_____________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address of Principal Executive Identification No.
Offices and Telephone Number
1-11299 ENTERGY CORPORATION 72-1229752
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 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
(a limited company under the laws of
England and Wales)
Templar House
81-87 High Holborn
London WC1V 6NU England
Telephone 011-44-171-242-9050
_____________________________________________________________________
Indicate by check mark whether the registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrants were required to file
such reports), and (2) have been subject to such filing requirements
for the past 90 days.
Yes X No
Common Stock Outstanding Outstanding at July 31, 1998
Entergy Corporation ($0.01 par value) 246,602,469
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 1998
Page Number
Definitions 1
Management's Financial Discussion and Analysis -
Liquidity and Capital Resources 3
Management's Financial Discussion and Analysis -
Significant Factors and Known Trends 6
Results of Operations and Financial Statements:
Entergy Corporation and Subsidiaries:
Results of Operations 11
Consolidated Statements of Income and
Comprehensive Income 15
Consolidated Statements of Cash Flows 16
Consolidated Balance Sheets 18
Selected Operating Results 20
Entergy Arkansas, Inc.:
Results of Operations 21
Statements of Income 23
Statements of Cash Flows 25
Balance Sheets 26
Selected Operating Results 28
Entergy Gulf States, Inc.:
Results of Operations 29
Statements of Income (Loss) 31
Statements of Cash Flows 33
Balance Sheets 34
Selected Operating Results 36
Entergy Louisiana, Inc.:
Results of Operations 37
Statements of Income 39
Statements of Cash Flows 41
Balance Sheets 42
Selected Operating Results 44
Entergy Mississippi, Inc.:
Results of Operations 45
Statements of Income 47
Statements of Cash Flows 49
Balance Sheets 50
Selected Operating Results 52
Entergy New Orleans, Inc.:
Results of Operations 53
Statements of Income 55
Statements of Cash Flows 57
Balance Sheets 58
Selected Operating Results 60
System Energy Resources, Inc.:
Results of Operations 61
Statements of Income 62
Statements of Cash Flows 63
Balance Sheets 64
Entergy London Investments plc and Subsidiary:
Results of Operations 66
Consolidated Statements of Income and
Comprehensive Income 68
Consolidated Statements of Cash Flows 69
Consolidated Balance Sheets 70
Notes to Financial Statements for Entergy Corporation
and Subsidiaries 72
Part II:
Item 1. Legal Proceedings 79
Item 4. Submission of Matters to a Vote of
Security Holders 81
Item 5. Other Information 83
Item 6. Exhibits and Reports on Form 8-K 84
Signature 87
This combined Quarterly Report on Form 10-Q is separately filed by
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc.,
Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans,
Inc., 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 reports herein only as
to itself and makes no other representations whatsoever as to any other
company. This combined Quarterly Report on Form 10-Q supplements and
updates the Annual Report on Form 10-K for the calendar year ended
December 31, 1997, and the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, filed by the individual registrants with the SEC,
and should be read in conjunction therewith.
EXCHANGE RATES
For the convenience of the reader, this Form 10-Q contains
translations of certain British pounds sterling (BPS) amounts into U.S.
dollars at specified rates, or, if not so specified, at 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 June 30, 1998 of $1.6678 = BPS1.00. No representation is made that
the BPS amounts have been, could have been or could be converted into
U.S. dollars at the rates indicated or at any other rates.
The following table sets out, for the periods indicated, certain
information concerning the exchange rates between BPS and U.S. dollars
based on the Noon Buying Rate in New York City for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve
Bank of New York.
Period Period End Average(1) High Low
($ per BPS1.00)
Three months ended March 31, 1997 1.64 1.63 1.70 1.59
Three months ended June 30, 1997 1.67 1.64 1.67 1.61
Six months ended June 30, 1997 1.67 1.63 1.70 1.59
Twelve months ended December 31, 1997 1.65 1.64 1.71 1.58
Three months ended March 31, 1998 1.67 1.65 1.69 1.61
Three months ended June 30, 1998 1.67 1.65 1.69 1.62
Six months ended June 30, 1998 1.67 1.65 1.69 1.61
(1) The average of the Noon Buying Rates in effect on the last business
day of each month during the relevant period.
Forward Looking Information
Investors are cautioned that forward-looking statements contained
herein with respect to the revenues, earnings, competitive performance,
or other prospects for the business of Entergy Corporation, Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc., System Energy
Resources, Inc., Entergy London Investments plc or their affiliated
companies may be influenced by factors that could cause actual outcomes
to be materially different than anticipated. 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, interest rate changes,
changes in foreign currency exchange rates, and other factors.
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym Term
ALJ Administrative Law Judge
ANO Arkansas Nuclear One Plant
ANO 1 Unit No. 1 of ANO
ANO 2 Unit No. 2 of ANO
APSC Arkansas Public Service Commission
BPS British pounds sterling
Cajun Cajun Electric Power Cooperative, Inc.
Capital Funds Agreement Agreement, dated as of June 21, 1974, as
amended, between System Energy and Entergy
Corporation, and the assignments thereof
Council Council of the City of New Orleans, Louisiana
domestic utility
companies Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, and Entergy New
Orleans, collectively
EPI Entergy Power, Inc.
EPMC Entergy Power Marketing Corp.
ETHC Entergy Technology Holding Company
Entergy Entergy Corporation and its various direct and
indirect subsidiaries
Entergy Arkansas Entergy Arkansas, Inc.
Entergy Corporation Entergy Corporation, a Delaware corporation,
successor to Entergy Corporation, a Florida
corporation
Entergy Gulf States Entergy Gulf States, Inc. (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.
Entergy Mississippi Entergy Mississippi, Inc.
Entergy New Orleans Entergy New Orleans, Inc.
Entergy Operations Entergy Operations, Inc., a subsidiary of
Entergy Corporation that has operating
responsibility for ANO, Grand Gulf 1, River
Bend, and Waterford 3
Entergy Services Entergy Services, Inc.
EPA U.S. Environmental Protection Agency
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Form 10-K The combined Annual Report on Form 10-K for the
year ended December 31, 1997, of Entergy,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New
Orleans, System Energy, and Entergy London
Grand Gulf 1 Unit No. 1 (nuclear) of the Grand Gulf Plant
Independence Independence Steam Electric Station (coal),
owned 16% by Entergy Arkansas, 25% by Entergy
Mississippi, and 11% by Entergy Power
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy effective February 1, 1997
MPSC Mississippi Public Service Commission
NRC Nuclear Regulatory Commission
Owner Participant A corporation that, in connection with the
Waterford 3 sale and leaseback transactions, has
acquired a beneficial interest in a trust, the
Owner Trustee of which is the owner and lessor
of undivided interests in Waterford 3
Owner Trustee Each institution and/or individual acting as
Owner Trustee under a trust agreement with an
Owner Participant in connection with the
Waterford 3 sale and leaseback transactions
PUHCA Public Utility Holding Company Act of 1935, as
amended
PUCT Public Utility Commission of Texas
River Bend River Bend Nuclear Plant, owned by Entergy Gulf
States
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards as
promulgated by the Financial Accounting
Standards Board
System Agreement Agreement, effective January 1, 1983, as
modified, among the domestic utility companies
relating to the sharing of generating capacity
and other power resources
System Energy System Energy Resources, Inc.
UK The United Kingdom of Great Britain and Northern
Ireland
Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant
White Bluff White Bluff Steam Electric Generating Station
57% owned by Entergy Arkansas
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash flow from operations for Entergy Corporation, the domestic
utility companies, System Energy, and Entergy London for the six months
ended June 30, 1998 and 1997 was as follows:
Six Months Six Months
Company Ended 6/30/98 Ended 6/30/97
(In Millions)
Entergy Corporation $653.3 $840.2
Entergy Arkansas $ 95.3 $177.7
Entergy Gulf States $161.7 $213.5
Entergy Louisiana $128.7 $115.2
Entergy Mississippi $ 73.3 $ 87.6
Entergy New Orleans $ 6.3 $ 29.2
System Energy $ 93.2 $131.6
Entergy London $165.3 $144.7
For the first six months of 1998, cash flow from operations declined
compared to 1997 due to rate reductions at Entergy Arkansas, Entergy Gulf
States, and Entergy New Orleans, as discussed in "Entergy Corporation and
Subsidiaries, Management's Financial Discussion and Analysis, Results of
Operations." Revenue collections under rate phase-in plans that exceed
current cash requirements for the related costs continue to contribute to
cash flow from operations. In the income statement, revenue collections
from phase-in plans are offset by the amortization of the previously
deferred costs so that there is no effect on net income. These phase-in
plans, which currently contribute to Entergy Corporation's cash position,
will expire in November 1998 for Entergy Arkansas, in September 1998 for
Entergy Mississippi, and in 2001 for Entergy New Orleans. Entergy Gulf
States' Louisiana retail phase-in plan for River Bend expired in February
1998. Competitive businesses contributed $150.8 million to Entergy
Corporation's cash flow from operations for the first six months of 1998.
In accordance with the purchase method of accounting, London
Electricity's results of operations are not included in the Entergy
Corporation and Subsidiaries and the Entergy London Consolidated
Statements of Cash Flows prior to February 1, 1997, the effective date of
the acquisition of London Electricity.
Financing Sources
Cash from operations, supplemented by cash on hand, was sufficient
to meet substantially all investing and financing requirements of the
domestic utility companies and System Energy, including capital
expenditures, dividends, and debt and preferred stock maturities, for the
six months ended June 30, 1998.
In the first six months of 1998, Entergy's domestic utility
companies have been able to fund their capital requirements with cash
from operations as discussed above in "Cash Flows". Should additional
cash be needed to fund investments or to retire debt, the domestic
utility companies and System Energy each have the ability, subject to
regulatory approval and compliance with issuance tests, to issue debt or
preferred securities to meet such requirements. Although the rate
proceedings in Texas discussed in Note 2 will have an impact on Entergy
Gulf States' cash flows from operations, management believes that Entergy
Gulf States' cash flow from operations will be sufficient to fund its
capital requirements for the foreseeable future. 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 4 for a discussion of Entergy's recent
redemptions. 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, 9 and 10 in the Form 10-K for additional information on
Entergy's capital and refinancing requirements in 1998-2002.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, Entergy Corporation had $190 million
outstanding under its $300 million bank credit facility. In addition,
Entergy Corporation had $165.5 million outstanding and ETHC had $112.8
million outstanding under a joint $300 million bank line of credit as of
June 30, 1998. See Note 4 to the Form 10-K for information on the short-
term borrowing authorizations and bank lines of credit of the domestic
utility companies, System Energy, and Entergy London.
London Electricity is Entergy London's only asset. Dividends paid
by London Electricity provide Entergy London with its sole source of cash
flow to pay its debt service. In addition to London Electricity's cash
flow from operations, Entergy London has other primary sources of
liquidity, including a commercial paper program and several committed and
uncommitted credit lines provided to London Electricity by banking
institutions. London Electricity intends to use credit available under
existing facilities to finance its remaining payment of windfall profits
taxes in December 1998, which will total approximately $117 million
(BPS70 million).
Management believes that cash flow from operations, together with
Entergy London's sources of credit, will provide sufficient financial
resources to meet London Electricity and Entergy London's projected
capital needs and other expenditure requirements for the foreseeable
future. London Electricity has represented to the Director General of
Electricity Supply for the UK, in connection with its Public Electricity
Supply License, that it will use all reasonable endeavors to maintain an
investment grade rating on its long-term debt.
Financing Uses
During the last several years, Entergy has made a number of utility
related investments overseas. These include investments in electricity
related businesses in the UK, Australia, Argentina, Chile, Peru,
Pakistan, and China. 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 foreign electricity-related investments in a
manner not inconsistent with these regulations. As of June 30, 1998,
Entergy Corporation had a net investment of $1.3 billion in equity
capital in competitive businesses.
In addition to its electricity related foreign investments, Entergy
has made investments in security monitoring and other telecommunications
related businesses in the United States. No specific SEC approvals are
required for such investments, and there is no maximum regulatory limit
on such investments. Entergy has also made investments in energy-related
businesses, including energy efficiency services and power marketing.
Under PUHCA, the SEC imposes a limit equal to 15% of consolidated
capitalization on the amount that may be invested in such businesses
without specific SEC approval. Entergy currently has considerable
capacity to make additional investments of this type before such limits
would be exceeded.
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 utilizes internally generated funds, cash
on hand, funds available under its bank credit facilities, and bank
financing as required. See Note 9 in the Form 10-K for a discussion of
capital requirements. Entergy Corporation receives funds through
dividend payments from its subsidiaries. During the six months ended
June 30, 1998 such dividend payments from the domestic utility companies
and System Energy totaled $176.8 million. During the six months ended
June 30, 1998, Entergy Corporation paid $221.8 million of cash dividends
on its common stock. Declarations of dividends on Entergy's common stock
are made at the discretion of Entergy Corporation's Board of Directors
(the Board). On August 2, 1998 the Board declared a quarterly dividend
of $.30 per share on Entergy's common stock. This dividend represents a
$.15 per share reduction from the recent level of Entergy's quarterly
common stock dividends. The reduction was made in order to strengthen
Entergy's financial position and fund investments. The Board will
continue to evaluate the level of the dividend on Entergy's common stock,
based upon Entergy's earnings and the Board's assessment of the financial
strength of Entergy. See Note 8 in the Form 10-K for information on
dividend restrictions.
Entergy Corporation and Entergy Gulf States
During the fourth quarter of 1997, Entergy Gulf States established
reserves of $381 million ($227 million net of tax) for the probable
outcome of the pending rate case and abeyed plant cost proceedings in
Texas based on management's estimates of the effects thereof. Entergy
Gulf States recorded additional reserves of $101.3 million ($60.3 million
net of tax) in the first six months of 1998 for the retroactive rate
actions contained in the order issued by the PUCT on July 22, 1998.
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 "Entergy Corporation and Subsidiaries,
Management's Financial Discussion and Analysis, Significant Factors and
Known Trends, Retail and Wholesale Rate Issues" and Note 2 for additional
information.
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 the consent of certain
creditors.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS" in the Form 10-K, including "Open Access
Transmission", "Municipalization", "Industry Consolidation", "Functional
Unbundling", "Effects of Alternate Energy Sources on Retail Electric
Sales to Industrial and Large Commercial Customers", and "Changes in
Contract with Steam Customer" for a discussion of the competitive
pressures facing Entergy and the electric utility industry. See also
"Foreign Distribution and Supply", "Property Tax Exemptions", and "Market
Risks" in the Form 10-K for a discussion of other significant issues
affecting Entergy. Set forth below are recent developments to update the
information contained in the Form 10-K for the sections presented.
Domestic Competition and Industry Challenges
Transition to Competition Filings
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT
FACTORS AND KNOWN TRENDS - Transition to Competition Filings" in the Form
10-K for a discussion of the domestic utility companies' filings with
their respective state regulators concerning the transition to
competition.
Subsequent to the APSC's approval of Entergy Arkansas' transition to
competition filing on December 12, 1997, the APSC opened four new generic
restructuring dockets and scheduled a series of hearings throughout 1998.
The APSC conducted hearings in these dockets in May 1998, in which the
majority of the participating parties indicated that competition in the
electric industry in Arkansas can begin by January 1, 2002. The APSC
will submit a report and recommendations to the Legislature by October
1998. Similar generic proceedings have also been established by the
public service commissions in Louisiana and Mississippi and by the
Council.
Entergy has proposed to FERC a regional transmission company as an
alternative to an Independent System Operator (ISO) for electricity
transmission. Entergy's proposal is a for-profit, FERC-regulated
regional transmission company that would operate independently of
Entergy's utility subsidiaries. Under the proposal, the transmission
system and the employees who would operate and maintain it would be
transferred from Entergy's utility subsidiaries to a separate legal
entity owned by Entergy, but not operated or maintained by Entergy.
Retail and Wholesale Rate Issues
On June 30, 1998, the PUCT held the first of several meetings to
decide the outcome of Entergy Gulf States' pending Texas rate case. In
so doing, the PUCT indicated that it would not act upon the most recent
settlement agreement entered into among Entergy Gulf States and various
intervenor groups in the rate case. After refining its decision over the
course of several meetings, the PUCT issued its written order in the rate
proceeding on July 22, 1998. The decision will result in a $122 million
annual rate reduction, offset through May 1999 by recovery of accounting
order deferrals, resulting in a net reduction of approximately $81
million through that date, as well as a rate refund of approximately $82
million retroactive to June 1, 1996. The order disallows recovery
through rates by Entergy Gulf States of a majority of the charges for
services provided by Entergy affiliates and provides a rate incentive for
Entergy Gulf States to improve service quality. This decision does not
address the majority of the transition to competition issues contained in
the initial rate filing by Entergy Gulf States, including the accelerated
recovery of the allowed nuclear investment. However, the PUCT's order
provides for the accelerated amortization, through May 31, 1999, of the
nuclear-related accounting order deferrals, which had been scheduled to
be amortized through 2009. In light of the base rate reduction, Entergy
Gulf States withdrew its voluntary commitment to open its retail market
to direct competition. See Note 2 for additional information regarding
this proceeding.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
The PUCT's July 22, 1998 order, if sustained, will have material
adverse consequences on Entergy Gulf States' revenues and net income.
Entergy Gulf States will file a motion for reconsideration with the PUCT.
Entergy Gulf States plans to seek such further remedies as may be
available to it, including appealing the order if the motion for
reconsideration fails to alter what Entergy Gulf States believes is an
incorrect result based on the evidence before the PUCT. On July 29,
1998, a Texas state district court granted Entergy Gulf States' request
for a temporary restraining order until August 12, 1998 to prevent
enforcement of the PUCT's July 22, 1998 order. Additionally, Entergy
Gulf States has a hearing on August 10, 1998 to determine if a temporary
injunction against enforcement of the PUCT's order should also be
granted. If sustained, the PUCT's ruling on the recoverability by
Entergy Gulf States of charges for services provided by Entergy
affiliates could result in Entergy Gulf States reevaluating the use of
such services. See Note 2 for additional information regarding this
proceeding.
Effective July 29, 1998, Entergy Gulf States lowered its base retail
electric rates in Louisiana by $18 million per year. This reduction,
which was agreed to by Entergy Gulf States and the LPSC staff and
approved by order of the LPSC, will facilitate the completion of
Entergy's fourth post-merger earnings review, which was filed with the
LPSC on May 30, 1997. However, pending proceedings in Entergy Gulf
States' second, third and fourth earnings reviews will continue.
