-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K71dHgZsmcoQNOigx7Gv/vPrBdbClc2kFmek17gXeyo43Soc+G07tk0BDINnnQyj zHdLghLNuBgeJdjSn/PUUw== 0000065984-02-000178.txt : 20020812 0000065984-02-000178.hdr.sgml : 20020812 20020812161528 ACCESSION NUMBER: 0000065984-02-000178 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY CORP /DE/ CENTRAL INDEX KEY: 0000065984 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 721229752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11299 FILM NUMBER: 02727015 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045764000 MAIL ADDRESS: STREET 1: PO BOX 61000 CITY: NEW ORLEANS STATE: LA ZIP: 70161 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH UTILITIES INC DATE OF NAME CHANGE: 19890521 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY GSU HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY CORP /FL/ DATE OF NAME CHANGE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEM ENERGY RESOURCES INC CENTRAL INDEX KEY: 0000202584 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720752777 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09067 FILM NUMBER: 02727016 BUSINESS ADDRESS: STREET 1: ECHELON ONE STREET 2: 1340 ECHELON PKWY CITY: JACKSON STATE: MS ZIP: 39213 BUSINESS PHONE: 601-368-5000 MAIL ADDRESS: STREET 1: ECHELON ONE STREET 2: 1340 ECHELON PKWY CITY: JACKSON STATE: MS ZIP: 39213 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH ENERGY INC DATE OF NAME CHANGE: 19860803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY NEW ORLEANS INC CENTRAL INDEX KEY: 0000071508 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 720273040 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05807 FILM NUMBER: 02727017 BUSINESS ADDRESS: STREET 1: 1600 PERDIDO ST STREET 2: BLDG 505 CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 504-670-3674 MAIL ADDRESS: STREET 1: 1600 PERDIDO ST STREET 2: BLDG 505 CITY: NEW ORLEANS STATE: LA ZIP: 70112 FORMER COMPANY: FORMER CONFORMED NAME: NEW ORLEANS PUBLIC SERVICE INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY MISSISSIPPI INC CENTRAL INDEX KEY: 0000066901 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 640205830 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00320 FILM NUMBER: 02727018 BUSINESS ADDRESS: STREET 1: 308 EAST PEARL STREET CITY: JACKSON STATE: MS ZIP: 39201 BUSINESS PHONE: 601-368-5000 MAIL ADDRESS: STREET 1: 308 EAST PEARL STREET CITY: JACKSON STATE: MS ZIP: 39201 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY LOUISIANA INC CENTRAL INDEX KEY: 0000060527 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720245590 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08474 FILM NUMBER: 02727019 BUSINESS ADDRESS: STREET 1: 4809 JEFFERSON HGWY CITY: JEFFERSON STATE: LA ZIP: 70121 BUSINESS PHONE: 504-840-2734 MAIL ADDRESS: STREET 1: 4809 JEFFERSON HIGHWAY CITY: JEFFERSON STATE: LA ZIP: 70121 FORMER COMPANY: FORMER CONFORMED NAME: LOUISIANA POWER & LIGHT CO /LA/ DATE OF NAME CHANGE: 19960610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY GULF STATES INC CENTRAL INDEX KEY: 0000044570 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 740662730 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-27031 FILM NUMBER: 02727020 BUSINESS ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 BUSINESS PHONE: 409-838-6631 MAIL ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 FORMER COMPANY: FORMER CONFORMED NAME: GULF STATES UTILITIES CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY ARKANSAS INC CENTRAL INDEX KEY: 0000007323 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 710005900 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10764 FILM NUMBER: 02727021 BUSINESS ADDRESS: STREET 1: 425 WEST CAPITOL AVE STREET 2: 40TH FLOOR CITY: LITTLE ROCK STATE: AR ZIP: 72201 BUSINESS PHONE: 501-377-4000 MAIL ADDRESS: STREET 1: P O BOX 551 CITY: LITTLE ROCK STATE: AR ZIP: 72203 FORMER COMPANY: FORMER CONFORMED NAME: ARKANSAS POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 10-Q 1 a16702.txt _____________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2002 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) 576-4000 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-27031 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 840-2734 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 1600 Perdido Street, Building 505 New Orleans, Louisiana 70112 Telephone (504) 670-3674 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 _____________________________________________________________________ Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at July 31, 2002 Entergy Corporation ($0.01 par value) 224,028,796 Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. 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, 2001, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward-Looking Information The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, performance, strategies, prospects and other aspects of the business of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. and their affiliated companies may involve risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: the effects of weather, the performance of generating units and transmission systems, the possession of nuclear materials, fuel and purchased power prices and availability, the effects of regulatory decisions and changes in law, litigation, capital spending requirements and the availability of capital, the onset of competition, the ability to recover net regulatory assets and other potential stranded costs, the effects of the California electricity market on the utility industry nationally, advances in technology, changes in accounting standards, corporate restructuring and changes in capital structure, the success of new business ventures, changes in the markets for electricity and other energy-related commodities, including the use of financial and derivative instruments and volatility of changes in market prices, changes in the number of participants and the risk profile of such participants in the energy marketing and trading business, changes in interest rates and in financial and foreign currency markets generally, the economic climate and growth in Entergy's service territories, changes in corporate strategies, and other factors. ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 2002 Page Number Definitions 1 Management's Financial Discussion and Analysis - Significant Factors and Known Trends 4 Management's Financial Discussion and Analysis - Liquidity and Capital Resources 9 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 14 Consolidated Statements of Income 21 Consolidated Statements of Cash Flows 22 Consolidated Balance Sheets 24 Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital 26 Selected Operating Results 27 Entergy Arkansas, Inc.: Results of Operations 28 Income Statements 32 Statements of Cash Flows 33 Balance Sheets 34 Selected Operating Results 36 Entergy Gulf States, Inc.: Results of Operations 37 Income Statements 40 Statements of Cash Flows 41 Balance Sheets 42 Selected Operating Results 44 Entergy Louisiana, Inc.: Results of Operations 45 Income Statements 48 Statements of Cash Flows 49 Balance Sheets 50 Selected Operating Results 52 Entergy Mississippi, Inc.: Results of Operations 53 Income Statements 56 Statements of Cash Flows 57 Balance Sheets 58 Selected Operating Results 60 Entergy New Orleans, Inc.: Results of Operations 61 Statements of Operations 64 Statements of Cash Flows 65 Balance Sheets 66 Selected Operating Results 68 System Energy Resources, Inc.: Results of Operations 69 Income Statements 71 Statements of Cash Flows 73 Balance Sheets 74 Notes to Financial Statements for Entergy Corporation and Subsidiaries 76 Part II: Item 1. Legal Proceedings 89 Item 4. Submission of Matters to a Vote of Security Holders 89 Item 5. Other Information 91 Item 6. Exhibits and Reports on Form 8-K 93 Signature 96 DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term ADEQ Arkansas Department of Environmental Quality AFUDC Allowance for Funds Used During Construction ALJ Administrative Law Judge ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear) APSC Arkansas Public Service Commission BCF/D One billion cubic feet of natural gas per day Board Board of Directors of Entergy Corporation Cajun Cajun Electric Power Cooperative, Inc. capacity factor The percentage of the period that the plant generates power calculated by dividing the output by the capacity and normalizing the time period CitiPower CitiPower Pty., an electric distribution company serving Melbourne, Australia and surrounding suburbs, which was sold by Entergy effective December 31, 1998 Council Council of the City of New Orleans, Louisiana Damhead Creek 800 MW (gas) combined cycle electric generating facility that entered commercial operations in the first quarter of 2001, located in the United Kingdom, and wholly- owned by an indirect subsidiary of EPDC DOE United States Department of Energy domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively electricity marketed Total physical GWH volumes marketed in the U.S. during the period electricity volatility Measure of price fluctuation over time using standard deviation of daily price differences for into-Entergy and into- Cinergy power prices for the upcoming month EPA United States Environmental Protection Agency EPDC Entergy Power Development Corporation, a wholly-owned subsidiary of Entergy Corporation EWO Entergy Wholesale Operations, which consists primarily of Entergy's power development business Entergy Entergy Corporation and its direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc. Entergy Gulf States Entergy Gulf States, Inc., including its wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company Entergy-Koch Entergy-Koch, L.P., a joint venture equally owned by Entergy and Koch Industries, Inc. Entergy London Entergy London Investments plc, formerly Entergy Power UK plc (including its wholly owned subsidiary, London Electricity plc), which was sold by Entergy effective December 4, 1998 Entergy Louisiana Entergy Louisiana, Inc. Entergy Mississippi Entergy Mississippi, Inc. Entergy New Orleans Entergy New Orleans, Inc. Entergy Power Entergy Power, Inc. FERC Federal Energy Regulatory Commission Fitzpatrick James A. Fitzpatrick nuclear power plant, 825 MW facility located near Oswego, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business Abbreviation or Acronym Term Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 2001 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy gain/loss days Ratio of the number of days when Entergy- Koch recognized a net gain from commodity trading activities to the number of days when Entergy-Koch recognized a net loss from commodity trading activities gas marketed Total volume of physical gas purchased plus volume of physical gas sold by Entergy-Koch in the U.S. denominated in billions of cubic feet per day gas volatility Measure of price fluctuation over time using standard deviation of daily price differences for Henry Hub natural gas prices for the upcoming month Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation Plant GGART Grand Gulf Accelerated Recovery Tariff GWH Gigawatt hour(s), which equals one million kilowatt-hours Indian Point 2 Indian Point Energy Center Unit 2 - nuclear power plant, 970 MW facility located in Westchester County, New York, purchased in September 2001 from Consolidated Edison by Entergy's domestic non-utility nuclear business Indian Point 3 Indian Point Energy Center Unit 3 - nuclear power plant, 980 MW facility located in Westchester County, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business KWH kilowatt-hour(s) LDEQ Louisiana Department of Environmental Quality LPSC Louisiana Public Service Commission miles of pipeline Total miles of transmission and gathering pipeline MMBTU One million British Thermal Units MPSC Mississippi Public Service Commission MW Megawatt(s), which equals one thousand kilowatt(s) Net MW in operation Installed capacity owned or operated Net revenue Operating revenue net of fuel, fuel-related, and purchased power expenses; other regulatory credits; and amortization of rate deferrals NRC Nuclear Regulatory Commission NYPA New York Power Authority production cost Cost in $/MMBTU associated with delivering gas, excluding the cost of the gas PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended RTO Regional transmission organization River Bend River Bend Steam Electric Generating Station (nuclear) SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board spark spread The dollar difference between electricity prices per unit and natural gas prices after assuming a conversion ratio for the number of natural gas units necessary to generate one unit of electricity storage capacity Working gas storage capacity System Agreement Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc. System Fuels System Fuels, Inc. Abbreviation or Acronym Term throughput Gas in BCF/D transported by the pipeline during the period Unit Power Sales Agreement Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf 1 Vermont Yankee Vermont Yankee nuclear power plant, 510 MW facility located in Vernon, Vermont, purchased in July 2002 from Vermont Yankee Nuclear Power Corporation by Entergy's domestic non-utility