25,811 $32,975
======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $15,451 $26,776 $34,386
Noncash items included in net income:
Amortization of rate deferrals 37,662 35,917 31,564
Other regulatory charges (credits) (6,394) (13,543) (3,985)
Depreciation and amortization 21,107 20,007 19,420
Deferred income taxes and investment tax credits (1,957) (12,274) (1,998)
Allowance for equity funds used during construction (380) (321) (158)
Changes in working capital:
Receivables (1,260) 832 (5,468)
Accounts payable 540 (5,638) 12,566
Taxes accrued 4,066 (4,350) 3,225
Interest accrued (276) 214 (131)
Income tax refund - - 20,172
Other working capital accounts (18,148) (5,216) (4,803)
Other (1,823) 1,602 (5,515)
---------- ---------- ----------
Net cash flow provided by operating activities 48,588 44,006 99,275
---------- ---------- ----------
Investing Activities:
Construction expenditures (16,137) (27,956) (27,836)
Allowance for equity funds used during construction 380 321 158
---------- ---------- ----------
Net cash flow used in investing activities (15,757) (27,635) (27,678)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of general and refunding mortgage bonds - 39,608 29,805
Retirement of:
First mortgage bonds (12,000) (23,250) -
General and refunding mortgage bonds - (30,000) (24,200)
Redemption of preferred stock - - (3,525)
Dividends paid:
Common stock (26,000) (34,000) (30,600)
Preferred stock (965) (965) (1,362)
---------- ---------- ----------
Net cash flow used in financing activities (38,965) (48,607) (29,882)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (6,134) (32,236) 41,715
Cash and cash equivalents at beginning of period 17,510 49,746 8,031
---------- ---------- ----------
Cash and cash equivalents at end of period $11,376 $17,510 $49,746
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $14,951 $15,357 $17,187
Income taxes - net $10,981 $31,870 ($941)
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $4,321 $1,015
Temporary cash investments - at cost,
which approximates market:
Associated companies 1,918 7,435
Other 5,137 9,060
-------- --------
Total cash and cash equivalents 11,376 17,510
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1997 and 1996) 26,913 27,430
Associated companies 1,081 714
Other 4,155 1,764
Accrued unbilled revenues 16,083 17,064
Deferred electric fuel and resale gas costs 9,384 7,290
Materials and supplies - at average cost 9,389 9,904
Rate deferrals 35,336 37,692
Prepayments and other 6,087 7,157
-------- --------
Total 119,804 126,525
-------- --------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
Utility Plant:
Electric 508,338 503,061
Natural gas 122,308 122,700
Construction work in progress 19,184 18,247
-------- --------
Total 649,830 644,008
Less - accumulated depreciation and amortization 355,854 347,790
-------- --------
Utility plant - net 293,976 296,218
-------- --------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 64,192 99,498
SFAS 109 regulatory asset - net 1,202 6,051
Unamortized loss on reacquired debt 1,435 1,647
Other regulatory assets 13,392 15,908
Other 890 890
-------- --------
Total 81,111 123,994
-------- --------
TOTAL $498,150 $549,996
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $- $12,000
Accounts payable:
Associated companies 15,922 18,757
Other 17,505 14,130
Customer deposits 16,982 18,974
Taxes accrued 5,270 1,204
Accumulated deferred income taxes 11,544 5,584
Interest accrued 5,049 5,325
Provision for rate refund 3,108 19,465
Other 2,231 1,521
-------- --------
Total 77,611 96,960
-------- --------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 61,000 72,895
Accumulated deferred investment tax credits 7,396 7,984
Accumulated provision for property insurance 15,487 15,666
Other 16,327 24,713
-------- --------
Total 100,210 121,258
-------- --------
Long-term debt 168,953 168,888
Shareholder's 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
Additional paid-in capital 36,294 36,294
Retained earnings subsequent to the elimination of
the accumulated deficit on November 30, 1988 61,558 73,072
-------- --------
Total 151,376 162,890
-------- --------
Commitments and Contingencies (Notes 2 and 9)
TOTAL $498,150 $549,996
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $73,072 $81,261 $78,886
Add:
Net income 15,451 26,776 34,386
Deduct:
Dividends declared:
Preferred stock 965 965 1,231
Common stock 26,000 34,000 30,600
Capital stock expenses - - 180
-------- -------- --------
Total 26,965 34,965 32,011
-------- -------- --------
Retained Earnings, December 31 (Note 8) $61,558 $73,072 $81,261
======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $504,822 $ 504,277 $470,278 $447,787 $ 514,822
Net Income $ 15,451 $ 26,776 $ 34,386 $ 13,211 $ 36,761
Total assets $498,150 $ 549,996 $596,206 $592,894 $ 647,605
Long-term obligations (1) $168,953 $ 168,888 $155,958 $167,610 $ 193,262
(1) Includes long-term debt (excluding currently maturing debt).
1997 1996 1995 1994 1993
(In Thousands)
Electric Operating Revenues:
Residential $145,688 $151,577 $141,353 $142,013 $151,423
Commercial 143,113 149,649 144,374 162,410 167,788
Industrial 24,616 24,663 22,842 25,422 26,205
Governmental 58,746 58,561 52,880 58,726 61,548
---------------------------------------------------
Total retail 372,163 384,450 361,449 388,571 406,964
Sales for resale
Associated companies 10,342 2,649 3,217 2,061 2,487
Non-associated companies 8,996 9,882 9,864 7,512 9,291
Other (1) 18,630 6,273 15,472 (37,714) 5,088
---------------------------------------------------
Total $410,131 $403,254 $390,002 $360,430 $423,830
===================================================
Billed Electric Energy
Sales (GWH):
Residential 1,971 1,998 2,049 1,896 1,914
Commercial 2,072 2,073 2,079 2,031 1,989
Industrial 484 481 537 518 499
Governmental 994 974 983 951 924
---------------------------------------------------
Total retail 5,521 5,526 5,648 5,396 5,326
Sales for resale
Associated companies 316 66 149 92 89
Non-associated companies 160 212 297 202 262
---------------------------------------------------
Total 5,997 5,804 6,094 5,690 5,677
===================================================
(1) 1994 includes the effects of the 1994 NOPSI Settlement.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
System Energy Resources, Inc.
We have audited the accompanying balance sheets of System Energy
Resources, Inc. as of December 31, 1997 and 1996, and the related
statements of income, retained earnings and cash flows for each of the
three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Company as
of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in
1996 the Company changed its method of accounting for incremental nuclear
plant outage maintenance costs.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased slightly in 1997 and 1996 primarily due to lower
interest charges attributed to the refinancing of higher-cost debt.
Significant factors affecting the results of operations and causing
variances between the years 1997 and 1996, and between the years 1996 and
1995, 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. See Note 2 herein for a discussion of System Energy's proposed
rate increase.
Expenses
Operating expenses increased in 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 that began in December 1996. Prior to this
outage, such costs were expensed as incurred and no such expenses were
incurred in 1996. The increase in depreciation, amortization, and
decommissioning expense is due to the reduction of the regulatory asset
set up to defer the depreciation associated with the sale and leaseback in
1989 of a portion of Grand Gulf 1. The depreciation was deferred to match
the collection of lease principal and revenues with the depreciation of
the asset. Grand Gulf 1 was on-line for 365 days in 1997 as compared to
322 days in 1996.
Operating expenses increased in 1996 due primarily to increases in
other operation and maintenance expenses, and depreciation, amortization,
and decommissioning expenses. Other operation and maintenance expenses
increased primarily because of higher waste disposal costs and medical
benefit charges for the year. The increase in decommissioning costs and
depreciation rates is reflected in the 1995 System Energy FERC rate
increase filing, subject to refund (see Note 2). These increases were
partially offset by a decrease in nuclear refueling outage expenses. The
decrease in nuclear outage expenses was primarily due to the effect of
deferring the nuclear refueling outage expenses in the fourth quarter of
1996 rather than recognizing those expenses as incurred (see Note 1).
Grand Gulf 1 was on-line for 322 days in 1996 as compared with 285 days in
1995. The increase in the on-line days was primarily due to the unit's
shorter eighth refueling outage that lasted from October 19, 1996 to
November 30, 1996 (41 days), compared to a 68-day outage in 1995, and to a
lesser extent, unplanned outages in 1996 totaling 3 days, compared to 12
days for 1995.
Other
Interest charges decreased in both 1997 and in 1996 due primarily to
the retirement and refinancing of higher-cost long-term debt.
The effective income tax rates in 1997, 1996, and 1995 were 42.2%,
45.4%, and 44.8%, respectively. The decrease in 1997 is primarily due to
the impact of recording the tax benefit of Entergy Corporation's expenses
as prescribed by the tax allocation agreement. The effective income tax
rate for 1996 was relatively unchanged from 1995.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Revenues $633,698 $623,620 $605,639
-------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 48,475 43,761 40,262
Nuclear refueling outage expenses 16,425 1,239 24,935
Other operation and maintenance 101,269 105,453 98,441
Depreciation, amortization, and decommissioning 147,859 128,474 100,747
Taxes other than income taxes 26,477 27,654 27,549
-------- -------- --------
Total 340,505 306,581 291,934
-------- -------- --------
Operating Income 293,193 317,039 313,705
-------- -------- --------
Other Income:
Allowance for equity funds used
during construction 2,209 1,122 1,878
Miscellaneous - net 8,517 5,234 2,492
-------- -------- --------
Total 10,726 6,356 4,370
-------- -------- --------
Interest Charges:
Interest on long-term debt 121,633 135,376 143,020
Other interest - net 7,020 8,344 8,491
Allowance for borrowed funds used
during construction (1,683) (1,114) (1,968)
-------- -------- --------
Total 126,970 142,606 149,543
-------- -------- --------
Income Before Income Taxes 176,949 180,789 168,532
Income Taxes 74,654 82,121 75,493
-------- -------- --------
Net Income $102,295 $98,668 $93,039
======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $102,295 $98,668 $93,039
Noncash items included in net income:
Depreciation, amortization, and decommissioning 147,859 128,474 100,747
Deferred income taxes and investment tax credits (39,370) 48,975 (45,337)
Allowance for equity funds used during construction (2,209) (1,122) (1,878)
Changes in working capital:
Receivables (9,543) 3,436 (66,433)
Accounts payable 11,172 560 (18,955)
Taxes accrued 7,852 (4,825) 37,266
Interest accrued 8,127 (2,548) (4,053)
Other working capital accounts 19,054 (13,430) (21,874)
Decommissioning trust contributions and realized
change in trust assets (22,452) (21,366) (7,507)
FERC Settlement - refund obligation (4,539) (4,009) (3,540)
Provision for estimated losses and reserves 43,216 46,919 3,167
Other 16,684 7,125 31,818
---------- ---------- ----------
Net cash flow provided by operating activities 278,146 286,857 96,460
---------- ---------- ----------
Investing Activities:
Construction expenditures (35,141) (29,469) (21,747)
Allowance for equity funds used during construction 2,209 1,122 1,878
Nuclear fuel purchases (16,524) (44,704) (51,455)
Proceeds from sale/leaseback of nuclear fuel 16,524 43,971 52,188
---------- ---------- ----------
Net cash flow used in investing activities (32,932) (29,080) (19,136)
---------- ---------- ----------
Financing Activities:
Proceeds from the issuance of:
First mortgage bonds - 233,656 -
Other long-term debt - 133,933 73,343
Retirement of:
First mortgage bonds (10,000) (325,101) (105,000)
Other long-term debt (7,319) (92,700) (45,320)
Changes in short-term borrowings - net - (2,990) 2,990
Common stock dividends paid (113,800) (112,500) (92,800)
---------- ---------- ----------
Net cash flow used in financing activities (131,119) (165,702) (166,787)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 114,095 92,075 (89,463)
Cash and cash equivalents at beginning of period 92,315 240 89,703
---------- ---------- ----------
Cash and cash equivalents at end of period $206,410 $92,315 $240
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $103,684 $138,483 $147,492
Income taxes $105,621 $36,397 $87,016
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $1,237 ($70) $3,061
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
December 31,
1997 1996
(In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $792 $26
Temporary cash investments - at cost,
which approximates market:
Associated companies 55,891 41,600
Other 149,727 50,689
---------- ----------
Total cash and cash equivalents 206,410 92,315
Accounts receivable:
Associated companies 79,262 71,337
Other 4,140 2,522
Materials and supplies - at average cost 63,782 66,302
Deferred nuclear refueling outage costs 7,777 24,005
Prepayments and other 3,658 4,929
---------- ----------
Total 365,029 261,410
---------- ----------
Other Property and Investments:
Decommissioning trust fund 85,912 62,223
---------- ----------
Utility Plant:
Electric 3,025,389 2,994,445
Electric plant under leases 440,970 447,409
Construction work in progress 36,445 41,362
Nuclear fuel under capital lease 64,190 83,558
---------- ----------
Total 3,566,994 3,566,774
Less - accumulated depreciation and amortization 1,086,820 974,472
---------- ----------
Utility plant - net 2,480,174 2,592,302
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 243,027 264,758
Unamortized loss on reacquired debt 51,386 57,785
Other regulatory assets 192,290 207,214
Other 14,213 15,601
---------- ----------
Total 500,916 545,358
---------- ----------
TOTAL $3,432,031 $3,461,293
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDER'S EQUITY
December 31,
1997 1996
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $70,000 $10,000
Accounts payable:
Associated companies 29,131 18,245
Other 19,122 18,836
Taxes accrued 75,675 67,823
Interest accrued 42,322 34,195
Obligations under capital leases 41,977 28,000
Other 1,341 2,306
---------- ----------
Total 279,568 179,405
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 562,051 624,020
Accumulated deferred investment tax credits 100,171 103,647
Obligations under capital leases 22,213 55,558
FERC Settlement - refund obligation 48,300 52,839
Other 227,847 165,517
---------- ----------
Total 960,582 1,001,581
---------- ----------
Long-term debt 1,341,948 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 60,583 72,088
---------- ----------
Total 849,933 861,438
---------- ----------
Commitments and Contingencies (Notes 2, 9 and 10)
TOTAL $3,432,031 $3,461,293
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF RETAINED EARNINGS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $72,088 $85,920 $85,681
Add:
Net income 102,295 98,668 93,039
Deduct:
Dividends declared 113,800 112,500 92,800
-------- -------- --------
Retained Earnings, December 31 (Note 8) $60,583 $72,088 $85,920
======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
1997 1996 1995 1994 1993
(In Thousands)
Operating revenues $ 633,698 $ 623,620 $ 605,639 $ 474,963 $ 650,768
Net income $ 102,295 $ 98,668 $ 93,039 $ 5,407 $ 93,927
Total assets $3,432,031 $3,461,293 $3,431,012 $3,613,359 $ 3,891,066
Long-term obligations (1) $1,364,161 $1,474,427 $1,264,024 $1,456,993 $ 1,536,593
Electric energy sales (GWH) 9,735 8,302 7,212 8,653 7,113
(1) Includes long-term debt (excluding current maturities) and noncurrent
capital lease obligations.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Entergy London Investments plc
We have audited the accompanying consolidated balance sheet of Entergy
London Investments plc and Subsidiary as of December 31, 1997, and the
related consolidated statements of loss, retained earnings and cash flows
for the year ended December 31, 1997. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Entergy London Investments plc and Subsidiary as of December 31, 1997, and
the results of their operations and their cash flows for the year ended
December 31, 1997 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Background
Entergy London (formerly Entergy Power UK plc) was incorporated as a
public limited company under the laws of England and Wales in October 1996,
as a vehicle for the acquisition of London Electricity. In February 1997,
Entergy London gained effective control of London Electricity, having
acquired over 90% of its shares. In May 1997, Entergy London acquired the
remaining shares of London Electricity. Total consideration for the
acquisition was approximately $2.0 billion, based on the exchange rate at
the time of the acquisition. Entergy London's sole significant asset is
the stock of London Electricity. Entergy London has no operations outside
of its investment in London Electricity.
Accounting for the Acquisition
Entergy London's acquisition of London Electricity effective February
1, 1997 was accounted for as a purchase in accordance with US GAAP.
Accordingly, the results of operations of London Electricity have been
consolidated into the results of operations for Entergy London beginning on
such date. In accordance with the purchase method of accounting, Entergy
London has allocated the price paid for London Electricity to London
Electricity's assets and liabilities based on their estimated fair market
values with the remainder allocated to London Electricity's distribution
license which represents an other identifiable intangible asset. The
assets and liabilities acquired as of February 1, 1997 were as follows (in
millions):
Current assets $ 518.2
Network assets 2,134.3
Other long term assets 1,601.2
Current liabilities (614.8)
Long term debt (333.9)
Other long term liabilities (1,285.9)
--------
Total purchase price $2,019.1
========
The principal adjustments to London Electricity's historical cost of
its assets and liabilities include: (a) increase in the value of network
assets ($782.9 million); (b) increase in pension asset for defined benefit
pension plan under US GAAP ($108.6 million); (c) recordation of
distribution license ($1,335.8 million); and (d) recordation of liability
for unfavorable long term contracts ($159.4 million). Additionally, the
Company provided for the deferred income tax effect of these adjustments at
a rate of 33%, which is included in other long term liabilities. Entergy
London is amortizing the adjustments for network assets and the
distribution license over estimated useful lives of 40 years and the
adjustment for unfavorable long term contracts over their remaining lives
ranging from 14 to 18 years. Entergy London's asset recorded for the
defined benefit pension plan will be increased or decreased on a
prospective basis based on future actuarial studies of the plan's projected
benefit obligation and fair value of pension plan assets. The liability
for unfavorable long term contracts is based on the estimated fair market
value of these contracts over the present value of the future cash flows
under the contracts at the applicable discount rates and prices. Although
amortization of the liability for unfavorable long-term contracts will
reduce the expense related to these contracts, it will not impact Entergy
London's actual payments or cash flow obligations.
London Electricity has utilized a portion of the pension plan surplus
to increase benefits to members and reduce employer and employee
contributions. A recent court ruling in the UK upheld such uses of pension
surplus. However, the decision is under appeal and should the decision be
reversed on appeal, Entergy London could be required to repay pension
surplus utilized and recompute Entergy London's prepaid pension asset,
which was $241 million at December 31, 1997.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Successor Company
The following discussion compares the results of operations for the
year ended December 31, 1997 for Entergy London with the results of
operations of London Electricity for the ten month period ended January 31,
1997 (London Electricity's fiscal year ended on March 31, prior to its
acquisition). The year ended December 31, 1997 for Entergy London includes
eleven months results for London Electricity due to its acquisition on
February 1, 1997. Periods prior to February 1, are included for
comparative purposes, however, they do not include the effects of
acquisition adjustments described above under "Accounting for the
Acquisition".
Operating Income
Operating income was $187 million for the year ended December 31, 1997
which included London Electricity for the eleven month period from February
1, 1997 through December 31, 1997. This represented an increase of $18
million compared to the historical London Electricity results for the ten
month period from April 1, 1996 through January 31, 1997. This increase
was due principally to higher revenue from an additional month's results of
operations in the later period and restructuring charges of $19 million
during the earlier period. Partially offsetting this were increases of $59
million in depreciation and amortization expense due principally to
acquisition adjustments and $17 million in other operation and maintenance
costs. The above variances were all impacted by an increase in the US
dollar to BPS average exchange rate from 1.58 to 1.00 in the ten month
period from April 1, 1996 through January 31, 1997 to 1.64 to 1.00 for the
eleven month period ending December 31, 1997.
Operating income by segments for the year ended December 31, 1997 was
$141 million, $15 million, and $31 million for the distribution, supply,
and other segments, respectively. Income (loss) from those segments for
the ten month period from April 1, 1996 through January 31, 1997 was $159
million, $(1) million, and $11 million, respectively.
The decrease in distribution operating income was principally due to
additional depreciation and amortization expense of $59 million in the
later period attributable to acquisition adjustments for fixed assets and
the distribution license based on 40-year useful lives partially offset by
one additional month of operations in the later period. Increases in the
supply and other segments are due principally to one additional month of
operations in the later period and improved margins in the non-Franchise
supply market and one-time charges in the period ending January 31, 1997
relating to the disposal of certain subsidiaries and associated
undertakings.
Net Income
Net income decreased by $245 million, from $98 million during the
period from April 1, 1996 to January 31, 1997, to a loss of $147 million
for the year ended December 31, 1997. The net loss for the later period
includes a one-time charge of $234 million (reflected in income taxes) for
the windfall profits tax enacted by the UK government in July 1997. The
windfall profits tax is not deductible for UK corporation tax purposes.
This charge was partially offset by a reduction of $65 million in the
Company's deferred income tax liability, in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," due
to the UK government also reducing the UK corporation tax rate from 33% to
31%, effective April 1, 1997. Acquisition related adjustments including
increased depreciation and amortization of approximately $59 million ($41
million after tax effect) and increased interest expense, principally on
acquisition debt, of approximately $152 million ($105 million after tax
effect) also contributed to the reduction in net income. The increase in
operating income of $18 million ($12 million after tax effect) and an
increase in interest and dividend income of $17 million ($12 million after
tax effect) partially offset the above impacts.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Revenues
Operating revenues increased by $82 million (5%) from $1,765 million
during the ten month period from April 1, 1996 to January 31, 1997 to
$1,847 million for the year ended December 31, 1997, as follows:
Operating Revenues
Increase (Decrease)
from ten-month Period
from April 1, 1996
through January 31,
1997 to the year ended
December 31, 1997
(In millions)
Electricity distribution $64
Electricity supply 26
Other (4)
Intra-business (4)
---
Total operating revenues $82
===
Two principal factors determine the amount of revenues produced by the
main electricity distribution business: the unit price of the electricity
distributed (which is controlled by the Distribution Price Control Formula)
and the number of electricity units distributed which depends on the demand
of London Electricity's customers for electricity within its Franchise
Area. Demand varies based upon weather conditions and economic activity.
Following London Electricity's regulatory distribution price review in
1994, London Electricity's allowable expected distribution revenues were
reduced by 14%, during the fiscal year ended March 31, 1996. Subsequently,
the Regulator announced a further allowed distribution price reduction of
11% beginning April 1, 1996, and an additional 3%, beginning April 1, 1997.
These price reductions have reduced and will continue to reduce London
Electricity's distribution revenues.
Revenues from the distribution business increased by $64 million (15%)
from $435 million for the ten month period from April 1, 1996 to January
31, 1997 to $499 million for the year ended December 31, 1997, principally
due to an 11% increase in units distributed as a result of there being
eleven months of London Electricity operations in the year ended December
31, 1997 compared to only ten months in the earlier period. Also
contributing to the total increase was the increase in the U.S. dollars to
BPS exchange rate during the year ended December 31, 1997.
Two principal factors determine the amount of revenues produced by the
supply business: the unit price of the electricity supplied (which, in the
case of the franchise supply customers, is controlled by the Supply Price
Control Formula) and the number of electricity units supplied. London
Electricity is expected to have the exclusive right to supply all franchise
supply customers in its Franchise Area until late 1998.
Franchise supply customers, who are generally residential and small
commercial customers, comprised 56% of total sales volume for the February
1, 1997 through December 31, 1997 period of London Electricity's inclusion
in Entergy London's 1997 results of operations. The volume of unit sales
of electricity for franchise supply customers is influenced largely by the
number of customers in London Electricity's Franchise Area, weather
conditions and prevailing economic conditions. Unit sales to non-franchise
supply customers, who are typically large commercial and industrial
businesses, constituted 44% of total sales volume for the period from
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
February 1, 1997 through December 31, 1997. Sales to non-franchise supply
customers are determined primarily by the success of the supply business
in contracting to supply customers with electricity who are located both
inside and outside London Electricity's Franchise Area.
During the February 1, 1997 through December 31, 1997 period that
London Electricity was included in Entergy London's 1997 results of
operations, the number of electricity units supplied increased by 5% while
total revenues produced by the supply business increased by 2% ($26
million) to $1,689 million from $1,663 million for the ten month period
from April 1, 1996 to January 31, 1997. While volume increased for both
Franchise Supply Customers and Non-Franchise Supply Customers due to the
additional month included in the later period, this was partially offset by
lower average unit prices for both customer categories. Reductions in
prices for Franchise Supply Customers are due primarily to pass-through of
reduced costs of purchased power. Reductions in prices for Non-Franchise
Supply Customers are due primarily to competitive pressures in this market
as purchased power costs decline.
Other revenues for the February 1, 1997 through December 31, 1997
period that London Electricity was included in Entergy London's 1997
results of operations were $103 million, a decrease of $4 million compared
to the ten month period from April 1, 1996 to January 31, 1997. This was
due principally to reduced revenues in the contracting business and the
exclusion of revenues from subsidiaries disposed of in the period ending
January 31, 1997.
Expenses
Operating expenses increased by $64 million (4%) from $1,596 million
in the ten month period from April 1, 1996 to January 31, 1997 to $1,660
million in the February 1, 1997 through December 31, 1997 period that
London Electricity was included in Entergy London's 1997 results of
operations. This increase was due principally to one additional month's
operations in the later period and to increases of $59 million in
depreciation and amortization expense related to the acquisition
adjustments for fixed assets and distribution license based on 40-year
useful lives and of $17 million in other operation and maintenance costs.
These increases were partially offset by restructuring charges of $19
million during the earlier period and a decrease in purchase power costs
due to a decline in the average purchase price per unit which was offset
by an increase in the exchange rate. Also contributing to the total
increase was the increase in the U.S. dollars to BPS exchange rate during
the year ended December 31, 1997.
Other
Interest Expense, Net
Interest expense, net increased by $152 million from $27 million
during the ten month period from April 1, 1996 to January 31, 1997 to $179
million for the year ended December 31, 1997. This increase was
principally as a result of the financing costs associated with the debt
facilities entered into to finance the acquisition of London Electricity,
effective February 1, 1997.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Income Taxes
Entergy London's effective income tax rate was approximately 596% and
34% for the year ended December 31, 1997, and for the ten month period from
April 1, 1996 to January 31, 1997, respectively. The effective rate in the
1997 period was affected by the recording of a one-time charge of $234
million during the year ended December 31, 1997 for the windfall profits
tax enacted by the UK government in July 1997 and the non-deductibility,
for UK corporation tax purposes, of this charge. This impact was partially
offset by the $65 million favorable impact of the reduction in the UK
corporation tax rate from 33% to 31%, as discussed above.
Entergy London's 34% effective income tax rate for the ten month
period from April 1, 1996 to January 31, 1997, approximated the statutory
rate of 33%.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF LOSS
For the Year Ended
December 31, 1997
(In Thousands)
Operating Revenues $1,847,042
Operating Expenses:
Purchased power 1,222,034
Depreciation and amortization 121,365
Other operation and maintenance costs 316,833
----------
Total 1,660,232
----------
Operating Income 186,810
----------
Other income (deductions):
Interest and dividend income 22,328
Miscellaneous - net (803)
----------
Total 21,525
----------
Interest Charges:
Distributions on preferred securities of subsidiaries 3,019
Other interest - net 175,628
----------
Total 178,647
----------
Income Before Income Taxes 29,688
Income tax expense 177,023
----------
Net Loss ($147,335)
==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended
December 31, 1997
(In Thousands)
Operating Activities:
Net loss ($147,335)
Noncash items included in net income:
Depreciation and amortization 121,365
Deferred income taxes (56,217)
Changes in assets and liabilities:
Inventory 375
Accounts receivable and unbilled revenue (66,019)
Other receivables 42,506
Prepayments and other (4,340)
Long-term receivables and other 4,546
Accounts payable 116,091
Income taxes accrued 81,568
Interest accrued (8,270)
Deferred revenue and other current liabilities (32,383)
Other liabilities (37,002)
Other 36,372
----------
Net cash flow provided by operating activities 51,257
----------
Investing Activities:
Construction expenditures (181,165)
Acquisition of London Electricity, net of cash acquired (1,951,701)
Other investments 1,321
----------
Net cash flow used in investing activities (2,131,545)
----------
Financing Activities:
Proceeds from the issuance of:
Bank notes and other long-term debt 1,559,748
Common Stock 505,953
Preferred securities of subsidiary partnership 300,000
Payment of long-term debt (259,428)
Changes in short-term borrowings - net (25,460)
----------
Net cash flow provided by financing activities 2,080,813
----------
Effect of exchange rates on cash and cash equivalents (10,615)
----------
Net decrease in cash and cash equivalents (10,090)
Cash and cash equivalents at beginning of period 54,478
----------
Cash and cash equivalents at end of period $44,388
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $139,578
Cash paid for income taxes $127,585
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, 1997
(In Thousands)
Current Assets:
Cash and cash equivalents
Cash $ -
Temporary cash investments 44,388
----------
Total cash and cash equivalents 44,388
Notes receivable 7,364
Accounts receivable:
Customer (less allowance for doubtful accounts of $21.9 million) 139,265
Other 39,764
Accrued unbilled revenue 262,818
Accumulated deferred income taxes 12,401
Inventory 1,976
Prepayments and other 13,623
----------
Total 521,599
----------
Property, Plant, and Equipment:
Property, plant and equipment 2,283,549
Construction work in progress 81,306
----------
Total 2,364,855
Less - accumulated depreciation and amortization 90,021
----------
Property, plant, and equipment - net 2,274,834
----------
Other Property, Investments, and Assets:
Investments, long-term 11,413
Distribution license (net of accumulated amortization of $31.1 million) 1,327,312
Long-term receivables 17,172
Prepaid pension asset 241,216
Other 10,079
----------
Total 1,607,192
----------
TOTAL $4,403,625
==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 1997
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $33,814
Notes payable 240,794
Accounts payable 349,821
Customer deposits 24,946
Taxes accrued 120,981
Interest accrued 14,201
Other 805
----------
Total 785,362
----------
Other Liabilities:
Accumulated deferred income taxes 995,865
Other 250,470
----------
Total 1,246,335
----------
Long-term debt 1,706,096
Company-obligated redeemable preferred securities
of subsidiary partnership holding solely junior subordinated
deferrable debentures 300,000
Shareholders' Equity:
Common stock, BPS1 par value, authorized, issued,
and outstanding 50,000 shares 114,081
Paid-in capital 391,900
Accumulated deficit (132,390)
Cumulative foreign currency translation adjustment (7,759)
----------
Total 365,832
----------
Commitments and Contingencies (Notes 2, 9 and 10)
TOTAL $4,403,625
==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
STATEMENT OF CONSOLIDATED RETAINED EARNINGS
For the Year Ended
December 31, 1997
(In Thousands)
Retained Earnings, January 1 $ -
Add:
Net loss (147,335)
Imputed interest on parent company debt 14,945
---------
Accumulated Deficit, December 31 ($132,390)
=========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
SELECTED FINANCIAL DATA
1997
(In Thousands)
Operating revenues $1,847,042
Net loss $(147,335)
Total assets $4,403,625
Long-term obligations (1) $2,006,096
(1) Includes long-term debt (excluding currently maturing debt) and
preferred securities of subsidiary partnership.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Energy, and Entergy London)
The accompanying consolidated financial statements include the
accounts of Entergy Corporation and its direct and indirect subsidiaries,
including the domestic utility companies, System Energy, and Entergy
London, whose financial statements are included in this document. Except
for London Electricity, which was the predecessor company to Entergy London
(see Note 13), the financial statements presented herein result from these
companies having registered securities with the SEC.
All significant intercompany transactions have been eliminated.
Entergy Corporation's domestic utility subsidiaries maintain accounts in
accordance with FERC and other regulatory guidelines. Certain previously
reported amounts have been reclassified to conform to current
classifications, with no effect on net income or shareholders' equity.
Use of Estimates in the Preparation of Financial Statements
The preparation of Entergy Corporation and its subsidiaries' financial
statements, in conformity with generally accepted accounting principles,
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities, and the reported amounts of revenues and expenses.
Adjustments to the reported amounts of assets and liabilities may be
necessary in the future to the extent that future estimates or actual
results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi generate,
transmit, and distribute electricity (primarily to retail customers) in
Arkansas, Louisiana, and Mississippi, respectively. Entergy Gulf States
generates, transmits, and distributes electricity primarily to retail
customers in Texas and Louisiana; distributes gas at retail primarily in
Baton Rouge, Louisiana, and also sells steam to a large refinery complex in
Baton Rouge. Entergy New Orleans sells both electricity and gas to retail
customers in the City of New Orleans (except for Algiers, where Entergy
Louisiana is the electricity supplier). London Electricity, Entergy
London's sole asset, distributes and supplies electricity to customers in
the London metropolitan area.
System Energy's operating revenues recover operating expenses,
depreciation, and capital costs attributable to Grand Gulf 1 from Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
Capital costs are computed by allowing a return on System Energy's common
equity funds allocable to its net investment in Grand Gulf 1, plus System
Energy's effective interest cost for its debt allocable to its investment
in Grand Gulf 1. See Note 2 for a discussion of System Energy's proposed
rate increase.
A portion of Entergy Arkansas' and Entergy Louisiana's purchase of
power from Grand Gulf has not been included in the determination of the
cost of service to retail customers by the APSC and LPSC, respectively, as
described in Note 2.
The domestic utility companies and Entergy London accrue estimated
revenues for energy delivered since the latest billings. Entergy London
records revenue net of value-added tax.
The domestic utility companies' rate schedules include either fuel
adjustment clauses or fixed fuel factors, both of which allow either
current recovery or deferrals of fuel costs until such costs are reflected
in the related revenues. Fixed fuel factors remain in effect until changed
as part of a general rate case, fuel reconciliation, or fixed fuel factor
filing.
Entergy London purchases power primarily from the wholesale trading
market for electricity in England and Wales (Electricity Pool). The
Electricity Pool monitors supply and demand between generators and
suppliers, sets prices for generation, and provides centralized settlement
of amounts due between generators and suppliers.
Price Control
Certain supply customers of Entergy London are subject to price
control formulas through December 1998 which allow a maximum charge per
unit of electricity. Distribution customers are subject to price control
formulas which allow a maximum charge per unit of electricity. Differences
in the charges, or in the purchase cost of electricity, can result in the
under or over-recovery of revenues in a particular year.
Where there is an over-recovery of supply or distribution business
revenues against the regulated maximum allowable amount, revenues are
deferred in an amount equivalent to the over-recovered amount. The
deferred amount is deducted from operating revenues and included in other
liabilities. Where there is an under-recovery, no asset is recorded in
anticipation of any potential future recovery.
Utility Plant
Utility plant is stated at original cost. The original cost of
utility plant retired or removed, plus the applicable removal costs, less
salvage, is charged to accumulated depreciation. Maintenance, repairs, and
minor replacement costs are charged to operating expenses. Substantially
all of the utility plant is subject to liens from mortgage bond indentures.
Utility plant includes the portions of Grand Gulf 1 and Waterford 3
that have been sold and leased back. For financial reporting purposes,
these sale and leaseback arrangements are reflected as financing
transactions.
Net utility plant, by company and functional category, as of December
31, 1997 is shown below (in millions):
Entergy Entergy Entergy Entergy Entergy System Entergy
Production Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Nuclear $ 7,559 $ 951 $ 2,312 $ 1,940 $ - $ - $2,356 $ -
Other 1,538 366 631 224 213 14 -
Transmission 1,703 450 467 329 304 21 10 -
Distribution 5,370 916 788 731 424 162 - 1,976
Other 859 131 189 107 90 17 13 218
Plant acquisition adjustment-
Entergy Gulf States 439 - - - - - - -
Other 93 - 32 - - 61 - -
Construction Work
in Progress 566 123 90 52 23 19 37 81
Nuclear Fuel
(leased and owned) 342 93 78 59 - - 64 -
Accumulated Provision
For Decommissioning (1) (336) (227) (49) (60) - - - -
----------------------------------------------------------------------------------------
Utility Plant - Net $18,133 $ 2,803 $ 4,538 $ 3,382 $ 1,054 $ 294 $2,480 $ 2,275
========================================================================================
(1) System Energy's decommissioning liability is recorded on the Balance
Sheet in "Deferred Credits and Other Liabilities - Other"
Depreciation is computed on the straight-line basis at rates based on
the estimated service lives and costs of removal of the various classes of
property. Depreciation rates on average depreciable property are shown
below:
Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
1997 3.2% 3.1% 2.8% 3.0% 2.5% 3.1% 3.4% 4.4%
1996 3.0% 3.2% 2.7% 3.0% 2.4% 3.1% 3.3% N/A
1995 2.9% 3.3% 2.7% 3.0% 2.4% 3.1% 2.9% N/A
AFUDC represents the approximate net composite interest cost of
borrowed funds and a reasonable return on the equity funds used for
construction. Although AFUDC increases both utility plant and earnings, it
is only realized in cash through depreciation provisions included in rates.
Jointly-Owned Generating Stations
Certain Entergy Corporation subsidiaries jointly own electric
generating facilities with third parties, and record the investments and
expenses associated with these generating stations to the extent of their
respective undivided ownership interests. As of December 31, 1997, the
subsidiaries' investment and accumulated depreciation in each of these
generating stations were as follows:
Total
Megawatt Accumulated
Generating Stations Fuel Capability Ownership Investment Depreciation
Type
(In Thousands)
Entergy Arkansas
Independence Unit 1 Coal 836 31.50% $117,515 $45,471
Common Facilities Coal 15.75% 29,568 10,591
White Bluff Units 1 and 2 Coal 1,659 57.00% 397,304 174,227
Entergy Gulf States (1)
Roy S. Nelson Unit 6 Coal 550 70.00% 400,409 177,305
Big Cajun 2 Unit 3 Coal 540 42.00% 222,957 92,960
Entergy Mississippi -
Independence Units 1 and 2 Coal 1,678 25.00% 224,081 85,860
System Energy -
Grand Gulf Unit 1 Nuclear 1,200 90.00%(2) 3,454,067 1,086,820
Entergy Power -
Independence Unit 2 Coal 842 21.50% 121,138 41,883
(1)On December 23, 1997, Cajun's 30% ownership interest in River Bend Unit
1, a 936 MW nuclear unit located near St. Francisville, Louisiana, was
transferred to Entergy Gulf States, which previously had owned the
other 70% of the unit. See Note 9.
(2)Includes an 11.5% leasehold interest held by System Energy. See Note
10.
Income Taxes
Entergy Corporation and its subsidiaries file a U.S. consolidated
federal income tax return. Income taxes are allocated to the subsidiaries
in proportion to their contribution to consolidated taxable income. SEC
regulations require that no Entergy Corporation subsidiary pay more taxes
than it would have paid if a separate income tax return had been filed.
Entergy London, as a member of an affiliated group in the UK, is eligible
for group relief. Group relief enables current losses to be surrendered by
one affiliated company to another affiliated company. It is the policy of
Entergy London's affiliated group to apply the group relief provisions in
order to minimize the UK corporation income tax of the group. In
accordance with SFAS 109, "Accounting for Income Taxes", deferred income
taxes are recorded for all temporary differences between the book and tax
basis of assets and liabilities, and for certain credits available for
carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion of the
deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Investment tax credits are deferred and amortized based upon the
average useful life of the related property, in accordance with rate
treatment.
Distribution Licenses
Distribution licenses represent the identifiable intangible assets
related to Entergy London and CitiPower which exclusively permit
distribution services to be provided within defined territories. These
licenses are being amortized over 40 years using the straight-line method.
Entergy's future net cash flows are expected to be sufficient to recover
the amortization of the cost of the CitiPower and Entergy London licenses.
Reacquired Debt
The premiums and costs associated with reacquired debt of the domestic
utility companies and System Energy (except that allocable to the
deregulated operations of Entergy Gulf States) are being amortized over the
life of the related new issuances, in accordance with ratemaking treatment.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Investments
Entergy applies the provisions of SFAS 115, "Accounting for
Investments for Certain Debt and Equity Securities", in accounting for
investments. As a result, Entergy has recorded on the consolidated balance
sheet an additional $53 million in decommissioning trust funds of the
domestic utility companies. Such increase represents the amount by which
the fair value of the securities held in such funds exceeds the amounts
deposited from rate recovery, plus the related earnings on the amounts
deposited. In accordance with the regulatory treatment for decommissioning
trust funds, Entergy has recorded an offsetting amount in unrealized gains
on investment securities as a regulatory liability in other deferred
credits.
Entergy London accounts for investments whose fair market values are
readily determinable in accordance with SFAS 115. These securities are
considered available-for-sale securities under SFAS 115 and their fair
values approximate cost. Other securities whose fair market values are not
readily determinable and in which Entergy London does not have a
significant interest are recorded at cost.
Investments in which Entergy London's ownership interest ranges from
20% to 50%, or which are less than 20% owned but over which Entergy London
exercises significant influence over operating and financial policies, are
accounted for using the equity method. The following are Entergy London's
principal equity method investments as of December 31, 1997:
Investment Percentage Ownership
Thames Valley Power Ltd 50%
London Total Energy Ltd 50%
Barking Power Limited 13.5%
These investments were acquired effective February 1, 1997, as part of
Entergy's acquisition of London Electricity.
Foreign Currency Translation
In accordance with SFAS 52, "Foreign Currency Translation," all assets
and liabilities of Entergy's foreign subsidiaries are translated into U.S.
dollars at the exchange rate in effect at the end of the period, and
revenues and expenses are translated at average exchange rates prevailing
during the period. The resulting translation adjustments are reflected in
a separate component of shareholders' equity. Current exchange rates are
used for U.S. dollar disclosures of future obligations denominated in
foreign currencies. No representation is made that the foreign currency
denominated amounts have been, could have been, or could be converted into
U.S. dollars at the rates indicated or at any other rates.
Earnings per Share - SFAS 128
The FASB issued SFAS 128, "Earnings per Share", in February 1997,
effective for calendar year-end 1997 financial statements. Entergy adopted
SFAS 128 and has included a dual presentation of basic and diluted earnings
per share on its consolidated statement of income. The average number of
common shares outstanding for the presentation of diluted earnings per
share for the years 1997, 1996, and 1995 were greater by approximately
90,000, 91,000, and 60,000 shares, respectively, than the number of such
shares for the presentation of basic earnings per share due to Entergy's
stock option and other stock compensation plans discussed more fully in
Note 5.
Options to purchase approximately 120,000, 235,000, and 155,000 shares
of common stock at various prices were outstanding at the end of 1997,
1996, and 1995, respectively, but were not included in the computation of
diluted earnings per share because the options' exercise prices were
greater than the market price of the common shares at the end of each of
the years presented.
Application of SFAS 71
The domestic utility companies and System Energy currently account for
the effects of regulation pursuant to SFAS 71, "Accounting for the Effects
of Certain Types of Regulation". This statement applies to the financial
statements of a rate-regulated enterprise that meets three criteria. The
enterprise must have rates that (i) are approved by the regulator; (ii) are
cost-based; and (iii) can be charged to and collected from customers.
These criteria may also be applied to separable portions of a utility's
business, such as the generation or transmission functions, or to specific
classes of customers. If an enterprise meets these criteria, it may
capitalize costs that would otherwise be charged to expense if the rate
actions of its regulator make it probable that those costs will be
recovered in future revenue. Such capitalized costs are reflected as
regulatory assets in the accompanying financial statements. SFAS 71
requires that rate-regulated enterprises assess the probability of
recovering their regulatory assets at each balance sheet date. When an
enterprise concludes that recovery of a regulatory asset is no longer
probable, the regulatory asset must be removed from the entity's balance
sheet.
SFAS 101, "Accounting for the Discontinuation of Application of FASB
Statement No. 71", specifies how an enterprise that ceases to meet the
criteria for application of SFAS 71 for all or part of its operations
should report that event in its financial statements. In general, SFAS 101
requires that the enterprise report the discontinuation of the application
of SFAS 71 by eliminating from its balance sheet all regulatory assets and
liabilities related to the applicable segment. Additionally, if it is
determined that a regulated enterprise is no longer recovering all of its
costs and therefore no longer qualifies for SFAS 71 accounting, it is
possible that an impairment (see further discussion below) may exist which
could require further write-offs of plant assets.
During 1997, EITF 97-4: "Deregulation of the Pricing of Electricity -
Issues Related to the Application of FASB Statements No. 71 and 101" was
issued and specifies that SFAS 71 should be discontinued at a date no later
than when the details of the transition to competition plan for all or a
portion of the entity subject to such plan are known. However, other
factors could cause the discontinuation of SFAS 71 before that date.
Additionally, EITF 97-4 promulgates that regulatory assets to be recovered
through cash flows derived from another portion of the entity which
continues to apply SFAS 71 should not be written off; rather, they should
be considered regulatory assets of the segment which will continue to apply
SFAS 71.
As of December 31, 1997, the majority of the domestic utility
companies' and System Energy's operations continue to meet each of the
criteria required for the use of SFAS 71, and the companies have recorded
significant regulatory assets.
During 1996, FERC issued Orders No. 888 and 889, which require
utilities to provide open access to their transmission system to promote a
more competitive market for wholesale power sales. As described in Note 2,
the domestic utility companies have filed transition to competition
proposals with their regulators providing, among other things, for
accelerated recovery of certain capitalized costs to facilitate for an
orderly transition to a competitive retail power market. In response to
these filings, certain regulatory commissions have begun proceedings to
consider retail competition in their jurisdictions.
Regulators have generally deferred action on the plans in lieu of
their general proceedings on competition. Entergy cannot, at this time,
predict the completion dates or ultimate outcome of all of these
proceedings. Accordingly, the domestic utility companies and System Energy
anticipate that they will continue to meet the criteria for the application
of SFAS 71 in the foreseeable future.
Entergy's foreign utility operations are not subject to cost-based
rate regulation in the jurisdictions in which they operate, but rather are
subject to price cap regulation in certain instances and to competitive
market forces in other instances. Therefore, the provisions of SFAS 71 do
not apply to Entergy's foreign utility operations.
Domestic Deregulated Operations
Entergy Gulf States discontinued regulatory accounting principles for
its wholesale jurisdiction and its steam department during 1989 and for the
Louisiana retail deregulated portion of River Bend in 1991. The results of
these deregulated operations (before interest charges) for the years ended
December 31, 1997, 1996, and 1995 are as follows:
1997 1996 1995
(In Thousands)
Operating Revenues $155,471 $174,751 $141,171
Operating Expenses:
Fuel, operating, and maintenance 89,987 119,784 115,799
Depreciation 36,351 31,455 31,129
------- ------- -------
Total Operating Expenses 126,338 151,239 146,928
Income Taxes 9,416 9,598 (6,979)
------- ------- -------
Net Income from Deregulated Utility $19,717 $13,914 $1,222
Operations ======= ======= =======
The net investment associated with these deregulated operations was
approximately $964 million as of December 31, 1997, which includes Cajun's
interest in River Bend which was transferred by Cajun's Trustee in
Bankruptcy to Entergy Gulf States in late 1997 at a fair value of $139
million, based on management's estimate of such value at the time of
transfer.
Impairment of Long-Lived Assets
Note 2 describes regulatory assets of $169 million (net of tax)
related to Texas retail deferred River Bend
operating and carrying costs which were written off upon the adoption of
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" (SFAS 121), in the first quarter of 1996.
In accordance with the provisions of SFAS 121, Entergy periodically
reviews long-lived assets whenever events or changes in circumstances
indicate that recoverability of these assets is uncertain. Generally, the
determination of recoverability is based on the net cash flows expected to
result from such operations and assets. Projected net cash flows depend on
the future operating costs associated with the assets, the efficiency and
availability of the assets and generating units, and the future market and
price for energy over the remaining life of the assets. Based on current
estimates of future cash flows, management anticipates that future revenues
from such assets and operations of Entergy will fully recover all related
costs.