See Note 2 to the Form 10-K and Note 2 herein for a discussion of
the ongoing trend of regulator mandated rate reductions as well as
incentive and performance-based regulation and filings made with state
and local regulators regarding an orderly transition to a more
competitive market for electricity.
On March 13, 1998, on remand from the Supreme Court of Texas, the
PUCT ruled by a vote of two to one that Entergy Gulf States should not be
allowed to recover in rates any of the $1.4 billion of abeyed costs
associated with its Texas jurisdictional investment in River Bend. These
costs have been held in abeyance since 1988, during which time they have
been the subject of appeals by Entergy Gulf States. Entergy Gulf States
filed a motion for rehearing on this issue with the PUCT on April 2,
1998. This motion was denied by the PUCT by order dated July 8, 1998.
Entergy Gulf States has again appealed the PUCT's decision on this matter
in the Texas courts. Based on advice of counsel, management believes
that it is probable that the matter will be remanded again to the PUCT
for further ruling on the prudence of the abeyed plant costs. See Note 2
for additional information.
Legislative Activity
In late March 1998, the Clinton Administration released its plan for
electricity restructuring. The plan calls for customer choice by 2003 in
addition to the recovery of stranded costs and repeal of PUHCA. In late
June, the Administration submitted a bill containing the above provisions
along with one allowing states to "opt out" of competition if they felt
restructuring would harm residents. With little time remaining on the
congressional calendar, it is unlikely that any comprehensive electric
restructuring legislation or a repeal of PUHCA will be enacted during
1998.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Domestic and Foreign Competitive Businesses
Entergy Corporation seeks opportunities to expand its domestic and
foreign businesses that are not regulated by domestic state and local
utility regulatory authorities. Such business ventures currently include
power development and operations and retail services related to the
utility business. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for a
discussion of Entergy Corporation's investments in nonregulated and
foreign energy-related businesses. These investments may involve a
greater risk than domestic regulated utility enterprises. For the six
months ended June 30, 1998, these investments contributed approximately
$96 million to Entergy Corporation's consolidated net income. Entergy's
investment in London contributed $74 million to net income for the six
months ended June 30, 1998, including $52 million due to non-recurring
tax benefits and gains on investments. Domestic power marketing
operations contributed $24 million to net income for the six months ended
June 30, 1998; CitiPower Pty., an Australian distribution business,
contributed $10 million; Edesur, S. A., an Argentine distribution
business, contributed $3.5 million; and foreign power development and
generation operations contributed $4 million. Energy retail businesses
had a net loss of $20 million for the six months ended June 30, 1998.
Following the conclusion of Entergy's Board of Directors meeting on
August 2, 1998, management announced its intention to focus Entergy's
resources on international power generation, nuclear operations, and
power trading and marketing. Consistent with this intention, management
expects to sell several businesses over the next eighteen months. These
businesses include international distribution businesses in the UK and
Australia, security monitoring, energy management, and portions of
Entergy's telecommunications interests. See Note 7 for further
information.
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, however,
this segment of the supply business will become open to competition,
subject to a six-month transition period. This means the retail market
will be fully opened and all customers will have access to competition by
June 1999. See Note 2 in the Form 10-K for a discussion of Entergy
London regulatory matters.
On June 30, 1997, the UK government announced a review of the
regulatory framework governing the utilities, including electricity and
distribution. The Department of Trade and Industry paper, "A Fair Deal
for Consumers - Modernising the Framework for Utility Regulation", was
published in late March 1998. Among the proposals with implications for
Entergy London contained in this paper are recommendations for the
separation of the electric distribution and supply businesses, the
placing of customer interests on a statutory footing, and mechanisms to
ensure that unearned gains are shared among all stakeholders. London
Electricity submitted its response to these proposals to the Department
of Trade and Industry in May 1998.
The issue of separation of businesses is being carried forward as
part of the Review of Public Electricity Suppliers 1998 to 2000. A
consultation paper detailing the implications of the separation of
distribution and supply and the options for legislative reform was
published in May 1998 by the Office of Electricity Regulation. The
Office of Electricity Regulation stated that it favored the separation of
the electric industry into independent distribution and supply companies.
London Electricity responded to the consultation paper in June 1998.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Two documents regarding power generation in the UK were published in
June 1998. The first, "Review of Energy Sources for Power Generation - A
Consultation Document", was published by the Department of Trade and
Industry. This document contains the preliminary conclusions arising
from the Review of Energy Sources for Power Generation. It concludes
that the basic flaws in the existing electricity market arrangements have
been identified. The resulting distortions need to be corrected so that
the government can achieve its policy objective of diverse, secure, and
sustainable energy supplies at competitive prices for consumers while
protecting the environment. London Electricity responded to the
preliminary conclusions in July 1998.
The second document, "Report on Pool Price Increases in Winter
1997/98", published by the Office of Electricity Regulation, states that
further steps need to be taken to increase the competitiveness of the
generation market. It concludes that the most effective route in the
short term would be to transfer National Power and PowerGen's coal fired
plants to competitors, who are expected to more actively compete. London
Electricity responded to this document in July 1998.
In June 1998, the UK's Department of Trade and Industry issued the
last remaining consent for Entergy's Damhead Creek merchant power plant
project in Southeast England. Construction of the plant is now expected
to begin in late 1998. Financing and other project requirements are
currently in the final stages of development.
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS" and Note 13 in the Form 10-K for a
discussion of Entergy's major nonregulated business opportunities and
foreign energy-related investments.
Domestic Deregulated Operations
Entergy Gulf States discontinued regulatory accounting principles in
1989 for its wholesale jurisdiction and steam department, and in 1991 for
the Louisiana deregulated portion of River Bend. In late 1997, Cajun's
30% interest in River Bend was transferred by the Cajun bankruptcy
trustee to Entergy Gulf States and such interest is being treated as a
deregulated operation. The domestic deregulated operations of Entergy
Gulf States showed operating losses of $2.7 million and $5.6 million
during the three and six months ended June 30, 1998, respectively,
compared to operating income of $4.6 million and $9.2 million during the
comparable periods in 1997.
The decrease in net income from these deregulated operations for the
three and six months ended June 30, 1998 was principally due to (1) lower
revenues from the wholesale jurisdiction resulting from reduced rates
charged to both a large wholesale customer and to Cajun for transmission
service, (2) decreased steam products revenues as a result of the revised
contractual arrangement with the steam customer, and (3) revenues from
off-system sales of the transferred 30% portion of River Bend not fully
recovering the costs associated with those sales. These decreases were
partially offset by higher revenues from the Louisiana deregulated
portion of River Bend. The future impact of these deregulated operations
on Entergy's and Entergy Gulf States' results of operations and financial
position will depend on operating costs, efficiency and availability of
generating units, and market prices for energy over the remaining life of
the assets.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Accounting Issues
New Accounting Standards - In June 1998, the FASB issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which
will be effective for Entergy in 2000. In early 1998, The American
Institute of Certified Public Accountants issued Statement of Position
(SOP) 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", which will be effective for Entergy in 1999.
The adoption of SFAS 133 and SOP 98-1 is not expected to have a material
effect on the financial position, results of operations, or cash flows of
Entergy. See Note 6 herein for additional developments concerning these
new accounting standards.
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.
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
"Domestic Deregulated 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 to the Form 10-K for additional discussion of Entergy's application of
SFAS 71.
Year 2000 Issues
Like many companies, Entergy has been evaluating its computer
software, databases, embedded microprocessors, suppliers, and other
relationships to determine the extent to which actions are required to
prevent problems related to the year 2000, and the resources that will be
required to take such actions. These problems could result in
malfunctions in certain software applications, databases, and computer
equipment with respect to dates on or after January 1, 2000, unless
corrected. Many of Entergy's suppliers also face year 2000 issues, which
could affect their performance and indirectly affect Entergy. Entergy
has been working on the above mentioned modifications and contingencies
and will continue these efforts throughout mid-2000. 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. Management's updated estimate of maintenance and modification
costs related to this project to be incurred in 1998 through mid-2000 is
approximately $90 to 95 million. These expenses are being funded through
operating cash flows.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Effective February 1, 1997, Entergy Corporation acquired London
Electricity. Accordingly, consolidated net income for the six months
ended June 30, 1997 reflects London Electricity's results subsequent to
February 1, 1997.
Net Income
Consolidated net income increased for the three months ended June
30, 1998, primarily due to higher competitive business revenues and lower
income taxes, partially offset by an increase in operating expenses. Net
income decreased for the six months ended June 30, 1998, primarily due to
decreased domestic electric revenues and higher operating expenses,
partially offset by increased competitive business revenues and lower
income taxes. Additional reserves were recorded for anticipated rate
actions for Texas retail customers which totaled $54.8 million and $60.3
million net of tax for the three and six months ended June 30, 1998,
respectively. Excluding the effects of the additional reserves, net
income for the three and six months ended June 30, 1998 would have
increased approximately, $112.8 million and $56.9 million, respectively,
net of tax, compared to the periods ended June 30, 1997.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues associated with Entergy's
domestic regulated operations for the three and six months ended June 30,
1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($135.0) ($157.7)
Rate riders (10.9) (36.5)
Fuel cost recovery (0.9) (65.0)
Sales volume/weather 84.1 65.8
Other revenue (including unbilled) 36.0 28.3
Sales for resale 26.3 32.8
------- -------
Total ($0.4) ($132.3)
======= =======
Electric operating revenues for the domestic utility companies
decreased for the three and six months ended June 30, 1998 primarily due
to a decrease in base revenues at Entergy Gulf States and Entergy
Louisiana, decreased rate rider revenue at Entergy Arkansas, and for the
six months ended June 30, 1998, decreased fuel cost recovery at Entergy
Arkansas and Entergy Louisiana. Base revenues at Entergy Gulf States
decreased primarily due to the reserves recorded for anticipated rate
refunds for Texas retail customers, aggressive pricing strategies for
targeted customer segments, and a base rate reduction for the Louisiana
retail customers that became effective in March 1998. Base revenues at
Entergy Louisiana decreased due to a base rate reduction that became
effective in the third quarter of 1997. The decrease in rate rider
revenue at Entergy Arkansas, which does not affect net income, was due to
the scheduled decline in Grand Gulf 1 cost recovery rate rider revenues
as provided in the phase-in plan. Fuel cost recovery revenues decreased
at Entergy Louisiana due to lower pricing resulting from a change in
generation mix. Partially offsetting these decreases were increases in
sales volume, other revenue (primarily unbilled revenue), and sales for
resale. Sales volume increased due to significantly warmer weather in
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
the second quarter of 1998. Unbilled revenue increased due to higher
sales volume. Sales for resale increased primarily due to sales to non-
associated utilities and additional revenues related to the sale of
energy from the 30% interest in River Bend transferred by the Cajun
bankruptcy trustee to Entergy Gulf States in December 1997.
Competitive business revenues increased for the three and six months
ended June 30, 1998. Entergy London revenues for the six months ended
June 30, 1998 were higher due to an additional month of activity under
Entergy ownership recorded in 1998 compared to 1997, partially offset by
the impact of a 3% price reduction, effective April 1, 1997, for kilowatt-
hours distributed. An additional 3% price reduction, effective April 1,
1998, also impacted the three months ended June 30, 1998. Also
contributing to the increase in competitive business revenues was an
increase in revenue at EPMC and EPI. This revenue increase was a result
of increased sales volume and price on the spot market due to increased
demand resulting from significantly warmer weather in the second quarter
of 1998. This increase was partially offset for EPMC by increased power
purchased for resale as discussed below. The acquisition of new security
companies at ETHC also contributed to the increase in competitive
business revenues.
Expenses
Operating expenses increased for the three and six months ended June
30, 1998. The increase in the three months ended June 30, 1998 was
primarily due to an increase in purchased power expenses and a decrease
in other regulatory credits, partially offset by the decreased
amortization of rate deferrals. The increase in the six months ended
June 30, 1998 was primarily due to increases in purchased power expenses,
other operation and maintenance expenses, and depreciation, amortization,
and decommissioning expense, partially offset by decreases in fuel
expenses and in the amortization of rate deferrals.
The increases in purchased power expenses were primarily the result
of a higher level of power trading by EPMC and, for the six months ended
June 30, 1998, due to an additional month of Entergy London activity.
The decrease in other regulatory credits for the three months ended June
30, 1998 was primarily due to the decrease in the under-recovery of Grand
Gulf 1 related costs at Entergy Mississippi. The increase in other
operation and maintenance expenses for the six months ended June 30, 1998
was primarily due to an additional month of Entergy London operations in
1998 as compared to 1997. Operation and maintenance expenses of security
companies acquired by ETHC subsequent to the second quarter of 1997 also
contributed to the increase in such expenses. Additionally, at Entergy
Gulf States, other operation and maintenance expenses increased as a
result of the inclusion of expenses related to the 30% interest in River
Bend transferred by the Cajun bankruptcy trustee to Entergy Gulf States
in December 1997. Beginning in 1998, Entergy Gulf States includes 100%
of River Bend's operation and maintenance expenses in its operating
expenses, as compared to 70% of such expenses for the three and six
months ended June 30, 1997. The increase in depreciation, amortization,
and decommissioning for the six months ended June 30, 1998 is primarily
due to the inclusion of an additional month of depreciation and
amortization expense at Entergy London in 1998 and the acquisition of
additional security company assets by ETHC.
A decrease in fuel expenses for the six months ended June 30, 1998,
primarily at Entergy Arkansas, was due to a reduction in generation due
to outages and disruption of coal deliveries to coal plants. Partially
offsetting the increases in operating expenses for the three and six
months ended June 30, 1998 were decreases in the amortization of rate
deferrals. These decreases were caused by a lower amortization as
prescribed in the Grand Gulf 1 rate phase-in plan and the Stipulation and
Settlement Agreement with the APSC at Entergy Arkansas and the expiration
of the Louisiana retail phase-in plan for River Bend in February 1998 at
Entergy Gulf States.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
Interest on long-term debt decreased for the three and six months
ended June 30, 1998 primarily due to the retirement of certain long-term
debt in 1998 at Entergy Arkansas, Entergy Gulf States, and System Energy.