nuclear business Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant 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 for discussions of Entergy's three business segments; its critical accounting policies; the status of the transition to retail competition in the domestic utility segment and the continued application of SFAS 71 to that business; state, local, and federal regulatory proceedings that could affect the domestic utility segment; the market risks that each of Entergy's business segments are exposed to; and other significant issues affecting Entergy. Set forth below are updates to the significant factors and known trends discussed in the Form 10-K. Entergy Wholesale Operations In the first six months of 2002, Entergy recorded charges of $419.5 million to operating expenses ($271.5 million net of tax), including $18.1 million ($10.6 million net of tax) in the second quarter, in the energy commodity services segment to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in the United States and the United Kingdom. The charges consist of the following: o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. $180.2 million of the charges is a provision for the net costs resulting from cancellation or sale of the turbines subject to purchase commitments with the special-purpose entity; o $167.5 million of the charges results from the write-off of EPDC's equity investment in the Damhead Creek project and the impairment of the values of its Warren Power power plant and its Crete and RS Cogen projects. This portion of the charges reflects Entergy's estimate of the effects of reduced spark spreads in the United States and the United Kingdom; o $39.1 million of the charges relates to the restructuring of EWO, which is comprised of $22.5 million of impairments of EWO administrative fixed assets, $10.7 million of estimated sublease losses, and $5.9 million of employee-related costs. Management expects the restructuring of EWO to be substantially complete by the end of 2002; and o $32.7 million of the charges results from the write-off of capitalized project development costs for projects that will not be completed. Entergy does not expect further adjustments to these charges in the future, other than those that could result from changes in asset values due to dispositions or changes in market conditions, and potential benefits from the sale of three turbines currently under option to a third party. Also, in the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru for net proceeds of $135.5 million. The proceeds include notes receivable totaling $86 million, on which EWO received $46 million of payments in the second quarter. The remaining balance is due in the third quarter 2003. After impairment provisions recorded for these interests in 2001, the net loss realized on the sale is insignificant. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS After the decision to discontinue additional greenfield development and the sale of the Latin American investments, EWO continues to operate or construct the following power plants:
Investment Capacity (MW) Percent Ownership Status United Kingdom - Damhead Creek 800 100% operational (see Note*) U.S. (AR)- Ritchie Unit 2 544 100% operational U.S. (AR)- Independence Unit 2 842 14% operational U.S. (MS)- Warren Power 300 100% operational U.S. (IA)- Top of Iowa Wind Farm 80 99% operational U.S. (IL)- Crete 320 50% operational U.S. (LA)- RS Cogen 425 50% under construction U.S. (TX)- Harrison County 550 70% under construction
Note*- As discussed above, EPDC has written off its equity investment in Damhead Creek. The credit facility financing Damhead Creek is non- recourse to Entergy, and there is no requirement for Entergy or EPDC to make additional capital contributions or provide credit support to Damhead Creek. Therefore, consistent with Entergy's decisions concerning EWO's business and because Entergy no longer has equity at risk in the Damhead Creek investment, Entergy earnings are no longer affected by Damhead Creek since the end of March 2002. However, Damhead Creek revenues and expenses continue to be included in the accompanying results of operations. Accordingly, commodity price risk disclosures in this section have been revised to eliminate Damhead Creek amounts on a forward-looking basis. Domestic Utility Transition to Competition Texas As discussed in the Form 10-K, a PUCT-approved settlement delayed the implementation of retail open access in Entergy Gulf States' Texas service territory until at least September 15, 2002. Management now estimates that the SeTrans RTO will not be operational prior to January 2004. Therefore, retail open access in Entergy Gulf States' Texas service territory within the context of a functional FERC-approved RTO is not likely to begin before January 2004. Given the delay in retail open access in its Texas service territory, Entergy Gulf States cannot predict what, if any, additional changes to previously approved plans may be required by the PUCT or the LPSC. State and Local Rate Regulation Entergy New Orleans In May 2002, Entergy New Orleans filed a cost of service study and revenue requirement filing with the Council. Using 2001 as the test year, the filing indicated that a revenue deficiency exists and that a $28.9 million electric rate increase and a $15.3 million gas rate increase are appropriate. The Council has not established a procedural schedule. As discussed in the Form 10-K, and as shown in Item 5 of this Form 10-Q, Entergy New Orleans' earnings for the year ended December 31, 2001 and for the twelve months ended June 30, 2002 were not adequate to cover its fixed charges. Under its mortgage covenants, Entergy New Orleans does not currently have the capacity to issue new debt. Since the settlement of Entergy New Orleans' last rate proceeding, which was approved by the Council in 1998, its fixed charge coverage has declined and its debt ratio has increased. While ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Entergy New Orleans has made investments and incurred expenses necessary to improve customer service since the last rate proceeding, its base revenues have not increased. Absent constructive rate-making in the pending proceeding, it is likely that the cost of and access to the capital necessary to finance Entergy New Orleans' current level of service will be adversely affected. Entergy Arkansas In May 2002, the APSC approved the March 2002 settlement agreement submitted by Entergy Arkansas, the APSC Staff, and the Arkansas attorney general. The APSC also approved in June 2002 a contribution by Entergy Arkansas of $5.9 million to the transition cost account (TCA) as a result of the 2001 earnings evaluation report filing. The settlement agreement allowed Entergy Arkansas to offset ice storm recovery costs with the balance in the TCA on a rate class basis. Entergy Arkansas recorded a regulatory asset of $15.8 million due to ice storm costs exceeding the available TCA funds. Entergy Gulf States In May 2001, Entergy Gulf States filed its eighth required post- merger earnings review with the LPSC. This filing is subject to review by the LPSC and may result in a change in rates. In April 2002, the LPSC staff filed testimony recommending a $16.5 million rate refund and a $40.1 million prospective rate reduction. The prospective reduction includes a recommended reduction in the rate of return on common equity (ROE) that would not take effect until the later of June 2003 or the date of the LPSC's order. Hearings were held in April 2002 and will continue in August 2002. In May 2002, Entergy Gulf States filed its ninth and last required post-merger earnings analysis with the LPSC. The filing was based on the 2001 test year and resulted in a rate decrease of $11.5 million, which was implemented effective June 2002. This filing is subject to review by the LPSC and may result in additional or different changes in rates than those sought in the filing. No procedural schedule has been adopted. Negotiations with the LPSC staff for a statewide formula rate plan in Louisiana are ongoing. Entergy Louisiana In July 2002, the LPSC approved a settlement between Entergy Louisiana and the LPSC Staff that resolves all remaining issues in the 2000 and 2001 formula rate plan proceedings. Entergy Louisiana agreed to a $5 million annual rate reduction effective August 2001. The prospective rate reduction will be implemented beginning in August 2002 and the refund for the retroactive period will occur in September 2002. As part of the settlement, Entergy Louisiana's rates, including its previously authorized ROE of 10.5%, will remain in effect until changed pursuant to a new formula rate plan or a revenue requirement analysis to be filed by June 30, 2003. Negotiations with the LPSC staff for a statewide formula rate plan in Louisiana are ongoing. Market Risks Disclosure Following are sections from the "Market Risks Disclosure" in the Form 10-K that have significant updates as of June 30, 2002. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Commodity Price Risk Power Generation As discussed in the Form 10-K, energy commodity services enters into forward power sale agreements to hedge its exposure to market price fluctuations. The following represents the percentage of planned electricity output sold forward under physical or financial contracts for energy commodity services' generation facilities updated as of June 30, 2002: 2002 2003 % sold % sold Planned GWH forward Planned GWH forward 1,237 46% 2,966 20% Marketing and Trading As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and Entergy use value-at-risk (VAR) models as one measure of a potential loss in fair value for EKT's natural gas and power trading portfolio and energy commodity services' mark-to-market portfolio. EKT's daily VAR for its trading portfolio at June 30, 2002 and March 31, 2002 was $13.6 million and $9.5 million, respectively, with a daily average of $10.0 million for the second quarter of 2002 and $7.7 million for the first quarter of 2002. Energy commodity services' consolidated subsidiaries' VAR for mark-to-market derivative instruments was approximately $0.8 million and $4.5 million as of June 30, 2002 and March 31, 2002, respectively. Mark-to-market Accounting As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to- market commodity instruments held by them for trading and risk management purposes that are considered derivatives under SFAS 133 or energy trading contracts under EITF 98-10. Following are the net mark-to-market assets (liabilities) and the period within which the assets (liabilities) would be realized in cash if they are held to maturity and market prices do not change:
Net mark-to- market asset (liability) at June 30, 2002 Cumulative cash realization period 2002 2003 2004-2005 Entergy consolidated subsidiaries ($8) million 84% 35% 100% Entergy-Koch $118 million 31% 73% 100%
ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Foreign Currency Exchange Rate Risk As discussed in the Form 10-K, Entergy Gulf States, System Fuels, and Entergy's domestic non-utility nuclear business enter into foreign currency forward contracts to hedge the Euro-denominated payments due under certain purchase contracts. As of June 30, 2002, the total notional amount of the foreign currency forward contracts is 268.9 million Euro and the forward currency rates range from .8624 to .9904 (the weighted average of the rates is .8784). The maturities of these forward contracts depend on the purchase contract payment dates and range in time from July 2002 to May 2005. The mark- to-market valuation of the forward contracts at June 30, 2002 was a net asset of $27.5 million. The counterparty banks obligated on 252.4 million Euro of the notional amount of these agreements are rated by Standard and Poor's Rating Services at AA on their senior debt obligations as of June 30, 2002. The counterparty bank obligated on 16.5 million Euro of the notional amount of these agreements, which are Entergy Gulf States contracts, are rated by Standard and Poor's Rating Services at A+ on their senior debt obligations as of June 30, 2002. For the Entergy Gulf States contracts, the total notional amount of the foreign currency forward contracts are 33.7 million Euro and the forward currency rates range from .8742 to .9831 (the weighted average of the rates is .8772). The maturities of the Entergy Gulf States forward contracts depend on the purchase contract payment dates and range in time from January 2003 to July 2004. The mark-to- market valuation of the forward contracts at June 30, 2002 was a net asset of $3.5 million. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flow Operations Net cash flow provided by (used in) operating activities for Entergy, the domestic utility companies, and System Energy for the six months ended June 30, 2002 and 2001 was as follows: Company 2002 2001 (In Millions) Entergy $803.0 $600.7 Entergy Arkansas $133.8 $160.5 Entergy Gulf States $242.8 $184.9 Entergy Louisiana $190.6 $195.2 Entergy Mississippi $59.2 ($8.4) Entergy New Orleans ($15.0) ($1.8) System Energy $121.6 $95.5 Entergy's consolidated net cash flow provided by operating activities increased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to: o an $85 million increase in operating cash flow provided by domestic utility primarily resulting from an increase in fuel-related accounts payable in 2002 due to larger payments on these payables in 2001; and o an $89 million increase in operating cash flow provided by domestic non-utility nuclear, primarily due to nuclear refueling outages at Pilgrim and Indian Point 3 in 2001 combined with increased net income in 2002 primarily resulting from the operation of Indian Point 2. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for discussion of a change in a method of accounting for tax purposes made by Entergy Louisiana in 2001. The new tax accounting method is now expected to provide a cumulative cash flow benefit of approximately $700 million - $800 million through 2004, which is expected to reverse in the years 2005 through 2031. The timing of the reversal of this benefit depends on several variables, including the price of power. Approximately half of the consolidated cash flow benefit for Entergy Corporation occurred in 2001 and the remainder will occur in 2002. In accordance with Entergy's intercompany tax allocation agreement, most of the cash flow benefit for Entergy Louisiana will occur in 2002. While Entergy believes it is entitled to make this change in its method of accounting for tax purposes, Entergy recognizes that it is a case of first impression and may be subject to an Internal Revenue Service audit. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Money pool activity also affected the operating cash flows of the domestic utility companies and System Energy. The money pool is an inter-company funding arrangement designed to reduce the domestic utility companies' and System Energy's dependence on external short- term borrowings. The money pool provides a means by which, on a daily basis, the excess funds of Entergy Corporation, the domestic utility companies, and System Energy may be used by the domestic utility companies or System Energy to fulfill short-term cash requirements. The following table shows the domestic utility companies and System Energy's receivables from and (payables) to the money pool as of the indicated date. An increase in a company's (payable) to the money pool increases the operating cash flow of that company. An increase in a company's receivable from the money pool decreases the operating cash flow of that company. June 30, December 31, June 30, December 31, Company 2002 2001 2001 2000 (In Millions) Entergy Arkansas $25.1 $23.8 ($165.4) ($30.7) Entergy Gulf States ($7.9) $27.7 ($26.6) $23.4 Entergy Louisiana ($84.5) $3.8 $72.0 $22.9 Entergy Mississippi ($3.8) $11.5 ($34.1) ($33.3) Entergy New Orleans ($5.3) $9.2 ($16.9) ($5.7) System Energy $62.8 $13.9 $256.7 $155.3 See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the Form 10-K for a discussion of the limitations on these borrowings. Investing Activities Net cash used in investing activities decreased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to: o cash contributions of approximately $414 million made in 2001 in the formation of Entergy-Koch; o cash of $272 million invested in 2001 to provide collateral for the NYPA line of credit in conjunction with the acquisition of the FitzPatrick and Indian Point 3 nuclear power plants; and o the maturity in 2002 of $150 million of other temporary investments. Partially offsetting the decrease in net cash used in investing activities was an increase of $153 million in construction expenditures for the six months ended June 30, 2002 compared to the same period in 2001 primarily related to turbine purchases for EWO's Harrison County project, as discussed below. Financing Activities Net cash used in financing activities increased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to: o net retirements of long-term debt by the domestic utility segment of $403 million in 2002, compared to net issuances of long- term debt of $48 million in 2001; and o the retirement of $268 million of long-term debt by EWO in April 2002 related to the purchase of the rights to the turbines discussed below. Partially offsetting the increase in net cash used in financing activities was an increase in the amount of draws made on short-term credit facilities by Entergy Corporation in 2002. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Capital Resources See MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources" in the Form 10-K for a discussion of Entergy's uses and sources of capital. The following are updates to the Form 10-K. Uses of Capital Capital Expenditures See "ANO Matters" in Part I of the Form 10-K for discussion of the ANO 1 steam generators and reactor vessel closure head. On July 25, 2002, the Board authorized Entergy Arkansas and Entergy Operations to replace the ANO 1 steam generators and reactor vessel closure head. Entergy management estimates the cost of the fabrication and replacement to be approximately $235 million, of which approximately $135 million will be incurred through 2004. Management expects a contractor for the installation of the replacement steam generators and reactor vessel closure head to be selected by December 2002. Management expects that the replacement will occur during a planned refueling outage in 2005. Entergy's current capital investment plan through 2004 includes $2.9 billion in spending by the domestic utility for maintenance capital; $0.4 billion in spending by energy commodity services comprised of $0.1 billion for after-tax turbine contract cancellation costs and $0.3 billion for previous investment commitments; and $0.7 billion in spending by the domestic non-utility nuclear business comprised of $0.5 billion for maintenance capital and $0.2 billion for the purchase of Vermont Yankee (discussed below). These amounts reflect the approval by the Board of the ANO 1 steam generator replacement project and the decision announced during 2002 to end new greenfield development by EWO. In addition to these amounts, Entergy estimates that an additional $2.8 billion will be available for other investments which have not yet been identified. This amount is based upon Entergy's current estimate of operating cash flows and dividends over the period from 2002 through 2004, and includes approximately $1.4 billion of additional debt which Entergy believes it can issue and still maintain its targeted 50% net debt to net capital ratio. Entergy Wholesale Operations As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric Company. The rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. In conjunction with Entergy's obligations related to this sale, Entergy retained certain rights to reacquire turbines or to cancel the construction of the turbines. In April 2002, Entergy paid a total of $351 million to reacquire the rights to the turbines. $83 million of the payments were for the turbines to be placed in the Harrison County project, which is in construction and scheduled to be completed in 2003. Entergy subsequently received a reimbursement from General Electric of $28 million of prior payments. With the reacquisition of the rights to the turbines, EWO's obligations to the special-purpose entity and Entergy Corporation's guarantee of up to $309 million in support of those obligations were terminated. EWO placed 17 of the original 36 turbines at sites that are either operating, under construction, or sold. Of the remaining 19 turbines, four were sold to a third party, three were optioned to another third party, and 12 were cancelled. As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," Entergy recorded a $180.2 million provision in the first six months of 2002 for the net costs resulting from cancellation or sale of the turbines that were subject to purchase commitments with the special-purpose entity. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Share Repurchases In accordance with its stock option plans, Entergy periodically grants stock options to its employees, which may be exercised to obtain shares of Entergy common stock. In order to reduce the increase in outstanding common shares caused by option exercises, Entergy plans to purchase up to 10 million shares of its common stock through mid-2004 on a discretionary basis through open market purchases or privately negotiated transactions. As of July 31, 2002, Entergy has repurchased 663,100 shares of common stock pursuant to this plan for a total purchase price of $27.8 million. Vermont Yankee In July 2002, Entergy's domestic non-utility nuclear business purchased the 510 MW Vermont Yankee nuclear power plant located in Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation for $180 million. Entergy received the plant, nuclear fuel, inventories, and related real estate. The liability to decommission the plant, as well as related decommissioning trust funds of approximately $310 million, were also transferred to Entergy. The acquisition included a 10-year power purchase agreement (PPA) under which the former owners will buy the power produced by the plant. Damhead Creek Credit Facility As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO increased its borrowings under the Damhead Creek credit facility in 2000 by approximately $164 million to finance construction of the plant. Damhead Creek commenced commercial operation in 2001. The Damhead Creek credit facility requires that the annual debt service coverage ratio be at least 1.05 to 1 for the previous 12 months at semi-annual dates commencing with June 30, 2002. Given the low electricity prices currently affecting the UK market, Damhead Creek would not have met the annual debt service coverage ratio test in respect of the 12 months ended June 30, 2002, but the lenders amended the facility so that the coverage ratio calculations would not commence until December 31, 2002. Damhead Creek is currently in negotiations with the lenders to develop and implement a debt restructuring for the project prior to December 2002. If a debt restructuring agreement cannot be reached, however, Damhead Creek will likely not meet the debt service coverage ratio provisions of the credit facility on December 31, 2002. In the event the annual debt service coverage ratio is deficient at December 31, 2002, Damhead Creek will seek a waiver of the default from the lenders. There is no requirement for Entergy or EPDC to make capital contributions or provide credit support to Damhead Creek following the occurrence of an event of default. Sources of Capital Entergy Corporation renewed its 364-day credit facility on May 16, 2002 and increased the available capacity from $1.325 billion to $1.425 billion. On July 15, 2002, the available capacity was increased to $1.450 billion. Entergy Arkansas and Entergy Mississippi each renewed their respective 364-day credit facilities on May 31, 2002. Amounts drawn on short-term credit facilities are as follows: Expiration Amount of Amount Drawn as of Company Date Facility June 30, 2002 Entergy Corporation May 2003 $1.450 billion $645 million Entergy Arkansas May 2003 $63 million - Entergy Louisiana January 2003 $15 million $15 million Entergy Mississippi May 2003 $25 million $25 million ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy Corporation has used borrowings from its credit facility for general corporate purposes and to make additional investments in competitive businesses. The domestic utility companies and System Energy have approximately $990 million of currently maturing long-term debt that matures primarily in the first half of 2003. It is expected that the majority of these amounts will be refinanced prior to or at maturity. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's consolidated earnings applicable to common stock were $241.7 million and $162.7 million for the three and six months ended June 30, 2002, respectively, compared to $238.9 million and $393.1 million for the three and six months ended June 30, 2001, respectively. The changes in earnings (loss) applicable to common stock by operating segments for the three and six months ended June 30, 2002 compared to the three and six months ended June 30, 2001 were as follows: Three Months Ended Six Months Ended Operating Segments Increase/(Decrease) Increase/(Decrease) (In Thousands) Domestic Utility $26,372 $14,954 Domestic Non-Utility Nuclear 20,430 29,112 Energy Commodity Services (31,867) (265,338) Other, including parent company (12,188) (9,060) ------- --------- Total $2,747 ($230,332) ======= ========= Entergy's income before taxes is discussed below according to the operating segments listed above. See Note 6 to the financial statements for further discussion of Entergy's operating segments and their financial results for the three and six months ended June 30, 2002 and 2001. Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC., ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW ORLEANS, INC." which follow each company's financial statements in this report for further information with respect to operating statistics. Domestic Utility The increase in earnings for domestic utility for the three months ended June 30, 2002 compared with the same period in 2001 was primarily due to more favorable sales volume and weather, increased unbilled revenues, and decreased interest expense. The increase in earnings was partially offset by increased other operation and maintenance expenses. The increase in earnings for domestic utility for the six months ended June 30, 2002 compared with the same period in 2001 was primarily due to increased unbilled revenues and decreased interest expense. The increase in earnings was partially offset by increased other operation and maintenance expenses and decreased other income. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues The changes in electric operating revenues for domestic utility for the three and six months ended June 30, 2002 compared to the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences ($12.7) ($8.0) Rate riders (11.4) (26.5) Fuel cost recovery (348.0) (814.7) Sales volume/weather 23.2 1.5 Unbilled revenue 46.2 103.9 Other revenue 8.1 30.4 Sales for resale (9.5) (62.2) ------- ------- Total ($304.1) ($775.6) ======= ======= Fuel cost recovery The domestic utility companies are allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 as a result of decreased recovery, through various fuel recovery mechanisms, of lower fuel and purchased power expenses primarily due to decreases in the market price of natural gas and purchased power. Also contributing to the decreases were a decrease in the fixed fuel factor in March 2002 and the termination of a fuel recovery surcharge in February 2002 in the Texas jurisdiction of Entergy Gulf States. Corresponding to the decreases in fuel cost recovery revenues, fuel and purchased power expenses related to electric sales decreased by $344.7 million and $821.5 million for the three and six months ended June 30, 2002, respectively, primarily due to decreases in the market price of natural gas and purchased power in 2002. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Higher electric sales volume increased revenues for the three months ended June 30, 2002 due to increased usage of 483 GWH in the residential and commercial sectors, after adjusting for the weather effect. Partially offsetting this increase was a decrease in usage of 416 GWH in the industrial sector primarily from contractual modifications that reclassified the sales associated with certain Entergy Gulf States customers from retail to wholesale. The effect of favorable weather in the second quarter of 2002 compared to the second quarter of 2001 increased electric sales volume by 190 GWH in the residential and commercial sectors. The number of customers in the domestic utility companies' service territories increased only slightly during these periods. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended June 30, 2002 and 2001 includes the reversal of the estimates for March 2002 and March 2001, respectively. The increase for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 is due to the effect on the June 2001 unbilled calculation of higher unbilled revenue in March 2001 caused by higher fuel rates. Unbilled revenue for the six months ended June 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 is due to the effect on the June 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by higher fuel rates and volume/weather. Sales for resale Sales for resale decreased for the six months ended June 30, 2002 primarily due to a decrease in the average price of energy sold to wholesale customers coupled with a decrease in sales volume to municipal and co-operative customers. The decrease is partially offset by the contractual modifications that resulted in the reclassified Entergy Gulf States sales noted above in sales volume/weather. Gas operating revenues Natural gas revenues decreased $69.6 million for the six months ended June 30, 2002 primarily due to a decrease in the market price of natural gas. Other effects on results of operations Results for the three and six months ended June 30, 2002 for domestic utility were also affected by the following: o increases in other operation and maintenance expenses of $203.7 million for the three months ended and $239.4 million for the six months ended primarily due to increased expenses at Entergy Arkansas. Entergy Arkansas had increased expenses of $157.1 million for the three months ended and $159.9 million for the six months ended due to the March 2002 Settlement Agreement and 2001 earnings review that became final in the second quarter of 2002, allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through previously-collected TCA amounts. Entergy Arkansas also had increased expenses of $24.5 million due to the reversal in 2001 of ice storm costs previously charged to expense in December 2000. These increases are partially offset by the increased other regulatory credits discussed below; ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS o increases in other regulatory credits of $183.7 million for the three months ended and $181.8 million for the six months ended primarily due to the March 2002 Settlement Agreement allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts; o decreases in interest expense of $21.9 million for the three months ended and $43.2 million for the six months ended, which are explained below; o increases in depreciation and amortization expense of $18.7 million for the three months ended and $18.2 million for the six months ended, which are primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives which lowered expense in 2001 in accordance with regulatory treatment; and o a decrease in interest income of $24.0 million for the six months ended primarily due to lower interest earned on declining deferred fuel balances. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. The decreases in interest expense for the three and six months ended June 30, 2002 are primarily due to the following: o decreases of $16.7 million for the three months ended and $29.4 million for the six months ended in interest on long-term debt primarily due to the retirement of long-term debt in late 2001 and early 2002; and o decreases of $5.2 million for the three months ended and $13.8 million for the six months ended in other interest expense primarily due to interest recorded on System Energy's reserve for rate refund in 2001. The refund was made in December 2001. Domestic Non-Utility Nuclear The increases in earnings for the three and six months ended June 30, 2002 compared to the same periods in 2001 for domestic non- utility nuclear were primarily due to the operation of Indian Point 2, which was purchased in September 2001, combined with improved operational performance by the nuclear fleet. Following are key performance measures for domestic non-utility nuclear during the three and six months ended June 30, 2002 and 2001: Three Months Ended Six Months Ended 2002 2001 2002 2001 Net MW in operation at June 30 3,445 2,475 3,445 2,475 Generation in GWH for the period 7,449 4,208 14,958 9,467 Capacity factor for the period 98.5% 77.8% 99.4% 88.0% ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The following fluctuations in the results of operations for domestic non-utility nuclear for the three months ended June 30, 2002 were primarily caused by the acquisition of Indian Point 2 and the increase in capacity factors shown above: o operating revenues increased $147.0 million to $297.1 million; o fuel expenses increased $13.5 million to $27.2 million; o nuclear refueling outage expenses increased $4.8 million to $9.9 million; o other operation and maintenance expenses increased $79.8 million to $143.4 million; o taxes other than income taxes increased $3.0 million to $6.7 million; and o depreciation and amortization expenses increased $6.3 million to $8.9 million. The following fluctuations in the results of operations for domestic non-utility nuclear for the six months ended June 30, 2002 were primarily caused by the acquisition of Indian Point 2 and the increase in capacity factors shown above: o operating revenues increased $246.6 million to $576.0 million; o fuel expenses increased $23.5 million to $53.6 million; o nuclear refueling outage expenses increased $14.4 million to $19.5 million; o other operation and maintenance expenses increased $130.2 million to $284.1 million; o taxes other than income taxes increased $8.9 million to $23.1 million; and o depreciation and amortization expenses increased $11.9 million to $17.0 million. Energy Commodity Services The decreases in earnings for energy commodity services for the three and six months ended June 30, 2002 were primarily due to the charges, discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS - Entergy Wholesale Operations," to reflect the impairment of certain assets, including impairments related to EWO's turbine acquisition plans, and to reflect the change in EWO's development plans. $401.4 million ($260.9 million net of tax) was recorded in the first quarter of 2002, and an additional $18.1 million ($10.6 million net of tax) was recorded in the second quarter of 2002. The second quarter amount includes an offsetting net of tax benefit of $18.5 million related to the sale of four turbines to a third party. The pre-tax charges are reflected in operation and maintenance expenses in the Consolidated Statement of Operations. Revenues decreased for energy commodity services by $235.0 million and $587.1 million for the three and six months ended June 30, 2002, respectively, primarily due to decreases of $159.8 million and $367.9 million for the three and six months ended June 30, 2002, respectively, resulting from the sale of EWO's interest in Highland Energy in the fourth quarter of 2001 combined with decreases of $60.0 million and $136.3 million for the three and six months ended June 30, 2002, respectively, resulting from the sale of EWO's interest in the Saltend plant in August 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Also contributing to the decreases in revenues for energy commodity services was the contribution of substantially all of Entergy's power marketing and trading business to Entergy-Koch in February 2001. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. As a result, for the six months ended June 30, 2002, revenues from this activity were lower by $134.9 million compared to the same period in 2001 and purchased power expenses were lower by $130.6 million. The net income effect of the lower revenue for the six months ended June 30, 2002 was offset by the equity in earnings from Entergy's interest in Entergy-Koch. The equity in earnings from Entergy's interest in Entergy-Koch was $55.1 million lower for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 primarily due to lower earnings from the trading business. Entergy-Koch Trading had lower trading earnings due to lower volatility in the power market and lower profitability on gas trading in the second quarter of 2002 compared to the second quarter of 2001. Following are key performance measures for Entergy-Koch's operations for the quarter and year-to-date period ended June 30, 2002 and 2001: Second Quarter Year-To-Date 2002 2001 2002 2001 Entergy-Koch Trading Gas volatility 53% 52% 67% 71% Electricity volatility 44% 78% 45% 76% Gas marketed (BCF/D) 4.8 6.8 5.1 7.0 Electricity marketed (GWH) 26,877 26,386 66,705 57,395 Gain/loss days 1.7 4.3 1.9 2.9 Gulf South Pipeline Throughput (BCF/D) 2.31 2.26 2.50 2.36 Production cost ($/MMBTU) $0.096 $0.095 $0.084 $0.093 As discussed in the Form 10-K, the partnership agreement allocates profits on a disproportionate basis. Substantially all of Entergy- Koch's profits were allocated to Entergy for the three and six months ended June 30, 2002. Also partially offsetting the decrease in earnings for energy commodity services for the six months ended June 30, 2002 was a net increase in earnings of $7.3 million ($5.0 million net of tax) related to the mark-to-market of the Damhead Creek power and gas contracts in the first quarter of 2002. Other, including parent company Earnings for Other, including the parent company, decreased for the three months ended June 30, 2002 primarily due to lower interest income in 2002 resulting from lower yields on invested cash. The reclassification to the energy commodity services segment for internal reporting purposes of $12.5 million of the 2001 write-down of investments in Latin American projects also contributed to the decrease. The decrease was partially offset by an increase in earnings related to the cessation of amortization of goodwill in January 2002 upon implementation of SFAS 142. Earnings for Other, including the parent company, decreased for the six months ended June 30, 2002 primarily due to lower interest income in 2002 resulting from lower yields on invested cash, partially offset by an increase in earnings related to the cessation of amortization of goodwill in January 2002 upon implementation of SFAS 142. Refer to Note 7 to the financial statements herein for further discussion of the implementation of SFAS 142. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 37.5% and 40.3%, respectively. The decrease in the second quarter results primarily from the realization of tax benefits in 2002 related to the impairment provisions recorded in 2001 on EWO's Latin American assets. The effective income tax rates for the six months ended June 30, 2002 and 2001 were 41.3% and 40.3%, respectively.