Assets regulated under traditional cost-of-service ratemaking, and
thereby subject to SFAS 71 accounting, are generally not subject to
impairment, because this form of regulation is designed to assure that all
allowed costs are subject to recovery. However, certain deregulated assets
and other operations of the domestic utility companies totaling
approximately $1.5 billion (pre-tax) could be affected in the future.
Those assets include Entergy Arkansas' and Entergy Louisiana's retained
shares of Grand Gulf 1, Entergy Gulf States' Louisiana deregulated asset
plan, the Texas jurisdiction abeyed portion of the River Bend plant, and
wholesale jurisdiction and steam department operations.
Change in Accounting for Nuclear Refueling Outage Costs (Entergy
Corporation, Entergy Arkansas, and System Energy)
In December 1995, at the recommendation of FERC, Entergy Arkansas
changed its method of accounting for nuclear refueling outage costs. The
change, effective January 1, 1995, results in Entergy Arkansas deferring
incremental maintenance costs incurred during an outage and amortizing
those costs over the operating period immediately following the nuclear
refueling outage, which is the period when the charges are billed to
customers. Previously, estimated costs of refueling outages were accrued
over the period (generally 18 months) preceding each scheduled outage. The
effect of the change for the year ended December 31, 1995, was to decrease
net income by $5.1 million (net of income taxes of $3.3 million) or $.02
per share. The cumulative effect of the change was to increase net income
$35.4 million (net of income taxes of $22.9 million) or $.15 per share.
System Energy filed a rate increase request with FERC in May 1995 (see
Note 2), which, among other things, proposed a 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 above
with respect to Entergy Arkansas. As described in Note 2, the FERC ALJ
issued an initial decision in this proceeding in July 1996, agreeing to the
change in recognition of outage costs proposed by System Energy.
Accordingly, System Energy deferred the refueling outage costs incurred in
the fourth quarter of 1996. As of December 31, 1996, System Energy's
current assets included $24.0 million in deferred nuclear refueling outage
costs which are being amortized over the next fuel cycle (approximately 18
months). Amortization of these costs in the fourth quarter of 1996 and in
1997 amounted to $1.2 million and $16.4 million, respectively, and the
deferred outage costs amounted to $7.8 million as of December 31, 1997.
This change has no impact on the net income of either Entergy or System
Energy because System Energy will recover the refueling outage costs from
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans, and these companies, in turn, will recover these costs from their
ratepayers.
Derivative Financial Instruments
Entergy uses a variety of derivative financial instruments, including
interest rate and foreign currency swaps, natural gas and electricity
futures, natural gas and electricity options, and energy trading swaps and
contracts for differences, as a part of its overall risk management
strategy. Entergy accounts for its derivative financial instruments in
accordance with SFAS No. 80, "Accounting for Futures Contracts," SFAS No.
52, "Foreign Currency Translation," and various EITF pronouncements. If
the interest rate swaps were to be sold or terminated, any gain or loss
would be deferred and amortized over the remaining life of the debt
instrument being hedged by the interest rate swap. If the debt instrument
being hedged by the interest rate swaps were to be extinguished, any gain
or loss attributable to the swap would be recognized in the period of the
transaction.
Entergy uses energy trading swaps and contracts for differences
primarily to hedge its UK and Australian supply businesses against the
price risk of electricity purchases. Use of these instruments is carried
out within the framework of Entergy's purchasing strategy and hedging
guidelines. Risk of loss is monitored through establishment of approved
counterparties and maximum counterparty limits and minimum credit ratings.
Entergy recognizes gains or losses on these instruments when settlement is
made on a basis consistent with the treatment of the underlying energy
customer contract being hedged.
Entergy's domestic energy and natural gas marketing business enters
into sales and purchases of electricity and natural gas for delivery up to
12 months in the future. To hedge price risk on such transactions, this
business utilizes natural gas and electricity futures and option contracts.
Gains or losses are recognized on such instruments when settlement is made
on a basis consistent with treatment of the underlying sales and purchases
of electricity and natural gas.
See Notes 6, 7, and 9 for additional information concerning Entergy's
derivative instruments outstanding as of December 31, 1997.
Fair Value Disclosures
The estimated fair value of financial instruments was determined using
bid prices reported by dealer markets and by nationally recognized
investment banking firms. The estimated fair value of derivative financial
instruments is based on market quotes of the applicable interest or foreign
currency exchange rates, or a survey of foreign Electricity Pool forward
prices. Considerable judgment is required in developing the estimates of
fair value. Therefore, estimates are not necessarily indicative of the
amounts that Entergy could realize in a current market exchange. In
addition, gains or losses realized on financial instruments held by
regulated businesses may be reflected in future rates and therefore not
accrue to the benefit or detriment of stockholders.
Entergy considers the carrying amounts of financial instruments
classified as current assets and liabilities to be a reasonable estimate of
their fair value because of the short maturity of these instruments. In
addition, Entergy does not expect that performance of its obligations will
be required in connection with certain off-balance sheet commitments and
guarantees considered financial instruments. For these reasons, and
because of the related-party nature of these commitments and guarantees,
determination of fair value is not considered practicable. See Notes 5, 7,
and 9 for additional disclosure.
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). As a result of the application of the
company's long-lived asset impairment policy, Entergy Gulf States wrote off
Abeyed Deferrals of $169 million, net of tax, effective January 1, 1996.
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.
On January 14, 1998, the commissioners of the PUCT voted by a 2 to 1
majority to disallow recovery of $1.4 billion of company-wide abeyed plant
costs. The Texas share of these costs, which is not currently in rates, is
approximately $624 million, based on 1988 costs and the jurisdictional
allocation included in current rates. The PUCT is expected to enter an
order pursuant to its vote, but has not yet done so. As of December 31,
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 $252 million,
respectively. See "Filings with the PUCT and Texas Cities" below for
information related to additional rulings by the PUCT and other retail rate
proceedings as well as the proposed agreement in principle between the
parties to the Entergy Gulf States rate proceedings in Texas.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
On December 12, 1997, the APSC resolved the rate application that
Entergy Arkansas filed in October 1996 by approving the settlement
agreement among Entergy Arkansas and four other parties that was filed with
the APSC on October 9, 1997. The settlement agreement as approved provides
for accelerated amortization of Entergy Arkansas' Grand Gulf purchased
power obligation in an amount totaling $165.3 million over the period
January 1, 1999 through June 30, 2004, and the establishment of a
transition cost account to collect earnings in excess of 11% return on
equity through a streamlined annual earnings review for offset against
stranded costs when retail access is implemented. Rates will be frozen for
at least a three-year period. As of December 31, 1997, Entergy Arkansas
established an estimated reserve of $16.6 million in the transition cost
account. This estimated reserve will be trued up once the APSC has
determined, in a mid-year streamlined earnings review procedure, the actual
amount of 1997 overearnings that should go towards the transition cost
account. The APSC's Order also established four generic dockets to address
competition and transition issues that must be resolved prior to retail
access. Finally, the APSC Order approved the rate decreases agreed to in
the settlement agreement totaling $200 million over the two-year period
1998-1999, most involving the ending of the Grand Gulf deferrals and other
mechanisms, such that the net income effect from these reductions is only
approximately $22 million. In management's opinion, Entergy Arkansas
continues to meet each of the criteria required for the application of SFAS
71. Refer to "Application of SFAS 71" in Note 1 for a discussion of SFAS
71 and 101, as well as EITF 97-4.
Filings with the PUCT and Texas Cities (Entergy Corporation and Entergy
Gulf States)
In March 1994, the Texas Office of Public Utility Counsel and certain
cities served by Entergy Gulf States instituted an investigation of the
reasonableness of Entergy Gulf States' rates. On March 20, 1995, the PUCT
ordered a retroactive annual base rate reduction of $52.9 million, which
was amended to an annual level of $36.5 million. The PUCT's action was
based, in part, upon a Texas Supreme Court decision not to require a
utility to use the prospective tax benefits generated by disallowed
expenses to reduce rates. The May 26, 1995, amended order no longer
required Entergy Gulf States to pass such prospective tax benefits on to
its customers. The rate refund ordered by the PUCT in its March 20, 1995,
order, retroactive to March 31, 1994, was approximately $61.8 million
(including interest) and was refunded to customers in September, October,
and November 1995. Entergy Gulf States and other parties have appealed the
PUCT order, but no assurance can be given as to the timing or outcome of
the appeal.
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. Entergy
Gulf States has appealed portions of the PUCT's order to the Texas District
Court. No assurance can be given as to the timing or outcome of these
appeals.
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 would be retroactive
to June 1, 1996, with accrued 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 was 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 all of the phases
have been completed. A supplemental filing with respect to the fourth
phase was made 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 to provide an opportunity for the full recovery of prudently
incurred investments previously approved by regulators. The rebuttal
testimony of Entergy Gulf States in the competition phase of the case
modified its position to include elements from the 1997 proposed Texas
legislation addressing retail access. Most notable were the provisions
calling for a transition period through the year 2001 and rate reductions
for residential and most commercial customers. The PUCT has not issued an
order with respect to the completed phases.
In addition to the January 14, 1998 ruling discussed above in "River
Bend," the PUCT upheld an ALJ's ruling disallowing recovery of
approximately $40 million of Entergy Services' affiliate costs allocated to
Entergy Gulf States in Texas. Entergy Services is responsible for managing
Entergy Gulf States' fossil generating plants and transmission and
distribution systems, as well as providing human resources, accounting, and
other necessary services to Entergy Gulf States and Entergy Corporation's
other electric utility subsidiaries. In another matter, the PUCT also
issued an order establishing service quality standards and rate of return
adjustments for Entergy Gulf States and its Texas retail service territory.
A portion of the adjustments will be retroactive and a portion will be
prospective. The PUCT will evaluate Entergy Gulf States' future
performance based on several criteria including feeder reliability, billing
error rates, customer call center performance, service installation
performance, line extension performance and street light replacements.
In March 1998, the parties to the Entergy Gulf States rate proceedings
in Texas reached an agreement in principle, subject to approval by the PUCT
and the Cities, which would resolve all of the pending rate issues. The
proposed agreement in principle would include a base rate reduction of
$40 million on an annual basis, with a refund retroactive to June 1,
1996; additionally it would provide for a recovery of $25 million
of deferred fuel costs; the base rates would remain at the same level for
the next four years after the reduction; a total service quality credit
of $9 million retroactive to June 1996; and the recovery of a portion of
the abeyed portion of River Bend such that at the end of the four year
rate freeze there will remain $125 million of net plant related to that
abeyed portion. Entergy Gulf States has established reserves for the
probable effects of this agreement in principle based on management's
estimates of the terms thereof. These reserves of approximately
$381 million (or $227 million net of taxes) were recorded in the fourth
quarter of 1997. The results of operations of Entergy Gulf States for
the year ended December 31, 1997, reflect corresponding charges to operating
revenues and other income (deductions) of $70 million and $311 million,
respectively. The parties are working to finalize a definitive agreement.
Entergy Gulf States has agreed to implement the refunds and rate
reductions, subject to final approval of the agreement in principle.
Final approval of the agreement in principle would resolve all regulatory
issues discussed above.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
Annual Earnings Reviews
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 in early 1998.
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. Hearings are scheduled to begin
in March 1998.
LPSC Fuel Cost Review
In September 1996, the LPSC completed the second phase of its review
of Entergy Gulf States' fuel costs, which covered the period October 1991
through December 1994 (Phase II). On October 7, 1996, the LPSC issued an
order requiring a $34.2 million refund. The ordered refund includes a
disallowance of $14.3 million of capital costs (including interest) related
to certain gas transportation and storage facilities, which were recovered
through the fuel clause, and which have been refunded pursuant to the
October 1996 LPSC Settlement. Entergy Gulf States will be permitted to
recover these costs in the future through base rates. On October 23, 1996,
Entergy Gulf States appealed and received an injunction to stay this order,
except insofar as the order requires the $14.3 million refund. On
September 19, 1997, the 19th Judicial District Court of Louisiana reversed
the LPSC's order with respect to several disallowances associated with the
operation of River Bend, affirmed the LPSC's order with respect to the
remainder of the ordered disallowances, and ordered a refund of $8.8
million, plus interest from December 31, 1995 until payment to the
ratepayers. Pleadings seeking appeals to the Louisiana Supreme Court have
been filed.
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
In September 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, over a seven-year period, of the remaining plant investment
associated with River Bend and Waterford 3 as of December 31, 1995, 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
utility industry restructuring.
(Entergy Corporation and Entergy Louisiana)
On April 15, 1996, Entergy Louisiana made its first annual performance-
based formula rate plan filing based on the 1995 test year. On June 19,
1996, the LPSC approved a $12 million annual reduction in base rates
effective July 1, 1996. This reduction was based upon the 1995 test year
results under the formula rate plan and reflected the expiration of the
Waterford 3 phase-in plan discussed below, which was partially offset by
the recovery of the property taxes on Waterford 3 and the related deferral
discussed below. Subsequently, additional issues were resolved by means of
a settlement conference, increasing the base rate reduction from $12
million to $16.5 million. Hearings have been conducted to review Entergy
Louisiana's allowed return on equity and to address certain other disputed
issues. This may result in an additional rate reduction, which would be
prospective only.
On May 30, 1997, Entergy Louisiana made its annual formula rate plan
filing with the LPSC for the 1996 test year. This filing showed the
necessity to reduce rates by approximately $27.8 million. Additionally, in
order to reflect certain Waterford 3 related items (property tax and
termination of the phase-in plan) that are addressed outside the formula
rate plan, the filing showed the necessity to reduce rates further by
approximately $26.7 million. These two reductions produced a total
reduction of approximately $54.5 million, which was implemented beginning
in the first filing cycle of July 1997. The May 30 filing is the final
filing in the two-year period of the formula rate plan. There has been no
determination to date by the LPSC as to whether the formula rate plan
should be extended, modified, or terminated. On January 21, 1998, the LPSC
approved a $4 million refund to reflect lower rates effective July 1, 1997,
as well as an $8 million prospective annual rate reduction.
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 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. In early July
1997 the MPSC issued an order directing the Mississippi Public Utilities
Staff to submit a report outlining a plan for restructuring the electric
utility industry in Mississippi. On November 3, 1997, the Mississippi
Public Utilities Staff submitted to the MPSC a proposed transition plan for
retail competition in the electric industry in Mississippi. The plan
represents the staff's current position on how retail competition can be
implemented in Mississippi and includes an implementation schedule in which
retail competition would begin on January 1, 2001. The plan assumes the
passage of necessary enabling legislation in 1999. The plan also provides
for a transition period, from January 1, 2001, through December 31, 2004,
for the recovery of any allowed stranded costs through a non-bypassable
charge. Parties filed comments on the plan during January and February of
1998 and a hearing is scheduled to be conducted by the MPSC in April 1998.
Filings with the Council (Entergy Corporation and Entergy New Orleans)
In March 1997, the Council established new dockets regarding electric
and gas utility service competition in the City of New Orleans. The
dockets will address competitive issues, including competition, stranded
costs, consumer savings, cost shifting, and potential conflicts among
federal, state, and local regulators, as such issues relate to electric and
gas service. Comments were filed by interested parties in April 1997.
Public hearings on these issues were held in May, July, and October of
1997.
The Council issued a resolution in February 1997 indicating that it
will conduct an investigation 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. That filing was later deferred until September 1997. In July 1997,
Entergy New Orleans and the Council agreed to implement an $18 million
annual reduction in base rates effective May 1, 1997, even though an
allowed rate of return had not yet been determined by the Council.
Entergy New Orleans made its cost of service and revenue requirement
filing in conjunction with its transition to competition plan on September
17, 1997. On November 6, 1997, the Council severed the traditional
ratemaking issues from the transition filings and established a procedural
schedule for the second phase of the rate proceeding, pursuant to which
hearings will be conducted in July 1998. Additionally, the Council ordered
Entergy New Orleans to file unbundled gas rates, in preparation for an
investigation of issues relating to gas industry competition. The electric
transition to competition filing is generally similar to those filed for
the other domestic utility companies. It includes a rate cap coupled with
a continuing right of the Council to conduct reviews of Entergy New
Orleans' earnings, an offer to seek authority from FERC for accelerated
recovery of Grand Gulf purchased power obligations, and implementation of a
non-bypassable universal service charge for all existing customers,
together with functional unbundling of electric rates. Entergy New
Orleans' transition filing will be subject to further review by the
Council. A procedural schedule on that filing has not been set, although
public comment has been requested by the Council.
Deregulated Asset Plan (Entergy Corporation and Entergy Gulf States)
A deregulated asset plan representing an unregulated portion
(approximately 25%) of River Bend (plant costs, generation, revenues, and
expenses) was established pursuant to a January 1992 LPSC order. The plan
allows Entergy Gulf States to sell such generation to Louisiana retail
customers at 4.6 cents per KWH or off-system at higher prices, with certain
provisions for sharing such incremental revenue above 4.6 cents per KWH
between ratepayers and shareholders.
River Bend Cost Deferrals (Entergy Corporation and Entergy Gulf States)
Entergy Gulf States deferred approximately $369 million of River Bend
operating and purchased power costs, depreciation, and accrued carrying
charges, pursuant to a 1986 PUCT accounting order. Approximately $182
million of these costs are being amortized over a 20-year period, and the
remaining $187 million was written off in the first quarter of 1996 in
accordance with SFAS 121, as discussed above. As of December 31, 1997, the
unamortized balance of the remaining costs was $107 million. Entergy Gulf
States deferred approximately $400.4 million of similar costs pursuant to a
1986 LPSC accounting order, which is being amortized over a 10-year period
ending in February 1998. Approximately $5 million was unamortized as of
December 31, 1997.
In accordance with a phase-in plan approved by the LPSC, Entergy Gulf
States deferred $294 million of its River Bend costs related to the period
February 1988 through February 1991. Entergy Gulf States has amortized
$286 million through December 31, 1997. The remaining $8 million will be
recovered in the first quarter of 1998. In connection with the completion
of the phase-in plan, on February 18, 1998, the LPSC approved an annual
prospective rate reduction of $87 million.
Grand Gulf 1 and Waterford 3 Deferrals
(Entergy Corporation and Entergy Arkansas)
Under the settlement agreement entered into with the APSC in 1985 and
amended in 1988, Entergy Arkansas agreed to retain a portion of its Grand
Gulf l-related costs, recover a portion of such costs currently, and defer
a portion of such costs for future recovery. In 1996 and subsequent years,
Entergy Arkansas retains 22% of its 36% share (approximately 7.92%) of
Grand Gulf 1 costs and recovers the remaining 78%. The deferrals ceased in
l990, and Entergy Arkansas is recovering a portion of the previously
deferred costs each year through 1998. As of December 31, l997, the
balance of deferred costs was $75 million. Entergy Arkansas is permitted
to recover on a current basis the incremental costs of financing the
unrecovered deferrals. In the event Entergy Arkansas is not able to sell
its retained share to third parties, it may sell such energy to its retail
customers at a price equal to its avoided energy cost, which is currently
less than Entergy Arkansas' cost of energy from its retained share.
(Entergy Corporation and Entergy Louisiana)
In a series of LPSC orders, court decisions, and agreements from late
1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to
costs associated with Waterford 3 and Entergy Louisiana's share of capacity
and energy from Grand Gulf l, subject to certain terms and conditions.
With respect to Waterford 3, Entergy Louisiana was granted an increase
aggregating $170.9 million over the period 1985-1988, and agreed to
permanently absorb, and not recover from retail ratepayers, $284 million of
its investment in the unit and to defer $266 million of its costs related
to the years 1985-1988, which was recovered from April 1988 through June
1997.
With respect to Grand Gulf l, in November 1988, Entergy Louisiana
agreed to retain and not recover from retail ratepayers, 18% of its 14%
share (approximately 2.52%) of the costs of Grand Gulf l capacity and
energy. Entergy Louisiana is allowed to recover through the fuel
adjustment clause 4.6 cents per KWH for the energy related to its retained
portion of these costs. Alternatively, Entergy Louisiana may sell such
energy to nonaffiliated parties at prices above the fuel adjustment clause
recovery amount, subject to the LPSC's approval.
(Entergy Corporation and Entergy Mississippi)
Entergy Mississippi entered into a plan with the MPSC that provides,
among other things, for the recovery by Entergy Mississippi, in equal
annual installments over 10 years beginning October 1, 1988, of all Grand
Gulf 1-related costs deferred through September 30, 1988, pursuant to a
final order by the MPSC. Additionally, the plan provided that Entergy
Mississippi would defer, in decreasing amounts, a portion of its Grand
Gulf 1-related costs over four years beginning October 1, 1988. These
deferrals are being recovered by Entergy Mississippi over a six-year period
that began in October 1992 and will end in September 1998. As of December
31, 1997, the uncollected balance of Entergy Mississippi's deferred costs
was approximately $127 million. The plan also allows for the current
recovery of carrying charges on all deferred amounts.
(Entergy Corporation and Entergy New Orleans)
Under Entergy New Orleans' various rate settlements with the Council
in 1986, 1988, and 1991, Entergy New Orleans agreed to absorb and not
recover from ratepayers a total of $96.2 million of its Grand Gulf 1 costs.
Entergy New Orleans was permitted to implement annual rate increases in
decreasing amounts each year through 1995, and to defer certain costs and
related carrying charges for recovery on a schedule extending from 1991
through 2001. As of December 31, 1997, the uncollected balance of Entergy
New Orleans' deferred costs was $99 million.
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 with respect to Entergy Arkansas. On December 12, 1995,
System Energy implemented the $65.5 million rate increase, subject to
refund, for which a portion has been reserved. 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 by FERC. 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 deferral period ends September 1998, and the deferred amount 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.
FERC Settlement (Entergy Corporation and System Energy)
In November 1994, FERC approved an agreement settling a long-standing
dispute involving income tax allocation procedures of System Energy. In
accordance with the agreement, System Energy will refund a total of
approximately $62 million, plus interest, to Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans through June 2004.
System Energy also reclassified from utility plant to other deferred debits
approximately $81 million of other Grand Gulf 1 costs. Although such costs
are excluded from rate base, System Energy is recovering them over a 10-
year period. Interest on the $62 million refund and the loss of the return
on the $81 million of other Grand Gulf 1 costs will reduce Entergy's and
System Energy's net income by approximately $10 million annually until
2004.
Entergy London Regulatory Matters (Entergy Corporation and Entergy London)
Distribution Business
The distribution business of London Electricity is regulated under its
PES license, pursuant to which revenue of the distribution business is
controlled by the Distribution Price Control Formula (DPCF). The DPCF
determines the maximum average price per unit of electricity (expressed in
kilowatt hours) that a REC may charge. The elements used in the DPCF are
established for a five-year period and are subject to review by the
Regulator at the end of each period and at other times at the discretion of
the Regulator. At each review the Regulator can adjust the value of
certain elements in the DPCF. Following a review by the Regulator in
August 1994, a 14% price reduction was set for London Electricity,
effective April 1, 1995. In July 1995, a further review of distribution
prices was concluded by the Regulator for fiscal years 1997 to 2000. As a
result of this further review, London Electricity's distribution prices
were reduced an additional 11% effective April 1, 1996; 3% effective April
1, 1997; and will be reduced by a further 3% on both April 1, 1998 and
1999.
Supply Business
The supply business of London Electricity is also regulated by the
Regulator, and prices are established based upon the Supply Price Control
Formula (SPCF) which is similar to the DPCF; however, the SPCF currently
allows full pass through for all properly incurred costs and is set for a
four-year period by the Regulator.
At present, London Electricity has an exclusive right to supply
electricity to residential and small industrial and commercial customers in
its franchise area with demand of less than 100 KW. In late 1998, this
segment of the supply business will become open to competition, subject to
a six-month transition period. This means the market will be fully opened
with all customers having access to competition by June 1999. Although the
advent of competition for all customers will permit all RECs to compete on
a national level, London Electricity may be more sensitive to competition
from its neighboring RECs due to its high customer concentration. London
Electricity is in the process of developing its strategy to meet expanded
competition in its supply business, which will focus on active marketing
and customer service to defend its residential customer base and expanding
product offerings to larger business customers. Such strategy may include
the development of strategic alliances in the provision of energy and
related services and the increased use of hedging of electricity prices to
mitigate the increased risk from the expansion of competition. There can
be no assurance that this strategy will be successful in avoiding a
significant loss of customers of London Electricity's supply business.
On October 16, 1997, the Regulator published final proposals for new
supply price restraints to apply for two years beginning April 1, 1998.
The proposals were accepted on November 16, 1997. Among other things,
these proposals implement a price reduction for London Electricity's
domestic and small business supply customers of 11.8% compared to the
supply price tariff in effect in August 1997. A further 3% reduction is
proposed to be effective on April 1, 1999. The 11.8% price reduction to be
effective on April 1, 1998, would be decreased by the supply tariff
reductions announced by London Electricity on September 29, 1997, and
effective from October 1, 1997, which will return over-recoveries
experienced under the current SPCF. The license modifications which took
effect December 31, 1997, discontinued the automatic pass-through of all
costs previously passed through to domestic and small business customers,
including purchased power costs from the Electricity Pool.
London Electricity expects to incur approximately $49 million (a
portion of which is expected to be capitalized) in fiscal year 1998 for re-
engineering and technology costs to prepare infrastructure services for
full competition in supply beginning September 1998. London Electricity,
along with the other PES license-holders, petitioned the Regulator to
recover such costs from customers. In the Regulator's supply price
restraint proposals published on October 16, 1997, the Regulator proposed,
within the SPCF, to provide for an annual allowance of $7.6 million for
each PES license-holder over the 5 years ending March 31, 2003, to cover
data management services set-up costs plus an annual allowance of $1.6
million plus $1.60 per customer to cover operating costs for the period
1998 through 2000. London Electricity estimates that these proposals will
result in an aggregate allowance for London Electricity of approximately
$12.6 million per annum for the period 1998 through 2000. On November 16,
1997, London Electricity accepted the Regulator's new SPCF to be applied
beginning April 1, 1998. In its fiscal year 1998 (ends March 31, 1998),
London Electricity also expects to incur a total of $8.2 million to procure
settlement software for the Electricity Pool designed to interface with
RECs' data management software. These costs are expected to be recouped
through Electricity Pool settlement charges.
The non-franchise supply market, which typically includes larger
commercial and industrial customers, was opened to competition for all
customers with usage above 1 MW upon privatization of the industry in 1990.
The non-franchise supply markets of 100 KW or more were opened to full
competition starting in April 1994.
NOTE 3. INCOME TAXES
Entergy and its registrant subsidiaries' income tax expenses for
1997, 1996, and 1995 consist of the following (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Current:
Federal $433,444 $113,278 $ 68,881 $ 94,448 $ 49,472 $12,003 $98,428 $ -
Foreign 237,337 - - - - - - 234,080
State 76,905 23,756 6,007 19,974 9,476 2,096 15,596 -
--------------------------------------------------------------------------------------------
Total 747,686 137,034 74,888 114,422 58,948 14,099 114,024 234,080
Deferred -- net (312,691) (73,406) (104,435) (9,833) (30,697) (1,369) (35,894) (57,057)
Investment tax credit
adjustments -- net 36,346 (4,408) 51,949 (5,624) (1,507) (588) (3,476) -
--------------------------------------------------------------------------------------------
Recorded income $471,341 $ 59,220 $ 22,402 $ 98,965 $ 26,744 $ 12,142 $74,654 $177,023
tax expense ============================================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Current:
Federal $272,036 $ 108,583 $ 510 $ 78,629 $ 64,358 $ 23,860 $ 19,637
State 72,204 21,888 201 21,122 9,635 4,631 13,508
----------------------------------------------------------------------------------
Total 344,240 130,471 711 99,751 73,993 28,491 33,145
Deferred -- net 100,572 (41,261) 106,715 24,656 (29,390) (11,587) 52,447
Investment tax credit
adjustments -- net (23,653) (4,766) (5,335) (5,847) (3,497) (687) (3,471)
----------------------------------------------------------------------------------
Recorded income tax $421,159 $ 84,444 $ 102,091 $ 118,560 $ 41,106 $ 16,217 $ 82,121
expense ==================================================================================
1995 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Current:
Federal $ 306,910 $ 87,937 $ 13 $ 93,670 $ 62,436 $ 19,071 $108,920
State 60,278 18,027 - 20,994 9,215 3,394 11,910
--------------------------------------------------------------------------------------
Total 367,188 105,964 13 114,664 71,651 22,465 120,830
Deferred -- net 13,333 (5,363) 67,703 8,148 (35,224) (1,364) (41,871)
Investment tax credit
adjustments -- net (21,478) (5,658) (4,472) (5,698) (1,550) (634) (3,466)
--------------------------------------------------------------------------------------
Recorded income tax $ 359,043 $ 94,943 $ 63,244 $117,114 $ 34,877 $ 20,467 $ 75,493
expense ======================================================================================
Charged to cumulative $ 22,861 $ 22,861 $ - $ - $ - $ - $ -
effect ======================================================================================
Entergy and its registrant subsidiaries' total income taxes differ
from the amounts computed by applying the statutory income tax rate to
income before taxes. The reasons for the differences for the years 1997,
1996, and 1995 are (amounts in thousands):
Entergy Entergy Entergy Entergy Entergy System Entergy
1997 Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Computed at statutory rate (35%) (31% $ 270,284 $ 64,470 $ 28,833 $ 84,253 $ 32,691 $ 9,658 $ 61,932 $ 9,196
for Entergy London)
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 33,272 8,382 1,274 12,106 3,110 1,191 7,209 -
Depreciation 25,471 (2,784) (3,670) 13,162 964 2,236 15,563 -
Rate deferrals - net 3,484 1,543 5,575 (526) (3,504) 396 - -
Amortization of investment
tax credits (19,592) (4,404) (3,981) (5,627) (1,512) (589) (3,479) -
Flow-through/permanent
differences (6,537) (308) (6,133) 47 (78) (65) - -
UK windfall profits tax 234,080 - - - - - - 234,080
Change in UK statutory rate (64,670) - - - - - - (64,670)
Non-deductible franchise fees 17,234
Interest on perpetual instruments (9,094)
Benefit of Entergy Corporation
expenses - (4,920) - (4,788) (2,704) (831) (4,037) -
Other -- net (12,591) (2,759) 504 338 (2,223) 146 (2,534) (1,583)
--------------------------------------------------------------------------------------------
Total income taxes $ 471,341 $ 59,220 $ 22,402 $ 98,965 $ 26,744 $ 12,142 $ 74,654 $ 177,023
============================================================================================
Effective Income Tax Rate 61.0% 31.6% 27.2% 41.1% 28.6% 44.0% 42.2% 596.8%
Entergy Entergy Entergy Entergy Entergy System
1996 Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Computed at statutory rate (35%) $ 319,103 $ 84,785 $ 34,371 $ 108,262 $ 42,111 $ 15,048 $ 63,626
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 54,801 10,796 19,389 11,535 4,188 1,449 7,444
Depreciation 15,829 (2,102) (6,305) 6,722 1,604 402 15,508
Rate deferrals - net 1,973 1,115 5,537 (1,829) (3,430) 580 -
Amortization of investment
tax credits (20,349) (4,608) (4,380) (5,664) (1,582) (635) (3,480)
Flow-through/permanent
differences 1,059 (845) 2,792 (449) (275) (164) -
SFAS 121 write-off 48,265 - 48,265 - - - -
Other -- net 478 (4,697) 2,422 (17) (1,510) (463) (977)
-------------------------------------------------------------------------------------
Total income taxes $ 421,159 $ 84,444 $ 102,091 $ 118,560 $ 41,106 $ 16,217 $ 82,121
=====================================================================================
Effective Income Tax Rate 46.2% 34.9% 104.0% 38.3% 34.2% 37.7% 45.4%
Entergy Entergy Entergy Entergy Entergy System
1995 Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Computed at statutory rate (35%) $ 334,944 $ 93,458 $ 65,157 $ 111,528 $ 36,240 $ 19,198 $ 58,986
Increases (reductions) in tax
resulting from:
State income taxes net of
federal income tax effect 42,599 11,551 8,375 11,532 3,344 1,971 7,036
Depreciation 1,670 (1,510) (13,073) 2,693 739 (661) 13,482
Rate deferrals - net 1,699 975 6,240 (2,626) (3,465) 575 -
Amortization of investment
tax credits (20,549) (5,658) (4,475) (5,711) (1,548) (634) (3,480)
Other -- net (1,320) (3,873) 1,020 (302) (433) 18 (531)
-----------------------------------------------------------------------------------
Total income taxes $ 359,043 $ 94,943 $ 63,244 $ 117,114 $ 34,877 $ 20,467 $ 75,493
===================================================================================
Effective Income Tax Rate 37.5% 35.5% 34.0% 36.7% 33.7% 37.3% 44.8%
Significant components of Entergy and its registrant subsidiaries'
net deferred tax liabilities as of December 31, 1997 and 1996, are as
follows (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Deferred Tax Liabilities:
Net regulatory assets/
(liabilities) (1,378,858) $(293,433) $ (437,397) $ (329,903) $ (32,140) $ (4,642) $(281,343) $ -
Plant-related basis differences (3,574,260) (475,950) (991,253) (716,512) (192,402) (52,295) (494,564) (572,896)
Rate deferrals (177,609) (26,164) (33,665) - (74,427) (43,353) - -
Pension-related items (74,777) - - - - - - (74,777)
Distribution License (411,467) - - - - - - (411,467)
Other (181,306) (53,666) (66,995) (32,101) (7,494) (4,336) (16,714) -
------------------------------------------------------------------------------------------------
Total $(5,798,277) $(849,213) (1,529,310) $(1,078,516) $(306,463) $(104,626) $(792,621) $(1,059,140)
================================================================================================
Deferred Tax Assets:
Accumulated deferred investment
tax credit 204,414 40,721 61,122 51,669 9,147 3,440 38,315 -
Investment tax credit
carryforwards 83,080 - 83,080 - - - - -
NOL carryforwards 2,137 - 2,137 - - - - -
Foreign tax credits (including
foreign tax on unremitted
earnings) 248,897 - - - - - - -
Alternative minimum tax credit 40,658 - 40,658 - - - - -
Sale and leaseback 235,668 - - 108,944 - - 126,724 -
Removal cost 105,477 1,198 27,027 63,759 2,590 10,903 - -
Unbilled revenues 45,505 - 23,848 16,970 (1,195) 5,882 - -
Pension-related items 33,724 - 12,897 9,653 1,801 6,097 3,276 -
Rate refund 195,484 6,504 154,153 - - - 34,827 -
FERC Settlement 17,193 - - - - - 17,193 -
Other 211,361 9,062 21,837 24,767 5,379 5,760 10,235 75,676
Valuation Allowance (248,897) - - - - - - -
------------------------------------------------------------------------------------------------
Total $ 1,174,701 $ 57,485 $ 426,759 $ 275,762 $ 17,722 $ 32,082 $ 230,570 $ 75,676
================================================================================================
Net deferred tax liability $(4,623,576) $ (791,728) $(1,102,551) $(802,754) $ (288,741) $(72,544) $(562,051) $(983,464)
================================================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Deferred Tax Liabilities:
Net regulatory assets/ $(1,406,921) $(287,217) $ (434,380) $(349,667) $ (21,537) $ (9,717) $(304,403)
(liabilities)
Plant-related basis differences (2,976,724) (476,364) (1,006,347) (716,974) (185,038) (50,435) (512,519)
Rate deferrals (322,530) (84,826) (68,282) (2,839) (113,669) (52,914) -
Other (143,792) (59,592) (9,243) (31,433) (7,604) (6,193) (24,917)
-----------------------------------------------------------------------------------------
Total $(4,849,967) $(907,999) $(1,518,252) $(1,100,913) $ (327,848) $(119,259) $(841,839)
=========================================================================================
Deferred Tax Assets:
Accumulated deferred investment
tax credit 210,879 42,450 61,563 53,831 9,724 3,666 39,645
Investment tax credit 138,779 - 138,779 - - - -
carryforwards
NOL carryforwards 24,990 - 24,990 - - - -
Alternative minimum tax credit 40,658 - 40,658 - - - -
Sale and leaseback 233,823 - - 108,390 - - 125,433
Removal cost 102,268 - 27,391 61,716 2,454 10,707 -
Unbilled revenues 37,692 - 17,824 14,965 (343) 5,246 -
Pension-related items 30,869 - 11,291 8,838 2,008 5,987 2,745
Rate refund 25,409 - - - - 7,077 18,332
FERC Settlement 19,079 - - - - - 19,079
Other 147,020 9,049 61,804 23,545 5,849 8,097 12,585
-----------------------------------------------------------------------------------------
Total $ 1,011,466 $ 51,499 $ 384,300 $ 271,285 $ 19,692 $ 40,780 $ 217,819
=========================================================================================
Net deferred tax liability $(3,838,501) $(856,500) $(1,133,952) $ (829,628) $ (308,156) $ (78,479) $(624,020)
=========================================================================================
As of December 31, 1997, Entergy has investment tax credit (ITC)
carryforward of $83.1 million and state net operating loss carryforward of
$26.7 million, all related to Entergy Gulf States operations. The ITC
carryforwards include the 35% reduction required by the Tax Reform Act of
1986 and may be applied solely against federal income tax liability of
Entergy Gulf States and, if not utilized, will expire between 1998 and
2002. The alternative minimum tax (AMT) credit carryforwards as of
December 31, 1997 were $40.7 million, all related to Entergy Gulf States
operations. This AMT credit can be carried forward indefinitely and may be
applied solely against the federal income tax liability of Entergy Gulf
States.
The valuation allowance is provided primarily against foreign tax
credit carryforwards and foreign tax credits on unremitted earnings which
can be utilized against future taxable income in the United States.
NOTE 4. LINES OF CREDIT AND RELATED SHORT-TERM BORROWINGS (Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, System Energy, and Entergy
London)
In November 1996, SEC authorization was received by Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy increasing short-term borrowing limits to $235
million, $340 million, $225 million, $103 million, $35 million, and $140
million, respectively (for a total of $1.078 billion). These authorizations
are effective through November 30, 2001. Of these companies, only Entergy
Mississippi had borrowings outstanding as of December 31, 1997. Entergy
Mississippi had $47.2 million of borrowings outstanding under the money
pool, an inter-company borrowing arrangement designed to reduce the
domestic utility companies' dependence on external short-term borrowings.
Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi had undrawn
lines of credit as of December 31, 1997, of $18 million, $64.2 million, and
$24 million, respectively.
In July 1995, Entergy Corporation obtained a $300 million bank credit
facility. Thereafter, a three-year credit agreement was signed with a
group of banks in October 1995 to provide up to $300 million of loans to
Entergy Corporation. As of December 31, 1997, $75 million was outstanding
against this facility. In January 1997, the SEC authorized an increase in
borrowings under Entergy's bank credit facilities from $300 million to a
maximum of $500 million.
On September 13, 1996 Entergy Corporation and ETHC obtained a three-
year $100 million bank line of credit which was increased to $250 million
in 1997, and that can be drawn by either Entergy Corporation or ETHC (with
a guarantee from Entergy Corporation). The proceeds are to be used
exclusively for exempt telecommunication investments. As of December 31,
1997, $111 million borrowed by Entergy Corporation was outstanding under
this facility.
Other Entergy companies have SEC authorization to borrow through the
money pool, from Entergy Corporation, and from commercial banks in the
aggregate principal amounts up to $265 million, of which $98.2 million was
outstanding as of December 31, 1997. Some of these borrowings are
restricted as to use, and are secured by certain assets.
In total, Entergy had short-term commitments in the amount of $1,029.7
million as of December 31, 1997, of which $745.2 million was unused. The
weighted-average interest rate on the outstanding borrowings of Entergy as
of December 31, 1997 and 1996, was 7.09% and 6.10%, respectively. Included
in these short-term commitments is $452.5 million of London Electricity's
commitments, which had an outstanding balance of $82.3 million of short-
term borrowings through committed facilities as of December 31, 1997. The
weighted average interest rate incurred on Entergy London's short-term
borrowings was 7.64% for the period from February 1, 1997 to December 31,
1997. Commitment fees on the lines of credit for Entergy Arkansas, Entergy
Louisiana, and Entergy Mississippi are .125% of the undrawn amounts. The
commitment fees for Entergy Corporation's $300 million credit facility and
ETHC's $250 million credit facility are currently .17%, but can fluctuate
depending on the senior debt ratings of the domestic utility companies.
The commitment fees for Entergy London's $452.5 million credit facility
range from .03% to .125% of the undrawn balance. See Note 7 for a
discussion of commitments for long-term financing arrangements.
NOTE 5. PREFERRED, PREFERENCE, AND COMMON STOCK (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans)
The number of shares, authorized and outstanding, and dollar value of
preferred and preference stock for Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans as of December 31, 1997, and 1996 were:
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy Arkansas Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.32% Series 70,000 70,000 $ 7,000 $ 7,000 $103.65
4.72% Series 93,500 93,500 9,350 9,350 $107.00
4.56% Series 75,000 75,000 7,500 7,500 $102.83
4.56% 1965 Series 75,000 75,000 7,500 7,500 $102.50
6.08% Series 100,000 100,000 10,000 10,000 $102.83
7.32% Series 100,000 100,000 10,000 10,000 $103.17
7.80% Series 150,000 150,000 15,000 15,000 $103.25
7.40% Series 200,000 200,000 20,000 20,000 $102.80
7.88% Series 150,000 150,000 15,000 15,000 $103.00
Cumulative, $0.01 par value:
$1.96 Series (a)(b) 600,000 600,000 15,000 15,000 -
--------- --------- -------- --------
Total without sinking fund 1,613,500 1,613,500 $116,350 $116,350
========= ========= ======== ========
With sinking fund:
Cumulative, $100 par value
8.52% Series 250,000 300,000 $ 25,000 $ 30,000 $104.26
Cumulative, $25 par value
9.92% Series 241,085 401,085 6,027 10,027 $26.32
--------- --------- -------- --------
Total with sinking fund 491,085 701,085 $ 31,027 $ 40,027
========= ========= ======== ========
Fair Value of Preferred Stock with sinking fund (d) $ 32,018 $ 41,835
======== ========
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy Gulf States Preferred and Preference Stock
Preference Stock
Cumulative, without par value
7% Series (a)(b) 6,000,000 6,000,000 $150,000 $150,000 -
========= ========= ======== ========
Preferred Stock
Authorized 6,000,000, $100 par
value, cumulative
Without sinking fund:
4.40% Series 51,173 51,173 $ 5,117 $ 5,117 $108.00
4.50% Series 5,830 5,830 583 583 $105.00
4.40%-1949 Series 1,655 1,655 166 166 $103.00
4.20% Series 9,745 9,745 975 975 $102.82
4.44% Series 14,804 14,804 1,480 1,480 $103.75
5.00% Series 10,993 10,993 1,099 1,099 $104.25
5.08% Series 26,845 26,845 2,685 2,685 $104.63
4.52% Series 10,564 10,564 1,056 1,056 $103.57
6.08% Series 32,829 32,829 3,283 3,283 $103.34
7.56% Series 350,000 350,000 35,000 35,000 $101.80
8.52% Series - 500,000 - 50,000 -
9.96% Series - 350,000 - 35,000 -
--------- --------- -------- --------
Total without sinking fund 514,438 1,364,438 $ 51,444 $136,444
========= ========= ======== ========
With sinking fund:
8.80% Series 162,283 184,595 $ 16,228 $ 18,459 $100.00
8.64% Series 112,000 140,000 11,200 14,000 $101.00
Adjustable Rate - A, 7.42%(c) 168,000 180,000 16,800 18,000 $100.00
Adjustable Rate - B, 7.47%(c) 247,500 270,000 24,750 27,000 $100.00
--------- --------- -------- --------
Total with sinking fund 689,783 774,595 $ 68,978 $ 77,459
========= ========= ======== ========
Fair Value of Preference Stock and
Preferred Stock with sinking fund (d) $220,413 $214,475
======== ========
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy Louisiana Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.96% Series 60,000 60,000 $ 6,000 $ 6,000 $104.25
4.16% Series 70,000 70,000 7,000 7,000 $104.21
4.44% Series 70,000 70,000 7,000 7,000 $104.06
5.16% Series 75,000 75,000 7,500 7,500 $104.18
5.40% Series 80,000 80,000 8,000 8,000 $103.00
6.44% Series 80,000 80,000 8,000 8,000 $102.92
7.84% Series 100,000 100,000 10,000 10,000 $103.78
7.36% Series 100,000 100,000 10,000 10,000 $103.36
Cumulative, $25 par value:
8.00% Series (b) 1,480,000 1,480,000 37,000 37,000 -
--------- --------- -------- --------
Total without sinking fund 2,115,000 2,115,000 $100,500 $100,500
========= ========= ======== ========
With sinking fund:
Cumulative, $100 par value
7.00% Series (b) 500,000 500,000 $ 50,000 $ 50,000 -
8.00% Series (b) 350,000 350,000 35,000 35,000 -
Cumulative, $25 par value
12.64% Series - 300,000 - 7,500 -
--------- --------- -------- --------
Total with sinking fund 850,000 1,150,000 $ 85,000 $ 92,500
========= ========= ======== ========
Fair Value of Preferred Stock with sinking fund (d) $ 87,288 $ 93,825
======== ========
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy Mississippi Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.36% Series 59,920 59,920 $ 5,992 $ 5,992 $103.86
4.56% Series 43,888 43,888 4,389 4,389 $107.00
4.92% Series 100,000 100,000 10,000 10,000 $102.88
7.44% Series 100,000 100,000 10,000 10,000 $102.81
8.36% Series(b) 200,000 200,000 20,000 20,000 -
9.16% Series - 75,000 - 7,500 -
--------- --------- -------- --------
Total without sinking fund 503,808 578,808 $ 50,381 $ 57,881
========= ========= ======== ========
With sinking fund:
Cumulative, $100 par value
9.76% Series - 70,000 $ - $ 7,000 -
--------- --------- -------- --------
Total with sinking fund - 70,000 $ - $ 7,000
========= ========= ======== ========
Fair Value of Preferred Stock with sinking fund (d) $ 7,000
========
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy New Orleans Preferred Stock
Without sinking fund:
Cumulative, $100 par value
4.75% Series 77,798 77,798 $ 7,780 $ 7,780 $105.00
4.36% Series 60,000 60,000 6,000 6,000 $104.57
5.56% Series 60,000 60,000 6,000 6,000 $102.59
--------- --------- -------- --------
Total without sinking fund 197,798 197,798 $ 19,780 $ 19,780
========= ========= ======== ========
Shares Call Price Per
Authorized Total Share as of
and Outstanding Dollar Value December 31,
1997 1996 1997 1996 1997
Entergy Corporation
Subsidiary's Preference Stock
(a)(b) 6,000,000 6,000,000 $150,000 $150,000 -
========= ========= ======== ========
Subsidiaries' Preferred Stock
Without sinking fund 4,944,544 5,869,544 $338,455 $430,955
========= ========= ======== ========
With sinking fund 2,030,868 2,695,680 $185,005 $216,986
========= ========= ======== ========
Fair Value of Preference Stock
and Preferred Stock with
sinking fund (d) $339,719 $357,135
======== ========
(a) The total dollar value represents the involuntary liquidation value of
$25 per share.
(b) These series are not redeemable as of December 31, 1997.
(c) Represents weighted-average annualized rates for 1997.
(d) Fair values were determined using bid prices reported by dealer
markets and by nationally recognized investment banking firms. See
Note 1 for additional disclosure of fair value of financial
instruments.