The effective income tax rates for the three months ended June 30,
1998 and 1997 were 23.6% and 35.9%, respectively. For the six months
ended June 30, 1998 and 1997 the effective income tax rates were 29.4%
and 35.3%, respectively. The decreases in 1998 were primarily due to the
recording of a $44 million deferred tax benefit in June 1998 related to
expected utilization of Entergy's capital loss carryforwards. The
expected utilization results from potential gain transactions that would
originate from investment/disposition strategies to be implemented within
five years. Realization of the deferred tax asset is dependent upon
Entergy's ability to utilize the capital loss carryforwards, which will
expire in 2002. Partially offsetting these decreases was an increase
primarily related to the increased reversal of previously recorded AFUDC
amounts included in depreciation at Entergy Arkansas and Entergy Gulf
States. The impact of the amortization of investment tax credits and of
excess deferred taxes on rate deferrals at Entergy Mississippi, and a
decrease in the flow-through of tax benefits related to operating
reserves at Entergy Gulf States also contributed to the offsetting
increases.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands, Except Share Data)
Operating Revenues:
Domestic electric $1,502,357 $1,502,742 $2,822,409 $2,954,667
Natural gas 24,188 23,025 74,613 80,521
Steam products 12,125 12,872 20,525 23,961
Competitive businesses 970,144 639,451 1,904,359 1,164,694
---------- ---------- ---------- ----------
Total 2,508,814 2,178,090 4,821,906 4,223,843
---------- ---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 327,854 339,778 676,817 738,520
Purchased power 808,264 469,726 1,586,938 890,688
Nuclear refueling outage expenses 21,015 13,172 43,689 30,408
Other operation and maintenance 500,505 512,830 984,193 938,917
Depreciation, amortization, and decommissioning 245,089 241,286 497,547 469,315
Taxes other than income taxes 90,318 90,205 186,112 183,196
Other regulatory credits (25,017) (35,225) (59,783) (56,771)
Amortization of rate deferrals 68,076 112,431 148,176 223,465
---------- ---------- ---------- ----------
Total 2,036,104 1,744,203 4,063,689 3,417,738
---------- ---------- ---------- ----------
Operating Income 472,710 433,887 758,217 806,105
---------- ---------- ---------- ----------
Other Income:
Allowance for equity funds used
during construction 3,274 3,035 5,623 6,068
Miscellaneous - net 18,208 29,224 49,781 46,617
---------- ---------- ---------- ----------
Total 21,482 32,259 55,404 52,685
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt 191,310 205,310 382,886 390,800
Other interest - net 14,053 11,148 24,155 23,053
Distributions on preferred securities of subsidiaries 8,950 4,710 20,128 8,882
Allowance for borrowed funds used
during construction (2,682) (2,440) (4,562) (4,877)
---------- ---------- ---------- ----------
Total 211,631 218,728 422,607 417,858
---------- ---------- ---------- ----------
Income Before Income Taxes 282,561 247,418 391,014 440,932
Income Taxes 66,582 88,839 114,981 155,868
---------- ---------- ---------- ----------
Net Income before Preferred Dividend Requirements and Other 215,979 158,579 276,033 285,064
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 11,704 12,303 23,480 29,026
---------- ---------- ---------- ----------
Consolidated Net Income 204,275 146,276 252,553 256,038
Other Comprehensive Income:
Foreign Currency Translation Adjustment (20,541) (10,763) (3,848) (11,522)
---------- ---------- ---------- ----------
Comprehensive Net Income $183,734 $135,513 $248,705 $244,516
========== ========== ========== ==========
Earnings per average common share
Basic and diluted $0.83 $0.61 $1.03 $1.08
Dividends declared per common share - $0.45 $0.90 $0.90
Average number of common shares outstanding:
Basic 246,452,120 238,577,894 246,187,736 236,865,266
Diluted 246,501,362 238,639,480 246,298,479 236,944,435
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income before preferred dividend requirements and other $276,033 $285,064
Noncash items included in net income:
Amortization of rate deferrals 148,176 223,311
Other regulatory credits (59,783) (21,546)
Depreciation, amortization, and decommissioning 497,547 469,315
Deferred income taxes and investment tax credits (88,348) (70,123)
Allowance for equity funds used during construction (5,623) (5,475)
Changes in working capital:
Receivables (54,452) 8,750
Fuel inventory 3,868 37,965
Accounts payable (38,423) (23,891)
Taxes accrued 134,994 106,367
Interest accrued 590 868
Other working capital accounts (117,599) (98,449)
Reserve for rate refund 101,255 -
Provision for estimated losses and reserves (80,643) (11,594)
Decommissioning trust contributions and realized change in trust assets (37,674) (35,489)
Other (26,583) (24,859)
-------- --------
Net cash flow provided by operating activities 653,335 840,214
-------- --------
Investing Activities:
Construction/capital expenditures (454,309) (296,817)
Allowance for equity funds used during construction 5,623 5,475
Nuclear fuel purchases (41,126) (52,323)
Proceeds from sale/leaseback of nuclear fuel 37,666 79,512
Acquisition of London Electricity, net of cash acquired - (1,980,631)
Investment in other nonregulated/nonutility properties (21,961) 78,537
Other (33,731) (20,767)
-------- --------
Net cash flow used in investing activities (507,838) (2,187,014)
-------- --------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Financing Activities:
Proceeds from the issuance of:
General and refunding mortgage bonds 78,703 64,827
First mortgage bonds 112,556 84,064
Bank notes and other long-term debt 201,070 1,691,201
Preferred securities of subsidiary trusts - 82,323
Common stock 15,228 166,870
Retirement of:
First mortgage bonds (341,335) (192,504)
General and refunding mortgage bonds (80,000) (634)
Other long-term debt (125,389) (21,160)
Redemption of preferred stock (6,250) (103,867)
Changes in short-term borrowings - net 186,167 113,104
Preferred stock dividends paid (23,580) (27,275)
Common stock dividends paid (221,772) (212,141)
--------- ----------
Net cash flow provided by (used in) financing activities (204,602) 1,644,808
--------- ----------
Effect of exchange rates on cash and cash equivalents 1,894 809
--------- ----------
Net increase (decrease) in cash and cash equivalents (57,211) 298,817
Cash and cash equivalents at beginning of period 830,547 388,703
--------- ----------
Cash and cash equivalents at end of period $773,336 $687,520
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $427,136 $256,899
Income taxes $78,761 $81,165
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $22,854 $6,268
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $78,332 $85,067
Temporary cash investments - at cost,
which approximates market 673,404 700,431
Special deposits 21,600 45,049
----------- -----------
Total cash and cash equivalents 773,336 830,547
Notes receivable 5,449 8,157
Accounts receivable:
Customer (less allowance for doubtful accounts of
$29.9 million in 1998 and $32.8 million in 1997) 488,903 458,085
Other 312,294 225,523
Accrued unbilled revenues 533,192 580,194
Deferred fuel costs 232,512 150,596
Fuel inventory 115,463 119,331
Materials and supplies - at average cost 391,948 367,870
Rate deferrals 106,451 237,302
Prepayments and other 215,282 193,717
----------- -----------
Total 3,174,830 3,171,322
----------- -----------
Other Property and Investments:
Decommissioning trust funds 649,578 589,050
Non-regulated investments 615,064 568,951
Other 222,633 225,818
----------- -----------
Total 1,487,275 1,383,819
----------- -----------
Utility Plant:
Electric 25,547,716 25,310,122
Plant acquisition adjustment - Entergy Gulf States 431,028 439,160
Electric plant under leases 674,483 674,483
Property under capital leases - electric 128,459 134,278
Natural gas 178,186 169,964
Steam products 82,751 82,289
Construction work in progress 766,786 565,667
Nuclear fuel under capital leases 247,811 269,011
Nuclear fuel 91,084 72,875
----------- -----------
Total 28,148,304 27,717,849
Less - accumulated depreciation and amortization 10,006,232 9,585,021
----------- -----------
Utility plant - net 18,142,072 18,132,828
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 145,277 162,602
SFAS 109 regulatory asset - net 1,157,286 1,174,187
Unamortized loss on reacquired debt 189,888 196,891
Other regulatory assets 520,482 466,780
Long-term receivables 35,693 36,984
CitiPower license (net of amortization of $30.6 million in 1998
and $25.6 million in 1997) 459,971 486,153
London Electricity license (net of amortization of $48.8 million
in 1998 and $25.6 million in 1997) 1,330,902 1,327,312
Other 529,702 461,822
----------- -----------
Total 4,369,201 4,312,731
----------- -----------
TOTAL $27,173,378 $27,000,700
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $305,027 $390,674
Notes payable 622,609 428,964
Accounts payable 893,454 915,800
Customer deposits 178,176 178,162
Taxes accrued 500,023 359,996
Accumulated deferred income taxes 7,384 56,524
Interest accrued 214,506 214,763
Dividends declared 8,068 8,166
Obligations under capital leases 163,189 167,700
Other 71,628 81,303
----------- -----------
Total 2,964,064 2,802,052
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,539,504 4,567,052
Accumulated deferred investment tax credits 569,519 587,781
Obligations under capital leases 213,396 236,000
Other 1,987,049 1,857,514
----------- -----------
Total 7,309,468 7,248,347
----------- -----------
Long-term debt 8,977,087 9,068,325
Subsidiaries' preferred stock with sinking fund 182,755 185,005
Subsidiary's preference stock 150,000 150,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated deferrable debentures 215,000 215,000
Company-obligated redeemable preferred securities of subsidiary
partnership holding solely junior subordinated deferrable debentures 300,000 300,000
Shareholders' Equity:
Subsidiaries' preferred stock without sinking fund 334,455 338,455
Common stock, $.01 par value, authorized 500,000,000
shares; issued 246,686,106 shares in 1998 and 246,149,198
shares in 1997 2,467 2,461
Additional paid-in capital 4,627,648 4,613,572
Retained earnings 2,188,165 2,157,912
Cumulative foreign currency translation adjustment (73,665) (69,817)
Less - treasury stock (134,504 shares in 1998 and
306,852 shares in 1997) 4,066 10,612
----------- -----------
Total 7,075,004 7,031,971
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $27,173,378 $27,000,700
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 503.7 $ 454.3 $ 49.4 11
Commercial 360.8 362.4 (1.6) -
Industrial 439.5 477.0 (37.5) (8)
Governmental 42.7 40.4 2.3 6
----------------------------------
Total retail 1,346.7 1,334.1 12.6 1
Sales for resale 107.3 81.0 26.3 32
Other 48.3 87.6 (39.3) (45)
----------------------------------
Total $ 1,502.3 $ 1,502.7 ($0.4) -
==================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 6,697 5,531 1,166 21
Commercial 5,496 4,952 544 11
Industrial 10,854 11,239 (385) (3)
Governmental 669 598 71 12
----------------------------------
Total retail 23,716 22,320 1,396 6
Sales for resale 2,645 1,828 817 45
----------------------------------
Total 26,361 24,148 2,213 9
==================================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Domestic Electric Operating Revenues:
Residential $ 966.7 $ 956.4 $ 10.3 1
Commercial 693.5 730.7 (37.2) (5)
Industrial 884.2 973.9 (89.7) (9)
Governmental 84.2 82.0 2.2 3
----------------------------------
Total retail 2,628.6 2,743.0 (114.4) (4)
Sales for resale 190.4 157.6 32.8 21
Other 3.4 54.1 (50.7) (94)
----------------------------------
Total $ 2,822.4 $ 2,954.7 ($132.3) (4)
==================================
Billed Electric Energy
Sales (Millions of kWh):
Residential 12,937 11,931 1,006 8
Commercial 10,325 9,847 478 5
Industrial 21,266 22,135 (869) (4)
Governmental 1,297 1,193 104 9
----------------------------------
Total retail 45,825 45,106 719 2
Sales for resale 4,574 4,253 321 8
----------------------------------
Total 50,399 49,359 1,040 2
==================================
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended June 30, 1998
primarily due to decreases in operating expenses and interest expense,
partially offset by decreases in electric operating revenues and other
income. Net income decreased for the six months ended June 30, 1998
primarily due to decreases in electric operating revenues and other
income, partially offset by decreases in operating expenses and interest
expense.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.8) ($2.2)
Rate riders (20.4) (47.5)
Fuel cost recovery (0.7) (7.5)
Sales volume/weather 24.1 22.5
Other revenue (including unbilled) 1.8 17.5
Sales for resale (33.3) (60.0)
------ ------
Total ($32.3) ($77.2)
====== ======
Electric operating revenues decreased for the three and six months
ended June 30, 1998 primarily as a result of a decrease in rate rider
revenue and sales for resale, partially offset by an increase in sales
volume and, for the six months ended June 30, 1998, an increase in other
revenue (primarily unbilled revenue). Rate rider revenue, which does not
affect net income, decreased due to the decline in Grand Gulf 1 cost
recovery rate rider revenues reflecting scheduled reductions in the phase-
in plan. Sales for resale decreased due to a decrease in sales to
associated companies. This decrease was a result of reduced generation
due to outages at both ANO1 and ANO2 and restricted generation at the
Independence and White Bluff coal plants due to disruption in coal
deliveries. Sales volume increased due to significantly warmer weather in
the second quarter of 1998. Unbilled revenue increased for the six
months ended June 30, 1998 primarily as a result of increased sales
volume.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and six months ended June
30, 1998 primarily due to decreases in fuel expenses and the amortization
of Grand Gulf 1 rate deferrals and an increase in other regulatory
credits, partially offset by slight increases in various other operating
expenses. Fuel expenses decreased primarily due to a reduction in
generation due to the outages and disrupted coal deliveries discussed
above. The decrease in the amortization of Grand Gulf 1 rate deferrals
is due to a decrease 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. The increase in other regulatory
credits is a result of the increase in the net under-recovery of Grand
Gulf 1 related costs.
Other
Miscellaneous other income - net decreased for the three and six
months ended June 30, 1998 primarily due to reduced Grand Gulf 1 carrying
charges as a result of a decline in the deferral balance, which does not
impact net income.
Interest charges decreased for the three and six months ended June
30, 1998 primarily due to the retirement of certain long-term debt in
1998.
The effective income tax rate of 38.3% for the three months ended
June 30, 1998 remained relatively unchanged from the rate of 38.8% for
the three months ended June 30, 1997. For the six months ended June 30,
1998 and 1997 the effective income tax rates were 38.9% and 35.3%,
respectively. The increase in 1998 is primarily due to the increased
reversal of previously recorded AFUDC amounts included in depreciation.
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $391,357 $423,619 $721,146 $798,350
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 29,142 62,754 75,365 129,347
Purchased power 114,997 109,120 210,312 203,854
Nuclear refueling outage expenses 7,728 5,367 15,819 12,266
Other operation and maintenance 90,497 86,085 176,296 171,801
Depreciation, amortization, and decommissioning 44,773 41,335 90,033 82,784
Taxes other than income taxes 9,840 9,101 20,200 18,529
Other regulatory credits (11,524) (9,485) (22,105) (8,749)
Amortization of rate deferrals 22,067 38,469 44,135 76,754
-------- -------- -------- --------
Total 307,520 342,746 610,055 686,586
-------- -------- -------- --------
Operating Income 83,837 80,873 111,091 111,764
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 1,628 1,445 2,332 2,888
Miscellaneous - net 1,678 5,090 8,548 10,414
-------- -------- -------- --------
Total 3,306 6,535 10,880 13,302
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 21,657 23,777 45,121 48,227
Other interest - net 584 971 1,360 1,900
Distributions on preferred securities of subsidiary 1,295 1,275 2,550 2,550
Allowance for borrowed funds used
during construction (1,164) (869) (1,651) (1,737)
-------- -------- -------- --------
Total 22,372 25,154 47,380 50,940
-------- -------- -------- --------
Income Before Income Taxes 64,771 62,254 74,591 74,126
Income Taxes 24,804 24,169 29,001 26,193
-------- -------- -------- --------
Net Income 39,967 38,085 45,590 47,933
Preferred Stock Dividend Requirements
and Other 2,593 2,798 5,219 5,630
-------- -------- -------- --------
Earnings Applicable to Common Stock $37,374 $35,287 $40,371 $42,303
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $45,590 $47,933
Noncash items included in net income:
Amortization of rate deferrals 44,135 76,754
Other regulatory credits (22,105) (8,749)
Depreciation, amortization, and decommissioning 90,033 82,784
Deferred income taxes and investment tax credits 2,886 (30,693)
Allowance for equity funds used during construction (2,332) (2,888)
Changes in working capital:
Receivables (34,717) 29,939
Fuel inventory (4,464) 29,293
Accounts payable 69,394 (22,365)
Taxes accrued 9,713 11,613
Interest accrued (4,013) 622
Deferred fuel costs (43,643) 6,044
Other working capital accounts (13,017) (39,775)
Decommissioning trust contributions and realized
change in trust assets (12,679) (12,283)
Provision for estimated losses and reserves (3,075) 5,383
Other (26,449) 4,051
-------- ---------
Net cash flow provided by operating activities 95,257 177,663
-------- ---------
Investing Activities:
Construction expenditures (81,803) (61,664)
Allowance for equity funds used during construction 2,332 2,888
Nuclear fuel purchases (6,997) (36,532)
Proceeds from sale/leaseback of nuclear fuel 6,997 36,553
-------- ---------
Net cash flow used in investing activities (79,471) (58,755)
-------- ---------
Financing Activities:
Proceeds from the issuance of first mortgage bonds - 84,064
Retirement of:
First mortgage bonds (105,774) (117,587)
Other long term debt (45,500) -
Redemption of preferred stock (4,000) -
Dividends paid:
Common stock (7,500) (31,400)
Preferred stock (5,318) (5,729)
-------- ---------
Net cash flow used in financing activities (168,092) (70,652)
-------- ---------
Net increase (decrease) in cash and cash equivalents (152,306) 48,256
Cash and cash equivalents at beginning of period 203,391 43,857
-------- ---------
Cash and cash equivalents at end of period $51,085 $92,113
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $48,855 $41,995
Income taxes $16,747 $40,864
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $15,048 $5,817
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $4,394 $6,076
Temporary cash investments - at cost,
which approximates market:
Associated companies 12,813 41,389
Other 33,878 110,877
Special deposits - 45,049
---------- ----------
Total cash and cash equivalents 51,085 203,391
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1998 and 1997) 82,406 71,910
Associated companies 60,964 46,166
Other 7,235 10,282
Accrued unbilled revenues 102,086 89,616
Deferred fuel costs 27,399 -
Fuel inventory - at average cost 32,633 28,169
Materials and supplies - at average cost 84,861 79,692
Rate deferrals 31,114 75,249
Deferred nuclear refueling outage costs 32,107 24,335
Prepayments and other 13,675 8,647
---------- ----------
Total 525,565 637,457
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,213 11,213
Decommissioning trust fund 278,300 250,573
Other - at cost (less accumulated depreciation) 4,980 4,939
---------- ----------
Total 294,493 266,725
---------- ----------
Utility Plant:
Electric 4,667,501 4,650,065
Property under capital leases 52,513 53,843
Construction work in progress 190,969 123,087
Nuclear fuel under capital lease 81,450 92,621
Nuclear fuel 32,607 -
---------- ----------
Total 5,025,040 4,919,616
Less - accumulated depreciation and amortization 2,207,859 2,116,826
---------- ----------
Utility plant - net 2,817,181 2,802,790
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 251,789 252,712
Unamortized loss on reacquired debt 53,665 53,780
Other regulatory assets 95,295 79,461
Other 21,130 13,952
---------- ----------
Total 421,879 399,905
---------- ----------
TOTAL $4,059,118 $4,106,877
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $850 $60,650
Notes payable 667 667
Accounts payable:
Associated companies 106,866 59,438
Other 98,371 76,405
Customer deposits 25,420 23,437
Taxes accrued 87,040 77,327
Accumulated deferred income taxes 24,802 32,239
Interest accrued 24,813 28,826
Co-owner advances 17,710 7,666
Deferred fuel costs - 16,244
Obligations under capital leases 47,751 62,623
Other 14,621 21,696
---------- ----------
Total 448,911 467,218
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 771,997 759,489
Accumulated deferred investment tax credits 101,333 103,899
Obligations under capital leases 86,212 83,841
Other 175,490 169,884
---------- ----------
Total 1,135,032 1,117,113
---------- ----------
Long-term debt 1,168,618 1,244,860
Preferred stock with sinking fund 31,027 31,027
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 60,000 60,000
Shareholders' Equity:
Preferred stock without sinking fund 112,350 116,350
Common stock, $0.01 par value, authorized
325,000,000 shares; issued and outstanding
46,980,196 shares 470 470
Additional paid-in capital 590,134 590,134
Retained earnings 512,576 479,705
---------- ----------
Total 1,215,530 1,186,659
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,059,118 $4,106,877
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 118.3 $ 105.2 $ 13.1 12
Commercial 68.9 75.9 (7.0) (9)
Industrial 78.4 84.2 (5.8) (7)
Governmental 3.6 4.6 (1.0) (22)
----------------------------
Total retail 269.2 269.9 (0.7) -
Sales for resale:
Associated companies 25.4 61.6 (36.2) (59)
Non-associated companies 53.9 51.0 2.9 6
Other 42.8 41.1 1.7 4
----------------------------
Total $ 391.3 $ 423.6 ($32.3) (8)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,357 1,091 266 24
Commercial 1,116 972 144 15
Industrial 1,642 1,541 101 7
Governmental 56 57 (1) (2)
----------------------------
Total retail 4,171 3,661 510 14
Sales for resale:
Associated companies 863 2,906 (2,043) (70)
Non-associated companies 1,236 1,515 (279) (18)
----------------------------
Total 6,270 8,082 (1,812) (22)
============================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 239.2 $ 236.6 $ 2.6 1
Commercial 128.3 148.5 (20.2) (14)
Industrial 150.8 165.8 (15.0) (9)
Governmental 6.9 8.9 (2.0) (22)
----------------------------
Total retail 525.2 559.8 (34.6) (6)
Sales for resale:
Associated companies 59.6 122.4 (62.8) (51)
Non-associated companies 98.0 95.2 2.8 3
Other 38.4 21.0 17.4 83
----------------------------
Total $ 721.2 $ 798.4 ($77.2) (10)
============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,861 2,609 252 10
Commercial 2,119 1,980 139 7
Industrial 3,208 3,111 97 3
Governmental 111 117 (6) (5)
----------------------------
Total retail 8,299 7,817 482 6
Sales for resale:
Associated companies 2,500 5,880 (3,380) (57)
Non-associated companies 2,409 3,011 (602) (20)
----------------------------
Total 13,208 16,708 (3,500) (21)
============================
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income (loss) decreased for the three and six months ended June
30, 1998 primarily due to a decrease in operating revenues caused by
additional reserves recorded for anticipated rate actions for Texas
retail customers which totaled $54.8 million and $60.3 million net of
tax, respectively. The decrease was partially offset by lower income
taxes and decreases in operating expenses and interest charges.