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands, Except Share Data) OPERATING REVENUES Domestic electric $1,686,758 $1,990,838 $3,087,767 $3,863,383 Natural gas 24,982 30,548 71,360 140,931 Competitive businesses 384,841 484,889 798,288 1,154,392 ---------- ---------- ---------- ---------- TOTAL 2,096,581 2,506,275 3,957,415 5,158,706 ---------- ---------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 471,413 1,025,619 940,274 2,151,481 Purchased power 233,518 245,895 403,004 609,774 Nuclear refueling outage expenses 24,687 23,077 49,874 40,283 Provision for turbine commitments, asset impairments and restructuring charges 18,169 - 419,542 - Other operation and maintenance 727,017 436,110 1,251,369 906,569 Decommissioning 8,198 8,903 16,391 17,804 Taxes other than income taxes 82,194 89,662 184,565 192,125 Depreciation and amortization 205,876 183,372 410,999 386,448 Other regulatory charges (credits) - net (170,645) 13,088 (169,082) 12,699 ---------- ---------- ---------- ---------- TOTAL 1,600,427 2,025,726 3,506,936 4,317,183 ---------- ---------- ---------- ---------- OPERATING INCOME 496,154 480,549 450,479 841,523 ---------- ---------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 8,323 6,644 15,004 11,587 Gain on sale of assets - net 1,009 760 1,674 1,344 Interest and dividend income 27,710 33,595 51,237 81,071 Equity in earnings of unconsolidated equity affiliates 17,740 70,780 92,804 95,543 Miscellaneous - net (109) 432 (11,182) 8,649 ---------- ---------- ---------- ---------- TOTAL 54,673 112,211 149,537 198,194 ---------- ---------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 121,393 130,732 244,919 259,703 Other interest - net 34,897 51,386 60,371 99,300 Distributions on preferred securities of subsidiary 4,709 4,709 9,419 9,419 Allowance for borrowed funds used during construction (6,291) (5,492) (11,930) (9,431) ---------- ---------- ---------- ---------- TOTAL 154,708 181,335 302,779 358,991 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 396,119 411,425 297,237 680,726 Income taxes 148,534 165,842 122,636 274,272 ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME 247,585 245,583 174,601 406,454 Preferred dividend requirements and other 5,932 6,677 11,872 13,393 ---------- ---------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $241,653 $238,906 $162,729 $393,061 ========== ========== ========== ========== Earnings per average common share: Basic $1.08 $1.08 $0.73 $1.78 Diluted $1.06 $1.06 $0.72 $1.75 Dividends declared per common share $0.33 $0.32 $0.66 $0.63 Average number of common shares outstanding: Basic 224,330,654 221,113,598 223,143,647 220,518,674 Diluted 228,847,752 225,706,421 227,588,889 224,749,374 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Consolidated net income $174,601 $406,454 Noncash items included in net income: Reserve for regulatory adjustments 12,684 50,533 Other regulatory charges (credits) - net (169,082) 12,699 Depreciation, amortization, and decommissioning 427,390 404,252 Deferred income taxes and investment tax credits (171,328) (6,673) Allowance for equity funds used during construction (15,004) (11,587) Gain on sale of assets - net (1,674) (1,344) Equity in earnings of unconsolidated equity affiliates (92,804) (95,543) Provision for turbine commitments, asset impairments and restructuring charges 419,542 - Changes in working capital: Receivables (139,808) 55,382 Fuel inventory (7,332) (19,701) Accounts payable (9,974) (433,769) Taxes accrued 255,629 230,308 Interest accrued (31,416) (2,697) Deferred fuel 549 217,152 Other working capital accounts (43,475) (115,947) Provision for estimated losses and reserves (8,576) (10,890) Changes in other regulatory assets 186,824 (139,361) Other 16,237 61,431 -------- ---------- Net cash flow provided by operating activities 802,983 600,699 -------- ---------- INVESTING ACTIVITIES Construction/capital expenditures (736,670) (583,782) Allowance for equity funds used during construction 15,004 11,587 Nuclear fuel purchases (161,090) (97,126) Proceeds from sale/leaseback of nuclear fuel 132,472 60,632 Proceeds from sale of businesses 147,115 14,000 Investment in other non-regulated/non-utility properties (19,057) 17,515 Decrease (increase) in other investments 39,460 (621,801) Proceeds from other temporary investments 150,000 - Decommissioning trust contributions and realized change in trust assets (27,894) (38,842) Other regulatory investments (29,755) (56,722) Other (2,690) 52,580 -------- ---------- Net cash flow used in investing activities (493,105) (1,241,959) -------- ---------- See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 299,431 90,382 Common stock 112,705 59,304 Retirement of long-term debt (910,908) (126,156) Repurchase of common stock - (7,813) Redemption of preferred stock (1,403) (4,574) Changes in short-term borrowings - net 334,333 95,000 Dividends paid: Common stock (147,329) (134,760) Preferred stock (11,872) (11,214) -------- --------- Net cash flow used in financing activities (325,043) (39,831) -------- --------- Effect of exchange rates on cash and cash equivalents (5,748) (2,638) -------- --------- Net decrease in cash and cash equivalents (20,913) (683,729) Cash and cash equivalents at beginning of period 751,573 1,382,424 -------- --------- Cash and cash equivalents at end of period $730,660 $698,695 ======== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $333,750 $351,033 Income taxes $33,877 $6,038 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($28,584) ($8,862) Net assets contributed to Entergy-Koch - $80,145 Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $144,446 $129,866 Temporary cash investments - at cost, which approximates market 585,875 618,327 Special deposits 339 3,380 ----------- ----------- Total cash and cash equivalents 730,660 751,573 ----------- ----------- Other temporary investments - 150,000 Notes receivable 3,244 2,137 Accounts receivable: Customer 343,479 294,799 Allowance for doubtful accounts (19,709) (19,255) Other 272,012 286,671 Accrued unbilled revenues 403,842 268,680 ----------- ----------- Total receivables 999,624 830,895 ----------- ----------- Deferred fuel costs 201,651 172,444 Accumulated deferred income taxes - 6,488 Fuel inventory - at average cost 104,829 97,497 Materials and supplies - at average cost 468,538 460,644 Deferred nuclear refueling outage costs 69,750 79,755 Prepayments and other 120,481 129,251 ----------- ----------- TOTAL 2,698,777 2,680,684 ----------- ----------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 706,700 766,103 Decommissioning trust funds 1,761,487 1,775,950 Non-utility property - at cost (less accumulated depreciation) 293,869 295,616 Other 424,245 495,542 ----------- ----------- TOTAL 3,186,301 3,333,211 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric 26,608,136 26,359,376 Property under capital lease 749,011 753,310 Natural gas 208,201 201,841 Construction work in progress 1,238,512 882,829 Nuclear fuel under capital lease 273,850 265,464 Nuclear fuel 247,760 232,387 ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT 29,325,470 28,695,207 Less - accumulated depreciation and amortization 12,122,894 11,805,578 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT - NET 17,202,576 16,889,629 ----------- ----------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 927,990 946,126 Unamortized loss on reacquired debt 160,822 166,546 Other regulatory assets 538,750 707,439 Long-term receivables 26,437 28,083 Goodwill 377,472 377,472 Other 882,209 781,121 ----------- ----------- TOTAL 2,913,680 3,006,787 ----------- ----------- TOTAL ASSETS $26,001,334 $25,910,311 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $1,092,562 $682,771 Notes payable 685,351 351,018 Accounts payable 584,762 592,529 Customer deposits 199,571 188,230 Taxes accrued 739,538 550,133 Accumulated deferred income taxes 11,294 - Nuclear refueling outage costs 8,150 2,080 Interest accrued 161,004 192,420 Obligations under capital leases 150,016 149,352 Other 265,379 345,387 ----------- ----------- TOTAL 3,897,627 3,053,920 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,387,719 3,574,664 Accumulated deferred investment tax credits 459,499 471,090 Taxes accrued 450,000 400,000 Obligations under capital leases 183,452 181,085 Other regulatory liabilities 179,921 135,878 Decommissioning 1,217,677 1,194,333 Transition to competition 79,098 231,512 Regulatory reserves 50,275 37,591 Accumulated provisions 410,548 425,399 Other 896,821 852,269 ----------- ----------- TOTAL 7,315,010 7,503,821 ----------- ----------- Long-term debt 6,558,538 7,321,028 Preferred stock with sinking fund 24,781 26,185 Preferred stock without sinking fund 334,337 334,337 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Common stock, $.01 par value, authorized 500,000,000 shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482 Paid-in capital 4,666,754 4,662,704 Retained earnings 3,653,841 3,638,448 Accumulated other comprehensive loss (17,241) (88,794) Less - treasury stock, at cost (23,500,208 shares in 2002 and 27,441,384 shares in 2001) 649,795 758,820 ----------- ----------- TOTAL 7,656,041 7,456,020 ----------- ----------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,001,334 $25,910,311 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,486,122 $3,275,548 Add - Earnings applicable to common stock 241,653 $241,653 238,906 $238,906 Deduct: Dividends declared on common stock 74,093 69,679 Capital stock and other expenses (159) (366) ---------- ---------- Total 73,934 69,313 ---------- ---------- Retained Earnings - End of period $3,653,841 $3,445,141 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes ($17,631) ($42,513) Other accumulated comprehensive (loss) items (10,048) (75,455) ---------- ---------- Total (27,679) (117,968) ---------- ---------- Net derivative instrument fair value changes arising during the period 14,003 14,003 20,645 20,645 Foreign currency translation adjustments 2,101 (64,233) (1,608) (1,608) Net unrealized investment (losses) (5,666) (5,666) (1,502) (1,502) ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (3,628) (21,868) Other accumulated comprehensive (loss) items (13,613) (78,565) ---------- ---------- Total ($17,241) ($100,433) ========== -------- ========== -------- Comprehensive Income $185,757 $256,441 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,663,931 $4,663,923 Add: Common stock issuances related to stock plans 2,823 (2,589) ---------- ---------- Paid-in Capital - End of period $4,666,754 $4,661,334 ========== ========== Six Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,638,448 $3,190,639 Add - Earnings applicable to common stock 162,729 $162,729 393,061 $393,061 Deduct: Dividends declared on common stock 147,355 138,925 Capital stock and other expenses (19) (366) ---------- ---------- Total 147,336 138,559 ---------- ---------- Retained Earnings - End of period $3,653,841 $3,445,141 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes ($17,973) - Other accumulated comprehensive (loss) items (70,821) ($75,033) ---------- ---------- Total (88,794) (75,033) ---------- ---------- Cumulative effect to January 1, 2001 of accounting change regarding fair value of derivative instruments - - (18,021) - Net derivative instrument fair value changes arising during the period 14,345 14,345 (3,847) (3,847) Foreign currency translation adjustments 68,057 1,723 (3,635) (3,635) Net unrealized investment gains (losses) (10,849) (10,849) 103 103 ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (3,628) (21,868) Other accumulated comprehensive (loss) items (13,613) (78,565) ---------- ---------- Total ($17,241) ($100,433) ========== -------- ========== -------- Comprehensive Income $167,948 $385,682 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,662,704 $4,660,483 Add: Common stock issuances related to stock plans 4,050 851 ---------- ---------- Paid-in Capital - End of period $4,666,754 $4,661,334 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 549.6 $ 617.2 ($67.6) (11) Commercial 405.6 481.4 (75.8) (16) Industrial 465.7 652.9 (187.2) (29) Governmental 43.1 53.7 (10.6) (20) --------- --------- ------- Total retail 1,464.0 1,805.2 (341.2) (19) Sales for resale 84.9 94.4 (9.5) (10) Other 137.8 91.2 46.6 51 --------- --------- ------- Total $ 1,686.7 $ 1,990.8 ($304.1) (15) ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 7,202 6,733 469 7 Commercial 6,112 5,908 204 3 Industrial 10,294 10,710 (416) (4) Governmental 654 630 24 4 --------- --------- ------- Total retail 24,262 23,981 281 1 Sales for resale 2,444 2,182 262 12 --------- --------- ------- Total 26,706 26,163 543 2 ========= ========= ======= Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 1,051.2 $ 1,252.2 ($201.0) (16) Commercial 762.5 932.9 (170.4) (18) Industrial 861.8 1,306.5 (444.7) (34) Governmental 81.7 107.2 (25.5) (24) --------- --------- ------- Total retail 2,757.2 3,598.8 (841.6) (23) Sales for resale 154.6 216.8 (62.2) (29) Other 176.0 47.8 128.2 268 --------- --------- ------- Total $ 3,087.8 $ 3,863.4 ($775.6) (20) ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 14,476 14,269 207 1 Commercial 11,710 11,482 228 2 Industrial 19,884 21,022 (1,138) (5) Governmental 1,271 1,245 26 2 --------- --------- ------- Total retail 47,341 48,018 (677) (1) Sales for resale 4,658 4,631 27 1 --------- --------- ------- Total 51,999 52,649 (650) (1) ========= ========= ======= ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 primarily due to decreased unbilled revenue, increased other operation and maintenance expenses, increased depreciation and amortization expenses, decreased other income, and the effect of the March 2002 Settlement Agreement and the 2001 earnings review that were approved by the APSC in the second quarter of 2002. The settlement agreement allowed Entergy Arkansas to recover 2000 and 2001 ice storm repair expenses through previously-collected TCA amounts. The effect of this settlement agreement increased other operation and maintenance expenses, other regulatory credits, and provisions for rate refunds. The net impact of the settlement agreement and the 2001 earnings review is an $8.5 million decrease in net income. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Net income decreased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to decreased sales for resale, increased other operation and maintenance expenses, increased depreciation and amortization expenses, decreased other income, and the effect of the March 2002 Settlement Agreement discussed above. The overall decrease was partially offset by increased unbilled revenue. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences ($0.7) $4.7 Rate riders (6.6) (15.0) Fuel cost recovery (29.4) (13.3) Sales volume/weather (0.4) (8.6) Unbilled revenue (5.1) 6.5 Provisions for rate refunds (18.1) (18.1) Other revenue 0.6 1.0 Sales for resale (25.5) (58.4) ------ ------- Total ($85.2) ($101.2) ====== ======= Base rate differences Base rate differences increased revenues for the six months ended June 30, 2002 primarily due to the effect of block rates on residential customers and higher effective prices for commercial and industrial customers due to decreased KWH usage. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Rate riders Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Rate rider revenues decreased for the three and six months ended June 30, 2002 primarily due to a decrease in the Grand Gulf rate rider effective January 2002 compared to the rate rider in effect during the three and six months ended June 30, 2001. The Grand Gulf rate rider allows Entergy Arkansas to recover 78% of its share of operating costs for Grand Gulf 1. Fuel cost recovery Entergy Arkansas is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Arkansas' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 primarily due to a decrease in the energy cost recovery rider that became effective in April 2002. The rider utilizes prior year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true- up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The rider is discussed further in Note 2 to the financial statements in the Form 10-K. Sales volume/weather Electric sales volume decreased revenues for the six months ended June 30, 2002 primarily due to decreased usage of 115 GWH in the industrial sector. The effect of less favorable weather in the first half of 2002 compared with the first half of 2001 decreased electric sales volume by 123 GWH in the residential and commercial sectors. The decreased usage resulted in higher effective rates in each sector, which are reflected in base rate differences. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended June 30, 2002 and 2001 includes the reversal of the estimates for March 2002 and March 2001, respectively. The decrease for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 is due to the effect on the June 2001 calculation of higher unbilled revenue in March 2001 caused by increased volume. Unbilled revenue for the six months ended June 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 is due to the effect on the June 2002 unbilled calculation of higher unbilled revenue in June 2002 caused by increased volume. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Provisions for rate refunds Revenues decreased for the three and six months ended June 30, 2002 due to the provisions for rate refunds to large general service customers pursuant to the March 2002 Settlement Agreement. The refunds are scheduled to be distributed beginning in August 2002. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Sales for resale Sales for resale decreased for the three and six months ended June 30, 2002 due to a decrease in the average price of energy sold to wholesale customers coupled with a decrease in sales volume to municipalities and co-operatives. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended June 30, 2002 primarily due to: o decreased market prices of natural gas and purchased power; and o decreased coal generation due to planned and unplanned maintenance outages. Fuel and purchased power expenses decreased for the six months ended June 30, 2002 primarily due to decreased market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended June 30, 2002 primarily due to: o increased expenses consisting of $157.1 million due primarily to the March 2002 Settlement Agreement and 2001 earnings review allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts and $24.5 million due to the reversal in 2001 of ice storm costs previously charged to expense in December 2000; o increased salaries and office expense of $2.7 million; and o increased nuclear plant expense of $1.6 million due to additional security costs. Other operation and maintenance expenses increased for the six months ended June 30, 2002 primarily due to: o increased expenses consisting of $159.9 million due primarily to the March 2002 Settlement Agreement and 2001 earnings review allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts and $24.5 million due to the reversal in 2001 of ice storm costs previously charged to expense in December 2000; o lower nuclear insurance refunds of $3.1 million; and o increased vegetation management spending of $2.1 million. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Depreciation, amortization, and decommissioning Depreciation and amortization increased for the three and six months ended June 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory charges (credits) - net Other regulatory credits increased for the three and six months ended June 30, 2002 primarily due to the March 2002 Settlement Agreement allowing Entergy Arkansas to recover 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts. The increase in other regulatory credits is offset by an increase other operation and maintenance expenses discussed above. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Other Other income (deductions) Other income decreased for the three and six months ended June 30, 2002 primarily due to: o a decrease in interest income recorded on the deferred fuel balance resulting from increased recovery; and o reversal of the first quarter 2002 recording of 2000 ice storm expenses in other operation and maintenance of $2.7 million, as originally recommended by the APSC staff, in accordance with the March 2002 Settlement Agreement. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 53.4% and 40.8%, respectively. The effective income tax rates for the six months ended June 30, 2002 and 2001 were 42.1% and 41.3%, respectively. The increase in the effective tax rate for the three months ended June 30, 2002 was primarily due to the effect of increased flow-through and permanent book and tax timing differences related to the March 2002 Settlement Agreement in addition to increased depreciation book and tax timing differences.
ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $367,926 $453,108 $745,749 $846,907 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 69,210 107,414 173,463 178,162 Purchased power 88,281 120,412 159,955 244,510 Nuclear refueling outage expenses 6,197 7,716 13,058 14,537 Other operation and maintenance 254,080 65,279 336,115 136,824 Taxes other than income taxes 9,385 8,664 20,573 17,428 Depreciation, amortization, and decommissioning 46,696 39,388 93,182 86,020 Other regulatory charges (credits) - net (175,317) 117 (175,722) (6,339) -------- -------- -------- -------- TOTAL 298,532 348,990 620,624 671,142 -------- -------- -------- -------- OPERATING INCOME 69,394 104,118 125,125 175,765 -------- -------- -------- -------- OTHER INCOME (DEDUCTIONS) Allowance for equity funds used during construction 1,962 1,548 3,300 2,639 Interest and dividend income 587 1,790 1,565 6,711 Miscellaneous - net (3,538) (814) (4,528) (1,928) -------- -------- -------- -------- TOTAL (989) 2,524 337 7,422 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 18,916 21,868 41,385 44,304 Other interest - net 8,116 5,115 11,047 8,505 Distributions on preferred securities of subsidiary 1,275 1,275 2,550 2,550 Allowance for borrowed funds used during construction (1,237) (1,004) (2,184) (1,715) -------- -------- -------- -------- TOTAL 27,070 27,254 52,798 53,644 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 41,335 79,388 72,664 129,543 Income taxes 22,088 32,350 30,579 53,527 -------- -------- -------- -------- NET INCOME 19,247 47,038 42,085 76,016 Preferred dividend requirements and other 1,944 1,944 3,888 3,888 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $17,303 $45,094 $38,197 $72,128 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $42,085 $76,016 Noncash items included in net income: Other regulatory credits - net (175,722) (6,339) Depreciation, amortization, and decommissioning 93,182 86,020 Deferred income taxes and investment tax credits (34,997) 9,611 Allowance for equity funds used during construction (3,300) (2,639) Changes in working capital: Receivables 1,059 11,851 Fuel inventory (11,267) 6,417 Accounts payable (24,542) (45,335) Taxes accrued 53,092 41,001 Interest accrued (5,708) (503) Deferred fuel costs 65,783 38,828 Other working capital accounts 15,105 (310) Provision for estimated losses and reserves (5,756) (4,009) Changes in other regulatory assets 152,331 (108,297) Changes in other deferred credits (22,204) 29,225 Other (5,379) 28,913 -------- -------- Net cash flow provided by operating activities 133,762 160,450 -------- -------- INVESTING ACTIVITIES Construction expenditures (131,681) (117,970) Allowance for equity funds used during construction 3,300 2,639 Nuclear fuel purchases (60,075) (19,103) Proceeds from sale/leaseback of nuclear fuel 60,075 19,103 Decommissioning trust contributions and realized change in trust assets (5,434) (4,379) Changes in other temporary investments - net 38,397 - Other regulatory investments - (16,796) -------- -------- Net cash flow used in investing activities (95,418) (136,506) -------- -------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt 94,557 - Retirement of long-term debt (170,000) - Changes in short-term borrowings (667) - Dividends paid: Common stock (14,100) (11,500) Preferred stock (3,888) (1,944) -------- -------- Net cash flow used in financing activities (94,098) (13,444) -------- -------- Net increase (decrease) in cash and cash equivalents (55,754) 10,500 Cash and cash equivalents at beginning of period 103,466 7,838 -------- -------- Cash and cash equivalents at end of period $47,712 $18,338 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $58,161 $53,353 Income taxes $9,356 ($3) Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($12,481) ($3,877) Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $10,540 $18,331 Temporary cash investments - at cost, which approximates market 37,172 85,135 ---------- ---------- Total cash and cash equivalents 47,712 103,466 ---------- ---------- Other temporary investments - 38,397 Accounts receivable: Customer 77,846 80,719 Allowance for doubtful accounts (1,667) (1,667) Associated companies 52,305 65,102 Other 17,160 20,889 Accrued unbilled revenues 80,647 62,307 ---------- ---------- Total accounts receivable 226,291 227,350 ---------- ---------- Deferred fuel costs - 17,246 Accumulated deferred income taxes 36,961 22,698 Fuel inventory - at average cost 15,639 4,372 Materials and supplies - at average cost 78,717 75,499 Deferred nuclear refueling outage costs 16,928 14,508 Prepayments and other 6,918 53,386 ---------- ---------- TOTAL 429,166 556,922 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 11,217 11,217 Decommissioning trust funds 344,067 351,114 Non-utility property - at cost (less accumulated depreciation) 1,462 1,465 Other 2,976 2,976 ---------- ---------- TOTAL 359,722 366,772 ---------- ---------- UTILITY PLANT Electric 5,462,186 5,399,294 Property under capital lease 34,370 35,604 Construction work in progress 196,974 157,994 Nuclear fuel under capital lease 102,940 65,556 Nuclear fuel 10,481 8,156 ---------- ---------- TOTAL UTILITY PLANT 5,806,951 5,666,604 Less - accumulated depreciation and amortization 2,668,964 2,615,013 ---------- ---------- UTILITY PLANT - NET 3,137,987 3,051,591 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 178,010 164,146 Unamortized loss on reacquired debt 40,736 40,817 Other regulatory assets 94,340 260,535 Other 18,918 10,797 ---------- ---------- TOTAL 332,004 476,295 ---------- ---------- TOTAL ASSETS $4,258,879 $4,451,580 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $100,000 $85,000 Notes payable - 667 Accounts payable: Associated companies 29,903 32,868 Other 65,459 87,036 Customer deposits 38,197 32,589 Taxes accrued 157,373 104,281 Interest accrued 24,836 30,544 Deferred fuel costs 48,537 - Obligations under capital