_____________________________________________________________________
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 September 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 October 31, 1998
Entergy Corporation ($0.01 par value) 246,596,137
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 Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 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 September 30, 1998 of $1.6989 = BPS1.00. No
representation is made that the BPS amounts have been, could have
been, or could be converted into U.S. dollars at the rates indicated
or at any other rates.
The following table sets out, for the periods indicated, certain
information concerning the exchange rates between BPS and U.S.
dollars based on the Noon Buying Rate in New York City for cable
transfers in pounds sterling as certified for customs purposes by the
Federal Reserve Bank of New York.
Period Period End Average (1) High Low
($ per BPS1.00)
Three months ended September 30, 1997 1.62 1.63 1.69 1.58
Nine months ended September 30, 1997 1.62 1.63 1.71 1.58
Twelve months ended December 31, 1997 1.65 1.64 1.71 1.58
Three months ended September 30, 1998 1.70 1.65 1.71 1.62
Nine months ended September 30, 1998 1.70 1.65 1.71 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 and changes in
financial markets generally, changes in foreign currency exchange
rates, the availability and cost of personnel trained in the year
2000 compliance area, the ability to locate and correct computer
codes relevant to year 2000 issues, and other factors.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 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 13
Consolidated Statements of Income and
Comprehensive Income 17
Consolidated Statements of Cash Flows 18
Consolidated Balance Sheets 20
Selected Operating Results 22
Entergy Arkansas, Inc.:
Results of Operations 23
Statements of Income 25
Statements of Cash Flows 27
Balance Sheets 28
Selected Operating Results 30
Entergy Gulf States, Inc.:
Results of Operations 31
Statements of Income 33
Statements of Cash Flows 35
Balance Sheets 36
Selected Operating Results 38
Entergy Louisiana, Inc.:
Results of Operations 39
Statements of Income 41
Statements of Cash Flows 43
Balance Sheets 44
Selected Operating Results 46
Entergy Mississippi, Inc.:
Results of Operations 47
Statements of Income 49
Statements of Cash Flows 51
Balance Sheets 52
Selected Operating Results 54
Entergy New Orleans, Inc.:
Results of Operations 55
Statements of Income 57
Statements of Cash Flows 59
Balance Sheets 60
Selected Operating Results 62
System Energy Resources, Inc.:
Results of Operations 63
Statements of Income 64
Statements of Cash Flows 65
Balance Sheets 66
Entergy London Investments plc and Subsidiary:
Results of Operations 68
Consolidated Statements of Income (Loss) and
Comprehensive Income 70
Consolidated Statements of Cash Flows 71
Consolidated Balance Sheets 72
Notes to Financial Statements for Entergy Corporation and
Subsidiaries 74
Part II:
Item 1. Legal Proceedings 83
Item 4. Submission of Matters to a Vote of
Security Holders 84
Item 5. Other Information 85
Item 6. Exhibits and Reports on Form 8-K 86
Signature 88
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
EPA U.S. Environmental Protection Agency
EPDC Energy Power Development Corporation
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)
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.
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
GWH one million kilowatt-hours
Independence Independence Steam Electric Station (coal),
owned 16% by Entergy Arkansas, 25% by Entergy
Mississippi, and 11% by EPI
LPSC Louisiana Public Service Commission
London Electricity London Electricity plc - a regional electric
company serving London, England, which was
acquired by Entergy effective February 1, 1997
Merger The combination transaction, consummated on
December 31, 1993, by which Entergy Gulf States
became a subsidiary of Entergy Corporation and
Entergy Corporation became a Delaware
corporation
MPSC Mississippi Public Service Commission
Abbreviation or Acronym Term
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
PUCT Public Utility Commission of Texas
PUHCA Public Utility Holding Company Act of 1935, as
amended
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 nine months
ended September 30, 1998 and 1997 was as follows:
Nine Months Nine Months
Company Ended 9/30/98 Ended 9/30/97
(In Millions)
Entergy Corporation $ 1,272.6 $1,574.7
Entergy Arkansas $ 272.4 $ 400.5
Entergy Gulf States $ 322.2 $ 382.6
Entergy Louisiana $ 261.2 $ 271.6
Entergy Mississippi $ 151.5 $ 141.0
Entergy New Orleans $ 34.9 $ 36.8
System Energy $ 184.9 $ 201.0
Entergy London $ 326.5 $ 200.4
For the first nine months of 1998, cash flow from operations
declined compared to 1997 principally 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, and in 2001 for Entergy New Orleans. Entergy Gulf
States' Louisiana retail phase-in plan for River Bend expired in February
1998, and Entergy Mississippi's phase-in plan for Grand Gulf 1 expired in
September 1998. Competitive businesses contributed $202.8 million to
Entergy Corporation's cash flow from operations for the first nine months
of 1998. Substantially all of such contributions came from London
Electricity and CitiPower Pty, both of which are expected to be sold by
Entergy during the next year. 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
nine months ended September 30, 1998. 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 could have a material adverse 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 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
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
issued in 1996 by Entergy Louisiana Capital I and Entergy Arkansas
Capital I, and those issued in 1997 by Entergy Gulf States Capital I.
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 and its subsidiaries' capital and refinancing
requirements in 1998-2002.
As of September 30, 1998, Entergy Corporation had no loans
outstanding under a $250 million bank credit facility that expires in
September 1999. In addition, Entergy Corporation had $165.5 million
outstanding and ETHC had $82.8 million outstanding under a joint $300
million bank line of credit that also expires in September 1999. 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 $119 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. Since November 1997, Entergy Corporation has not had
the 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 consistent with these regulations. As of September 30, 1998,
Entergy Corporation had a net investment of $1.3 billion in equity
capital in businesses other than the domestic utility businesses.
However, if London Electricity and CitiPower are sold during the next
twelve months, as expected, it is anticipated that Entergy may
regain substantial ability to make investments under the SEC's
PUHCA regulations, regardless of whether the SEC has acted on the
pending application. See Note 7.
In addition to its electricity-related foreign investments, Entergy
has made investments in security monitoring and other telecommunications
related businesses in the United States. Entergy's security monitoring
businesses are currently being offered for sale. 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 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
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
approval. Entergy currently has considerable capacity to make additional
investments of this type before such limits would be exceeded.
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 nine months ended
September 30, 1998 such dividend payments from the domestic utility
companies and System Energy totaled $488.5 million. During the nine
months ended September 30, 1998, Entergy Corporation paid $296 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 and
October 30, 1998 the Board declared quarterly dividends of $.30 per share
on Entergy's common stock. These dividends represent a $.15 per share
reduction from the prior 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.
On October 30, 1998, Entergy Corporation's Board approved a plan for
the repurchase in the open market of up to 5 million shares of common
stock for an aggregate consideration of up to $250 million through
December 31, 2001. Substantially all of the repurchased shares are
expected to be used to fulfill the requirements of various compensation
and benefit plans.
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 $123.5 million ($73.6 million
net of tax) in 1998 which include $101.3 million ($60.3 million net of
tax) for the retroactive rate reductions for the nine months ended
September 30, 1998, and $22.2 million ($13.3 million net of tax) for the
prospective portion of the rate reduction for the three months ended
September 30, 1998 based on management's estimates. Refunds to customers
began in August 1998, pursuant to the PUCT's order. Final resolution of
these matters could have a material adverse effect on Entergy Gulf
States' cash flow, return on investment, and 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 three of these dockets in May 1998, in
which the majority of the participating parties indicated that
competition in the electric industry in Arkansas should begin by January
1, 2002. On October 1, 1998, the APSC submitted to the Arkansas
Legislature its "Report on Restructuring the Arkansas Electric Utility
Industry". This report recommended that electric generation supply
competition in the electric industry in Arkansas start no later than the
beginning of 2002. The report also recommends that the APSC be given the
authority to address the following: market power, including affiliate
codes of conduct; potential divestiture of utility assets; the
determination, recovery, and securitization of stranded costs; and
reliability of electric service. Arkansas law requires that legislation
be enacted before competition is allowed in the state's retail electric
utility industry. The Arkansas Legislature is expected to address the
deregulation of the electric industry during its 1999 legislative
session.
The MPSC issued a Revised Proposed Transition Plan (the Plan) in
June 1998 that included deletion of the previous prohibition on
securitization of stranded costs and provided for enabling legislation
necessary to implement the Plan in 2000. The Plan also provides for
retail competition in Mississippi to begin January 1, 2001 and for
recovery of allowable stranded costs through a non-bypassable charge
during a transition period between January 2001 and the end of 2004. The
MPSC conducted hearings in September 1998 on the market power and
reliability studies previously filed (as requested by the MPSC) by the
investor-owned utilities in Mississippi and has scheduled a hearing for
November 1998 to address certification requirements and load dispatch and
control rules. The LPSC and the Council have also established generic
proceedings similar to those in Arkansas and Mississippi.
During two recent technical conferences, Entergy has urged the FERC
to consider the formation of a regional transmission company (Transco) as
an acceptable alternative to an Independent System Operator (ISO) for the
transmission of electricity. As currently contemplated by Entergy,
Transco would be a FERC-regulated regional transmission company that
would operate independently of Entergy's utility subsidiaries. Under the
proposal, the transmission system and the employees who operate and
maintain it would be transferred from Entergy's utility subsidiaries to a
separate legal entity owned by Entergy, which would then be responsible
for the operation and maintenance of the transmission system. The
domestic utility companies would retain a passive ownership interest in
the Transco, but would not control or otherwise direct the operation and
management of Transco. Entergy anticipates filing with the FERC in late
1998 or early 1999, seeking a declaration as to whether a Transco would
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
be consistent with applicable FERC precedent on the formation of
independent regional entities. Subsequent filings will be made with
the FERC and the applicable state regulatory authorities seeking
necessary approvals for the formation of the Transco.
Retail and Wholesale Rate Issues
See Note 2 to the Form 10-K for information regarding the settlement
agreement filed with the APSC and the establishment of a transition cost
account. The estimated reserve recorded in December 1997 was adjusted in
September 1998 as a result of a mid-year streamlined earnings review
procedure for a negative net income impact of $3.7 million. Entergy
Arkansas also recorded an additional reserve of $27.9 million in
September 1998 in the transition cost account to reflect the estimated
1998 accrual of excess earnings. Additional reserves may also be
required in 1999 based on earnings reviews.
On June 30, 1998, the PUCT began its deliberations on the Entergy
Gulf States rate case filed in November 1996. The PUCT did not accept
settlements filed in March and June by Entergy Gulf States and various
intervenor groups. On July 22, 1998, the PUCT issued an order and after
making modifications on rehearing, issued a second order on rehearing on
October 14, 1998. The second order on rehearing reduces Entergy Gulf
States' Texas rates by $111 million annually effective December 1, 1998,
offset through May 1999 by the accelerated recovery of accounting order
deferrals, resulting in a net reduction of $69 million on an annual basis
through that date. This order also required a refund of $76 million.
This refund is calculated as a rate reduction and service quality refund
retroactive to June 1, 1996, offset by the accelerated recovery of the
accounting order deferrals, actual taxes paid, and a fuel surcharge.
This refund amount was reduced by $32 million from the original refund
ordered in the July 22, 1998 order, but was offset by the passage of time
from the original rate reduction's assumed effective date of August 1998
to the new assumed effective date of December 1, 1998. Entergy Gulf
States established reserves of $381 million ($227 million net of tax) in
the fourth quarter of 1997 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 $123.5 million ($73.6 million net of tax) in 1998
based on management's estimates which include $101.3 million ($60.3
million net of tax) for the retroactive rate reductions for the nine
months ended September 30, 1998 and $22.2 million ($13.3 million net of
tax) for the prospective portion of the rate reduction for the three
months ended September 30, 1998. The results of operations of Entergy
Gulf States for the three and nine months ended September 30, 1998
reflect these corresponding charges in operating revenues. See Note 2
for further discussion of accounting order deferrals and actual taxes
paid.
The PUCT's October 14, 1998 order on rehearing, if sustained, is
expected to have a material adverse effect on Entergy Gulf States'
revenues, cash flows, and net income. Entergy Gulf States will file a
motion for reconsideration with the PUCT. The PUCT has until November
28, 1998 to act on the motion, or the motion is overruled by operation of
law. 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. Subsequent to this,
Entergy Gulf States entered an agreement with the PUCT that allowed for
refunds pursuant to the PUCT's order to begin in August 1998 and delayed
the implementation of the ordered rate decrease until 18 days following
the issuance by the PUCT of a final and appealable order.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
A component of the rulings discussed above was a disallowance by the
PUCT of 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 and nuclear
generating plants and transmission and distribution systems, as well as
providing human resources, accounting, legal, and other necessary
services to Entergy Gulf States and Entergy Corporation's other electric
utility subsidiaries. The PUCT had previously issued proposed rules
governing affiliate transactions of Texas utility companies, including
Entergy Gulf States. Hearings concerning the proposed rules were
conducted by the PUCT in July 1998. However, the PUCT has withdrawn
these proposed rules pending the outcome of the 1999 legislative session.
The rules, if adopted in their proposed form, could severely restrict the
types 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 may be adopted.
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
to the Travis County District Court in Texas and it is currently in the
scheduling process. Based on advice of counsel, management believes that
it is probable that the matter will be remanded again to the PUCT for a
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.
On September 8, 1998, Entergy Gulf States filed an application with
the PUCT for an increase in its fixed fuel factor and a surcharge to
Texas retail customers for the cumulative under-recovery of fuel and
purchased power costs. The proposed increase in the fixed fuel factor
would result in increased revenues of $55.6 million annually compared to
the current fixed fuel factor. The proposed surcharge is designed to
recover $128.1 million, including interest, for fuel under-recoveries
incurred during the period July 1, 1996 through June 30, 1998. Hearings
on the merits were held in October 1998, and the PUCT is required to rule
on the application by December 7, 1998. All amounts at issue in this
proceeding will be subject to review in a future fuel reconciliation
proceeding before the PUCT, at which time the PUCT will consider the
reasonableness of Entergy Gulf States' fuel and purchased power expenses
extending back to July 1, 1996. Entergy Gulf States cannot predict the
outcome of this proceeding.
In July 1998, Entergy Gulf States agreed to implement an $18 million
rate reduction for Louisiana retail electric customers effective July 29,
1998 to reflect reductions that are expected to occur as a result of
Entergy Gulf States' annual LPSC earnings reviews. Proceedings on issues
in the second, third, and fourth post-Merger earnings analyses will
continue.
On September 10, 1998, the LPSC issued an order in the third
required post-Merger earnings analysis that required a refund of $44.8
million for the period June 1, 1996 through May 31, 1997, and a
prospective rate reduction of $54.6 million effective September 20, 1998.
Due to the $18 million reduction that was implemented on July 29, 1998,
an additional prospective reduction of $36.6 million would be required as
a result of the third earnings analysis. Entergy Gulf States has not
reserved for this reduction. Entergy Gulf States has appealed this order
and has been granted injunctive relief pending a final decision on
appeal.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
In July 1998, the LPSC also issued an order extending the Formula
Rate Plan (FRP) for Entergy Louisiana through three additional annual
filings. On September 10, 1998, Entergy Louisiana filed its FRP
Evaluation Report, based on a 1997 test year. The filing indicated that
earnings were such that no change in rates would be warranted with the
exception of the elimination of a $3.7 million one-time credit that will
result in a rate increase of this amount. Hearings will be conducted on
this filing.
On September 18, 1998, the MPSC announced a net rate reduction of
$127.1 million, effective October 1, 1998 for all Entergy Mississippi
customers. The reduction was scheduled to coincide with the expiration
of the phase-in plan, which was implemented in the late 1980's in regard
to Entergy Mississippi's portion of costs of System Energy's Grand Gulf 1
unit. The reduction was partially offset by the accelerated recovery of
Entergy Mississippi's Grand Gulf purchased power obligation and the
recovery of a portion of Entergy Mississippi's allocation of the proposed
System Energy wholesale rate increase. See Note 2 for further discussion
of these offsets. The rate reduction will not result in a decrease in
Entergy Mississippi's income, as the phase-in plan deferrals have now
been fully amortized and there is no further expense associated with the
phase-in plan to be recognized.
See Note 2 to the Form 10-K and Note 2 herein for additional
information regarding the above rate actions as well as a discussion of
the ongoing trend of regulatory mandated rate reductions, incentive and
performance-based regulation, and filings made with state and local
regulators regarding an orderly transition to a more competitive market
for electricity.