Excluding the effects of the additional reserves, net income for the
three and six months ended June 30, 1998 would have increased
approximately $22.5 million and $10.2 million, respectively. See Note 2
for a discussion of the additional reserves recorded for anticipated rate
actions for Texas retail customers.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($114.6) ($124.8)
Fuel cost recovery 1.9 0.3
Sales volume/weather 26.1 26.1
Other revenue (including unbilled) 13.9 0.9
Sales for resale 20.4 29.0
------ ------
Total ($52.3) ($68.5)
====== ======
Electric operating revenues decreased for the three and six months
ended June 30, 1998 primarily due to a decrease in base revenues,
partially offset by higher sales volume and increases in sales for resale
and an increase in the second quarter of 1998 in other revenue (primarily
unbilled revenue). Base revenues decreased primarily due to reserves
recorded during the three and six months ended June 30, 1998 for
anticipated rate actions for Texas retail customers, aggressive pricing
strategies for targeted customer segments, and a base rate reduction in
Louisiana that became effective in March 1998. Sales volume increased
due to significantly warmer weather in the second quarter of 1998. Sales
for resale increased due to an increase in sales to non-associated
utilities and additional revenues related to the sale of energy from the
30% interest in River Bend transferred by the Cajun bankruptcy trustee to
Entergy Gulf States in December 1997. Unbilled revenues increased for
the three months ended June 30, 1998 primarily as a result of increased
sales volume, partially offset by decreased pricing caused by the rate
reduction.
Gas operating revenues decreased for the six months ended June 30,
1998 due to a lower unit price for gas purchased for resale. Steam
operating revenues decreased for the six months ended June 30, 1998
primarily due to changes in the customer contract, which took effect in
August 1997.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and six months ended June
30, 1998 primarily due to a decrease in the amortization of rate
deferrals, partially offset by increased other operation and maintenance
expenses and a net increase in fuel and purchased power expenses. The
amortization of rate deferrals decreased due to the expiration of the
Louisiana retail phase-in plan for River Bend in February 1998. Other
operation and maintenance expenses increased as a result of the inclusion
of expenses related to the 30% interest in River Bend transferred by the
Cajun bankruptcy trustee to Entergy Gulf States in December 1997.
Entergy Gulf States now includes 100% of River Bend's operation and
maintenance expenses in its operating expenses, as compared to 70% of
such expenses for the three and six months ended June 30, 1997. The net
increase in fuel and purchased power expenses is primarily due to an
increase in generation, partially offset by the impact of the under-
recovered deferred fuel costs in excess of the fixed fuel factor applied
in Entergy Gulf States' Texas retail jurisdiction.
Other
Interest charges decreased for the three and six months ended June
30, 1998 primarily due to the retirement of certain long-term debt in
1997 and 1998.
For the three months ended June 30, 1998 and 1997, the effective
income tax rates were 16.1% and 26.7%, respectively. The effective
income tax rates for the six months ended June 30, 1998 and 1997 were
55.7% and 33.3%, respectively. The changes in the effective income tax
rates in 1998 are primarily due to a decrease in the flow-through of tax
benefits related to operating reserves and the increased reversal of
previously recorded AFUDC amounts included in depreciation.
ENTERGY GULF STATES, INC.
STATEMENTS OF INCOME (LOSS)
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues:
Electric $405,475 $457,739 $837,339 $905,877
Natural gas 6,055 5,810 23,300 27,911
Steam products 12,125 12,872 20,525 23,961
-------- -------- -------- --------
Total 423,655 476,421 881,164 957,749
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 128,968 138,692 247,254 259,084
Purchased power 80,972 66,428 159,632 145,769
Nuclear refueling outage expenses 3,675 2,573 8,224 5,218
Other operation and maintenance 98,161 92,182 196,700 175,444
Depreciation, amortization, and decommissioning 52,740 53,833 107,037 106,801
Taxes other than income taxes 28,057 26,803 58,968 56,010
Other regulatory credits (2,715) (6,083) (9,051) (11,948)
Amortization of rate deferrals 2,268 26,350 17,210 52,714
-------- -------- -------- --------
Total 392,126 400,778 785,974 789,092
-------- -------- -------- --------
Operating Income 31,529 75,643 95,190 168,657
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 688 726 1,300 1,451
Miscellaneous - net 2,538 4,488 6,498 8,589
-------- -------- -------- --------
Total 3,226 5,214 7,798 10,040
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 38,717 41,755 77,088 83,741
Other interest - net 971 978 1,715 3,716
Distributions on preferred securities of subsidiary 1,859 1,860 3,719 3,182
Allowance for borrowed funds used
during construction (547) (620) (1,014) (1,239)
-------- -------- -------- --------
Total 41,000 43,973 81,508 89,400
-------- -------- -------- --------
Income (Loss) Before Income Taxes (6,245) 36,884 21,480 89,297
Income Taxes (Benefit) (1,004) 9,856 11,965 29,734
-------- -------- -------- --------
Net Income (Loss) (5,241) 27,028 9,515 59,563
Preferred and Preference Stock
Dividend Requirements and Other 4,774 4,995 9,588 13,938
-------- -------- -------- --------
Earnings (Loss) Applicable to Common Stock ($10,015) $22,033 ($73) $45,625
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
Six Months Ended
1998 1997
(In Thousands)
Operating Activities:
Net income $9,515 $59,563
Noncash items included in net income:
Amortization of rate deferrals 17,210 52,714
Other regulatory credits (9,051) (11,948)
Depreciation, amortization, and decommissioning 107,037 106,801
Deferred income taxes and investment tax credits (29,286) (1,887)
Allowance for equity funds used during construction (1,300) (1,451)
Changes in working capital:
Receivables (14,082) (35,261)
Fuel inventory 2,909 3,889
Accounts payable (10,274) 17,673
Taxes accrued 28,932 26,282
Interest accrued (209) (1,218)
Deferred fuel costs (23,103) (205)
Other working capital accounts (7,269) 12,274
Decommissioning trust contributions and realized
change in trust assets (7,466) (4,277)
Provision for estimated losses and reserves (3,443) (17,021)
Reserve for rate refund 101,255 -
Other 280 7,585
-------- --------
Net cash flow provided by operating activities 161,655 213,513
-------- --------
Investing Activities:
Construction expenditures (52,288) (59,558)
Allowance for equity funds used during construction 1,300 1,451
Nuclear fuel purchases (200) -
Proceeds from sale/leaseback of nuclear fuel 193 -
-------- --------
Net cash flow used in investing activities (50,995) (58,107)
-------- --------
Financing Activities:
Proceeds from the issuance of :
Long-term debt 21,600 -
Preferred securities of subsidiary trust - 82,323
Retirement of:
First mortgage bonds (25,000) (46,917)
Other long-term debt (25) (425)
Redemption of preferred and preference stock (2,250) (89,367)
Dividends paid:
Common stock (80,315) -
Preferred and preference stock (9,588) (11,936)
-------- --------
Net cash flow used in financing activities (95,578) (66,322)
-------- --------
Net increase in cash and cash equivalents 15,082 89,084
Cash and cash equivalents at beginning of period 165,164 122,406
-------- --------
Cash and cash equivalents at end of period $180,246 $211,490
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $74,414 $83,269
Income taxes $22,532 $1,158
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $3,154 $859
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $7,565 $10,549
Temporary cash investments - at cost,
which approximates market:
Associated companies 36,378 37,389
Other 114,703 117,226
Special deposits 21,600 -
---------- ----------
Total cash and cash equivalents 180,246 165,164
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1998 and 1997) 100,119 99,762
Associated companies 10,253 9,024
Other 26,902 32,837
Accrued unbilled revenues 93,256 74,825
Deferred fuel costs 168,860 145,757
Accumulated deferred income taxes 28,757 22,093
Fuel inventory - at average cost 34,718 37,627
Materials and supplies - at average cost 110,370 104,690
Rate deferrals 9,077 21,749
Prepayments and other 28,646 21,680
---------- ----------
Total 791,204 735,208
---------- ----------
Other Property and Investments:
Decommissioning trust fund 198,082 187,462
Other - at cost (less accumulated depreciation) 175,789 176,953
---------- ----------
Total 373,871 364,415
---------- ----------
Utility Plant:
Electric 7,197,023 7,168,668
Natural gas 50,554 47,656
Steam products 82,751 82,289
Property under capital leases 65,106 67,946
Construction work in progress 106,071 90,333
Nuclear fuel under capital lease 43,683 54,390
Nuclear fuel 18,300 23,051
---------- ----------
Total 7,563,488 7,534,333
Less - accumulated depreciation and amortization 3,091,721 2,996,147
---------- ----------
Utility plant - net 4,471,767 4,538,186
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 93,872 98,410
SFAS 109 regulatory asset - net 377,434 376,275
Unamortized loss on reacquired debt 45,559 48,417
Other regulatory assets 83,361 86,819
Long-term receivables 35,693 36,984
Other 215,357 203,923
---------- ----------
Total 851,276 850,828
---------- ----------
TOTAL $6,488,118 $6,488,637
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $212,065 $190,890
Accounts payable:
Associated companies 54,216 48,726
Other 93,680 109,444
Customer deposits 31,456 30,311
Taxes accrued 77,250 48,318
Interest accrued 44,945 45,154
Nuclear refueling reserve 11,096 3,386
Obligations under capital leases 34,648 30,280
Other 14,168 17,646
---------- ----------
Total 573,524 524,155
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,114,298 1,124,644
Accumulated deferred investment tax credits 204,983 215,438
Obligations under capital leases 74,141 92,055
Other 1,019,191 923,409
---------- ----------
Total 2,412,613 2,355,546
---------- ----------
Long-term debt 1,678,229 1,702,719
Preferred stock with sinking fund 66,728 68,978
Preference stock 150,000 150,000
Company - obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 85,000 85,000
Shareholders' Equity:
Preferred stock without sinking fund 51,444 51,444
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 1,152,575
Retained earnings 203,950 284,165
---------- ----------
Total 1,522,024 1,602,239
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $6,488,118 $6,488,637
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 139.5 $ 133.5 $ 6.0 4
Commercial 103.2 107.0 (3.8) (4)
Industrial 174.6 176.9 (2.3) (1)
Governmental 10.7 8.5 2.2 26
-------------------------------
Total retail 428.0 425.9 2.1 -
Sales for resale:
Associated companies 8.2 4.3 3.9 91
Non-associated companies 27.3 10.8 16.5 153
Other (1) (58.1) 16.7 (74.8) (448)
-------------------------------
Total $ 405.4 $ 457.7 ($ 52.3) (11)
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,948 1,644 304 18
Commercial 1,647 1,530 117 8
Industrial 4,614 4,555 59 1
Governmental 166 114 52 46
-------------------------------
Total retail 8,375 7,843 532 7
Sales for resale:
Associated companies 205 152 53 35
Non-associated companies 946 489 457 93
-------------------------------
Total 9,526 8,484 1,042 12
===============================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 267.8 $ 267.1 $ 0.7 -
Commercial 203.5 212.3 (8.8) (4)
Industrial 350.2 354.9 (4.7) (1)
Governmental 21.3 16.5 4.8 29
-------------------------------
Total retail 842.8 850.8 (8.0) (1)
Sales for resale:
Associated companies 10.0 5.5 4.5 82
Non-associated companies 48.8 24.3 24.5 101
Other (1) (64.3) 25.2 (89.5) (355)
-------------------------------
Total $ 837.3 $ 905.8 ($ 68.5) (8)
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,668 3,437 231 7
Commercial 3,088 3,018 70 2
Industrial 8,962 8,720 242 3
Governmental 320 228 92 40
-------------------------------
Total retail 16,038 15,403 635 4
Sales for resale:
Associated companies 262 199 63 32
Non-associated companies 1,447 1,152 295 26
-------------------------------
Total 17,747 16,754 993 6
===============================
(1) Includes the effect of the provision for rate refunds.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended June 30, 1998
primarily due to an increase in electric operating revenues and a
decrease in operating expenses, partially offset by higher income taxes.
Net income increased for the six months ended June 30, 1998 primarily due
to a decrease in operating expenses, partially offset by higher income
taxes and a decrease in electric operating revenues.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($10.4) ($18.9)
Fuel cost recovery (21.2) (67.3)
Sales volume/weather 18.0 1.9
Other revenue (including unbilled) 14.1 7.0
Sales for resale 11.4 11.2
----- ------
Total $11.9 ($66.1)
===== ======
Electric operating revenues increased for the three months ended
June 30, 1998 primarily due to increases in sales volume, other revenue
(primarily unbilled revenue), and sales for resale, partially offset by
lower fuel cost recovery revenues, which do not affect net income, and a
decrease in base revenues. Electric operating revenues decreased for the
six months ended June 30, 1998, primarily due to decreases in fuel cost
recovery revenues and base revenues, partially offset by an increase in
sales for resale. Sales volume increased due to significantly warmer
weather in the second quarter of 1998. This increase in sales volume was
partially offset by the loss of a large industrial customer as well as
substantially lower sales to another large industrial customer due to
cogeneration. The increase in unbilled revenue is primarily a result of
increased sales volume. Sales for resale increased as a result of an
increase in sales to associated companies primarily due to changes in
generation requirements and availability among the domestic utility
companies. Fuel cost recovery revenues decreased due to lower pricing
resulting from a change in generation mix. Base revenues decreased due
to a base rate reduction that became effective in the third quarter of
1997.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three months ended June 30,
1998 primarily due to a decrease in purchased power expenses and other
operation and maintenance expenses, partially offset by increases in
fuel expenses and nuclear refueling outage expenses. Operating expenses
decreased for the six months ended June 30, 1998 primarily due to
decreases in fuel expenses, purchased power expenses, and other
operation and maintenance expenses, partially offset by an increase in
nuclear refueling outage expenses. Purchased power expenses decreased
due to shifting generation requirements in 1997 as a result of the
extended refueling outage at the Waterford 3 nuclear plant. Fuel
expenses increased for the three months ended June 30, 1998 as a result
of increased generation. The 1997 extended refueling outage at
Waterford 3, which resulted in reduced generation, also contributed to
this increase. Fuel expenses decreased for the six months ended June
30,1998 due to a shift in mix to nuclear fuel. Other operation and
maintenance expenses decreased due to non-refueling outage related
contract work and maintenance performed at Waterford 3 in 1997. Nuclear
refueling outage expenses increased due to increased outage expenses and
a shortened amortization period resulting from the extended refueling
outage at Waterford 3 in 1997.
Other
For the three and six months ended June 30, 1998 and 1997 the
effective income tax rates were relatively unchanged. The effective
income tax rates for the three months ended June 30, 1998 and 1997 were
40.8% and 41.1%, respectively. The effective income tax rates for the
six months ended June 30, 1998 and 1997 were 42.3% and 41.0%,
respectively.