leases 52,191 51,973 System Energy refund 6,650 53,732 Other 34,245 17,221 ---------- ---------- TOTAL 557,391 495,911 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 808,165 809,742 Accumulated deferred investment tax credits 80,735 83,239 Obligations under capital leases 85,119 49,187 Transition to competition - 152,414 Accumulated provisions 35,659 41,415 Other 85,220 107,424 ---------- ---------- TOTAL 1,094,898 1,243,421 ---------- ---------- Long-term debt 1,178,359 1,308,075 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2002 and 2001 470 470 Paid-in capital 591,127 591,127 Retained earnings 660,284 636,226 ---------- ---------- TOTAL 1,368,231 1,344,173 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,258,879 $4,451,580 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 112.4 $ 124.3 ($11.9) (10) Commercial 71.2 81.0 (9.8) (12) Industrial 76.8 91.8 (15.0) (16) Governmental 3.8 4.2 (0.4) (10) ------- ------- ------ Total retail 264.2 301.3 (37.1) (12) Sales for resale Associated companies 51.4 70.1 (18.7) (27) Non-associated companies 41.0 47.8 (6.8) (14) Other 11.3 33.9 (22.6) (67) ------- ------- ------ Total $ 367.9 $ 453.1 ($85.2) (19) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 1,402 1,383 19 1 Commercial 1,219 1,213 6 - Industrial 1,626 1,687 (61) (4) Governmental 62 60 2 3 ------- ------- ------ Total retail 4,309 4,343 (34) (1) Sales for resale Associated companies 1,804 1,953 (149) (8) Non-associated companies 1,189 1,296 (107) (8) ------- ------- ------ Total 7,302 7,592 (290) (4) ======= ======= ====== Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 249.6 $ 264.3 ($14.7) (6) Commercial 143.3 149.5 (6.2) (4) Industrial 158.5 170.0 (11.5) (7) Governmental 7.8 7.7 0.1 1 ------- ------- ------- Total retail 559.2 591.5 (32.3) (5) Sales for resale Associated companies 93.1 119.7 (26.6) (22) Non-associated companies 75.8 107.6 (31.8) (30) Other 17.6 28.1 (10.5) (37) ------- ------- ------- Total $ 745.7 $ 846.9 ($101.2) (12) ======= ======= ======= Billed Electric Energy Sales (GWH): Residential 3,123 3,237 (114) (4) Commercial 2,350 2,363 (13) (1) Industrial 3,232 3,347 (115) (3) Governmental 124 117 7 6 ------- ------- ------- Total retail 8,829 9,064 (235) (3) Sales for resale Associated companies 3,886 3,080 806 26 Non-associated companies 2,236 2,627 (391) (15) ------- ------- ------- Total 14,951 14,771 180 1 ======= ======= ======= ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 primarily due to increased unbilled revenue, increased other regulatory credits, and decreased interest expense, partially offset by decreased sales for resale, increased depreciation and amortization expenses, and decreased interest income. Net income decreased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to decreased sales for resale, increased depreciation and amortization expenses, and decreased interest income, partially offset by increased unbilled revenue, increased other regulatory credits, and decreased interest expense. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences ($1.9) ($2.3) Fuel cost recovery (171.1) (379.0) Sales volume/weather 3.3 (7.6) Unbilled revenue 18.9 16.9 Other revenue 2.4 3.2 Sales for resale (13.7) (44.9) ------- ------- Total ($162.1) ($413.7) ======= ======= Fuel cost recovery Entergy Gulf States is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Gulf States' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 in both operational jurisdictions of Entergy Gulf States. In the Louisiana jurisdiction, fuel recovery revenues decreased $109.4 million and $264.1 million for the three and six months ended June 30, 2002, respectively, due to the lower prices of fuel and purchased power in 2002 compared with 2001 and the impact of the current period recovery through the fuel adjustment clause of lower fuel and purchased power costs from prior months. In the Louisiana jurisdiction, these fuel costs are recovered on a two- month lag. In the Texas jurisdiction, fuel cost recovery revenues decreased $61.7 million and $114.9 million for the three and six months ended June 30, 2002, respectively, due to a decrease in the fixed fuel factor in March 2002 and the completion of a fuel recovery surcharge in February 2002. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Lower electric sales volume reduced revenues for the six months ended June 30, 2002 primarily due to decreased usage in the industrial sector as a result of contractual modifications that reclassified the sales associated with certain customers from retail to wholesale. Under the terms of the former contract with these customers, Entergy Gulf States was also required to purchase the electricity produced by the customers' generating units. As a result of the cessation of the purchased power obligation, the reclassification of these sales will not have a negative impact on Entergy Gulf States' earnings. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended June 30, 2002 and 2001 includes the reversal of the estimates for March 2002 and March 2001, respectively. The increase for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 is due to the effect on the June 2001 calculation of higher unbilled revenue in March 2001 caused by higher fuel rates. Unbilled revenue for the six months ended June 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 is due to the effect on the June 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by volume/weather. Sales for resale Sales for resale decreased for the three and six months ended June 30, 2002 primarily due to a decrease in the average price of resale electricity as a result of lower market prices of natural gas used in generation. The decrease is partially offset by the contractual modifications that resulted in the reclassified sales noted above in sales volume/weather. Gas operating revenues Gas operating revenues decreased for the six months ended June 30, 2002 primarily due to the decreased market price of natural gas. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three and six months ended June 30, 2002 primarily due to decreases in the market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the six months ended June 30, 2002 due to increases in: o injuries and damages expense of $3.0 million; o plant maintenance expenses at certain fossil plants of $2.8 million; o pension and benefits expense of $2.5 million; and o nuclear operation and maintenance expenses of $2.4 million. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The increase in other operation and maintenance expenses was partially offset by decreases in: o regulatory expenses of $4.2 million primarily due to the payment in 2001 of the Texas System Benefit Fund assessment; o transmission expenses of $2.2 million; and o uncollectible receivable write-offs of $1.3 million. Taxes other than income taxes Taxes other than income taxes increased for the three and six months ended June 30, 2002 primarily due to lower sales and use tax audit assessments in 2001. Depreciation and amortization Depreciation and amortization increased for the three and six months ended June 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory charges (credits) - net Other regulatory credits increased for the three and six months ended June 30, 2002 primarily due to the recognition in income of the Louisiana portion of the unamortized deferred gain on the 1988 sale of Nelson Units 1 and 2. The deferred gain was recognized because the LPSC no longer requires that the gain reduce Entergy Gulf States' cost of service. Other Other income Other income decreased for the three and six months ended June 30, 2002 primarily due to decreased interest income recorded on the deferred fuel balance due to partial recovery of the balance. Interest and other charges Interest on long-term debt decreased for the three and six months ended June 30, 2002 primarily due to lower interest expense on variable-rate First Mortgage Bonds and the retirement of $148 million of First Mortgage Bonds in January 2002. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 38.7% and 35.0%, respectively. The effective income tax rates for the six months ended June 30, 2002 and 2001 were 38.6% and 36.1%, respectively.
ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $559,538 $721,597 $1,006,789 $1,420,473 Natural gas 8,025 9,296 24,678 44,896 -------- -------- ---------- ---------- TOTAL 567,563 730,893 1,031,467 1,465,369 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 145,046 306,998 284,900 600,165 Purchased power 108,349 125,903 174,178 267,855 Nuclear refueling outage expenses 3,023 3,021 6,079 6,111 Other operation and maintenance 107,377 108,159 204,952 201,413 Decommissioning 1,579 1,561 3,152 3,123 Taxes other than income taxes 30,674 27,563 61,312 58,559 Depreciation and amortization 50,400 45,190 100,693 94,951 Other regulatory charges (credits) - net (12,626) 936 (12,026) (4,553) -------- -------- ---------- ---------- TOTAL 433,822 619,331 823,240 1,227,624 -------- -------- ---------- ---------- OPERATING INCOME 133,741 111,562 208,227 237,745 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 2,757 2,342 4,983 4,167 Gain on sale of assets 1,009 603 1,673 1,188 Interest and dividend income 2,610 6,293 4,931 14,226 Miscellaneous - net (351) (1,162) (1,448) (2,574) -------- -------- ---------- ---------- TOTAL 6,025 8,076 10,139 17,007 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 32,649 39,359 64,497 78,152 Other interest - net 1,146 1,858 2,743 4,195 Distributions on preferred securities of subsidiary 1,859 1,860 3,719 3,719 Allowance for borrowed funds used during construction (2,354) (2,441) (4,614) (4,155) -------- -------- ---------- ---------- TOTAL 33,300 40,636 66,345 81,911 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 106,466 79,002 152,021 172,841 Income taxes 41,230 27,620 58,747 62,413 -------- -------- ---------- ---------- NET INCOME 65,236 51,382 93,274 110,428 Preferred dividend requirements and other 1,226 1,271 2,460 2,581 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $64,010 $50,111 $90,814 $107,847 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $93,274 $110,428 Noncash items included in net income: Reserve for regulatory adjustments 5,070 1,932 Other regulatory credits - net (12,026) (4,553) Depreciation, amortization, and decommissioning 103,845 98,074 Deferred income taxes and investment tax credits (15,641) 10,793 Allowance for equity funds used during construction (4,983) (4,167) Gain on sale of assets (1,673) (1,188) Changes in working capital: Receivables (12,275) (4,676) Fuel inventory (2,893) (21,056) Accounts payable (1,512) (117,594) Taxes accrued 61,696 55,386 Interest accrued (7,221) 1,544 Deferred fuel costs 8,060 66,419 Other working capital accounts 11,213 7,536 Provision for estimated losses and reserves (1,238) (3,164) Changes in other regulatory assets 7,499 (14,365) Other 11,617 3,539 -------- -------- Net cash flow provided by operating activities 242,812 184,888 -------- -------- INVESTING ACTIVITIES Construction expenditures (161,118) (145,421) Allowance for equity funds used during construction 4,983 4,167 Nuclear fuel purchases (21,733) (3,929) Proceeds from sale/leaseback of nuclear fuel 21,923 3,937 Decommissioning trust contributions and realized change in trust assets (5,464) (5,912) Changes in other temporary investments - net 44,643 - Other regulatory investments (29,755) (39,926) -------- -------- Net cash flow used in investing activities (146,521) (187,084) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (148,000) - Redemption of preferred stock (1,404) (4,574) Dividends paid: Common stock (31,400) (34,000) Preferred stock (2,460) (2,588) -------- -------- Net cash flow used in financing activities (183,264) (41,162) -------- -------- Net decrease in cash and cash equivalents (86,973) (43,358) Cash and cash equivalents at beginning of period 123,728 68,279 -------- -------- Cash and cash equivalents at end of period $36,755 $24,921 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $75,495 $81,891 Income taxes $17,700 $920 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($6,413) ($2,138) See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $30,895 $19,503 Temporary cash investments - at cost, which approximates market 5,860 104,225 ---------- ---------- Total cash and cash equivalents 36,755 123,728 ---------- ---------- Other temporary investments - 44,643 Accounts receivable: Customer 101,579 81,136 Allowance for doubtful accounts (2,131) (2,131) Associated companies 4,630 34,032 Other 36,111 53,249 Accrued unbilled revenues 123,116 84,744 ---------- ---------- Total accounts receivable 263,305 251,030 ---------- ---------- Deferred fuel costs 148,425 126,730 Fuel inventory - at average cost 56,904 54,011 Materials and supplies - at average cost 94,553 95,674 Prepayments and other 20,496 22,373 ---------- ---------- TOTAL 620,438 718,189 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 244,433 245,382 Non-utility property - at cost (less accumulated depreciation) 193,080 194,830 Other 17,315 15,970 ---------- ---------- TOTAL 454,828 456,182 ---------- ---------- UTILITY PLANT Electric 7,758,403 7,694,226 Property under capital lease 25,039 28,087 Natural gas 61,171 59,100 Construction work in progress 