Domestic and Foreign Competitive Businesses
Following the conclusion of Entergy's Board of Directors meeting on
August 2, 1998, management announced its intention to focus Entergy's
resources on its domestic utilities, international power generation,
nuclear operations, and power trading and marketing. Consistent with
this intention, management expects to sell several businesses before the
end of 1999. These businesses include the international distribution
businesses of London Electricity and CitiPower Pty., Entergy's security
monitoring business, and portions of Entergy's telecommunications
interests. See Note 7 for further information. Proceeds from the sales
will be used, in part, to pay off debt associated with the acquisition of
these businesses. Also refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND
ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for a
discussion of Entergy Corporation's current investments in nonregulated
and foreign energy-related businesses. These investments may involve a
greater risk than domestic regulated utility enterprises.
For the nine months ended September 30, 1998, these investments
contributed approximately $79 million to Entergy Corporation's
consolidated net income. Entergy's investment in Entergy London
contributed $161 million to net income for the nine months ended
September 30, 1998, including $97 million due to recognition of foreign
tax credits and other tax benefits and $39 million net of tax due to
capitalization of information technology systems development costs, an
adjustment to pension surplus based on actuarial studies, and a decrease
in a provision for restructuring. Domestic power marketing operations
and foreign power development and generation operations incurred net
losses of $21 million and $6 million, respectively, for the nine months
ended September 30, 1998, as a result of power trading losses and a
counterparty default. CitiPower Pty., an Australian distribution
business, contributed $21 million; and Edesur, S. A., an Argentine
distribution business, contributed $5.2 million to net income. Entergy's
domestic unregulated energy-related retail businesses had a net loss of
$81 million for the nine months ended September 30, 1998, partially as a
result of the net of tax loss of $36 million on the September 30, 1998
sale of Efficient Solutions, Inc., formerly Entergy Integrated Solutions,
Inc.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
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 be opened 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.
In September 1998, Damhead Creek, a 775 MW combined cycle gas
turbine merchant power plant located in Southeast England, entered the
construction phase. Agreements have been finalized regarding interim
financing and construction and gas supply contracts. Damhead Creek's
power will be sold through the England and Wales Electricity Pool. The
target date for commercial operation is the fourth quarter of 2000. See
Note 4 for information regarding the financing.
In September 1998, EPMC entered into a six-year energy management
agreement (beginning January 1, 2000) with Ormet Primary Aluminum
Corporation, which produces high-quality aluminum products for the
fabrication, extrusion, and conversion markets. Under the terms of the
contract, EPMC will acquire and optimize supply of up to 535 megawatts of
electricity for Ormet's aluminum reduction plant and rolling mill in
Hannibal, Ohio.
In October 1998, Entergy Nuclear, Inc. (Entergy Nuclear) and the
Maine Yankee Atomic Power Company, which owns the Maine Yankee nuclear
plant, signed a long-term contract that calls for Entergy Nuclear to
provide management oversight of decommissioning activities at Maine
Yankee through the projected completion of such activities in 2004.
Management believes this arrangement is the first of its kind for
decommissioning and reflects a growing trend among utilities to utilize
outside management for nuclear activities.
Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -
SIGNIFICANT FACTORS AND KNOWN TRENDS", Note 7, 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 income of $2.3 million and an operating loss
of $3.3 million during the three and nine months ended September 30,
1998, respectively, compared to operating income of $6.6 million and
$15.8 million during the comparable periods in 1997.
The decrease in operating income from these deregulated operations
for the three and nine months ended September 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, and (2) revenues from off-system sales of the
transferred 30% portion of River Bend not fully recovering the costs
associated with those sales. For the nine months ended September 30,
1998, the decrease in operating income was also due to decreased steam
products revenues as a result of the revised contractual arrangement with
the steam customer. 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 regulation 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
Entergy has been evaluating its computer software and hardware,
databases, embedded microprocessors (collectively referred to as "IT and
non-IT assets"), suppliers, and other relationships to determine which
actions are required to prevent problems related to the year 2000, and
the resources required to take such actions. These problems may result
in malfunctions in certain software applications, databases, and computer
equipment with respect to dates on or after January 1, 2000, unless
corrected. These malfunctions could disrupt operations of nuclear or
fossil generating plants, operation of transmission and distribution
systems, access to interconnections with neighboring utilities, and cause
other operational problems.
Entergy has adopted a four-step approach to address Year 2000 issues
including: 1) an inventory of all IT and non-IT assets; 2) an assessment
to determine if the assets are critical to the business and, if so,
whether Year 2000 has an impact; 3) remediation to fix or replace systems
determined to be Year 2000 deficient; and 4) certification of such
critical systems to confirm Year 2000 compliance.
Entergy has substantially completed its inventory of IT and non-IT
assets, has identified systems and equipment that could be affected by
the millennium change, and has assessed the risk of potential failure for
most of its assets. Management defines year 2000 compliant services or
products as those that perform the business, office automation, or
process control requirements as designed into the twenty-first century.
Management defines an asset as "certified" as year 2000 compliant after
it has been modified or upgraded if necessary, tested, and deployed in
the operating environment. Certification of Entergy's assets that
significantly affect operations is scheduled to be substantially complete
by the end of the first quarter of 1999, and is on schedule and
approximately 40% complete at this time. Certification will continue for
assets that do not significantly affect operations, but do impact
efficiency and profitability, throughout 1999.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
SIGNIFICANT FACTORS AND KNOWN TRENDS
Entergy is currently performing an assessment of its vendors that
affect Entergy's operations. Entergy's goal is to receive written
confirmation of the year 2000 compliance of its critical vendors.
Alternative suppliers or contingency plans will be considered for those
suppliers who do not demonstrate a sufficient effort towards year 2000
readiness. Entergy intends to implement year 2000 contingency plans for
suppliers throughout 1998 and 1999.
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 current estimate of maintenance
and modification costs related to year 2000 issues to be incurred in 1998
through mid-2000 is approximately $81 million, of which approximately $15
million has been incurred through September 1998. These expenses are
being funded through operating cash flows. Capitalized costs related to
year 2000 issues are not considered material.
An independent consultant has been engaged to assist management in
its assessment of the risks of year 2000 malfunctions. This assessment
is currently in progress. Based on the risk determinations of this
assessment, and the results of certification activities, management will
create and implement contingency plans to address year 2000 issues, as
needed, throughout 1999.
Please see "Forward Looking Information" herein.
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 nine months
ended September 30, 1997 reflects London Electricity's results subsequent
to February 1, 1997.
Net Income
Consolidated net income increased for the three and nine months
ended September 30, 1998, primarily due to higher competitive business
revenues and lower income taxes, partially offset by an increase in
operating expenses. The increase in competitive business revenues was
partially offset by losses at EPMC due to increased power trading and a
counterparty default. Additional reserves were recorded for rate
reductions ordered by the PUCT with respect to Texas retail customers
which totaled $13.3 million and $73.6 million net of tax for the three
and nine months ended September 30, 1998, respectively. Income taxes
were lower for the three and nine months ended September 30, 1998 due to
an additional reduction in the UK corporation tax rate from 31% to 30% in
the third quarter of 1998 and the recording of a one-time windfall
profits tax at London Electricity in July 1997. This decrease was
partially offset by a one-time reduction in income tax expense for London
Electricity due to a reduction in the UK corporation tax rate from 33% to
31% in July 1997. Excluding the effects of the additional reserves in
1998 and the net tax adjustments in 1998 and 1997, net income would have
decreased approximately $17.8 million, net of tax, for the three months
ended September 30, 1998, and increased approximately $39.1 million, net
of tax, for the nine months ended September 30, 1998 compared to the
respective periods ended September 30, 1997.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 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 nine months ended
September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($66.5) ($238.5)
Rate riders (17.5) (54.0)
Fuel cost recovery 17.0 (39.1)
Sales volume/weather 86.8 158.0
Other revenue (including unbilled) (20.2) 8.4
Sales for resale 34.8 67.4
----- ------
Total $34.4 ($97.8)
===== ======
Electric operating revenues for the domestic utility companies
increased for the three months ended September 30, 1998, primarily due to
increased sales volume at all domestic utility companies, increased sales
for resale at Entergy Gulf States, and increased fuel cost recovery
revenues at Entergy Gulf States, Entergy
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Mississippi, and Entergy New Orleans. Sales volume increased as a result
of significantly warmer weather in the third quarter of 1998. Sales for
resale at Entergy Gulf States 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. Fuel cost
recovery revenues, which do not impact net income, increased at Entergy
Gulf States, Entergy Mississippi, and Entergy New Orleans primarily due
to increased fuel prices and increased generation. Partially offsetting
these increases were decreases in base revenue, rate rider revenue, and
other revenue (primarily unbilled). Base revenues decreased at Entergy
Gulf States primarily due to reserves recorded for rate reductions
ordered by the PUCT with respect to Texas retail customers, aggressive
pricing strategies for targeted customer segments, and base rate
reductions in Louisiana that became effective in March and July 1998.
Rate rider revenue, which does not affect net income, decreased at
Entergy Arkansas due to the decline in Grand Gulf 1 cost recovery rate
rider revenues reflecting scheduled reductions in the phase-in plan and
the Stipulation and Settlement Agreement with the APSC. Unbilled revenue
decreased at Entergy Louisiana primarily as a result of decreased sales
to three large industrial customers and a decrease in sales volume due to
distribution outages caused by major storms at the end of September 1998.
Electric operating revenues for the domestic utility companies
decreased for the nine months ended September 30, 1998. The decrease was
primarily due to a decrease in base revenues at Entergy Gulf States,
decreased rate rider revenue at Entergy Arkansas, and decreased fuel cost
recovery revenues at Entergy Louisiana. Base revenues at Entergy Gulf
States decreased primarily due to reserves recorded during the nine
months ended September 30, 1998 for rate reductions ordered by the PUCT
with respect to Texas retail customers, aggressive pricing strategies for
targeted customer segments, and base rate reductions in Louisiana that
became effective in March and July 1998. 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 at Entergy
Louisiana decreased due to lower pricing resulting from a change in
generation mix. Partially offsetting these decreases were increases in
sales volume and sales for resale. Sales volume increased for all
domestic utility companies as a result of significantly warmer weather in
1998. Sales for resale at Entergy Gulf States increased due to an
increase in sales to non-associated utilities and additional revenues
related to the sale of energy from River Bend as discussed above.
Competitive business revenues increased for the three and nine
months ended September 30, 1998, primarily due to the significant
increase in revenue at EPMC and EPI. This revenue increased as a result
of increased sales volume on the spot market driven by increased demand
resulting from increased marketing efforts and significantly warmer
weather in 1998. This increase was offset for EPMC by increased power
purchased for resale as discussed in expenses below. Entergy London
revenues for the nine months ended September 30, 1998 were higher due to
nine months of activity under Entergy ownership recorded in 1998 compared
to eight months in 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 and nine months ended September 30, 1998.
Expenses
Operating expenses increased for the three and nine months ended
September 30, 1998. The increase in the three months ended September 30,
1998 was primarily due to increases in fuel expenses, purchased power
expenses, other operation and maintenance expenses, and other regulatory
charges, partially offset by the decreased amortization of rate
deferrals. The increase in the nine months ended September 30, 1998 was
primarily due to increases in purchased power expenses, other operation
and maintenance expenses, depreciation, amortization, and decommissioning
expense, and other regulatory charges, partially offset by a decrease in
amortization of rate deferrals.
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The increase in fuel expenses for the three months ended September
30, 1998 was primarily due to increased volume of fuel purchased for
resale at EPMC. The increase in purchased power expenses for the three
and nine months ended September 30, 1998 was primarily the result of
significantly increased power trading by EPMC. Also, for the three
months ended September 30, 1998, the increase in purchased power expenses
at EPMC was due to a $44 million counterparty default. Other regulatory
charges for the three and nine months ended September 30, 1998, increased
due to additional accruals made in 1998 for the transition cost account
at Entergy Arkansas and the over-recovery of Grand Gulf 1-related costs
at Entergy Mississippi. The increase in other operation and maintenance
expenses for the three and nine months ended September 30, 1998 was
principally due to: i) the write-off of certain costs related to
Efficient Solutions, Inc. and ETHC's security companies in preparation
for the sale; ii) the additional operation and maintenance expenses of
security companies acquired by ETHC; and iii) increased transmission
expenses at EPMC due to significantly increased power trading sales
volume. These increases in other operation and maintenance expenses were
partially offset by capitalization of information technology systems
development costs, an adjustment to pension surplus based on actuarial
studies, and a decrease in a provision for restructuring at London
Electricity. The decrease in the amortization of rate deferrals was
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.
Other
The decrease in other income was a result of the loss on the sale of
Efficient Solutions, Inc. in September 1998. See Note 7 for further
information.