Changes in the preferred stock, with and without sinking fund,
preference stock, and common stock of Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans
during the last three years were:
Number of Shares
1997 1996 1995
Preferred stock retirements
Entergy Arkansas
$100 par value (50,000) (50,000) (25,000)
$25 par value (160,000) (560,000) (280,000)
$0.01 par value - (2,000,000) -
Entergy Gulf States
$100 par value (934,812) (101,943) (72,834)
Entergy Louisiana
$100 par value - (100,000) -
$25 par value (300,000) (2,300,370) (450,211)
Entergy Mississippi
$100 par value (145,000) (97,700) (150,000)
Entergy New Orleans
$100 par value - - (34,495)
Cash sinking fund requirements and mandatory redemptions for the next
five years for preferred and preference stock, outstanding as of December
31, 1997, are:
Entergy
Entergy Gulf Entergy
Entergy Arkansas States Louisiana
(In Thousands)
1998 $14,225 $4,500 $5,966 $3,759
1999 60,466 4,500 5,966 50,000
2000 160,466 4,500 155,966 -
2001 45,466 4,500 5,966 35,000
2002 10,466 4,500 5,966 -
Entergy Arkansas, Entergy Gulf States, and Entergy Louisiana have the
annual noncumulative option to redeem, at par, additional amounts of
certain series of their outstanding preferred stock.
Entergy Corporation from time to time reissues treasury shares to meet
the requirements of the Stock Plan for Outside Directors (Directors' Plan),
the Equity Ownership Plan of Entergy Corporation and Subsidiaries (Equity
Plan), and certain other stock benefit plans. The Directors' Plan awards
to nonemployee directors a portion of their compensation in the form of a
fixed number of shares of Entergy Corporation common stock. Shares awarded
under the Directors' Plan were 9,104, 6,750, and 9,251 during 1997, 1996,
and 1995, respectively.
During 1997, Entergy Corporation issued 1,189,266 shares of its
previously repurchased common stock, reducing the amount held as treasury
stock by $34.8 million. Included in the foregoing were 813,161 shares of
common stock issued at a value of $21.5 million in connection with the
acquisition of the security monitoring company, Ranger American, during
1997. Entergy Corporation issued the remaining shares to meet the
requirements of its various stock plans. In addition, Entergy Corporation
received proceeds of $297 million from the issuance of 11,692,741 shares of
common stock under its dividend reinvestment and stock purchase plan during
1997.
The Equity Plan grants stock options, equity awards, and incentive
awards to key employees of the domestic utility companies. The costs of
awards are charged to income over the period of the grant or restricted
period, as appropriate. Amounts charged to compensation expense in 1997
were immaterial. Stock options, which comprise 50% of the shares targeted
for distribution under the Equity Plan, are granted at exercise prices not
less than market value on the date of grant. The options are generally
exercisable six months from the date of grant, with the exception of
250,000 options granted on March 31, 1995, which are not exercisable until
March 31, 1998, but not more than 10 years after the date of grant.
Entergy applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for stock options.
Accordingly, no compensation cost is required to be recognized until such
options are exercised because the exercise prices are not less than market
price on the date of grant. The impact on Entergy's net income would have
been $296,000, $166,000, and $374,000 in 1997, 1996, and 1995,
respectively, had compensation cost for the stock options been determined
based on the fair value at the grant date for awards under the option plan
consistent with the method prescribed by SFAS 123.
In applying the disclosure provisions of SFAS 123, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with expected stock price volatility of 19% in 1997
and 1996 and 18% in 1995 and additional assumptions for each of those
years as follows: risk-free interest rates of 6.3%, 5.4%, and 7.2% in
1997, 1996, and 1995, respectively, average expected lives of five years,
and dividends of $1.80 per share.
Nonstatutory stock option transactions are summarized as follows:
1997 1996 1995
Average Average Average
Number Option Number Option Number Option
of Options Price of Options Price of Options Price
Beginning-of-year balance 527,909 $26.42 457,909 $25.94 170,409 $34.86
Options granted 255,000 25.84 82,500 29.38 315,000 21.39
Options exercised (2,500) 23.38 (7,500) 23.38 (12,500) 23.38
Options forfeited (107,500) 25.43 (5,000) 35.88 (15,000) 33.79
------- ------- -------
End-of-year balance 672,909 $26.37 527,909 $26.42 457,909 $25.94
======= ======= =======
Options exercisable at year-end 422,909 277,909 207,909
Weighted average fair value of $ 4.49 $ 3.51 $ 2.48
options granted
The following table summarizes information about stock options
outstanding as of December 31, 1997:
Options Outstanding Options Exercisable
-------------------------------------- ------------------------
Weighted-Avg
Remaining Weighted- Weighted
Range of As of Contractual Avg. Exercise As of Avg. Exercise
Exercise Prices 12/31/97 Life-Yrs. Price 12/31/97 Price
$20 - $30 554,302 7.7 $24.29 304,302 $27.09
$30 - $40 118,607 5.6 $36.10 118,607 $36.10
------- -------
$20 - $40 672,909 7.3 $26.37 422,909 $29.62
======= =======
To meet the requirements of the Employee Stock Investment Plan (ESIP),
Entergy Corporation was authorized to issue or acquire, through March 31,
1997, up to 2,000,000 shares of its common stock to be held as treasury
shares. In February 1997, Entergy received authority from the SEC to
extend the ESIP for an additional three years ending on March 31, 2000.
Under the extended plan, Entergy Corporation may issue either treasury
shares or previously authorized but unissued shares. Under the terms of
the ESIP, employees can choose each year to have up to 10% of their
regular annual salary (not to exceed $25,000) withheld to purchase the
Company's common stock at a purchase price equal to 85% of the lower of
the market value on the first or last business day of the plan year. The
1997 plan year runs from April 1, 1997, to March 31, 1998. Under the plan,
the number of subscribed shares was 319,457, 327,017, and 247,122 in
1997, 1996, and 1995, respectively.
The fair value of shares granted was estimated on the date of the
grant using the Black-Scholes option-pricing model with expected stock
price volatility of 19% in 1997 and 1995 and 18% in 1996 and additional
assumptions for each of those years as follows: risk-free interest rates
of 6.1%, 5.4%, and 6.3% in 1997, 1996, and 1995, respectively, an
average expected life of one year, and dividends of $1.80 per share. The
weighted-average fair value of those purchase rights granted was $4.75,
$5.41, and $4.02, in 1997, 1996, and 1995, respectively. The impact on
Entergy's net income would have been $48,000, $894,000, and ($315,000) in
1997, 1996, and 1995, respectively, had compensation cost for the ESIP
been determined based on the fair value at the grant date for awards under
the ESIP consistent with the method prescribed by SFAS 123.
Entergy sponsors the Employee Stock Ownership Plan of Entergy
Corporation and Subsidiaries (ESOP) and the Savings Plan of Entergy
Corporation and Subsidiaries (Savings Plan). Both plans are defined
contribution plans covering eligible employees of Entergy and its
subsidiaries who have completed certain service requirements. Entergy's
subsidiaries' contributions to the ESOP and the Savings Plan, and any
income thereon, are invested in shares of Entergy Corporation common
stock. The allowed contributions to the ESOP are accrued based on the
expected utilization of additional investment tax credits in the applicable
federal income tax return of Entergy and its subsidiaries, and on expected
voluntary participant contributions. Entergy's subsidiaries contributed
$22.8 million to the ESOP for the year ended December 31, 1995. There were
no contributions in the years ended December 31, 1996 and 1997.
The Savings Plan provides that the employing Entergy subsidiary may
make matching contributions to the plan in an amount equal to 50% of the
participant's basic contribution up to 6% of their salary. In 1997, 1996,
and 1995, Entergy's subsidiaries contributed $13.2 million annually to the
Entergy Savings Plan.
Entergy Gulf States sponsors the Gulf States Utilities Company
Employee Stock Ownership Plan (GSU ESOP) and the Gulf States Utilities
Company Employees' Thrift Plan (GSU Thrift Plan), which are both defined
contribution plans. The GSU ESOP is available to all Entergy Gulf States
employees, pre-Merger Entergy Gulf States employees, and post-Merger
employees of Entergy Operations, whose primary work location is River Bend,
upon completion of certain eligibility requirements. All contributions to
the plan are invested in shares of Entergy Corporation common stock.
Entergy Gulf States makes contributions to the GSU ESOP based on expected
utilization of additional investment tax credits in the Entergy Gulf States
federal tax return and on expected participants' contributions. No
additional contributions were made to the GSU ESOP during 1997, 1996, and
1995. The GSU Thrift Plan is available to certain Entergy Operations
employees whose primary work location is River Bend. Entergy Gulf States
makes matching contributions to the GSU Thrift Plan equal to 50% of a
participant's basic contribution which may be invested, at the
participant's discretion, in shares of Entergy Corporation common stock.
Entergy Gulf States' contributions to the GSU Thrift Plan for the years
ended December 31, 1997, 1996, and 1995 were $306,000, $300,000, and $1.1
million, respectively.
NOTE 6. COMPANY-OBLIGATED REDEEMABLE PREFERRED SECURITIES
(Entergy Arkansas, Entergy Louisiana, Entergy Gulf States)
Entergy Arkansas Capital I, Entergy Louisiana Capital I, and Entergy
Gulf States Capital I (Trusts) were established as financing subsidiaries
of Entergy Arkansas, Entergy Louisiana, and Entergy Gulf States,
respectively, for the purpose of issuing common and preferred securities.
The Trusts issued Cumulative Quarterly Income Preferred Securities
(Preferred Securities) to the public and common securities to their
respective parent companies and used the proceeds from the sale to
purchase, from their respective parent company, junior subordinated
deferrable interest debentures (Debentures). The Debentures held by each
Trust are its only assets and each Trust will use interest payments
received on the Debentures owned by it to make cash distributions on the
Preferred Securities.
Fair Market
Interest Trust's Value of
Preferred Common Rate Investment Preferred
Date Securities Securities Securities in Securities at
Trusts of Issue Issued Issued Debentures Debentures 12/31/97
Arkansas Capital I 8-14-96 $60.0 $1.9 8.50% $61.9 $62.0
Louisiana Capital I 7-16-96 $70.0 $2.2 9.00% $72.2 $74.0
Gulf States Capital I 1-28-97 $85.0 $2.6 8.75% $87.6 $88.6
The Preferred Securities of the Trusts of Entergy Arkansas and Entergy
Louisiana will mature on September 30, 2045 and will mature on March 31,
2046 for Entergy Gulf States. The Preferred Securities are redeemable at
100% of their principal amount at the option of Entergy Arkansas and
Entergy Louisiana beginning in 2001, and at the option of Entergy Gulf
States beginning in 2002, or earlier under certain limited circumstances,
including the loss of the tax deduction arising out of the interest paid on
the Debentures. Entergy Arkansas, Entergy Louisiana, and Entergy Gulf
States have, pursuant to certain agreements, fully and unconditionally
guaranteed payment of distributions on the Preferred Securities issued by
their respective trusts. Entergy Arkansas, Entergy Louisiana, and Entergy
Gulf States are the owners of all of the common securities of their
individual Trusts, which constitute 3% of each Trust's total capital.
(Entergy London)
Entergy London Capital, L.P. (Entergy London Capital), a limited
partnership, was established as a financing subsidiary of Entergy London
for the purpose of issuing preferred securities. On November 19, 1997, the
limited partnership issued $300 million in aggregate liquidation preference
amount of 8.625% Cumulative Quarterly Income Preferred Securities in a
public offering. All of the proceeds from the sale of these preferred
securities were invested by Entergy London Capital in the Perpetual Junior
Subordinated Debentures issued by Entergy London to Entergy London Capital.
Entergy London used the net proceeds from such investment, together with
other funds available to Entergy London, to repay a portion of
indebtedness incurred in connection with the acquisition of London
Electricity. These debentures will be payable in U.S. dollars.
Management's estimate of the fair value of these preferred securities as of
December 31, 1997, was $303 million, based on the New York Stock Exchange
closing price.
Entergy London has entered into currency exchange rate swap agreements
to hedge the risk associated with exchange rate fluctuations. The exchange
rate swap agreements hedging this risk involve the exchange of fixed rate
U.S. dollars and BPS interest payments periodically over seven years.
Management's estimate of the fair value of the currency swaps outstanding
as of December 31, 1997, based on quoted interest and currency exchange
rates, is a net asset of approximately $2.0 million.
The preferred securities of the partnership, as well as the
debentures, have no stated date of maturity. The preferred securities are
redeemable at the option of Entergy London on or after November 19, 2002,
at 100% of their principal amount, or earlier under certain limited
circumstances, including the loss of the tax deduction arising out of the
interest paid on the debentures. Entergy London is the sole General
Partner in Entergy London Capital, and has agreed to maintain ownership of
1% of all capital of Entergy London Capital.
NOTE 7. LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, System Energy, and Entergy London)
The long-term debt of Entergy Corporation's subsidiaries, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, System Energy, and Entergy London as of December
31, 1997, was:
Maturities Interest Entergy Entergy Entergy Entergy Entergy System Entergy
From To From To Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
(In Thousands)
First Mortgage Bonds
1998 1999 6.000% 11.375% $491,000 $15,000 $211,000 $35,000 $230,000
2000 2004 6.000% 8.250% 1,435,270 265,000 603,750 361,520 205,000
2005 2009 6.650% 7.500% 313,000 215,000 98,000
2010 2019 9.750% 75,000 75,000
2020 2026 7.000% 10.000% 939,011 289,061 444,950 205,000
G&R Bonds
2000 2023 6.625% 8.800% 590,000 $420,000 $170,000
Governmental Obligations(a)
1998 2008 5.900% 8.750% 104,617 47,190 45,010 11,532 885
2009 2026 5.600% 9.875% 1,596,735 286,200 435,735 412,170 46,030 416,600
Debentures
1998 2000 7.380% 9.720% 125,000 50,000 75,000
Eurobonds
2003 2005 8.000% 8.625% 325,940 $325,940
Loan Notes Due 2003(b) 33,814 33,814
Revolving Bank Debt Facility:
Facility A, avg rate 8.789% due 2002 1,332,774 1,332,774
Facility B,(Entergy International Ltd LLC) 117,000
EPDC Revolving Credit Facility due 2000 70,307
Saltend Project Senior Credit Facility/2014 39,610
Long-Term DOE Obligation (Note 9) 123,506 123,506
Waterford 3 Lease Obligation 8.09% (Note 10) 353,600 353,600
Grand Gulf Lease Obligation 7.02% (Note 10) 489,162 489,162
EP Edegel, Inc. Note Payable, due 2000 67,000
CitiPower Crt Line avg rate 8.31% due 2000 715,330
Other Long-Term Debt 149,201 9,937 47,382
Unamortized Premium and Discount - Net (27,878) (10,447) (4,773) (5,058) (2,739) (1,047) (3,814)
--------------------------------------------------------------------------------------
Total Long-Term Debt 9,458,999 1,305,510 1,893,609 1,373,764 464,176 168,953 1,411,948 1,739,910
Less Amount Due Within One Year 390,674 60,650 190,890 35,300 20 - 70,000 33,814
--------------------------------------------------------------------------------------
Long-Term Debt Excluding Amount Due
Within One Year $9,068,325 $1,244,860 $1,702,719 $1,338,464 $464,156 $168,953 $1,341,948 $1,706,096
=======================================================================================
Fair Value of Long-Term Debt (c) $8,635,583 $1,223,591 $1,990,881 $1,074,053 $488,145 $171,199 $969,724 $1,708,743
=======================================================================================
The long-term debt of Entergy Corporation's subsidiaries, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and System Energy, as of December 31, 1996, was:
Maturities Interest Entergy Entergy Entergy Entergy System
From To From To Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
(In Thousands)
First Mortgage Bonds
1997 1999 5.375% 11.375% $687,000 $45,000 $321,000 $69,000 $12,000 $240,000
2000 2004 6.000% 8.250% 1,355,270 180,000 608,750 361,520 205,000
2005 2009 6.650% 7.500% 325,000 215,000 110,000
2010 2019 9.750% 75,000 75,000
2020 2026 7.000% 10.000% 1,031,648 376,648 450,000 205,000
G&R Bonds
1997 1999 6.950% 11.2% 96,000 $ 96,000
2000 2023 6.625% 8.800% 525,000 355,000 170,000
Governmental Obligations (a)
1997 2008 5.900% 10.000% 108,267 49,655 45,875 11,837 900
2009 2026 5.950% 9.875% 1,551,235 240,700 435,735 412,170 46,030 416,600
Debentures
1997 2000 7.380% 9.720% 175,000 100,000 75,000
Long-Term DOE Obligation (Note9) 117,270 117,270
Waterford 3 Lease Obligation
8.76% (Note 10) 353,600 353,600
Grand Gulf Lease Obligation
7.02% (Note 10) 496,480 496,480
Line of Credit, variable rate
due 1998 65,000
CitiPower Credit Line
avg.rate 8.31% due 2000 921,553
Other Long-Term Debt 83,411 9,938
Unamortized Premium and Discount-Net (30,310) (11,420) (5,087) (5,619) (2,861) (1,112) (4,211)
-------------------------------------------------------------------------------------
Total Long-Term Debt 7,936,424 1,287,853 2,076,211 1,407,508 495,069 180,888 1,428,869
Less Amount Within One Year 345,620 32,465 160,865 34,275 96,015 12,000 10,000
-------------------------------------------------------------------------------------
Long-Term Debt Excluding Amount
Due Within One Year $7,590,804 $1,255,388 $1,915,346 $1,373,233 $399,054 $168,888 $1,418,869
======================================================================================
Fair Value of Long-Term Debt (c) $7,087,027 $1,160,377 $2,142,389 $1,104,891 $503,461 $175,566 $ 982,423
======================================================================================
(a) Consists of pollution control bonds, certain series of which are
secured by non-interest bearing first mortgage bonds.
(b) Loan notes are included as current maturities of long-term debt
based on the option of the holders to redeem such notes on March
31 of each year until their final maturity on March 31, 2003.
(c) The fair value excludes lease obligations, long-term DOE
obligations, and other long-term debt and includes debt due within
one year. It is determined using bid prices reported by dealer
markets and by nationally recognized investment banking firms.
See Note 1 for additional information.
The annual long-term debt maturities (excluding lease obligations)
and annual cash sinking fund requirements for debt outstanding as of
December 31, 1997, for the next five years are as follows:
Entergy Entergy Entergy Entergy System Entergy
Entergy(a) Arkansas(b) Gulf States(c) Louisiana(d) Mississippi Energy London
(In Thousands)
1998 $ 390,674 $60,650 $190,890 $35,300 $ 20 $70,000 $33,814
1999 232,538 365 71,915 238 20 160,000 -
2000 1,029,047 220 945 100,225 20 75,000 -
2001 277,710 35 123,725 18,925 25 135,000 -
2002 1,946,328 110,135 151,010 217,484 65,025 70,000 1,332,774
(a) Not included are other sinking fund requirements of approximately
$15.8 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
(b) Not included are other sinking fund requirements of approximately
$0.79 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
(c) Not included are other sinking fund requirements of approximately
$11.6 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
(d) Not included are other sinking fund requirements of approximately
$3.41 million annually, which may be satisfied by cash or by
certification of property additions at the rate of 167% of such
requirements.
Entergy Gulf States has two outstanding series of pollution
control bonds collateralized by irrevocable letters of credit, which
are scheduled to expire before the scheduled maturity of the bonds.
The letter of credit collateralizing the $28.4 million variable-rate
series, due December 1, 2015, expires in September 1999 and the letter
of credit collateralizing the $20 million variable-rate series, due
April 1, 2016, expires in February 1999.
Entergy's subsidiary, CitiPower, established a variable rate
revolving credit facility in the aggregate amount of 1.2 billion
Australian dollars ($780 million) on January 5, 1996. The facility is
fully collateralized by all of CitiPower's assets and is non-recourse
to Entergy. Borrowings have maturities of 30 to 185 days, and are
continuously renewable for 30 to 185 day periods at CitiPower's option
until the facility matures on June 30, 2000. As of December 31, 1997,
the facility was drawn down to 1.1 billion Australian dollars ($715.3
million) at an average interest rate of 5.30%. Credit support is
provided to facility banks in the form of a subordinated letter of
credit supplied by the Commonwealth Bank of Australia. The letter of
credit matures on January 21, 1999, and is for an amount of 70 million
Australian dollars ($45.5 million). The letter of credit is fully
collateralized by a second-ranking security interest in all of
CitiPower's assets and is non-recourse to Entergy.
CitiPower entered into several interest rate swaps to reduce the
impact of interest rate changes on the borrowings under its variable
rate line of credit. The interest rate swap agreements which hedge
this debt involve the exchange of fixed and floating rate interest
payments periodically over the life of the agreements. Interest is
recognized currently based on the fixed rate of interest resulting from
use of these swap agreements. Market risks arise from the movements in
interest rates. If the counterparties to an interest rate swap
agreement were to default on contractual payments, the subsidiary could
be exposed to increased costs related to replacing the original
agreement. However, CitiPower does not anticipate nonperformance by
any counterparty to any interest rate swap in effect as of December 31,
1997. As of December 31, 1997, CitiPower was a party to interest rate
swaps having a notional amount of 900 million Australian dollars with
maturity dates ranging from February 1999 to December 2000, which
effectively fixed the rate of interest on the CitiPower credit line at
7.70%. CitiPower is also a party to an additional swap with a notional
amount of 32 million Australian dollars and a maturity date of December
2009. The estimated fair value of the interest rate swaps, which
represents the estimated amount CitiPower would pay to terminate the
swaps at December 31, 1997, based on quoted interest rates, is a net
liability of $28 million. See Note 1 for a discussion of Entergy
accounting policies regarding interest rate swaps.
Entergy London executed a credit facility with several banks on
December 17, 1996, to obtain credit facilities in the aggregate amount
of approximately BPS1.25 billion ($2.1 billion). Proceeds of this
facility, which were in three tranches, were used, together with $392
million of cash provided by Entergy, to fund the acquisition of, and to
provide working capital for, London Electricity. The facilities were
refinanced in November 1997. New or restated borrowing facilities were
negotiated and Cumulative Quarterly Income Preferred Securities were
issued (see Note 6 for more information) to partially replace one of
the tranches. The restated credit facility is non-recourse to Entergy
and is collateralized by certain assets of Entergy London, consisting
of 65% of the shares of London Electricity. The maturity dates of the
various tranches of the credit facility range from December 17, 2001,
to October 31, 2002. The interest rate on these facilities is the
London Interbank Offered Rate plus up to 1.00%, depending on the
capitalization ratio of Entergy London and its subsidiaries.
A portion of the amended and restated facility ($1.3 billion), and
related interest rate swaps, are now obligations of Entergy UK Limited,
an indirect, wholly-owned subsidiary of Entergy Corporation. These
obligations are still reflected in the financial statements of Entergy
London, however, because the facility is guaranteed by Entergy London,
Entergy UK Limited's indirect, wholly-owned subsidiary. Entergy London
recognizes the interest expense associated with this debt in its
financial statements, with a credit to shareholder's equity for the
same amount. This credit to shareholder's equity offsets dividends as
they are declared from Entergy London to Entergy UK Limited. These
dividends are the funding mechanism for Entergy UK Limited to service
this debt. Management intends to declare future dividends from Entergy
London to enable Entergy UK Limited to continue to service this debt.
Entergy London entered into 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 London 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 London could be exposed to increased costs related to
replacing the original agreement. However, management does not
anticipate nonperformance by any counterparty to any interest rate swap
in effect as of December 31, 1997. As of December 31, 1997, Entergy
London was party to interest rate swaps having a notional amount of
BPS600 million with maturity dates ranging from March 1999 to September
2001, which effectively fixed the rate of interest at 7.48%. The
estimated fair value of the interest rate swaps, which represents the
estimated amount Entergy London would pay to terminate the swaps as of
December 31, 1997, based on quoted interest rates, is a net liability
of $11 million. See Note 1 for a discussion of Entergy's accounting
policies regarding interest rate swaps.
In August 1997, EPDC entered into a BPS50 million ($82.5 million)
credit facility to finance the acquisition of the Damhead Creek
project. In December 1997, EPDC amended the credit facility and
increased the amount of the revolver to BPS100 million ($165 million).
As of December 31, 1997, approximately BPS97.4 million ($160.2 million)
was outstanding under this facility. The interest rate on the
outstanding borrowings was 7.84% at December 31, 1997.
In December 1997, Saltend Cogeneration Company (SCC), an
indirect wholly-owned subsidiary of EPDC, entered into a BPS646 million
($1.07 billion) non-recourse senior credit facility (Senior Credit
Facility) to finance the construction of a 1200 MW gas-fired power
plant in Hull, England. Borrowings under the Senior Credit Facility
are payable after completion of construction over a 15-year period
beginning December 31, 2000. SCC also entered into a BPS72 million
($118 million) Subordinated Credit Facility that provides funding upon
the earlier of completion of construction or July 31, 2000. The
proceeds of borrowings under this facility will be used to repay a
portion of the Senior Credit Facility. The Subordinated Credit
Facility is payable over a 10-year period beginning December 31, 2000.
The Senior Credit Facility is collateralized by all of the assets
of SCC. Furthermore, the credit facilities require SCC to enter into
interest rate hedges for a significant portion of the project debt.
Certain cash balances, primarily related to SCC, are restricted from
being used to make loans and advances or to pay dividends to EPDC by
the amount required for debt payments, letter of credit expenses, and
permitted project costs. The total restricted cash was $2.6 million as
of December 31, 1997.
On January 16, 1998, Entergy Arkansas redeemed, in full at par,
prior to its maturity, $45.5 million of its 1977 6 1/8% Series
Jefferson County pollution control revenue bonds due October 1, 2007,
with proceeds of 5.6% pollution control revenue bonds, due October 1,
2017, issued in December 1997.
NOTE 8. DIVIDEND RESTRICTIONS (Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy
New Orleans, System Energy, and Entergy London)
Provisions within the Articles of Incorporation or pertinent
indentures and various other agreements relating to the long-term debt
and preferred stock of certain of Entergy Corporation's subsidiaries
restrict the payment of cash dividends or other distributions on their
common and preferred stock. Additionally, PUHCA prohibits Entergy
Corporation's subsidiaries from making loans or advances to Entergy
Corporation. Detailed below are the restricted retained earnings
unavailable for distribution to Entergy Corporation by subsidiary.
Restricted
Earnings
(in millions)
Entergy Arkansas $291.3
Entergy Mississippi 15.8
During 1997, cash dividends paid to Entergy Corporation by its
subsidiaries totaled $550.2 million. In February 1998, Entergy
Corporation received common stock dividend payments from its
subsidiaries totaling $103.9 million.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Cajun - River Bend Litigation (Entergy Corporation and Entergy Gulf
States)
Entergy Gulf States and Cajun, respectively, owned 70% and 30%
undivided interests in River Bend (operated by Entergy Gulf States),
and own 42% and 58% undivided interests in Big Cajun 2, Unit 3
(operated by Cajun). These relationships spawned a number of long-
standing disputes and claims between the parties. An agreement setting
forth terms for the resolution of all such disputes was 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). The
Cajun Settlement was consummated on December 23, 1997.
The Cajun Settlement includes, but is not limited to, the
following elements: (i) Cajun's 30% interest in River Bend was
transferred, at the behest of the RUS, by Cajun's Trustee in
Bankruptcy to Entergy Gulf States; (ii) Cajun set aside in trust a
total of $132 million for its share of the decommissioning costs of
River Bend; (iii) Cajun transferred certain transmission assets to
Entergy Gulf States; (iv) Cajun and Entergy Gulf States settled
transmission disputes and released each other from claims for payment
under transmission arrangements; (v) all funds paid by Entergy Gulf
States into the registry of the District Court, which totaled over $102
million on December 23, 1997, were returned to Entergy Gulf States;
(vi) Cajun was released from its unpaid past, present, and future
liability to Entergy Gulf States for River Bend costs and expenses; and
(vii) all remaining litigation between Cajun and Entergy Gulf States
was 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. The consummation of the Cajun Settlement resulted in
an addition to net income for Entergy Gulf States of $146 million in
1997.
Proponents of all of the plans of reorganization submitted to the
Bankruptcy Court in the Cajun bankruptcy case have incorporated the
Cajun Settlement as an integral condition to the effectiveness of their
plans. The Bankruptcy Court has approved proposals by three groups
seeking to acquire the non-nuclear assets of Cajun and has signed an
order that establishes rules for how Cajun's creditors will vote on the
three plans. On December 16, 1996, the Bankruptcy Court began hearings
on the balloting and the plan that will be adopted. Additional hearings
are scheduled for 1998.
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 in which 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 took the position
that it was not a party to, and had 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
contended that Entergy Gulf States' declaratory judgment action should
be dismissed and, in the alternative, argued that Cajun was Entergy
Gulf States' agent in the procurement of coal for Big Cajun 2, Unit 3,
and that Entergy Gulf States was a party to and had liability under the
coal supply contracts. On September 4, 1997, the U.S. Bankruptcy Court
ruled that Entergy Gulf States was not liable for the Cajun coal
contracts. The coal suppliers have subsequently appealed this decision
to the District Court, and oral argument on the appeal is set for April
1998.
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, Entergy London, and System Energy)
Construction expenditures (excluding nuclear fuel) for the
domestic utility companies, System Energy, and Entergy London for the
years 1998, 1999, and 2000 are estimated to total $734 million, $644
million, and $680 million, respectively. Entergy will also require
$1.887 billion during the period 1998-2000 to meet long-term debt and
preferred stock maturities and cash sinking fund requirements. Entergy
plans to meet these requirements primarily with internally generated
funds and cash on hand, supplemented by proceeds of the issuance of
debt and company-obligated mandatorily redeemable preferred securities
and from outstanding credit facilities. Certain domestic utility
companies and System Energy may also continue with the acquisition or
refinancing of all or a portion of certain outstanding series of
preferred stock and long-term debt. See Notes 5, 6, and 7 for further
information.
Grand Gulf 1-Related Agreements
Capital Funds Agreement (Entergy Corporation and System Energy)
Entergy Corporation has agreed to supply System Energy with
sufficient capital to (i) maintain System Energy's equity capital at an
amount equal to a minimum of 35% of its total capitalization (excluding
short-term debt), and (ii) permit the continued commercial operation of
Grand Gulf 1 and pay in full all indebtedness for borrowed money of
System Energy when due. In addition, under supplements to the Capital
Funds Agreement assigning System Energy's rights as security for
specific debt of System Energy, Entergy Corporation has agreed to make
cash capital contributions to enable System Energy to make payments on
such debt when due.
System Energy has entered into agreements with Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby
they are obligated to purchase their respective entitlements of
capacity and energy from System Energy's 90% ownership and leasehold
interest in Grand Gulf 1, and to make payments that, together with
other available funds, are adequate to cover System Energy's operating
expenses. System Energy would have to secure funds from other sources,
including Entergy Corporation's obligations under the Capital Funds
Agreement, to cover any shortfalls from payments received from Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans under these agreements.
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy has agreed to sell all of its 90% owned and leased
share of capacity and energy from Grand Gulf 1 to Entergy Arkansas,
Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans in
accordance with specified percentages (Entergy Arkansas-36%, Entergy
Louisiana-14%, Entergy Mississippi-33%, and Entergy New Orleans-17%) as
ordered by FERC. Charges under this agreement are paid in
consideration for the purchasing companies' respective entitlement to
receive capacity and energy and are payable irrespective of the
quantity of energy delivered so long as the unit remains in commercial
operation. The agreement will remain in effect until terminated by the
parties and approved by FERC, most likely upon Grand Gulf 1's
retirement from service. Monthly obligations for payments, including
the rate increase that was placed into effect in December 1995, subject
to refund, under the agreement are approximately $21 million, $8
million, $19 million, and $10 million for Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans, respectively.
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans are individually obligated to make payments or
subordinated advances to System Energy in accordance with stated
percentages (Entergy Arkansas-17.1%, Entergy Louisiana-26.9%, Entergy
Mississippi-31.3%, and Entergy New Orleans-24.7%) in amounts that, when
added to amounts received under the Unit Power Sales Agreement or
otherwise, are adequate to cover all of System Energy's operating
expenses as defined, including an amount sufficient to amortize the
cost of Grand Gulf 2 over 27 years. (See Reallocation Agreement terms
below.) System Energy has assigned its rights to payments and advances
to certain creditors as security for certain obligations. Since
commercial operation of Grand Gulf 1, payments under the Unit Power
Sales Agreement have exceeded the amounts payable under the
Availability Agreement. Accordingly, no payments under the
Availability Agreement have ever been required. If Entergy Arkansas or
Entergy Mississippi fails to make its Unit Power Sales Agreement
payments, and System Energy is unable to obtain funds from other
sources, Entergy Louisiana and Entergy New Orleans could become subject
to claims or demands by System Energy or its creditors for payments or
advances under the Availability Agreement (or the assignments thereof)
equal to the difference between their required Unit Power Sales
Agreement payments and their required Availability Agreement payments.
Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
System Energy, Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans entered into the Reallocation
Agreement relating to the sale of capacity and energy from Grand Gulf
and the related costs, in which Entergy Louisiana, Entergy Mississippi,
and Entergy New Orleans agreed to assume all of Entergy Arkansas'
responsibilities and obligations with respect to Grand Gulf under the
Availability Agreement. FERC's decision allocating a portion of Grand
Gulf 1 capacity and energy to Entergy Arkansas supersedes the
Reallocation Agreement as it relates to Grand Gulf 1. Responsibility
for any Grand Gulf 2 amortization amounts has been individually
allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and
Entergy New Orleans-29.80%) under the terms of the Reallocation
Agreement. However, the Reallocation Agreement does not affect Entergy
Arkansas' obligation to System Energy's lenders under the assignments
referred to in the preceding paragraph. Entergy Arkansas would be
liable for its share of such amounts if Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans were unable to meet their
contractual obligations. No payments of any amortization amounts will
be required so long as amounts paid to System Energy under the Unit
Power Sales Agreement, including other funds available to System
Energy, exceed amounts required under the Availability Agreement, which
is expected to be the case for the foreseeable future.
Reimbursement Agreement (System Energy)
In December 1988, System Energy entered into two entirely
separate, but identical, arrangements for the sale and leaseback of an
approximate aggregate 11.5% ownership interest in Grand Gulf 1 (see
Note 10). In connection with the equity funding of the sale and
leaseback arrangements, letters of credit are required to be maintained
to secure certain amounts payable for the benefit of the equity
investors by System Energy under the leases. The current letters of
credit are effective until January 15, 2000.
Under the provisions of a bank letter of credit reimbursement
agreement, System Energy has agreed to a number of covenants relating
to the maintenance of certain capitalization and fixed charge coverage
ratios. System Energy agreed, during the term of the reimbursement
agreement, to maintain its equity at not less than 33% of its adjusted
capitalization (defined in the reimbursement agreement to include
certain amounts not included in capitalization for financial statement
purposes). In addition, System Energy must maintain, with respect to
each fiscal quarter during the term of the reimbursement agreement, a
ratio of adjusted net income to interest expense (calculated, in each
case, as specified in the reimbursement agreement) of at least 1.60
times earnings. As of December 31, 1997, System Energy's equity
approximated 34.80% of its adjusted capitalization, and its fixed
charge coverage ratio was 2.43.
Fuel Purchase Agreements
(Entergy Arkansas and Entergy Mississippi)
Entergy Arkansas has long-term contracts with mines in the State
of Wyoming for the supply of low-sulfur coal for White Bluff and
Independence (which is 25% owned by Entergy Mississippi). These
contracts, which expire in 2002 and 2011, provide for approximately 85%
of Entergy Arkansas' expected annual coal requirements. Additional
requirements are satisfied by spot market purchases.
(Entergy Gulf States)
Entergy Gulf States has a contract for a supply of low-sulfur
Wyoming coal for Nelson Unit 6, which should be sufficient to satisfy
the fuel requirements at Nelson Unit 6 through 2010. Cajun has advised
Entergy Gulf States that Cajun has contracts that should provide an
adequate supply of coal until 1999 for the operation of Big Cajun 2,
Unit 3.
Entergy Gulf States has long-term gas contracts which will satisfy
approximately 21% of its annual requirements, which is the minimum
volume Entergy Gulf States is required to purchase under the contracts.
Additional gas requirements are satisfied under less expensive short-
term contracts. Entergy Gulf States has a transportation service
agreement with a gas supplier that provides flexible natural gas
service to the Sabine and Lewis Creek generating stations. This
service is provided by the supplier's pipeline and salt dome gas
storage facility, which has a present capacity of 12.7 billion cubic
feet.
(Entergy Louisiana)
In June 1992, Entergy Louisiana agreed to a renegotiated 20-year
natural gas supply contract. Entergy Louisiana agreed to purchase
natural gas in annual amounts equal to approximately one-third of its
projected annual fuel requirements for certain generating units.
Annual demand charges associated with this contract are estimated to be
$8.6 million through 1997, and a total of $116.6 million for the years
1998 through 2012. Entergy Louisiana recovers the cost of fuel
consumed during the generation of electricity through its fuel
adjustment clause.
Sales Agreements/Power Purchases
(Entergy Gulf States)
In 1988, Entergy Gulf States entered into a joint venture with a
primary term of 20 years with Conoco, Inc., Citgo Petroleum
Corporation, and Vista Chemical Company (collectively the Industrial
Participants), whereby Entergy Gulf States' Nelson Units 1 and 2 were
sold to a partnership (NISCO) consisting of the Industrial Participants
and Entergy Gulf States. The Industrial Participants supply the fuel
for the units, while Entergy Gulf States operates the units at the
discretion of the Industrial Participants and purchases the electricity
produced by the units. Entergy Gulf States is continuing to sell
electricity to the Industrial Participants. For the years ended
December 31, 1997, 1996, and 1995, the purchases by Entergy Gulf States
of electricity from the joint venture totaled $70.7 million, $62.0
million, and $58.5 million, respectively.
(Entergy Louisiana)
Entergy Louisiana has an agreement extending through the year 2031
to purchase energy generated by a hydroelectric facility. During 1997,
1996, and 1995, Entergy Louisiana made payments under the contract of
approximately $64.6 million, $56.3 million, and $55.7 million,
respectively. If the maximum percentage (94%) of the energy is made
available to Entergy Louisiana, current production projections would
require estimated payments of approximately $61.0 million in 1998, and
a total of $3.7 billion for the years 1999 through 2031. Entergy
Louisiana recovers the costs of purchased energy through its fuel
adjustment clause.
(Entergy London)
London Electricity uses CFDs and power purchase contracts with
certain UK generators to fix the price of electricity for a contracted
quantity over a specific period of time. As of December 31, 1997,
London Electricity has outstanding CFDs and power purchase contracts
for approximately 40,000 GWH of electricity. These include a long term
power purchase contract with an affiliate which is based on 27.5% of
the affiliate's capacity from its 1000 MW facility through the year
2010. London Electricity's sales volume was approximately 18,000 GWH in
the year ended 1997. Management's estimate of the fair value of London
Electricity's CFDs outstanding as of December 31, 1997, is that fair
value approximates contract value.
(Entergy Corporation)
In accordance with the debt covenants included in the financing
provisions of the CitiPower acquisition, CitiPower must hedge at least
80% of its energy purchases. CitiPower's current strategy is to hedge
approximately 100% of its forecasted energy purchases through energy
trading swaps entered into with certain generators. As of December 31,
1997, CitiPower has outstanding energy trading swaps totaling a
notional amount of 38,372 MW of average daily load of electricity.
These contracts mature through the year 2000. Management's estimate of
the fair value of such swaps outstanding at December 31, 1997, is a net
liability of approximately $86.1 million.
System Fuels (Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans have interests in System Fuels of 35%, 33%, 19%,
and 13%, respectively. The parent companies of System Fuels have
agreed to make loans to System Fuels to finance its fuel procurement,
delivery, and storage activities. As of December 31, 1997, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans had, respectively, approximately $11 million, $14.2 million,
$5.5 million, and $3.3 million in loans outstanding to System Fuels,
which loans mature in 2008.
Nuclear Insurance (Entergy Corporation, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and System Energy)
The Price-Anderson Act limits public liability for a single
nuclear incident to approximately $8.92 billion. Protection for this
liability is provided through a combination of private insurance
(currently $200 million each for Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and System Energy) and an industry assessment
program. Under the assessment program, the maximum payment requirement
for each nuclear incident would be $79.3 million per reactor, payable
at a rate of $10 million per licensed reactor per incident per year.
Entergy has five licensed reactors. As a co-licensee of Grand Gulf 1
with System Energy, SMEPA would share 10% of this obligation. In
addition, each owner/licensee of Entergy's five nuclear units
participates in a private insurance program that provides coverage for
worker tort claims filed for bodily injury caused by radiation
exposure. The program provides for a maximum assessment of
approximately $16 million for the five nuclear units in the event
losses exceed accumulated reserve funds.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy are also members of certain insurance programs that
provide coverage for property damage, including decontamination and
premature decommissioning expense, to members' nuclear generating
plants. As of December 31, 1997, Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, and System Energy each was insured against
such losses up to $2.3 billion. In addition, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans are members of an insurance program that covers
certain replacement power and business interruption costs incurred due
to prolonged nuclear unit outages. Under the property damage and
replacement power/business interruption insurance programs, these
Entergy subsidiaries could be subject to assessments if losses exceed
the accumulated funds available to the insurers. As of December 31,
1997, the maximum amounts of such possible assessments were: Entergy
Arkansas - $25.3 million; Entergy Gulf States - $8.8 million; Entergy
Louisiana - $19.9 million; Entergy Mississippi - $1.0 million; Entergy
New Orleans - $0.5 million; and System Energy - $17.0 million. Under
its agreement with System Energy, SMEPA would share in System Energy's
obligation.
The amount of property insurance maintained for each Entergy
nuclear unit exceeds the NRC's minimum requirement for nuclear power
plant licensees of $1.06 billion per site. NRC regulations provide
that the proceeds of this insurance must be used, first, to place and
maintain the reactor in a safe and stable condition and, second, to
complete decontamination operations. Only after proceeds are dedicated
for such use and regulatory approval is secured would any remaining
proceeds be made available for the benefit of plant owners or their
creditors.
Spent Nuclear Fuel and Decommissioning Costs (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System
Energy)
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy provide for estimated future disposal costs for spent
nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982.
The affected Entergy companies entered into contracts with the DOE,
whereby the DOE will furnish disposal service at a cost of one mill per
net KWH generated and sold after April 7, 1983, plus a one time fee for
generation prior to that date. Entergy Arkansas, the only Entergy
company that generated electricity with nuclear fuel prior to that
date, elected to pay the one-time fee plus accrued interest, no earlier
than 1998, and has recorded a liability as of December 31, 1997, of
approximately $122 million for generation prior to 1983. The fees
payable to the DOE may be adjusted in the future to assure full
recovery. Entergy considers all costs incurred or to be incurred,
except accrued interest, for the disposal of spent nuclear fuel to be
proper components of nuclear fuel expense, and provisions to recover
such costs have been or will be made in applications to regulatory
authorities.
Delays have occurred in the DOE's program for the acceptance and
disposal of spent nuclear fuel at a permanent repository. In a
statement released February 17, 1993, the DOE asserted that it did not
have a legal obligation to accept spent nuclear fuel without an
operational repository for which it has not yet arranged. Entergy
Operations and System Fuels joined in lawsuits against the DOE, seeking
clarification of the DOE's responsibility to receive spent nuclear fuel
beginning in 1998. The original suits, filed June 20, 1994, asked for
a ruling stating that the Nuclear Waste Policy Act requires the DOE to
begin taking title to the spent fuel and to start removing it from
nuclear power plants in 1998, a mandate for the DOE's nuclear waste
management program to begin accepting fuel in 1998 and for court
monitoring of the program, and the potential for escrow of payments to
a nuclear waste fund instead of directly to the DOE. Argument in the
case before a three-judge panel of the U.S. Court of Appeals was made
on January 17, 1996. On July 23, 1996, the court reversed the DOE's
interpretation of the 1998 obligation and unanimously ruled that the
Nuclear Waste Policy Act creates an unconditional obligation to begin
acceptance of spent fuel by 1998, but did not make a ruling on the
remedies.
On December 17, 1996, the DOE notified contract holders that it
anticipated it would not be able to begin such acceptance until after
that date. Subsequently, on January 31, 1997, Entergy Operations and a
coalition of 36 electric utilities and 46 state agencies filed lawsuits
to suspend payments to the Nuclear Waste Fund. The lawsuits ask the
court to (i) find that the December 17, 1996, DOE letter demonstrates
breach of contract on the part of the DOE; (ii) order utilities to
place the Nuclear Waste Fund payments in an escrow account and not
provide the funds to the DOE until it fulfills its obligation, (iii)
prevent the DOE from taking adverse action against utilities that
withhold payments; and (iv) order the DOE to submit a plan to the court
describing how the agency intends to fulfill its obligation on an
ongoing basis. On November 14, 1997, the court reaffirmed the DOE's
unconditional obligation to begin accepting spent fuel by January 31,
1998, and ordered the DOE to proceed with contractual remedies
consistent with the DOE's unconditional obligation. Nevertheless, the
ruling did not address the plaintiffs' request for authority to
withhold payments to the DOE. Therefore, on December 11, 1997, Entergy
Operations and a coalition of 27 utilities petitioned the DOE to
suspend and escrow future payments to the DOE's waste fund beginning
February 1, 1998. On January 12, 1998, the DOE rejected the
coalition's petition. On February 19, 1998, Entergy Operations and the
coalition of 36 electric utilities filed a motion with the court
seeking enforcement of its November 14, 1997 order and other relief.
In the meantime, all Entergy companies are responsible for their
spent fuel storage. Current on-site spent fuel storage capacity at
River Bend, Waterford 3, and Grand Gulf 1 is estimated to be sufficient
until 2003, 2000, and 2004, respectively. Thereafter, the affected
companies will provide additional storage. Current on-site spent fuel
storage capacity at ANO is estimated to be sufficient until 2000. An
ANO storage facility using dry casks began operation in 1996. This
facility may be expanded further as required. The initial cost of
providing the additional on-site spent fuel storage capability required
at ANO, River Bend, Waterford 3, and Grand Gulf 1 is expected to be
approximately $5 million to $10 million per unit. In addition, about
$3 million to $5 million per unit will be required every two to three
years subsequent to 2000 for ANO and every four to five years
subsequent to 2003, 2000, and 2004 for River Bend, Waterford 3, and
Grand Gulf 1, respectively, until the DOE's repository or storage
facility begins accepting such units' spent fuel.
Total decommissioning costs as of December 31, 1997, for the Entergy
nuclear power plants, excluding co-owner shares, have been estimated as
follows:
Total Estimated
Decommissioning Costs
(In Millions)
ANO 1 and ANO 2 (based on a 1994 interim update to the $ 806.3
1992 cost study)
River Bend (based on a 1996 cost study reflecting 1996 dollars) 419.0
Waterford 3 (based on a 1994 updated study in 1993 dollars) 320.1
Grand Gulf 1 (based on a 1994 cost study using 1993 dollars) 365.9
--------
$1,911.3
========
The estimate for River Bend includes the decommissioning costs
related to the 30% share of River Bend formerly owned by Cajun. The
30% share was acquired by Entergy Gulf States in connection with the
Cajun Settlement. As a part of the Cajun Settlement, Cajun placed in
trust a total of $132 million for its share of the decommissioning
costs of River Bend. See "Cajun - River Bend Litigation" above for
further discussion regarding the Cajun Settlement.