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $424,115 $412,263 $780,153 $846,246
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 71,007 61,063 145,709 173,979
Purchased power 101,359 114,557 189,355 210,753
Nuclear refueling outage expenses 5,435 1,324 10,870 5,299
Other operation and maintenance 72,486 82,301 143,510 156,386
Depreciation, amortization, and decommissioning 43,152 41,095 87,230 85,466
Taxes other than income taxes 17,013 17,581 35,471 35,820
Other regulatory charges (credits) (877) 3,521 (1,754) 7,016
Amortization of rate deferrals - 2,910 - 5,736
-------- -------- -------- --------
Total 309,575 324,352 610,391 680,455
-------- -------- -------- --------
Operating Income 114,540 87,911 169,762 165,791
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 459 219 820 437
Miscellaneous - net 229 (276) 2,369 (917)
-------- -------- -------- --------
Total 688 (57) 3,189 (480)
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 28,848 30,007 57,610 60,090
Other interest - net 1,511 1,276 3,017 3,211
Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150
Allowance for borrowed funds used
during construction (417) (378) (750) (756)
-------- -------- -------- --------
Total 31,517 32,480 63,027 65,695
-------- -------- -------- --------
Income Before Income Taxes 83,711 55,374 109,924 99,616
Income Taxes 34,165 22,767 46,461 40,837
-------- -------- -------- --------
Net Income 49,546 32,607 63,463 58,779
Preferred Stock Dividend Requirements
and Other 3,254 3,254 6,507 6,846
-------- -------- -------- --------
Earnings Applicable to Common Stock $46,292 $29,353 $56,956 $51,933
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Six Months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $63,463 $58,779
Noncash items included in net income:
Amortization of rate deferrals - 5,736
Other regulatory charges (credits) (1,754) 7,016
Depreciation, amortization, and decommissioning 87,230 85,466
Deferred income taxes and investment tax credits 1,866 1,343
Allowance for equity funds used during construction (820) (437)
Changes in working capital:
Receivables (22,000) (11,709)
Accounts payable (8,329) (11,107)
Taxes accrued 39,706 12,737
Interest accrued (1,037) (10,083)
Deferred fuel costs (5,491) -
Other working capital accounts (221) (21,691)
Other deferred credits (22,396) 4,188
Decommissioning trust contributions and realized
change in trust assets (6,000) (8,101)
Provision for estimated losses and reserves 2,961 3,951
Other 1,510 (844)
-------- --------
Net cash flow provided by operating activities 128,688 115,244
-------- --------
Investing Activities:
Construction expenditures (42,204) (36,173)
Allowance for equity funds used during construction 820 437
Nuclear fuel purchases - (42,920)
Proceeds from sale/leaseback of nuclear fuel - 42,920
-------- --------
Net cash flow used in investing activities (41,384) (35,736)
-------- --------
Financing Activities:
Proceeds from the issuance of first mortgage bonds 112,556 -
Retirement of:
First mortgage bonds (150,561) (16,000)
Other long-term debt (115) (194)
Redemption of preferred stock - (7,500)
Changes in short-term borrowings - net - 13,049
Dividends paid:
Common stock (24,300) (51,500)
Preferred stock (6,507) (6,744)
-------- --------
Net cash flow used in financing activities (68,927) (68,889)
-------- --------
Net increase in cash and cash equivalents 18,377 10,619
Cash and cash equivalents at beginning of period 49,749 23,746
-------- --------
Cash and cash equivalents at end of period $68,126 $34,365
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $60,913 $68,469
Income taxes $25,657 $17,805
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $2,991 $633
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $7,221 $5,148
Temporary cash investments - at cost,
which approximates market 60,905 44,601
---------- ----------
Total cash and cash equivalents 68,126 49,749
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.2 million in 1998 and 1997) 73,624 69,566
Associated companies 17,775 15,035
Other 8,504 7,441
Accrued unbilled revenues 76,013 61,874
Deferred fuel costs 2,223 -
Accumulated deferred income taxes 11,472 10,994
Materials and supplies - at average cost 83,372 82,850
Deferred nuclear refueling outage costs 16,306 27,176
Prepayments and other 18,301 10,793
---------- ----------
Total 375,716 335,478
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 74,095 65,104
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 110,850 101,859
---------- ----------
Utility Plant:
Electric 5,073,099 5,058,130
Property under capital leases 233,513 233,513
Construction work in progress 70,441 52,632
Nuclear fuel under capital lease 39,872 57,811
Nuclear fuel 1,560 1,560
---------- ----------
Total 5,418,485 5,403,646
Less - accumulated depreciation and amortization 2,096,117 2,021,392
---------- ----------
Utility plant - net 3,322,368 3,382,254
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 269,047 278,234
Unamortized loss on reacquired debt 32,707 33,468
Other regulatory assets 29,009 29,991
Other 15,590 14,116
---------- ----------
Total 346,353 355,809
---------- ----------
TOTAL $4,155,287 $4,175,400
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $198 $35,300
Accounts payable:
Associated companies 46,445 43,508
Other 84,620 95,886
Customer deposits 55,654 55,331
Taxes accrued 64,949 25,243
Interest accrued 33,534 34,571
Dividends declared 3,253 3,253
Deferred fuel costs - 3,268
Obligations under capital leases 16,932 29,232
Other 5,194 8,578
---------- ----------
Total 310,779 334,170
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 810,300 813,748
Accumulated deferred investment tax credits 131,482 134,276
Obligations under capital leases 22,940 28,579
Deferred interest - Waterford 3 lease obligation 19,408 17,799
Other 100,084 119,519
---------- ----------
Total 1,084,214 1,113,921
---------- ----------
Long-term debt 1,338,793 1,338,464
Preferred stock with sinking fund 85,000 85,000
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely junior subordinated deferrable debentures 70,000 70,000
Shareholders' Equity:
Preferred stock without sinking fund 100,500 100,500
Common stock, no par value, authorized
250,000,000 shares; issued and outstanding
165,173,180 shares 1,088,900 1,088,900
Capital stock expense and other (2,321) (2,321)
Retained earnings 79,422 46,766
---------- ----------
Total 1,266,501 1,233,845
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,155,287 $4,175,400
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 126.9 $ 119.5 $ 7.4 6
Commercial 83.7 85.1 (1.4) (2)
Industrial 136.4 169.7 (33.3) (20)
Governmental 7.4 8.1 (0.7) (9)
-----------------------------
Total retail 354.4 382.4 (28.0) (7)
Sales for resale:
Associated companies 9.3 0.5 8.8 1760
Non-associated companies 15.8 13.2 2.6 20
Other (1) 44.6 16.1 28.5 177
-----------------------------
Total $ 424.1 $ 412.2 $ 11.9 3
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,906 1,581 325 21
Commercial 1,275 1,127 148 13
Industrial 3,675 4,268 (593) (14)
Governmental 114 110 4 4
-----------------------------
Total retail 6,970 7,086 (116) (2)
Sales for resale:
Associated companies 207 19 188 989
Non-associated companies 259 220 39 18
-----------------------------
Total 7,436 7,325 111 2
=============================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 241.0 $ 252.8 ($ 11.8) (5)
Commercial 162.4 174.6 (12.2) (7)
Industrial 286.0 357.8 (71.8) (20)
Governmental 15.8 17.1 (1.3) (8)
-----------------------------
Total retail 705.2 802.3 (97.1) (12)
Sales for resale:
Associated companies 10.2 0.8 9.4 1175
Non-associated companies 26.9 25.1 1.8 7
Other (1) 37.8 18.0 19.8 110
-----------------------------
Total $ 780.1 $ 846.2 ($66.1) (8)
=============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 3,562 3,304 258 8
Commercial 2,364 2,230 134 6
Industrial 7,315 8,593 (1,278) (15)
Governmental 238 229 9 4
-----------------------------
Total retail 13,479 14,356 (877) (6)
Sales for resale:
Associated companies 235 26 209 804
Non-associated companies 412 360 52 14
-----------------------------
Total 14,126 14,742 (616) (4)
=============================
(1) Includes the effect of the provision for rate refunds.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and six months ended June 30,
1998 primarily as a result of an increase in electric operating revenues,
partially offset by an increase in operating expenses and higher income
taxes.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.3) ($5.5)
Grand Gulf rate rider 9.6 11.0
Fuel cost recovery 10.1 5.9
Sales volume/weather 9.1 10.3
Other revenue (including unbilled) 13.6 16.8
Sales for resale 16.9 22.2
----- -----
Total $56.0 $60.7
===== =====
Electric operating revenues increased for the three and six months
ended June 30, 1998 primarily due to increases in sales for resale, other
revenue (primarily unbilled revenue), fuel cost recovery revenues, Grand
Gulf rate rider revenue, and higher sales volume. Sales for resale
increased as a result of an increase in sales to associated companies
primarily due to changes in generation requirements and availability
among the domestic utility companies. The increase in unbilled revenue
is primarily a result of increased sales volume and, for the six months
ended June 30, 1998, the prior year's unfavorable price variance in fuel
revenues that is not occurring in the current year due to the fixed fuel
factor. Fuel cost recovery revenues, which do not affect net income,
increased due to an MPSC order, effective May 1, 1997, that changed fuel
recovery pricing to a fixed fuel factor, subject to annual review. The
increases in the Grand Gulf rate rider revenue, which does not affect net
income, and in sales volume are primarily due to significantly warmer
weather in the second quarter of 1998.
Expenses
Operating expenses increased for the three and six months ended June
30, 1998 primarily due to an increase in fuel expenses and a decrease in
other regulatory credits, partially offset by decreases in purchased
power expenses and other operation and maintenance expenses. The
increase in fuel expenses is due to increased generation requirements
and, for the six months ended June 30, 1998, the shift from higher priced
purchased power to lower priced fossil fuel. The decrease in other
regulatory credits is a result of the reduction in the under-recovery of
Grand Gulf 1 related costs. Other operation and maintenance expenses
decreased primarily as a result of higher contract work in the six months
ended June 30, 1997 as compared to the same period in 1998.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
The effective income tax rate of 35.9% for the three months ended
June 30, 1998 remained relatively unchanged from the rate of 34.7% for
the three months ended June 30, 1997. For the six months ended June 30,
1998 and 1997 the effective income tax rates were 34.1% and 31.7%,
respectively. The increase in 1998 is primarily due to the impact of
excess deferred taxes on rate deferrals and the amortization of
investment tax credits.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $268,908 $212,892 $473,925 $413,220
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 59,089 26,526 110,401 66,549
Purchased power 72,032 76,215 138,626 146,574
Other operation and maintenance 32,407 33,457 60,230 63,477
Depreciation and amortization 11,079 10,682 22,394 21,381
Taxes other than income taxes 11,043 11,077 22,198 21,413
Other regulatory credits (7,451) (21,172) (22,029) (40,686)
Amortization of rate deferrals 34,989 35,712 69,979 71,423
-------- -------- -------- --------
Total 213,188 172,497 401,799 350,131
-------- -------- -------- --------
Operating Income 55,720 40,395 72,126 63,089
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction (20) 286 - 572
Miscellaneous - net 1,004 563 2,031 251
-------- -------- -------- --------
Total 984 849 2,031 823
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 9,885 10,790 19,461 21,413
Other interest - net 865 987 2,160 2,323
Allowance for borrowed funds used
during construction (93) (231) (133) (462)
-------- -------- -------- --------
Total 10,657 11,546 21,488 23,274
-------- -------- -------- --------
Income Before Income Taxes 46,047 29,698 52,669 40,638
Income Taxes 16,535 10,299 17,963 12,887
-------- -------- -------- --------
Net Income 29,512 19,399 34,706 27,751
Preferred Stock Dividend Requirements
and Other 841 1,014 1,684 2,129
-------- -------- -------- --------
Earnings Applicable to Common Stock $28,671 $18,385 $33,022 $25,622
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $34,706 $27,751
Noncash items included in net income:
Amortization of rate deferrals 69,979 71,423
Other regulatory credits (22,029) (40,686)
Depreciation and amortization 22,394 21,381
Deferred income taxes and investment tax credits (15,721) (13,203)
Allowance for equity funds used during construction - (572)
Changes in working capital:
Receivables (29,624) 6,893
Fuel inventory (532) 2,112
Accounts payable 15,398 (2,733)
Taxes accrued 20,395 18,235
Interest accrued (244) (2,204)
Other working capital accounts (15,021) (2,896)
Other (6,355) 2,122
------- -------
Net cash flow provided by operating activities 73,346 87,623
------- -------
Investing Activities:
Construction expenditures (18,641) (25,426)
Allowance for equity funds used during construction - 572
------- -------
Net cash flow used in investing activities (18,641) (24,854)
------- -------
Financing Activities:
Proceeds from the issuance of general and refunding
mortgage bonds 78,703 64,827
Retirement of:
General and refunding mortgage bonds (80,000) -
Other long-term debt (20) (15)
Redemption of preferred stock - (7,000)
Changes in short-term borrowings - net (35,521) (50,253)
Dividends paid:
Common stock (16,900) (19,600)
Preferred stock (1,685) (2,142)
------- -------
Net cash flow used in financing activities (55,423) (14,183)
------- -------
Net increase (decrease) in cash and cash equivalents (718) 48,586
Cash and cash equivalents at beginning of period 6,816 9,498
------- -------
Cash and cash equivalents at end of period $6,098 $58,084
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $21,100 $24,864
Income taxes (refund) $1,054 ($7,039)
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents $6,098 $6,816
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1 million in 1998 and 1997) 47,255 36,636
Associated companies 7,589 6,842
Other 1,674 4,139
Accrued unbilled revenues 70,716 49,993
Deferred fuel costs 16,584 14,967
Fuel inventory - at average cost 3,918 3,386
Materials and supplies - at average cost 18,409 17,657
Rate deferrals 34,989 104,969
Prepayments and other 17,750 24,896
---------- ----------
Total 224,982 270,301
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,674 7,757
---------- ----------
Total 13,205 13,288
---------- ----------
Utility Plant:
Electric 1,694,718 1,687,400
Construction work in progress 31,300 22,960
---------- ----------
Total 1,726,018 1,710,360
Less - accumulated depreciation and amortization 675,618 656,828
---------- ----------
Utility plant - net 1,050,400 1,053,532
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 26,168 22,993
Unamortized loss on reacquired debt 8,428 8,404
Other regulatory assets 102,477 64,827
Other 6,376 6,216
---------- ----------
Total 143,449 102,440
---------- ----------
TOTAL $1,432,036 $1,439,561
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $20 $20
Notes payable - associated companies 11,641 47,162
Accounts payable:
Associated companies 40,467 36,057
Other 22,264 11,276
Customer deposits 17,120 24,084
Taxes accrued 52,709 32,314
Accumulated deferred income taxes 9,257 44,277
Interest accrued 14,065 14,309
Other 3,104 2,806
---------- ----------
Total 170,647 212,305
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 267,938 244,464
Accumulated deferred investment tax credits 23,161 23,915
Other 11,862 15,892
---------- ----------
Total 302,961 284,271
---------- ----------
Long-term debt 463,477 464,156
Shareholders' Equity:
Preferred stock without sinking fund 50,381 50,381
Common stock, no par value, authorized
15,000,000 shares; issued and outstanding
8,666,357 shares 199,326 199,326
Capital stock expense and other (59) (59)
Retained earnings 245,303 229,181
---------- ----------
Total 494,951 478,829
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $1,432,036 $1,439,561
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 83.0 $ 68.7 $ 14.3 21
Commercial 69.7 61.9 7.8 13
Industrial 43.5 40.5 3.0 7
Governmental 6.7 6.4 0.3 5
-------------------------------
Total retail 202.9 177.5 25.4 14
Sales for resale:
Associated companies 24.8 10.7 14.1 132
Non-associated companies 7.1 4.3 2.8 65
Other 34.1 20.4 13.7 67
-------------------------------
Total $ 268.9 $ 212.9 $ 56.0 26
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 1,005 830 175 21
Commercial 938 834 104 12
Industrial 790 750 40 5
Governmental 83 77 6 8
-------------------------------
Total retail 2,816 2,491 325 13
Sales for resale:
Associated companies 693 233 460 197
Non-associated companies 146 81 65 80
-------------------------------
Total 3,655 2,805 850 30
===============================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 157.9 $ 143.9 $ 14.0 10
Commercial 132.5 126.4 6.1 5
Industrial 84.9 83.5 1.4 2
Governmental 13.2 13.1 0.1 1
-------------------------------
Total retail 388.5 366.9 21.6 6
Sales for resale:
Associated companies 42.0 21.7 20.3 94
Non-associated companies 11.3 9.4 1.9 20
Other 32.1 15.2 16.9 111
-------------------------------
Total $ 473.9 $ 413.2 $ 60.7 15
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 2,010 1,821 189 10
Commercial 1,774 1,653 121 7
Industrial 1,529 1,473 56 4
Governmental 159 157 2 1
-------------------------------
Total retail 5,472 5,104 368 7
Sales for resale:
Associated companies 1,233 430 803 187
Non-associated companies 211 183 28 15
-------------------------------
Total 6,916 5,717 1,199 21
===============================
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended June 30, 1998
primarily due to an increase in electric and gas operating revenues,
partially offset by higher income taxes and operating expenses. Net
income decreased slightly for the six months ended June 30, 1998
primarily due to an increase in operating expenses, partially offset by
an increase in electric operating revenues.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues and Sales", "Expenses", and "Other" below.
Revenues and Sales
The changes in electric operating revenues for the three and six
months ended June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($2.8) ($6.3)
Fuel cost recovery 9.2 3.6
Sales volume/weather 6.7 5.0
Other revenue (including unbilled) 3.3 3.1
Sales for resale (2.0) (0.1)
----- ----
Total $14.4 $5.3
===== ====
Electric operating revenues increased for the three and six months
ended June 30, 1998 primarily due to increases in fuel cost recovery
revenues, sales volume, and other revenue (primarily unbilled revenue),
partially offset by a decrease in base revenues. Fuel cost recovery
revenues, which do not affect net income, increased for the three months
ended June 30, 1998 due to higher fuel prices and increased generation.
For the six months ended June 30, 1998, fuel cost recovery revenues
increased primarily due to increased generation. The increase in sales
volume is primarily due to significantly warmer weather in the second
quarter of 1998. The increase in unbilled revenue is primarily due to
increased sales volume. Base revenues decreased primarily due to
reductions in residential and commercial rates that went into effect in
August 1997.
Gas operating revenues increased slightly for the three months ended
June 30, 1998 primarily due to a higher unit purchase price for gas
purchased for resale. Gas operating revenues decreased slightly for the
six months ended June 30, 1998 primarily due to $1.5 million of rate
reductions that went into effect in August 1997.
Expenses
Operating expenses increased for the three and six months ended
June 30, 1998 primarily due to an increase in purchased power expenses.
This increase is partially offset by a decrease in fuel expenses and gas
purchased for resale. Purchased power expenses increased primarily due
to increased generation as a result of warmer weather in the second
quarter of 1998. Fuel expenses decreased for the three and six months
ended June 30, 1998 primarily due to increased under-recovery of fuel
costs as a result of increased generation requirements in the second
quarter 1998.