Interest on long-term debt decreased for the three and nine months
ended September 30, 1998, primarily due to the retirement, redemption, or
refinancing 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 September
30, 1998 and 1997 were 22.9% and 79.0%, respectively. The effective
income tax rates for the nine months ended September 30, 1998 and 1997
were 26.4% and 57.3%, respectively. The decreases were due to i) the
impact of the one-time windfall profits tax recorded in July 1997,
partially offset by a reduction in the UK corporation tax rate from 33%
to 31% in the same period, ii) the recording of a $44 million deferred
tax benefit in June 1998 related to expected utilization of Entergy's
capital loss carryforwards, and iii) the impact of an additional
reduction in the UK corporation tax rate from 31% to 30% in the third
quarter of 1998. The decrease in the three months ended September 30,
1998 was also due to decreased pretax income at certain competitive
businesses and the expected utilization of foreign tax credits.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands, Except Share Data)
Operating Revenues:
Domestic electric $2,032,463 $1,998,058 $4,854,872 $4,952,725
Natural gas 17,003 17,516 91,616 98,037
Steam products 11,626 11,142 32,151 35,103
Competitive businesses 2,526,355 770,871 4,430,714 1,935,565
---------- ---------- ---------- ----------
Total 4,587,447 2,797,587 9,409,353 7,021,430
---------- ---------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 579,961 509,532 1,256,778 1,248,052
Purchased power 2,423,958 702,582 4,010,896 1,593,270
Nuclear refueling outage expenses 20,445 18,675 64,134 49,083
Other operation and maintenance 482,129 420,012 1,466,322 1,358,929
Depreciation, amortization, and decommissioning 256,375 246,736 753,922 716,051
Taxes other than income taxes 91,033 92,233 277,145 275,429
Other regulatory charges (credits) 71,542 22,541 11,759 (34,230)
Amortization of rate deferrals 71,331 112,659 219,507 336,124
---------- ---------- ---------- ----------
Total 3,996,774 2,124,970 8,060,463 5,542,708
---------- ---------- ---------- ----------
Operating Income 590,673 672,617 1,348,890 1,478,722
---------- ---------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 4,027 1,777 9,650 7,845
Sale of non-regulated business (68,590) - (68,590) -
Miscellaneous - net 18,660 (914) 68,440 45,703
---------- ---------- ---------- ----------
Total (45,903) 863 9,500 53,548
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt 182,899 208,909 565,785 599,709
Other interest - net 11,481 16,541 35,636 39,594
Distributions on preferred securities of subsidiaries 13,407 4,709 33,535 13,591
Allowance for borrowed funds used
during construction (3,453) (1,455) (8,015) (6,332)
---------- ---------- ---------- ----------
Total 204,334 228,704 626,941 646,562
---------- ---------- ---------- ----------
Income Before Income Taxes 340,436 444,776 731,449 885,708
Income Taxes 77,839 351,455 192,820 507,323
---------- ---------- ---------- ----------
Net Income before Preferred Dividend Requirements and Other 262,597 93,321 538,629 378,385
Preferred and Preference Dividend Requirements of
Subsidiaries and Other 11,611 12,379 35,091 41,405
---------- ---------- ---------- ----------
Consolidated Net Income 250,986 80,942 503,538 336,980
Other Comprehensive Income:
Foreign Currency Translation Adjustment (14,708) (15,885) (18,556) (27,407)
---------- ---------- ---------- ----------
Comprehensive Net Income $236,278 $65,057 $484,982 $309,573
========== ========== ========== ==========
Earnings per average common share:
Basic and diluted $1.02 $0.33 $2.04 $1.41
Dividends declared per common share $0.30 $0.90 $1.20 $1.80
Average number of common shares outstanding:
Basic 246,615,620 242,172,319 246,331,931 238,653,723
Diluted 246,699,893 242,258,956 246,432,782 238,735,315
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income before preferred dividend requirements and other $538,629 $378,385
Noncash items included in net income:
Amortization of rate deferrals 219,507 336,124
Other regulatory charges 11,759 (34,230)
Depreciation, amortization, and decommissioning 753,922 716,051
Deferred income taxes and investment tax credits (125,224) (169,887)
Allowance for equity funds used during construction (9,650) (7,845)
Sale of non-regulated businesses 68,590 -
Changes in working capital:
Receivables (438,679) (175,147)
Fuel inventory 26,119 68,892
Accounts payable 286,360 59,540
Taxes accrued 338,440 387,233
Windfall profit tax liability - 234,080
Interest accrued (19,151) (30,923)
Deferred fuel (121,413) (31,819)
Other working capital accounts (94,325) (71,912)
Reserve for rate refund 76,883 -
Provision for estimated losses and reserves (132,556) (40,814)
Decommissioning trust contributions and realized change in trust assets (56,915) (50,950)
Other (49,742) 7,937
---------- ----------
Net cash flow provided by operating activities 1,272,554 1,574,715
---------- ----------
Investing Activities:
Construction/capital expenditures (712,671) (554,638)
Allowance for equity funds used during construction 9,650 7,845
Nuclear fuel purchases (59,409) (52,323)
Proceeds from sale/leaseback of nuclear fuel 78,969 91,504
Acquisition of London Electricity, net of cash acquired - (1,951,701)
Investment in other nonregulated/nonutility properties (40,704) (10,576)
Sale of non-regulated businesses (21,893) -
Other (35,595) (25,863)
---------- ----------
Net cash flow used in investing activities (781,653) (2,495,752)
---------- ----------
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended September 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 141,994 84,064
Bank notes and other long-term debt 282,219 1,717,569
Preferred securities of subsidiary trusts and partnerships - 82,323
Common stock 15,333 238,193
Retirement of:
First mortgage bonds (351,335) (327,692)
General and refunding mortgage bonds (110,000) (7,622)
Other long-term debt (211,754) (76,583)
Redemption of preferred stock (10,250) (119,367)
Changes in short-term borrowings - net (17,964) 103,454
Preferred stock dividends paid (35,217) (39,540)
Common stock dividends paid (296,022) (328,182)
---------- ----------
Net cash flow provided by (used in) financing activities (514,293) 1,391,444
---------- ----------
Effect of exchange rates on cash and cash equivalents 1,006 2,655
---------- ----------
Net increase (decrease) in cash and cash equivalents (22,386) 473,062
Cash and cash equivalents at beginning of period 830,547 388,703
---------- ----------
Cash and cash equivalents at end of period $808,161 $861,765
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $654,846 $650,190
Income taxes $97,775 $116,761
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($4,696) $16,309
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents:
Cash $101,056 $85,067
Temporary cash investments - at cost,
which approximates market 707,105 700,431
Special deposits - 45,049
----------- -----------
Total cash and cash equivalents 808,161 830,547
Notes receivable 9,490 8,157
Accounts receivable:
Customer (less allowance for doubtful accounts of
$31 million in 1998 and $32.8 million in 1997) 580,825 458,085
Other 517,060 225,523
Accrued unbilled revenues 564,447 580,194
Deferred fuel costs 272,009 150,596
Accumulated deferred income taxes 18,800 -
Fuel inventory 93,212 119,331
Materials and supplies - at average cost 392,778 367,870
Rate deferrals 46,710 237,302
Prepayments and other 170,600 193,717
----------- -----------
Total 3,474,092 3,171,322
----------- -----------
Other Property and Investments:
Decommissioning trust funds 641,270 589,050
Non-regulated investments 529,023 568,951
Other 222,526 225,818
----------- -----------
Total 1,392,819 1,383,819
----------- -----------
Utility Plant:
Electric 25,774,603 25,310,122
Plant acquisition adjustment - Entergy Gulf States 426,961 439,160
Electric plant under leases 675,317 674,483
Property under capital leases - electric 117,772 134,278
Natural gas 183,438 169,964
Steam products 83,037 82,289
Construction work in progress 811,872 565,667
Nuclear fuel under capital leases 254,062 269,011
Nuclear fuel 59,959 72,875
----------- -----------
Total 28,387,021 27,717,849
Less - accumulated depreciation and amortization 10,205,316 9,585,021
----------- -----------
Utility plant - net 18,181,705 18,132,828
----------- -----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 133,687 162,602
SFAS 109 regulatory asset - net 1,148,885 1,174,187
Unamortized loss on reacquired debt 184,931 196,891
Other regulatory assets 514,416 466,780
Long-term receivables 35,163 36,984
CitiPower license (net of amortization of $32.2 million in 1998
and $25.6 million in 1997) 436,738 486,153
London Electricity license (net of amortization of $58.5 million
in 1998 and $31.1 million in 1997) 1,344,518 1,327,312
Other 523,305 461,822
----------- -----------
Total 4,321,643 4,312,731
----------- -----------
TOTAL $27,370,259 $27,000,700
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Currently maturing long-term debt $323,992 $390,674
Notes payable 414,052 428,964
Accounts payable 1,197,566 915,800
Customer deposits 178,877 178,162
Taxes accrued 702,078 359,996
Accumulated deferred income taxes - 56,524
Interest accrued 194,873 214,763
Dividends declared 8,040 8,166
Obligations under capital leases 138,526 167,700
Other 26,295 81,303
----------- -----------
Total 3,184,299 2,802,052
----------- -----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 4,502,106 4,567,052
Accumulated deferred investment tax credits 572,115 587,781
Obligations under capital leases 233,482 236,000
Other 1,855,571 1,857,514
----------- -----------
Total 7,163,274 7,248,347
----------- -----------
Long-term debt 8,942,186 9,068,325
Subsidiaries' preferred stock with sinking fund 178,755 185,005
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 246,763,336 shares in 1998 and 246,149,198
shares in 1997 2,468 2,461
Additional paid-in capital 4,629,098 4,613,572
Retained earnings 2,365,285 2,157,912
Cumulative foreign currency translation adjustment (88,373) (69,817)
Less - treasury stock (222,354 shares in 1998 and
306,852 shares in 1997) 6,188 10,612
----------- -----------
Total 7,236,745 7,031,971
----------- -----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $27,370,259 $27,000,700
=========== ===========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Domestic Electric Operating Revenues:
Residential $ 844.5 $ 803.6 $ 40.9 5
Commercial 454.9 466.2 (11.3) (2)
Industrial 496.3 532.6 (36.3) (7)
Governmental 48.9 46.8 2.1 4
---------------------------------
Total retail 1,844.6 1,849.2 (4.6) -
Sales for resale 144.9 110.1 34.8 32
Other 43.0 38.8 4.2 11
---------------------------------
Total $ 2,032.5 $ 1,998.1 $ 34.4 2
=================================
Billed Electric Energy
Sales (GWH):
Residential 11,229 9,892 1,337 14
Commercial 7,122 6,563 559 9
Industrial 11,311 11,425 (114) (1)
Governmental 745 693 52 8
---------------------------------
Total retail 30,407 28,573 1,834 6
Sales for resale 3,005 2,883 122 4
---------------------------------
Total 33,412 31,456 1,956 6
=================================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Domestic Electric Operating Revenues:
Residential $ 1,811.2 $ 1,759.9 $ 51.3 3
Commercial 1,148.4 1,197.0 (48.6) (4)
Industrial 1,380.5 1,506.5 (126.0) (8)
Governmental 133.2 128.8 4.4 3
---------------------------------
Total retail 4,473.3 4,592.2 (118.9) (3)
Sales for resale 335.2 267.8 67.4 25
Other 46.4 92.7 (46.3) (50)
---------------------------------
Total $ 4,854.9 $ 4,952.7 ($97.8) (2)
=================================
Billed Electric Energy
Sales (GWH):
Residential 24,166 21,823 2,343 11
Commercial 17,446 16,410 1,036 6
Industrial 32,577 33,560 (983) (3)
Governmental 2,042 1,886 156 8
---------------------------------
Total retail 76,231 73,679 2,552 3
Sales for resale 7,580 7,136 444 6
---------------------------------
Total 83,811 80,815 2,996 4
=================================
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income decreased for the three and nine months ended September
30, 1998 primarily due to decreases in electric operating revenues,
partially offset by decreases in operating expenses and interest expense.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 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 nine
months ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.6) ($3.7)
Rate riders (30.3) (77.8)
Fuel cost recovery (11.1) (18.6)
Sales volume/weather 27.7 50.2
Other revenue (including unbilled) 0.2 17.5
Sales for resale (3.7) (63.6)
------ ------
Total ($18.8) ($96.0)
====== ======
Electric operating revenues decreased for the three and nine months
ended September 30, 1998, primarily due to a decrease in rate rider
revenue and fuel cost recovery revenues, which do not affect net income,
partially offset by an increase in sales volume. Electric operating
revenues decreased for the nine months ended September 30, 1998, also due
to a decrease in sales for resale, partially offset by an increase in
other revenue (including unbilled). 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 and the Stipulation and Settlement Agreement with the APSC. See
Note 2 for further discussion. Fuel cost recovery revenues decreased due
to unfavorable pricing resulting from a change to a fixed fuel factor in
January 1998, partially offset by an increase in generation. Sales
volume increased as a result of significantly warmer weather in 1998.
Sales for resale decreased for the nine months ended September 30,
1998, 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 during the second quarter of 1998.
Unbilled revenue increased for the nine months ended September 30, 1998,
primarily as a result of increased sales volume due to warmer weather.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and nine months ended
September 30, 1998, primarily due to decreases in fuel expenses and the
amortization of Grand Gulf 1 rate deferrals, partially offset by an
increase in other regulatory charges. Fuel expenses decreased primarily
due to the impact of the under-recovered deferred fuel cost in excess of
the fixed fuel factor billed to retail customers. The decrease in the
amortization of Grand Gulf 1 rate deferrals was 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. The increase in
other regulatory charges was a result of additional accruals made in 1998
for the transition cost account. See Note 2 for further discussion of
the Stipulation and Settlement Agreement with the APSC and the transition
cost account. The increase in other regulatory charges was partially
offset by an increase in the net under-recovery of Grand Gulf 1-related
costs.
Other
Interest charges decreased for the three and nine months ended
September 30, 1998 primarily due to the retirement of certain long-term
debt in 1998.
The effective income tax rate of 39.4% for the three months ended
September 30, 1998 remained relatively unchanged from the rate of 38.5%
for the three months ended September 30, 1997. For the nine months ended
September 30, 1998 and 1997, the effective income tax rates were 39.2%
and 37.3%, respectively. The increase in 1998 was primarily due to the
increased reversal of previously recorded AFUDC amounts included in
depreciation.
ENTERGY ARKANSAS, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $527,059 $545,849 $1,248,205 $1,344,199
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 63,469 72,147 138,834 201,494
Purchased power 116,085 123,871 326,397 327,725
Nuclear refueling outage expenses 8,128 7,639 23,947 19,905
Other operation and maintenance 79,706 80,280 256,002 252,081
Depreciation, amortization, and decommissioning 44,303 42,745 134,336 125,529
Taxes other than income taxes 8,481 9,114 28,681 27,643
Other regulatory charges 43,983 22,957 21,878 14,208
Amortization of rate deferrals 22,067 38,408 66,202 115,162
-------- -------- ---------- ----------
Total 386,222 397,161 996,277 1,083,747
-------- -------- ---------- ----------
Operating Income 140,837 148,688 251,928 260,452
-------- -------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 1,934 (316) 4,266 2,572
Miscellaneous - net 2,092 4,573 10,640 14,987
-------- -------- ---------- ----------
Total 4,026 4,257 14,906 17,559
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 20,974 23,368 66,095 71,595
Other interest - net 2,307 950 3,667 2,850
Distributions on preferred securities of subsidiary trust 1,275 1,275 3,825 3,825
Allowance for borrowed funds used
during construction (1,383) 105 (3,034) (1,632)
-------- -------- ---------- ----------
Total 23,173 25,698 70,553 76,638
-------- -------- ---------- ----------
Income Before Income Taxes 121,690 127,247 196,281 201,373
Income Taxes 47,959 48,996 76,960 75,189
-------- -------- ---------- ----------
Net Income 73,731 78,251 119,321 126,184
Preferred Stock Dividend Requirements
and Other 2,526 2,733 7,745 8,363
-------- -------- ---------- ----------
Earnings Applicable to Common Stock $71,205 $75,518 $111,576 $117,821
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $119,321 $126,184
Noncash items included in net income:
Amortization of rate deferrals 66,202 115,162
Other regulatory charges 21,878 14,208
Depreciation, amortization, and decommissioning 134,336 125,529
Deferred income taxes and investment tax credits (19,501) (58,694)
Allowance for equity funds used during construction (4,266) (2,572)
Changes in working capital:
Receivables (78,001) (13,783)
Fuel inventory 890 40,975
Accounts payable 41,397 (20,826)
Taxes accrued 82,721 95,308
Interest accrued (2,566) 767
Deferred fuel costs (65,408) 7,688
Other working capital accounts (8,836) (34,326)
Decommissioning trust contributions and realized
change in trust assets (17,776) (18,255)
Provision for estimated losses and reserves (3,800) 5,878
Other 5,816 17,262
--------- ---------
Net cash flow provided by operating activities 272,407 400,505
--------- ---------
Investing Activities:
Construction expenditures (122,209) (101,796)
Allowance for equity funds used during construction 4,266 2,572
Nuclear fuel purchases (38,354) (36,633)
Proceeds from sale/leaseback of nuclear fuel 38,354 36,553
--------- ---------
Net cash flow used in investing activities (117,943) (99,304)
--------- ---------
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) (4,000)
Dividends paid:
Common stock (92,600) (97,200)
Preferred stock (7,844) (8,462)
--------- ---------
Net cash flow used in financing activities (255,718) (143,185)
--------- ---------
Net increase (decrease) in cash and cash equivalents (101,254) 158,016
Cash and cash equivalents at beginning of period 203,391 43,857
--------- ---------
Cash and cash equivalents at end of period $102,137 $201,873
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $64,367 $63,660
Income taxes $13,521 $29,011
Noncash investing and financing activities:
Change in unrealized appreciation of
decommissioning trust assets $35 $12,867
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $15,013 $6,076
Temporary cash investments - at cost,
which approximates market:
Associated companies 18,311 41,389
Other 68,813 110,877
Special deposits - 45,049
---------- ----------
Total cash and cash equivalents 102,137 203,391
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1998 and 1997) 110,844 71,910
Associated companies 74,918 46,166
Other 7,742 10,282
Accrued unbilled revenues 102,471 89,616
Deferred fuel costs 49,164 -
Fuel inventory - at average cost 27,279 28,169
Materials and supplies - at average cost 87,931 79,692
Rate deferrals 9,046 75,249
Deferred nuclear refueling outage costs 25,540 24,335
Prepayments and other 11,006 8,647
---------- ----------
Total 608,078 637,457
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 11,213 11,213
Decommissioning trust fund 268,384 250,573
Other - at cost (less accumulated depreciation) 4,984 4,939
---------- ----------
Total 284,581 266,725
---------- ----------
Utility Plant:
Electric 4,709,866 4,650,065
Property under capital leases 51,539 53,843
Construction work in progress 189,875 123,087
Nuclear fuel under capital lease 99,871 92,621
---------- ----------
Total 5,051,151 4,919,616
Less - accumulated depreciation and amortization 2,252,355 2,116,826
---------- ----------
Utility plant - net 2,798,796 2,802,790
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 252,407 252,712
Unamortized loss on reacquired debt 52,706 53,780
Other regulatory assets 102,328 79,461
Other 22,781 13,952
---------- ----------
Total 430,222 399,905
---------- ----------
TOTAL $4,121,677 $4,106,877
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $865 $60,650
Notes payable 667 667
Accounts payable:
Associated companies 84,450 59,438
Other 92,790 76,405
Customer deposits 25,318 23,437
Taxes accrued 160,048 77,327
Accumulated deferred income taxes 13,568 32,239
Interest accrued 26,260 28,826
Co-owner advances 11,443 7,666
Deferred fuel costs - 16,244
Obligations under capital leases 47,788 62,623
Other 19,005 21,696
---------- ----------
Total 482,202 467,218
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 761,496 759,489
Accumulated deferred investment tax credits 100,050 103,899
Obligations under capital leases 103,621 83,841
Other 211,365 169,884
---------- ----------
Total 1,176,532 1,117,113
---------- ----------
Long-term debt 1,170,266 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 498,696 479,705
---------- ----------
Total 1,201,650 1,186,659
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,121,677 $4,106,877
========== ==========
See Notes to Financial Statements.