Entergy Arkansas and Entergy Louisiana are authorized to recover
in rates amounts that, when added to estimated investment income,
should be sufficient to meet the above estimated decommissioning costs
for ANO and Waterford 3, respectively. In the Texas retail
jurisdiction, Entergy Gulf States is recovering in rates River Bend
decommissioning costs (based on the 1991 cost study that totaled $267.8
million) that, with adjustments, total $204.9 million. Entergy Gulf
States included decommissioning costs based on the 1996 study in the
PUCT rate review filed in November 1996. That review is ongoing. In
the Louisiana retail jurisdiction, Entergy Gulf States is currently
recovering in rates decommissioning costs (based on a 1985 cost study)
which total $141 million. Entergy Gulf States included decommissioning
costs (based on the 1991 study) in the LPSC rate review filed in May
1995. In October 1996, the LPSC approved Entergy Gulf States rates
that include decommissioning costs based on the 1991 study. The
October 1996 LPSC order has been appealed and the decommissioning costs
based on the 1991 study have not yet been implemented. Entergy Gulf
States included decommissioning costs, based on the 1996 study, in the
LPSC rate review filed in May 1996. The LPSC's review is ongoing.
However, in June of 1996, a rate decrease was implemented that included
decommissioning revenue requirements based on the 1996 study. System
Energy was previously recovering in rates amounts sufficient to fund
$198 million (in 1989 dollars) of its Grand Gulf 1 decommissioning
costs. System Energy included decommissioning costs (based on the 1994
study) in its rate increase filing with FERC. Rates requested in this
proceeding were placed into effect in December 1995, subject to refund.
FERC has not yet issued an order in the System Energy rate case.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy periodically review and update estimated decommissioning
costs. Although Entergy is presently underrecovering for Grand Gulf
and River Bend based on the above estimates, applications have been and
will continue to be made to the appropriate regulatory authorities to
reflect in rates any future change in projected decommissioning costs.
The amounts recovered in rates are deposited in trust funds and
reported at market value as quoted on nationally traded markets or as
determined by widely used pricing services. These trust fund assets
largely offset the accumulated decommissioning liability that is
recorded as accumulated depreciation for Entergy Arkansas, Entergy Gulf
States, and Entergy Louisiana, and as other deferred credits for System
Energy and the trust funds received with the transfer of Cajun's 30%
share of River Bend.
The cumulative liabilities and actual decommissioning expenses
recorded in 1997 by Entergy were as follows:
Cumulative 1997 Cumulative
Liabilities as of 1997 Trust Decommissioning Liabilities as of
December 31, 1996 Earnings Expenses Other December 31, 1997
(In Millions)
ANO 1 and ANO 2 $ 200.6 $ 9.1 $ 17.3 $ - $ 227.0
River Bend 39.2 2.0 7.5 132.0 $ 180.7
Waterford 3 49.0 2.4 8.8 - $ 60.2
Grand Gulf 1 60.7 3.5 19.0 - $ 83.2
-------- ------- ------- ------ --------
$ 349.5 $ 17.0 $ 52.6 $132.0 $ 551.1
======== ======= ======= ====== ========
In 1996 and 1995, ANO's decommissioning expense was $20.1 million
and $17.7 million, respectively; River Bend's decommissioning expense
was $6.0 million and $8.1 million, respectively; Waterford 3's
decommissioning expense was $8.8 million and $7.5 million,
respectively; and Grand Gulf 1's decommissioning expense was $19.0
million and $5.4 million, respectively. The actual decommissioning
costs may vary from the estimates because of regulatory requirements,
changes in technology, and increased costs of labor, materials, and
equipment. Management believes that actual decommissioning costs are
likely to be higher than the estimated amounts presented above.
The SEC has questioned certain of the financial accounting
practices of the electric utility industry regarding the recognition,
measurement, and classification of decommissioning costs for nuclear
plants in the financial statements of electric utilities. In response
to these questions, the FASB has been reviewing the accounting for
decommissioning and has expanded the scope of its review to include
liabilities related to the closure and removal of all long-lived
assets. 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 and 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.
The EPAct has a provision that assesses domestic nuclear utilities
with fees for the decontamination and decommissioning of the DOE's past
uranium enrichment operations. The decontamination and decommissioning
assessments are being used to set up a fund into which contributions
from utilities and the federal government will be placed. Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy's
annual assessments, which will be adjusted annually for inflation, are
approximately $3.7 million, $0.9 million, $1.4 million, and $1.5
million (in 1997 dollars), respectively, for approximately 15 years.
As of December 31, 1997, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and System Energy had recorded liabilities of $33.4 million,
$5.8 million, $12.7 million, and $12.5 million, respectively, for
decontamination and decommissioning fees in other current liabilities
and other noncurrent liabilities, and these liabilities were offset in
the consolidated financial statements by regulatory assets. FERC
requires that utilities treat these assessments as costs of fuel as
they are amortized and recover these costs through rates in the same
manner as other fuel costs.
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 Arkansas and Entergy Operations to
negotiate a contract 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 a contract, with certain
cancellation provisions, for the design and fabrication of replacement
steam generators. A letter of intent has been issued for the
installation of the replacement steam generators. 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 Gulf States)
Entergy Gulf States has been designated as a 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 these sites. Several class action and other suits have
been filed in state and federal courts seeking relief from Entergy Gulf
States and others for damages caused by the disposal of hazardous waste
and for asbestos-related disease allegedly resulting from exposure on
Entergy Gulf States premises. While the amounts at issue in the clean-
up efforts and suits may be substantial, Entergy Gulf States believes
that its results of operations and financial condition will not be
materially adversely affected by the outcome of the suits. As of
December 31, 1997, a remaining recorded provision of $23.8 million
existed relating to the clean-up of seven sites at which Entergy Gulf
States has been designated a PRP.
(Entergy Louisiana)
During 1993, the LDEQ issued new rules for solid waste regulation,
including regulation of waste water impoundments. Entergy Louisiana
has determined that certain of its power plant waste water impoundments
were affected by these regulations and has chosen to upgrade or close
them. As a result, a remaining recorded liability in the amount of
$6.7 million existed as of December 31, 1997, for waste water upgrades
and closures. Completion of this work is pending LDEQ approval.
Cumulative expenditures relating to the upgrades and closures of waste
water impoundments are $7.1 million as of December 31, 1997.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the City
of New Orleans pursuant to City franchise ordinances that state, among
other things, the City has a continuing option to purchase Entergy New
Orleans' electric and gas utility properties.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
identical transactions for the sale and leaseback of undivided
interests (aggregating approximately 9.3%) in Waterford 3. In July
1997, Entergy Louisiana caused the lessors to issue $307,632,000
aggregate principal amount of Waterford 3 Secured Lease Obligation
Bonds, 8.09% Series due 2017, to refinance the outstanding bonds
originally issued to finance the purchase of the undivided interests by
the lessors. The lease payments will be reduced to reflect the lower
interest costs. Upon the occurrence of certain events, Entergy
Louisiana may be obligated to pay amounts sufficient to permit the
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 for further information.
Employment Litigation
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, and Entergy New Orleans are defendants in numerous
lawsuits described below that have been filed by former employees
asserting that they were wrongfully terminated and/or discriminated
against due to age, race, and/or sex. Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New
Orleans are vigorously defending these suits and deny any liability to
the plaintiffs. However, no assurance can be given as to the outcome
of these cases.
(Entergy Corporation, Entergy Louisiana, and Entergy New Orleans)
Entergy Corporation, Entergy Louisiana, and Entergy New Orleans
are defendants in numerous lawsuits filed in Louisiana state court on
behalf of approximately 147 plaintiffs who claim that they were
illegally terminated from their jobs due to discrimination on the basis
of age. The plaintiffs have requested that the court certify the
matter as a class action. On August 13, 1997, the court certified the
case as a class action. The court decision to certify a class action
has been appealed to the Louisiana Fifth Circuit Court of Appeal. No
assurance can be given as to the timing or outcome of these
proceedings.
(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 60 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. In May 1997,
the jury rendered findings as to 22 of the plaintiffs indicating that
Entergy had no liability to them for discrimination. However, the jury
also found that Entergy had intentionally discriminated against the
remaining five plaintiffs on the basis of age. As a result, these five
plaintiffs are entitled to damages equal to twice their back pay plus
lost future wages, and they will be awarded attorneys' fees in an
amount which has not yet been determined by the court.
A trial date for another suit involving 18 plaintiffs, originally
scheduled for May 1997, has been continued until April 1998. A motion
for summary judgment in favor of the defendants is pending in this
suit. Another suit, involving a single plaintiff, which had been set
for trial in February 1998, has been continued with no new trial date
set. Another of the suits, involving a single plaintiff, was settled
for an immaterial amount prior to trial in November 1997. Another of
the suits, involving nine plaintiffs, has been set for trial in June
1998. The last of these suits is in the discovery stage and has been
set for trial in July 1998.
(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.
(Entergy Corporation, Entergy Gulf States, and Entergy Louisiana)
Entergy Corporation, Entergy Gulf States, and Entergy Louisiana
were defendants in a suit filed in federal court in Louisiana by
approximately 57 plaintiffs who claimed, among other things, they were
wrongfully discharged from their employment on the basis of their age.
However, all of these claims were settled before reaching trial in
September 1997.
Entergy London Agreements and Contracts (Entergy London)
Entergy London is subject to an agreement whereby the UK
government is entitled to a proportion of certain property gains
realized by London Electricity as a result of disposals or events
treated as disposals occurring after March 31, 1990, of properties held
at that date. This commitment is effective until March 31, 2000.
Entergy London has recorded approximately $165 million in reserves
as of December 31, 1997, related to unfavorable long-term contracts.
These reserves will be amortized over the remaining lives of the
contracts which range from 14 to 18 years. The reserves recorded are
based on the excess of estimated fair market value of these contracts
over the present value of the future cash flows under the contracts at
the applicable discount rate and prices.
NOTE 10. LEASES
General
As of December 31, 1997, Entergy had capital leases and
noncancelable operating leases for equipment, buildings, vehicles, and
fuel storage facilities (excluding nuclear fuel leases and the sale and
leaseback transactions) with minimum lease payments as follows:
Capital Leases
Entergy Entergy
Year Entergy Arkansas Gulf States
(In Thousands)
1998 $ 27,369 $ 10,953 $ 12,480
1999 27,343 10,953 12,480
2000 25,534 9,646 11,983
2001 23,452 9,646 11,628
2002 19,574 9,646 9,879
Years thereafter 80,512 42,211 38,101
---------- ---------- ----------
Minimum lease payments 203,784 93,055 96,551
Less: Amount
representing interest 68,074 37,311 29,073
Present value of net ---------- ---------- ----------
minimum lease payments $ 135,710 $ 55,744 $ 67,478
========== ========== ==========
Operating Leases
Entergy Entergy Entergy Entergy
Year Entergy Arkansas Gulf States Louisiana London
(In Thousands)
1998 $67,748 $17,946 $14,429 $5,108 $10,780
1999 65,557 17,913 14,408 4,702 9,831
2000 62,645 17,913 13,801 4,644 9,707
2001 56,473 17,995 11,546 1,178 9,707
2002 55,011 17,772 11,292 1,163 9,589
Years thereafter 334,155 55,886 56,528 - 119,956
-------- -------- -------- ------- --------
Minimum lease payments $641,589 $145,425 $122,004 $16,795 $169,570
======== ======== ======== ======= ========
Rental expense for Entergy's leases (excluding nuclear fuel
leases and the sale and leaseback transactions) amounted to
approximately $70.7 million, $62.1 million, and $61.1 million in 1997,
1996, and 1995, respectively. These amounts include $19.7 million,
$26.0 million, and $26.0 million, respectively, for Entergy Arkansas;
$17.6 million, $11.8 million, and $13.0 million, respectively, for
Entergy Gulf States; $12.8 million, $13.7 million, and $13.6 million,
respectively, for Entergy Louisiana; and $11.4 million in 1997 for
Entergy London.
Nuclear Fuel Leases (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, System Energy)
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy each has arrangements to lease nuclear fuel in an
aggregate amount up to $140 million, $70 million, $80 million, and $90
million respectively. As of December 31, 1997, the unrecovered cost
base of Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's,
and System Energy's nuclear fuel leases amounted to approximately $92.6
million, $54.4 million, $57.8 million, and $64.2 million, respectively.
The lessors finance the acquisition and ownership of nuclear fuel
through credit agreements and the issuance of notes. These agreements
are subject to annual renewal with, in Entergy Louisiana's and Entergy
Gulf States' case, the consent of the lenders. The credit agreements
for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and
System Energy have been extended and now have termination dates of
December 2000, December 2000, January 2001, and February 2001,
respectively. The debt securities issued pursuant to these fuel lease
arrangements have varying maturities through December 15, 2000. It is
expected that the credit agreements will be extended or alternative
financing will be secured by each lessor upon the maturity of the
current arrangements. If extensions or alternative financing cannot be
arranged, the lessee in each case must purchase sufficient nuclear fuel
to allow the lessor to retire such borrowings.
Lease payments are based on nuclear fuel use. Nuclear fuel lease
expense charged to operations by the domestic utility companies in
1997, 1996, and 1995 was $149.7 million (including interest of $18.7
million), $158.5 million (including interest of $21.7 million), and
$153.5 million (including interest of $22.1 million), respectively.
Specifically, in 1997, 1996, and 1995, Entergy Arkansas' expense was
$53.7 million, $53.9 million, and $46.8 million (including interest of
$6.4 million, $7.1 million, and $6.7 million), respectively; Entergy
Gulf States' expense was $25.5 million, $27.1 million, and $41.4
million (including interest of $3.2 million, $4.2 million, and $6.0
million), respectively; Entergy Louisiana's expense was $29.4 million,
$39.8 million, and $30.8 million (including interest of $3.7 million,
$4.9 million, and $3.7 million), respectively; System Energy's expense
was $41.1 million, $37.7 million, and $34.5 million (including interest
of $5.4 million, $5.5 million, and $5.7 million), respectively.
Sale and Leaseback Transactions
Waterford 3 Lease Obligations (Entergy Louisiana)
Entergy Louisiana is the lessee of three separate undivided
interests in Waterford 3 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. Entergy Louisiana is leasing
back the interests on a net lease basis over an approximate 28-year
basic lease term. 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. Interests were
acquired from Entergy Louisiana with funds obtained from the
issuance and sale by the purchasers of intermediate-term and long-term
secured lease obligation bonds. The lease payments to be made by
Entergy Louisiana will be sufficient to service such debt.
Entergy Louisiana did not exercise its option to repurchase the
undivided interests in Waterford 3 in September 1994. As a result,
Entergy Louisiana was required to provide collateral for the equity
portion of certain amounts payable by Entergy Louisiana under the
leases. Such collateral was in the form of a new series of non-
interest-bearing first mortgage bonds in the aggregate principal amount
of $208.2 million issued by Entergy Louisiana in September 1994.
In July 1997, Entergy Louisiana caused the Waterford 3 lessors to
issue $307,632,000 aggregate principal amount of Waterford 3 Secured
Lease Obligation Bonds, 8.09% Series due 2017, to refinance the
outstanding bonds originally issued to finance the purchase of the
undivided interests by the lessors. The lease payments have been
reduced to reflect the lower interest costs.
Upon the occurrence of certain events (including lease events of
default, events of loss, deemed loss events or certain adverse
"Financial Events" with respect to Entergy Louisiana), 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. "Financial Events" include, among other
things, failure by Entergy Louisiana, following the expiration of any
applicable grace or cure periods, to maintain (1) as of the end of any
fiscal quarter, total equity capital (including preferred stock) at
least equal to 30% of adjusted capitalization, or (2) in respect of the
12-month period ending on the last day of any fiscal quarter, a fixed
charge coverage ratio of at least 1.50. As of December 31, 1997,
Entergy Louisiana's total equity capital (including preferred stock)
was 46.8% of adjusted capitalization and its fixed charge coverage
ratio was 2.79.
As of December 31, 1997, Entergy Louisiana had future minimum
lease payments (reflecting an overall implicit rate of 7.45%) in
connection with the Waterford 3 sale and leaseback transactions, which
are recorded as long-term debt, as follows (in thousands):
1998 $ 23,850
1999 49,108
2000 42,573
2001 40,909
2002 39,246
Years thereafter 532,137
----------
Total 727,823
Less: Amount representing interest 374,223
----------
Present value of net minimum lease payments $ 353,600
==========
Grand Gulf 1 Lease Obligations (System Energy)
On December 28, 1988, System Energy entered into two arrangements
for the sale and leaseback of an aggregate 11.5% undivided ownership
interest in Grand Gulf 1 for an aggregate cash consideration of $500
million. System Energy is leasing back the undivided interest on a net
lease basis over a 26 1/2-year basic lease term. System Energy has
options to terminate the leases and to repurchase the undivided
interest in Grand Gulf 1 at certain intervals during the basic lease
term. Further, at the end of the basic lease term, System Energy has
an option to renew the leases or to repurchase the undivided interest
in Grand Gulf 1. See Note 9 with respect to certain other terms of the
transactions.
In accordance with SFAS 98, "Accounting for Leases," due to
"continuing involvement" by System Energy, the sale and leaseback
arrangements of the undivided portions of Grand Gulf 1, as described
above, are required to be reflected for financial reporting purposes as
financing transactions in System Energy's financial statements. The
amounts charged to expense for financial reporting purposes include the
interest portion of the lease obligations and depreciation of the
plant. However, operating revenues include the recovery of the lease
payments because the transactions are accounted for as sales and
leasebacks for rate-making purposes. The total of interest and
depreciation expense exceeds the corresponding revenues realized during
the early part of the lease term. Consistent with a recommendation
contained in a FERC audit report, System Energy recorded as a deferred
asset the difference between the recovery of the lease payments and the
amounts expensed for interest and depreciation and is recording such
difference as a deferred asset on an ongoing basis. The amount of this
deferred asset was $84.0 million and $93.2 million as of December 31,
1997, and 1996, respectively.
As of December 31, 1997, System Energy had future minimum lease
payments (reflecting an implicit rate of 7.02%), which are recorded as
long-term debt as follows (in thousands):
1998 $ 42,753
1999 42,753
2000 42,753
2001 46,803
2002 53,827
Years thereafter 659,437
----------
Total 888,326
Less: Amount representing interest 399,164
----------
Present value of net minimum lease payments $ 489,162
==========
NOTE 11. POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, System Energy, and Entergy London)
Pension Plans
Entergy has two postretirement benefit plans, "Entergy Corporation
Retirement Plan for Non-Bargaining Employees" and "Entergy Corporation
Retirement Plan for Bargaining Employees", covering substantially all
of its domestic employees. The pension plans are noncontributory and
provide pension benefits that are based on employees' credited service
and compensation during the final years before retirement. Entergy
Corporation and its subsidiaries fund pension costs in accordance with
contribution guidelines established by the Employee Retirement Income
Security Act of 1974, as amended, and the Internal Revenue Code of
1986, as amended. The assets of the plans include common and preferred
stocks, fixed income securities, interest in a money market fund, and
insurance contracts.
Entergy London participates in a defined benefit pension plan,
which provides pension and other related defined benefits, based on
final pensionable pay, to substantially all employees throughout the
electricity supply industry in the UK. Entergy London uses the
projected unit credit actuarial method for funding purposes. Amounts
funded to the pension are primarily invested in equity and fixed income
securities.
Total 1997, 1996, and 1995 pension cost of Entergy Corporation and
its subsidiaries, including amounts capitalized, included the following
components (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Service cost - benefits earned
during the period $48,908 $6,937 $5,365 $3,762 $1,893 $763 $2,389 $16,615
Interest cost on projected
benefit obligation 193,930 26,472 23,684 15,778 10,011 2,783 2,942 99,358
Actual return on plan assets (306,613) (46,065) (53,729) (49,438) (19,577) (1,914) (6,052) (118,465)
Net amortization and deferral 86,486 16,906 23,657 27,200 7,549 63 2,055 -
----------------------------------------------------------------------------------
Net pension cost (income) $22,711 $4,250 ($1,023) ($2,698) ($124) $1,695 $1,334 ($2,492)
==================================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $31,584 $7,605 $5,852 $4,684 $2,157 $1,147 $2,658
Interest cost on projected
benefit obligation 84,303 24,540 20,952 15,735 9,462 2,973 2,645
Actual return on plan assets (163,520) (41,183) (47,416) (41,219) (17,767) (1,826) (4,146)
Net amortization and deferral 71,260 14,015 18,732 20,313 6,382 88 526
-------------------------------------------------------------------------
Net pension cost (income) $23,627 $4,977 ($1,880) ($487) $234 $2,382 $1,683
=========================================================================
1995 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned $29,282 $7,786 $6,686 $4,143 $2,152 $1,158 $2,260
during the period
Interest cost on projected 80,794 24,372 21,098 15,111 9,240 2,680 2,230
benefit obligation
Actual return on plan assets (261,864) (71,807) (82,624) (53,348) (30,443) (1,614) (8,827)
Net amortization and deferral 178,345 47,766 53,921 34,902 20,081 64 5,510
--------------------------------------------------------------------------
Net pension cost (income) $26,557 $8,117 ($919) $808 $1,030 $2,288 $1,173
==========================================================================
The funded status of Entergy's various pension plans as of
December 31, 1997, and 1996 was (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
Actuarial present value of
accumulated pension
plan obligation:
Vested $2,189,915 $333,343 $294,552 $201,454 $126,882 $34,616 $31,774 $1,026,071
Nonvested 9,882 3,295 883 2,318 682 357 543 -
-------------------------------------------------------------------------------------
Accumulated benefit obligation 2,199,797 336,638 295,435 203,772 127,564 34,973 32,317 1,026,071
-------------------------------------------------------------------------------------
Plan assets at fair value 3,144,498 427,175 454,912 328,381 174,651 23,043 53,105 1,537,297
Projected benefit obligation 2,496,086 381,581 327,842 226,254 140,317 40,568 46,433 1,134,174
-------------------------------------------------------------------------------------
Plan assets in excess of 648,412 45,594 127,070 102,127 34,334 (17,525) 6,672 403,123
(less than) projected benefit
obligation
Unrecognized prior service cost 35,500 13,656 12,649 5,353 4,414 1,706 1,021 -
Unrecognized transition asset (32,151) (9,343) (7,162) (11,230) (5,001) (572) (4,694) -
Unrecognized net loss (gain) (431,178) (69,076) (179,742) (96,391) (34,699) 7,209 (7,211) (161,907)
-------------------------------------------------------------------------------------
Accrued pension asset (liability) $220,583 ($19,169) ($47,185) ($141) ($952) ($9,182) ($4,212) $241,216
=====================================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Actuarial present value of
accumulated pension
plan obligation:
Vested $1,027,307 $296,181 $287,201 $193,183 $117,142 $34,466 $25,195
Nonvested 4,775 1,345 748 697 154 29 655
-----------------------------------------------------------------------------
Accumulated benefit obligation 1,032,082 297,526 287,949 193,880 117,296 34,495 25,850
-----------------------------------------------------------------------------
Plan assets at fair value 1,359,614 374,849 397,749 282,470 150,616 22,017 43,943
Projected benefit obligation 1,196,925 338,307 315,781 217,711 129,578 41,511 38,401
-----------------------------------------------------------------------------
Plan assets in excess of 162,689 36,542 81,968 64,759 21,038 (19,494) 5,542
(less than) projected benefit
obligation
Unrecognized prior service cost 36,131 14,882 11,964 5,911 4,894 1,965 1,100
Unrecognized transition asset (39,504) (11,679) (9,550) (14,037) (6,252) (767) (5,291)
Unrecognized net loss (gain) (180,525) (55,536) (132,832) (61,130) (23,769) 9,897 (4,502)
-----------------------------------------------------------------------------
Accrued pension liability ($21,209) ($15,791) ($48,450) ($4,497) ($4,089) ($8,399) ($3,151)
=============================================================================
The significant actuarial assumptions used in computing the
information above for the domestic utility companies and System Energy
for 1997, 1996, and 1995 were as follows: weighted-average discount
rate, 7.25% for 1997, 7.75% for 1996, and 7.5% for 1995, weighted-
average rate of increase in future compensation levels, 4.6% for 1997,
1996, and 1995; and expected long-term rate of return on plan assets,
9.0% for 1997 and 1996, and 8.5% for 1995. Transition assets of
Entergy are being amortized over the greater of the remaining service
period of active participants or 15 years.
The significant actuarial assumptions used in computing the
information above for Entergy London for 1997 were as follows:
weighted-average discount rate of 9.0%, weighted-average rate of
increase in future compensation levels of 6.5%, and expected long-term
rate of return on plan assets of 9.0%.
Other Postretirement Benefits
Entergy also provides certain health care and life insurance
benefits for retired employees. Substantially all domestic employees
may become eligible for these benefits if they reach retirement age
while still working for Entergy.
Effective January 1, 1993, Entergy adopted SFAS 106 which required
a change from a cash method to an accrual method of accounting for
postretirement benefits other than pensions. The domestic utility
companies have sought approval, in their respective regulatory
jurisdictions, to implement the appropriate accounting requirements
related to SFAS 106 for ratemaking purposes. Entergy Arkansas received
an order permitting deferral, as a regulatory asset, of the difference
between its annual cash expenditures for postretirement benefits other
than pensions and the SFAS 106 accrual, for a five-year period that
began January 1, 1993. In December 1997, the APSC issued an order
allowing the 15 year amortization of this regulatory asset. Beginning
in 1998, Entergy Arkansas will be allowed to recover its SFAS 106
expenses in rates. Entergy Mississippi is expensing its SFAS 106 costs,
which are reflected in rates pursuant to an order from the MPSC in
connection with Entergy Mississippi's formulary incentive rate plan.
Entergy New Orleans is expensing its SFAS 106 costs. Pursuant to
the PUCT's May 26, 1995, amended order, Entergy Gulf States is currently
collecting the Texas portion of its SFAS 106 costs in rates. The LPSC
ordered Entergy Gulf States and Entergy Louisiana to continue the use
of the pay-as-you-go method for ratemaking purposes for postretirement
benefits other than pensions, but the LPSC retains the flexibility to
examine individual companies' accounting for postretirement benefits
to determine if special exceptions to this order are warranted.
In December 1997, Entergy Arkansas was allowed to begin funding
its SFAS 106 costs commencing in 1998. Pursuant to regulatory
directives, Entergy Mississippi, Entergy New Orleans, the portion of
Entergy Gulf States regulated by the PUCT, and System Energy, fund
postretirement benefit obligations collected in rates. System Energy
is funding on behalf of Entergy Operations postretirement benefits
associated with Grand Gulf 1. Entergy Louisiana and Entergy Gulf
States continue to fund a portion of these benefits regulated by the
LPSC and FERC on a pay-as-you-go basis. The assets of the various
postretirement benefit plans other than pensions include common stocks,
fixed-income securities, and a money market fund. At January 1, 1993,
the actuarially determined accumulated postretirement benefit
obligation (APBO) earned by retirees and active employees was estimated
to be approximately $241.4 million and $128 million for Entergy (other
than Entergy Gulf States) and for Entergy Gulf States, respectively.
Such obligations are being amortized over a 20-year period beginning in
1993.
Total 1997, 1996, and 1995 postretirement benefit cost of Entergy
Corporation and its subsidiaries, including amounts capitalized and
deferred, included the following components (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $13,991 $3,204 $3,227 $2,081 $1,092 $618 $939
Interest cost on APBO 29,317 6,232 9,466 4,490 2,278 3,106 648
Actual return on plan assets (3,386) - (1,637) - (695) (840) (214)
Net amortization and deferral 15,864 3,716 6,519 2,623 1,399 1,936 262
---------------------------------------------------------------------------
Net postretirement benefit cost $55,786 $13,152 $17,575 $9,194 $4,074 $4,820 $1,635
===========================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned
during the period $14,351 $3,128 $3,476 $2,155 $1,081 $661 $890
Interest cost on APBO 26,133 5,580 8,164 4,283 2,171 3,085 512
Actual return on plan assets (1,654) - (388) - (479) (681) (106)
Net amortization and deferral 14,214 3,397 5,370 2,694 1,458 1,977 209
---------------------------------------------------------------------------
Net postretirement benefit cost $53,044 $12,105 $16,622 $9,132 $4,231 $5,042 $1,505
===========================================================================
1995 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Service cost - benefits earned $10,797 $2,777 $1,864 $2,047 $909 $650 $687
during the period
Interest cost on APBO 25,629 5,398 8,526 4,215 1,969 3,258 603
Actual return on plan assets (759) - - - (245) (514) -
Net amortization and deferral 11,023 2,702 4,477 2,121 988 1,876 262
-------------------------------------------------------------------------
Net postretirement benefit cost $46,690 $10,877 $14,867 $8,383 $3,621 $5,270 $1,552
=========================================================================
The funded status of Entergy's postretirement plans as of December
31, 1997, and 1996, was (in thousands):
1997 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $313,243 $66,279 $112,150 $47,774 $23,062 $37,890 $3,264
Other fully eligible participants 32,530 6,151 6,203 4,713 3,543 1,974 1,936
Other active participants 82,189 18,667 17,875 12,898 6,668 3,969 5,264
-------------------------------------------------------------------------------
Accumulated benefit obligation 427,962 91,097 136,228 65,385 33,273 43,833 10,464
Plan assets at fair value 63,930 - 28,390 - 12,140 18,565 4,835
-------------------------------------------------------------------------------
Plan assets less than APBO (364,032) (91,097) (107,838) (65,385) (21,133) (25,268) (5,629)
Unrecognized transition obligation 172,085 59,298 87,050 44,575 22,529 40,183 3,932
Unrecognized net loss (gain)/other 21,819 (4,104) (3,886) (4,338) (3,038) (12,737) (559)
-------------------------------------------------------------------------------
Accrued postretirement benefit asset (liability) ($170,128) ($35,903) ($24,674) ($25,148) ($1,642) $2,178 ($2,256)
===============================================================================
1996 Entergy Entergy Entergy Entergy Entergy System
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy
Actuarial present value of accumulated
postretirement benefit obligation:
Retirees $263,504 $56,945 $90,450 $44,083 $21,639 $36,613 $1,401
Other fully eligible participants 28,507 5,599 5,728 4,063 2,753 1,694 1,861
Other active participants 73,188 15,505 16,623 11,553 5,837 3,630 4,587
----------------------------------------------------------------------------
Accumulated benefit obligation 365,199 78,049 112,801 59,699 30,229 41,937 7,849
Plan assets at fair value 37,970 - 15,528 - 7,517 12,647 2,278
----------------------------------------------------------------------------
Plan assets less than APBO (327,229) (78,049) (97,273) (59,699) (22,712) (29,290) (5,571)
Unrecognized transition obligation 183,557 63,252 92,853 47,546 24,031 42,861 4,194
Unrecognized net loss (gain)/other (5,032) (13,414) (13,859) (7,726) (3,221) (11,704) (1,476)
-----------------------------------------------------------------------------
Accrued postretirement benefit asset (liability) ($148,704) ($28,211) ($18,279) ($19,879) ($1,902) $1,867 ($2,853)
=============================================================================
The assumed health care cost trend rate used in measuring the APBO
of Entergy was 6.8% for 1998, gradually decreasing each successive year
until it reaches 5.0% in 2005. A one percentage-point increase in the
assumed health care cost trend rate for each year would have increased
the APBO of Entergy, as of December 31, 1997, by 11.3% (Entergy
Arkansas-11.5%, Entergy Gulf States-10.3%, Entergy Louisiana-11.4%,
Entergy Mississippi-11.9%, Entergy New Orleans-10.0%, and System Energy-
15.4%), and the sum of the service cost and interest cost by
approximately 14.7% (Entergy Arkansas-14.7%, Entergy Gulf States-13.9%,
Entergy Louisiana-14.2%, Entergy Mississippi-14.9%, Entergy New Orleans-
11.5%, and System Energy-18.9%). The assumed discount rate and rate of
increase in future compensation used in determining the APBO were 7.25%
for 1997, 7.75% for 1996, and 7.5% for 1995, and 4.6% for 1997, 1996,
and 1995, respectively. The expected long-term rate of return on plan
assets was 9.0% for 1997 and 1996, and 8.5% for 1995.
NOTE 12. RESTRUCTURING CHARGES (Entergy London)
In 1995 and 1996, London Electricity implemented a restructuring
program to reduce the number of employees in the Network Services,
Customer Services, Corporate and Information Technology groups. An
initial plan was approved by the Board of Directors in September 1994
and was based on a business plan developed subsequent to the 1994
Regulatory Review of Distribution (the Distribution Review).
Following the reopening of the Distribution Review during 1995, a
further plan was proposed leading to further reduction of employees in
the same areas. This plan was approved by the Board of Directors in May
1996. The balance as of December 31, 1997, for restructuring charges is
shown below along with the actual termination benefits paid under the
restructuring plan for the year ended December 31, 1997 (in millions).
Provision for restructuring as of January 31, $ 41.7
1997 (date of acquisition)
Adjustments to restructuring provision in 1997 13.3
Payments made in 1997 (29.7)
Cumulative translation adjustment 1.0
------
Balance December 31, 1997 $ 26.3
======
The restructuring charges shown above primarily included employee
severance costs related to the expected termination of approximately
1,372 employees in various groups. As of December 31, 1997, 895
employees had either been terminated or accepted voluntary separation
packages under the restructuring plan.
NOTE 13. ACQUISITIONS (Entergy Corporation and Entergy London)
On December 18, 1996, Entergy Corporation, through its wholly-
owned subsidiary Entergy London, 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 UK, and, as of February 7, 1997, the offer was made
unconditional. Entergy Corporation, through Entergy London, 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 by Entergy London with $1.7 billion of debt,
which is non-recourse to Entergy Corporation, and $392 million of
equity provided by Entergy Corporation from available cash and
borrowings under Entergy Corporation's $300 million line of credit.
The debt has since been refinanced (see Note 7).
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 December 31, 1997, the unamortized balance of the license was
approximately $1.3 billion.
In accordance with the purchase method of accounting, the 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 and 1996, respectively. 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.
For the Twelve Months Ending:
December 31, 1997(a) December 31, 1996(b)
(In Millions of U.S. Dollars, Except Share Data)
Operating revenues $9,783 $9,288
Net income $304 $488
Earnings per average common share
Basic and diluted $1.04 $1.82
(a)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. London
Electricity's liability for this tax is approximately BPS140
million (approximately $234 million), which will not be deductible
for UK corporation tax purposes. Payment of the tax is required in
two equal installments, the first was paid on December 1, 1997, and
the second of which is due one year later. The government also
decreased the corporate income tax rate in the UK from 33% to 31%,
effective as of April 1, 1997. In accordance with SFAS 109,
"Accounting for Income Taxes," this reduction in UK corporate tax
rates resulted in a one-time reduction in income tax expense for
London Electricity of approximately $65 million during the quarter
ended September 30, 1997.
(b)Net Income in 1996 includes the $174 million net of tax write-off
of River Bend rate deferrals pursuant to SFAS 121.
NOTE 14. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Gulf
States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy, and Entergy London)
The various domestic utility companies purchase electricity from
and/or sell electricity to other domestic utility companies, System
Energy, and Entergy Power (in the case of Entergy Arkansas) under rate
schedules filed with FERC. In addition, the domestic utility companies
and System Energy purchase fuel from System Fuels; receive management,
technical, advisory, operating, and administrative services from
Entergy Services; and receive management, technical, and operating
services from Entergy Operations. Entergy London receives technical,
advisory, and administrative services from Entergy Services and Entergy
Enterprises.
As described in Note 1, all of System Energy's operating revenues
consist of billings to Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans.
The tables below contain the various affiliate transactions among
the domestic utility companies and System Entergy (in millions).
Intercompany Revenues
Entergy Entergy Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Mississippi New Orleans Energy
1997 $229.7 $14.6 $2.0 $84.9 $10.8 $633.7
1996 $282.7 $21.2 $5.6 $65.9 $ 2.6 $623.6
1995 $195.5 $62.7 $1.6 $43.3 $ 3.2 $605.6
Intercompany Operating Expenses
Entergy Entergy Entergy Entergy Entergy System Entergy
Arkansas(1) Gulf States Louisiana Mississippi New Orleans Energy London
1997 $335.0 $416.4 $326.7 $316.1 $177.1 $36.5 $5.3
1996 $346.7 $395.7 $331.3 $294.6 $185.9 $ 8.6 -
1995 $316.0 $266.5 $335.5 $262.6 $164.4 $ 6.5 -
(1)Includes $16.5 million in 1997, $38.8 million in 1996, and $31.0
million in 1995 for power purchased from Entergy Power.
Operating Expenses Paid or Reimbursed to Entergy Operations
Entergy Entergy Entergy System
Arkansas Gulf States Louisiana Energy
1997 $162.1 $135.7 $133.3 $ 64.7
1996 $163.3 $133.7 $ 97.7 $ 98.1
1995 $189.8 $129.1 $122.6 $116.9
In addition, certain materials and services required for
fabrication of nuclear fuel are acquired and financed by System Fuels
and then sold to System Energy as needed. Charges for these materials
and services, which represent additions to nuclear fuel, amounted to
approximately $16.5 million in 1997, $44.7 million in 1996, and $51.5
million in 1995.
NOTE 15. BUSINESS SEGMENT INFORMATION (Entergy New Orleans and
Entergy London)
Entergy New Orleans supplies electric and natural gas services in
the City. Entergy New Orleans' segment information follows:
1997 1996 1995
Electric Gas Electric Gas Electric Gas
(In Thousands)
Operating revenues $410,131 $94,691 $403,254 $101,023 $390,002 $80,276
Revenue from sales to
unaffiliated customers (1) 399,789 94,691 400,605 101,023 386,785 80,276
Operating income
before income taxes 38,752 3,539 51,937 5,641 61,092 9,638
Net utility plant 212,648 62,144 214,106 63,865 204,407 65,236
Depreciation expense 17,157 3,638 16,525 3,342 15,858 3,290
Construction expenditures 14,988 1,149 23,411 4,545 21,729 6,107
(1) Entergy New Orleans' intersegment transactions are not material
(less than 1% of sales to unaffiliated customers).
Entergy London is engaged in two electric industry segments:
distribution, which involves the transfer and delivery of electricity
across its network to its customers, and supply, which involves bulk
purchases of electricity from the Electricity Pool for delivery to the
distribution networks. Other consists principally of Entergy London's
investment in private distribution networks, electricity contracting
services, and investments in generating assets. Information about
Entergy London's operations in these individual segments for the year
ended December 31, 1997 is as follows (in thousands):
Distribution Supply Other Eliminations Consolidated
Operating revenues $498,801 $1,689,034 $102,550 $(443,343) $1,847,042
Operating income 140,713 15,095 37,082 (6,080) 186,810
Depreciation and amortization 111,028 7,219 3,118 - 121,365
Total assets employed at period end 3,628,954 537,973 236,698 - 4,403,625
Capital expenditures 143,936 16,069 21,160 - 181,165
NOTE 16. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Energy, and Entergy London)
The business of the domestic utility companies, System Energy, and
Entergy London is subject to seasonal fluctuations with the peak periods
occurring during the third quarter for the domestic utility companies
and System Energy and occurring during the first quarter for Entergy
London. Operating results for the four quarters of 1997 and 1996 were:
Operating Revenue
Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
(In Thousands)
1997:
First Quarter $2,045,753 $374,731 $ 481,328 $433,983 $ 200,328 $124,956 $155,662 $379,519
Second Quarter 2,178,090 423,619 476,421 412,263 212,892 109,803 161,021 450,405
Third Quarter 2,797,587 545,849 599,974 554,486 294,983 139,940 160,573 443,975
Fourth Quarter 2,540,291 371,515 590,106 402,540 229,192 130,123 156,442 573,143
1996:
First Quarter $1,598,992 $383,081 $ 456,631 $417,767 $ 203,902 $127,280 $156,424 N/A
Second Quarter 1,853,677 467,990 525,567 457,847 247,479 127,829 160,369 N/A
Third Quarter 2,148,332 529,276 592,130 549,295 297,118 150,937 154,467 N/A
Fourth Quarter 1,576,656 363,086 444,853 403,958 209,931 98,231 152,360 N/A
Operating Income (Loss)
Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
(In Thousands)
1997:
First Quarter $372,218 $30,890 $ 93,014 $ 77,880 $ 22,694 $ 8,755 $74,316 $37,135
Second Quarter 433,887 80,873 75,643 87,911 40,395 9,400 73,568 47,704
Third Quarter 672,617 148,688 158,365 147,976 52,832 18,096 72,813 58,673
Fourth Quarter 378,436 6,424 203,524 53,813 20,827 6,040 72,496 43,298
1996:
First Quarter $342,403 $41,955 $ 77,058 $ 95,166 $ 30,470 $15,752 $82,938 N/A
Second Quarter 501,169 105,237 118,420 119,736 57,283 19,608 82,894 N/A
Third Quarter 609,763 131,319 152,022 155,755 54,696 28,319 75,270 N/A
Fourth Quarter 239,517 31,639 64,398 65,789 22,147 (6,101) 75,937 N/A
Net Income (Loss)
Entergy Entergy Entergy Entergy Entergy System Entergy
Entergy Arkansas Gulf States Louisiana Mississippi New Orleans Energy London
(In Thousands)
1997:
First Quarter $126,485 $ 9,848 $ 32,535 $26,172 $ 8,352 $ 2,818 $24,345 $15,639
Second Quarter 158,579 38,085 27,028 32,607 19,399 3,038 24,093 9,320
Third Quarter 93,321 78,251 70,740 70,681 27,335 8,590 24,449 (172,268)
Fourth Quarter (77,486) 1,793 (70,327) 12,297 11,575 1,005 29,408 (26)
1996:
First Quarter $(68,990) $19,268 $(152,257) $40,530 $ 12,924 $ 8,035 $23,530 N/A
Second Quarter 206,701 55,712 47,140 55,385 29,818 10,360 23,382 N/A
Third Quarter 299,166 70,791 90,965 77,302 28,205 15,221 24,749 N/A
Fourth Quarter 53,686 12,027 10,265 17,545 8,264 (6,840) 27,007 N/A
Earnings (Loss) per Average Common Share (Entergy Corporation)
1997 1996
Basic Diluted Basic Diluted
First Quarter $ 0.47 $ 0.47 $ (0.38) $(0.38)
Second Quarter $ 0.61 $ 0.61 $ 0.83 $ 0.83
Third Quarter $ 0.33 $ 0.33 $ 1.22 $ 1.22
Fourth Quarter $(0.36) $(0.36) $ 0.16 $ 0.16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of London Electricity plc
We have audited the accompanying consolidated balance sheet of London
Electricity plc as of March 31, 1996 and the related consolidated
statements of operations, cash flows and changes in shareholders' equity
for the period from April 1, 1996 to January 31, 1997, and the year ended
March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
London Electricity plc as of March 31, 1996 and the results of its
operations and its cash flows for the period from April 1, 1996 to January
31, 1997 and the year ended March 31, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
July 31, 1997
LONDON ELECTRICITY PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Predecessor Company
The following discussion of results of operations for London
Electricity relates to periods prior to its acquisition by Entergy London.
Such periods do not include acquisition adjustments described under
"Accounting for the Acquisition"in "ENTERGY LONDON INVESTMENTS plc AND
SUBSIDIARY - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS." This analysis is included based on London
Electricity constituting a predecessor of Entergy London. Entergy London's
results of operations do not include results for London Electricity prior
to February 1, 1997.
National Grid Group Transactions
During the fiscal year ended March 31, 1996, London Electricity, as
well as each of the other 11 REC businesses in the UK, reorganized their
interests in the National Grid Group (NGG). London Electricity distributed
the majority of its shares in NGG to its shareholders. As part of this
distribution, London Electricity revalued these shares to fair market value
and recognized a gain of approximately $417 million and received special
dividends of $205 million and rights dividends of $4.7 million from NGG
which were also recognized as income. Additionally, London Electricity
received approximately $109.8 million as a result of NGG's sale of its
pumped storage business which was also recognized as a gain in fiscal year
1996. London Electricity has retained shares of NGG for the purpose of
establishing an employee stock ownership plan ("ESOP") for its employees
who were participants in London Electricity stock option and sharesave
plans to compensate them for any dimunition in value in London Electricity
shares as a result of NGG distributions. The cost of such ESOP shares has
been reflected as expense of $27.1 million in the fiscal year 1996 results
of operations. As a result of all of the above, London Electricity
recognized a total nonrecurring gain of $709 million ($573 million after
tax effect) in the fiscal year ended March 31, 1996 results of operations.
As part of the agreement among the shareholders of NGG, each of the RECs
agreed to provide a discount to each of their respective Franchise Supply
Customers which, together with the associated reduction in the Fossil Fuel
Levy (a reimbursement to non-fossil fuel generators for the extra cost of
such generation), produced a credit on each Franchise Supply Customer's
bill of just over $78. The cost to London Electricity of providing this
discount amounted to $130 million (net of the reduction in the Fossil Fuel
Levy of $13 million) which was credited to customers in the last quarter of
the fiscal year ended March 31, 1996. The effect of the refund was to
reduce operating revenues, cost of sales, gross profit, and net income by
$143 million, $13 million, $130 million, and $88 million, respectively.
The net dividends received from NGG and the net after tax proceeds from the
sale of NGG's pumped storage business were sufficient to offset the after
tax cash cost of providing the $78 per customer discount to its Franchise
Supply Customers and taxation cost of distributing its NGG investment to
its shareholders.
Income from Operations
Income from operations was $169 million for the ten-month period from
April 1, 1996 to January 31, 1997, an increase of $10 million from the
fiscal year which ended March 31, 1996. The increase was due principally
to lower selling, general and administrative expenses and lower other
operation and maintenance costs in the latter period due to there being
only ten months in that period. Revenues were lower by $95 million
(including the impact of the NGG refund) in the period from April 1, 1996
to January 31, 1997, when compared to the revenues in fiscal year 1996 of
$1,860 million. Largely offsetting this decrease was a $92 million
decrease in cost of sales from the $1,307 million incurred in fiscal year
1996. Both decreases were principally due to the shorter time period from
April 1, 1996 to January 31, 1997.
LONDON ELECTRICITY PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Income (loss) from operations by segments for the ten-month period
ended January 31, 1997, was $159 million, $(1) million, and $11 million for
the distribution, supply, and other segments, respectively. Income (loss)
from those segments in fiscal year 1996 was $247 million, $(110) million,
and $22 million, respectively.
The decrease in distribution operating income of $88 million was
principally due to: (i) reductions in distribution revenue from an 11%
allowed distribution revenues reduction announced by the Regulator
effective at the beginning of fiscal year 1997 and a decrease of 15% in
distribution sales volume due to the shorter time period and (ii) an
increase in distribution operating expenses due to restructuring charges
during the ten-month period ended January 31, 1997.
The reduction in supply operating loss of $109 million was principally
due to the $130 million customer refund (net of the Fossil Fuel Levy
reduction) in 1996 from the NGG transactions. Such increase was partially
offset by a 5% decrease in number of electricity units supplied.
Net Income
Net income decreased by $48 million, from $146 million in fiscal year
1996 (excluding the after tax effect of NGG transactions of $573 million)
to $98 million in the ten-month period ended January 31, 1997. This
decrease was primarily due to the reduction in distribution operating
revenues due to the factors discussed below in "Revenues."
Revenues
Operating revenues, excluding the impact of the NGG refund, decreased
by $238 million (12%) from $2,003 million in fiscal year 1996 to $1,765
million in the ten-month period ended January 31, 1997, as follows:
Operating Revenues
Increase (Decrease)
from Fiscal Year
1996 to the ten-month Period
ended January 31, 1997
(In millions)
Electricity distribution $ (124)
Electricity supply (199)
Other 14
Intra-business 71
------
Total operating revenues $ (238)
======
The factors affecting distribution revenues are the same as those
described in "ENTERGY LONDON INVESTMENTS plc AND SUBSIDIARY - MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
comparing the year ended December 31, 1997 with the ten-month period ended
January 31, 1997 above.