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Other
For the three months ended June 30, 1998 and 1997 the effective
income tax rates were 41.0% and 47.7%, respectively. The decrease in
1998 is primarily due to the reversal of previously recorded AFUDC
amounts included in depreciation. The effective income tax rate of 44.9%
for the six months ended June 30, 1998 remained relatively unchanged from
the rate of 45.9% for the six months ended June 30, 1997.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues:
Electric $106,975 $92,588 $187,457 $182,149
Natural gas 18,131 17,215 51,312 52,610
-------- -------- -------- --------
Total 125,106 109,803 238,769 234,759
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 16,793 25,658 55,684 68,440
Purchased power 52,067 36,382 86,828 72,964
Other operation and maintenance 19,943 17,427 37,086 32,682
Depreciation and amortization 5,298 5,398 11,079 10,591
Taxes other than income taxes 9,237 8,606 18,725 17,492
Other regulatory credits (2,451) (2,059) (4,844) (2,404)
Amortization of rate deferrals 8,751 8,991 16,852 16,839
-------- -------- -------- --------
Total 109,638 100,403 221,410 216,604
-------- -------- -------- --------
Operating Income 15,468 9,400 17,359 18,155
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction (10) 80 89 160
Miscellaneous - net (643) (11) 122 20
-------- -------- -------- --------
Total (653) 69 211 180
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 3,429 3,436 6,859 7,059
Other interest - net 236 288 477 579
Allowance for borrowed funds used
during construction 8 (63) (68) (126)
-------- -------- -------- --------
Total 3,673 3,661 7,268 7,512
-------- -------- -------- --------
Income Before Income Taxes 11,142 5,808 10,302 10,823
Income Taxes 4,565 2,770 4,627 4,967
-------- -------- -------- --------
Net Income 6,577 3,038 5,675 5,856
Preferred Stock Dividend Requirements
and Other 241 241 482 482
-------- -------- -------- --------
Earnings Applicable to Common Stock $6,336 $2,797 $5,193 $5,374
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $5,675 $5,856
Noncash items included in net income:
Amortization of rate deferrals 16,852 16,839
Other regulatory credits (4,844) (2,404)
Depreciation and amortization 11,079 10,591
Deferred income taxes and investment tax credits (2,491) (4,964)
Allowance for equity funds used during construction (89) (160)
Changes in working capital:
Receivables (7,564) 3,129
Accounts payable (885) 6,217
Taxes accrued 2,825 5,471
Interest accrued (383) (631)
Deferred fuel and resale gas costs (8,061) 1,804
Other working capital accounts (3,809) (11,069)
Other (1,998) (1,520)
------- -------
Net cash flow provided by operating activities 6,307 29,159
------- -------
Investing Activities:
Construction expenditures (7,688) (3,909)
Allowance for equity funds used during construction 89 160
------- -------
Net cash flow used in investing activities (7,599) (3,749)
------- -------
Financing Activities:
Retirement of:
First mortgage bonds - (12,000)
Dividends paid:
Common stock - (14,700)
Preferred stock (482) (724)
------- -------
Net cash flow used in financing activities (482) (27,424)
------- -------
Net decrease in cash and cash equivalents (1,774) (2,014)
Cash and cash equivalents at beginning of period 11,376 17,510
------- -------
Cash and cash equivalents at end of period $9,602 $15,496
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $7,500 $7,969
Income taxes - net $4,802 $4,928
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $1,935 $4,321
Temporary cash investments - at cost,
which approximates market:
Associated companies 2,104 1,918
Other 5,563 5,137
-------- --------
Total cash and cash equivalents 9,602 11,376
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1998 and 1997) 29,918 26,913
Associated companies 1,272 1,081
Other 3,341 4,155
Accrued unbilled revenues 21,265 16,083
Deferred electric fuel and resale gas costs 17,445 9,384
Materials and supplies - at average cost 9,193 9,389
Rate deferrals 31,270 35,336
Prepayments and other 7,542 6,087
-------- --------
Total 130,848 119,804
-------- --------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
Utility Plant:
Electric 508,012 508,338
Natural gas 127,632 122,308
Construction work in progress 24,102 19,184
-------- --------
Total 659,746 649,830
Less - accumulated depreciation and amortization 368,304 355,854
-------- --------
Utility plant - net 291,442 293,976
-------- --------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 51,406 64,192
SFAS 109 regulatory asset - net 1,496 1,202
Unamortized loss on reacquired debt 1,341 1,435
Other regulatory assets 16,675 13,392
Other 866 890
-------- --------
Total 71,784 81,111
-------- --------
TOTAL $497,333 $498,150
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Accounts payable:
Associated companies $20,942 $15,922
Other 11,600 17,505
Customer deposits 17,387 16,982
Taxes accrued 8,095 5,270
Accumulated deferred income taxes 13,554 11,544
Interest accrued 4,666 5,049
Provision for rate refund - 3,108
Other 2,384 2,231
-------- --------
Total 78,628 77,611
-------- --------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 56,969 61,000
Accumulated deferred investment tax credits 7,145 7,396
Accumulated provision for property insurance 15,487 15,487
Other 13,550 16,327
-------- --------
Total 93,151 100,210
-------- --------
Long-term debt 168,985 168,953
Shareholders' Equity:
Preferred stock without sinking fund 19,780 19,780
Common stock, $4 par value, authorized
10,000,000 shares; issued and outstanding
8,435,900 shares 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 66,751 61,558
-------- --------
Total 156,569 151,376
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $497,333 $498,150
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 36.0 $ 27.2 $ 8.8 32
Commercial 35.4 32.6 2.8 9
Industrial 6.4 5.7 0.7 12
Governmental 14.3 12.9 1.4 11
-------------------------------
Total retail 92.1 78.4 13.7 17
Sales for resale:
Associated companies 1.8 5.1 (3.3) (65)
Non-associated companies 3.2 1.9 1.3 68
Other (1) 9.9 7.2 2.7 38
-------------------------------
Total $107.0 $ 92.6 $ 14.4 16
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 481 386 95 25
Commercial 521 488 33 7
Industrial 133 125 8 6
Governmental 250 239 11 5
-------------------------------
Total retail 1,385 1,238 147 12
Sales for resale:
Associated companies 57 178 (121) (68)
Non-associated companies 57 38 19 50
-------------------------------
Total 1,499 1,454 45 3
===============================
Six Months Ended Increase/
Description 1998 1997 (Decrease) %
(In Millions)
Electric Operating Revenues:
Residential $ 60.9 $ 55.9 $ 5.0 9
Commercial 66.7 68.9 (2.2) (3)
Industrial 12.3 11.9 0.4 3
Governmental 27.0 26.5 0.5 2
-------------------------------
Total retail 166.9 163.2 3.7 2
Sales for resale:
Associated companies 5.2 7.0 (1.8) (26)
Non-associated companies 5.3 3.6 1.7 47
Other (1) 10.0 8.3 1.7 20
-------------------------------
Total $187.4 $ 182.1 $ 5.3 3
===============================
Billed Electric Energy
Sales (Millions of kWh):
Residential 836 760 76 10
Commercial 980 966 14 1
Industrial 251 239 12 5
Governmental 469 460 9 2
-------------------------------
Total retail 2,536 2,425 111 5
Sales for resale:
Associated companies 180 225 (45) (20)
Non-associated companies 95 61 34 56
-------------------------------
Total 2,811 2,711 100 4
===============================
(1) Includes the effect of the provision for rate refunds.
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income for the three and six months ended June 30, 1998 remained
relatively unchanged as compared to the same periods in 1997.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
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. See Note 2 to the Form 10-
K for a discussion of System Energy's proposed rate increase, which is
subject to refund.
Expenses
Operating expenses decreased for the three and six months ended June
30, 1998 primarily due to lower fuel expenses, other operation and
maintenance expenses, and depreciation, amortization, and decommissioning
expenses. Fuel expenses decreased because of a scheduled nuclear
refueling outage in April and May of this year. The decrease in other
operation and maintenance expenses was due primarily to the impact of
various materials and supplies refunds and adjustments and an insurance
refund. Depreciation, amortization, and decommissioning expenses were
lower as a result of the recognition of additional depreciation in the
three and six months ended June 30, 1997 associated with the sale and
leaseback in 1989 of a portion of Grand Gulf 1.
Other
Interest on long-term debt decreased for the three and six months
ended June 30, 1998 as a result of the redemption of a series of First
Mortgage Bonds in April 1998.
For the three and six months ended June 30, 1998 and 1997 the
effective income tax rates were relatively unchanged. The effective
income tax rates for the three months ended June 30, 1998 and 1997 were
45.2% and 44.1%, respectively. The effective income tax rates for the
six months ended June 30, 1998 and 1997 were 45.2% and 44.2%,
respectively.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $144,336 $161,021 $292,942 $316,682
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 6,183 12,441 17,030 24,458
Nuclear refueling outage expenses 4,177 3,907 8,776 7,624
Other operation and maintenance 22,491 28,407 43,772 48,797
Depreciation, amortization, and decommissioning 32,432 35,917 65,590 74,713
Taxes other than income taxes 6,876 6,781 13,638 13,206
-------- -------- -------- --------
Total 72,159 87,453 148,806 168,798
-------- -------- -------- --------
Operating Income 72,177 73,568 144,136 147,884
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 528 280 1,081 561
Miscellaneous - net 2,507 1,919 5,612 3,241
-------- -------- -------- --------
Total 3,035 2,199 6,693 3,802
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 28,875 31,103 58,451 61,861
Other interest - net 1,614 1,830 3,267 3,611
Allowance for borrowed funds used
during construction (470) (279) (946) (557)
-------- -------- -------- --------
Total 30,019 32,654 60,772 64,915
-------- -------- -------- --------
Income Before Income Taxes 45,193 43,113 90,057 86,771
Income Taxes 20,414 19,020 40,691 38,333
-------- -------- -------- --------
Net Income $24,779 $24,093 $49,366 $48,438
======== ======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $49,366 $48,438
Noncash items included in net income:
Depreciation, amortization, and decommissioning 65,590 74,713
Deferred income taxes and investment tax credits (16,796) (23,444)
Allowance for equity funds used during construction (1,081) (561)
Changes in working capital:
Receivables 195 (7,290)
Accounts payable (9,691) 5,297
Taxes accrued (7,374) 8,374
Interest accrued (7,560) 3,212
Other working capital accounts (9,377) 6,353
Decommissioning trust contributions and realized
change in trust assets (11,529) (11,190)
FERC Settlement - refund obligation (2,491) (2,199)
Provision for estimated losses and reserves 37,147 20,699
Other 6,772 9,183
-------- --------
Net cash flow provided by operating activities 93,171 131,585
-------- --------
Investing Activities:
Construction expenditures (19,472) (8,466)
Allowance for equity funds used during construction 1,081 561
Nuclear fuel purchases (30,476) (39)
Proceeds from sale/leaseback of nuclear fuel 30,476 39
-------- --------
Net cash flow used in investing activities (18,391) (7,905)
-------- --------
Financing Activities:
Retirement of first mortgage bonds (60,000) -
Common stock dividends paid (47,800) (58,700)
-------- --------
Net cash flow used in financing activities (107,800) (58,700)
-------- --------
Net increase (decrease) in cash and cash equivalents (33,020) 64,980
Cash and cash equivalents at beginning of period 206,410 92,315
-------- --------
Cash and cash equivalents at end of period $173,390 $157,295
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $61,012 $57,634
Income taxes $54,956 $42,853
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $1,661 ($1,041)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $401 $792
Temporary cash investments - at cost,
which approximates market:
Associated companies 47,472 55,891
Other 125,517 149,727
---------- ----------
Total cash and cash equivalents 173,390 206,410
Accounts receivable:
Associated companies 78,769 79,262
Other 4,438 4,140
Materials and supplies - at average cost 61,512 63,782
Deferred nuclear refueling outage costs 18,317 7,777
Prepayments and other 4,930 3,658
---------- ----------
Total 341,356 365,029
---------- ----------
Other Property and Investments:
Decommissioning trust fund 99,102 85,912
---------- ----------
Utility Plant:
Electric 3,025,241 3,025,389
Electric plant under leases 440,970 440,970
Construction work in progress 55,888 36,445
Nuclear fuel under capital lease 82,807 64,190
---------- ----------
Total 3,604,906 3,566,994
Less - accumulated depreciation and amortization 1,144,753 1,086,820
---------- ----------
Utility plant - net 2,460,153 2,480,174
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 231,353 243,027
Unamortized loss on reacquired debt 48,186 51,386
Other regulatory assets 193,666 192,290
Other 13,572 14,213
---------- ----------
Total 486,777 500,916
---------- ----------
TOTAL $3,387,388 $3,432,031
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDER'S EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $70,000 $70,000
Accounts payable:
Associated companies 25,941 29,131
Other 12,621 19,122
Taxes accrued 68,301 75,675
Interest accrued 34,762 42,322
Obligations under capital leases 36,156 41,977
Other 1,506 1,341
---------- ----------
Total 249,287 279,568
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 533,363 562,051
Accumulated deferred investment tax credits 98,433 100,171
Obligations under capital leases 46,651 22,213
FERC Settlement - refund obligation 45,809 48,300
Other 288,074 227,847
---------- ----------
Total 1,012,330 960,582
---------- ----------
Long-term debt 1,274,272 1,341,948
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 62,149 60,583
---------- ----------
Total 851,499 849,933
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $3,387,388 $3,432,031
========== ==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following discussion compares the results of operations for the
three and six months ended June 30, 1998 with the results of operations
for the same periods in 1997. The six months ended June 30, 1997
includes five months of results of operations for London Electricity due
to its acquisition effective February 1, 1997.
Net Income
Net income increased for the three and six months ended June 30,
1998 primarily due to increases in operating revenues, partially offset
by increases in operating expenses and interest charges for the six month
periods.
Significant factors affecting the results of operations and causing
variances between the three and six months ended June 30, 1998 and 1997
are discussed under "Revenues", "Expenses", and "Other" below.
Revenues
The changes in operating revenues for the three and six months ended
June 30, 1998 are as follows:
Three Months Ended Six Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Electricity distribution $4 $51
Electricity supply 8 174
Other 16 33
Intra-business (3) (58)
--- ----
Total $25 $200
=== ====
Two principal factors determine the amount of revenues produced by
the main electricity distribution and supply businesses: the unit prices
of the electricity distributed and supplied (which are controlled by the
Distribution Price Control Formula and Supply Price Control Formula,
respectively, which determine the maximum average price per unit
(kilowatt hour) of electricity that may be charged) and the number of
electricity units distributed and supplied 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. London
Electricity is expected to have the exclusive right to supply all
franchise supply customers in its Franchise Area until late 1998.
Revenues from the distribution business increased for both the three
and six months ended June 30, 1998.
For the three month period, the increase was due to an increase in the
units distributed. The increase for the six month period was principally
due to an increase in units distributed as a result of there being six
months of London Electricity operations compared to only five months
during the same period in 1997. Partially offsetting these factors were
3% distribution price reductions effective April 1, 1997 and April 1,
1998.
Franchise supply customers, who are generally residential and small
commercial customers, comprised 58% and 60% of total supply sales volume
for the three and six months ended June 30, 1998, respectively. 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 42% and 40% of total
sales volume for the three and six months ended June 30, 1998,
respectively. Sales to non-franchise supply customers are determined
primarily by the success of the supply business in contracting to supply
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
customers with electricity both inside and outside of London
Electricity's Franchise Area. Such sales have declined as a percentage
of the total supply sales mix from 46% and 45% for the comparable periods
of 1997.
During the three months ended June 30, 1998, the number of
electricity units supplied decreased by 5% compared to the same period in
1997 while total revenues produced by the supply business increased by
2%. Sales volume increased by 3% for franchise customers but decreased by
14% for non-franchise customers for the three months ended June 30, 1998.
The decrease in sales volume for non-franchise customers was due to a
focus on higher profit margin customers.
During the six months ended June 30, 1998, the number of electricity
units supplied increased by 17% due to the additional month included in
1998 results. Volume increased for both franchise supply customers (27%)
and non-franchise supply customers (5%) for the six months of 1998
compared with 1997.
Other revenues increased for the three and six month periods ended
June 30, 1998. The increase for the three month period was attributable
primarily to increased marketing of natural gas to retail customers. The
additional increase in other revenues for the six month period is due to
six months of London Electricity operations in 1998 compared to five
months during the same period in 1997.
Expenses
Operating expenses decreased for the three months ended June 30,
1998 primarily due to reversal of a valuation allowance on an investment
and the start of amortization of the provision for an unfavorable long-
term purchased power contract. The valuation allowance was originally
recorded in the quarters ended December 1997 and March 1998. Management
subsequently determined that reversal of a portion of such allowance was
appropriate based on improved prospects for recovery of this investment.
The unfavorable long-term contract provision was established at the time
of the acquisition of London Electricity. Amortization of this provision
offsets a portion of the purchased power costs related to this contract.
The decreases in operating expenses noted above were partially offset by
increases in purchased power costs and in depreciation and amortization
expense. Operating expenses increased for the six months ended June 30,
1998 due principally to one additional month of operations included in
1998 compared to 1997.
Other
Interest charges increased for the three and six months ended June
30, 1998, compared to the same periods in 1997, due principally to an
increase in the average level of debt and preferred securities
outstanding during 1998 compared to 1997. The increase in average debt
levels was due principally to the acquisition of London Electricity
effective February 1, 1997 which was not fully funded until May 1997.
Such increase was partially offset by the November 1997 decrease in debt
due to the transfer of a $114 million facility to Entergy London's parent
in exchange for additional equity. Also, interest expense increased for
the six months ended June 30, 1998 due to one additional month of
operations included in 1998 compared to 1997.
Other income decreased for the three months ended June 30, 1998 due
principally to a decrease in gains on disposition of property.
The effective income tax rate for the three months ended June 30,
1998 and 1997 were 31.1% and 30.5%, respectively. The rates for the six
months ended June 30, 1998 and 1997 were 31.0% and 33.1%, respectively.
The decrease in 1998 for the six months period is principally due to the
reduction in the UK corporation tax rate from 33% to 31%, effective as of
April 1, 1997.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $479,003 $453,968 $1,029,791 $829,924
-------- -------- ---------- --------
Operating Expenses:
Purchased power 296,339 289,700 663,235 552,998
Depreciation and amortization 35,274 32,936 69,020 53,697
Other operation and maintenance costs 73,180 85,603 167,365 138,391
-------- -------- ---------- --------
Total 404,793 408,239 899,620 745,086
-------- -------- ---------- --------
Operating Income 74,210 45,729 130,171 84,838
-------- -------- ---------- --------
Other Income:
Interest and dividend income 2,727 3,362 4,151 3,684
Gain on disposition of property 2,681 6,579 5,088 11,029
Miscellaneous - net 3,409 5,643 8,318 2,802
-------- -------- ---------- --------
Total 8,817 15,584 17,557 17,515
-------- -------- ---------- --------
Interest Charges:
Distributions on preferred securities of subsidiary 6,469 - 12,938 -
Other interest - net 43,099 44,612 84,204 65,051
-------- -------- ---------- --------
Total 49,568 44,612 97,142 65,051
-------- -------- ---------- --------
Income Before Income Taxes 33,459 16,701 50,586 37,302
Income Taxes 10,410 5,102 15,660 12,344
-------- -------- ---------- --------
Net Income 23,049 11,599 34,926 24,958
Other comprehensive income:
Foreign currency translation adjustments (2,031) 5,798 10,224 8,166
-------- -------- ---------- --------
Comprehensive Income $21,018 $17,397 $45,150 $33,124
======== ======== ========== ========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net Income $34,926 $24,958
Noncash items included in net income:
Depreciation and amortization 69,020 53,697
Deferred income taxes 7,216 63,249
Imputed interest on parent company debt 55,702 -
Changes in assets and liabilities:
Inventory (1,441) 1,340
Accounts receivable and unbilled revenue 125,659 21,602
Other receivables 16,953 10,429
Prepayments and other (1,109) (3,760)
Long-term receivables and other (8,903) (2,652)
Accounts payable (76,281) 1,656
Income taxes accrued 4,932 (70,403)
Interest accrued 228 10,529
Deferred revenue and other current liabilities 4,388 15,056
Other liabilities (64,637) 2,438
Other (1,402) 16,531
-------- --------
Net cash flow provided by operating activities 165,251 144,670
-------- --------
Investing Activities:
Construction expenditures (89,649) (59,609)
Acquisition of London Electricity, net of cash acquired - (1,980,631)
Other investments (4,406) 21,654
-------- --------
Net cash flow used in investing activities (94,055) (2,018,586)
-------- --------
Financing Activities:
Proceeds from the issuance of:
Bank notes and other long-term debt - 1,691,201
Common Stock - 391,953
Retirement of long-term debt (13,330) -
Common stock dividends paid (53,184) -
Changes in short-term borrowings - net 15,264 (153,154)
-------- --------
Net cash flow provided by (used in) financing activities (51,250) 1,930,000
-------- --------
Effect of exchange rates on cash and cash equivalents 1,366 1,263
-------- --------
Net increase in cash and cash equivalents 21,312 57,347
Cash and cash equivalents at beginning of period 44,388 -
-------- --------
Cash and cash equivalents at end of period $65,700 $57,347
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $75,193 $27,391
Income taxes - net $8,251 $9,893
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $6,396 $ -
Temporary cash investments - at cost,
which approximates market 59,304 44,388
---------- ----------
Total cash and cash equivalents 65,700 44,388
Notes receivable 4,964 7,364
Accounts receivable:
Customer (less allowance for doubtful accounts of $21.1 million
in 1998 and $19.3 million in 1997) 140,195 139,265
Other 38,471 52,374
Accrued unbilled revenue 140,480 262,818
Accumulated deferred income taxes 47,113 12,401
Inventory 15,298 13,650
Prepayments and other 14,935 13,623
---------- ----------
Total 467,156 545,883
---------- ----------
Property, Plant, and Equipment:
Property, plant and equipment 2,472,070 2,353,181
Less - accumulated depreciation 139,870 90,021
---------- ----------
Property, plant, and equipment - net 2,332,200 2,263,160
---------- ----------
Other Property, Investments, and Assets:
Investments, long-term 16,028 11,413
Distribution license (net of accumulated amortization of $48.8
million in 1998 and $25.6 million in 1997) 1,330,902 1,327,312
Long-term receivables 17,413 17,172
Prepaid pension asset 252,985 241,216
Other 10,839 10,079
---------- ----------
Total 1,628,167 1,607,192
---------- ----------
TOTAL $4,427,523 $4,416,235
========== ==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDER'S EQUITY
(In Thousands)
Current Liabilities:
Currently maturing long-term debt $21,894 $33,814
Notes payable 259,608 240,794
Accounts payable 277,606 349,821
Customer deposits 27,552 24,946
Taxes accrued 127,666 120,981
Interest accrued 14,631 14,201
Other 732 805
---------- ----------
Total 729,689 785,362
---------- ----------
Other Liabilities:
Accumulated deferred income taxes 1,051,684 995,865
Other 240,893 299,775
---------- ----------
Total 1,292,577 1,295,640
---------- ----------
Long-term debt 1,691,757 1,669,401
Company-obligated redeemable preferred securities
of subsidiary partnership holding solely junior
subordinated deferrable debentures 300,000 300,000
Shareholders' Equity:
Common stock, BPS1 par value, 901,000,000 shares authorized,
877,359,785 shares issued and outstanding (less Entergy UK
Limited debt adjustment of $1,351.5 million) 114,000 114,000
Additional paid-in capital 391,981 391,981
Accumulated deficit (94,946) (132,390)
Cumulative foreign currency translation 2,465 (7,759)
---------- ----------
Total 413,500 365,832
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,427,523 $4,416,235
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun - Coal Contracts" in Note 9 of the Form 10-K for
information relating to the declaratory judgment action filed by Entergy
Gulf States against the coal suppliers to Big Cajun 2, a coal-fired power
station located in Point Coupee Parish, Louisiana, of which Entergy Gulf
States owns a 42% undivided interest in Unit 3. Entergy Gulf States
filed a similar petition for a declaratory judgment against the rail and
barge companies that transport the coal from Wyoming to Big Cajun 2. A
motion for summary judgment in that proceeding was filed by Entergy Gulf
States and denied by the Cajun bankruptcy judge. Concurrently with this
denial, the bankruptcy judge filed a report with the district court,
recommending that the appeal by the coal suppliers be remanded for
reconsideration by the bankruptcy judge in light of his decision in the
coal transporters' action.