ENTERGY ARKANSAS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 208.0 $ 194.1 $ 13.9 7
Commercial 91.7 105.5 (13.8) (13)
Industrial 98.2 112.6 (14.4) (13)
Governmental 4.2 5.2 (1.0) (19)
------------------------------
Total retail 402.1 417.4 (15.3) (4)
Sales for resale:
Associated companies 39.1 53.8 (14.7) (27)
Non-associated companies 78.0 67.0 11.0 16
Other 7.8 7.6 0.2 3
------------------------------
Total $ 527.0 $ 545.8 ($18.8) (3)
==============================
Billed Electric Energy
Sales (GWH):
Residential 2,368 2,031 337 17
Commercial 1,510 1,391 119 9
Industrial 1,901 1,833 68 4
Governmental 67 67 - -
------------------------------
Total retail 5,846 5,322 524 10
Sales for resale:
Associated companies 1,523 2,102 (579) (28)
Non-associated companies 1,425 2,012 (587) (29)
------------------------------
Total 8,794 9,436 (642) (7)
==============================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 447.2 $ 430.7 $ 16.5 4
Commercial 220.0 254.0 (34.0) (13)
Industrial 248.9 278.4 (29.5) (11)
Governmental 11.2 14.1 (2.9) (21)
------------------------------
Total retail 927.3 977.2 (49.9) (5)
Sales for resale:
Associated companies 98.7 176.2 (77.5) (44)
Non-associated companies 176.1 162.2 13.9 9
Other 46.1 28.6 17.5 61
-------------------------------
Total $1,248.2 $ 1,344.2 ($96.0) (7)
===============================
Billed Electric Energy
Sales (GWH):
Residential 5,229 4,640 589 13
Commercial 3,629 3,371 258 8
Industrial 5,109 4,944 165 3
Governmental 178 184 (6) (3)
------------------------------
Total retail 14,145 13,139 1,006 8
Sales for resale:
Associated companies 4,022 7,982 (3,960) (50)
Non-associated companies 3,835 5,023 (1,188) (24)
------------------------------
Total 22,002 26,144 (4,142) (16)
==============================
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three months ended September 30, 1998,
primarily due to an increase in operating revenues and a decrease in
interest charges, partially offset by higher income taxes. Net income
decreased for the nine months ended September 30, 1998, primarily due to
a decrease in operating revenues, partially offset by a decrease in
interest charges and lower income taxes. The changes in operating
revenues for the three and nine months ended September 30, 1998 reflected
additional reserves recorded for rate reductions ordered by the PUCT with
respect to Texas retail customers which totaled $13.3 million and $73.6
million net of tax, respectively. Excluding the effects of the
additional reserves, net income for the three and nine months ended
September 30, 1998 would have increased approximately $20.8 million and
$31.1 million, respectively. See Note 2 for a discussion of the
additional reserves recorded for rate reductions ordered by the PUCT with
respect to Texas retail customers.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 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 nine
months ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($58.4) ($183.2)
Fuel cost recovery 28.3 28.6
Sales volume/weather 23.0 49.1
Other revenue (including unbilled) (1.4) (0.6)
Sales for resale 17.5 46.5
---- ------
Total $9.0 ($59.6)
==== ======
Electric operating revenues increased for the three months ended
September 30, 1998 primarily due to increases in fuel cost recovery
revenues, which do not impact net income, and higher sales volume and
sales for resale, partially offset by a decrease in base revenues.
Electric operating revenues decreased for the nine months ended September
30, 1998 primarily due to the decrease in base revenues exceeding the
impact of higher sales volume and increases in fuel cost recovery
revenues and sales for resale. Base revenues decreased primarily due to
reserves recorded during the three and nine months ended September 30,
1998 for rate reductions ordered by the PUCT with respect to Texas retail
customers, aggressive pricing strategies for targeted customer segments,
and base rate reductions in Louisiana that became effective in March and
July 1998. The increase in fuel cost recovery revenues, which do not
affect net income, was due to higher fuel prices and increased generation
in 1998. Sales volume increased due to significantly warmer weather in
1998. Sales for resale increased due to 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 and an
increase in sales to non-associated utilities as a result of an increase
in the average price of wholesale energy.
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Gas operating revenues decreased for the nine months ended September
30, 1998 due to a lower unit price for gas purchased for resale. Steam
operating revenues decreased for the nine months ended September 30, 1998
primarily due to changes in the customer contract, which took effect in
August 1997.
Expenses
Operating expenses for the three and nine months ended September 30,
1998 remained relatively unchanged reflecting increases in other
operation and maintenance expenses, taxes other than income taxes, and a
net increase in fuel and purchased power expenses, which were offset by a
decrease in the amortization of rate deferrals. 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 nine months ended September 30, 1997. Taxes other than
income taxes increased due to increased franchise, ad valorem, and
payroll taxes. The net increase in fuel and purchased power expenses was
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 billed to Texas retail customers. The amortization of rate
deferrals decreased due to the expiration of the Louisiana retail phase-
in plan for River Bend in February 1998.
Other
Interest charges decreased for the three and nine months ended
September 30, 1998 primarily due to the retirement, redemption, or
refinancing of certain long-term debt in 1997 and 1998.
For the three months ended September 30, 1998 and 1997, the
effective income tax rates were 42.0% and 40.4%, respectively. The
effective income tax rates for the nine months ended September 30, 1998
and 1997 were 43.9% and 37.4%, respectively. The changes in the
effective income tax rates in 1998 were 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
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues:
Electric $593,326 $584,357 $1,430,665 $1,490,234
Natural gas 4,410 4,476 27,710 32,387
Steam products 11,626 11,141 32,151 35,102
-------- -------- ---------- ----------
Total 609,362 599,974 1,490,526 1,557,723
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale 159,442 152,511 406,696 411,595
Purchased power 95,358 93,208 254,990 238,977
Nuclear refueling outage expenses 3,403 1,569 11,627 6,787
Other operation and maintenance 99,802 93,978 296,502 269,422
Depreciation, amortization, and decommissioning 50,865 53,768 157,902 160,569
Taxes other than income taxes 33,191 25,800 92,159 81,810
Other regulatory credits (1,373) (5,602) (10,424) (17,550)
Amortization of rate deferrals 2,270 26,377 19,480 79,091
-------- -------- ---------- ----------
Total 442,958 441,609 1,228,932 1,230,701
-------- -------- ---------- ----------
Operating Income 166,404 158,365 261,594 327,022
-------- -------- ---------- ----------
Other Income:
Allowance for equity funds used
during construction 757 235 2,057 1,686
Miscellaneous - net 7,357 7,029 13,855 15,618
-------- -------- ---------- ----------
Total 8,114 7,264 15,912 17,304
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 37,104 40,516 114,192 124,257
Other interest - net 1,132 4,704 2,847 8,420
Distributions on preferred securities of subsidiary trust 1,859 1,859 5,578 5,041
Allowance for borrowed funds used
during construction (611) (156) (1,625) (1,395)
-------- -------- ---------- ----------
Total 39,484 46,923 120,992 136,323
-------- -------- ---------- ----------
Income Before Income Taxes 135,034 118,706 156,514 208,003
Income Taxes 56,721 47,966 68,686 77,700
-------- -------- ---------- ----------
Net Income 78,313 70,740 87,828 130,303
Preferred and Preference Stock
Dividend Requirements and Other 4,747 5,025 14,335 18,963
-------- -------- ---------- ----------
Earnings Applicable to Common Stock $73,566 $65,715 $73,493 $111,340
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Nine Months Ended
1998 1997
(In Thousands)
Operating Activities:
Net income $87,828 $130,303
Noncash items included in net income:
Amortization of rate deferrals 19,480 79,091
Other regulatory credits (10,424) (17,550)
Depreciation, amortization, and decommissioning 157,902 160,569
Deferred income taxes and investment tax credits 4,456 22,299
Allowance for equity funds used during construction (2,057) (1,686)
Changes in working capital:
Receivables (16,460) (55,099)
Fuel inventory 6,560 19,761
Accounts payable (9,621) 26,758
Taxes accrued 65,956 60,741
Interest accrued 8,189 6,211
Deferred fuel costs (43,391) (29,208)
Other working capital accounts (323) (4,059)
Decommissioning trust contributions and realized
change in trust assets (10,024) (7,131)
Provision for estimated losses and reserves (4,978) (16,811)
Reserve for rate refund 76,883 -
Other (7,798) 8,361
--------- ---------
Net cash flow provided by operating activities 322,178 382,550
--------- ---------
Investing Activities:
Construction expenditures (77,904) (96,998)
Allowance for equity funds used during construction 2,057 1,686
Nuclear fuel purchases (226) (11,580)
Proceeds from sale/leaseback of nuclear fuel 219 11,580
--------- ---------
Net cash flow used in investing activities (75,854) (95,312)
--------- ---------
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) (57,240)
Other long-term debt (72,090) (50,865)
Redemption of preferred and preference stock (6,250) (93,367)
Dividends paid:
Common stock (109,400) (48,200)
Preferred and preference stock (14,362) (16,960)
--------- ---------
Net cash flow used in financing activities (205,502) (184,309)
--------- ---------
Net increase in cash and cash equivalents 40,822 102,929
Cash and cash equivalents at beginning of period 165,164 122,406
--------- ---------
Cash and cash equivalents at end of period $205,986 $225,335
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $101,855 $118,834
Income taxes $23,164 $2,631
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets ($4,907) $2,129
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $17,018 $10,549
Temporary cash investments - at cost,
which approximates market:
Associated companies 35,770 37,389
Other 153,198 117,226
---------- ----------
Total cash and cash equivalents 205,986 165,164
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.8 million in 1998 and 1997) 103,075 99,762
Associated companies 7,395 9,024
Other 29,251 32,837
Accrued unbilled revenues 93,187 74,825
Deferred fuel costs 189,148 145,757
Accumulated deferred income taxes 29,656 22,093
Fuel inventory - at average cost 31,067 37,627
Materials and supplies - at average cost 107,326 104,690
Rate deferrals 9,077 21,749
Prepayments and other 28,116 21,680
---------- ----------
Total 833,284 735,208
---------- ----------
Other Property and Investments:
Decommissioning trust fund 192,580 187,462
Other - at cost (less accumulated depreciation) 176,008 176,953
---------- ----------
Total 368,588 364,415
---------- ----------
Utility Plant:
Electric 7,234,921 7,168,668
Natural gas 50,990 47,656
Steam products 83,037 82,289
Property under capital leases 56,319 67,946
Construction work in progress 95,158 90,333
Nuclear fuel under capital lease 37,738 54,390
Nuclear fuel 15,697 23,051
---------- ----------
Total 7,573,860 7,534,333
Less - accumulated depreciation and amortization 3,138,741 2,996,147
---------- ----------
Utility plant - net 4,435,119 4,538,186
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 91,602 98,410
SFAS 109 regulatory asset - net 379,332 376,275
Unamortized loss on reacquired debt 44,313 48,417
Other regulatory assets 83,175 86,819
Long-term receivables 35,163 36,984
Other 218,284 203,923
---------- ----------
Total 851,869 850,828
---------- ----------
TOTAL $6,488,860 $6,488,637
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $140,515 $190,890
Accounts payable:
Associated companies 59,801 48,726
Other 88,748 109,444
Customer deposits 31,440 30,311
Taxes accrued 114,274 48,318
Interest accrued 53,343 45,154
Nuclear refueling reserve 14,431 3,386
Obligations under capital leases 34,153 30,280
Other 14,221 17,646
---------- ----------
Total 550,926 524,155
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 1,142,622 1,124,644
Accumulated deferred investment tax credits 211,638 215,438
Obligations under capital leases 59,904 92,055
Other 981,941 923,409
---------- ----------
Total 2,396,105 2,355,546
---------- ----------
Long-term debt 1,677,768 1,702,719
Preferred stock with sinking fund 62,729 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 248,258 284,165
---------- ----------
Total 1,566,332 1,602,239
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $6,488,860 $6,488,637
========== ==========
See Notes to Financial Statements.
ENTERGY GULF STATES, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollar In Millions)
Electric Operating Revenues:
Residential $ 202.7 $ 210.7 ($ 8.0) (4)
Commercial 113.8 125.3 (11.5) (9)
Industrial 189.1 189.2 (0.1) -
Governmental 7.7 8.6 (0.9) (10)
------------------------------
Total retail 513.3 533.8 (20.5) (4)
Sales for resale:
Associated companies 3.2 7.6 (4.4) (58)
Non-associated companies 39.4 17.5 21.9 125
Other (1) 37.4 25.4 12.0 47
------------------------------
Total $ 593.3 $ 584.3 $ 9.0 2
==============================
Billed Electric Energy
Sales (GWH):
Residential 3,210 2,845 365 13
Commercial 2,102 1,935 167 9
Industrial 4,631 4,739 (108) (2)
Governmental 141 131 10 8
------------------------------
Total retail 10,084 9,650 434 4
Sales for resale:
Associated companies 85 181 (96) (53)
Non-associated companies 1,162 438 724 165
------------------------------
Total 11,331 10,269 1,062 10
==============================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollar In Millions)
Electric Operating Revenues:
Residential $ 470.5 $ 477.8 ($ 7.3) (2)
Commercial 317.4 337.6 (20.2) (6)
Industrial 539.3 544.1 (4.8) (1)
Governmental 29.0 25.1 3.9 16
------------------------------
Total retail 1,356.2 1,384.6 (28.4) (2)
Sales for resale:
Associated companies 13.3 13.1 0.2 2
Non-associated companies 88.1 41.8 46.3 111
Other (1) (27.0) 50.7 (77.7) (153)
-------------------------------
Total $1,430.6 $ 1,490.2 ($ 59.6) (4)
===============================
Billed Electric Energy
Sales (GWH):
Residential 6,878 6,282 596 9
Commercial 5,190 4,953 237 5
Industrial 13,594 13,459 135 1
Governmental 460 359 101 28
------------------------------
Total retail 26,122 25,053 1,069 4
Sales for resale:
Associated companies 347 380 (33) (9)
Non-associated companies 2,609 1,077 1,532 142
------------------------------
Total 29,078 26,510 2,568 10
==============================
(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 and nine months ended September
30, 1998 primarily due to a decrease in operating expenses, partially
offset by a decrease in electric operating revenues and higher income
taxes.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 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 nine
months ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.7) ($34.9)
Fuel cost recovery (26.9) (85.3)
Sales volume/weather 18.4 25.7
Other revenue (including unbilled) (7.3) (0.2)
Sales for resale 0.6 11.8
------ ------
Total ($16.9) ($82.9)
====== ======
Electric operating revenues decreased for the three months ended
September 30, 1998 primarily due to lower fuel cost recovery revenues,
which do not affect net income, and a decrease in other revenue
(primarily unbilled revenue), partially offset by an increase in sales
volume. Electric operating revenues decreased for the nine months ended
September 30, 1998 primarily due to a decrease in base revenues and lower
fuel cost recovery revenues, which do not affect net income, partially
offset by increases in sales volume and sales for resale. Fuel cost
recovery revenues decreased due to lower pricing resulting from a change
in generation mix. The decrease in unbilled revenue for the three months
ended September 30, 1998 was primarily a result of decreased sales to
three large industrial customers and a decrease in sales volume in late
September 1998 due to distribution outages caused by major storms. Sales
volume increased for the three and nine months ended September 30, 1998
due to significantly warmer weather in 1998. This increase in sales
volume was partially offset by the loss of a large industrial customer as
well as substantially lower sales to two other large industrial
customers. For the nine months ended September 1998, base revenues
decreased due to a base rate reduction that became effective in the third
quarter of 1997. Sales for resale increased for the nine months ended
September 1998 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.
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses decreased for the three and nine months ended
September 30, 1998 primarily due to a decrease in fuel expenses,
purchased power expenses, and other operation and maintenance expenses.