LONDON ELECTRICITY PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Revenues from the distribution business decreased by $124 million
(22%) from $559 million for fiscal year 1996 to $435 million for the ten-
month period ended January 31, 1997, principally due to two additional
months of operation in the earlier time period. An additional factor
contributing to the decrease was a reduction in the maximum allowable
average price of units distributed as a result of the application of the
revised Distribution Price Control Formula.
Two principal factors determine the amount of revenues produced by the
supply business: the unit price of electricity supplied (which, in the case
of franchise supply customers, is controlled by the Supply Price Control
Formula) and the number of electricity units supplied. London Electricity
is expected to have the exclusive right to supply all franchise supply
customers in its Franchise Area until at least April 1, 1998.
Franchise supply customers, who are generally residential and small
commercial customers, comprised 54% of total sales volume in the ten-month
period ended January 31, 1997. The volume of unit sales of electricity for
franchise supply customers is influenced largely by the number of customers
in London Electricity's Franchise Area, weather conditions and prevailing
economic conditions. Unit sales to non-franchise supply customers, who are
typically large commercial and industrial businesses, constituted 46% of
total sales volume during the ten-month period ended January 31, 1997.
Volume in this segment is determined primarily by the success of the supply
business in contracting to supply customers with electricity who are
located both inside and outside London Electricity's Franchise Area.
During the ten-month period ended January 31, 1997, the number of
electricity units supplied decreased by 5% while total revenues produced by
the supply business decreased by $199 million (11%), to $1,663 million from
$1,862 million (excluding the impact of the NGG refund of $143 million) for
fiscal year 1996. Units supplied to franchise supply customers decreased
by 16%, while units supplied to non-franchise supply customers increased by
12%.
Other revenues for the ten-month period ended January 31, 1997 totaled
$107 million, an increase of $14 million over fiscal year 1996. Such
increase was primarily a result of increased electrical contracting
services to the distribution segment by London Electricity Contracting
Limited ("LEC"), the revenues for which were eliminated in intra-business
eliminations. Intra-business eliminations decreased slightly from fiscal
year 1996 to the ten-month period ended January 31, 1997, notwithstanding
the LEC increase due principally to the reductions (due to a shorter time
period) in electricity distribution revenues (the majority of which are
charged to the supply segment) as discussed above.
Cost of Sales
Cost of sales decreased by $105 million (8%) from $1,320 million
(excluding the NGG-related Fossil Fuel Levy reduction of $13 million) in
fiscal year 1996 to $1,215 million in the ten-month period ended January
31, 1997. This decrease was principally due to two additional months
results of operations in the earlier period.
Expenses
Operating expenses decreased by $13 million (3%) from $394 million in
fiscal year 1996 to $381 million for the ten-month period ended January 31,
1997. This decrease was primarily due to lower selling, general and
administrative expenses and other operation and maintenance costs,
partially offset by one-time restructuring charges of $19 million in the
later period.
LONDON ELECTRICITY PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Other
Other Income (Expense)
Other income (expense) decreased by $733 million from $740 million in
fiscal year 1996 to $7 million in the ten-month period ended January 31,
1997. This decrease was primarily attributable to other income of $709
million from the NGG transaction in fiscal year 1996. See "National Grid
Group Transactions" above.
Interest Expense, Net
Interest expense, net increased by $19 million from $8 million in
fiscal year 1996 to $27 million in the ten-month period ended January 31,
1997, principally as a result of the financing costs associated with the 8-
5/8%, BPS100 million Eurobond issue in October 1995 which was outstanding
for five months of fiscal year 1996 and the entire period from April 1,
1996 through January 31, 1997.
Income Taxes
Entergy London's effective income tax rate of 19% in fiscal year 1996
increased to 34% for the ten-month period ended January 31, 1997. This
increase was due principally to book/tax differences from the NGG
transaction in fiscal year 1996.
LONDON ELECTRICITY PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
for the period from April 1, 1996 to January 31, 1997 and the year ended
March 31, 1996
(in thousands)
Period from
April 1, 1996 to Year Ended
January 31, 1997 March 31, 1996
Operating revenues $1,765,605 $1,859,938
Cost of sales 1,215,455 1,306,827
---------- ----------
Gross profit 550,150 553,111
Depreciation and amortization 62,165 66,085
Property taxes 30,687 31,790
Restructuring charges 18,507 _
Selling, general and administrative 211,961 229,889
Other operation and maintenance costs 58,052 66,242
---------- ----------
Income from operations 168,778 159,105
Other income:
National Grid Transaction
Gain on revaluation of National Grid investment _ 416,869
Gain on sale of pumped storage business _ 109,777
Special dividends _ 205,146
Contribution to Employee Stock Ownership Plan _ (27,092)
Dividend income 6,011 38,837
Equity in earnings (loss) of affiliate 3,796 (3,445)
Other, net (2,531) 157
---------- ----------
Total other income 7,276 740,249
Interest expense, net 27,049 7,673
---------- ----------
Income before income taxes 149,005 891,681
Income taxes 50,776 172,260
---------- ----------
Net income $ 98,229 $ 719,421
========== ==========
See Notes to Financial Statements.
LONDON ELECTRICITY PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the period from April 1, 1996 to January 31, 1997 and the year ended
March 31, 1996
(in thousands)
Period from
April 1, 1996 to Year Ended
January 31, 1997 March 31, 1996
Cash flows from operating activities:
Net income $ 98,229 $ 719,421
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 62,165 66,085
Deferred income taxes 22,778 27,248
Gain on revaluation of National Grid investment _ (416,869)
Change in assets and liabilities:
Inventory (3,164) (4,855)
Accounts receivable and unbilled revenue (21,354) (24,743)
Income tax receivable 182,065 (124,184)
Other receivables 4,904 (50,738)
Prepayments and other 3,164 (6,890)
Long-term receivables and other (9,491) (27,248)
Accounts payable 41,127 8,456
Income taxes payable (200,098) 117,450
Deferred revenue and other current liabilities (17,242) 23,647
Other long-term liabilities (2,215) (7,673)
--------- ----------
Net cash provided by operating activities 160,868 299,107
--------- ----------
Cash flows from investing activities:
Capital expenditures (182,856) (173,201)
Proceeds from sale of fixed assets 791 1,879
Receipt of consumer contributions 26,574 23,334
Purchase of investments (6,169) (37,114)
Sales of investments 10,282 57,785
--------- ----------
Net cash used in investing activities (151,378) (127,317)
--------- ----------
Cash flows from financing activities:
Proceeds from bond issue 316 155,191
Proceeds from issuance of common stock 1,740 15,033
Repayments on bond issue _ _
Net proceeds from available lines of credit 103,669 57,785
Dividends paid (108,215) (397,717)
Repurchase of common stock _ (1,253)
--------- ----------
Net cash used in financing activities (2,490) (170,961)
--------- ----------
Effect of exchange rates on cash and cash equivalents 8,880 (11,301)
--------- ----------
Increase (decrease) in cash and cash equivalents 15,880 (10,472)
Beginning of period cash and cash equivalents 19,851 30,323
--------- ----------
End of period cash and cash equivalents $ 35,731 $ 19,851
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 44,290 $ 19,418
Cash paid for income taxes $ 267,324 $ 120,582
See Notes to Financial Statements.
LONDON ELECTRICITY PLC
CONSOLIDATED BALANCE SHEET
March 31, 1996
(in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 19,851
Accounts receivable:
Customer receivable net of reserve of $13.3 173,315
million
Unbilled revenue 117,884
Deferred income tax asset 24,127
Income tax receivable 191,028
Other receivables 82,304
Prepayments and other 12,369
Inventory 11,300
Investments 25,501
----------
Total current assets 657,679
----------
Property, plant and equipment, net of accumulated 1,070,885
depreciation of $710.5 million
Construction work in progress 125,672
Goodwill, net of accumulated amortization of $3.4 63,065
million
Investments, long-term 16,186
Long-term receivables 15,270
Prepaid pension asset 111,624
----------
Total assets $2,060,381
==========
See Notes to Financial Statements.
LONDON ELECTRICITY PLC
CONSOLIDATED BALANCE SHEET
March 31, 1996
(in thousands, except share and per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 146,745
Accounts payable 179,423
Income taxes payable 236,838
Deferred revenue 30,693
Other liabilities 74,058
----------
Total current liabilities 667,757
----------
Long-term debt 301,888
Deferred income tax liability 317,769
Other 89,634
----------
Total liabilities 1,377,048
----------
Commitments and Contingencies
Shareholders' equity:
Common stock, BPS .583 par value per share,
257,142,857 shares authorized, 203,153
174,290,836 shares issued and outstanding
Additional paid-in capital 14,960
Retained earnings 499,536
Cumulative translation adjustment (34,316)
----------
Total shareholders' equity 683,333
----------
Total liabilities and shareholders' equity $2,060,381
==========
See Notes to Financial Statements.
LONDON ELECTRICITY PLC
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the period from April 1, 1996 to January 31, 1997 and the year ended
March 31, 1996
(in thousands, except share amounts)
Additional Cumulative
Common Stock Paid-In Retained Translation Shareholders'
Shares Amount Capital Earnings Adjustment Equity
Balance, March 31, 1995 197,695,699 $198,612 $4,468 $722,724 $30,719 $956,523
Common stock issued 4,956,992 4,541 10,492 _ _ 15,033
Reduction in shares from
reverse stock split (27,522,282) _ _ _ _ _
Treasury shares acquired (839,573) _ _ (1,253) _ (1,253)
Revaluation of National
Grid investment _ _ _ _ _ 274,254
Realized gain on
distribution of National
Grid investment _ _ _ _ _ (274,254)
Net income _ _ _ 719,421 _ 719,421
Dividends declared:
Cash dividends _ _ _ (402,686) _ (402,686)
National Grid Distribution _ _ _ (538,670) _ (538,670)
Cumulative translation
adjustment _ _ _ - (65,035) (65,035)
----------- -------- ------- -------- ------- --------
Balance, March 31, 1996 174,290,836 203,153 14,960 499,536 (34,316) 683,333
Common stock issued 390,712 158 _ 1,582 _ 1,740
Net income _ _ _ 98,229 _ 98,229
Dividends declared _ _ _ (113,833) _ (113,833)
Cumulative translation
adjustment _ _ _ - 32,178 32,178
----------- -------- ------- -------- ------- --------
Balance, January 31, 1997 174,681,548 $203,311 $14,960 $485,514 $(2,138) $701,647
=========== ======== ======= ======== ======= ========
See Notes to Financial Statements.
LONDON ELECTRICITY PLC
SELECTED FINANCIAL DATA - FOUR-YEAR COMPARISON
Period from
April 1, 1996 to Year Ended March 31,
January 31, 1997 1996 1995 1994 (1)
(In Thousands)
Operating revenues $1,765,605 $ 1,859,938 $1,898,976 $1,970,830
Net income $98,229 $ 719,421 $189,269 $213,795
Total assets N/A $ 2,060,381 $2,007,417 $1,813,448
Long-term obligations (2) N/A $ 301,888 $159,879 $281,960
(1) Amounts as of and for the year ended March 31, 1994 are derived from
financial statements prepared in accordance with UK generally accepted
accounting principles (GAAP). The principal differences between US
GAAP and UK GAAP financial statements relate to the treatment of
goodwill, pension costs, deferred income taxes, timing of recognition
of restructuring accruals, and timing of recognition of dividends.
(2) Includes long-term debt (excluding currently maturing debt).
LONDON ELECTRICITY PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS:
London Electricity plc ("London Electricity") is one of the twelve
regional electricity companies ("RECs") in England and Wales licensed to
supply, distribute, and, to a limited extent, generate electricity. The
RECs were created as a result of the privatization of the United Kingdom
("UK") electric industry in 1990 after the state-owned low voltage
distribution networks were allocated to the then existing twelve regional
boards. London Electricity's main business, the distribution and supply of
electricity to customers in London, England, is regulated under the terms
of London Electricity's PES license by the Office of Electricity Regulation
(the "Regulator").
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
In accordance with SFAS 52, "Foreign Currency Translation", all assets
and liabilities of London Electricity are translated into U.S. dollars at
the exchange rate in effect at the end of the period, and revenues and
expenses are translated at average exchange rates prevailing during the
period. The resulting translation adjustments are reflected in a separate
component of shareholders' equity. Current exchange rates are used for
U.S. dollar disclosure of future obligations. No representation is made
that the foreign currency denominated amounts have been, could have been or
could be converted into U.S. dollars at the rates indicated or at any other
rates.
The financial statements of London Electricity are presented in
conformity with accounting principles generally accepted in the United
States ("US GAAP"). The consolidated financial statements include the
accounts of London Electricity and its wholly-owned and majority-owned
subsidiaries and have been prepared from records maintained by London
Electricity in the UK. All significant intercompany accounts and
transactions have been eliminated in consolidation. London Electricity is
not subject to rate regulation, but rather, is subject to price cap
regulation and, therefore, the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types
of Regulation" ("SFAS 71") do not apply.
London Electricity was acquired by Entergy London Investments plc,
formerly Entergy Power UK plc, effective February 1, 1997. The financial
statements include the results of operations of London Electricity through
the date of acquisition.
Use of Estimates in the Preparation of Financial Statements
The preparation of London Electricity's financial statements, in
conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses during the
reporting period. Adjustments to the reported amounts of assets and
liabilities may be necessary in the future to the extent that future
estimates or actual results are different from the estimates used in the
financial statements.
Revenue Recognition
London Electricity distributes electricity to commercial, residential
and industrial customers within the London area. London Electricity
records revenue net of value added tax ("VAT") and accrues revenue for
services provided but unbilled at the end of each reporting period. London
Electricity purchases power primarily from the wholesale trading market for
electricity in England and Wales (the "Pool"). The Pool monitors supply
and demand between generators and suppliers, sets prices for generation and
provides centralized settlement of amounts due between generators and
suppliers.
Cash and Cash Equivalents
London Electricity considers all short-term investments with an
original maturity of three months or less to be cash and cash equivalents.
Property, Plant and Equipment
Property, plant and equipment is stated at original cost and includes
materials, labor and appropriate overhead costs. London Electricity is
entitled, under certain conditions, to collect cash contributions from
consumers to fund improvements to London Electricity's distribution
networks. These consumer contributions are credited against the historical
cost of the asset.
Depreciation is computed by the straight-line method at rates based on
the estimated service lives of each of the various classes of property.
Consumer contributions are amortized into income at a rate of 2.5%.
Depreciation rates on average depreciable property are shown below:
Distribution network assets 2.5%
Buildings 1.7%
Vehicles and mobile plant 10%-20%
Furniture and equipment, including computer 20%-33%
hardware and software
Income Taxes
London Electricity accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). This standard requires that deferred income taxes be
recorded for all temporary differences between the financial statement
basis and tax basis of assets and liabilities and loss carryforwards, and
that deferred tax balances be based on enacted tax laws at rates that are
expected to be in effect when the temporary differences reverse.
Goodwill
Goodwill represents the excess of cost over the fair value of net
assets acquired and is being amortized over forty years using the straight-
line method.
Financial Instruments
London Electricity enters into interest rate swaps as a part of its
overall risk management strategy and does not hold or issue material
amounts of derivative financial instruments for trading purposes. London
Electricity accounts for its interest rate swaps in accordance with the
concepts established in Statement of Financial Accounting Standards No. 80,
"Accounting for Futures Contracts" ("SFAS 80") and various Emerging Issue
Task Force pronouncements. If the interest rate swaps were to be sold or
terminated, any gain or loss would be deferred and amortized over the
remaining life of the debt instrument being hedged by the interest rate
swap. If the debt instrument being hedged by the interest rate swaps were
to be extinguished, any gain or loss attributable to the swap would be
recognized in the period of the transaction.
London Electricity considers the carrying amounts of financial
instruments classified as current assets and liabilities to be a reasonable
estimate of their fair value because of the short maturity of these
instruments.
Price Control
Charges for distribution of electricity and supply to customers with a
maximum demand under 100kW are subject to a price control formula set out
in London Electricity's PES license which allows a maximum charge per unit
of electricity.
Differences in the charges, or in the purchase cost of electricity,
can result in the under or overrecovery of revenues in a particular year.
Where there is an overrecovery of supply of distribution business
revenues against the regulated maximum allowable amount, revenues are
deferred in an amount equivalent to the overrecovered amount. The deferred
amount is deducted from operating revenues and included in other
liabilities. Where there is an underrecovery, no anticipation of any
potential future recovery is made.
London Electricity enters into contracts for differences ("CFDs")
primarily to hedge its supply business against the price risk of
electricity purchases from the Pool. Use of these CFDs is carried out
within the framework of London Electricity's purchasing strategy and
hedging guidelines. Risk of loss is monitored through establishment of
approved counterparties and maximum counterparty limits and minimum credit
ratings. London Electricity recognizes gains (losses) on CFDs when
settlement is made. Gains (losses) on CFDs are recognized as a decrease
(increase) to cost of sales based upon the difference between fixed prices
in the CFD compared to variable prices paid to the Pool for the period.
Gains (losses) based upon the difference between fixed prices in the CFD
compared to variable prices paid to the Pool for future electricity
purchases are not recognized until the period of such settlements.
Pursuant to Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of" ("SFAS 121") London Electricity periodically
reviews its long-lived assets whenever events or changes in circumstances
indicate that recoverability of these assets is uncertain. Generally, the
determination of recoverability is based on the undiscounted net cash flows
expected to result from such assets. Projected undiscounted net cash flows
depend on the future operating costs associated with the assets and future
market prices over the remaining life of the assets. Based on current
estimates of future undiscounted cash flows as prescribed under SFAS 121,
management anticipates that future revenues from such assets will fully
recover all related costs.
NOTE 3. REGULATORY MATTERS:
The distribution business of London Electricity is regulated under its
PES license, pursuant to which revenue of the distribution business is
controlled by the Distribution Price Control Formula (DPCF). The DPCF
determines the maximum average price per unit of electricity (expressed in
kilowatt hours, a "unit") that a REC may charge. The elements used in the
DPCF are established for a five-year period and are subject to review by
the Regulator at the end of each five-year period and at other times at the
discretion of the Regulator. At each review the Regulator can adjust the
value of certain elements in the DPCF. Following a review by the Regulator
in August 1994, a 14% price reduction was set for London Electricity,
effective April 1, 1995. In July 1995, a further review of distribution
prices was concluded by the Regulator for fiscal years 1997 to 2000. As a
result of this further review, London Electricity's distribution prices
were reduced an additional 11%, effective April 1, 1996, 3% effective April
1, 1997 and will be reduced by a further 3% on both April 1, 1998 and 1999.
The supply business of London Electricity is also regulated by the
Regulator and prices are established based upon the Supply Price Control
Formula which is similar to the DPCF; however, it allows full pass through
for all properly incurred costs and is set for a four-year period by the
Regulator.
The non-franchise supply market, which typically includes larger
commercial and industrial customers was opened to competition for all
customers with usage above 1MW upon privatization of the industry in 1990.
The non-franchise supply markets of 100 kW or more were opened to full
competition starting in April 1994.
Currently London Electricity, under its PES license, has the exclusive
right to supply residential and small industrial and commercial customers
within its franchise area. It is anticipated that the supply market will
be fully competitive over a six month period starting in April 1998.
NOTE 4. INVESTMENTS:
London Electricity accounts for investments whose fair market value is
readily determinable in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Investments for Certain Debt and Equity
Securities" ("SFAS 115"). These securities are considered available-for-
sale securities under SFAS 115 and their fair values approximate cost.
Other securities whose fair market values are not readily determinable and
in which London Electricity does not have a significant interest are
recorded at cost.
Investments in companies in which London Electricity's ownership
interests range from 20% to 50% and investments in which London
Electricity's ownership is less than 20% but over which London Electricity
exercises significant influence over operating and financial policies are
accounted for using the equity method. The following are London
Electricity's equity method investments as of March 31, 1996:
Investment Percentage Ownership
London Total Gas Ltd 50%
Combined Power Systems Ltd 32% combined ownership in
common and preferred shares
Thames Valley Power Ltd 50%
London Total Energy Ltd 50%
Barking Power Ltd 13.5%
NOTE 5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost, consists of the following (in
thousands):
March 31, 1996
Distribution network assets $1,769,946
Land and buildings 117,579
Vehicles and mobile plant 24,279
Furniture, fixtures and equipment, including 181,407
computer hardware and software
Consumer contributions to construction (311,813)
----------
1,781,398
Less accumulated depreciation and amortization (710,513)
----------
$1,070,885
==========
NOTE 6. INCOME TAXES:
London Electricity's income tax expense for the period from April 1,
1996 to January 31, 1997, and the year ended March 31, 1996, consists of
the following (in thousands):
Period from
April 1, 1996 to Year ended
January 31, 1997 March 31, 1996
Current $ 27,998 $64,206
Deferred 22,778 27,248
Current taxes on National Grid transactions:
Tax on special dividend _ 35,705
Tax on distribution in kind _ 93,490
Tax on ESOP contribution _ (5,637)
Tax reduction related to customer discount _ (42,752)
-------- --------
Total $ 50,776 $172,260
======== ========
London Electricity's total income taxes differ from the amounts
computed by applying the statutory income tax rate to income before taxes.
The reasons for the differences in the period from April 1, 1996 to January
31, 1997 and the year ended March 31, 1996 are (in thousands):
Period from
April 1, 1996 to Year ended
January 31, 1997 March 31, 1996
Pre-tax income $149,005 $891,681
Income taxes computed at statutory rate 49,194 294,252
National Grid transactions:
Revaluation of investment excluded from taxable income _ (44,005)
Gain on sale of pumped storage business excluded from
taxable income _ (36,175)
Tax credit on contribution to ESOP _ (5,638)
Special dividends not taxable _ (10,805)
Effect of difference between statutory rate (33%) and
rate on dividends received (20%) (791) (31,163)
Amortization of goodwill 475 626
Other 1,898 5,168
-------- --------
Total income tax expense $ 50,776 $172,260
======== ========
Significant components of London Electricity's net deferred tax
liability as of March 31, 1996 are as follows (in thousands):
Deferred tax liability
Property-related basis differences $(280,968)
Prepaid pension asset (36,801)
---------
Total (317,769)
Deferred tax asset
Restructuring and other provisions 24,127
---------
Net deferred tax liability $(293,642)
=========
As a result of Parliamentary elections held on May 1, 1997, the Labour
Party gained control of the UK Government. On July 31, 1997 legislation
establishing a windfall profits tax, which affects regulated companies
privatized since 1979 including London Electricity, was enacted. In
accordance with SFAS 109 under US GAAP, London Electricity will record a
charge to income for the windfall profits tax during the quarter ending
September 30, 1997. A change in the UK statutory rate from 33% to 31% was
also included in the legislation. The impact of such changes will be
recognition in the quarter ending September 30, 1997 of the $224 million
expense for the windfall profits tax and approximately $61 million of
income tax benefit as a result of the change in the UK statutory income tax
rate in London Electricity's results of operations.
The tax years since fiscal year 1990 are currently under review by the
Inland Revenue in the UK. London Electricity believes that there is no
additional liability related to the tax years under review.
NOTE 7. LONG-TERM DEBT:
The long-term debt of London Electricity as of March 31, 1996 consists
of the following (in thousands):
8% Eurobonds repayable March 28, 2003 $ 151,020
8 5/8% Eurobonds repayable October 26, 2005 150,868
---------
Total $ 301,888
=========
The 8% and 8 5/8% Eurobonds may become due prior to their stated
maturity only upon the occurrence of certain events including default,
liquidation or bankruptcy of London Electricity. London Electricity does
not anticipate default under the agreements.
London Electricity entered into an interest rate swap agreement to
reduce the impact of interest rate changes on its outstanding debt. The
interest rate swap agreement involves the exchange of a fixed interest rate
for a floating interest rate periodically over the life of the agreement.
If the counterparty to the interest rate swap was to default on contractual
payments, London Electricity could be exposed to increased cost related to
replacing the original agreement. However, London Electricity does not
anticipate non-performance. At March 31, 1996, London Electricity was party
to a notional amount of $12 million for an interest rate swap agreement
with a maturity date of May 6, 2003.
NOTE 8. COMMON STOCK:
During 1996, London Electricity effected a reverse stock split of six
for every seven shares of common stock held. This reduced, by approximately
28 million, the number of common shares outstanding and increased the par
value of the stock from BPS0.50 to BPS0.583 per share.
NOTE 9. NOTES PAYABLE:
Other facilities available to London Electricity are short-term
unsecured, uncommitted facilities of BPS228 million and a BPS150 million
Sterling Commercial Paper Program ("Sterling Program"). Uncommitted
facilities are unsecured facilities which are available at London
Electricity's request, however there is no obligation by the bank
counterparty to make funds available to London Electricity. The Sterling
Program is a negotiable promissory note with short term maturities (up to
364 days) issued at a discount to face value. London Electricity had an
outstanding balance of $146.7 million on all of these facilities as of
March 31, 1996. The weighted average interest rate incurred on these
borrowings was 6.3% and 6.1% for the period from April 1, 1996 to January
31, 1997 and for the year ended March 31, 1996, respectively.
NOTE 10. COMMITMENTS AND CONTINGENCIES:
London Electricity has entered into operating lease agreements for the
use of buildings and vehicles. Minimum future rental payments under all
operating leases as of March 31, 1996 are as follows (in thousands):
1997 $10,842
1998 10,536
1999 10,078
2000 10,078
2001 9,773
Thereafter 127,810
--------
Total $179,117
========
Rental expense incurred under these lease agreements was $10.6 million
and $12.4 million for the period from April 1, 1996 to January 31, 1997 and
for the year ended March 31, 1996, respectively.
London Electricity is subject to an agreement whereby the UK
government is entitled to a proportion of certain property gains accruing
to London Electricity as a result of disposals or events treated as
disposals occurring after March 31, 1990 of properties held at that date.
This commitment is effective until March 31, 2000.
London Electricity has utilized a portion of the pension plan surplus
to increase benefits to members and reduce employer and employee
contributions. A recent court ruling in the UK upheld such uses of pension
surpluses. However, should the decision be reversed on appeal, London
Electricity could be required to repay pension surpluses utilized.
Management is unable to predict the likely outcome of this matter at this
time.
The UK Environmental Protection Act 1990 addresses waste management
issues and imposes certain obligations on companies which handle and
dispose of waste. Some of London Electricity's distribution activities
produce waste but London Electricity believes that it has taken and
continues to take measures to comply with the applicable laws and
governmental regulations for the protection of the environment. There are
no material legal or administrative proceedings pending against London
Electricity with respect to any environmental matter.
London Electricity is required to file five-year projections with the
Regulator for capital expenditures related to its regulated distribution
network and updates of such projections annually. The most recent updated
projection was for the five-year period ended March 31, 2000 and was filed
in July 1997. This filing indicated London Electricity's current projection
of approximately $772.3 million for the five-year period. Approximately
$294.2 million has already been spent in fiscal years 1996 and 1997 related
to this five-year projection.
London Electricity uses CFDs and power purchase contracts with certain
UK generators to fix the price of electricity for a contracted quantity
over a specific period of time. At March 31, 1996, London Electricity has
outstanding CFDs and power purchase contracts for approximately 52,000 GWH
of electricity. These include a long term power purchase contract with an
affiliate which is based on 27.5% of the affiliate's capacity from its 1000
MW facility through the year 2010. London Electricity's sales volumes were
approximately 17,000 GWH and 18,000 GWH in the period from April 1, 1996 to
January 31, 1997, and the year ended March 31, 1996, respectively.
NOTE 11. PENSION BENEFITS:
London Electricity participates in a defined benefit pension plan,
which provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the electric
supply industry in the UK. Contributions to the plan by London Electricity
on behalf of its employees were $16.0 million for the year ended March 31,
1996. London Electricity made no contributions to the plan during the
period April 1, 1996 to January 31, 1997.
London Electricity uses the projected unit credit actuarial method for
funding purposes. Amounts funded to the pension are primarily invested in
equity and fixed income securities.
Statement of Financial Accounting Standards No. 87 "Employees
Accounting for Pensions" ("SFAS 87") was issued in 1988 and is effective
for fiscal years beginning after December 15, 1988. The provisions of SFAS
87 were initially adopted by London Electricity on April 1, 1994.
Accordingly, the unrecognized net transition asset at the date of initial
application of SFAS 87 is being amortized over 15 years beginning April 1,
1989. The amount of the unrecognized net transition asset credited to
equity on April 1, 1994 was $42.9 million.
The following table sets forth the plan's funded status and amounts
recognized in London Electricity's balance sheet at March 31, 1996 (in
thousands):
Accumulated benefit obligation:
Vested $ 900,625
=========
Projected benefit obligation 1,029,962
Plan assets at fair value 1,231,831
---------
Assets in excess of projected benefit 201,869
obligation
Unrecognized net gain (18,782)
Unrecognized net transition asset (71,463)
---------
Prepaid pension asset $ 111,624
=========
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation, and the expected long-term rate of return on
assets was 9%, 6.5% and 9%, respectively, for the period from April 1, 1996
to January 31, 1997 and for the year ended March 31, 1996.
The components of the plan's net pension income during the periods are
shown below (in thousands):
Period from
April 1, 1996 to Year ended
January 31, 1997 March 31, 1996
Service cost (benefits earned during the period) $10,440 $ 13,311
Interest cost on projected benefit obligations 70,232 85,347
Actual return on plan assets (92,377) (227,227)
Net amortization and deferral 3,955 115,258
------- --------
Net pension benefit $(7,750) $(13,311)
======= ========
NOTE 12. DISTRIBUTION OF NATIONAL GRID INVESTMENT:
In December 1995, each of the RECs distributed their investments in
the National Grid Holding Company plc ("National Grid"). London Electricity
distributed its ownership shares in National Grid to its shareholders.
Prior to the distribution, the National Grid shares were listed on the
London Stock Exchange and revalued to reflect the market value of the
common stock of National Grid, whose shares had not previously been
publicly traded and for which there was no readily determinable fair market
value. London Electricity recorded a gain on the revaluation of $416.9
million in the Statement of Operations for the year ended March 31, 1996.
National Grid also effected a rights issue at $3.12 per share to raise
additional equity capital. London Electricity invested an additional $27.5
million in National Grid as a result of the rights issue. Approximately
96% of the total National Grid shares owned by London Electricity were then
distributed in kind to the shareholders of London Electricity.
The remaining shares owned by London Electricity were retained to
establish an Employee Stock Ownership Plan ("ESOP") to compensate
participants of the Employee and Executive Sharesave Plans (employee stock
option plans) for any diminution in value of London Electricity shares as a
result of the demerger. Approximately 5.1 million shares of National Grid
were reserved for contributions to the ESOP. The actual shares will be
contributed to the ESOP upon exercise of options under the employee stock
option plans. The contributed shares related to the establishment of the
ESOP plus expenses and cash contributions due to the ESOP to compensate the
participants for taxes payable related to this distribution were charged to
expense during the fiscal year ended March 31, 1996. The difference
between actual National Grid shares contributed and the total amount
charged to expense is included in other liabilities in London Electricity's
balance sheet as of March 31, 1996.
National Grid also distributed to London Electricity its ownership
shares in PSB Holding Limited ("PSB"), the holding company of First Hydro
Limited which had been transferred to National Grid in 1990. As part of
the demerger, PSB was sold to Mission Energy and London Electricity
recorded a $109.8 million gain on the sale.
Finally, as part of the demerger, the Regulator ordered a $78 refund
to each of London Electricity's supply customers which was offset by a
reduction in the fossil fuel levy charged to London Electricity. The
effect of the refund, which was recorded in the year ended March 31, 1996,
was to reduce operating revenues, cost of sales and gross profit by $142.3
million , $13.0 million and $129.4 million, respectively.
The investment in National Grid has been accounted for by London
Electricity as a cost method investment. The consolidated results of
operations of London Electricity therefore do not include any of the
results of operations of National Grid.
NOTE 13. EMPLOYEE OPTIONS:
London Electricity was acquired by Entergy London Investments plc,
formerly Entergy Power UK plc, effective February 1, 1997. In conjunction
with the purchase of London Electricity, the holders of any outstanding
options under the employee option plans were given the opportunity to
exercise their options and sell their shares to Entergy London Investments
plc at a price of BPS7.05 per share which then entitled the owner of the
shares to the interim dividend of BPS.179 per share. If the holders of the
options did not exercise their options, such options were cash canceled and
the holders were paid BPS7.05 per share.
Under the Employee Sharesave Plan, London Electricity was authorized
to issue shares of common stock pursuant to stock options granted to
officers, key employees and directors. Under the Executive Sharesave Plan,
London Electricity was authorized to issue shares of common stock pursuant
to stock options granted to directors.
The stock options had an exercise price equal to the fair market value
of the common stock on the date of grant and a contractual term of 10
years. The stock options became exercisable on the third anniversary of
the date of grant under the Executive Sharesave Plan.
A summary of the status of London Electricity's stock options for the
period from April 1, 1996 to January 31, 1997 and for the year ended March
31, 1996 and the changes during the years ended on such dates is presented
below:
Period from
April 1, 1996 to
January 31, 1997 Years ended March 31, 1996
# Shares of # Shares of
Underlying Exercise Underlying Exercise
Options Prices Options Prices
Outstanding at beginning of year 1,873,505 BPS3.56 6,985,705 BPS2.26
Granted 3,625,911 4.82 89,628 5.94
Exercised (390,712) 3.33 (4,956,992) 1.89
Forfeited _ _ (244,836) 2.09
Expired _ _ _ _
--------- ---------
Outstanding at end of year 5,108,704 1,873,505
========= =========
</TABLE
NOTE 14. RESTRUCTURING CHARGES:
In 1995 and 1996, London Electricity implemented a restructuring
program to reduce the number of employees in the Network Services, Customer
Services, Corporate and Information Technology groups. An initial plan was
approved by the Board of Directors of London Electricity in September 1994
and was based on a business plan developed subsequent to the 1994
Regulatory Review of Distribution (the "Distribution Review").
Following the reopening of the Distribution Review during 1995, a
further plan was proposed leading to a further reduction of employees in
the same areas. This plan was approved by the Board of Directors in May
1996, and approximately $18.5 million in restructuring charges was recorded
for the period from April 1, 1996 to January 31, 1997. The balances for
restructuring charges and the actual termination benefits paid under the
program for the period from April 1, 1996 to January 31, 1997 and the year
ended March 31, 1996 are as follows (in thousands):
Provision for restructuring as of March 31, 1995 $30,322
Restructuring charges in 1996 _
Payments made in 1996 _
Translation adjustment (1,767)
-------
Balance March 31, 1996 28,555
Restructuring charges in 1997 18,507
Payments made in 1997 (16,609)
Translation adjustment 1,433
-------
Provision for restructuring as of January 31, 1997 $31,886
=======
The number of employees terminated under these plans was 250 and 308
for the period from April 1, 1996 to January 31, 1997 and the year ended
March 31, 1996, respectively.
NOTE 15. SEGMENT INFORMATION:
London Electricity is engaged in two electric industry segments:
distribution, which involves the transfer and delivery of electricity
across London Electricity's network to its customers, and supply, which
involves bulk purchases of electricity from the Pool for delivery of supply
to the distribution networks. Other consists principally of London
Electricity's investment in private distribution networks, electricity
contracting services and investments in generating assets. Information
about London Electricity's operations in these individual segments during
the period from April 1, 1996 to January 31, 1997 and for the year ended
March 31, 1996 is as follows (in thousands):
Period from April 1, 1996 to January 31, 1997
Distribution Supply Other Eliminations Consolidated
Operating revenues $435,470 $1,662,788 $106,772 $(439,425) $1,765,605
Operating income 159,129 (1,265) 10,914 _ 168,778
Depreciation and amortization 51,092 6,485 4,588 _ 62,165
Total assets employed at 1,363,077 446,560 287,453 _ 2,097,090
period end
Capital expenditures 153,118 15,027 14,711 _ 182,856
Year Ended March 31, 1996
Distribution Supply Other Eliminations Consolidated
Operating revenues $559,219 $1,719,468 (a) $92,550 $(511,299) $1,859,938
Operating income 247,428 (110,246)(b) 24,272 (2,349) 159,105
Depreciation and amortization 54,967 3,915 7,203 _ 66,085
Total assets employed at 1,211,827 376,710 471,844 _ 2,060,381
period end
Capital expenditures 151,590 7,047 14,564 _ 173,201
(a) Includes $142.3 million refund to customers related to National Grid
transaction.
(b) Includes net effect of $142.3 million refund and $13.0 reduction of
fossil fuel levy related to National Grid transaction. See Note 12.
Item 9. Changes In and Disagreements With Accountants On Accounting
and Financial Disclosure.
No event that would be described in response to this item has
occurred with respect to Entergy, System Energy, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, or
Entergy New Orleans.
PART III
Item 10. Directors and Executive Officers of the Registrants (Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, System Energy and Entergy London)
All officers and directors listed below held the specified
positions with their respective companies as of the date of filing
this report.
Name Age Position Period
ENTERGY ARKANSAS, INC.
Directors
R. Drake Keith 62 President and Director of Entergy Arkansas 1989-Present
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
Michael R. Niggli 48 Senior Vice President - Customer Accounts of Entergy 1996-1998
Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and Entergy
Services
Senior Vice President - Marketing of Entergy Arkansas, 1993-1996
Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and Entergy Services
Vice President - Customer Services of Entergy 1993-1993
Louisiana, Entergy New Orleans, and Entergy Services
C. Gary Clary 53 Vice President - Human Resources and Administration of 1997-Present
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
and Entergy Operations
Vice President - Human Resources and Administration of 1996-Present
Entergy Services
Director-System Human Resources of Entergy Services 1993-1996
Cecil L. Alexander 62 Vice President - Governmental Affairs of Entergy 1991-Present
Arkansas
James S. Pilgrim 62 Vice President - Customer Service of Entergy Arkansas 1994-Present
Director, Central Region, TDCS Customer Service 1993-1994
Central Division Manager of Mississippi 1991-1993
C. Hiram Walters 61 Vice President - Customer Service of Entergy Arkansas 1993-Present
Vice President - Customer Service of Entergy Louisiana 1994-Present
Vice President - Customer Service of Entergy Services 1997-Present
Vice President - Customer Service, Central Region of 1993-1997
Entergy Services
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
R. Drake Keith See information under the Entergy Arkansas Directors
Section above.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
ENTERGY GULF STATES, INC.
Directors
Karen R. Johnson 53 President - Texas 1997-Present
Director of Entergy Gulf States 1996-Present
State President - Texas 1996-1997
Vice President - Governmental Affairs of Entergy Gulf 1994-1996
States - Texas
Executive Director of State Bar of Texas (state agency) 1990-1994
John J. Cordaro 64 President - Louisiana 1997-Present
Director of Entergy Gulf States and Entergy Louisiana 1996-Present
State President - Louisiana 1996-1997
President and Director of Entergy Louisiana and Entergy 1992-1996
New Orleans
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
William E. Colston 62 Vice President - Customer Service of Entergy Gulf 1994-Present
States
Vice President - Customer Service of Entergy Louisiana 1993-Present
Vice President - Customer Service of Southern Region of 1993-Present
Entergy Services
Regional Director of Entergy Louisiana 1992-1993
S. G. Cunningham, Jr. 57 Vice President - Regulatory and Governmental Affairs of 1996-Present
Entergy Louisiana and Entergy Gulf States
Vice President - State Regulatory Affairs of Entergy 1994-1996
Services
Vice President - Entergy Corporation, Entergy Gulf 1993-1994
States Transition, and Regulatory Affairs of Entergy
Services
Vice President - Rates and Regulatory Affairs of 1991-1994
Entergy Louisiana and Entergy New Orleans
Vice President - Regulatory Affairs of Entergy Services 1992-1993
J. Parker McCollough 47 Vice President - State Governmental Affairs of Entergy 1996-Present
Gulf States
Vice President - Governmental Affairs, Texas 1993-1996
Association of Realtors (trade association)
Member- Texas House of Representatives 1989-1993
Wright & Greenhill, PC (law firm) 1991-1993
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
C. Gary Clary See information under the Entergy Arkansas Officers
Section above.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
Michael R. Niggli See information under the Entergy Arkansas Officers
Section above.
Karen Johnson See information under the Entergy Gulf States Directors
Section above.
John J. Cordaro See information under the Entergy Gulf States Directors
Section above.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
ENTERGY LOUISIANA, INC.
Directors
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
John J. Cordaro See information under the Entergy Gulf States Directors
Section above.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
James D. Bruno 58 Vice President - Customer Service of Entergy Louisiana 1994-Present
and Entergy New Orleans
Vice President - Metro Region of Entergy Services 1993-Present
Region Director - Metro Region of Entergy Services 1991-1993
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
John J. Cordaro See information under the Entergy Gulf States Directors
Section above.
C. Gary Clary See information under the Entergy Arkansas Officers
Section above.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
Michael R. Niggli See information under the Entergy Arkansas Officers
Section above.
William E. Colston See information under the Entergy Gulf States Officers
Section above.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
C. Hiram Walters See information under the Entergy Arkansas Officers
Section above.
S. G. Cunningham, Jr. See information under the Entergy Gulf States Officers
Section above.
ENTERGY MISSISSIPPI, INC.
Directors
Donald E. Meiners (a) 62 President and Director of Entergy Mississippi 1992-Present
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
Bill F. Cossar 59 Vice President - Governmental Affairs of Entergy 1987-Present
Mississippi
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Donald E. Meiners See information under the Entergy Mississippi Directors
Section above.
C. Gary Clary See information under the Entergy Arkansas Officers
Section above.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
Michael R. Niggli See information under the Entergy Arkansas Officers
Section above.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
ENTERGY NEW ORLEANS, INC.
Directors
Daniel F. Packer 50 President and Director of Entergy New Orleans 1997-Present
State President - City of New Orleans 1996-1997
Vice President - Regulatory and Governmental Affairs of 1994-1996
Entergy New Orleans
General Manager - Plant Operations at Waterford 3 1991-1994
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
C. Gary Clary See information under the Entergy Arkansas Officers
Section above.
Jerry D. Jackson See information under the Entergy Corporation Officers
Section in Part I.
Frank F. Gallaher See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
Michael R. Niggli See information under the Entergy Arkansas Officers
Section above.
Daniel F. Packer See information under the Entergy New Orleans Directors
Section above.
James D. Bruno See information under the Entergy Louisiana Officers
Section above.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
SYSTEM ENERGY RESOURCES, INC.
Directors
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Jerry L. Maulden See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
Officers
Joseph L. Blount 51 Secretary of System Energy and Entergy Operations 1991-Present
Vice President Legal and External Affairs of Entergy 1990-1993
Operations
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Donald C. Hintz See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
ENTERGY LONDON INVESTMENTS PLC
Directors
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Michael B. Bemis See information under the Entergy Corporation Officers
Section in Part I.
Officers
Edwin Lupberger See information under the Entergy Corporation Officers
Section in Part I.
Michael B. Bemis See information under the Entergy Corporation Officers
Section in Part I.
Michael G. Thompson See information under the Entergy Corporation Officers
Section in Part I.
William J. Regan, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Louis E. Buck, Jr. See information under the Entergy Corporation Officers
Section in Part I.
Gerald D. McInvale See information under the Entergy Corporation Officers
Section in Part I.
(a) Mr. Meiners is a director of Trustmark National Bank, Jackson,
MS, and Trustmark Corporation, Jackson, MS.
Each director and officer of the applicable Entergy company is
elected yearly to serve by the unanimous consent of the sole
stockholder, Entergy Corporation, at its annual meeting.
Directorships shown in footnote (a) above are generally limited
to entities subject to Section 12 or 15(d) of the Securities and
Exchange Act of 1934 or to the Investment Company Act of 1940.
Section 16(a) Beneficial Ownership Reporting Compliance
Information called for by this item concerning the directors and
officers of Entergy Corporation is set forth in the Proxy Statement of
Entergy Corporation to be filed in connection with its Annual Meeting
of Stockholders to be held on May 15, 1998, under the heading "Section
16(a) Beneficial Ownership Reporting Compliance", which information is
incorporated herein by reference.
Item 11. Executive Compensation
ENTERGY CORPORATION
Information called for by this item concerning the directors and
officers of Entergy Corporation is set forth in the Proxy Statement
under the headings "Executive Compensation Tables", "General
Information About Nominees", and "Director Compensation", which
information is incorporated herein by reference.
ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY
MISSISSIPPI, ENTERGY NEW ORLEANS, SYSTEM ENERGY AND ENTERGY LONDON
Summary Compensation Table
The following table includes the Chief Executive Officer and the
four other most highly compensated executive officers in office as of
December 31, 1997 at Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy and
Entergy London, (collectively, the "Named Executive Officers") as well
as Gerald D. McInvale who would have been included as one of the four
most highly compensated officers but for the fact that he was not
serving as an executive officer at the end of the fiscal year. This
determination was based on total annual base salary and bonuses from
all Entergy sources earned by each officer for the year 1997. See
Item 10, "Directors and Executive Officers of the Registrants," for
information on the principal positions of the Named Executive Officers
in the table below.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Entergy and Entergy London
As shown in Item 10, most Named Executive Officers are employed
by several Entergy companies. Because it would be impracticable to
allocate such officers' salaries among the various companies, the
table below includes the aggregate compensation paid by all Entergy
companies.
Long-Term Compensation
Annual Compensation Awards Payouts
Restricted Securities (b) (c)
(a) Other Annual Stock Underlying LTIP All Other
Name Year Salary Bonus Compensation Awards Options Payouts Compensation
Michael B. Bemis 1997 $314,154 $ 0 $ 734,368 (f) (d) 5,000 shares $ 0 $11,736
1996 297,115 168,125 43,884 (d) 5,000 0 12,813
1995 290,000 216,909 22,844 (d) 27,500 294,282 12,063
Joseph L. Blount 1997 $126,288 $ 0 $ 291 (d) 0 shares $ 0 $3,789
1996 124,904 38,471 10,147 (d) 0 0 6,177
1995 119,185 43,645 15,842 (d) 0 0 15,705
Louis E. Buck, Jr. 1997 $159,954 $29,882 $ 9,105 (d) 2,500 shares $ 0 $ 4,799
1996 153,558 66,187 26,132 (d) 0 0 20,683
1995 49,039 21,280 9,151 (d) 0 0 7,529
Frank F. Gallaher 1997 $327,385 $ 0 $ 11,132 (d) 5,000 shares $ 0 $ 9,822
1996 276,538 130,150 35,641 (d) 5,000 0 10,321
1995 240,000 198,360 61,360 (d) 27,500 324,398 7,638
Donald C. Hintz* 1997 $365,077 $ 0 $ 18,245 (d) 5,000 shares $ 0 $10,952
1996 343,269 231,299 12,516 (d) 5,000 0 14,197
1995 325,000 265,049 13,394 (d) 30,000 409,414 9,750
Jerry D. Jackson 1997 $342,077 $ 0 $ 56,359 (d) 5,000 shares $ 0 $10,262
1996 332,115 209,489 37,928 (d) 5,000 0 13,862
1995 325,000 256,838 43,054 (d) 30,000 422,438 9,750
Edwin Lupberger** 1997 $785,385 $ 0 $ 271,422 (d) 10,000 shares $ 0 $23,562
1996 735,577 448,794 123,601 (d) 10,000 0 23,567
1995 700,000 568,400 89,163 (d) 60,000 781,337 21,000
Jerry L. Maulden 1997 $445,615 $ 0 $ 67,485 (d) 5,000 shares $ 0 $13,369
1996 435,000 260,301 27,056 (d) 5,000 0 14,550
1995 435,000 353,220 26,248 (d) 30,000 422,438 13,050
Gerald D. McInvale (e) 1997 $331,154 $ 0 $ 17,389 (d) 5,000 shares $ 0 $ 9,923
1996 271,730 179,576 13,995 (d) 5,000 0 12,051
1995 255,481 186,739 12,525 (d) 27,500 294,282 7,664
William J. Regan, Jr. 1997 $195,379 $36,448 $ 13,740 (d) 2,500 shares $ 0 $ 5,861
1996 190,000 81,132 20,684 (d) 0 0 8,852
1995 120,577 54,727 21,141 (d) 2,000 0 7,821
Michael G. Thompson 1997 $259,315 $ 0 $ 12,856 (d) 5,000 shares $ 0 $ 7,729
1996 245,960 132,620 20,640 (d) 5,000 0 11,278
1995 236,546 163,612 57,600 (d) 2,500 211,219 7,096
* Chief Executive Officer of System Energy.