The district court remanded the declaratory judgment proceeding
against the coal suppliers back to the bankruptcy court, and a trial was
held on the issue of liability of Entergy Gulf States to both the coal
suppliers and transporters. No assurance can be given regarding the
timing or outcome of this proceeding. Collectively, the coal suppliers
and transporters have asserted claims in the Cajun bankruptcy case that
exceed $1.6 billion. Entergy Gulf States believes these claims to be
significantly exaggerated. The coal suppliers and transporters allege
that Entergy Gulf States, as a joint venturer with Cajun in Big Cajun 2,
should be responsible under Louisiana law for 50% of their alleged claims
against Cajun, despite Entergy Gulf States only owning 14% of the entire
power station. Entergy Gulf States believes this position is totally
without merit and that it has no liability to either the coal suppliers
or transporters. Entergy Gulf States' position is that it was not
engaged in a joint venture with Cajun but rather that Cajun was the
operator of Unit 3 in which Entergy Gulf States owns an undivided
interest.
Whether liability will ultimately be asserted against Entergy Gulf
States by the coal suppliers and transporters depends upon which plan of
reorganization is confirmed in the Cajun bankruptcy case. Three
competing plans of reorganization have been filed in the bankruptcy case,
two of which contain settlements with the coal suppliers and transporters
that would satisfy their claims. The district judge disqualified the
third plan of reorganization, which does not contain a settlement with
the coal suppliers and transporters, in June 1998. The proponent of that
plan appealed the decision of the district judge, including the judge's
decision to deny a stay of the proceeding pending appeal. The United
States Court of Appeals for the Fifth Circuit has ordered a stay of the
order of the district court and the plan confirmation proceedings, and
heard oral argument on the appeal on August 4, 1998. No assurance can be
given regarding the timing or outcome of this appeal.
Capital Requirements and Financing (Entergy Corporation, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, Entergy London, and System Energy)
See Note 9 in the Form 10-K for information on the domestic utility
companies', System Energy's, and Entergy London's construction
expenditures (excluding nuclear fuel) for the years 1998, 1999, and 2000
and long-term debt and preferred stock maturities and cash sinking fund
requirements for the period 1998-2000.
Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
See Note 9 in the Form 10-K for information on nuclear liability,
property and replacement power insurance, related NRC regulations, the
disposal of spent nuclear fuel, other high-level radioactive waste, and
decommissioning costs associated with ANO 1, ANO 2, River Bend, Waterford
3, and Grand Gulf 1. The owner/licensees of each of Entergy's five
nuclear units previously participated in a private insurance program that
provides coverage for certain worker tort claims filed for bodily injury
caused by radiation exposure. The program continues to provide for a
maximum aggregate assessment of approximately $16 million for the five
nuclear units in the event that losses exceed accumulated reserve funds.
ANO Matters (Entergy Corporation and Entergy Arkansas)
See Note 9 in the Form 10-K for information on cracks in a number of
steam generator tubes at ANO 2 that were discovered and repaired during
an outage in March 1992. Further repairs were conducted at subsequent
refueling and mid-cycle outages, including the most recent mid-cycle
outage in March 1998. In March 1998, Entergy Arkansas filed a Petition
for Declaratory Order and Approval of New Depreciation Rates with the
APSC, requesting approval of the steam generator replacement project and
appropriate revised depreciation rates.
Environmental Issues
(Entergy Gulf States)
Entergy Gulf States has been designated as a potentially responsible
party (PRP) for the clean up of certain hazardous waste disposal sites.
Entergy Gulf States is currently negotiating with the EPA and state
authorities regarding the clean up of certain of these sites. As of June
30, 1998, a remaining recorded liability of $20 million existed relating
to the clean up of the remaining sites at which Entergy Gulf States has
been designated a PRP. See "Environmental Regulation" in Item 1 of Part
I of the Form 10-K for additional discussion of the sites where Entergy
Gulf States has been designated as a PRP by the EPA and related
litigation.
(Entergy Louisiana)
During 1993, the Louisiana Department of Environmental Quality
(LDEQ) issued new rules for solid waste regulation, including regulation
of wastewater impoundments. Entergy Louisiana has determined that
certain of its power plant wastewater impoundments were affected by these
regulations and chose to upgrade or close them. Cumulative expenditures
relating to the upgrades and closures of wastewater impoundments were
$7.1 million as of June 30, 1998. A remaining recorded liability in the
amount of $6.7 million existed at June 30, 1998, for wastewater upgrades
and closures. Completion of this work is pending LDEQ approval.
Waterford 3 Lease Obligations (Entergy Louisiana)
On September 28, 1989, Entergy Louisiana entered into three
transactions for the sale and leaseback of undivided interests
(aggregating approximately 9.3%) in Waterford 3, which were refinanced in
1997. Upon the occurrence of certain events, Entergy Louisiana may be
obligated to pay amounts sufficient to permit the Owner Participants to
withdraw from the lease transactions, and Entergy Louisiana may be
required to assume the outstanding bonds issued by the Owner Trustee to
finance, in part, its acquisition of the undivided interests in Waterford
3. See Note 10 to the Form 10-K for further information.
Reimbursement Agreement (System Energy)
Under a bank letter of credit and reimbursement agreement, System
Energy has agreed to a number of covenants relating to the maintenance of
certain capitalization and fixed charge coverage ratios. System Energy
agreed, during the term of the agreement, to maintain its equity at not
less than 33% of its adjusted capitalization (defined in the agreement to
include certain amounts not included in capitalization for financial
statement purposes). In addition, System Energy must maintain, with
respect to each fiscal quarter during the term of the agreement, a ratio
of adjusted net income to interest expense (calculated, in each case, as
specified in the agreement) of at least 1.60 times earnings. System
Energy was in compliance with the above covenants at June 30, 1998. See
Note 9 to the Form 10-K for further information.
Employment Litigation
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, and Entergy New Orleans)
See Note 9 in the Form 10-K for information relating to lawsuits
filed by former employees asserting they were wrongfully terminated
and/or discriminated against on the basis of age, race, and/or sex.
(Entergy Corporation, 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 requested that the court certify the matter as a class
action. In August 1997, the district court certified the case as a class
action. The district court decision to certify the class action was
reversed by the Louisiana Fifth Circuit Court of Appeal in April 1998.
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
62 plaintiffs who claim they were illegally terminated from their jobs
due to discrimination on the basis of age or race.
The first of these lawsuits, originally involving 29 plaintiffs, was
tried before a jury beginning in April 1997. Settlements were reached
with two of the plaintiffs prior to the trial. On May 1, 1997, the jury
rendered findings as to 22 of the plaintiffs indicating that Entergy had
no liability to them for discrimination. These plaintiffs have appealed
that decision. The jury did find that Entergy had intentionally
discriminated against the remaining five plaintiffs on the basis of age.
Entergy concluded settlements with these five plaintiffs during the first
quarter of 1998.
The remaining lawsuits have predominately either been settled for
nominal amounts or decided by summary judgment in favor of Entergy.
However, certain plaintiff appeals are still pending.
NOTE 2. RATE AND REGULATORY MATTERS
River Bend (Entergy Corporation and Entergy Gulf States)
See Note 2 to the Form 10-K for information related to previous
developments in the original Entergy Gulf States rate proceeding in 1988
seeking recovery of River Bend plant investment and related deferred
costs. On March 13, 1998, the PUCT issued an order disallowing recovery
of $1.4 billion of company-wide abeyed plant costs and approximately $157
million of Texas retail jurisdiction deferred River Bend operating and
carrying costs (Abeyed Deferrals). On June 30, 1998, the PUCT affirmed
its March 1998 decision on Motions for Rehearing, and issued an order to
that effect on July 8, 1998. Entergy Gulf States has again appealed the
PUCT's decision in the Texas courts. Based on advice of counsel,
management believes that it is probable that the matter will be remanded
again to the PUCT for further ruling on the prudence of the abeyed plant
costs, and it is reasonably possible that some portion of these costs
will be included in rate base. Therefore, management believes that the
reserves discussed below in "Retail Rate Proceedings, Filings with the
PUCT," are adequate to reflect the probable outcome of the abeyed plant
costs proceeding. 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. As of June 30,
1998, 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 $11 million and $246
million, respectively.
On April 14, 1998, an ALJ issued a proposal for decision (PFD) in
the pending judicial remand of the PUCT's 1988 decision to require
Entergy Gulf States to use tax benefits generated by disallowed expenses
to reduce rates. The PFD called for recovery of $100.1 million plus
carrying costs over a period not to exceed seven years. Entergy Gulf
States believes that additional amounts should be allowed to account for
tax liabilities that will result from the recovery and for certain other
matters. On June 30, 1998, the PUCT adjusted the PFD to call for the
recovery of $74 million primarily by reducing the allowed carrying costs
from the overall rate of return to the amount allowed for the over and
under billing for utility service. These costs were used to offset the
retroactive rate refund discussed below.
Retail Rate Proceedings
Filings with the PUCT (Entergy Corporation and Entergy Gulf States)
On June 30, 1998, the PUCT began its deliberations on the Entergy
Gulf States' rate case filed in November 1996 based on the merits of the
record established in that case, thereby not accepting settlements filed
in March and June by Entergy Gulf States and various intervenor groups.
On July 22, 1998, the PUCT issued an order reducing Entergy Gulf States'
Texas rates by $122 million annually, offset through May 1999 by recovery
of accounting order deferrals, resulting in a net reduction of $81
million through that date. The PUCT also ordered a refund of $82 million.
This refund is calculated as a retroactive rate reduction and service
quality refund to June 1, 1996, offset by the recovery of the accounting
order deferrals and actual taxes paid. Entergy Gulf States established
reserves of approximately $381 million ($227 million net of taxes) in
the fourth quarter of 1997 to reflect the probable outcome of the rate
case and abeyed plant cost proceedings based on management's estimates
of the effects thereof. Entergy Gulf States recorded additional reserves
of $101.3 million ($60.3 million net of taxes) for the retroactive rate
actions for the six months ended June 30, 1998 based on management's
estimates. The results of operations of Entergy Gulf States for the
three and six months ended June 30, 1998 reflected these corresponding
charges in operating revenues.
The PUCT's July 22, 1998 order, if sustained, will have material
adverse consequences on Entergy Gulf States' revenues and net income.
Entergy Gulf States will file a motion for reconsideration with the PUCT.
Entergy Gulf States plans to seek such further remedies as may be
available to it, including appealing the order if the motion for
reconsideration fails to alter what Entergy Gulf States believes is an
incorrect result based on the evidence before the PUCT. On July 29,
1998, a Texas state district court granted Entergy Gulf States' request
for a temporary restraining order until August 12, 1998 to prevent
enforcement of the PUCT's July 22, 1998 order. Additionally, Entergy
Gulf States has a hearing on August 10, 1998 to determine if a temporary
injunction against enforcement of the PUCT's order should also be
granted.
Included in the rulings discussed above, the PUCT disallowed
recovery of approximately $49 million of Entergy's affiliate costs
allocated to Entergy Gulf States in Texas. Entergy's affiliate costs
result from managing Entergy Gulf States' fossil generating plants and
transmission and distribution systems, managing Entergy Gulf States'
nuclear plant, as well as providing human resources, accounting, and
other necessary services to Entergy Gulf States and Entergy Corporation's
other electric utility subsidiaries. The PUCT has also issued proposed
rules governing the affiliate transactions of Texas utility companies,
including Entergy Gulf States, with their affiliated companies. Entergy
Gulf States filed comments on the rules in June 1998. Hearings
concerning the proposed rules were conducted by the PUCT in July 1998.
The rules, if adopted in their proposed form, could severely restrict the
type and extent of services provided to Entergy Gulf States by Entergy
Services and Entergy Operations, and will result in higher costs to
Entergy Gulf States for equivalent services. It is not certain when or
in what form the rules will be adopted.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
On May 30, 1997, Entergy Gulf States filed its fourth post-Merger
earnings analysis with the LPSC. In July 1998, the LPSC and Entergy Gulf
States agreed to implement an $18 million rate reduction for Entergy Gulf
States residential customers in Louisiana. This rate reduction is
effective July 29, 1998. Proceedings on remaining issues in the second,
third, and fourth post-Merger earnings analyses will continue.
(Entergy Corporation and Entergy Louisiana)
Entergy Louisiana filed annual formula rate plan filings with the
LPSC in April 1996 and May 1997. The LPSC determined in July 1998 that
the annual formula rate plan filings for Entergy Louisiana will be
extended for an additional three years, through an April 2000 filing for
the 1999 test year.
Filings with the MPSC (Entergy Corporation and Entergy Mississippi)
On March 15, 1998, Entergy Mississippi filed its annual earnings
review with the MPSC under its formula rate plan for the 1997 test year.
In April 1998, the MPSC issued an order approving a prospective rate
reduction of $6.6 million. This rate reduction went into effect May 1,
1998.
Filings with the Council (Entergy Corporation and Entergy New Orleans)
Hearings on the ratemaking issues in Entergy New Orleans' September
1997 cost of service and revenue requirement filing were held in July
1998. A ruling from the Council is expected in the fall of 1998.
Grand Gulf Accelerated Recovery Tariff
In April 1998, FERC approved the Grand Gulf Accelerated Recovery
Tariff that Entergy Arkansas filed as part of the settlement agreement,
which was approved by the APSC in December 1997. The tariff was designed
to allow Entergy Arkansas to pay down a portion of its Grand Gulf
obligation in advance of the implementation to retail access in Arkansas.
The tariff will go into effect January 1, 1999. See Note 2 to the Form
10-K for a discussion of the settlement agreement with the APSC.
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 were 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 of June 30, 1998, the
unamortized balance of the remaining costs was $103 million. These
accounting order deferrals have been given accelerated recovery in the
July 22, 1998 PUCT order discussed above. For further discussion, see
Retail Rate Proceedings above.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the six months ended June 30, 1998, Entergy Corporation
issued 172,348 shares of its previously repurchased common stock to
satisfy stock options exercised and stock purchases under its Equity
Ownership Plan. In addition, Entergy Corporation received proceeds of
$6.5 million from the issuance of 243,745 shares of common stock under
its dividend reinvestment and stock purchase plan during the six months
ended June 30, 1998.
NOTE 4. LONG-TERM DEBT (Entergy Gulf States and Entergy New Orleans)
(Entergy Gulf States)
On July 1, 1998, Entergy Gulf States redeemed, prior to maturity,
$21.6 million of 7% Parish of Iberville Pollution Control Revenue
Refunding Bonds, 1976 Series A, due 2006. Proceeds from the issuance in
May 1998 of $21.6 million of 5.7% Parish of Iberville Pollution Control
Revenue Refunding Bonds due 2014 were used for this redemption.
(Entergy New Orleans)
On July 14, 1998, Entergy New Orleans issued $30 million of 7%
Series First Mortgage Bonds due 2008. The proceeds will be used in
August to redeem $30 million of 8.67% General and Refunding Mortgage
Bonds due 2005.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On August 2, 1998, Entergy Corporation's Board of Directors declared
a common stock dividend of $.30 per share, payable on September 1, 1998,
to holders of record on August 12, 1998.
NOTE 6. ACCOUNTING ISSUES (Entergy Corporation and Entergy London)
New Accounting Standards - In June 1998, the FASB issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which
will be effective for Entergy in 2000. This statement requires that all
derivatives be recognized in the statement of financial position as
either assets or liabilities and measured at fair value. The statement
also requires the designation and reassessment of all hedging
relationships. The changes in fair value of derivatives will be
recognized in earnings or in comprehensive income, depending on the type
of hedge relationship involved. The adoption of SFAS 133 is not expected
to have a material effect on the financial position, results of
operations, or cash flows of Entergy Corporation or Entergy London.
In early 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use", which
will be effective for Entergy in 1999. This SOP requires that computer
software costs that are incurred in the preliminary project stage be
expensed as incurred. Once the capitalization criteria of the SOP have
been met, external direct cost of materials and services used in
developing or obtaining internal use computer software, as well as
payroll and payroll-related costs of employees (to the extent of time
spent directly on internal use computer software projects), and interest
costs incurred in developing such computer software should be
capitalized. Training costs and data conversion costs should be expensed
as incurred, with certain exceptions. The adoption of SOP 98-1 is not
expected to have a material effect on the financial position, results of
operations, or cash flows of Entergy Corporation.