Fuel expenses decreased due to lower gas prices and a shift in mix to
nuclear fuel. 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 and to increased generation in
the third quarter of 1998. Other operation and maintenance expenses
decreased due to non-refueling outage related contract work and
maintenance performed at Waterford 3 in 1997.
Other
For the three and nine months ended September 30, 1998 and 1997, the
effective income tax rates were relatively unchanged at 39.8% versus
39.7% and 40.9% versus 40.3%, respectively.
ENTERGY LOUISIANA, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $537,632 $554,486 $1,317,785 $1,400,732
-------- -------- ---------- ----------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 134,631 152,609 280,340 326,588
Purchased power 102,559 113,235 291,914 323,988
Nuclear refueling outage expenses 5,435 5,267 16,305 10,566
Other operation and maintenance 72,275 75,251 215,785 231,637
Depreciation, amortization, and decommissioning 40,102 42,877 127,332 128,343
Taxes other than income taxes 18,237 17,892 53,708 53,712
Other regulatory charges (credits) - (634) (1,754) 6,382
Amortization of rate deferrals - 13 - 5,749
-------- -------- ---------- ----------
Total 373,239 406,510 983,630 1,086,965
-------- -------- ---------- ----------
Operating Income 164,393 147,976 334,155 313,767
-------- -------- ---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 586 601 1,406 1,038
Miscellaneous - net 339 (789) 2,708 (1,706)
-------- -------- ---------- ----------
Total 925 (188) 4,114 (668)
-------- -------- ---------- ----------
Interest Charges:
Interest on long-term debt 27,180 27,921 84,790 88,011
Other interest - net 1,665 1,635 4,682 4,846
Distributions on preferred securities of subsidiary trust 1,575 1,575 4,725 4,725
Allowance for borrowed funds used
during construction (535) (555) (1,285) (1,311)
-------- -------- ---------- ----------
Total 29,885 30,576 92,912 96,271
-------- -------- ---------- ----------
Income Before Income Taxes 135,433 117,212 245,357 216,828
Income Taxes 53,963 46,531 100,424 87,368
-------- -------- ---------- ----------
Net Income 81,470 70,681 144,933 129,460
Preferred Stock Dividend Requirements
and Other 3,253 3,251 9,760 10,097
-------- -------- ---------- ----------
Earnings Applicable to Common Stock $78,217 $67,430 $135,173 $119,363
======== ======== ========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $144,933 $129,460
Noncash items included in net income:
Amortization of rate deferrals - 5,749
Other regulatory charges (credits) (1,754) 6,382
Depreciation, amortization, and decommissioning 127,332 128,343
Deferred income taxes and investment tax credits 4,842 (8,136)
Allowance for equity funds used during construction (1,406) (1,038)
Changes in working capital:
Receivables (60,531) (48,067)
Accounts payable (12,276) (15,502)
Taxes accrued 108,558 100,900
Interest accrued 1,895 (23,166)
Deferred fuel costs (18,217) 5,296
Other working capital accounts 14,826 (1,525)
Other deferred credits (26,479) 4,164
Decommissioning trust contributions and realized
change in trust assets (11,062) (8,363)
Provision for estimated losses and reserves 1,251 5,046
Other (10,674) (7,898)
--------- ---------
Net cash flow provided by operating activities 261,238 271,645
--------- ---------
Investing Activities:
Construction expenditures (62,672) (60,071)
Allowance for equity funds used during construction 1,406 1,038
Nuclear fuel purchases (22,293) (43,332)
Proceeds from sale/leaseback of nuclear fuel 9,872 43,332
--------- ---------
Net cash flow used in investing activities (73,687) (59,033)
--------- ---------
Financing Activities:
Proceeds from the issuance of first mortgage bonds 112,556 -
Retirement of:
First mortgage bonds (150,561) (34,000)
Other long-term debt (175) (262)
Redemption of preferred stock - (7,500)
Changes in short-term borrowings - net - (31,066)
Dividends paid:
Common stock (138,500) (111,200)
Preferred stock (9,760) (9,997)
--------- ---------
Net cash flow used in financing activities (186,440) (194,025)
--------- ---------
Net increase in cash and cash equivalents 1,111 18,587
Cash and cash equivalents at beginning of period 49,749 23,746
--------- ---------
Cash and cash equivalents at end of period $50,860 $42,333
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized 86,292 $101,334
Income taxes $21,150 ($1,754)
Noncash investing and financing activities:
Change in unrealized appreciation/(depreciation) of
decommissioning trust assets ($138) $1,877
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $2,705 $5,148
Temporary cash investments - at cost,
which approximates market 48,155 44,601
---------- ----------
Total cash and cash equivalents 50,860 49,749
Accounts receivable:
Customer (less allowance for doubtful accounts
of $1.2 million in 1998 and 1997) 122,065 69,566
Associated companies 17,827 15,035
Other 8,785 7,441
Accrued unbilled revenues 65,770 61,874
Deferred fuel costs 14,949 -
Accumulated deferred income taxes 8,727 10,994
Materials and supplies - at average cost 81,706 82,850
Deferred nuclear refueling outage costs 10,884 27,176
Prepayments and other 11,596 10,793
---------- ----------
Total 393,169 335,478
---------- ----------
Other Property and Investments:
Nonutility property 22,525 22,525
Decommissioning trust fund 76,028 65,104
Investment in subsidiary companies - at equity 14,230 14,230
---------- ----------
Total 112,783 101,859
---------- ----------
Utility Plant:
Electric 5,093,145 5,058,130
Property under capital leases 233,513 233,513
Construction work in progress 73,878 52,632
Nuclear fuel under capital lease 42,613 57,811
Nuclear fuel 13,982 1,560
---------- ----------
Total 5,457,131 5,403,646
Less - accumulated depreciation and amortization 2,133,131 2,021,392
---------- ----------
Utility plant - net 3,324,000 3,382,254
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 263,432 278,234
Unamortized loss on reacquired debt 31,668 33,468
Other regulatory assets 27,910 29,991
Other 16,209 14,116
---------- ----------
Total 339,219 355,809
---------- ----------
TOTAL $4,169,171 $4,175,400
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $294 $35,300
Accounts payable:
Associated companies 43,443 43,508
Other 83,675 95,886
Customer deposits 55,936 55,331
Taxes accrued 133,801 25,243
Interest accrued 36,466 34,571
Dividends declared 3,253 3,253
Deferred fuel costs - 3,268
Obligations under capital leases 16,932 29,232
Other 6,166 8,578
---------- ----------
Total 379,966 334,170
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 804,914 813,748
Accumulated deferred investment tax credits 130,085 134,276
Obligations under capital leases 25,682 28,579
Deferred interest - Waterford 3 lease obligation 9,942 17,799
Other 94,291 119,519
---------- ----------
Total 1,064,914 1,113,921
---------- ----------
Long-term debt 1,338,758 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 43,454 46,766
---------- ----------
Total 1,230,533 1,233,845
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,169,171 $4,175,400
========== ==========
See Notes to Financial Statements.
ENTERGY LOUISIANA, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 224.1 $ 222.6 $ 1.5 1
Commercial 112.1 116.8 (4.7) (4)
Industrial 155.0 180.2 (25.2) (14)
Governmental 8.8 9.1 (0.3) (3)
------------------------------
Total retail 500.0 528.7 (28.7) (5)
Sales for resale:
Associated companies 3.7 2.7 1.0 37
Non-associated companies 16.0 16.4 (0.4) (2)
Other 17.9 6.7 11.2 167
------------------------------
Total $ 537.6 $ 554.5 ($16.9) (3)
==============================
Billed Electric Energy
Sales (GWH):
Residential 3,058 2,738 320 12
Commercial 1,615 1,502 113 8
Industrial 3,805 3,918 (113) (3)
Governmental 125 119 6 5
------------------------------
Total retail 8,603 8,277 326 4
Sales for resale:
Associated companies 76 72 4 6
Non-associated companies 207 256 (49) (19)
------------------------------
Total 8,886 8,605 281 3
==============================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 465.1 $ 475.4 ($ 10.3) (2)
Commercial 274.6 291.4 (16.8) (6)
Industrial 441.0 538.0 (97.0) (18)
Governmental 24.5 26.2 (1.7) (6)
------------------------------
Total retail 1,205.2 1,331.0 (125.8) (9)
Sales for resale:
Associated companies 14.0 3.5 10.5 300
Non-associated companies 42.8 41.5 1.3 3
Other 55.8 24.7 31.1 126
-------------------------------
Total $1,317.8 $ 1,400.7 ($82.9) (6)
===============================
Billed Electric Energy
Sales (GWH):
Residential 6,620 6,042 578 10
Commercial 3,979 3,732 247 7
Industrial 11,120 12,511 (1,391) (11)
Governmental 364 348 16 5
------------------------------
Total retail 22,083 22,633 (550) (2)
Sales for resale:
Associated companies 311 98 213 217
Non-associated companies 619 616 3 -
------------------------------
Total 23,013 23,347 (334) (1)
==============================
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and nine months ended September
30, 1998 primarily due to 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 nine months ended September 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 nine
months ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($3.5) ($9.0)
Grand Gulf rate rider 12.8 23.8
Fuel cost recovery 9.1 15.0
Sales volume/weather 10.9 21.2
Other revenue (including unbilled) (2.8) 14.0
Sales for resale 3.3 25.5
----- -----
Total $29.8 $90.5
===== =====
Electric operating revenues increased for the three and nine months
ended September 30, 1998 primarily due to increases in Grand Gulf rate
rider revenue, sales volume, and fuel cost recovery revenues. The
increase in other revenues (primarily unbilled revenues) and sales for
resale also contributed to the increase in electric operating revenues
for the nine months ended September 30, 1998. The increase in the Grand
Gulf rate rider revenue, which does not affect net income, and in sales
volume was primarily due to significantly warmer weather in 1998. The
increase in fuel costs recovery revenues, which do not affect net income,
was due to increased generation in 1998 as well as, for the nine months
ended September 30, 1998, an MPSC order, effective May 1, 1997, that
changed fuel recovery pricing to a fixed fuel factor, subject to annual
review. For the nine months ended September 30, 1998, unbilled revenue
increased due to increased sales volume and favorable pricing
attributable to the application of the fixed fuel factor in 1998. For
the nine months ended September 30, 1998, sales for resale increased as a
result of an increase in sales to associated companies primarily due to
increased generation and availability among the domestic utility
companies.
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expenses
Operating expenses increased for the three and nine months ended
September 30, 1998 primarily due to an increase in fuel expenses and
other regulatory charges (credits) which, for the nine months ended
September 30, 1998, was partially offset by a decrease in purchased power
expenses. The increase in fuel expenses was due to the impact of the
under-recovery of deferred fuel costs in excess of the fixed fuel factor
applied in 1997. In January 1998, Entergy Mississippi increased its
fixed fuel factor to more accurately recover actual fuel expenses. The
increase in other regulatory charges (credits), which do not materially
affect net income, was a result of the over-recovery of Grand Gulf 1-
related costs due to increased sales. The decrease in purchased power
expense for the nine months ended September 30, 1998 was due to a shift
from higher priced purchased power to lower priced fossil fuel.
Other
The effective income tax rate of 35.7% for the three months ended
September 30, 1998 remained relatively unchanged from the rate of 35.4%
for the three months ended September 30, 1997. For the nine months ended
September 30, 1998 and 1997, the effective income tax rates were 34.8%
and 33.6%, respectively. The increase in 1998 was 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 Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $324,784 $294,983 $798,709 $708,203
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 85,859 72,379 196,260 138,928
Purchased power 71,404 71,441 210,030 218,015
Other operation and maintenance 30,631 32,227 90,861 95,704
Depreciation and amortization 10,900 10,739 33,294 32,120
Taxes other than income taxes 12,061 12,058 34,259 33,471
Other regulatory charges (credits) 24,912 7,596 2,883 (33,090)
Amortization of rate deferrals 34,989 35,711 104,968 107,134
-------- -------- -------- --------
Total 270,756 242,151 672,555 592,282
-------- -------- -------- --------
Operating Income 54,028 52,832 126,154 115,921
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 17 - 17 560
Miscellaneous - net 971 399 3,002 662
-------- -------- -------- --------
Total 988 399 3,019 1,222
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 9,153 9,798 28,614 31,211
Other interest - net 577 1,154 2,737 3,477
Allowance for borrowed funds used
during construction (287) (20) (420) (482)
-------- -------- -------- --------
Total 9,443 10,932 30,931 34,206
-------- -------- -------- --------
Income Before Income Taxes 45,573 42,299 98,242 82,937
Income Taxes 16,252 14,964 34,215 27,851
-------- -------- -------- --------
Net Income 29,321 27,335 64,027 55,086
Preferred Stock Dividend Requirements
and Other 843 1,129 2,527 3,258
-------- -------- -------- --------
Earnings Applicable to Common Stock $28,478 $26,206 $61,500 $51,828
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $64,027 $55,086
Noncash items included in net income:
Amortization of rate deferrals 104,968 107,134
Other regulatory charges (credits) 2,883 (33,090)
Depreciation and amortization 33,294 32,120
Deferred income taxes and investment tax credits (35,446) (29,761)
Allowance for equity funds used during construction (17) (560)
Changes in working capital:
Receivables (50,180) (18,818)
Fuel inventory 809 5,011
Accounts payable 14,255 5,316
Taxes accrued 43,546 38,807
Interest accrued (1,212) (7,751)
Other working capital accounts (7,703) (12,506)
Other (17,740) 20
--------- ---------
Net cash flow provided by operating activities 151,484 141,008
--------- ---------
Investing Activities:
Construction expenditures (31,391) (37,378)
Allowance for equity funds used during construction 17 560
--------- ---------
Net cash flow used in investing activities (31,374) (36,818)
--------- ---------
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) (96,000)
Other long-term debt (20) (15)
Redemption of preferred stock - (14,500)
Changes in short-term borrowings - net (47,162) (7,132)
Dividends paid:
Common stock (66,000) (53,400)
Preferred stock (2,527) (3,156)
--------- ---------
Net cash flow used in financing activities (117,006) (109,376)
--------- ---------
Net increase (decrease) in cash and cash equivalents 3,104 (5,186)
Cash and cash equivalents at beginning of period 6,816 9,498
--------- ---------
Cash and cash equivalents at end of period $9,920 $4,312
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $31,165 $41,044
Income taxes $18,926 $11,670
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $8,999 $6,816
Temporary cash investments - at cost,
which approximates market 921 -
---------- ----------
Total cash and cash equivalents 9,920 6,816
Accounts receivable:
Customer (less allowance for doubtful accounts
of $.9 million in 1998 and 1997) 67,280 36,636
Associated companies 10,792 6,842
Other 1,146 4,139
Accrued unbilled revenues 68,572 49,993
Deferred fuel costs 14,289 14,967
Fuel inventory - at average cost 2,577 3,386
Materials and supplies - at average cost 17,500 17,657
Rate deferrals - 104,969
Prepayments and other 4,790 24,896
---------- ----------
Total 196,866 270,301
---------- ----------
Other Property and Investments:
Investment in subsidiary companies - at equity 5,531 5,531
Other - at cost (less accumulated depreciation) 7,633 7,757
---------- ----------
Total 13,164 13,288
---------- ----------
Utility Plant:
Electric 1,715,139 1,687,400
Construction work in progress 26,163 22,960
---------- ----------
Total 1,741,302 1,710,360
Less - accumulated depreciation and amortization 684,605 656,828
---------- ----------
Utility plant - net 1,056,697 1,053,532
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 27,702 22,993
Unamortized loss on reacquired debt 8,205 8,404
Other regulatory assets 88,261 64,827
Other 6,599 6,216
---------- ----------
Total 130,767 102,440
---------- ----------
TOTAL $1,397,494 $1,439,561
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
September 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 - 47,162
Accounts payable:
Associated companies 43,067 36,057
Other 18,521 11,276
Customer deposits 17,389 24,084
Taxes accrued 75,860 32,314
Accumulated deferred income taxes 600 44,277
Interest accrued 13,097 14,309
Other 3,183 2,806
---------- ----------
Total 171,737 212,305
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 258,147 244,464
Accumulated deferred investment tax credits 22,784 23,915
Other 6,950 15,892
---------- ----------
Total 287,881 284,271
---------- ----------
Long-term debt 463,547 464,156
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 224,681 229,181
---------- ----------
Total 474,329 478,829
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $1,397,494 $1,439,561
========== ==========
See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 139.2 $ 120.9 $ 18.3 15
Commercial 89.4 80.5 8.9 11
Industrial 46.0 44.3 1.7 4
Governmental 7.7 7.3 0.4 5
---------------------------
Total retail 282.3 253.0 29.3 12
Sales for resale:
Associated companies 29.3 27.8 1.5 5
Non-associated companies 8.3 6.5 1.8 28
Other 4.9 7.7 (2.8) (36)
---------------------------
Total $ 324.8 $ 295.0 $ 29.8 10
===========================
Billed Electric Energy
Sales (GWH):
Residential 1,750 1,517 233 15
Commercial 1,246 1,125 121 11
Industrial 830 806 24 3
Governmental 101 94 7 7
---------------------------
Total retail 3,927 3,542 385 11
Sales for resale:
Associated companies 903 715 188 26
Non-associated companies 162 126 36 29
---------------------------
Total 4,992 4,383 609 14
===========================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 297.1 $ 264.8 $ 32.3 12
Commercial 221.9 206.9 15.0 7
Industrial 130.9 127.8 3.1 2
Governmental 21.0 20.4 0.6 3
---------------------------
Total retail 670.9 619.9 51.0 8
Sales for resale:
Associated companies 71.2 49.5 21.7 44
Non-associated companies 19.7 15.9 3.8 24
Other 36.9 22.9 14.0 61
---------------------------
Total $ 798.7 $ 708.2 $ 90.5 13
===========================
Billed Electric Energy
Sales (GWH):
Residential 3,759 3,338 421 13
Commercial 3,021 2,778 243 9
Industrial 2,359 2,279 80 4
Governmental 260 251 9 4
---------------------------
Total retail 9,399 8,646 753 9
Sales for resale:
Associated companies 2,136 1,145 991 87
Non-associated companies 373 309 64 21
---------------------------
Total 11,908 10,100 1,808 18
===========================
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Income
Net income increased for the three and nine months ended September
30, 1998 primarily due to an increase in electric operating revenues,
partially offset by an increase in operating expenses.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 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 nine
months ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Change in base revenues ($1.3) ($7.7)
Fuel cost recovery 17.6 21.2
Sales volume/weather 6.8 11.8
Other revenue (including unbilled) 2.1 5.2
Sales for resale 1.1 1.1
----- -----
Total $26.3 $31.6
===== =====
Electric operating revenues increased for the three and nine months
ended September 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 primarily due to
higher fuel prices and increased generation. The increase in sales
volume was primarily due to significantly warmer weather in 1998. The
increase in unbilled revenue was primarily due to the impact of a
September 1997 price refund, which lowered unbilled revenue at September
30, 1997. Base revenues decreased primarily due to reductions in
residential and commercial rates that went into effect in August 1997.