** Chief Executive Officer of Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
Entergy London.
(a) Includes bonuses earned pursuant to the Annual Incentive Plan.
(b) Amounts include the value of restricted shares that vested in
1997, 1996, and 1995 (see note (d) below) under Entergy's Equity
Ownership Plan.
(c) Includes the following:
(1) 1997 benefit accruals under the Defined Contribution
Restoration Plan as follows: Mr. Bemis $4,625; Mr. Gallaher
$5,022; Mr. Hintz $6,152; Mr. Jackson $5,462; Mr.
Lupberger $18,762; Mr. Maulden $8,969; Mr. McInvale
$5,123; Mr. Regan $1,061; and Mr. Thompson $2,979.
(2) 1997 employer contributions to the System Savings Plan
as follows: Mr. Bemis $4,800; Mr. Blount $3,789; Mr. Buck
$4,799; Mr. Gallaher $4,800; Mr. Hintz $4,800; Mr.
Jackson $4,800; Mr. Lupberger $4,800; Mr. Maulden $4,400;
Mr. McInvale $4,800; Mr. Regan $4,800; and Mr. Thompson
$4,750.
(3) 1997 reimbursements for moving expenses as follows:
Mr. Bemis $2,311.
(d) There were no restricted stock awards in 1997 under the Equity
Ownership Plan. At December 31, 1997, the number and value of
the aggregate restricted stock holdings were as follows: Mr.
Bemis 30,000 shares, $898,125; Mr. Blount 2,250 shares, $67,359;
Mr. Buck 4,500 shares, $134,719; Mr. Gallaher 30,000 shares,
$898,125; Mr. Hintz 30,000 shares, $898,125; Mr. Jackson 30,000
shares, $898,125; Mr. Lupberger 60,000 shares, $1,796,250; Mr.
Maulden 37,500 shares, $1,122,656; Mr. McInvale 30,000 shares,
$898,125; Mr. Regan 4,500 shares, $134,719; and Mr. Thompson
22,500 shares, $673,594. Accumulated dividends are paid on
restricted stock when vested. The value of stock for which
restrictions were lifted in 1997, 1996, and 1995, and the
applicable portion of accumulated cash dividends, are reported in
the LTIP Payouts column in the above table. The value of
restricted stock awards as of December 31, 1997 are determined by
multiplying the total number of shares awarded by the closing
market price of Entergy Corporation common stock on the New York
Stock Exchange Composite Transactions on December 31, 1997
($29.9375 per share).
(e) Gerald D. McInvale is a former officer of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Energy and Entergy
London.
(f) Includes approximately $670,000 related to various overseas
living expenses, including UK taxes and housing, associated with
Mr. Bemis' overseas assignment in London.
Option Grants in 1997
The following table summarizes option grants during 1997 to the
Named Executive Officers. The absence, in the table below, of any
Named Executive Officer indicates that no options were granted to such
officer.
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Entergy and Entergy London
Individual Grants Potential Realizable
% of Total Value
Number of Options at Assumed Annual
Securities Granted to Exercise Rates of Stock
Underlying Employees Price Price Appreciation
Options in (per share) Expiration for Option Term (b)
Name Granted (a) 1997 (a) Date 5% 10%
Michael B. Bemis 5,000 2.0% $ 26.5 1/30/07 $ 83,329 $211,171
Louis E. Buck, Jr. 2,500 1.0% 26.5 1/30/07 41,664 105,585
Frank F. Gallaher 5,000 2.0% 26.5 1/30/07 83,329 211,171
Donald C. Hintz 5,000 2.0% 26.5 1/30/07 83,329 211,171
Jerry D. Jackson 5,000 2.0% 26.5 1/30/07 83,329 211,171
Edwin Lupberger 10,000 3.9% 26.5 1/30/07 166,657 422,342
Jerry L. Maulden 5,000 2.0% 26.5 1/30/07 83,329 211,171
Gerald D. McInvale 5,000 2.0% 26.5 1/30/07 83,329 211,171
William J. Regan, Jr. 2,500 1.0% 26.5 1/30/07 41,664 105,585
Michael G. Thompson 5,000 2.0% 26.5 1/30/07 83,329 211,171
(a) Options were granted on January 30, 1997, pursuant to the Equity
Ownership Plan. All options granted on this date have an
exercise price equal to the closing price of Entergy Corporation
common stock on the New York Stock Exchange Composite
Transactions on January 30, 1997. These options became
exercisable on July 30, 1997.
(b) Calculation based on the market price of the underlying
securities assuming the market price increases over a ten-year
option period and assuming annual compounding. The column
presents estimates of potential values based on simple
mathematical assumptions. The actual value, if any, a Named
Executive Officer may realize is dependent upon the market price
on the date of option exercise.
Aggregated Option Exercises in 1997 and December 31, 1997 Option
Values
The following table summarizes the number and value of all
unexercised options held by the Named Executive Officers. The
absence, in the table below, of any Named Executive Officer indicates
that no options are held by such officer. In 1997, no options were
exercised by any Named Executive Officer.
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
as of December 31, 1997 as of December 31, 1997(a)
Name Exercisable Unexercisable Exercisable Unexercisable
Michael B. Bemis 20,000 25,000 $ 37,188 $ 226,563
Louis E. Buck, Jr. 2,500 - 8,594 -
Frank F. Gallaher 17,500 25,000 36,406 226,563
Donald C. Hintz 27,500 25,000 53,594 226,563
Jerry D. Jackson 24,411 25,000 20,841 226,563
Edwin Lupberger 58,824 50,000 107,308 453,125
Jerry L. Maulden 30,000 25,000 54,375 226,563
Gerald D. McInvale 20,000 25,000 37,188 226,563
William J. Regan, Jr. 2,500 2,000 8,594 12,875
Michael G. Thompson 17,500 - 36,406 -
(a) Based on the difference between the closing price of Entergy
Corporation's common stock on the New York Stock Exchange
Composite Transactions on December 31, 1997, and the option
exercise price.
Pension Plan Tables
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy
Retirement Income Plan Table
Annual
Covered Years of Service
Compensation 15 20 25 30 35
$100,000 $ 22,500 $ 30,000 $37,500 $45,000 $52,000
200,000 45,000 60,000 75,000 90,000 105,000
300,000 67,500 90,000 112,500 135,000 157,500
400,000 90,000 120,000 150,000 180,000 210,000
500,000 112,500 150,000 187,500 225,000 262,500
650,000 146,250 195,000 243,750 292,500 341,250
950,000 213,750 285,000 356,250 427,500 498,750
All of the Named Executive Officers participate in a Retirement
Income Plan, a defined benefit plan, that provides a benefit for
employees at retirement from Entergy based upon (1) generally all
years of service beginning at age 21 through termination, with a
forty-year maximum, multiplied by (2) 1.5%, multiplied by (3) the
final average compensation. Final average compensation is based on
the highest consecutive 60 months of covered compensation in the last
120 months of service. The normal form of benefit for a single
employee is a lifetime annuity and for a married employee is a 50%
joint and survivor annuity. Other actuarially equivalent options are
available to each retiree. Retirement benefits are not subject to any
deduction for Social Security or other offset amounts. The amount of
the Named Executive Officers' annual compensation covered by the plan
as of December 31, 1997, is represented by the salary column in the
Summary Compensation Table above.
The credited years of service under the Retirement Income Plan,
as of December 31, 1997, for the Named Executive Officers is as
follows: Mr. Bemis 15; Mr. Blount 13; Mr. Buck 2; Mr. Gallaher 28;
Mr. Maulden 32; and Mr. Regan 2. The credited years of service under
the respective Retirement Income Plan, as of December 31, 1997 for the
following Named Executive Officers, as a result of entering into
supplemental retirement agreements, is as follows: Mr. Hintz 26;
Mr. Jackson 18; Mr. Lupberger 34; Mr. McInvale 25; and Mr. Thompson
21.
The maximum benefit under the Retirement Income Plan is limited
by Sections 401 and 415 of the Internal Revenue Code of 1986, as
amended; however, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy
have elected to participate in the Pension Equalization Plan sponsored
by Entergy Corporation. Under this plan, certain executives,
including the Named Executive Officers, would receive an additional
amount equal to the benefit that would have been payable under the
Retirement Income Plan, except for the Sections 401 and 415
limitations discussed above.
In addition to the Retirement Income Plan discussed above,
Entergy Arkansas, Louisiana, Mississippi, New Orleans, and System
Energy participate in the Supplemental Retirement Plan of Entergy
Corporation and Subsidiaries and the Post-Retirement Plan of Entergy
Corporation and Subsidiaries. Participation is limited to one of these
two plans and is at the invitation of Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy. The participant may receive from the appropriate Entergy
company a monthly benefit payment not in excess of .025 (under the
Supplemental Retirement Plan) or .0333 (under the Post-Retirement
Plan) times the participant's average basic annual salary (as defined
in the plans) for a maximum of 120 months. Mr. Hintz has entered into
a Supplemental Retirement Plan participation contract, and all of the
other Named Executive Officers, (except for Mr. Blount, Mr. Buck,
Mr. McInvale, Mr. Regan, and Mr. Thompson) have entered into Post-
Retirement Plan participation contracts. Current estimates indicate
that the annual payments to the Named Executive Officers under the
above plans would be less than the payments to that officer under the
System Executive Retirement Plan discussed below.
System Executive Retirement Plan Table (1)
Annual
Covered Years of Service
Compensation 15 20 25 30+
$ 200,000 $ 90,000 $100,000 $110,000 $120,000
300,000 135,000 150,000 165,000 180,000
400,000 180,000 200,000 220,000 240,000
500,000 225,000 250,000 275,000 300,000
600,000 270,000 300,000 330,000 360,000
700,000 315,000 350,000 385,000 420,000
1,000,000 450,000 500,000 550,000 600,000
___________
(1) Benefits shown are based on a target replacement ratio of 50%
based on the years of service and covered compensation shown. The
benefits for 10, 15, and 20 or more years of service at the 45%
and 55% replacement levels would decrease (in the case of 45%) or
increase (in the case of 55%) by the following percentages: 3.0%,
4.5%, and 5.0%, respectively.
In 1993, Entergy Corporation adopted the System Executive
Retirement Plan (SERP). Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and
System Energy are participating employers in the SERP. The SERP is an
unfunded defined benefit plan offered at retirement to certain senior
executives, which would currently include all the Named Executive
Officers (except for Mr. Blount). Participating executives choose, at
retirement, between the retirement benefits paid under provisions of
the SERP or those payable under the Supplemental Retirement Plan or
the Post-Retirement Plan discussed above. Covered pay under the SERP
includes final annual base salary (see the Summary Compensation Table
above for the base salary covered by the SERP as of December 31, 1997)
plus the Target Incentive Award (i.e., a percentage of final annual
base salary) for the participant in effect at retirement. Benefits
paid under the SERP are calculated by multiplying the covered pay
times target pay replacement ratios (45%, 50%, or 55%, dependent on
job rating at retirement) that are attained, according to plan design,
at 20 years of credited service. The target ratios are increased by
1% for each year of service over 20 years, up to a maximum of 30 years
of service. In accordance with the SERP formula, the target ratios
are reduced for each year of service below 20 years. The credited
years of service under this plan are identical to the years of service
for Named Executive Officers (other than Mr. Bemis, Mr. Jackson, Mr.
McInvale, and Mr. Thompson) disclosed above in the section entitled
"Pension Plan Tables-Retirement Income Plan Table". Mr. Bemis, Mr.
Jackson, Mr. McInvale, and Mr. Thompson have 25 years, 24 years, 16
years, and 16 years, respectively, of credited service under this
plan.
The normal form of benefit for a single employee is a lifetime
annuity and for a married employee is a 50% joint and survivor
annuity. All SERP payments are guaranteed for ten years. Other
actuarially equivalent options are available to each retiree. SERP
benefits are offset by any and all defined benefit plan payments from
Entergy and from prior employers. SERP benefits are not subject to
Social Security offsets.
Eligibility for and receipt of benefits under any of the
executive plans described above are contingent upon several factors.
The participant must agree, without the specific consent of the
Entergy company for which such participant was last employed, not to
take employment after retirement with any entity that is in
competition with, or similar in nature to, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy or any affiliate thereof. Eligibility for
benefits is forfeitable for various reasons, including violation of an
agreement with Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System
Energy, resignation of employment, or termination of employment
without Company permission.
In addition to the Retirement Income Plan discussed above,
Entergy Gulf States provides, among other benefits to officers, an
Executive Income Security Plan for key managerial personnel. The plan
provides participants with certain retirement, disability,
termination, and survivors' benefits. To the extent that such
benefits are not funded by the employee benefit plans of Entergy Gulf
States or by vested benefits payable by the participants' former
employers, Entergy Gulf States is obligated to make supplemental
payments to participants or their survivors. The plan provides that
upon the death or disability of a participant during his employment,
he or his designated survivors will receive (i) during the first year
following his death or disability an amount not to exceed his annual
base salary, and (ii) thereafter for a number of years until the
participant attains or would have attained age 65, but not less than
nine years, an amount equal to one-half of the participant's annual
base salary. The plan also provides supplemental retirement benefits
for life for participants retiring after reaching age 65 equal to one-
half of the participant's average final compensation rate, with one-
half of such benefit upon the death of the participant being payable
to a surviving spouse for life.
Entergy Gulf States amended and restated the plan effective March
1, 1991, to provide such benefits for life upon termination of
employment of a participating officer or key managerial employee
without cause (as defined in the plan) or if the participant separates
from employment for good reason (as defined in the plan), with 1/2 of
such benefits to be payable to a surviving spouse for life. Further,
the plan was amended to provide medical benefits for a participant and
his family when the participant separates from service. These medical
benefits generally continue until the participant is eligible to
receive medical benefits from a subsequent employer; but in the case
of a participant who is over 50 at the time of separation and was
participating in the plan on March 1, 1991, medical benefits continue
for life. By virtue of the 1991 amendment and restatement, benefits
for a participant under such plan cannot be modified once he becomes
eligible to participate in the plan. None of the Named Executive
Officers are participants in this plan.
Compensation of Directors
For information regarding compensation of the directors of
Entergy Corporation, see the Proxy Statement under the heading
"Director Compensation", which information is incorporated herein by
reference. Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, System Energy and Entergy
London currently have no non-employee directors, and none of the
current directors is compensated for his responsibilities as director.
Retired non-employee directors of Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans with a minimum
of five years of service on the respective Boards of Directors are
paid $200 a month for a term of years corresponding to the number of
years of active service as directors. Retired non-employee directors
with over ten years of service receive a lifetime benefit of $200 a
month. Years of service as an advisory director are included in
calculating this benefit. System Energy and Entergy London have no
retired non-employee directors.
Retired non-employee directors of Entergy Gulf States receive
retirement benefits under a plan in which all directors who served
continuously for a period of years will receive a percentage of their
retainer fee in effect at the time of their retirement for life. The
retirement benefit is 30 percent of the retainer fee for service of
not less than five nor more than nine years, 40 percent for service of
not less than ten nor more than fourteen years, and 50 percent for
fifteen or more years of service. For those directors who retired
prior to the retirement age, their benefits are reduced. The plan
also provides disability retirement and optional hospital and medical
coverage if the director has served at least five years prior to the
disability. The retired director pays one-third of the premium for
such optional hospital and medical coverage and Entergy Gulf States
pays the remaining two-thirds. Years of service as an advisory
director are included in calculating this benefit.
Employment Contracts and Termination of Employment and Change-in-
Control Arrangements
Entergy Gulf States
As a result of the Merger, Entergy Gulf States is obligated to
pay benefits under the Executive Income Security Plan to those persons
who were participants at the time of the Merger and who later
terminated their employment under circumstances described in the plan.
For additional description of the benefits under the Executive Income
Security Plan, see the "Pension Plan Tables-System Executive
Retirement Plan Table" section noted above.
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy,
and Entergy London
In connection with the resignation of his position as Vice
Chairman, Mr. McInvale entered into a contract under which he will
provide services as required and remain as an employee of Entergy Services
through May 31, 2001, subject to certain terms and conditions, at a
monthly salary of approximately $33,300. In addition, such contract
provides for the continuation of benefits under Mr. McInvale's continued
participation in, or the providing of benefits comparable to those under,
Entergy's Savings Plan, Retirement Plan, Supplemental Credited Service
Agreement, System Executive Retirement Plan, Equity Ownership Plan,
Executive Medical Plan and the applicable portion of any awards under
the Executive Annual Incentive Plan and Long Term Incentive Program.
In the event of Mr. McInvale's death prior to May 31, 2001, his
surviving spouse or estate would receive a lump sum equal to the net
present value of all base salary payments due from the date of death
to May 31, 2001, together with the benefits lost, or the comparable
value.
Personnel Committee Interlocks and Insider Participation
The compensation of Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, System
Energy and Entergy London executive officers was set by the Personnel
Committee of Entergy Corporation's Board of Directors, composed solely
of Directors of Entergy Corporation. No current or former officers or
employees of any Entergy company participated in deliberations
concerning compensation during 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Entergy Corporation owns 100% of the outstanding common stock of
registrants Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, System Energy and Entergy
London. The information with respect to persons known by Entergy
Corporation to be beneficial owners of more than 5% of Entergy
Corporation's outstanding common stock is included under the heading
"Stockholders Who Own at Least Five Percent" in the Proxy Statement,
which information is incorporated herein by reference. The
registrants know of no contractual arrangements that may, at a
subsequent date, result in a change in control of any of the
registrants.
As of December 31, 1997, the directors, the Named Executive
Officers, and the directors and officers as a group for Entergy
Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, System Energy and Entergy
London, respectively, beneficially owned directly or indirectly common
stock of Entergy Corporation as indicated:
Entergy Corporation
Common Stock
Amount and Nature of
Beneficial Ownership(a)
Sole Voting
and Other
Investment Beneficial
Name Power Ownership(b)
Entergy Corporation
W. Frank Blount* 5,034 -
John A. Cooper, Jr.* 7,534 -
Lucie J. Fjeldstad**** 3,984 -
Dr. Norman C. Francis* 1,200 -
Frank F. Gallaher** 19,641 17,500
Donald C. Hintz** 11,318 27,500
Jerry D. Jackson** 29,500 24,411
Robert v.d. Luft* 4,284 -
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
Adm. Kinnaird R. McKee* 3,067 -
Paul W. Murrill* 2,985 -
James R. Nichols* 6,065 -
Eugene H. Owen* 3,692 -
John N. Palmer, Sr.* 16,481 -
Robert D. Pugh* 8,300 6,500 (c)
Wm. Clifford Smith* 6,621 -
Bismark A. Steinhagen* 8,237 -
All directors and executive
officers 262,891 244,235
Entergy Arkansas
Frank F. Gallaher*** 19,641 17,500
Donald C. Hintz*** 11,318 27,500
Jerry D. Jackson*** 29,500 24,411
R. Drake Keith* 9,019 -
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden*** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
All directors and executive
officers 198,064 205,235
Entergy Gulf States
John J. Cordaro * 5,369 -
Frank F. Gallaher*** 19,641 17,500
Donald C. Hintz*** 11,318 27,500
Jerry D. Jackson*** 29,500 24,411
Karen R. Johnson * 802 -
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden*** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
All directors and executive
officers 192,465 205,235
Entergy Louisiana
John J. Cordaro* 5,369 -
Frank F. Gallaher*** 19,641 17,500
Donald C. Hintz*** 11,318 27,500
Jerry D. Jackson*** 29,500 24,411
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden*** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
All directors and executive
officers 201,761 205,235
Entergy Mississippi
Frank F. Gallaher*** 19,641 17,500
Donald C. Hintz* 11,318 27,500
Jerry D. Jackson*** 29,500 24,411
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden*** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
Donald E. Meiners* 10,521 -
Michael G. Thompson** 13,462 17,500
All directors and executive
officers 185,188 205,235
Entergy New Orleans
Frank F. Gallaher** 19,641 17,500
Jerry D. Jackson*** 29,500 24,411
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden*** 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
Daniel F. Packer *** 3,854 -
Michael G. Thompson** 13,462 17,500
All directors and executive
officers 168,482 177,735
System Energy
Joseph L. Blount** 3,535 -
Louis E. Buck, Jr.** 2,996 2,500
Donald C. Hintz*** 11,318 27,500
Edwin Lupberger*** 36,583 63,324 (c)
Jerry L. Maulden* 27,165 30,000
Gerald D. McInvale (d) 10,901 20,000
William J. Regan, Jr.** 2,908 2,500
All directors and executive
officers 95,406 145,824
Entergy London
Michael B. Bemis*** 24,646 20,000
Louis E. Buck, Jr.** 2,996 2,500
Edwin Lupberger*** 36,583 63,324 (c)
Gerald D. McInvale (d) 10,901 20,000
William J. Regan, Jr.** 2,908 2,500
Michael G. Thompson** 13,462 17,500
All directors and executive
officers 80,585 125,824
* Director of the respective Company
** Named Executive Officer of the respective Company
*** Director and Named Executive Officer of the respective Company
**** Mrs. Fjeldstad's term will expire at the Annual Meeting and she
is not standing for re-election.
(a) Based on information furnished by the respective individuals.
Except as noted, each individual has sole voting and investment
power. The amount owned by each individual and by all directors
and executive officers as a group does not exceed one percent of
the outstanding securities of any class of security so owned.
(b) Includes, for the Named Executive Officers, shares of Entergy
Corporation common stock in the form of unexercised stock options
awarded pursuant to the Equity Ownership Plan as follows: Louis
E. Buck, Jr., 2,500 shares; Michael B. Bemis, 20,000 shares;
Frank F. Gallaher, 17,500 shares; Donald C. Hintz, 27,500 shares;
Jerry D. Jackson, 24,411 shares; Edwin Lupberger, 58,824 shares;
Jerry L. Maulden, 30,000 shares; Gerald D. McInvale, 20,000
shares; William J. Regan, Jr., 2,500 shares; and Michael G.
Thompson, 17,500 shares.
(c) Includes, for the Named Executive Officers, shares of Entergy
Corporation common stock held by their spouses. The named
persons disclaim beneficial ownership in these shares as follows:
Edwin Lupberger, 2,500 shares; and Robert D. Pugh, 6,500 shares.
In addition, Edwin Lupberger owns 2,000 shares in joint tenancy
with his mother for which he disclaims beneficial ownership.
(d) Gerald D. McInvale is a former officer of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, System Energy, and Entergy
London.
Item 13. Certain Relationships and Related Transactions
During 1997, T. Baker Smith & Son, Inc. performed land surveying
services for, and received payments of approximately $81,000 from,
Entergy Louisiana, Inc. Mr. Wm. Clifford Smith, a director of Entergy
Corporation, is President of T. Baker Smith & Son, Inc. Mr. Smith's
children own 100% of the voting stock of T. Baker Smith & Son, Inc.
See Item 10, "Directors and Executive Officers of the
Registrants," for information on certain relationships and
transactions required to be reported under this item.
Other than as provided under applicable corporate laws, Entergy
does not have policies whereby transactions involving executive
officers and directors are approved by a majority of disinterested
directors. However, pursuant to the Entergy Corporation Code of
Conduct, transactions involving an Entergy company and its executive
officers must have prior approval by the next higher reporting level
of that individual, and transactions involving an Entergy company and
its directors must be reported to the secretary of the appropriate
Entergy company.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a)1. Financial Statements and Independent Auditors' Reports for
Entergy, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, System
Energy, Entergy London, and London Electricity are listed in
the Index to Financial Statements (see pages 44 and 45)
(a)2. Financial Statement Schedules
Reports of Independent Accountants on Financial Statement
Schedules (see page 249)
Financial Statement Schedules are listed in the Index to
Financial Statement Schedules (see page S-1)
(a)3. Exhibits
Exhibits for Entergy, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy and Entergy London are listed in the Exhibit
Index (see page E-1). Each management contract or compensatory
plan or arrangement required to be filed as an exhibit hereto
is identified as such by footnote in the Exhibit Index.
(b) Reports on Form 8-K
Entergy Corporation
A current report on Form 8-K, dated September 23, 1997, was
filed with the SEC on October 1, 1997, reporting information
under Item 5. "Other Events".
Entergy Corporation, Entergy Arkansas, and Entergy Gulf States
A current report on Form 8-K, dated October 9, 1997, was filed
with the SEC on October 10, 1997, reporting information under
Item 5. "Other Events".
Entergy Corporation
A current report on Form 8-K, dated November 19, 1997, was
filed with the SEC on November 24, 1997, reporting information
under Item 5. "Other Information".
Entergy Corporation, Entergy Arkansas, Entergy Gulf States, and
System Energy
A current report on Form 8-K, dated December 12, 1997, was
filed with the SEC on December 29, 1997, reporting information
under Item 5. "Other Information".
ENTERGY CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY CORPORATION
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); W.
Frank Blount, John A. Cooper, Jr., Lucie J. Fjeldstad,
N. C. Francis, Robert v.d. Luft, Kinnaird R. McKee,
Paul W. Murrill, James R. Nichols, Eugene H. Owen, John
N. Palmer, Sr., Robert D. Pugh, Wm. Clifford Smith,
and Bismark A. Steinhagen (Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY ARKANSAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY ARKANSAS, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); Frank
F. Gallaher, Donald C. Hintz, Jerry D. Jackson, R.
Drake Keith, and Jerry L. Maulden (Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY GULF STATES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY GULF STATES, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); John
J. Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D.
Jackson, Karen R. Johnson, and Jerry L. Maulden
(Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY LOUISIANA, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY LOUISIANA, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); John
J. Cordaro, Frank F. Gallaher, Donald C. Hintz, Jerry D.
Jackson, and Jerry L. Maulden (Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY MISSISSIPPI, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY MISSISSIPPI, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); Frank
F. Gallaher, Donald C. Hintz, Jerry D. Jackson, Jerry L.
Maulden, and Donald E. Meiners (Directors).
By:/s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY NEW ORLEANS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY NEW ORLEANS, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer); Jerry
D. Jackson, Jerry L. Maulden, and Daniel F. Packer
(Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
SYSTEM ENERGY RESOURCES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
SYSTEM ENERGY RESOURCES, INC.
By /s/ Louis E. Buck
Louis E. Buck, Vice President,
Chief Accounting Officer and
Assistant Secretary
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Vice President, Chief Accounting March 9, 1998
Officer and Assistant Secretary
(Principal Accounting Officer)
Donald C. Hintz (President, Chief Executive Officer and
Director; Principal Executive Officer); Edwin Lupberger
(Chairman of the Board), and Jerry L. Maulden
(Directors).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
ENTERGY LONDON INVESTMENTS PLC
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized. The signature of the undersigned company shall be deemed
to relate only to matters having reference to such company and any
subsidiaries thereof.
ENTERGY LONDON INVESTMENTS PLC
By /s/ Louis E. Buck
Louis E. Buck, Audit Controller
Date: March 9, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated. The signature of each of the undersigned shall be deemed
to relate only to matters having reference to the above-named company
and any subsidiaries thereof.
Signature Title Date
/s/ Louis E. Buck
Louis E. Buck Audit Controller March 9, 1998
(Principal Accounting Officer)
Edwin Lupberger (Chairman of the Board, Chief Executive
Officer and Director; Principal Executive Officer);
Michael B. Bemis (Director).
By: /s/ Louis E. Buck March 9, 1998
(Louis E. Buck, Attorney-in-fact)
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective
Amendment Nos. 2, 3, 4A, and 5A on Form S-8 and the related
Prospectuses to the registration statement of Entergy Corporation on
Form S-4 (File Number 33-54298) and on Form S-3 (File Numbers 333-02503
and 333-22007) of our reports dated March 4, 1998, on our audits of the
consolidated financial statements and financial statement schedules of
Entergy Corporation as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, which reports
include an explanatory paragraph related to changes in accounting
methods for the impairment of long-lived assets and for long-lived
assets to be disposed of and incremental nuclear plant outage
maintenance costs by one of the Corporation's subsidiaries and are
included in this Annual Report on Form 10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of Entergy Arkansas, Inc.
(formerly Arkansas Power & Light Company) on Form S-3 (File Numbers
33-50289, 333-00103 and 333-05045) of our reports dated March 4, 1998,
on our audits of the financial statements and financial statement
schedule of Entergy Arkansas, Inc. as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997,
which are included in this Annual Report on Form 10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of Entergy Gulf States, Inc.
(formerly Gulf States Utilities Company) on Form S-3 (File Numbers 33-
49739 and 33-51181), Form S-8 (File Numbers 2-76551 and 2-98011) and on
Form S-2 (File Number 333-17911), of our reports dated March 4, 1998,
on our audits of the financial statements and financial statement
schedule of Entergy Gulf States, Inc. as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997,
which reports include an explanatory paragraph related to a change in
accounting for the impairment of long-lived assets and long-lived
assets to be disposed of and are included in this Annual Report on Form
10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of Entergy Louisiana, Inc.
(formerly Louisiana Power & Light Company) on Form S-3 (File Numbers 33-
46085, 33-39221, 33-50937, 333-00105, 333-01329 and 333-03567) of our
reports dated March 4, 1998, on our audits of the financial statements
and financial statement schedule of Entergy Louisiana, Inc. as of
December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, which are included in this Annual
Report on Form 10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of Entergy Mississippi, Inc.
(formerly Mississippi Power & Light Company) on Form S-3 (File Numbers
33-53004, 33-55826 and 33-50507) of our reports dated March 4, 1998,
on our audits of the financial statements and financial statement
schedule of Entergy Mississippi, Inc. as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997,
which are included in this Annual Report on Form 10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of Entergy New Orleans, Inc.
(formerly New Orleans Public Service Inc.) on Form S-3 (File Numbers 33-
57926 and 333-00255) of our reports dated March 4, 1998, on our audits
of the financial statements and financial statement schedule of Entergy
New Orleans, Inc. as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, which are
included in this Annual Report on Form 10-K.
We consent to the incorporation by reference in the registration
statements and the related Prospectuses of System Energy Resources,
Inc. on Form S-3 (File Numbers 33-47662, 33-61189 and 333-06717) of our
report dated March 4, 1998, on our audits of the financial statements
of System Energy Resources, Inc. as of December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997,
which report includes an explanatory paragraph related to the Company's
1996 change in its method of accounting for incremental nuclear
plant outage maintenance costs and is included in this Annual Report
on Form 10-K.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 9, 1998
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders
of Entergy Corporation
We have audited the consolidated financial statements of Entergy
Corporation and Subsidiaries and the financial statements of Entergy
Arkansas, Inc. (formerly Arkansas Power & Light Company), Entergy Gulf
States, Inc. (formerly Gulf States Utilities Company), Entergy
Louisiana, Inc. (formerly Louisiana Power & Light Company), Entergy
Mississippi, Inc. (formerly Mississippi Power & Light Company) and
Entergy New Orleans, Inc. (formerly New Orleans Public Service Inc.)
as of December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, and the consolidated financial
statements of Entergy London Investments plc and Subsidiary as of
December 31, 1997 and for the year then ended, and have issued our
reports thereon dated March 4, 1998, and have audited the consolidated
financial statements of London Electricity plc as of March 31, 1996
and for the period from April 1, 1996 to January 31, 1997 and the year
ended March 31, 1996, and have issued our report thereon dated July 31,
1997, which reports are included elsewhere in this Form 10-K, which
reports as to Entergy Corporation and Entergy Gulf States, Inc.
include an explanatory paragraph related to a change in accounting for
the impairment of long-lived assets and long-lived assets to be
disposed of, and which reports as to Entergy Corporation and System
Energy Resources, Inc. include an explanatory paragraph related to
changes in accounting for incremental nuclear plant outage maintenance
expenses. In connection with our audits of such financial statements,
we have also audited the related financial statement schedules
included in Item 14(a)2 of this Form 10-K.
In our opinion the financial statement schedules referred to
above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
March 4, 1998
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule Page
I Financial Statements of Entergy Corporation:
Statements of Income - For the Years Ended December 31, 1997,
1996, and 1995 S-2
Statements of Cash Flows - For the Years Ended December 31, 1997,
1996, and 1995 S-3
Balance Sheets, December 31, 1997 and 1996 S-4
Statements of Retained Earnings and Paid-In Capital - For the
Years Ended December 31, 1997, 1996, and 1995 S-5
II Valuation and Qualifying Accounts
1997, 1996 and 1995:
Entergy Corporation and Subsidiaries S-6
Entergy Arkansas, Inc. S-7
Entergy Gulf States, Inc. S-8
Entergy Louisiana, Inc. S-9
Entergy Mississippi, Inc. S-10
Entergy New Orleans, Inc.. S-11
Entergy London Investments plc S-12
London Electricity plc S-13
Schedules other than those listed above are omitted because they
are not required, not applicable or the required information is shown
in the financial statements or notes thereto.
Columns have been omitted from schedules filed because the
information is not applicable.
ENTERGY CORPORATION
SCHEDULE I-FINANCIAL STATEMENTS OF ENTERGY CORPORATION
STATEMENTS OF INCOME
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Income:
Equity in income of subsidiaries $325,419 $459,350 $549,144
Interest on temporary investments 5,086 4,840 20,641
-------- -------- --------
Total 330,505 464,190 569,785
-------- -------- --------
Expenses and Other Deductions:
Administrative and general expenses 62,250 34,402 53,872
Income taxes (credit) 3,438 (1,558) (5,383)
Taxes other than income 1,226 828 1,102
Interest 15,908 10,491 214
-------- -------- --------
Total 82,822 44,163 49,805
-------- -------- --------
Net Income $247,683 $420,027 $519,980
======== ======== ========
See Entergy Corporation and Subsidiaries Notes to Financial
Statements in Part II, Item 8.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996 1995
(In Thousands)
Operating Activities:
Net income $247,683 $420,027 $519,980
Noncash items included in net income:
Equity in earnings of subsidiaries (325,419) (459,350) (549,144)
Deferred income taxes 898 8,499 (2,024)
Depreciation 1,442 1,628 1,421
Changes in working capital:
Receivables (8,683) 3,232 2,161
Payables (3,690) 9,919 (3,776)
Other working capital accounts (400) (1,170) (1,701)
Common stock dividends received from subsidiaries 550,200 554,200 565,589
Other 43,479 (3,524) 8,652
-------- -------- --------
Net cash flow provided by operating activities 505,510 533,461 541,158
-------- -------- --------
Investing Activities:
Investment in subsidiaries (633,449) (266,681) (477,709)
Capital expenditures (23,079) - -
Advance to subsidiary - - 221,540
-------- -------- --------
Net cash flow used in investing activities (656,528) (266,681) (256,169)
-------- -------- --------
Financing Activities:
Changes in short-term borrowings 166,000 20,000 -
Common stock dividends paid (438,183) (405,346) (408,553)
Issuance of common stock 305,379 118,087 -
-------- -------- --------
Net cash flow provided by (used in) financing activities 33,196 (267,259) (408,553)
-------- -------- --------
Net decrease in cash and cash equivalents (117,822) (479) (123,564)
Cash and cash equivalents at beginning of period 128,665 129,144 252,708
-------- -------- --------
Cash and cash equivalents at end of period $10,843 $128,665 $129,144
======== ======== ========
See Entergy Corporation and Subsidiaries Notes to Financial Statements
in Part II, Item 8.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
BALANCE SHEETS
December 31,
1997 1996
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $ - $23
Temporary cash investments - at cost,
which approximates market:
Associated companies 2,947 57,986
Other 7,896 70,656
---------- ----------
Total cash and cash equivalents 10,843 128,665
Accounts receivable:
Associated companies 14,700 5,940
Interest receivable 301 378
Other 20,345 20,389
---------- ----------
Total 46,189 155,372
---------- ----------
Investment in Wholly-owned Subsidiaries 6,832,590 6,531,729
---------- ----------
Deferred Debits and Other Assets 89,315 74,891
---------- ----------
Total $6,968,094 $6,761,992
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $186,000 $20,000
Accounts payable:
Associated companies 4,331 11,613
Other 1,884 22
Interest accrued 1,918 188
Other current liabilities 8,827 15,638
---------- ----------
Total 202,960 47,461
---------- ----------
Deferred Credits and Noncurrent Liabilities 71,618 73,616
---------- ----------
Shareholders' Equity:
Common stock, $.01 par value, authorized
500,000,000 shares; issued 246,149,198 shares
in 1997 and 234,456,457 shares in 1996 2,461 2,345
Paid-in capital 4,613,572 4,320,591
Retained earnings 2,157,912 2,341,703
Cumulative foreign currency translation adjustment (69,817) 21,725
Less cost of treasury stock (306,852 shares in
1997 and 1,496,118 shares in 1996) 10,612 45,449
---------- ----------
Total common shareholders' equity 6,693,516 6,640,915
---------- ----------
Total $6,968,094 $6,761,992
========== ==========
See Entergy Corporation and Subsidiaries Notes to Financial Statements
in Part II, Item 8.
ENTERGY CORPORATION
SCHEDULE I - FINANCIAL STATEMENTS OF ENTERGY CORPORATION
STATEMENTS OF RETAINED EARNINGS AND PAID-IN CAPITAL
For the Years Ended
December 31,
1997 1996 1995
(In Thousands)
Retained Earnings, January 1 $2,341,703 $2,335,579 $2,223,739
Add:
Net income 247,683 420,027 519,980
Deduct:
Dividends declared on common stock 432,268 412,250 409,801
Capital stock and other expenses (794) 1,653 (1,661)
---------- ---------- ----------
Total 431,474 413,903 408,140
---------- ---------- ----------
Retained Earnings, December 31 $2,157,912 $2,341,703 $2,335,579
========== ========== ==========
Paid-in Capital, January 1 $4,320,591 $4,201,483 $4,202,134
Add:
Gain (loss) on reacquisition of
subsidiaries' preferred stock 273 1,795 (26)
Common stock issuances related to stock plans 292,870 117,560 (3,002)
---------- ---------- ----------
Total 293,143 119,355 (3,028)
---------- ---------- ----------
Deduct:
Capital stock discounts and other expenses 162 247 (2,377)
---------- ---------- ----------
Paid-in Capital, December 31 $4,613,572 $4,320,591 $4,201,483
========== ========== ==========
See Entergy Corporation and Subsidiaries Notes to Consolidated Financial
Statements in Part II, Item 8.
ENTERGY CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Balance Deductions
at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $7,822 $12,926 $14,359 $6,389
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $35,026 $24,128 $35,732 $23,422
Injuries and damages (Note 2) 26,145 20,294 19,955 26,484
Environmental 37,719 5,993 7,344 36,368
------- ------- ------- -------
Total $98,890 $50,415 $63,031 $86,274
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $7,109 $18,403 $17,690 $7,822
Other 12,337 - 12,337 -
------- ------- ------- -------
Total $19,446 $18,403 $30,027 $7,822
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $36,733 $26,136 $27,843 $35,026
Injuries and damages (Note 2) 19,981 23,373 17,209 26,145
Environmental 40,262 2,599 5,142 37,719
------- ------- ------- -------
Total $96,976 $52,108 $50,194 $98,890
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $6,740 $14,586 $14,217 $7,109
Other - 12,337 - 12,337
------- ------- ------- -------
Total $6,740 $26,923 $14,217 $19,446
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $32,871 $16,263 $12,401 $36,733
Injuries and damages (Note 2) 22,066 11,667 13,752 19,981
Environmental 42,739 7,639 10,116 40,262
------- ------- ------- -------
Total $97,676 $35,569 $36,269 $96,976
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY ARKANSAS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $2,326 $3,140 $3,667 $1,799
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $14 $11,613 $10,769 $858
Injuries and damages (Note 2) 2,810 3,538 1,550 4,798
Environmental 5,163 1,320 1,730 4,753
------- ------- ------- -------
Total $7,987 $16,471 $14,049 $10,409
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $2,058 $5,341 $5,073 $2,326
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $900 $8,808 $9,694 $14
Injuries and damages (Note 2) 1,810 2,980 1,980 2,810
Environmental 6,514 1,320 2,671 5,163
------- ------- ------- -------
Total $9,224 $13,108 $14,345 $7,987
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,950 $3,997 $3,889 $2,058
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $1,916 $4,810 $5,826 $900
Injuries and damages (Note 2) 2,660 710 1,560 1,810
Environmental 5,350 4,435 3,271 6,514
------- ------- ------- -------
Total $9,926 $9,955 $10,657 $9,224
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY GULF STATES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,997 $3,695 $3,901 $1,791
======= ======= ======= =======
Accumulated Provisions
Not Deducted from Assets--
Property insurance $17,003 $5,584 $18,270 $4,317
Injuries and damages (Note 2) 9,594 5,479 9,734 5,339
Environmental 21,829 3,746 1,786 23,789
------- ------- ------- -------
Total $48,426 $14,809 $29,790 $33,445
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,608 $4,709 $4,320 $1,997
======= ======= ======= =======
Accumulated Provisions
Not Deducted from Assets--
Property insurance $14,141 $5,899 $3,037 $17,003
Injuries and damages (Note 2) 5,199 7,955 3,560 9,594
Environmental 21,864 365 400 21,829
------- ------- ------- -------
Total $41,204 $14,219 $6,997 $48,426
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $715 $3,715 $2,822 $1,608
======= ======= ======= =======
Accumulated Provisions
Not Deducted from Assets--
Property insurance $10,451 $6,396 $2,706 $14,141
Injuries and damages (Note 2) 6,922 6,243 7,966 5,199
Environmental 20,314 2,483 933 21,864
------- ------- ------- -------
Total $37,687 $15,122 $11,605 $41,204
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY LOUISIANA, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,429 $2,542 $2,814 $1,157
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $261 $5,411 $5,091 $581
Injuries and damages (Note 2) 9,443 5,080 4,579 9,944
Environmental 9,979 495 2,875 7,599
------- ------- ------- -------
Total $19,683 $10,986 $12,545 $18,124
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,390 $3,241 $3,202 $1,429
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $1,013 $4,583 $5,335 $261
Injuries and damages (Note 2) 8,414 10,646 9,617 9,443
Environmental 11,379 495 1,895 9,979
------- ------- ------- -------
Total $20,806 $15,724 $16,847 $19,683
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,175 $2,450 $2,235 $1,390
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $814 $3,537 $3,338 $1,013
Injuries and damages (Note 2) 7,350 4,486 3,422 8,414
Environmental 16,394 (89) 4,926 11,379
------- ------- ------- -------
Total $24,558 $7,934 $11,686 $20,806
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY MISSISSIPPI, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,374 $1,950 $2,393 $931
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $2,082 $1,520 $1,423 $2,179
Injuries and damages (Note 2) 2,905 4,055 2,298 4,662
Environmental 693 330 796 227
------- ------- ------- -------
Total $5,680 $5,905 $4,517 $7,068
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $1,585 $2,996 $3,207 $1,374
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $5,013 $6,846 $9,777 $2,082
Injuries and damages (Note 2) 2,565 928 588 2,905
Environmental 467 330 104 693
------- ------- ------- -------
Total $8,045 $8,104 $10,469 $5,680
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $2,070 $1,691 $2,176 $1,585
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $3,779 $1,520 $286 $5,013
Injuries and damages (Note 2) 3,725 (1,154) 6 2,565
Environmental 684 735 952 467
------- ------- ------- -------
Total $8,188 $1,101 $1,244 $8,045
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current
expenses as appropriate and for the estimated cost of settling claims
for injuries and damages.
ENTERGY NEW ORLEANS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996, and 1995
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $696 $1,599 $1,584 $711
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $15,666 - $179 $15,487
Injuries and damages (Note 2) 1,393 $2,142 1,794 1,741
Environmental 55 102 157 -
------- ------- ------- -------
Total $17,114 $2,244 $2,130 $17,228
======= ======= ======= =======
Year ended December 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $468 $2,116 $1,888 $696
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $15,666 - - $15,666
Injuries and damages (Note 2) 1,993 $864 $1,464 1,393
Environmental 38 89 72 55
------- ------- ------- -------
Total $17,697 $953 $1,536 $17,114
======= ======= ======= =======
Year ended December 31, 1995
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $830 $2,733 $3,095 $468
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $15,911 - $245 $15,666
Injuries and damages (Note 2) 1,409 $1,382 798 1,993
Environmental (3) 75 34 38
------- ------- ------- -------
Total $17,317 $1,457 $1,077 $17,697
======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Injuries and damages provision is provided to absorb all current expenses
as appropriate and for the estimated cost of settling claims for injuries
and damages.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 31, 1997
(In Thousands)
Column A Column B Column C Column D Column E
Other
Additions Changes
Deductions
Balance at from Balance
Beginning Charged to Provisions at End
Description of Period Income (Note 1) of Period
Year ended December 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $17,465 $5,300 $ 865 $21,900
======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Property insurance $18,747 $3,300 $ 7,247 $14,800
======= ======= ======= =======
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
LONDON ELECTRICITY PLC
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Period from April 1, 1996 to January 31, 1997 and
for the Year Ended March 31, 1996
(In Thousands)
Column A Column B Column C Column D Column E
Additions
Deductions
Balance at from Balance
Beginning Charged to Other Provisions at End
Description of Period Income Changes (Note 1) of Period
Period ended January 31, 1997
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $13,285 $10,124 $700 $6,644 $17,465
======= ======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Insurance (2) $24,432 $2,373 $1,116 $9,174 $18,747
======= ======= ======= ======= =======
Period ended March 31, 1996
Accumulated Provisions
Deducted from Assets--
Doubtful Accounts $13,783 $1,096 $(811) $783 $13,285
======= ======= ======= ======= =======
Accumulated Provisions Not
Deducted from Assets:
Insurance (2) $26,430 $470 $(1,528) $940 $24,432
======= ======= ======= ======= =======
___________
Notes:
(1) Deductions from provisions represent losses or expenses for which the
respective provisions were created. In the case of the provision for
doubtful accounts, such deductions are reduced by recoveries of amounts
previously written off.
(2) Represents the deductible portion of casualty losses to be incurred
before third party reimbursement begins for injuries and damages.
EXHIBIT INDEX
The following exhibits indicated by an asterisk preceding the
exhibit number are filed herewith. The balance of the exhibits
have heretofore been filed with the SEC, respectively, as the
exhibits and in the file numbers indicated and are incorporated
herein by reference. The exhibits marked with a (+) are
management contracts or compensatory plans or arrangements
required to be filed herewith and required to be identified as
such by Item 14 of Form 10-K. Reference is made to a duplicate
list of exhibits being filed as a part of this Form 10-K, which
list, prepared in accordance with Item 102 of Regulation S-T of
the SEC, immediately precedes the exhibits being physically filed
with this Form 10-K.