NOTE 7. SUBSEQUENT EVENT (Entergy Corporation and Entergy London)
On August 2, 1998, Entergy's Board of Directors approved a new
strategic direction for Entergy that includes the expected sale of
several businesses over the next eighteen months. These businesses
include London Electricity, CitiPower Pty., Entergy Security, Inc.,
Entergy Integrated Solutions, Inc., and certain portions of Entergy's
telecommunications businesses. These businesses collectively represent
$5.8 billion of Entergy's total assets as of June 30, 1998 and $73.3
million of Entergy's net income for the six months then ended.
Management believes that the sale price of these businesses will exceed
their net book value at June 30, 1998. Accordingly, no adjustment has
been recorded at June 30, 1998 for the carrying amount of these
businesses in the accompanying financial statements.
__________________________________
In the opinion of Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy, and Entergy London, the accompanying unaudited condensed
financial statements contain all adjustments (consisting primarily of
normal recurring accruals and reclassifying previously reported amounts
to conform to current classifications) necessary for a fair statement of
the results for the interim periods presented. However, the business of
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 utilities companies and System Energy
and occurring during the first quarter for Entergy London. The results
for the interim periods presented should not be used as a basis for
estimating results of operations for a full year.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, and Entergy New Orleans)
See "Employment Litigation" in Item 1 of Part I of the Form 10-K for
information relating to lawsuits filed by former employees asserting they
were wrongfully terminated and/or discriminated against due to age, race,
and/or sex. See "Employment Litigation" in Note 1 herein for
developments that have occurred since the filing of the Form 10-K.
Cajun - Coal Contracts (Entergy Corporation and Entergy Gulf States)
See "Cajun - Coal Contracts" in Note 9 of the Form 10-K for
information relating to the declaratory judgment action filed by Entergy
Gulf States and the counterclaims filed by the defendants. See "Cajun -
Coal Contracts" in Note 1 herein for developments that have occurred
since the filing of the Form 10-K.
Catalyst Technologies, Inc. (Entergy Corporation)
See "Catalyst Technologies, Inc." in Item 1 of Part I of the Form 10-
K for information relating to the lawsuit filed by Catalyst Technologies,
Inc. The plaintiff filed its appeal brief in March 1998, and Entergy
Corporation filed its response brief in May 1998. The date of oral
argument on the appeal has not been set.
Union Pacific Railroad Company (Entergy Corporation and Entergy
Arkansas)
See "Item 1. Legal Proceedings" in the 1998 first quarter Entergy
Form 10-Q for a discussion of the civil suit filed by Entergy Arkansas
and Entergy Services against Union Pacific Railroad Company (Union
Pacific). The case has been transferred to the United States District
Court for the District of Nebraska, in Omaha, Nebraska. As a result of
Union Pacific's failure to transport coal, inventories at the coal plants
were below normal during the spring of 1998. In anticipation of the
summer season, and with no apparent cure to Union Pacific's delivery
problems, generation at the two coal-fired stations was curtailed to
increase the coal inventories. As a result of the curtailment and some
improvement in the number of Union Pacific's deliveries, the inventory
levels have improved. However, Union Pacific's deliveries continue to be
delayed. Entergy Arkansas continues to seek an order from the Federal
Surface Transportation Board requiring Union Pacific to allow another
railroad to bring coal to one of the Entergy Arkansas generating plants.
The operational and financial effect of Union Pacific's failure to
deliver coal to Entergy Arkansas during the third and fourth quarters of
1998 will depend upon a number of factors that are not within Entergy
Arkansas' control.
Aquila Power Corporation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
In March 1998, Aquila Power Corporation ("Aquila") filed a complaint
with the FERC against Entergy Services, as agent for the domestic utility
companies, alleging that Entergy's domestic utility companies improperly
reserved transmission capacity on Entergy's transmission system,
resulting in the denial of Aquila's request for transmission service.
Aquila's complaint seeks compensation for lost profits, an order
prohibiting Entergy and/or its affiliates from engaging in similar
conduct, and suspension of the domestic utility companies' and EPMC's
market-rate authority. In May 1998, Entergy filed its response denying
the Aquila allegations. Subsequently, Aquila amended and restated its
complaint, alleging additional instances of improper activities by
Entergy. In addition to its requests in its original complaint, Aquila's
amended complaint seeks a finding by FERC that Entergy is in violation of
FERC Orders No. 888 and 889, and an order that Entergy should be required
to join or agree to the formation of an independent system operator.
Entergy filed its response to the amended and restated complaint denying
the alleged improper conduct.
Ratepayer Lawsuits (Entergy Corporation, Entergy Louisiana, and Entergy
New Orleans)
In April 1998, a group of residential and business ratepayers filed
a complaint against Entergy New Orleans in state court in Orleans Parish
purportedly on behalf of all ratepayers in New Orleans. The plaintiffs
allege that Entergy New Orleans overcharged ratepayers by at least $300
million since 1975 in violation of limits that the plaintiffs allege are
set by the 1922 franchise ordinances passed by the New Orleans City
Council. The plaintiffs seek, among other things, (1) a declaratory
judgment that such franchise ordinances have been violated, and (2) a
remand to the City Council for the establishment of the amount of
overcharges plus interest. Management believes the lawsuit is completely
without merit. Entergy New Orleans has charged only those rates
authorized by the City Council, which the City Council has set in
accordance with applicable law. Entergy New Orleans will vigorously
defend itself in the lawsuit.
In May 1998, a group of ratepayers filed a complaint against Entergy
Corporation, EPI, and Entergy Louisiana in state court in Orleans Parish
purportedly on behalf of all Entergy Louisiana ratepayers. The
plaintiffs allege that the fuel costs passed by Entergy Louisiana through
its fuel adjustment clause were improper. The plaintiffs seek, among
other things, a refund of the amounts allegedly charged in excess of the
proper fuel adjustment. This same group of ratepayers also filed with
the LPSC a complaint against Entergy Corporation and Entergy Louisiana
seeking relief similar to that which they seek by their lawsuit in state
court. Management believes the lawsuit in state court and the complaint
to the LPSC are completely without merit. Entergy will vigorously defend
itself in the lawsuit.
In May 1998, a group of ratepayers filed a complaint against Entergy
Louisiana in state court in East Baton Rouge Parish purportedly on behalf
of all Entergy Louisiana ratepayers. The plaintiffs allege that the
formula ratemaking plan authorized by the LPSC has allowed Entergy
Louisiana to earn amounts in excess of a fair return. The plaintiffs
seek, among other things, (1) a declaratory judgment that the formula
ratemaking plan is an improper ratemaking practice, and (2) a refund of
the amounts allegedly charged in excess of proper ratemaking practices.
Management believes the lawsuit is completely without merit. Entergy
Louisiana will vigorously defend itself in the lawsuit.
Asbestos Litigation (Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans)
Entergy's domestic utility subsidiaries, and in particular Entergy
Gulf States, Entergy Louisiana, and Entergy New Orleans, are defendants
along with manufacturers, distributors, and other businesses in numerous
individual and class action lawsuits filed on behalf of persons claiming
injury as a result of exposure to asbestos. While Entergy and its
domestic utility subsidiaries believe that the exposure to material
liability to any single plaintiff as a result of these lawsuits is not
material, there can be no assurance that the aggregate liability in the
lawsuits to which Entergy Gulf States, Entergy Louisiana, or Entergy New
Orleans are parties would not be material as to those companies,
respectively.
Item 4. Submission of Matters to a Vote of Security Holders
Election of Board of Directors
Entergy Corporation
The annual meeting of stockholders of Entergy Corporation was held
on May 15, 1998. The following matters were voted on and received the
specified number of votes for, abstentions, votes withheld (against),
and broker non-votes:
1. Election of Directors:
Broker
Name of Nominee Votes For Abstentions Votes Withheld Non-Votes
W. Frank Blount 197,742,237 N/A 14,558,746 N/A
John A. Cooper, Jr. 197,763,872 N/A 14,537,111 N/A
George W. Davis 197,559,329 N/A 14,741,654 N/A
Norman C. Francis 197,614,238 N/A 14,686,745 N/A
Robert v.d. Luft 197,702,815 N/A 14,598,168 N/A
Edwin Lupberger 177,496,679 N/A 34,804,304 N/A
Kinnaird R. McKee 197,623,536 N/A 14,677,447 N/A
Paul W. Murrill 197,693,717 N/A 14,607,266 N/A
James R. Nichols 197,787,475 N/A 14,513,508 N/A
Eugene H. Owen 197,720,711 N/A 14,580,272 N/A
John N. Palmer, Sr. 197,820,140 N/A 14,480,843 N/A
Robert D. Pugh 197,691,692 N/A 14,609,291 N/A
Wm. Clifford Smith 197,733,663 N/A 14,567,320 N/A
Bismark A. Steinhagen 197,780,078 N/A 14,520,905 N/A
Subsequent to the annual meeting of stockholders, Edwin Lupberger
relinquished his duties as a director and chairman of the board of
directors. Robert v.d. Luft is now serving as chairman of the board of
directors.
2.Approval of the 1998 Equity Ownership Plan: 184,693,496 votes for;
25,946,435 votes against; 1,661,052 abstentions; and broker non-votes
are not applicable.
3.Approval of the 1998 Executive Annual Incentive Plan: 198,088,955
votes for; 9,793,680 votes against; 4,418,348 abstentions; and broker
non-votes are not applicable.
4.Ratify the appointment of independent public accountants, Coopers &
Lybrand L.L.P. for the year 1998: 209,764,961 votes for; 687,557 votes
against; 1,848,465 abstentions; and broker non-votes are not
applicable.
(Entergy Arkansas)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Arkansas: Wayne Leonard, Frank F. Gallaher, Donald C. Hintz,
Jerry D. Jackson, R. Drake Keith, and Jerry L. Maulden.
(Entergy Gulf States)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Gulf States: Wayne Leonard, John J. Cordaro, Frank F. Gallaher,
Donald C. Hintz, Jerry D. Jackson, and Jerry L. Maulden.
(Entergy Louisiana)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Louisiana: Wayne Leonard, John J. Cordaro, Frank F. Gallaher,
Donald C. Hintz, Jerry D. Jackson, and Jerry L. Maulden.
(Entergy Mississippi)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy Mississippi: Wayne Leonard, Frank F. Gallaher, Donald C. Hintz,
Jerry D. Jackson, Jerry L. Maulden, and Donald E. Meiners.
(Entergy New Orleans)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
Entergy New Orleans: Robert v.d. Luft, Wayne Leonard, Jerry D. Jackson,
and Daniel F. Packer.
(System Energy)
A consent in lieu of the annual meeting of common stockholders was
executed on June 18, 1998. The consent was signed on behalf of Entergy
Corporation, the holder of all issued and outstanding shares of common
stock. The common stockholder, by such consent, elected the following
individuals to serve as directors constituting the Board of Directors of
System Energy Resources: Robert v.d. Luft, Wayne Leonard, Donald C.
Hintz, and Jerry L. Maulden.
Item 5. Other Information
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans, System Energy, and
Entergy London)
The domestic utility companies, System Energy, and Entergy London
have calculated ratios of earnings to fixed charges and ratios of
earnings to combined fixed charges and preferred dividends pursuant to
Item 503 of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31, June 30,
1993 1994 1995 1996 1997 1998
Entergy Arkansas 3.11(b) 2.32 2.56 2.93 2.54 2.62
Entergy Gulf States 1.54 (c)- 1.86 1.47 1.42 1.08
Entergy Louisiana 3.06 2.91 3.18 3.16 2.74 2.84
Entergy Mississippi 3.79(b) 2.12 2.92 3.40 2.98 3.34
Entergy New Orleans 4.68(b) 1.91 3.93 3.51 2.70 2.69
System Energy 1.87 1.23 2.07 2.21 2.31 2.39
Entergy London N/A N/A N/A N/A 1.16 1.20
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, June 30,
1993 1994 1995 1996 1997 1998
Entergy Arkansas 2.54(b) 1.97 2.12 2.44 2.24 2.30
Entergy Gulf States (a) 1.21 (c)- 1.54 1.19 1.23 (d)-
Entergy Louisiana 2.39 2.43 2.60 2.64 2.36 2.44
Entergy Mississippi 3.08(b) 1.81 2.51 2.95 2.69 3.02
Entergy New Orleans 4.12(b) 1.73 3.56 3.22 2.44 2.43
(a) "Preferred Dividends" in the case of Entergy Gulf States
also include dividends on preference stock.
(b) Earnings for the year ended December 31, 1993, include $81
million, $52 million, and $18 million for Entergy Arkansas,
Entergy Mississippi, and Entergy New Orleans, respectively,
related to a 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 reserves recorded for PUCT rate actions,
earnings for the twelve months ended June 30, 1998 for
Entergy Gulf States were not adequate to cover combined
fixed charges and preferred dividends by $19.3 million.
Shareholder Proposals (Entergy Corporation)
Stockholders wishing to bring a proposal before the 1999 Annual
Meeting of Stockholders, but not to include it in Entergy Corporation's
Proxy Statement, must cause written notice of the proposal to be received
by the Secretary of the Company at the principal executive offices in New
Orleans, Louisiana by no later than February 13, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits*
3(a) - By-laws of Entergy Arkansas, as amended and currently
in effect.
3(b) - By-laws of Entergy Gulf States, as amended and
currently in effect.
3(c) - By-laws of Entergy Louisiana, as amended and currently
in effect.
3(d) - By-laws of Entergy Mississippi, as amended and
currently in effect.
3(e) - By-laws of Entergy New Orleans, as amended and
currently in effect.
3(f) - By-laws of System Energy, as amended and currently in
effect.
** 4(a) - Refunding Agreement between Entergy Gulf States and
Parish of Iberville, State of Louisiana dated as of
May 1, 1998 (B-3(a) to Rule 24 Certificate dated May
29, 1998 in File No. 70-8721).
4(b) - Seventh Supplemental Indenture, dated as of July 1,
1998, to Entergy New Orleans' Mortgage and Deed of
Trust, dated as of May 1, 1987.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of June 30, 1998.
27(b) - Financial Data Schedule for Entergy Arkansas as of
June 30, 1998.
27(c) - Financial Data Schedule for Entergy Gulf States as of
June 30, 1998.
27(d) - Financial Data Schedule for Entergy Louisiana as of
June 30, 1998.
27(e) - Financial Data Schedule for Entergy Mississippi as of
June 30, 1998.
27(f) - Financial Data Schedule for Entergy New Orleans as of
June 30, 1998.
27(g) - Financial Data Schedule for System Energy as of June
30, 1998.
27(h) - Financial Data Schedule for Entergy London as of June
30, 1998.
99(a) - Entergy Arkansas' Computation of Ratios of Earnings to
Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(b) - Entergy Gulf States' Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(c) - Entergy Louisiana's Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(d) - Entergy Mississippi's Computation of Ratios of
Earnings to Fixed Charges and of Earnings to Combined
Fixed Charges and Preferred Dividends, as defined.
99(e) - Entergy New Orleans' Computation of Ratios of Earnings
to Fixed Charges and of Earnings to Combined Fixed
Charges and Preferred Dividends, as defined.
99(f) - System Energy's Computation of Ratios of Earnings to
Fixed Charges, as defined.
99(g) - Entergy London's Computation of Ratios of Earnings to
Fixed Charges, as defined.
** 99(h) - Annual Reports on Form 10-K of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy, and Entergy London for the fiscal year
ended December 31, 1997, portions of which are
incorporated herein by reference as described
elsewhere in this document (filed with the SEC in File
Nos. 1-11299, 1-10764, 1-2703, 1-8474, 0-320, 0-5807,
1-9067, and 333-33331, respectively).
** 99(i) - Quarterly Reports on Form 10-Q of Entergy Corporation,
Entergy Arkansas, Entergy Gulf States, Entergy
Louisiana, Entergy Mississippi, Entergy New Orleans,
System Energy, and Entergy London for the quarter
ended March 31, 1998, portions of which are
incorporated herein by reference as described
elsewhere in this document (filed with the SEC in File
Nos. 1-11299, 1-10764, 1-2703, 1-8474, 0-320, 0-5807,
1-9067, and 333-33331, respectively).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation
agrees to furnish to the Commission upon request any instrument with
respect to long-term debt that is not registered or listed herein as an
Exhibit because the total amount of securities authorized under such
agreement does not exceed ten percent of Entergy Corporation and its
subsidiaries on a consolidated basis.
* Reference is made to a duplicate list of exhibits being
filed as a part of this report on Form 10-Q for the quarter
ended June 30, 1998, which list, prepared in accordance
with Item 102 of Regulation S-T of the SEC, immediately
precedes the exhibits being filed with this report on Form
10-Q for the quarter ended June 30, 1998.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Mississippi
A Current Report on Form 8-K, dated April 3, 1998,
was filed with the SEC on April 3, 1998, reporting
information under Item 5. "Other Events" and Item 7.
"Financial Statements. Pro Forma Financial
Information and Exhibits".
Entergy Corporation and Entergy New Orleans
A Current Report on Form 8-K, dated April 15, 1998,
was filed with the SEC on April 21, 1998, reporting
information under Item 5. "Other Events".
Entergy New Orleans
A Current Report on Form 8-K, dated April 28, 1998,
was filed with the SEC on April 28, 1998, reporting
information under Item 5. "Other Events".
Entergy New Orleans
A Current Report on Form 8-K/A, dated April 28, 1998,
was filed with the SEC on April 29, 1998, reporting
information under Item 5. "Other Events".
Entergy New Orleans
A Current Report on Form 8-K/A, dated April 28, 1998,
was filed with the SEC on April 29, 1998, reporting
information under Item 5. "Other Events".
Entergy Corporation and Entergy Gulf States
A Current Report on Form 8-K, dated May 4, 1998, was
filed with the SEC on May 12, 1998, reporting
information under Item 5. "Other Events".
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized. The signature for each
undersigned company shall be deemed to relate only to matters having
reference to such company or its subsidiaries.
ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES, INC.
ENTERGY LOUISIANA, INC.
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
SYSTEM ENERGY RESOURCES, INC.
ENTERGY LONDON INVESTMENTS PLC
/s/ Louis E. Buck
Louis E. Buck
Vice President, Chief Accounting
Officer and Assistant Secretary
(For each Registrant and for each as
Principal Accounting Officer)
Date: August 5, 1998