Expenses
Operating expenses increased for the three and nine months ended
September 30, 1998 primarily due to increases in fuel expense and other
regulatory charges and, for the nine months ended September 30, 1998, an
increase in purchased power. Fuel expenses increased primarily due to
an increase in deferred electric fuel costs for the three months ended
September 30, 1998, resulting from a net over-recovery of fuel costs in
the third quarter of 1998 as compared to a net under-recovery of fuel
costs in the third quarter of 1997. The increase in deferred electric
fuel costs for the nine months ended September 30, 1998 was partially
offset by an under-recovery of fuel costs requirements in the first and
second quarters of 1998 due to increased generation. Additionally, for
the nine months ended September 30, 1998, fuel oil expenses increased
due to increased generation requirements and increased usage of fossil
fuel. Partially offsetting the increase in fuel expenses was decreased
gas purchased for resale expense due to lower gas prices. The increase
in other regulatory charges, which do not materially affect net income,
was primarily due to the increased over-recovery of Grand Gulf 1-related
costs for the three and nine months ended September 30, 1998 compared to
the net under-recovery for the same periods in 1997. Purchased power
expenses increased for the nine months ended
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
September 30, 1998 primarily due to increased generation requirements as
a result of significantly warmer weather in the second and third
quarters of 1998.
Other
For the three and nine months ended September 30, 1998 and 1997, the
effective income tax rates were relatively unchanged at 39.5% versus
40.0% and 41.6% versus 42.5%, respectively.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues:
Electric $153,215 $126,901 $340,672 $309,050
Natural gas 12,593 13,039 63,905 65,649
-------- -------- -------- --------
Total 165,808 139,940 404,577 374,699
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel, fuel-related expenses,
and gas purchased for resale 47,512 28,146 103,196 96,586
Purchased power 44,058 46,958 130,886 119,922
Other operation and maintenance 20,677 19,443 57,763 52,125
Depreciation and amortization 5,224 5,477 16,303 16,068
Taxes other than income taxes 12,102 11,448 30,827 28,940
Other regulatory charges (credits) 4,020 (1,776) (824) (4,180)
Amortization of rate deferrals 12,005 12,148 28,857 28,987
-------- -------- -------- --------
Total 145,598 121,844 367,008 338,448
-------- -------- -------- --------
Operating Income 20,210 18,096 37,569 36,251
-------- -------- -------- --------
Other Income (Deductions):
Allowance for equity funds used
during construction 125 99 214 259
Miscellaneous - net 376 (27) 498 (7)
-------- -------- -------- --------
Total 501 72 712 252
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 3,547 3,429 10,406 10,488
Other interest - net 294 485 771 1,064
Allowance for borrowed funds used
during construction (97) (68) (165) (194)
-------- -------- -------- --------
Total 3,744 3,846 11,012 11,358
-------- -------- -------- --------
Income Before Income Taxes 16,967 14,322 27,269 25,145
Income Taxes 6,709 5,732 11,336 10,699
-------- -------- -------- --------
Net Income 10,258 8,590 15,933 14,446
Preferred Stock Dividend Requirements
and Other 242 242 724 724
-------- -------- -------- --------
Earnings Applicable to Common Stock $10,016 $8,348 $15,209 $13,722
======== ======== ======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $15,933 $14,446
Noncash items included in net income:
Amortization of rate deferrals 28,857 28,987
Other regulatory charges (credits) (824) (4,180)
Depreciation and amortization 16,303 16,068
Deferred income taxes and investment tax credits (12,696) (1,690)
Allowance for equity funds used during construction (214) (259)
Changes in working capital:
Receivables (24,676) (801)
Accounts payable 2,161 (1,323)
Taxes accrued 19,638 12,233
Interest accrued (3,054) (2,426)
Deferred fuel and resale gas costs 4,925 (4,586)
Other working capital accounts 528 (12,288)
Other (11,977) (7,390)
--------- ---------
Net cash flow provided by operating activities 34,904 36,791
--------- ---------
Investing Activities:
Construction expenditures (12,073) (7,652)
Allowance for equity funds used during construction 214 259
--------- ---------
Net cash flow used in investing activities (11,859) (7,393)
--------- ---------
Financing Activities:
Proceeds from the issuance of general and refunding mortgage bonds 29,438 -
Retirement of:
First mortgage bonds - (12,000)
General and refunding mortgage bonds (30,000) -
Dividends paid:
Common stock (9,700) (26,000)
Preferred stock (724) (965)
--------- ---------
Net cash flow used in financing activities (10,986) (38,965)
--------- ---------
Net increase (decrease) in cash and cash equivalents 12,059 (9,567)
Cash and cash equivalents at beginning of period 11,376 17,510
--------- ---------
Cash and cash equivalents at end of period $23,435 $7,943
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $13,259 $13,535
Income taxes - net $5,462 $4,309
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $6,823 $4,321
Temporary cash investments - at cost,
which approximates market:
Associated companies 3,492 1,918
Other 13,120 5,137
-------- --------
Total cash and cash equivalents 23,435 11,376
Accounts receivable:
Customer (less allowance for doubtful accounts
of $0.7 million in 1998 and 1997) 48,607 26,913
Associated companies 921 1,081
Other 3,465 4,155
Accrued unbilled revenues 19,915 16,083
Deferred electric fuel and resale gas costs 4,459 9,384
Materials and supplies - at average cost 8,615 9,389
Rate deferrals 28,587 35,336
Prepayments and other 4,800 6,087
-------- --------
Total 142,804 119,804
-------- --------
Other Property and Investments:
Investment in subsidiary companies - at equity 3,259 3,259
-------- --------
Utility Plant:
Electric 514,074 508,338
Natural gas 132,448 122,308
Construction work in progress 15,676 19,184
-------- --------
Total 662,198 649,830
Less - accumulated depreciation and amortization 369,374 355,854
-------- --------
Utility plant - net 292,824 293,976
-------- --------
Deferred Debits and Other Assets:
Regulatory assets:
Rate deferrals 42,085 64,192
SFAS 109 regulatory asset - net - 1,202
Unamortized loss on reacquired debt 1,453 1,435
Other regulatory assets 18,966 13,392
Other 1,409 890
-------- --------
Total 63,913 81,111
-------- --------
TOTAL $502,800 $498,150
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (In Thousands)
Current Liabilities:
Accounts payable:
Associated companies $17,164 $15,922
Other 18,424 17,505
Customer deposits 17,991 16,982
Taxes accrued 24,908 5,270
Accumulated deferred income taxes 6,015 11,544
Interest accrued 1,995 5,049
Provision for rate refund - 3,108
Other 2,797 2,231
-------- --------
Total 89,294 77,611
-------- --------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 51,725 61,000
Accumulated deferred investment tax credits 7,019 7,396
Accumulated provision for property insurance 15,322 15,487
SFAS 109 regulatory liability - net 1,001
Other 12,552 16,327
-------- --------
Total 87,619 100,210
-------- --------
Long-term debt 169,002 168,953
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 67,067 61,558
-------- --------
Total 156,885 151,376
-------- --------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $502,800 $498,150
======== ========
See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 70.4 $ 55.3 $ 15.1 27
Commercial 47.8 38.3 9.5 25
Industrial 8.1 6.3 1.8 29
Governmental 20.5 16.6 3.9 23
----------------------------
Total retail 146.8 116.5 30.3 26
Sales for resale:
Associated companies 1.5 0.8 0.7 88
Non-associated companies 3.2 2.8 0.4 14
Other (1) 1.7 6.8 (5.1) (75)
----------------------------
Total $ 153.2 $ 126.9 $ 26.3 21
============================
Billed Electric Energy
Sales (GWH):
Residential 844 761 83 11
Commercial 648 610 38 6
Industrial 144 128 16 13
Governmental 311 285 26 9
----------------------------
Total retail 1,947 1,784 163 9
Sales for resale:
Associated companies 42 22 20 91
Non-associated companies 50 51 (1) (2)
----------------------------
Total 2,039 1,857 182 10
============================
Nine Months Ended Increase/
Description 1998 1997 (Decrease) %
(Dollars In Millions)
Electric Operating Revenues:
Residential $ 131.3 $ 111.2 $ 20.1 18
Commercial 114.5 107.2 7.3 7
Industrial 20.4 18.2 2.2 12
Governmental 47.4 43.1 4.3 10
----------------------------
Total retail 313.6 279.7 33.9 12
Sales for resale:
Associated companies 6.8 7.8 (1.0) (13)
Non-associated companies 8.5 6.4 2.1 33
Other (1) 11.8 15.2 (3.4) (22)
----------------------------
Total $ 340.7 $ 309.1 $ 31.6 10
============================
Billed Electric Energy
Sales (GWH):
Residential 1,680 1,521 159 10
Commercial 1,628 1,576 52 3
Industrial 395 367 28 8
Governmental 780 745 35 5
----------------------------
Total retail 4,483 4,209 274 7
Sales for resale:
Associated companies 222 247 (25) (10)
Non-associated companies 145 112 33 29
----------------------------
Total 4,850 4,568 282 6
============================
(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 nine months ended September 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 nine months ended September 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 nine months ended
September 30, 1998 primarily due to lower other operation and maintenance
expenses. The decrease in operating expenses for the nine months ended
September 30, 1998, was also impacted by lower fuel expenses and
depreciation, amortization, and decommissioning expenses. The decrease
in other operation and maintenance expenses was due primarily to the
impact of various materials and supplies refunds, an insurance refund,
and a decrease in contract labor. Fuel expenses decreased because of
lower generation due to a scheduled nuclear refueling outage in April and
May of this year. Depreciation, amortization, and decommissioning
expenses were lower as a result of the recognition of additional
depreciation in the nine months ended September 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 nine months
ended September 30, 1998 as a result of the redemption of a series of
First Mortgage Bonds in April 1998.
For the three and nine months ended September 30, 1998 and 1997 the
effective income tax rates were relatively unchanged at 45.1% versus
46.0% and 45.2% versus 44.8%, respectively.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $152,083 $160,573 $445,025 $477,255
-------- -------- -------- --------
Operating Expenses:
Operation and maintenance:
Fuel and fuel-related expenses 12,278 12,270 29,308 36,728
Nuclear refueling outage expenses 3,479 4,202 12,255 11,826
Other operation and maintenance 22,513 28,431 66,285 77,228
Depreciation, amortization, and decommissioning 38,477 36,238 104,067 110,951
Taxes other than income taxes 6,564 6,619 20,202 19,825
-------- -------- -------- --------
Total 83,311 87,760 232,117 256,558
-------- -------- -------- --------
Operating Income 68,772 72,813 212,908 220,697
-------- -------- -------- --------
Other Income:
Allowance for equity funds used
during construction 608 1,169 1,689 1,730
Miscellaneous - net 3,058 2,323 8,670 5,564
-------- -------- -------- --------
Total 3,666 3,492 10,359 7,294
-------- -------- -------- --------
Interest Charges:
Interest on long-term debt 25,617 30,079 84,068 91,940
Other interest - net 1,560 1,720 4,827 5,331
Allowance for borrowed funds used
during construction (542) (761) (1,488) (1,318)
-------- -------- -------- --------
Total 26,635 31,038 87,407 95,953
-------- -------- -------- --------
Income Before Income Taxes 45,803 45,267 135,860 132,038
Income Taxes 20,664 20,818 61,355 59,151
-------- -------- -------- --------
Net Income $25,139 $24,449 $74,505 $72,887
======== ======== ======== ========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net income $74,505 $72,887
Noncash items included in net income:
Depreciation, amortization, and decommissioning 104,067 110,951
Deferred income taxes and investment tax credits (28,736) (30,168)
Allowance for equity funds used during construction (1,689) (1,730)
Changes in working capital:
Receivables 1,283 (8,110)
Accounts payable (4,318) 5,380
Taxes accrued 21,590 6,146
Interest accrued (10,830) 169
Other working capital accounts (6,621) 14,423
Decommissioning trust contributions and realized
change in trust assets (18,053) (17,202)
FERC Settlement - refund obligation (3,795) (3,351)
Provision for estimated losses and reserves 51,503 30,303
Other 6,016 21,298
--------- ---------
Net cash flow provided by operating activities 184,922 200,996
--------- ---------
Investing Activities:
Construction expenditures (20,004) (25,403)
Allowance for equity funds used during construction 1,689 1,730
Nuclear fuel purchases (30,523) (39)
Proceeds from sale/leaseback of nuclear fuel 30,523 39
--------- ---------
Net cash flow used in investing activities (18,315) (23,673)
--------- ---------
Financing Activities:
Retirement of:
First mortgage bonds (70,000) (10,000)
Other long-term debt (7,861) (7,319)
Common stock dividends paid (72,300) (84,000)
--------- ---------
Net cash flow used in financing activities (150,161) (101,319)
--------- ---------
Net increase in cash and cash equivalents 16,446 76,004
Cash and cash equivalents at beginning of period 206,410 92,315
--------- ---------
Cash and cash equivalents at end of period $222,856 $168,319
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $87,298 $89,681
Income taxes $63,664 $77,016
Noncash investing and financing activities:
Change in unrealized appreciation (depreciation) of
decommissioning trust assets $314 ($564)
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $686 $792
Temporary cash investments - at cost,
which approximates market:
Associated companies 46,695 55,891
Other 175,475 149,727
---------- ----------
Total cash and cash equivalents 222,856 206,410
Accounts receivable:
Associated companies 77,827 79,262
Other 4,292 4,140
Materials and supplies - at average cost 62,332 63,782
Deferred nuclear refueling outage costs 16,331 7,777
Prepayments and other 3,357 3,658
---------- ----------
Total 386,995 365,029
---------- ----------
Other Property and Investments:
Decommissioning trust fund 104,279 85,912
---------- ----------
Utility Plant:
Electric 3,029,956 3,025,389
Electric plant under leases 441,803 440,970
Construction work in progress 52,872 36,445
Nuclear fuel under capital lease 73,839 64,190
---------- ----------
Total 3,598,470 3,566,994
Less - accumulated depreciation and amortization 1,169,371 1,086,820
---------- ----------
Utility plant - net 2,429,099 2,480,174
---------- ----------
Deferred Debits and Other Assets:
Regulatory assets:
SFAS 109 regulatory asset - net 227,011 243,027
Unamortized loss on reacquired debt 46,587 51,386
Other regulatory assets 193,775 192,290
Other 13,614 14,213
---------- ----------
Total 480,987 500,916
---------- ----------
TOTAL $3,401,360 $3,432,031
========== ==========
See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDER'S EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $160,000 $70,000
Accounts payable:
Associated companies 25,637 29,131
Other 18,298 19,122
Taxes accrued 97,265 75,675
Interest accrued 31,492 42,322
Obligations under capital leases 36,156 41,977
Other 1,523 1,341
---------- ----------
Total 370,371 279,568
---------- ----------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 516,858 562,051
Accumulated deferred investment tax credits 97,564 100,171
Obligations under capital leases 37,683 22,213
FERC Settlement - refund obligation 44,505 48,300
Other 307,877 227,847
---------- ----------
Total 1,004,487 960,582
---------- ----------
Long-term debt 1,174,350 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 62,802 60,583
---------- ----------
Total 852,152 849,933
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $3,401,360 $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 nine months ended September 30, 1998 with the results of
operations for the respective periods in 1997. The nine months ended
September 30, 1997 includes eight 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 nine months ended September
30, 1998 primarily due to decreases in income tax expenses, and, for the
nine months ended, an increase in operating revenues, partially offset by
an increase in operating expenses. Excluding the effects of the windfall
profits tax in 1997 and the corporation tax rate changes in 1998 and
1997, which are discussed under "Other" below, net income would have
increased approximately $40 million and $50 million for the three and
nine months ended September 30, 1998, respectively.