(3) (i) Articles of Incorporation
Entergy Corporation
(a) 1 -- Certificate of Incorporation of Entergy
Corporation dated December 31, 1993, (A-1(a) to Rule 24
Certificate in 70-8059).
System Energy
(b) 1 -- Amended and Restated Articles of Incorporation of
System Energy and amendments thereto through April 28,
1989 (A-1(a) to Form U-1 in 70-5399).
Entergy Arkansas
(c) 1 -- Amended and Restated Articles of Incorporation of
Entergy Arkansas and amendments thereto through April 22,
1996 (3(a) to Form 10-Q for the quarter ended March 31,
1996 in 1-10764).
Entergy Gulf States
(d) 1 -- Restated Articles of Incorporation of Entergy Gulf
States and amendments thereto through April 22, 1996
(3(b) to Form 10-Q for the quarter ended March 31, 1996
in 1-2703).
Entergy Louisiana
(e) 1 -- Restated Articles of Incorporation of Entergy
Louisiana and amendments thereto through April 22, 1996
(3(c) to Form 10-Q for the quarter ended March 31, 1996
in 1-8474).
Entergy Mississippi
*(f) 1 -- Restated Articles of Incorporation of Entergy
Mississippi and amendments thereto through November 17,
1997
Entergy New Orleans
(g) 1 -- Restatement of Articles of Incorporation of
Entergy New Orleans and amendments thereto through April
22, 1996 (3(e) to Form 10-Q for the quarter ended March
31, 1996 in 0-5807).
Entergy London
(h) 1 -- Memorandum and Articles of Association of the
Company and amendments thereto through September 1, 1997
(4.01 in 333-33331 dated October 1, 1997).
(3) (ii) By-Laws
(a) -- By-Laws of Entergy Corporation effective August
25, 1992, and as presently in effect (A-2(a) to Rule 24
Certificate in 70-8059).
(b) -- By-Laws of System Energy effective May 4, 1989,
and as presently in effect (A-2(a) in 70-5399).
(c) -- By-Laws of Entergy Arkansas as amended effective
May 5, 1994, and as presently in effect (3(d) to Form 10-
Q for the quarter ended June 30, 1994).
(d) -- By-Laws of Entergy Gulf States as amended
effective May 5, 1994, and as presently in effect (A-12
in 70-8059).
(e) -- By-Laws of Entergy Louisiana effective January 23,
1984, and as presently in effect (A-4 in 70-6962).
(f) -- By-Laws of Entergy Mississippi as amended
effective April 5, 1995, and as presently in effect
(3(ii)(f) to Form 10-K for the year ended December 31,
1995 in 0-320).
(g) -- By-Laws of Entergy New Orleans effective May 5,
1994, and as presently in effect (3(g) to Form 10-Q for
the quarter ended June 30, 1994 in 0-5807).
(4) Instruments Defining Rights of Security Holders,
Including Indentures
Entergy Corporation
(a) 1 -- See (4)(b) through (4)(g) below for instruments
defining the rights of holders of long-term debt of
System Energy, Entergy Arkansas, Entergy Gulf States,
Entergy Louisiana, Entergy Mississippi and Entergy New
Orleans.
(a) 2 --Share Sale Agreement (Revised) of December 12, 1995,
relating to acquisition of CitiPower Limited, among State
Electricity Commission of Victoria, the State of
Victoria, Entergy Victoria LDC, Entergy Victoria Holding
LDC and Entergy Corporation (filed as Exhibit C-1(o) to
Form U5S for the year ended December 31, 1995 pursuant to
Rule 104).
(a) 3 -- Multi-Option Syndicated Facility Agreement, dated
as of January 5, 1996, among CitiPower Limited as
Borrower, Commonwealth Bank of Australia as Facility
Agent, Bank of America N.T. & S.A. as Arranger, and
Commonwealth Bank of Australia as Security Trustee (filed
as Exhibit C-1(p) to Form U5S for the year ended December
31, 1995).
(a) 4 -- Undertaking Agreement, dated as of March 7, 1996,
of Entergy Corporation to Commonwealth Bank of Australia
as Facility-Agent, of CitiPower Limited's obligations up
to maximum of $7,367,000 under the Multi-Option
Syndicated Facility Agreement (filed as Exhibit C-1(q) to
Form U5S for the year ended December 31, 1995).
(a) 5 -- Credit Agreement, dated as of September 13, 1996,
among Entergy Corporation, Entergy Technology Holding
Company, the Banks (The Bank of New York, Bank of America
NT & SA, The Bank of Nova Scotia, Banque Nationale de
Paris (Houston Agency), The First National Bank of
Chicago, The Fuji Bank Ltd., Societe Generale Southwest
Agency, and CIBC Inc.) and The Bank of New York, as Agent
(the "Entergy-ETHC Credit Agreement") (filed as Exhibit
4(a)12 to Form 10-K for the year ended December 31, 1996
in 1-11299).
(a) 6 -- Amendment No. 1, dated as of October 22, 1996 to
Credit Agreement Entergy-ETHC Credit Agreement (filed as
Exhibit 4(a)13 to Form 10-K for the year ended December
31, 1996 in 1-11299).
(a) 7 -- Guaranty and Acknowledgment Agreement, dated as of
October 3, 1996, by Entergy Corporation to The Bank of
New York of certain promissory notes issued by ETHC in
connection with acquisition of 280 Equity Holdings, Ltd
(filed as Exhibit 4(a)14 to Form 10-K for the year ended
December 31, 1996 in 1-11299).
(a) 8 -- Amendment, dated as of November 21, 1996, to
Guaranty and Acknowledgment Agreement by Entergy
Corporation to The Bank of New York of certain promissory
notes issued by ETHC in connection with acquisition of
280 Equity Holdings, Ltd (filed as Exhibit 4(a)15 to Form
10-K for the year ended December 31, 1996 in 1-11299).
(a) 9 -- Guaranty and Acknowledgment Agreement, dated as of
November 21, 1996, by Entergy Corporation to The Bank of
New York of certain promissory notes issued by ETHC in
connection with acquisition of Sentry (filed as Exhibit
4(a)16 to Form 10-K for the year ended December 31, 1996
in 1-11299).
(a) 10-- Amended and Restated Credit Agreement, dated as of
December 12, 1996, among Entergy, the Banks (Bank of
America National Trust & Savings Association, The Bank of
New York, The Chase Manhattan Bank, Citibank, N.A., Union
Bank of Switzerland, ABN Amro Bank N.V., The Bank of Nova
Scotia, Canadian Imperial Bank of Commerce, Mellon Bank,
N.A., First National Bank of Commerce and Whitney
National Bank) and Citibank, N.A., as Agent (filed as
Exhibit 4(a)17 to Form 10-K for the year ended December
31, 1996 in 1-11299).
System Energy
(b) 1 -- Mortgage and Deed of Trust, dated as of June 15,
1977, as amended by twenty-one Supplemental Indentures
(A-1 in 70-5890 (Mortgage); B and C to Rule 24
Certificate in 70-5890 (First); B to Rule 24 Certificate
in 70-6259 (Second); 20(a)-5 to Form 10-Q for the quarter
ended June 30, 1981, in 1-3517 (Third); A-1(e)-1 to
Rule 24 Certificate in 70-6985 (Fourth); B to Rule 24
Certificate in 70-7021 (Fifth); B to Rule 24 Certificate
in 70-7021 (Sixth); A-3(b) to Rule 24 Certificate in
70-7026 (Seventh); A-3(b) to Rule 24 Certificate in
70-7158 (Eighth); B to Rule 24 Certificate in 70-7123
(Ninth); B-1 to Rule 24 Certificate in 70-7272 (Tenth);
B-2 to Rule 24 Certificate in 70-7272 (Eleventh); B-3 to
Rule 24 Certificate in 70-7272 (Twelfth); B-1 to Rule 24
Certificate in 70-7382 (Thirteenth); B-2 to Rule 24
Certificate in 70-7382 (Fourteenth); A-2(c) to Rule 24
Certificate in 70-7946 (Fifteenth); A-2(c) to Rule 24
Certificate in 70-7946 (Sixteenth); A-2(d) to Rule 24
Certificate in 70-7946 (Seventeenth); A-2(e) to Rule 24
Certificate dated May 4, 1993 in 70-7946 (Eighteenth); A-
2(g) to Rule 24 Certificate dated May 6, 1994, in 70-7946
(Nineteenth); A-2(a)(1) to Rule 24 Certificate dated
August 8, 1996 in File No. 70-8511 (Twentieth); and A-
2(a)(2) to Rule 24 Certificate dated August 8, 1996 in
File No. 70-8511 (Twenty-first)).
(b) 2 -- Facility Lease No. 1, dated as of December 1,
1988, between Meridian Trust Company and Stephen M. Carta
(Steven Kaba, successor), as Owner Trustees, and System
Energy (B-2(c)(1) to Rule 24 Certificate dated January 9,
1989 in 70-7561), as supplemented by Lease Supplement No.
1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24
Certificate dated April 21, 1989 in 70-7561) and Lease
Supplement No. 2 dated as of January 1, 1994 (B-3(d) to
Rule 24 Certificate dated January 31, 1994 in 70-8215).
(b) 3 -- Facility Lease No. 2, dated as of December 1, 1988
between Meridian Trust Company and Stephen M. Carta
(Steven Kaba, successor), as Owner Trustees, and System
Energy (B-2(c)(2) to Rule 24 Certificate dated January 9,
1989 in 70-7561), as supplemented by Lease Supplement No.
1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24
Certificate dated April 21, 1989 in 70-7561) and Lease
Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule
24 Certificate dated January 31, 1994 in 70-8215).
(b) 4 -- Indenture (for Unsecured Debt Securities), dated
as of September 1, 1995, between System Energy Resources,
Inc., and Chemical Bank (B-10(a) to Rule 24 Certificate
in 70-8511).
Entergy Arkansas
(c) 1 -- Mortgage and Deed of Trust, dated as of
October 1, 1944, as amended by fifty-fourth Supplemental
Indentures (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121
(First); 7(c) in 2-7605 (Second); 7(d) in 2-8100 (Third);
7(a)-4 in 2-8482 (Fourth); 7(a)-5 in 2-9149 (Fifth);
4(a)-6 in 2-9789 (Sixth); 4(a)-7 in 2-10261 (Seventh);
4(a)-8 in 2-11043 (Eighth); 2(b)-9 in 2-11468 (Ninth);
2(b)-10 in 2-15767 (Tenth); D in 70-3952 (Eleventh); D in
70-4099 (Twelfth); 4(d) in 2-23185 (Thirteenth); 2(c) in
2-24414 (Fourteenth); 2(c) in 2-25913 (Fifteenth); 2(c)
in 2-28869 (Sixteenth); 2(d) in 2-28869 (Seventeenth);
2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646
(Nineteenth); 2(c) in 2-39253 (Twentieth); 2(c) in
2-41080 (Twenty-first); C-1 to Rule 24 Certificate in
70-5151 (Twenty-second); C-1 to Rule 24 Certificate in
70-5257 (Twenty-third); C to Rule 24 Certificate in
70-5343 (Twenty-fourth); C-1 to Rule 24 Certificate in
70-5404 (Twenty-fifth); C to Rule 24 Certificate in
70-5502 (Twenty-sixth); C-1 to Rule 24 Certificate in
70-5556 (Twenty-seventh); C-1 to Rule 24 Certificate in
70-5693 (Twenty-eighth); C-1 to Rule 24 Certificate in
70-6078 (Twenty-ninth); C-1 to Rule 24 Certificate in
70-6174 (Thirtieth); C-1 to Rule 24 Certificate in
70-6246 (Thirty-first); C-1 to Rule 24 Certificate in
70-6498 (Thirty-second); A-4b-2 to Rule 24 Certificate in
70-6326 (Thirty-third); C-1 to Rule 24 Certificate in
70-6607 (Thirty-fourth); C-1 to Rule 24 Certificate in
70-6650 (Thirty-fifth); C-1 to Rule 24 Certificate, dated
December 1, 1982, in 70-6774 (Thirty-sixth); C-1 to
Rule 24 Certificate, dated February 17, 1983, in 70-6774
(Thirty-seventh); A-2(a) to Rule 24 Certificate, dated
December 5, 1984, in 70-6858 (Thirty-eighth); A-3(a) to
Rule 24 Certificate in 70-7127 (Thirty-ninth); A-7 to
Rule 24 Certificate in 70-7068 (Fortieth); A-8(b) to
Rule 24 Certificate dated July 6, 1989 in 70-7346
(Forty-first); A-8(c) to Rule 24 Certificate, dated
February 1, 1990 in 70-7346 (Forty-second); 4 to Form
10-Q for the quarter ended September 30, 1990 in 1-10764
(Forty-third); A-2(a) to Rule 24 Certificate, dated
November 30, 1990, in 70-7802 (Forty-fourth); A-2(b) to
Rule 24 Certificate, dated January 24, 1991, in 70-7802
(Forty-fifth); 4(d)(2) in 33-54298 (Forty-sixth); 4(c)(2)
to Form 10-K for the year ended December 31, 1992 in 1-
10764 (Forty-seventh); 4(b) to Form 10-Q for the quarter
ended June 30, 1993 in 1-10764 (Forty-eighth); 4(c) to
Form 10-Q for the quarter ended June 30, 1993 in 1-10764
(Forty-ninth); 4(b) to Form 10-Q for the quarter ended
September 30, 1993 in 1-10764 (Fiftieth); 4(c) to Form 10-
Q for the quarter ended September 30, 1993 in 1-10764
(Fifty-first); 4(a) to Form 10-Q for the quarter ended
June 30, 1994 (Fifty-second); C-2 to Form U5S for the
year ended December 31, 1995 (Fifty-third); and C-2(a) to
Form U5S for the year ended December 31, 1996 (Fifty-
fourth)).
(c) 2 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities between Entergy
Arkansas and Bank of New York (as Trustee), dated as of
August 1, 1996 (filed as Exhibit A-1(a) to Rule 24
Certificate dated August 26, 1996 in File No. 70-8723).
(c) 3 -- Amended and Restated Trust Agreement of
Entergy Arkansas Capital I, dated as of August 14, 1996
(filed as Exhibit A-3(a) to Rule 24 Certificate dated
August 26, 1996 in File No. 70-8723).
(c) 4 -- Guarantee Agreement between Entergy Arkansas
(as Guarantor) and The Bank of New York (as Trustee),
dated as of August 14, 1996, with respect to Entergy
Arkansas Capital I's obligations on its 8 1/2% Cumulative
Quarterly Income Preferred Securities, Series A (filed as
Exhibit A-4(a) to Rule 24 Certificate dated August 26,
1996 in File No. 70-8723).
Entergy Gulf States
(d) 1 -- Indenture of Mortgage, dated September 1, 1926, as
amended by certain Supplemental Indentures (B-a-I-1 in
Registration No. 2-2449 (Mortgage); 7-A-9 in Registration
No. 2-6893 (Seventh); B to Form 8-K dated September 1,
1959 (Eighteenth); B to Form 8-K dated February 1, 1966
(Twenty-second); B to Form 8-K dated March 1, 1967
(Twenty-third); C to Form 8-K dated March 1, 1968 (Twenty-
fourth); B to Form 8-K dated November 1, 1968 (Twenty-
fifth); B to Form 8-K dated April 1, 1969 (Twenty-sixth);
2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4-2 to
Form 10-K for the year ended December 31, 1984 in 1-2703
(Forty-eighth); 4-2 to Form 10-K for the year ended
December 31, 1988 in 1-2703 (Fifty-second); 4 to Form 10-
K for the year ended December 31, 1991 in 1-2703 (Fifty-
third); 4 to Form 8-K dated July 29, 1992 in 1-2703
(Fifth-fourth); 4 to Form 10-K dated December 31, 1992
in 1-2703 (Fifty-fifth); 4 to Form 10-Q for the quarter
ended March 31, 1993 in 1-2703 (Fifty-sixth); and 4-2 to
Amendment No. 9 to Registration No. 2-76551 (Fifty-
seventh)).
(d) 2 -- Indenture, dated March 21, 1939, accepting
resignation of The Chase National Bank of the City of New
York as trustee and appointing Central Hanover Bank and
Trust Company as successor trustee (B-a-1-6 in
Registration No. 2-4076).
(d) 3 -- Trust Indenture for 9.72% Debentures due July 1,
1998 (4 in Registration No. 33-40113).
(d) 4 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities, dated as of
January 15, 1997 (filed as Exhibit A-11(a) to Rule 24
Certificate dated February 6, 1997 in File No. 70-8721).
(d) 5 -- Amended and Restated Trust Agreement of Entergy
Gulf States Capital I dated January 28, 1997 of Series A
Preferred Securities (filed as Exhibit A-13(a) to Rule 24
Certificate dated February 6, 1997 in File No. 70-8721).
(d) 6 -- Guarantee Agreement between Entergy Gulf States,
Inc. (as Guarantor) and The Bank of New York (as Trustee)
dated as of January 28, 1997 with respect to Entergy Gulf
States Capital I's obligation on its 8.75% Cumulative
Quarterly Income Preferred Securities, Series A (filed as
Exhibit A-14(a) to Rule 24 Certificate dated February 6,
1997 in File No. 70-8721).
Entergy Louisiana
(e) 1 -- Mortgage and Deed of Trust, dated as of April 1,
1944, as amended by fifty-one Supplemental Indentures
(7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); 7(c)
in 2-8636 (Second); 4(b)-3 in 2-10412 (Third); 4(b)-4 in
2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862
(Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429
(Eighth); 4(c)-9 in 2-25801 (Ninth); 4(c)-10 in 2-26911
(Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659
(Twelfth); C to Rule 24 Certificate in 70-4793
(Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 2(b)-2 in
2-39437 (Fifteenth); 2(b)-2 in 2-42523 (Sixteenth); C to
Rule 24 Certificate in 70-5242 (Seventeenth); C to
Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to
Rule 24 Certificate in 70-5449 (Nineteenth); C-1 to
Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to
Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to
Rule 24 Certificate in 70-5711 (Twenty-second); C-1 to
Rule 24 Certificate in 70-5919 (Twenty-third); C-1 to
Rule 24 Certificate in 70-6102 (Twenty-fourth); C-1 to
Rule 24 Certificate in 70-6169 (Twenty-fifth); C-1 to
Rule 24 Certificate in 70-6278 (Twenty-sixth); C-1 to
Rule 24 Certificate in 70-6355 (Twenty-seventh); C-1 to
Rule 24 Certificate in 70-6508 (Twenty-eighth); C-1 to
Rule 24 Certificate in 70-6556 (Twenty-ninth); C-1 to
Rule 24 Certificate in 70-6635 (Thirtieth); C-1 to
Rule 24 Certificate in 70-6834 (Thirty-first); C-1 to
Rule 24 Certificate in 70-6886 (Thirty-second); C-1 to
Rule 24 Certificate in 70-6993 (Thirty-third); C-2 to
Rule 24 Certificate in 70-6993 (Thirty-fourth); C-3 to
Rule 24 Certificate in 70-6993 (Thirty-fifth); A-2(a) to
Rule 24 Certificate in 70-7166 (Thirty-sixth); A-2(a) in
70-7226 (Thirty-seventh); C-1 to Rule 24 Certificate in
70-7270 (Thirty-eighth); 4(a) to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988, in 1-8474
(Thirty-ninth); A-2(b) to Rule 24 Certificate in 70-7553
(Fortieth); A-2(d) to Rule 24 Certificate in 70-7553
(Forty-first); A-3(a) to Rule 24 Certificate in 70-7822
(Forty-second); A-3(b) to Rule 24 Certificate in 70-7822
(Forty-third); A-2(b) to Rule 24 Certificate in File
No. 70-7822 (Forty-fourth); A-3(c) to Rule 24 Certificate
in 70-7822 (Forty-fifth); A-2(c) to Rule 24 Certificate
dated April 7, 1993 in 70-7822 (Forty-sixth); A-3(d) to
Rule 24 Certificate dated June 4, 1993 in 70-7822 (Forth-
seventh); A-3(e) to Rule 24 Certificate dated December
21, 1993 in 70-7822 (Forty-eighth); A-3(f) to Rule 24
Certificate dated August 1, 1994 in 70-7822 (Forty-
ninth); A-4(c) to Rule 24 Certificate dated September 28,
1994 in 70-7653 (Fiftieth) and A-2(a) to Rule 24
Certificate dated April 4, 1996 in File No. 70-8487
(Fifty-first)).
(e) 2 -- Facility Lease No. 1, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-1 in Registration
No. 33-30660).
(e) 3 -- Facility Lease No. 2, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-2 in Registration
No. 33-30660).
(e) 4 -- Facility Lease No. 3, dated as of September 1,
1989, between First National Bank of Commerce, as Owner
Trustee, and Entergy Louisiana (4(c)-3 in Registration
No. 33-30660).
(e) 5 -- Indenture for Unsecured Subordinated Debt
Securities relating to Trust Securities, dated as of July
1, 1996 (filed as Exhibit A-14(a) to Rule 24 Certificate
dated July 25, 1996 in File No. 70-8487).
(e) 6 -- Amended and Restated Trust Agreement of Entergy
Louisiana Capital I dated July 16, 1996 of Series A
Preferred Securities (filed as Exhibit A-16(a) to Rule 24
Certificate dated July 25, 1996 in File No. 70-8487).
(e) 7 -- Guarantee Agreement between Entergy Louisiana,
Inc. (as Guarantor) and The Bank of New York (as Trustee)
dated as of July 16, 1996 with respect to Entergy
Louisiana Capital I's obligation on its 9% Cumulative
Quarterly Income Preferred Securities, Series A (filed as
Exhibit A-19(a) to Rule 24 Certificate dated July 25,
1996 in File No. 70-8487).
Entergy Mississippi
(f) 1 -- Mortgage and Deed of Trust, dated as of September
1, 1944, as amended by twenty-five Supplemental
Indentures (7(d) in 2-5437 (Mortgage); 7(b) in 2-7051
(First); 7(c) in 2-7763 (Second); 7(d) in 2-8484 (Third);
4(b)-4 in 2-10059 (Fourth); 2(b)-5 in 2-13942 (Fifth);
A-11 to Form U-1 in 70-4116 (Sixth); 2(b)-7 in 2-23084
(Seventh); 4(c)-9 in 2-24234 (Eighth); 2(b)-9(a) in
2-25502 (Ninth); A-11(a) to Form U-1 in 70-4803 (Tenth);
A-12(a) to Form U-1 in 70-4892 (Eleventh); A-13(a) to
Form U-1 in 70-5165 (Twelfth); A-14(a) to Form U-1 in
70-5286 (Thirteenth); A-15(a) to Form U-1 in 70-5371
(Fourteenth); A-16(a) to Form U-1 in 70-5417 (Fifteenth);
A-17 to Form U-1 in 70-5484 (Sixteenth); 2(a)-19 in
2-54234 (Seventeenth); C-1 to Rule 24 Certificate in
70-6619 (Eighteenth); A-2(c) to Rule 24 Certificate in
70-6672 (Nineteenth); A-2(d) to Rule 24 Certificate in
70-6672 (Twentieth); C-1(a) to Rule 24 Certificate in
70-6816 (Twenty-first); C-1(a) to Rule 24 Certificate in
70-7020 (Twenty-second); C-1(b) to Rule 24 Certificate in
70-7020 (Twenty-third); C-1(a) to Rule 24 Certificate in
70-7230 (Twenty-fourth); and A-2(a) to Rule 24
Certificate in 70-7419 (Twenty-fifth)).
(f) 2 -- Mortgage and Deed of Trust, dated as of
February 1, 1988, as amended by eleventh Supplemental
Indentures (A-2(a)-2 to Rule 24 Certificate in 70-7461
(Mortgage); A-2(b)-2 in 70-7461 (First); A-5(b) to
Rule 24 Certificate in 70-7419 (Second); A-4(b) to
Rule 24 Certificate in 70-7554 (Third); A-1(b)-1 to Rule
24 Certificate in 70-7737 (Fourth); A-2(b) to Rule 24
Certificate dated November 24, 1992 in 70-7914 (Fifth);
A-2(e) to Rule 24 Certificate dated January 22, 1993 in
70-7914 (Sixth); A-2(g) to Form U-1 in 70-7914 (Seventh);
A-2(i) to Rule 24 Certificate dated November 10, 1993 in
70-7914 (Eighth); A-2(j) to Rule 24 Certificate dated
July 22, 1994 in 70-7914 (Ninth); and (A-2(l) to Rule 24
Certificate dated April 21, 1995 in File 70-7914 (Tenth);
and A-2(a) to Rule 24 Certificate dated June 27, 1997 in
File 70-8719 (Eleventh)).
Entergy New Orleans
(g) 1 -- Mortgage and Deed of Trust, dated as of May 1,
1987, as amended by six Supplemental Indentures (A-2(c)
to Rule 24 Certificate in 70-7350 (Mortgage); A-5(b) to
Rule 24 Certificate in 70-7350 (First); A-4(b) to Rule 24
Certificate in 70-7448 (Second); 4(f)4 to Form 10-K for
the year ended December 31, 1992 in 0-5807 (Third); 4(a)
to Form 10-Q for the quarter ended September 30, 1993 in
0-5807 (Fourth); 4(a) to Form 8-K dated April 26, 1995 in
File No. 0-5807 (Fifth); and 4(a) to Form 8-K dated March
22, 1996 in File No. 0-5807 (Sixth)).
Entergy London
(h) 1 -- Indenture for Unsecured Subordinated Debt
Securities relating to Preferred Securities, dated as of
November 1, 1997 (filed as Exhibit A-1(a) to Rule 24
Certificate dated December 4, 1997 in File No. 70-9081).
(h) 2 -- Amended and Restated Limited Partnership Agreement
of Entergy London Capital, L.P. dated as of November 19,
1997 of Series A Preferred Securities (filed as Exhibit A-
5(a) to Rule 24 Certificate dated December 4, 1997 in
File No. 70-9081).
(h) 3 -- Guarantee Agreement between Entergy London
Investments plc (as Guarantor) and The Bank of New York
(as Trustee) dated as of November 19, 1997 with respect
to Entergy London Capital, L.P.'s obligation on its 8-
5/8% Cumulative Quarterly Income Preferred Securities,
Series A (filed as Exhibit A-6(a) to Rule 24 Certificate
dated December 4, 1997 in File No. 70-9081).
*(h) 4 -- The BPS1,010,000,000 Restated Credit Agreement
dated November 17, 1997 among Entergy Power UK plc, ABN
AMRO Bank N.V., Bank of America International Limited and
Union Bank of Switzerland as arrangers and ABN AMRO Bank
N.V. as Agent for the banks named therein.
(10) Material Contracts
Entergy Corporation
(a) 1 -- Agreement, dated April 23, 1982, among certain
System companies, relating to System Planning and
Development and Intra-System Transactions (10(a)1 to
Form 10-K for the year ended December 31, 1982, in
1-3517).
(a) 2 -- Middle South Utilities (now Entergy Corporation)
System Agency Agreement, dated December 11, 1970 (5(a)-2
in 2-41080).
(a) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated
December 11, 1970 (5(a)-4 in 2-41080).
(a) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a)-4 in 2-41080).
(a) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(a) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-41080).
(a) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (5(a)-6 in 2-43175).
(a) 8 -- Amendment, dated April 27, 1984, to Service
Agreement with Entergy Services (10(a)-7 to Form 10-K for
the year ended December 31, 1984, in 1-3517).
(a) 9 -- Amendment, dated August 1, 1988, to Service
Agreement with Entergy Services (10(a)-8 to Form 10-K for
the year ended December 31, 1988, in 1-3517).
(a) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(a)-9 to Form 10-K for
the year ended December 31, 1990, in 1-3517).
(a) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 for the year
ended December 31, 1994 in 1-3517).
(a) 12-- Availability Agreement, dated June 21, 1974, among
System Energy and certain other System companies (B to
Rule 24 Certificate, dated June 24, 1974, in 70-5399).
(a) 13-- First Amendment to Availability Agreement, dated
as of June 30, 1977 (B to Rule 24 Certificate, dated
June 24, 1977, in 70-5399).
(a) 14-- Second Amendment to Availability Agreement, dated
as of June 15, 1981 (E to Rule 24 Certificate, dated
July 1, 1981, in 70-6592).
(a) 15-- Third Amendment to Availability Agreement, dated
as of June 28, 1984 (B-13(a) to Rule 24 Certificate,
dated July 6, 1984, in 70-6985).
(a) 16-- Fourth Amendment to Availability Agreement, dated
as of June 1, 1989 (A to Rule 24 Certificate, dated
June 8, 1989, in 70-5399).
(a) 17-- Eighteenth Assignment of Availability Agreement,
Consent and Agreement, dated as of September 1, 1986,
with United States Trust Company of New York and
Gerard F. Ganey, as Trustees (C-2 to Rule 24 Certificate,
dated October 1, 1986, in 70-7272).
(a) 18-- Nineteenth Assignment of Availability Agreement,
Consent and Agreement, dated as of September 1, 1986,
with United States Trust Company of New York and
Gerard F. Ganey, as Trustees (C-3 to Rule 24 Certificate,
dated October 1, 1986, in 70-7272).
(a) 19-- Twenty-sixth Assignment of Availability Agreement,
Consent and Agreement, dated as of October 1, 1992, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (B-2(c) to Rule 24 Certificate, dated
November 2, 1992, in 70-7946).
(a) 20-- Twenty-seventh Assignment of Availability
Agreement, Consent and Agreement, dated as of April 1,
1993, with United States Trust Company of New York and
Gerard F. Ganey as Trustees (B-2(d) to Rule 24
Certificate dated May 4, 1993 in 70-7946).
(a) 21-- Twenty-ninth Assignment of Availability Agreement,
Consent and Agreement, dated as of April 1, 1994, with
United States Trust Company of New York and Gerard F.
Ganey as Trustees (B-2(f) to Rule 24 Certificate dated
May 6, 1994, in 70-7946).
(a) 22-- Thirtieth Assignment of Availability Agreement,
Consent and Agreement, dated as of August 1, 1996, among
System Energy, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi and Entergy New Orleans, and United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (filed as Exhibit B-2(a) to Rule 24 Certificate
dated August 8, 1996 in File No. 70-8511).
(a) 23-- Thirty-first Assignment of Availability Agreement,
Consent and Agreement, dated as of August 1, 1996, among
System Energy, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans, and United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (filed as Exhibit B-2(b) to Rule 24 Certificate
dated August 8, 1996 in File No. 70-8511).
(a) 24-- Thirty-second Assignment of Availability
Agreement, Consent and Agreement, dated as of December
27, 1996, among System Energy, Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans,
and The Chase Manhattan Bank (filed as Exhibit B-2(a) to
Rule 24 Certificate dated January 13, 1997 in File No. 70-
7561).
(a) 25-- Capital Funds Agreement, dated June 21, 1974,
between Entergy Corporation and System Energy (C to
Rule 24 Certificate, dated June 24, 1974, in 70-5399).
(a) 26-- First Amendment to Capital Funds Agreement, dated
as of June 1, 1989 (B to Rule 24 Certificate, dated
June 8, 1989, in 70-5399).
(a) 27-- Eighteenth Supplementary Capital Funds Agreement
and Assignment, dated as of September 1, 1986, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (D-2 to Rule 24 Certificate, dated
October 1, 1986, in 70-7272).
(a) 28-- Nineteenth Supplementary Capital Funds Agreement
and Assignment, dated as of September 1, 1986, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (D-3 to Rule 24 Certificate, dated
October 1, 1986, in 70-7272).
(a) 29-- Twenty-sixth Supplementary Capital Funds Agreement
and Assignment, dated as of October 1, 1992, with United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-3(c) to Rule 24 Certificate dated November 2,
1992 in 70-7946).
(a) 30-- Twenty-seventh Supplementary Capital Funds
Agreement and Assignment, dated as of April 1, 1993, with
United States Trust Company of New York and Gerard F.
Ganey, as Trustees (B-3(d) to Rule 24 Certificate dated
May 4, 1993 in 70-7946).
(a) 31-- Twenty-ninth Supplementary Capital Funds Agreement
and Assignment, dated as of April 1, 1994, with United
States Trust Company of New York and Gerard F. Ganey, as
Trustees (B-3(f) to Rule 24 Certificate dated May 6,
1994, in 70-7946).
(a) 32-- Thirtieth Supplementary Capital Funds Agreement
and Assignment, dated as of August 1, 1996, among Entergy
Corporation, System Energy and United States Trust
Company of New York and Gerard F. Ganey, as Trustees
(filed as Exhibit B-3(a) to Rule 24 Certificate dated
August 8, 1996 in File No. 70-8511).
(a) 33-- Thirty-first Supplementary Capital Funds Agreement
and Assignment, dated as of August 1, 1996, among Entergy
Corporation, System Energy and United States Trust
Company of New York and Gerard F. Ganey, as Trustees
(filed as Exhibit B-3(b) to Rule 24 Certificate dated
August 8, 1996 in File No. 70-8511).
(a) 34-- Thirty-second Supplementary Capital Funds
Agreement and Assignment, dated as of December 27, 1996,
among Entergy Corporation, System Energy and The Chase
Manhattan Bank (filed as Exhibit B-1(a) to Rule 24
Certificate dated January 13, 1997 in File No. 70-7561).
(a) 35-- First Amendment to Supplementary Capital Funds
Agreements and Assignments, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy, Deposit
Guaranty National Bank, United States Trust Company of
New York and Gerard F. Ganey (C to Rule 24 Certificate,
dated June 8, 1989, in 70-7026).
(a) 36-- First Amendment to Supplementary Capital Funds
Agreements and Assignments, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy, United
States Trust Company of New York and Gerard F. Ganey (C
to Rule 24 Certificate, dated June 8, 1989, in 70-7123).
(a) 37-- First Amendment to Supplementary Capital Funds
Agreement and Assignment, dated as of June 1, 1989, by
and between Entergy Corporation, System Energy and
Chemical Bank (C to Rule 24 Certificate, dated June 8,
1989, in 70-7561).
+(a) 38-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a)-42 to Form 10-K for the year ended
December 31, 1985, in 1-3517).
(a) 39-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(a) 40-- Joint Construction, Acquisition and Ownership
Agreement, dated as of May 1, 1980, between System Energy
and SMEPA (B-1(a) in 70-6337), as amended by Amendment
No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and
Amendment No. 2, dated as of October 31, 1980 (1 to Rule
24 Certificate, dated October 30, 1981, in 70-6337).
(a) 41-- Operating Agreement dated as of May 1, 1980,
between System Energy and SMEPA (B(2)(a) in 70-6337).
(a) 42-- Assignment, Assumption and Further Agreement
No. 1, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(1) to Rule 24 Certificate, dated January 9, 1989,
in 70-7561).
(a) 43-- Assignment, Assumption and Further Agreement
No. 2, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(2) to Rule 24 Certificate, dated January 9, 1989,
in 70-7561).
(a) 44-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B(3)(a) in 70-6337).
(a) 45-- Grand Gulf Unit No. 2 Supplementary Agreement,
dated as of February 7, 1986, between System Energy and
SMEPA (10(aaa) in 33-4033).
(a) 46-- Compromise and Settlement Agreement, dated June 4,
1982, between Texaco, Inc. and Entergy Louisiana (28(a)
to Form 8-K, dated June 4, 1982, in 1-3517).
+(a) 47-- Post-Retirement Plan (10(a)37 to Form 10-K for the
year ended December 31, 1983, in 1-3517).
(a) 48-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a)-39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(a) 49-- First Amendment to Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(a) 50-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(a) 51-- Middle South Utilities Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (Exhibit D-1 to Form U5S for the
year ended December 31, 1987).
(a) 52-- First Amendment, dated January 1, 1990, to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(a) 53-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(a) 54-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(a) 55-- Fourth Amendment dated April 1, 1997 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-5 to Form U5S for the year
ended December 31, 1996).
(a) 56-- Guaranty Agreement between Entergy Corporation and
Entergy Arkansas, dated as of September 20, 1990 (B-1(a)
to Rule 24 Certificate, dated September 27, 1990, in
70-7757).
(a) 57-- Guarantee Agreement between Entergy Corporation
and Entergy Louisiana, dated as of September 20, 1990
(B-2(a) to Rule 24 Certificate, dated September 27, 1990,
in 70-7757).
(a) 58-- Guarantee Agreement between Entergy Corporation
and System Energy, dated as of September 20, 1990 (B-3(a)
to Rule 24 Certificate, dated September 27, 1990, in 70-
7757).
(a) 59-- Loan Agreement between Entergy Operations and
Entergy Corporation, dated as of September 20, 1990
(B-12(b) to Rule 24 Certificate, dated June 15, 1990, in
70-7679).
(a) 60-- Loan Agreement between Entergy Power and Entergy
Corporation, dated as of August 28, 1990 (A-4(b) to Rule
24 Certificate, dated September 6, 1990, in 70-7684).
(a) 61-- Loan Agreement between Entergy Corporation and
Entergy Systems and Service, Inc., dated as of
December 29, 1992 (A-4(b) to Rule 24 Certificate in
70-7947).
+(a) 62-- Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries (10(a) 52 to Form 10-K for
the year ended December 31, 1989, in 1-3517).
+(a) 63-- Entergy Corporation Annual Incentive Plan (10(a)
54 to Form 10-K for the year ended December 31, 1989, in
1-3517).
+(a) 64-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate, dated May
24, 1991, in 70-7831).
+(a) 65-- Retired Outside Director Benefit Plan (10(a)63 to
Form 10-K for the year ended December 31, 1991, in
1-3517).
+(a) 66-- Agreement between Entergy Corporation and Jerry D.
Jackson. (10(a) 67 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(a) 67-- Agreement between Entergy Services, Inc., a
subsidiary of Entergy Corporation, and Gerald D. McInvale
(10(a) 68 to Form 10-K for the year ended December 31,
1992 in 1-3517).
*+(a) 68--Agreement between Entergy Services, Inc., a subsidiary
of Entergy Corporation, and Gerald D. McInvale.
+(a) 69-- Supplemental Retirement Plan (10(a) 69 to Form 10-
K for the year ended December 31, 1992 in 1-3517).
+(a) 70-- Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries (10(a)53 to Form 10-K for
the year ended December 31, 1989 in 1-3517).
+(a) 71-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a) 71 to Form 10-
K for the year ended December 31, 1992 in 1-3517).
+(a) 72-- Executive Disability Plan of Entergy Corporation
and Subsidiaries (10(a) 72 to Form 10-K for the year
ended December 31, 1992 in 1-3517).
+(a) 73-- Executive Medical Plan of Entergy Corporation and
Subsidiaries (10(a) 73 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(a) 74-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries, as amended (10(a) 74 to
Form 10-K for the year ended December 31, 1992 in 1-
3517).
+(a) 75-- Summary Description of Private Ownership Vehicle
Plan of Entergy Corporation and Subsidiaries (10(a) 75 to
Form 10-K for the year ended December 31, 1992 in 1-
3517).
(a) 76-- Agreement and Plan of Reorganization Between
Entergy Corporation and Gulf States Utilities Company,
dated June 5, 1992 (1 to Current Report on Form 8-K dated
June 5, 1992 in 1-3517).
+(a) 77-- Amendment to Defined Contribution Restoration Plan
of Entergy Corporation and Subsidiaries (10(a) 81 to Form
10-K for the year ended December 31, 1993 in 1-11299).
+(a) 78-- System Executive Retirement Plan (10(a) 82 to Form
10-K for the year ended December 31, 1993 in 1-11299).
System Energy
(b) 1 through
(b) 13-- See 10(a)-12 through 10(a)-24 above.
(b) 14 through
(b) 26-- See 10(a)-25 through 10(a)-37 above.
(b) 27-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(b) 28-- Joint Construction, Acquisition and Ownership
Agreement, dated as of May 1, 1980, between System Energy
and SMEPA (B-1(a) in 70-6337), as amended by Amendment
No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and
Amendment No. 2, dated as of October 31, 1980 (1 to
Rule 24 Certificate, dated October 30, 1981, in 70-6337).
(b) 29-- Operating Agreement, dated as of May 1, 1980,
between System Energy and SMEPA (B(2)(a) in 70-6337).
(b) 30-- Installment Sale Agreement, dated as of
December 1, 1983 between System Energy and Claiborne
County, Mississippi (B-1 to First Rule 24 Certificate in
70-6913).
(b) 31-- Installment Sale Agreement, dated as of June 1,
1984, between System Energy and Claiborne County,
Mississippi (B-2 to Second Rule 24 Certificate in
70-6913).
(b) 32-- Installment Sale Agreement, dated as of
December 1, 1984, between System Energy and Claiborne
County, Mississippi (B-1 to First Rule 24 Certificate in
70-7026).
(b) 33-- Amended and Restated Installment Sale Agreement,
dated as of May 1, 1995, between System Energy and
Claiborne County, Mississippi (B-6(a) to Rule 24
Certificate in 70-8511).
(b) 34- Amended and Restated Installment Sale Agreement, dated
as of February 15, 1996, between System Energy and Claiborne
County, Mississippi (filed as Exhibit B-6(a) to Rule 24
Certificate dated March 4, 1996 in File No. 70-8511).
(b) 35-- Facility Lease No. 1, dated as of December 1,
1988, between Meridian Trust Company and Stephen M. Carta
(Stephen J. Kaba, successor), as Owner Trustees, and
System Energy (B-2(c)(1) to Rule 24 Certificate dated
January 9, 1989 in 70-7561), as supplemented by Lease
Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1)
to Rule 24 Certificate dated April 21, 1989 in 70-7561)
and Lease Supplement No. 2 dated as of January 1, 1994 (B-
3(d) to Rule 24 Certificate dated January 31, 1994 in 70-
8215).
(b) 36-- Facility Lease No. 2, dated as of December 1, 1988
between Meridian Trust Company and Stephen M. Carta
(Stephen J. Kaba, successor), as Owner Trustees, and
System Energy (B-2(c)(2) to Rule 24 Certificate dated
January 9, 1989 in 70-7561), as supplemented by Lease
Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2)
to Rule 24 Certificate dated April 21, 1989 in 70-7561)
and Lease Supplement No. 2 dated as of January 1, 1994 (B-
4(d) Rule 24 Certificate dated January 31, 1994 in 70-
8215).
(b) 37-- Assignment, Assumption and Further Agreement
No. 1, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(1) to Rule 24 Certificate, dated January 9, 1989,
in 70-7561).
(b) 38-- Assignment, Assumption and Further Agreement
No. 2, dated as of December 1, 1988, among System Energy,
Meridian Trust Company and Stephen M. Carta, and SMEPA
(B-7(c)(2) to Rule 24 Certificate, dated January 9, 1989,
in 70-7561).
(b) 39-- Collateral Trust Indenture, dated as of January 1,
1994, among System Energy, GG1B Funding Corporation and
Bankers Trust Company, as Trustee (A-3(e) to Rule 24
Certificate dated January 31, 1994, in 70-8215), as
supplemented by Supplemental Indenture No. 1 dated
January 1, 1994, (A-3(f) to Rule 24 Certificate dated
January 31, 1994, in 70-8215).
(b) 40-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B(3)(a) in 70-6337).
(b) 41-- Grand Gulf Unit No. 2 Supplementary Agreement,
dated as of February 7, 1986, between System Energy and
SMEPA (10(aaa) in 33-4033).
(b) 42-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a)-39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(b) 43-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(b) 44-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(b) 45-- Fuel Lease, dated as of February 24, 1989, between
River Fuel Funding Company #3, Inc. and System Energy
(B-1(b) to Rule 24 Certificate, dated March 3, 1989, in
70-7604).
(b) 46-- System Energy's Consent, dated January 31, 1995,
pursuant to Fuel Lease, dated as of February 24, 1989,
between River Fuel Funding Company #3, Inc. and System
Energy (B-1(c) to Rule 24 Certificate, dated February 13,
1995 in 70-7604).
(b) 47-- Sales Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (D to
Rule 24 Certificate, dated June 26, 1974, in 70-5399).
(b) 48-- Service Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (E to
Rule 24 Certificate, dated June 26, 1974, in 70-5399).
(b) 49-- Partial Termination Agreement, dated as of
December 1, 1986, between System Energy and Entergy
Mississippi (A-2 to Rule 24 Certificate, dated January 8,
1987, in 70-5399).
(b) 50-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(b) 51-- First Amendment, dated January 1, 1990 to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(b) 52-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(b) 53-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(b) 54-- Service Agreement with Entergy Services, dated as
of July 16, 1974, as amended (10(b)-43 to Form 10-K for
the year ended December 31, 1988, in 1-9067).
(b) 55-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(b)-45 to Form 10-K
for the year ended December 31, 1990, in 1-9067).
(b) 56-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a) -11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(b) 57-- Operating Agreement between Entergy Operations and
System Energy, dated as of June 6, 1990 (B-3(b) to Rule
24 Certificate, dated June 15, 1990, in 70-7679).
(b) 58-- Guarantee Agreement between Entergy Corporation
and System Energy, dated as of September 20, 1990 (B-3(a)
to Rule 24 Certificate, dated September 27, 1990, in
70-7757).
+(b) 59-- Agreement between System Energy and Donald C.
Hintz (10(b)47 to Form 10-K for the year ended
December 31, 1991, in 1-9067).
+(b) 60-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a)-42 to Form 10-K for the year ended
December 31, 1985 in 1-3517).
+(b) 61-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(b) 62-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
(b) 63-- Amended and Restated Reimbursement Agreement,
dated as of December 1, 1988 as amended and restated as
of December 27, 1996, among System Energy Resources,
Inc., The Bank of Tokyo-Mitsubishi, Ltd., as Funding Bank
and The Chase Manhattan Bank (as successor by merger with
Chemical Bank), as administrating bank, Union Bank of
California, N.A., as documentation agent, and the Banks
named therein, as Participating Banks (B-3(a) to Rule 24
Certificate dated January 13, 1997 in 70-7561).
Entergy Arkansas
(c) 1 -- Agreement, dated April 23, 1982, among Entergy
Arkansas and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982, in 1-3517).
(c) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)2 in 2-41080).
(c) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a)-4 in 2-41080).
(c) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(c) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(c) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-41080).
(c) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (5(a)- 6 in 2-43175).
(c) 8 -- Amendment, dated April 27, 1984, to Service
Agreement, with Entergy Services (10(a)- 7 to Form 10-K
for the year ended December 31, 1984, in 1-3517).
(c) 9 -- Amendment, dated August 1, 1988, to Service
Agreement with Entergy Services (10(c)- 8 to Form 10-K
for the year ended December 31, 1988, in 1-10764).
(c) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(c)-9 to Form 10-K for
the year ended December 31, 1990, in 1-10764).
(c) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(c) 12 through
(c) 24-- See 10(a)-12 through 10(a)-24 above.
(c) 25-- Agreement, dated August 20, 1954, between Entergy
Arkansas and the United States of America (SPA)(13(h) in
2-11467).
(c) 26-- Amendment, dated April 19, 1955, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-2 in 2-41080).
(c) 27-- Amendment, dated January 3, 1964, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-3 in 2-41080).
(c) 28-- Amendment, dated September 5, 1968, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-4 in 2-41080).
(c) 29-- Amendment, dated November 19, 1970, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-5 in 2-41080).
(c) 30-- Amendment, dated July 18, 1961, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-6 in 2-41080).
(c) 31-- Amendment, dated December 27, 1961, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-7 in 2-41080).