Significant factors affecting the results of operations and causing
variances between the three and nine months ended September 30, 1998 and
1997 are discussed under "Revenues", "Expenses", and "Other" below.
Revenues
The changes in operating revenues for the three and nine months
ended September 30, 1998 are as follows:
Three Months Ended Nine Months Ended
Description Increase/(Decrease) Increase/(Decrease)
(In Millions)
Electricity distribution $17.0 $68.3
Electricity supply 3.9 177.8
Other 7.9 40.4
Intra-business (8.0) (65.8)
----- ------
Total $20.8 $220.7
===== ======
Two principal factors determine the amount of revenues produced by
the main electricity distribution and supply businesses: (1) the unit
prices of the electricity distributed and supplied (which are controlled
by the Distribution Price Control Formula and, for franchise customers,
the Supply Price Control Formula, respectively, which determine the
maximum average price per unit (kilowatt hour) of electricity that may be
charged) and (2) 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 will have the
exclusive right to supply all franchise supply customers in its Franchise
Area until late 1998.
Revenues from the distribution business increased for the three and
nine months ended September 30, 1998. The increase for the three month
period was primarily due to an increase in the BPS to U.S. dollar
exchange rate for the period, a change in the seasonal tariff structure
to recover higher system costs in the summer months, and a one time
recovery of meter installation costs. The increase for the nine month
period was principally due to an increase in units distributed as a
result of the additional month of activity in 1998. Partially offsetting
these factors was a distribution price reduction effective April 1, 1997.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Franchise supply customers, who are generally residential and small
commercial customers, comprised 56% and 59% of total supply sales volume
for the three and nine months ended September 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 44% and 41% of total
supply sales volume for the three and nine months ended September 30,
1998, respectively. Sales to non-franchise supply customers are
determined primarily by the success of the supply business in contracting
to supply 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 September 30, 1998, the number of
electricity units supplied decreased by 6% compared to the same period in
1997, while total revenues produced by the supply business increased by
1%. The increase in revenue was due to an increase in the BPS to U.S.
dollar exchange rate for the three months ended September 30, 1998
compared to the same period in 1997. Sales volume decreased by 1% for
franchise customers and decreased by 12% for non-franchise customers for
the three months ended September 30, 1998. The decrease in sales volume
for non-franchise customers was due principally to a strategy of pursuing
customers with higher profit margins.
During the nine months ended September 30, 1998, the number of
electricity units supplied increased by 9% due to the additional month
included in 1998 results.
Other revenues increased for the three and nine month periods ended
September 30, 1998, primarily due to increased marketing of natural gas
to retail customers.
Expenses
Operating expenses decreased for the three months ended September
30, 1998 primarily due to capitalization of costs related to information
technology systems development, an adjustment to pension surplus based on
actuarial studies, and a reduction of a provision for restructuring to
more appropriately reflect the remaining liability. Operating expenses
increased for the nine months ended September 30, 1998 due principally to
one additional month of operations included in 1998 compared to 1997.
Other
Interest charges increased for the nine months ended September 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 that 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. Interest charges for the three months
ended September 30, 1998 decreased primarily due to the transfer of the
$114 million facility.
Income tax expense for the three and nine months ended September 30,
1998 declined due to the one-time windfall profits tax of $234 million
enacted by the UK government and recorded in July 1997, which was offset
by the $65 million favorable impact of the reduction in the UK
corporation tax rate from 33% to 31% in the same period. Income tax
expense was also lower due to the $31 million favorable impact of the
additional reduction in the UK corporation tax rate from 31% to 30%
recorded in the third quarter of 1998.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)
Three Months Ended Nine Months Ended
1998 1997 1998 1997
(In Thousands) (In Thousands)
Operating Revenues $464,760 $443,975 $1,494,552 $1,273,899
-------- -------- ----------- -----------
Operating Expenses:
Purchased power 277,581 277,713 940,815 830,711
Depreciation and amortization 34,221 30,639 103,241 84,336
Other operation and maintenance costs 57,959 89,800 225,324 228,190
-------- -------- ----------- -----------
Total 369,761 398,152 1,269,380 1,143,237
-------- -------- ----------- -----------
Operating Income 94,999 45,823 225,172 130,662
-------- -------- ----------- -----------
Other Income (Deductions):
Interest and dividend income 2,699 6,312 6,849 9,997
Gain (loss) on disposition of property 1,499 (4,759) 6,587 6,271
Miscellaneous - net 3,216 2,413 11,534 5,215
-------- -------- ----------- -----------
Total 7,414 3,966 24,970 21,483
-------- -------- ----------- -----------
Interest Charges:
Distributions on preferred securities of subsidiary partnership 6,469 - 19,406 -
Other interest - net 43,979 53,932 128,183 118,983
-------- -------- ----------- -----------
Total 50,448 53,932 147,589 118,983
-------- -------- ----------- -----------
Income (Loss) Before Income Taxes 51,965 (4,143) 102,553 33,162
Income Taxes (Benefit) (15,638) 168,127 22 180,470
-------- -------- ----------- -----------
Net Income (Loss) 67,603 (172,270) 102,531 (147,308)
Other comprehensive income:
Foreign currency translation adjustments 14,749 (7,023) 24,974 1,143
-------- -------- ----------- -----------
Comprehensive Income $82,352 ($179,293) $127,505 ($146,165)
======== ========= =========== ===========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
(In Thousands)
Operating Activities:
Net Income (Loss) $102,531 ($147,308)
Noncash items included in net income:
Depreciation and amortization 103,241 84,336
Deferred income taxes (15,145) (63,671)
Imputed interest on parent company debt 84,369 -
Changes in assets and liabilities:
Inventory (3,704) 937
Accounts receivable and unbilled revenue 108,883 (7,406)
Other receivables 23,023 38,818
Prepayments and other 543 (2,030)
Long-term receivables and other (17,966) (573)
Accounts payable 11,519 46,402
Income taxes accrued 14,582 223,738
Interest accrued 7,113 10,566
Deferred revenue and other current liabilities (4,312) 14,171
Other liabilities (87,006) 2,431
Other (1,192) -
--------- ----------
Net cash flow provided by operating activities 326,479 200,411
--------- ----------
Investing Activities:
Construction expenditures (151,367) (98,352)
Acquisition of London Electricity, net of cash acquired - (1,951,701)
Other investments (20,031) 6,656
--------- ----------
Net cash flow used in investing activities (171,398) (2,043,397)
--------- ----------
Financing Activities:
Proceeds from the issuance of:
Bank notes and other long-term debt - 1,717,479
Common Stock - 391,953
Retirement of long-term debt (6,957) -
Common stock dividends paid (110,688) -
Changes in short-term borrowings - net (13,142) (184,571)
--------- ----------
Net cash flow provided by (used in) financing activities (130,787) 1,924,861
--------- ----------
Effect of exchange rates on cash and cash equivalents 2,806 (1,279)
--------- ----------
Net increase in cash and cash equivalents 27,100 80,596
Cash and cash equivalents at beginning of period 44,388 -
--------- ----------
Cash and cash equivalents at end of period $71,488 $80,596
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $142,233 $100,951
Income taxes - net $8,247 $9,927
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
ASSETS (In Thousands)
Current Assets:
Cash and cash equivalents:
Cash $4,049 $ -
Temporary cash investments - at cost,
which approximates market 67,439 44,388
---------- ----------
Total cash and cash equivalents 71,488 44,388
Notes receivable 5,056 7,364
Accounts receivable:
Customer (less allowance for doubtful accounts of $19.9 million
in 1998 and $21.9 million in 1997) 121,512 139,265
Other 33,070 52,374
Accrued unbilled revenue 182,286 262,818
Accumulated deferred income taxes 43,833 12,401
Inventory 17,889 13,650
Prepayments and other 13,514 13,623
---------- ----------
Total 488,648 545,883
---------- ----------
Property, Plant, and Equipment:
Property, plant and equipment 2,579,882 2,353,181
Less - accumulated depreciation 168,187 90,021
---------- ----------
Property, plant, and equipment - net 2,411,695 2,263,160
---------- ----------
Other Property, Investments, and Assets:
Investments, long-term 32,296 11,413
Distribution license (net of accumulated amortization of $58.5 million
in 1998 and $31.3 million in 1997) 1,344,518 1,327,312
Long-term receivables 17,735 17,172
Prepaid pension asset 266,655 241,216
Other 11,282 10,079
---------- ----------
Total 1,672,486 1,607,192
---------- ----------
TOTAL $4,572,829 $4,416,235
========== ==========
See Notes to Financial Statements.
ENTERGY LONDON INVESTMENTS PLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997
(Unaudited)
1998 1997
LIABILITIES AND SHAREHOLDER'S EQUITY (In Thousands)
Current Liabilities:
Currently maturing long-term debt $22,299 $33,814
Notes payable 235,241 240,794
Accounts payable 373,096 349,821
Customer deposits 27,713 24,946
Taxes accrued 139,881 120,981
Interest accrued 21,950 14,201
Other 728 805
---------- ----------
Total 820,908 785,362
---------- ----------
Other Liabilities:
Accumulated deferred income taxes 1,041,685 995,865
Other 214,268 299,775
---------- ----------
Total 1,255,953 1,295,640
---------- ----------
Long-term debt 1,729,691 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 $1,376.5 million in 1998 and
$1,371.8 million in 1997) 114,000 114,000
Additional paid-in capital 391,981 391,981
Accumulated deficit (56,919) (132,390)
Cumulative foreign currency translation 17,215 (7,759)
---------- ----------
Total 466,277 365,832
---------- ----------
Commitments and Contingencies (Notes 1 and 2)
TOTAL $4,572,829 $4,416,235
========== ==========
See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
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, in 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
without merit and significantly exaggerated as to the damages alleged.
While their position is not entirely clear, the coal suppliers and
transporters apparently allege that Entergy Gulf States, as a joint
venturer with Cajun in Big Cajun 2, should be responsible under Louisiana
law for as much as 100% of their alleged claims against Cajun, despite
Entergy Gulf States only owning 14% of the entire power station. Entergy
Gulf States believes 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. Two competing
plans of reorganization have been filed and are still pending in the
bankruptcy case, one of which contains settlements with the coal
suppliers and transporters that would satisfy their claims. The district
judge disqualified the other plan of reorganization, which did not
contain a settlement with the coal suppliers and transporters, but the
United States Court of Appeals for the Fifth Circuit reversed the
decision of the district judge in August 1998. A decision by the
bankruptcy judge on whether to confirm one of the two competing plans of
reorganization is now pending. No assurance can be given regarding the
timing or outcome of this decision.
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. In August 1998, Entergy announced
a new strategic direction that includes the expected sale of London
Electricity. See Note 7 for further information.
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. In July 1998, Entergy Operations
entered into a contract, with certain cancellation provisions, for the
installation of the replacement steam generators.
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
September 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 September 30, 1998. A remaining recorded liability in
the amount of $6.7 million existed at September 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 September 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. In May 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 predominantly 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, but no assurance can be given that additional future
reserves or write-offs will not be required. 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 September 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 $244 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 (actual taxes paid). 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 herein.
Retail Rate Proceedings
Filings with the APSC (Entergy Corporation and Entergy Arkansas)
See Note 2 to the Form 10-K for information regarding the settlement
agreement filed with the APSC and the establishment of a transition cost
account. The estimated reserve recorded in December 1997 was adjusted in
September 1998 as a result of a mid-year streamlined earnings review
procedure for a negative net income impact of $3.7 million. Entergy
Arkansas also recorded an additional reserve of $27.9 million in
September 1998 in the transition cost account to reflect the estimated
1998 accrual of excess earnings. The results of operations of Entergy
Arkansas for the three and nine months ended September 30, 1998 reflect
these charges in operating expenses. Additional reserves may also be
required in 1999 based on earnings reviews, which will have similar net
income effects.
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. The PUCT did not accept
settlements filed in March and June by Entergy Gulf States and various
intervenor groups. On July 22, 1998, the PUCT issued an order and after
making modifications on rehearing, issued its second order on rehearing
on October 14, 1998. The second order on rehearing reduces Entergy Gulf
States' Texas rates by $111 million annually effective December 1, 1998,
offset through May 1999 by accelerated recovery of accounting order
deferrals, resulting in a net reduction of $69 million on an annual basis
through that date. This order also required a refund of $76 million.
This refund is calculated as a rate reduction and service quality refund
retroactive to June 1, 1996, offset by the accelerated recovery of the
accounting order deferrals, actual taxes paid, and a fuel surcharge.
This refund amount was reduced by $32 million from the original refund
ordered in the July 22, 1998 order, but was offset by the passage of time
from the original rate reduction's assumed effective date of August 1998
to the new assumed effective date of December 1, 1998. 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 $123.5 million ($73.6 million net of
taxes) in 1998 based on management's estimates which include $101.3
million ($60.3 million net of tax) for the retroactive rate actions for
the nine months ended September 30, 1998, and $22.2 million ($13.3
million net of tax) for the prospective portion of the rate reduction for
the three months ended September 30, 1998. The results of operations of
Entergy Gulf States for the three and nine months ended September 30,
1998 reflect these corresponding charges in operating revenues.
The PUCT's October 14, 1998 order on rehearing, if sustained, is
expected to have a material adverse effect on Entergy Gulf States'
revenues, cash flow, and net income. Entergy Gulf States has filed a
motion for reconsideration with the PUCT. The PUCT has until November
28, 1998 to act on the motion or the motion is overruled by operation of
law. 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. Subsequent to this,
Entergy Gulf States entered an agreement with the PUCT that allowed for
refunds pursuant to the PUCT's order to begin in August 1998 and delayed
the implementation of the ordered rate decrease until 18 days following
issuance by the PUCT of a final and appealable order.
A component of the rulings discussed above was a disallowance by the
PUCT of 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 and nuclear
generating plants and transmission and distribution systems, as well as
providing human resources, accounting, legal, and other necessary
services to Entergy Gulf States and Entergy Corporation's other electric
utility subsidiaries. The PUCT had previously issued proposed rules
governing affiliate transactions of Texas utility companies, including
Entergy Gulf States. Hearings concerning the proposed rules were
conducted by the PUCT in July 1998. However, the PUCT has withdrawn
these proposed rules pending the outcome of the 1999 legislative session.
The rules, if adopted in their proposed form, could severely restrict the
types and extent of services provided to Entergy Gulf States by Entergy
Services and Entergy Operation, and will result in higher costs to
Entergy Gulf States for equivalent services. It is not certain when or
in what form the rules may be adopted.
On September 8, 1998, Entergy Gulf States filed an application with
the PUCT for an increase in its fixed fuel factor and a surcharge to
Texas retail customers for the cumulative under-recovery of fuel and
purchased power costs. The proposed increase in the fixed fuel factor
would result in increased revenues of $55.6 million annually compared to
the current fixed fuel factor. The proposed surcharge is designed to
recover $128.1 million, including interest, for fuel under-recoveries
incurred during the period July 1, 1996 through June 30, 1998. Hearings
on the merits were held in October 1998, and the PUCT is required to rule
on the application by December 7, 1998. All amounts at issue in this
proceeding will be subject to review in a future fuel reconciliation
proceeding before the PUCT, at which time the PUCT will consider the
reasonableness of Entergy Gulf States' fuel and purchased power expenses
extending back to July 1, 1996. Entergy Gulf States cannot predict the
outcome of this proceeding.
Filings with the LPSC
(Entergy Corporation and Entergy Gulf States)
On May 29, 1998, Entergy Gulf States filed its fifth required post-
Merger earnings analysis with the LPSC. No rate reduction was shown to
be required in this filing. Entergy Gulf States' filing will be subject
to further review by the LPSC, which may result in a change in rates.
Hearings are scheduled to begin in April 1999.
In July 1998, Entergy Gulf States agreed to implement an $18 million
rate reduction effective July 29, 1998 to reflect reductions that are
expected to occur as a result of Entergy Gulf States' annual earnings
reviews. Proceedings on issues in the second, third, and fourth post-
Merger earnings analyses will continue.
On September 10, 1998, the LPSC issued an order in the third
required post-Merger earnings analysis that required a refund of $44.8
million for the period June 1, 1996 through May 31, 1997, and a
prospective rate reduction of $54.6 million effective September 20, 1998.
Due to the $18 million reduction that was implemented effective July 29,
1998, an additional prospective reduction of only $36.6 million would be
required as a result of the third earnings analysis. Entergy Gulf States
has not reserved for this reduction. Entergy Gulf States has appealed
this order and has been granted injunctive relief pending a final
decision on appeal.
(Entergy Corporation and Entergy Louisiana)
On April 15, 1996, Entergy Louisiana made its first annual
performance-based formula rate plan filing based on the 1995 test year.
On June 19, 1996, the LPSC approved a $12 million annual reduction in
base rates effective July 1, 1996. Subsequently, additional issues were
resolved by means of a settlement conference, increasing the base rate
reduction to $16.5 million. On January 21, 1998, the LPSC approved an $8
million prospective annual rate reduction reflecting a change in Entergy
Louisiana's allowed return on equity, together with a $4 million refund
making this change effective July 1, 1997.
On May 30, 1997, Entergy Louisiana made its annual formula rate plan
filing with the LPSC for the 1996 test year. This filing resulted in a
total rate reduction of approximately $54.5 million, which was
implemented beginning in the first filing cycle of July 1997. Rates were
reduced by an additional $0.7 million effective July 1, 1997, and by an
additional $2.9 million effective March 1998. A final order is expected
during the fourth quarter of 1998.
The LPSC determined in July 1998 that the annual formula rate plan
filings for Entergy Louisiana would be extended for an additional three
years, through an April 2000 filing for the 1999 test year. In September
1998, Entergy Louisiana made its third annual formula rate plan filing
with the LPSC for the 1997 test year. The filing indicated that earnings
were such that no change in rates would be warranted with the exception
of the elimination of a $3.7 million one-time credit that will result in
a rate increase of this amount. Hearings will be conducted on this
filing.
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)
Entergy New Orleans made its cost of service and revenue
requirement filing in conjunction with its transition to competition
plan on September 17, 1997. Hearings on the ratemaking issues in the
filing were held in July 1998. Entergy New Orleans filed a
settlement agreement before the Council, which was approved on
November 5, 1998. The settlement agreement required base rate
reductions for Entergy New Orleans' electric customers of $7.1
million effective January 1, 1999; $3.2 million effective October 1,
1999; and $16.1 million effective October 1, 2000. The agreement
also required a $1.9 million base rate reduction for Entergy New
Orleans' gas customers effective January 1999. The settlement
prohibited Entergy New Orleans from seeking any base rate increases
prior to October 1, 2001.
Grand Gulf Accelerated Recovery Tariff
(Entergy Arkansas)
In April 1998, FERC approved the Grand Gulf Accelerated Recovery
Tariff that Entergy Arkansas filed as part of the settlement agreement
that 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.
(Entergy Mississippi)
On September 29, 1998, FERC approved the Grand Gulf Accelerated
Recovery Tariff for Entergy Mississippi's allocable portion of Grand Gulf
that was filed with the FERC in August 1998. The tariff provides for the
acceleration of Entergy Mississippi's Grand Gulf purchased power
obligation in an amount totaling $221.3 million over the period October
1, 1998 through June 30, 2004 and is used to offset the rate reduction
described below.
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. These accounting order
deferrals have been given accelerated recovery in the July 22, 1998 PUCT
order discussed above. Entergy Gulf States has not recorded such
accelerated recovery pending the resolution of its motion for
reconciliation of the order. For further discussion, see Retail Rate
Proceedings above.
Grand Gulf 1 Deferrals (Entergy Corporation and Entergy Mississippi)
See Note 2 of the Form 10-K for information regarding Entergy
Mississippi's plan with the MPSC for recovery of previously deferred
Grand Gulf 1-related costs. The completion of the recovery of the
deferred costs and associated carrying charges, offset by i) the
accelerated recovery of Entergy Mississippi's Grand Gulf purchased power
obligation and ii) the recovery of a portion of Entergy Mississippi's
allocation of the proposed System Energy wholesale rate increase
discussed herein, results in a $127.1 million annual rate reduction for
Entergy Mississippi as of October 1, 1998. The reduction will not result
in a decrease in Entergy Mississippi's income as the phase-in plan
deferrals have now been fully amortized and no further expense associated
with the phase-in plan will be recognized.
Proposed Rate Increase (Entergy Mississippi)
See Note 2 of the Form 10-K for information regarding System
Energy's application with FERC for a rate increase and Entergy
Mississippi's allocation of the proposed rate increase. On August 12,
1998, Entergy Mississippi filed a revised deferral plan with the MPSC
that provides for recovery of a portion of the System Energy rate
increase effective October 1, 1998. Under the revised plan, Entergy
Mississippi will continue to defer until September 30, 2000, or until the
issuance of a final order by the FERC, the difference between the System
Energy rate increase and the amount of the increase approved by the ALJ's
initial decision ("ALJ Decision Level") issued on July 11, 1996. This
deferred amount will be amortized over 54 months beginning October 2000.
Entergy Mississippi began recovery of its allocation at the ALJ Decision
Level in October 1998. The previously deferred portion of the ALJ
Decision Level, including carrying charges, will be recovered over 48
months.
NOTE 3. COMMON STOCK (Entergy Corporation)
During the nine months ended September 30, 1998, Entergy Corporation
issued 284,498 shares of its previously repurchased common stock to
satisfy stock options exercised and stock purchases under its Equity
Ownership Plan. During the third quarter of 1998, Entergy Corporation
repurchased 200,000 shares from the trust originally established to hold
the shares expected to be awarded under the 1996-1998 Long-term Incentive
Plan. In addition, Entergy Corporation received proceeds of $8.6
million from the issuance of 320,030 shares of common stock under its
dividend reinvestment and stock purchase plan during the nine months
ended September 30, 1998.
NOTE 4. LONG-TERM DEBT
(Entergy Gulf States)
On October 1, 1998, Entergy Gulf States retired $40 million of 6.75%
Series First Mortgage Bonds upon maturity.
On November 1, 1998, Entergy Gulf States retired $75 million of
7.35% Series First Mortgage Bonds upon maturity.
(System Energy Resources)
On November 4, 1998, System Energy Resources issued $216 million of
5 7/8% Pollution Control Revenue Bonds due April 1, 2022. The proceeds
will be used to redeem on December 1, 1998, $10.0 million of the $49.5
million of 9.5% Series Pollution Control Revenue Bonds due 2013 and $206
million of 9.875% Series C Pollution Control Revenue Bonds due 2014.
(Entergy Corporation)
See Note 7 in the Form 10-K for a discussion of the financing of
EPDC's Damhead Creek project. In September 1998, a subsidiary of EPDC
entered into a BPS75 million ($127.5 million) six-month bridge financing
to fund certain construction and development costs related to the
project. Contemporaneously with the bridge financing, EPDC obtained a
commitment letter for the long-term financing requirements of the
project, which is expected to be completed by the end of the term of the
bridge financing.
NOTE 5. RETAINED EARNINGS (Entergy Corporation)
On October 30, 1998, Entergy Corporation's Board of Directors
declared a common stock dividend of $.30 per share, payable on December
1, 1998, to holders of record on November 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.
During 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. DISPOSITION OF SUBSIDIARY BUSINESSES (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 before the end of 1999. These businesses include
London Electricity, CitiPower Pty., Entergy Security, Inc., Efficient
Solutions, Inc., and certain portions of Entergy's telecommunications
businesses.
On September 30, 1998, Entergy sold its energy management
subsidiary, Efficient Solutions, Inc. (formerly Entergy Integrated
Solutions, Inc.) The loss on the sale of $68.6 million ($35.9 million
net of tax) is reflected in other income in the accompanying Consolidated
Statements of Income and Comprehensive Income.
The remaining businesses expected to be sold collectively represent
$5.7 billion of Entergy's total assets as of September 30, 1998 and
generated $174 million of Entergy's net income for the nine months then
ended. Management believes that the sale price of these businesses will
exceed their net book value at September 30, 1998. Accordingly, no
adjustment has been recorded at September 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. Oral argument on the plaintiff's appeal has been set for November
1998.
Union Pacific Railroad Company (Entergy Corporation and Entergy
Arkansas)
See "Union Pacific Railroad Company" in Item 1 of Part II of the
1998 first and second quarter Entergy Forms 10-Q for a discussion of the
civil suit filed by Entergy Arkansas and Entergy Services against Union
Pacific Railroad Company.
Aquila Power Corporation (Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New
Orleans)
See "Aquila Power Corporation" in Item 1 of Part II of the 1998
second quarter Entergy Form 10-Q for a discussion of the complaint filed
with the FERC by Aquila Power Corporation against Entergy Services, as
agent for the domestic utility companies.
Ratepayer Lawsuits (Entergy Corporation, Entergy Louisiana, and Entergy
New Orleans)
See "Ratepayer Lawsuits" in Item 1 of Part II of the 1998 second
quarter Entergy Form 10-Q for a discussion of the lawsuits filed by
ratepayers in Louisiana state courts in Orleans and East Baton Rouge
Parishes, and with the LPSC.
Asbestos Litigation (Entergy Gulf States, Entergy Louisiana, and
Entergy New Orleans)
See "Asbestos Litigation" in Item 1 of Part II of the 1998 second
quarter Entergy Form 10-Q for a discussion of the numerous individual
and class action lawsuits filed against Entergy's domestic utility
subsidiaries, and in particular Entergy Gulf States, Entergy Louisiana,
and Entergy New Orleans on behalf of persons claiming injury as a result
of exposure to asbestos.
Panda Energy Corporation (Entergy Corporation)
In 1994, Panda Energy Corporation (Panda) commenced litigation in
Texas in the Dallas District Court against Entergy Corporation. Entergy
Enterprises, Inc., EPI, Entergy Power Asia, Ltd., and Entergy Power
Development Corporation, direct and indirect wholly owned subsidiaries
of Entergy Corporation, are also named as defendants. The allegations
include, among others, tortious interference with contractual relations,
conspiracy, misappropriation of corporate opportunity, unfair
competition and fraud, and constructive trust issues. Panda seeks
damages of approximately $4.8 billion, of which $3.6 billion is claimed
in punitive damages. The district court granted the defendants' motion
for summary judgment and dismissed the lawsuit, finding that Panda is
unable to show damages and that the facts alleged do not support a cause
of action against the defendants. In August 1998, an appellate court
reversed the dismissal and remanded the lawsuit to the trial court. The
defendants petitioned the appellate court for rehearing, but that
petition was denied in October 1998. Entergy Gulf States expects to
petition the Texas Supreme Court for review of the appellate court
decision.
Franchise Fee Litigation (Entergy Gulf States)
In September 1998, the City of Nederland filed a petition against
Entergy Gulf States, and Entergy Services, Inc. in state court in
Jefferson County, Texas purportedly on behalf of all Texas
municipalities that have ordinances or agreements with Entergy Gulf
States. The lawsuit alleges that Entergy Gulf States has been
underpaying its franchise fees due to failure to properly calculate its
gross receipts. Plaintiff seeks a judgment for the allegedly underpaid
fees and punitive damages. Entergy will vigorously defend itself in the
lawsuit.
Fiber Optic Cable Litigation (Entergy Corporation)
In May 1998, a group of property owners filed a petition against
Entergy Corporation, Entergy Gulf States, Entergy Services, and ETHC in
state court in Jefferson County, Texas purportedly on behalf of all
property owners throughout the Entergy service area who have conveyed
easements to the defendants. The lawsuit alleges that Entergy placed
fiber optic cable across their property without obtaining appropriate
easements. The plaintiffs seek actual damages for the use of the land
and a share of the profits made through use of the fiber optic cables
and punitive damages. Entergy will vigorously defend itself in the
lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
During the third quarter of 1998, no matters were submitted to a
vote of the security holders of Entergy Corporation, Entergy Arkansas,
Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, System Energy, or Entergy London.
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, Sept 30,
1993 1994 1995 1996 1997 1998
Entergy Arkansas 3.11(b) 2.32 2.56 2.93 2.54 2.57
Entergy Gulf States 1.54 (c)- 1.86 1.47 1.42 1.17
Entergy Louisiana 3.06 2.91 3.18 3.16 2.74 2.98
Entergy Mississippi 3.79(b) 2.12 2.92 3.40 2.98 3.48
Entergy New Orleans 4.68(b) 1.91 3.93 3.51 2.70 2.87
System Energy 1.87 1.23 2.07 2.21 2.31 2.45
Entergy London N/A N/A N/A N/A 1.16 1.47
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends
Twelve Months Ended
December 31, Sept 30,
1993 1994 1995 1996 1997 1998
Entergy Arkansas 2.54(b) 1.97 2.12 2.44 2.24 2.27
Entergy Gulf States (a) 1.21 (c)- 1.54 1.19 1.23 1.01
Entergy Louisiana 2.39 2.43 2.60 2.64 2.36 2.56
Entergy Mississippi 3.08(b) 1.81 2.51 2.95 2.69 3.14
Entergy New Orleans 4.12(b) 1.73 3.56 3.22 2.44 2.59
(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.
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, as amended and currently in effect.
3(b) - By-laws of Entergy Arkansas, as amended and currently in
effect.
3(c) - By-laws of Entergy Gulf States, as amended and currently
in effect.
3(d) - By-laws of Entergy Louisiana, as amended and currently in
effect.
3(e) - By-laws of Entergy Mississippi, as amended and currently
in effect.
3(f) - By-laws of Entergy New Orleans, as amended and currently
in effect.
27(a) - Financial Data Schedule for Entergy Corporation and
Subsidiaries as of September 30, 1998.
27(b) - Financial Data Schedule for Entergy Arkansas as of
September 30, 1998.
27(c) - Financial Data Schedule for Entergy Gulf States as of
September 30, 1998.
27(d) - Financial Data Schedule for Entergy Louisiana as of
September 30, 1998.
27(e) - Financial Data Schedule for Entergy Mississippi as of
September 30, 1998.
27(f) - Financial Data Schedule for Entergy New Orleans as of
September 30, 1998.
27(g) - Financial Data Schedule for System Energy as of September
30, 1998.
27(h) - Financial Data Schedule for Entergy London as of
September 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).
** 99(j) - 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 June 30, 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 September 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 September 30,
1998.
** Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Entergy Corporation and Entergy Gulf States
A Current Report on Form 8-K, dated July 14, 1998,
was filed with the SEC on July 24, 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.
/s/ Nathan E. Langston
Nathan E. Langston
Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)
ENTERGY LONDON INVESTMENTS PLC
/s/ Nathan E. Langston
Nathan E. Langston
Director and Vice President and Audit Controller
Date: November 6, 1998