(c) 32-- Amendment, dated January 25, 1968, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-8 in 2-41080).
(c) 33-- Amendment, dated October 14, 1971, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-9 in 2-43175).
(c) 34-- Amendment, dated January 10, 1977, to the United
States of America (SPA) Contract, dated August 20, 1954
(5(d)-10 in 2-60233).
(c) 35-- Agreement, dated May 14, 1971, between Entergy
Arkansas and the United States of America (SPA) (5(e) in
2-41080).
(c) 36-- Amendment, dated January 10, 1977, to the United
States of America (SPA) Contract, dated May 14, 1971
(5(e)-1 in 2-60233).
(c) 37-- Contract, dated May 28, 1943, Amendment to
Contract, dated July 21, 1949, and Supplement to
Amendment to Contract, dated December 30, 1949, between
Entergy Arkansas and McKamie Gas Cleaning Company;
Agreements, dated as of September 30, 1965, between
Entergy Arkansas and former stockholders of McKamie Gas
Cleaning Company; and Letter Agreement, dated June 22,
1966, by Humble Oil & Refining Company accepted by
Entergy Arkansas on June 24, 1966 (5(k)-7 in 2-41080).
(c) 38-- Agreement, dated April 3, 1972, between Entergy
Services and Gulf United Nuclear Fuels Corporation
(5(l)-3 in 2-46152).
(c) 39-- Fuel Lease, dated as of December 22, 1988, between
River Fuel Trust #1 and Entergy Arkansas (B-1(b) to Rule
24 Certificate in 70-7571).
(c) 40-- White Bluff Operating Agreement, dated June 27,
1977, among Entergy Arkansas and Arkansas Electric
Cooperative Corporation and City Water and Light Plant of
the City of Jonesboro, Arkansas (B-2(a) to Rule 24
Certificate, dated June 30, 1977, in 70-6009).
(c) 41-- White Bluff Ownership Agreement, dated June 27,
1977, among Entergy Arkansas and Arkansas Electric
Cooperative Corporation and City Water and Light Plant of
the City of Jonesboro, Arkansas (B-1(a) to Rule 24
Certificate, dated June 30, 1977, in 70-6009).
(c) 42-- Agreement, dated June 29, 1979, between Entergy
Arkansas and City of Conway, Arkansas (5(r)-3 in
2-66235).
(c) 43-- Transmission Agreement, dated August 2, 1977,
between Entergy Arkansas and City Water and Light Plant
of the City of Jonesboro, Arkansas (5(r)-3 in 2-60233).
(c) 44-- Power Coordination, Interchange and Transmission
Service Agreement, dated as of June 27, 1977, between
Arkansas Electric Cooperative Corporation and Entergy
Arkansas (5(r)-4 in 2-60233).
(c) 45-- Independence Steam Electric Station Operating
Agreement, dated July 31, 1979, among Entergy Arkansas
and Arkansas Electric Cooperative Corporation and City
Water and Light Plant of the City of Jonesboro, Arkansas
and City of Conway, Arkansas (5(r)-6 in 2-66235).
(c) 46-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Operating Agreement
(10(c) 51 to Form 10-K for the year ended December 31,
1984, in 1-10764).
(c) 47-- Independence Steam Electric Station Ownership
Agreement, dated July 31, 1979, among Entergy Arkansas
and Arkansas Electric Cooperative Corporation and City
Water and Light Plant of the City of Jonesboro, Arkansas
and City of Conway, Arkansas (5(r)-7 in 2-66235).
(c) 48-- Amendment, dated December 28, 1979, to the
Independence Steam Electric Station Ownership Agreement
(5(r)-7(a) in 2-66235).
(c) 49-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Ownership Agreement
(10(c) 54 to Form 10-K for the year ended December 31,
1984, in 1-10764).
(c) 50-- Owner's Agreement, dated November 28, 1984, among
Entergy Arkansas, Entergy Mississippi, other co-owners of
the Independence Station (10(c) 55 to Form 10-K for the
year ended December 31, 1984, in 1-10764).
(c) 51-- Consent, Agreement and Assumption, dated December
4, 1984, among Entergy Arkansas, Entergy Mississippi,
other co-owners of the Independence Station and United
States Trust Company of New York, as Trustee (10(c) 56 to
Form 10-K for the year ended December 31, 1984, in
1-10764).
(c) 52-- Power Coordination, Interchange and Transmission
Service Agreement, dated as of July 31, 1979, between
Entergy Arkansas and City Water and Light Plant of the
City of Jonesboro, Arkansas (5(r)-8 in 2-66235).
(c) 53-- Power Coordination, Interchange and Transmission
Agreement, dated as of June 29, 1979, between City of
Conway, Arkansas and Entergy Arkansas (5(r)-9 in
2-66235).
(c) 54-- Agreement, dated June 21, 1979, between Entergy
Arkansas and Reeves E. Ritchie ((10)(b)-90 to Form 10-K
for the year ended December 31, 1980, in 1-10764).
(c) 55-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
+(c) 56-- Post-Retirement Plan (10(b) 55 to Form 10-K for
the year ended December 31, 1983, in 1-10764).
(c) 57-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(c) 58-- First Amendment to Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy, Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(c) 59-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(c) 60-- Contract For Disposal of Spent Nuclear Fuel and/or
High-Level Radioactive Waste, dated June 30, 1983, among
the DOE, System Fuels and Entergy Arkansas (10(b)-57 to
Form 10-K for the year ended December 31, 1983, in
1-10764).
(c) 61-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(c) 62-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(c) 63-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(c) 64-- Third Amendment dated January 1, 1994, to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(c) 65-- Assignment of Coal Supply Agreement, dated
December 1, 1987, between System Fuels and Entergy
Arkansas (B to Rule 24 letter filing, dated November 10,
1987, in 70-5964).
(c) 66-- Coal Supply Agreement, dated December 22, 1976,
between System Fuels and Antelope Coal Company (B-1 in
70-5964), as amended by First Amendment (A to Rule 24
Certificate in 70-5964); Second Amendment (A to Rule 24
letter filing, dated December 16, 1983, in 70-5964); and
Third Amendment (A to Rule 24 letter filing, dated
November 10, 1987 in 70-5964).
(c) 67-- Operating Agreement between Entergy Operations and
Entergy Arkansas, dated as of June 6, 1990 (B-1(b) to
Rule 24 Certificate, dated June 15, 1990, in 70-7679).
(c) 68-- Guaranty Agreement between Entergy Corporation and
Entergy Arkansas, dated as of September 20, 1990 (B-1(a)
to Rule 24 Certificate, dated September 27, 1990, in
70-7757).
(c) 69-- Agreement for Purchase and Sale of Independence
Unit 2 between Entergy Arkansas and Entergy Power, dated
as of August 28, 1990 (B-3(c) to Rule 24 Certificate,
dated September 6, 1990, in 70-7684).
(c) 70-- Agreement for Purchase and Sale of Ritchie Unit 2
between Entergy Arkansas and Entergy Power, dated as of
August 28, 1990 (B-4(d) to Rule 24 Certificate, dated
September 6, 1990, in 70-7684).
(c) 71-- Ritchie Steam Electric Station Unit No. 2
Operating Agreement between Entergy Arkansas and Entergy
Power, dated as of August 28, 1990 (B-5(a) to Rule 24
Certificate, dated September 6, 1990, in 70-7684).
(c) 72-- Ritchie Steam Electric Station Unit No. 2
Ownership Agreement between Entergy Arkansas and Entergy
Power, dated as of August 28, 1990 (B-6(a) to Rule 24
Certificate, dated September 6, 1990, in 70-7684).
(c) 73-- Power Coordination, Interchange and Transmission
Service Agreement between Entergy Power and Entergy
Arkansas, dated as of August 28, 1990 (10(c)-71 to Form
10-K for the year ended December 31, 1990, in 1-10764).
+(c) 74-- Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries (10(a)52 to Form 10-K for
the year ended December 31, 1989, in 1-3517).
+(c) 75-- Entergy Corporation Annual Incentive Plan (10(a)54
to Form 10-K for the year ended December 31, 1989, in
1-3517).
+(c) 76-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate, dated
May 24, 1991, in 70-7831).
+(c) 77-- Agreement between Arkansas Power & Light Company
and R. Drake Keith. (10(c) 78 to Form 10-K for the year
ended December 31, 1992 in 1-10764).
+(c) 78-- Supplemental Retirement Plan (10(a)69 to Form 10-K
for the year ended December 31, 1992 in 1-3517).
+(c) 79-- Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries (10(a)53 to Form 10-K for
the year ended December 31, 1989 in 1-3517).
+(c) 80-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a)71 to Form
10-K for the year ended December 31, 1992 in 1-3517).
+(c) 81-- Executive Disability Plan of Entergy Corporation
and Subsidiaries (10(a)72 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(c) 82-- Executive Medical Plan of Entergy Corporation and
Subsidiaries (10(a)73 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(c) 83-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries, as amended (10(a)74 to Form
10-K for the year ended December 31, 1992 in 1-3517).
+(c) 84-- Summary Description of Private Ownership Vehicle
Plan of Entergy Corporation and Subsidiaries (10(a)75 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(c) 85-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a)-42 to Form 10-K for the year ended
December 31, 1985 in 1-3517).
+(c) 86-- Agreement between Entergy Corporation and Jerry D.
Jackson (10(a)-67 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(c) 87-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(c) 88-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
+(c) 89-- Agreement between System Energy and Donald C.
Hintz (10(b)-47 to Form 10-K for the year ended
December 31, 1991 in 1-9067).
+(c) 90-- Summary Description of Retired Outside Director
Benefit Plan. (10(c) 90 to Form 10-K for the year ended
December 31, 1992 in 1-10764).
+(c) 91-- Amendment to Defined Contribution Restoration Plan
of Entergy Corporation and Subsidiaries (10(a) 81 to Form
10-K for the year ended December 31, 1993 in 1-11299).
+(c) 92-- System Executive Retirement Plan (10(a) 82 to Form
10-K for the year ended December 31, 1993 in 1-11299).
(c) 93-- Loan Agreement dated June 15, 1993, between
Entergy Arkansas and Independence Country, Arkansas (B-1
(a) to Rule 24 Certificate dated July 9, 1993 in 70-
8171).
(c) 94-- Installment Sale Agreement dated January 1, 1991,
between Entergy Arkansas and Pope Country, Arkansas (B-1
(b) to Rule 24 Certificate dated January 24, 1991 in 70-
7802).
(c) 95-- Installment Sale Agreement dated November 1, 1990,
between Entergy Arkansas and Pope Country, Arkansas (B-1
(a) to Rule 24 Certificate dated November 30, 1990 in 70-
7802).
(c) 96-- Loan Agreement dated June 15, 1994, between
Entergy Arkansas and Jefferson County, Arkansas (B-1(a)
to Rule 24 Certificate dated June 30, 1994 in 70-8405).
(c) 97-- Loan Agreement dated June 15, 1994, between
Entergy Arkansas and Pope County, Arkansas (B-1(b) to
Rule 24 Certificate in 70-8405).
(c) 98-- Loan Agreement dated November 15, 1995,
between Entergy Arkansas and Pope County, Arkansas (10(c)
96 to Form 10-K for the year ended December 31, 1995 in 1-
10764).
(c) 99-- Agreement as to Expenses and Liabilities
between Entergy Arkansas and Entergy Arkansas Capital I,
dated as of August 14, 1996 (4(j) to Form 10-Q for the
quarter ended September 30, 1996 in 1-10764).
*(c) 100-- Loan Agreement dated December 1, 1997,
between Entergy Arkansas and Jefferson County, Arkansas.
Entergy Gulf States
(d) 1 -- Guaranty Agreement, dated July 1, 1976, between
Entergy Gulf States and American Bank and Trust Company
(C and D to Form 8-K, dated August 6, 1976 in 1-2703).
(d) 2 -- Lease of Railroad Equipment, dated as of December
1, 1981, between The Connecticut Bank and Trust Company
as Lessor and Entergy Gulf States as Lessee and First
Supplement, dated as of December 31, 1981, relating to
605 One Hundred-Ton Unit Train Steel Coal Porter Cars (4-
12 to Form 10-K for the year ended December 31, 1981 in 1-
2703).
(d) 3 -- Guaranty Agreement, dated August 1, 1992, between
Entergy Gulf States and Hibernia National Bank, relating
to Pollution Control Revenue Refunding Bonds of the
Industrial Development Board of the Parish of Calcasieu,
Inc. (Louisiana) (10-1 to Form 10-K for the year ended
December 31, 1992 in 1-2703).
(d) 4 -- Guaranty Agreement, dated January 1, 1993, between
Entergy Gulf States and Hancock Bank of Louisiana,
relating to Pollution Control Revenue Refunding Bonds of
the Parish of Pointe Coupee (Louisiana) (10-2 to Form 10-
K for the year ended December 31, 1992 in 1-2703).
(d) 5 -- Deposit Agreement, dated as of December 1, 1983
between Entergy Gulf States, Morgan Guaranty Trust Co. as
Depositary and the Holders of Depository Receipts,
relating to the Issue of 900,000 Depositary Preferred
Shares, each representing 1/2 share of Adjustable Rate
Cumulative Preferred Stock, Series E-$100 Par Value (4-17
to Form 10-K for the year ended December 31, 1983 in 1-
2703).
(d) 6 -- Letter of Credit and Reimbursement Agreement,
dated December 27, 1985, between Entergy Gulf States and
Westpac Banking Corporation relating to Variable Rate
Demand Pollution Control Revenue Bonds of the Parish of
West Feliciana, State of Louisiana, Series 1985-D (4-26
to Form 10-K for the year ended December 31, 1985 in 1-
2703) and Letter Agreement amending same dated October
20, 1992 (10-3 to Form 10-K for the year ended December
31, 1992 in 1-2703).
(d) 7 -- Reimbursement and Loan Agreement, dated as of
April 23, 1986, by and between Entergy Gulf States and
The Long-Term Credit Bank of Japan, Ltd., relating to
Multiple Rate Demand Pollution Control Revenue Bonds of
the Parish of West Feliciana, State of Louisiana, Series
1985 (4-26 to Form 10-K, for the year ended December 31,
1986 in 1-2703) and Letter Agreement amending same, dated
February 19, 1993 (10 to Form 10-K for the year ended
December 31, 1992 in 1-2703).
(d) 8 -- Agreement effective February 1, 1964, between
Sabine River Authority, State of Louisiana, and Sabine
River Authority of Texas, and Entergy Gulf States,
Central Louisiana Electric Company, Inc., and Louisiana
Power & Light Company, as supplemented (B to Form 8-K,
dated May 6, 1964, A to Form 8-K, dated October 5, 1967,
A to Form 8-K, dated May 5, 1969, and A to Form 8-K,
dated December 1, 1969, in 1-2708).
(d) 9 -- Joint Ownership Participation and Operating
Agreement regarding River Bend Unit 1 Nuclear Plant,
dated August 20, 1979, between Entergy Gulf States,
Cajun, and SRG&T; Power Interconnection Agreement with
Cajun, dated June 26, 1978, and approved by the REA on
August 16, 1979, between Entergy Gulf States and Cajun;
and Letter Agreement regarding CEPCO buybacks, dated
August 28, 1979, between Entergy Gulf States and Cajun
(2, 3, and 4, respectively, to Form 8-K, dated September
7, 1979, in 1-2703).
(d) 10-- Ground Lease, dated August 15, 1980, between
Statmont Associates Limited Partnership (Statmont) and
Entergy Gulf States, as amended (3 to Form 8-K, dated
August 19, 1980, and A-3-b to Form 10-Q for the quarter
ended September 30, 1983 in 1-2703).
(d) 11-- Lease and Sublease Agreement, dated August 15,
1980, between Statmont and Entergy Gulf States, as
amended (4 to Form 8-K, dated August 19, 1980, and A-3-c
to Form 10-Q for the quarter ended September 30, 1983 in
1-2703).
(d) 12-- Lease Agreement, dated September 18, 1980, between
BLC Corporation and Entergy Gulf States (1 to Form 8-K,
dated October 6, 1980 in 1-2703).
(d) 13-- Joint Ownership Participation and Operating
Agreement for Big Cajun, between Entergy Gulf States,
Cajun Electric Power Cooperative, Inc., and Sam Rayburn
G&T, Inc, dated November 14, 1980 (6 to Form 8-K, dated
January 29, 1981 in 1-2703); Amendment No. 1, dated
December 12, 1980 (7 to Form 8-K, dated January 29, 1981
in 1-2703); Amendment No. 2, dated December 29, 1980 (8
to Form 8-K, dated January 29, 1981 in 1-2703).
(d) 14-- Agreement of Joint Ownership Participation between
SRMPA, SRG&T and Entergy Gulf States, dated June 6, 1980,
for Nelson Station, Coal Unit #6, as amended (8 to Form 8-
K, dated June 11, 1980, A-2-b to Form 10-Q For the
quarter ended June 30, 1982; and 10-1 to Form 8-K, dated
February 19, 1988 in 1-2703).
(d) 15-- Agreements between Southern Company and Entergy
Gulf States, dated February 25, 1982, which cover the
construction of a 140-mile transmission line to connect
the two systems, purchase of power and use of
transmission facilities (10-31 to Form 10-K, for the year
ended December 31, 1981 in 1-2703).
+(d) 16-- Executive Income Security Plan, effective October
1, 1980, as amended, continued and completely restated
effective as of March 1, 1991 (10-2 to Form 10-K for the
year ended December 31, 1991 in 1-2703).
(d) 17-- Transmission Facilities Agreement between Entergy
Gulf States and Mississippi Power Company, dated February
28, 1982, and Amendment, dated May 12, 1982 (A-2-c to
Form 10-Q for the quarter ended March 31, 1982 in 1-2703)
and Amendment, dated December 6, 1983 (10-43 to Form 10-
K, for the year ended December 31, 1983 in 1-2703).
(d) 18-- Lease Agreement dated as of June 29, 1983, between
Entergy Gulf States and City National Bank of Baton
Rouge, as Owner Trustee, in connection with the leasing
of a Simulator and Training Center for River Bend Unit 1
(A-2-a to Form 10-Q for the quarter ended June 30, 1983
in 1-2703) and Amendment, dated December 14, 1984 (10-55
to Form 10-K, for the year ended December 31, 1984 in 1-
2703).
(d) 19-- Participation Agreement, dated as of June 29,
1983, among Entergy Gulf States, City National Bank of
Baton Rouge, PruFunding, Inc. Bank of the Southwest
National Association, Houston and Bankers Life Company,
in connection with the leasing of a Simulator and
Training Center of River Bend Unit 1 (A-2-b to Form 10-Q
for the quarter ended June 30, 1983 in 1-2703).
(d) 20-- Tax Indemnity Agreement, dated as of June 29,
1983, between Entergy Gulf States and PruFunding, Inc.,
in connection with the leasing of a Simulator and
Training Center for River Bend Unit I (A-2-c to Form 10-Q
for the quarter ended June 30, 1993 in 1-2703).
(d) 21-- Agreement to Lease, dated as of August 28, 1985,
among Entergy Gulf States, City National Bank of Baton
Rouge, as Owner Trustee, and Prudential Interfunding
Corp., as Trustor, in connection with the leasing of
improvement to a Simulator and Training Facility for
River Bend Unit I (10-69 to Form 10-K, for the year ended
December 31, 1985 in 1-2703).
(d) 22-- First Amended Power Sales Agreement, dated
December 1, 1985 between Sabine River Authority, State of
Louisiana, and Sabine River Authority, State of Texas,
and Entergy Gulf States, Central Louisiana Electric Co.,
Inc., and Louisiana Power and Light Company (10-72 to
Form 10-K for the year ended December 31, 1985 in 1-
2703).
+(d) 23-- Deferred Compensation Plan for Directors of
Entergy Gulf States and Varibus Corporation, as amended
January 8, 1987, and effective January 1, 1987 (10-77 to
Form 10-K for the year ended December 31, 1986 in 1-
2703). Amendment dated December 4, 1991 (10-3 to
Amendment No. 8 in Registration No. 2-76551).
+(d) 24-- Trust Agreement for Deferred Payments to be made
by Entergy Gulf States pursuant to the Executive Income
Security Plan, by and between Entergy Gulf States and
Bankers Trust Company, effective November 1, 1986 (10-78
to Form 10-K for the year ended December 31, 1986 in 1-
2703).
+(d) 25-- Trust Agreement for Deferred Installments under
Entergy Gulf States' Management Incentive Compensation
Plan and Administrative Guidelines by and between Entergy
Gulf States and Bankers Trust Company, effective June 1,
1986 (10-79 to Form 10-K for the year ended December 31,
1986 in 1-2703).
+(d) 26-- Nonqualified Deferred Compensation Plan for
Officers, Nonemployee Directors and Designated Key
Employees, effective December 1, 1985, as amended,
continued and completely restated effective as of March
1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-
76551).
+(d) 27-- Trust Agreement for Entergy Gulf States'
Nonqualified Directors and Designated Key Employees by
and between Entergy Gulf States and First City Bank,
Texas-Beaumont, N.A. (now Texas Commerce Bank), effective
July 1, 1991 (10-4 to Form 10-K for the year ended
December 31, 1992 in 1-2703).
(d) 28-- Lease Agreement, dated as of June 29, 1987, among
GSG&T, Inc., and Entergy Gulf States related to the
leaseback of the Lewis Creek generating station (10-83 to
Form 10-K for the year ended December 31, 1988 in 1-
2703).
(d) 29-- Nuclear Fuel Lease Agreement between Entergy Gulf
States and River Bend Fuel Services, Inc. to lease the
fuel for River Bend Unit 1, dated February 7, 1989 (10-64
to Form 10-K for the year ended December 31, 1988 in 1-
2703).
(d) 30-- Trust and Investment Management Agreement between
Entergy Gulf States and Morgan Guaranty and Trust Company
of New York (the "Decommissioning Trust Agreement) with
respect to decommissioning funds authorized to be
collected by Entergy Gulf States, dated March 15, 1989
(10-66 to Form 10-K for the year ended December 31, 1988
in 1-2703).
(d) 31-- Amendment No. 2 dated November 1, 1995 between
Entergy Gulf States and Mellon Bank to Decommissioning
Trust Agreement (10(d) 31 to Form 10-K for the year ended
December 31, 1995).
(d) 32-- Credit Agreement, dated as of December 29, 1993,
among River Bend Fuel Services, Inc. and Certain
Commercial Lending Institutions and CIBC Inc. as Agent
for the Lenders (10(d) 34 to Form 10-K for year ended
December 31, 1994).
(d) 33-- Amendment No. 1 dated as of January 31, to Credit
Agreement, dated as of December 31, 1993, among River
Bend Fuel Services, Inc. and certain commercial lending
institutions and CIBC Inc. as agent for Lenders (10(d) 33
to Form 10-K for the year ended December 31, 1995).
(d) 34-- Partnership Agreement by and among Conoco Inc.,
and Entergy Gulf States, CITGO Petroleum Corporation and
Vista Chemical Company, dated April 28, 1988 (10-67 to
Form 10-K for the year ended December 31, 1988 in 1-
2703).
+(d) 35-- Gulf States Utilities Company Executive Continuity
Plan, dated January 18, 1991 (10-6 to Form 10-K for the
year ended December 31, 1990 in 1-2703).
+(d) 36-- Trust Agreement for Entergy Gulf States' Executive
Continuity Plan, by and between Entergy Gulf States and
First City Bank, Texas-Beaumont, N.A. (now Texas Commerce
Bank), effective May 20, 1991 (10-5 to Form 10-K for the
year ended December 31, 1992 in 1-2703).
+(d) 37-- Gulf States Utilities Board of Directors'
Retirement Plan, dated February 15, 1991 (10-8 to Form 10-
K for the year ended December 31, 1990 in 1-2703).
+(d) 38-- Gulf States Utilities Company Employees' Trustee
Retirement Plan effective July 1, 1955 as amended,
continued and completely restated effective January 1,
1989; and Amendment No.1 effective January 1, 1993 (10-6
to Form 10-K for the year ended December 31, 1992 in 1-
2703).
(d) 39-- Agreement and Plan of Reorganization, dated June
5, 1992, between Entergy Gulf States and Entergy
Corporation (2 to Form 8-K, dated June 8, 1992 in 1-
2703).
+(d) 40-- Gulf States Utilities Company Employee Stock
Ownership Plan, as amended, continued, and completely
restated effective January 1, 1984, and January 1, 1985
(A to Form 11-K, dated December 31, 1985 in 1-2703).
+(d) 41-- Trust Agreement under the Gulf States Utilities
Company Employee Stock Ownership Plan, dated December 30,
1976, between Entergy Gulf States and the Louisiana
National Bank, as Trustee (2-A to Registration No. 2-
62395).
+(d) 42-- Letter Agreement dated September 7, 1977 between
Entergy Gulf States and the Trustee, delegating certain
of the Trustee's functions to the ESOP Committee (2-B to
Registration Statement No. 2-62395).
+(d) 43-- Gulf States Utilities Company Employees Thrift
Plan as amended, continued and completely restated
effective as of January 1, 1992 (28-1 to Amendment No. 8
to Registration No. 2-76551).
+(d) 44-- Restatement of Trust Agreement under the Gulf
States Utilities Company Employees Thrift Plan,
reflecting changes made through January 1, 1989, between
Entergy Gulf States and First City Bank, Texas-Beaumont,
N.A., (now Texas Commerce Bank ), as Trustee (2-A to Form
8-K dated October 20, 1989 in 1-2703).
(d) 45-- Operating Agreement between Entergy Operations and
Entergy Gulf States, dated as of December 31, 1993 (B-
2(f) to Rule 24 Certificate in 70-8059).
(d) 46-- Guarantee Agreement between Entergy Corporation
and Entergy Gulf States, dated as of December 31, 1993 (B-
5(a) to Rule 24 Certificate in 70-8059).
(d) 47-- Service Agreement with Entergy Services, dated as
of December 31, 1993 (B-6(c) to Rule 24 Certificate in
70-8059).
+(d) 48-- Amendment to Employment Agreement between J. L.
Donnelly and Entergy Gulf States, dated December 22, 1993
(10(d) 57 to Form 10-K for the year ended December 31,
1993 in 1-2703).
(d) 49-- Assignment, Assumption and Amendment Agreement to
Letter of Credit and Reimbursement Agreement between
Entergy Gulf States, Canadian Imperial Bank of Commerce
and Westpac Banking Corporation (10(d) 58 to Form 10-K
for the year ended December 31, 1993 in 1-2703).
(d) 50-- Third Amendment, dated January 1, 1994, to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(d) 51-- Refunding Agreement between Entergy Gulf States
and West Feliciana Parish (dated December 20, 1994 (B-
12(a) to Rule 24 Certificate dated December 30, 1994 in
70-8375).
(d) 52-- Agreement as to Expenses and Liabilities
between Entergy Gulf States and Entergy Gulf States
Capital I, dated as of January 28, 1997 (10(d)52 to Form
10-K for the year ended December 31, 1996 in 1-2703).
+(d) 53-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
Entergy Louisiana
(e) 1 -- Agreement, dated April 23, 1982, among Entergy
Louisiana and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982, in 1-3517).
(e) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(e) 3 -- Amendment, dated as of February 10, 1971, to
Middle South Utilities System Agency Agreement, dated
December 11, 1970 (5(a)-4 in 2-41080).
(e) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(e) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(e) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (5(a)-5 in 2-42523).
(e) 7 -- Amendment, dated as of January 1, 1972, to Service
Agreement with Entergy Services (4(a)-6 in 2-45916).
(e) 8 -- Amendment, dated as of April 27, 1984, to Service
Agreement with Entergy Services (10(a) 7 to Form 10-K for
the year ended December 31, 1984, in 1-3517).
(e) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(d)-8 to Form 10-K for
the year ended December 31, 1988, in 1-8474).
(e) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(d)-9 to Form 10-K for
the year ended December 31, 1990, in 1-8474).
(e) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(e) 12 through
(e) 24-- See 10(a)-12 through 10(a)-24 above.
(e) 25-- Fuel Lease, dated as of January 31, 1989, between
River Fuel Company #2, Inc., and Entergy Louisiana
(B-1(b) to Rule 24 Certificate in 70-7580).
(e) 26-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
(e) 27-- Compromise and Settlement Agreement, dated June 4,
1982, between Texaco, Inc. and Entergy Louisiana (28(a)
to Form 8-K, dated June 4, 1982, in 1-8474).
+(e) 28-- Post-Retirement Plan (10(c)23 to Form 10-K for the
year ended December 31, 1983, in 1-8474).
(e) 29-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(e) 30-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(e) 31-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(e) 32-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Tax Allocation Agreement, dated
April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(e) 33-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement, dated
January 1, 1990 (D-2 to Form U5S for the year ended
December 31, 1989).
(e) 34-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(e) 35-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
(e) 36-- Contract for Disposal of Spent Nuclear Fuel and/or
High-Level Radioactive Waste, dated February 2, 1984,
among DOE, System Fuels and Entergy Louisiana (10(d)33 to
Form 10-K for the year ended December 31, 1984, in
1-8474).
(e) 37-- Operating Agreement between Entergy Operations and
Entergy Louisiana, dated as of June 6, 1990 (B-2(c) to
Rule 24 Certificate, dated June 15, 1990, in 70-7679).
(e) 38-- Guarantee Agreement between Entergy Corporation
and Entergy Louisiana, dated as of September 20, 1990
(B-2(a), to Rule 24 Certificate, dated September 27,
1990, in 70-7757).
+(e) 39-- Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries (10(a) 52 to Form 10-K for
the year ended December 31, 1989, in 1-3517).
+(e) 40-- Entergy Corporation Annual Incentive Plan (10(a)
54 to Form 10-K for the year ended December 31, 1989, in
1-3517).
+(e) 41-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate, dated
May 24, 1991, in 70-7831).
+(e) 42-- Supplemental Retirement Plan (10(a) 69 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(e) 43-- Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries (10(a) 53 to Form 10-K for
the year ended December 31, 1989 in 1-3517).
+(e) 44-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a) 71 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(e) 45-- Executive Disability Plan of Entergy Corporation
and Subsidiaries (10(a) 72 to Form 10-K for the year
ended December 31, 1992 in 1-3517).
+(e) 46-- Executive Medical Plan of Entergy Corporation and
Subsidiaries (10(a) 73 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(e) 47-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries (10(a) 74 to Form 10-K for
the year ended December 31, 1992 in 1-3517).
+(e) 48-- Summary Description of Private Ownership Vehicle
Plan of Entergy Corporation and Subsidiaries (10(a) 75 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(e) 49-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a) 42 to Form 10-K for the year ended
December 31, 1985 in 1-3517).
+(e) 50-- Agreement between Entergy Corporation and Jerry D.
Jackson (10(a) 67 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(e) 51-- Agreement between Entergy Services and Gerald D.
McInvale (10(a) 68 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(e) 52-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
+(e) 53-- Agreement between System Energy and Donald C.
Hintz (10(b) 47 to Form 10-K for the year ended
December 31, 1991 in 1-9067).
+(e) 54-- Summary Description of Retired Outside Director
Benefit Plan (10(c)90 to Form 10-K for the year ended
December 31, 1992 in 1-10764).
+(e) 55-- Amendment to Defined Contribution Restoration Plan
of Entergy Corporation and Subsidiaries (10(a) 81 to Form
10-K for the year ended December 31, 1993 in 1-11299).
+(e) 56-- System Executive Retirement Plan (10(a) 82 to Form
10-K for the year ended December 31, 1993 in 1-11299).
(e) 57-- Installment Sale Agreement, dated July 20, 1994,
between Entergy Louisiana and St. Charles Parish,
Louisiana (B-6(e) to Rule 24 Certificate dated August 1,
1994 in 70-7822).
(e) 58-- Installment Sale Agreement, dated November 1,
1995, between Entergy Louisiana and St. Charles Parish,
Louisiana (B-6(a) to Rule 24 Certificate dated December
19, 1995 in 70-8487).
(e) 59-- Agreement as to Expenses and Liabilities between
Entergy Louisiana, Inc. and Entergy Louisiana Capital I
dated July 16, 1996 (4(d) to Form 10-Q for the quarter
ended June 30, 1996 in 1-8474).
Entergy Mississippi
(f) 1 -- Agreement dated April 23, 1982, among Entergy
Mississippi and certain other System companies, relating
to System Planning and Development and Intra-System
Transactions (10(a) 1 to Form 10-K for the year ended
December 31, 1982, in 1-3517).
(f) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(f) 3 -- Amendment, dated February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a) 4 in 2-41080).
(f) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(f) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(f) 6 -- Service Agreement with Entergy Services, dated as
of April 1, 1963 (D in 37-63).
(f) 7 -- Amendment, dated January 1, 1972, to Service
Agreement with Entergy Services (A to Notice, dated
October 14, 1971, in 37-63).
(f) 8 -- Amendment, dated April 27, 1984, to Service
Agreement with Entergy Services (10(a) 7 to Form 10-K for
the year ended December 31, 1984, in 1-3517).
(f) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(e) 8 to Form 10-K for
the year ended December 31, 1988, in 0-320).
(f) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(e) 9 to Form 10-K for
the year ended December 31, 1990, in 0-320).
(f) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for the year ended December 31, 1994 in 1-3517).
(f) 12 though
(f) 24-- See 10(a)-12 - 10(a)-24 above.
(f) 25-- Installment Sale Agreement, dated as of June 1,
1974, between Entergy Mississippi and Washington County,
Mississippi (B-2(a) to Rule 24 Certificate, dated August
1, 1974, in 70-5504).
(f) 26-- Installment Sale Agreement, dated as of July 1,
1982, between Entergy Mississippi and Independence
County, Arkansas, (B-1(c) to Rule 24 Certificate dated
July 21, 1982, in 70-6672).
(f) 27-- Installment Sale Agreement, dated as of December
1, 1982, between Entergy Mississippi and Independence
County, Arkansas, (B-1(d) to Rule 24 Certificate dated
December 7, 1982, in 70-6672).
(f) 28-- Amended and Restated Installment Sale Agreement,
dated as of April 1, 1994, between Entergy Mississippi
and Warren County, Mississippi, (B-6(a) to Rule 24
Certificate dated May 4, 1994, in 70-7914).
(f) 29-- Amended and Restated Installment Sale Agreement,
dated as of April 1, 1994, between Entergy Mississippi
and Washington County, Mississippi, (B-6(b) to Rule 24
Certificate dated May 4, 1994, in 70-7914).
(f) 30-- Substitute Power Agreement, dated as of May 1,
1980, among Entergy Mississippi, System Energy and SMEPA
(B-3(a) in 70-6337).
(f) 31-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Operating Agreement
(10(c) 51 to Form 10-K for the year ended December 31,
1984, in 0-375).
(f) 32-- Amendment, dated December 4, 1984, to the
Independence Steam Electric Station Ownership Agreement
(10(c) 54 to Form 10-K for the year ended December 31,
1984, in 0-375).
(f) 33-- Owners Agreement, dated November 28, 1984, among
Entergy Arkansas, Entergy Mississippi and other co-
owners of the Independence Station (10(c) 55 to Form 10-K
for the year ended December 31, 1984, in 0-375).
(f) 34-- Consent, Agreement and Assumption, dated December
4, 1984, among Entergy Arkansas, Entergy Mississippi,
other co-owners of the Independence Station and United
States Trust Company of New York, as Trustee (10(c) 56 to
Form 10-K for the year ended December 31, 1984, in
0-375).
(f) 35-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
+(f) 36-- Post-Retirement Plan (10(d) 24 to Form 10-K for
the year ended December 31, 1983, in 0-320).
(f) 37-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(f) 38-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(f) 39-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(f) 40-- Sales Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (D to Rule
24 Certificate, dated June 26, 1974, in 70-5399).
(f) 41-- Service Agreement, dated as of June 21, 1974,
between System Energy and Entergy Mississippi (E to Rule
24 Certificate, dated June 26, 1974, in 70-5399).
(f) 42-- Partial Termination Agreement, dated as of
December 1, 1986, between System Energy and Entergy
Mississippi (A-2 to Rule 24 Certificate dated January 8,
1987, in 70-5399).
(f) 43-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(f) 44-- First Amendment dated January 1, 1990 to the
Middle South Utilities Inc. and Subsidiary Companies
Intercompany Tax Allocation Agreement (D-2 to Form U5S
for the year ended December 31, 1989).
(f) 45-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(f) 46-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
+(f) 47-- Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries (10(a) 52 to Form 10-K for
the year ended December 31, 1989, in 1-3517).
+(f) 48-- Entergy Corporation Annual Incentive Plan (10(a)
54 to Form 10-K for the year ended December 31, 1989, in
1-3517).
+(f) 49-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate, dated
May 24, 1991, in 70-7831).
+(f) 50-- Supplemental Retirement Plan (10(a)69 to Form 10-K
for the year ended December 31, 1992 in 1-3517).
+(f) 51-- Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries (10(a)53 to Form 10-K for
the year ended December 31, 1989 in 1-3517).
+(f) 52-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a)71 to Form
10-K for the year ended December 31, 1992 in 1-3517).
+(f) 53-- Executive Disability Plan of Entergy Corporation
and Subsidiaries (10(a)72 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(f) 54-- Executive Medical Plan of Entergy Corporation and
Subsidiaries (10(a)73 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(f) 55-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries, as amended (10(a)74 to Form
10-K for the year ended December 31, 1992 in 1-3517).
+(f) 56-- Summary Description of Private Ownership Vehicle
Plan of Entergy Corporation and Subsidiaries (10(a)75 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(f) 57-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a)-42 to Form 10-K for the year ended
December 31, 1985 in 1-3517).
+(f) 58-- Agreement between Entergy Corporation and Jerry D.
Jackson (10(a)-67 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(f) 59-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(f) 60-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
+(f) 61-- Agreement between System Energy and Donald C.
Hintz (10(b)-47 to Form 10-K for the year ended
December 31, 1991 in 1-9067).
+(f) 62-- Summary Description of Retired Outside Director
Benefit Plan (10(c)-90 to Form 10-K for the year ended
December 31, 1992 in 1-10764).
+(f) 63-- Amendment to Defined Contribution Restoration Plan
of Entergy Corporation and Subsidiaries (10(a) 81 to Form
10-K for the year ended December 31, 1993 in 1-11299).
+(f) 64-- System Executive Retirement Plan (10(a) 82 to Form
10-K for the year ended December 31, 1993 in 1-11299).
Entergy New Orleans
(g) 1 -- Agreement, dated April 23, 1982, among Entergy New
Orleans and certain other System companies, relating to
System Planning and Development and Intra-System
Transactions (10(a)-1 to Form 10-K for the year ended
December 31, 1982, in 1-3517).
(g) 2 -- Middle South Utilities System Agency Agreement,
dated December 11, 1970 (5(a)-2 in 2-41080).
(g) 3 -- Amendment dated as of February 10, 1971, to Middle
South Utilities System Agency Agreement, dated December
11, 1970 (5(a)-4 in 2-41080).
(g) 4 -- Amendment, dated May 12, 1988, to Middle South
Utilities System Agency Agreement, dated December 11,
1970 (5(a) 4 in 2-41080).
(g) 5 -- Middle South Utilities System Agency Coordination
Agreement, dated December 11, 1970 (5(a)-3 in 2-41080).
(g) 6 -- Service Agreement with Entergy Services dated as
of April 1, 1963 (5(a)-5 in 2-42523).
(g) 7 -- Amendment, dated as of January 1, 1972, to Service
Agreement with Entergy Services (4(a)-6 in 2-45916).
(g) 8 -- Amendment, dated as of April 27, 1984, to Service
Agreement with Entergy Services (10(a)7 to Form 10-K for
the year ended December 31, 1984, in 1-3517).
(g) 9 -- Amendment, dated as of August 1, 1988, to Service
Agreement with Entergy Services (10(f)-8 to Form 10-K for
the year ended December 31, 1988, in 0-5807).
(g) 10-- Amendment, dated January 1, 1991, to Service
Agreement with Entergy Services (10(f)-9 to Form 10-K for
the year ended December 31, 1990, in 0-5807).
(g) 11-- Amendment, dated January 1, 1992, to Service
Agreement with Entergy Services (10(a)-11 to Form 10-K
for year ended December 31, 1994 in 1-3517).
(g) 12 through
(g) 24-- See 10(a)-12 - 10(a)-24 above.
(g) 25-- Reallocation Agreement, dated as of July 28, 1981,
among System Energy and certain other System companies
(B-1(a) in 70-6624).
+(g) 26-- Post-Retirement Plan (10(e) 22 to Form 10-K for
the year ended December 31, 1983, in 1-1319).
(g) 27-- Unit Power Sales Agreement, dated as of June 10,
1982, between System Energy and Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi and Entergy New Orleans
(10(a) 39 to Form 10-K for the year ended December 31,
1982, in 1-3517).
(g) 28-- First Amendment to the Unit Power Sales Agreement,
dated as of June 28, 1984, between System Energy and
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi
and Entergy New Orleans (19 to Form 10-Q for the quarter
ended September 30, 1984, in 1-3517).
(g) 29-- Revised Unit Power Sales Agreement (10(ss) in
33-4033).
(g) 30-- Transfer Agreement, dated as of June 28, 1983,
among the City of New Orleans, Entergy New Orleans and
Regional Transit Authority (2(a) to Form 8-K, dated June
24, 1983, in 1-1319).
(g) 31-- Middle South Utilities, Inc. and Subsidiary
Companies Intercompany Income Tax Allocation Agreement,
dated April 28, 1988 (D-1 to Form U5S for the year ended
December 31, 1987).
(g) 32-- First Amendment, dated January 1, 1990, to the
Middle South Utilities, Inc. and Subsidiary Companies
Intercompany Income Tax Allocation Agreement (D-2 to
Form U5S for the year ended December 31, 1989).
(g) 33-- Second Amendment dated January 1, 1992, to the
Entergy Corporation and Subsidiary Companies Intercompany
Income Tax Allocation Agreement (D-3 to Form U5S for the
year ended December 31, 1992).
(g) 34-- Third Amendment dated January 1, 1994 to Entergy
Corporation and Subsidiary Companies Intercompany Income
Tax Allocation Agreement (D-3(a) to Form U5S for the year
ended December 31, 1993).
+(g) 35-- Executive Financial Counseling Program of Entergy
Corporation and Subsidiaries (10(a)52 to Form 10-K for
the year ended December 31, 1989, in 1-3517).
+(g) 36-- Entergy Corporation Annual Incentive Plan (10(a)54
to Form 10-K for the year ended December 31, 1989, in
1-3517).
+(g) 37-- Equity Ownership Plan of Entergy Corporation and
Subsidiaries (A-4(a) to Rule 24 Certificate, dated
May 24, 1991, in 70-7831).
+(g) 38-- Supplemental Retirement Plan (10(a)69 to Form 10-K
for the year ended December 31, 1992 in 1-3517).
+(g) 39-- Defined Contribution Restoration Plan of Entergy
Corporation and Subsidiaries (10(a)53 to Form 10-K for
the year ended December 31, 1989 in 1-3517).
+(g) 40-- Amendment No. 1 to the Equity Ownership Plan of
Entergy Corporation and Subsidiaries (10(a)71 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(g) 41-- Executive Disability Plan of Entergy Corporation
and Subsidiaries (10(a)72 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(g) 42-- Executive Medical Plan of Entergy Corporation and
Subsidiaries (10(a)73 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(g) 43-- Stock Plan for Outside Directors of Entergy
Corporation and Subsidiaries, as amended (10(a)74 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(g) 44-- Summary Description of Private Ownership Vehicle
Plan of Entergy Corporation and Subsidiaries (10(a)75 to
Form 10-K for the year ended December 31, 1992 in
1-3517).
+(g) 45-- Agreement between Entergy Corporation and Edwin
Lupberger (10(a)-42 to Form 10-K for the year ended
December 31, 1985 in 1-3517).
+(g) 46-- Agreement between Entergy Corporation and Jerry D.
Jackson (10(a)-67 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(g) 47-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1992 in 1-3517).
+(g) 48-- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
+(g) 49-- Agreement between System Energy and Donald C.
Hintz (10(b)-47 to Form 10-K for the year ended December
31, 1991 in 1-9067).
+(g) 50-- Summary Description of Retired Outside Director
Benefit Plan (10(c)-90 to Form 10-K for the year ended
December 31, 1992 in 1-10764).
+(g) 51-- Amendment to Defined Contribution Restoration Plan
of Entergy Corporation and Subsidiaries (10(a) 81 to Form
10-K for the year ended December 31, 1993 in 1-11299).
+(g) 52-- System Executive Retirement Plan (10(a) 82 to Form
10-K for the year ended December 31, 1993 in 1-11299).
Entergy London
(h) 1 -- London Electricity Public Electricity Supply
("PES") License dated March 26, 1990, as revised through
January 8, 1996 (10.01 in File No. 333-33331).
(h) 2 -- Modifications to the PES License issued to London
Electricity effective October 1997 (10.02 in File No. 333-
33331).
(h) 3 -- Second-Tier License to Supply Electricity for
London Electricity dated March 25, 1991 (10.03 in File
No. 333-33331).
(h) 4 -- Pooling and Settlement Agreement dated March 30,
1990, as amended and restated at October 17, 1996, and as
supplemented through July 28, 1997 among the Generators
named therein, the Suppliers named therein (including
London Electricity), Energy Settlements and Information
Services (as Settlement System Administrator), Energy
Pool Funds Administration Limited (as Pool Funds
Administrator), The National Grid Company plc (as Grid
Operator and Ancillary Services Provider), London
Electricity and Other Parties (10.04 in File No.
333-33331).
(h) 5 -- Master Connection and Use of System Agreement
dated as of March 30, 1990 among The National Grid
Company plc and its users (including London Electricity)
(10.05 in File No. 333-33331).
(h) 6 -- Master Agreement dated as of October 25, 1995
among The National Grid Holding plc, The National Grid
Company plc, London Electricity and the other RECs (10.06
in File No. 333-33331).
(h) 7 -- Memorandum of Understanding between the National
Grid Group plc, London Electricity and each of the RECs,
dated November 17, 1995 (10.07 in File No. 333-33331).
+(h) 8 -- Agreement between Entergy Services and Gerald D.
McInvale (10(a)-68 to Form 10-K for the year ended
December 31, 1997 in 1-11299).
(12) Statement Re Computation of Ratios
*(a) Entergy Arkansas's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(b) Entergy Gulf States' Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(c) Entergy Louisiana's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(d) Entergy Mississippi's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(e) Entergy New Orleans' Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends, as defined.
*(f) System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
*(g) Entergy London's Computation of Ratios of Earnings to
Fixed Charges, as defined.
*(21) Subsidiaries of the Registrants
(23) Consents of Experts and Counsel
*(a) The consent of Coopers & Lybrand L.L.P. is contained
herein at page 248.
*(24) Powers of Attorney
(27) Financial Data Schedule
*(a) Financial Data Schedule for Entergy Corporation and
Subsidiaries as of December 31, 1997.
*(b) Financial Data Schedule for Entergy Arkansas as of
December 31, 1997.
*(c) Financial Data Schedule for Entergy Gulf States as of
December 31, 1997.
*(d) Financial Data Schedule for Entergy Louisiana as of
December 31, 1997.
*(e) Financial Data Schedule for Entergy Mississippi as of
December 31, 1997.
*(f) Financial Data Schedule for Entergy New Orleans as of
December 31, 1997.
*(g) Financial Data Schedule for System Energy as of December
31, 1997.
*(h) Financial Data Schedule for Entergy London as of December
31, 1997.
_________________
* Filed herewith.
+ Management contracts or compensatory plans or arrangements.