286,037 221,730 Nuclear fuel under capital lease 54,647 67,688 ---------- ---------- TOTAL UTILITY PLANT 8,185,297 8,070,831 Less - accumulated depreciation and amortization 3,819,300 3,750,770 ---------- ---------- UTILITY PLANT - NET 4,365,997 4,320,061 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 424,420 426,623 Unamortized loss on reacquired debt 32,706 34,321 Other regulatory assets 196,033 201,329 Long-term receivables 24,935 26,576 Other 20,183 26,460 ---------- ---------- TOTAL 698,277 715,309 ---------- ---------- TOTAL ASSETS $6,139,540 $6,209,741 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $339,000 $147,921 Accounts payable: Associated companies 49,378 38,728 Other 122,861 135,023 Customer deposits 46,549 45,876 Taxes accrued 152,300 90,604 Accumulated deferred income taxes 23,819 21,412 Nuclear refueling outage costs 8,150 2,080 Interest accrued 36,193 43,414 Obligations under capital leases 37,113 36,668 Other 22,465 20,995 ---------- ---------- TOTAL 837,828 582,721 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,216,031 1,227,084 Accumulated deferred investment tax credits 160,084 163,766 Obligations under capital leases 42,572 60,163 Decommissioning 146,510 144,926 Transition to competition 79,098 79,098 Regulatory reserves 38,661 33,591 Accumulated provisions 62,573 63,811 Other 74,174 93,719 ---------- ---------- TOTAL 1,819,703 1,866,158 ---------- ---------- Long-term debt 1,620,014 1,958,897 Preferred stock with sinking fund 24,781 26,185 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 85,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 47,327 47,327 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055 Paid-in capital 1,157,459 1,157,459 Retained earnings 431,295 371,939 Accumulated other comprehensive income 2,078 - ---------- ---------- TOTAL 1,752,214 1,690,780 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,139,540 $6,209,741 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 164.0 $ 194.4 ($30.4) (16) Commercial 123.3 156.7 (33.4) (21) Industrial 182.1 285.3 (103.2) (36) Governmental 8.3 10.2 (1.9) (19) --------- --------- ------ Total retail 477.7 646.6 (168.9) (26) Sales for resale Associated companies 1.0 16.9 (15.9) (94) Non-associated companies 35.7 33.5 2.2 7 Other 45.1 24.6 20.5 83 --------- --------- ------ Total $ 559.5 $ 721.6 ($162.1) (22) ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 2,190 2,017 173 9 Commercial 1,942 1,836 106 6 Industrial 4,075 4,584 (509) (11) Governmental 118 110 8 7 --------- --------- ------ Total retail 8,325 8,547 (222) (3) Sales for resale Associated companies 25 341 (316) (93) Non-associated companies 1,155 736 419 57 --------- --------- ------ Total 9,505 9,624 (119) (1) ========= ========= ====== Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 308.8 $ 382.8 ($74.0) (19) Commercial 232.2 302.0 (69.8) (23) Industrial 326.1 565.9 (239.8) (42) Governmental 16.1 20.3 (4.2) (21) --------- --------- ------ Total retail 883.2 1,271.0 (387.8) (31) Sales for resale Associated companies 5.5 29.3 (23.8) (81) Non-associated companies 63.5 84.6 (21.1) (25) Other 54.6 35.6 19.0 53 --------- --------- ------ Total $ 1,006.8 $ 1,420.5 ($413.7) (29) ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 4,292 4,143 149 4 Commercial 3,718 3,581 137 4 Industrial 7,719 8,836 (1,117) (13) Governmental 229 221 8 4 --------- --------- ------ Total retail 15,958 16,781 (823) (5) Sales for resale Associated companies 129 448 (319) (71) Non-associated companies 2,213 1,695 518 31 --------- --------- ------ Total 18,300 18,924 (624) (3) ========= ========= ====== ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 primarily due to an increase in unbilled revenue, more favorable volume on billed sales, an increase in interest income, and decreases in taxes other than income taxes and interest charges. The increases were partially offset by increases in other operation and maintenance expenses and depreciation and amortization expenses. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences ($10.4) ($10.4) Fuel cost recovery (99.6) (322.9) Sales volume/weather 16.1 15.7 Unbilled revenue 33.1 78.2 Other revenue 1.0 3.9 Sales for resale (4.6) (7.8) ------ ------- Total ($64.4) ($243.3) ====== ======= Base rate differences Base rate differences decreased for the three and six months ended June 30, 2002 primarily due to an increase in accruals for potential rate refunds, decreased rates for special-use industrial customers as a result of increased KWH usage, and additional formula rate plan reductions which became effective in October 2001. Fuel cost recovery Entergy Louisiana is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Louisiana's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 due to recovery of lower fuel and purchased power expenses through the fuel adjustment clause, primarily due to decreases in the market price of natural gas and purchased power. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Higher electric sales volume increased revenues for the three months ended June 30, 2002 due to increased usage of 192 GWH in the residential and commercial sectors, after adjusting for the weather effect, and 209 GWH in the industrial sector. The increased usage resulted in lower effective rates for the industrial sector, which is reflected in base rate differences. The effect of favorable weather in the second quarter of 2002 compared to the second quarter of 2001 increased electric sales volume by 50 GWH in the residential and commercial sectors. Higher electric sales volume increased revenues for the six months ended June 30, 2002 due to increased usage of 236 GWH in the residential and commercial sectors, after adjusting for the weather effect, and 213 GWH in the industrial sector. The increased usage resulted in lower effective rates for the industrial sector, which is reflected in base rate differences. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended June 30, 2002 and 2001 includes the reversal of the estimates for March 2002 and March 2001, respectively. The increase for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 is due to the effect on the June 2001 calculation of higher unbilled revenue in March 2001 caused by higher fuel rates. Unbilled revenue for the six months ended June 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 is due to the effect on the June 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by higher fuel rates and volume/weather. Sales for resale Sales for resale decreased for the three and six months ended June 30, 2002 primarily due to a decrease in volume to adjoining utility systems and affiliated customers. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three and six months ended June 30, 2002 primarily due to a 29% and 44% decrease, respectively, in the market price of natural gas. The decreases were also due to decreases in the average market price of purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended June 30, 2002 primarily due to: o an increase in employee pension and benefits expense of $1.5 million; o an increase in maintenance expense at certain fossil plants of $4.2 million; and o an increase in transmission expenses of $1.4 million. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other operation and maintenance expenses increased for the six months ended June 30, 2002 primarily due to: o lower nuclear insurance refunds of $1.3 million; o an increase in incentive compensation expense of $3.5 million; o an increase in maintenance expense at certain fossil plants of $4.1 million; o an increase in employee pension and benefits expense of $2.6 million; and o an increase in transmission expenses of $1.7 million. Taxes other than income taxes Taxes other than income taxes decreased for the three and six months ended June 30, 2002 primarily due to franchise tax adjustments. As a result of a favorable court decision, Entergy Louisiana expects to receive a refund for certain franchise taxes previously expensed and paid under protest. Depreciation and amortization Depreciation and amortization increased for the three and six months ended June 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory charges - net Other regulatory charges increased for the three and six months ended June 30, 2002 primarily due to the amortization of capacity charges associated with power purchases in the summer of 2000. The amortization of these charges will occur through July 2002. Refer to Note 2 to the financial statements for further discussion of deferred capacity charges. Other Other income Interest income increased for the three and six months ended June 30, 2002 primarily due to the interest related to franchise tax adjustments discussed above. Interest and other charges Interest on long-term debt decreased for the three and six months ended June 30, 2002 due to the refinancing and net redemption of First Mortgage Bonds in the amounts of $18.7 million in 2001 and $63.0 million in the first quarter of 2002. Other interest decreased for the three and six months ended June 30, 2002 primarily due to interest accrued in 2001 on reserves provided for fuel-related refunds that were made in the summer of 2001 and adjustments to interest expense previously recorded on franchise tax accruals. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 37.0% and 40.3%, respectively. The effective income tax rates for the six months ended June 30, 2002 and 2001 were 38.3% and 41.8%, respectively. The decreases in the effective income tax rates were primarily due to higher pre-tax income reducing the effect of book and tax timing differences.
ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $483,389 $547,784 $853,352 $1,096,698 -------- -------- -------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 85,709 190,046 148,690 424,469 Purchased power 121,899 132,485 201,662 267,990 Nuclear refueling outage expenses 2,961 3,262 6,012 6,524 Other operation and maintenance 81,193 71,269 159,659 141,083 Decommissioning 2,606 2,606 5,211 5,212 Taxes other than income taxes 5,546 18,165 23,979 36,717 Depreciation and amortization 45,679 40,498 91,141 85,444 Other regulatory charges - net 3,315 540 6,630 1,080 -------- -------- -------- ---------- TOTAL 348,908 458,871 642,984 968,519 -------- -------- -------- ---------- OPERATING INCOME 134,481 88,913 210,368 128,179 -------- -------- -------- ---------- OTHER INCOME Allowance for equity funds used during construction 1,364 1,226 2,432 2,161 Gain on sale of assets - 152 - 152 Interest and dividend income 6,583 1,465 6,819 4,134 Miscellaneous - net (741) (721) (1,620) (1,454) -------- -------- -------- ---------- TOTAL 7,206 2,122 7,631 4,993 -------- -------- -------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 21,815 24,734 45,255 49,190 Other interest - net (1,161) 3,570 679 7,087 Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150 Allowance for borrowed funds used during construction (1,006) (922) (1,867) (1,632) -------- -------- -------- ---------- TOTAL 21,223 28,957 47,217 57,795 -------- -------- -------- ---------- INCOME BEFORE INCOME TAXES 120,464 62,078 170,782 75,377 Income taxes 44,619 25,044 65,442 31,483 -------- -------- -------- ---------- NET INCOME 75,845 37,034 105,340 43,894 Preferred dividend requirements and other 1,678 2,378 3,357 4,757 -------- -------- -------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $74,167 $34,656 $101,983 $39,137 ======== ======== ======== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $105,340 $43,894 Noncash items included in net income: Reserve for regulatory adjustments - (3,698) Other regulatory charges - net 6,630 1,080 Depreciation, amortization, and decommissioning 96,352 90,656 Deferred income taxes and investment tax credits 27,874 (55,432) Allowance for equity funds used during construction (2,432) (2,161) Gain on sale of assets - (152) Changes in working capital: Receivables (57,646) (15,569) Accounts payable 55,199 (66,985) Taxes accrued 58,644 103,346 Interest accrued (12,986) (7,192) Deferred fuel costs (77,570) 121,877 Other working capital accounts (17,889) (24,616) Provision for estimated losses and reserves 1,845 2,133 Changes in other regulatory assets 17,967 (3,779) Other (10,689) 11,750 -------- -------- Net cash flow provided by operating activities 190,639 195,152 -------- -------- INVESTING ACTIVITIES Construction expenditures (97,001) (99,550) Allowance for equity funds used during construction 2,432 2,161 Nuclear fuel purchases (50,473) - Proceeds from sale/leaseback of nuclear fuel 50,473 - Decommissioning trust contributions and realized change in trust assets (8,824) (9,043) Changes in other temporary investments - net 6,152 - -------- -------- Net cash flow used in investing activities (97,241) (106,432) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 144,874 - Retirement of long-term debt (228,968) (35,088) Changes in short-term borrowings 15,000 - Dividends paid: Common stock (48,600) (13,300) Preferred stock (3,357) (4,757) -------- -------- Net cash flow used in financing activities (121,051) (53,145) -------- -------- Net increase (decrease) in cash and cash equivalents (27,653) 35,575 Cash and cash equivalents at beginning of period 42,408 43,959 -------- -------- Cash and cash equivalents at end of period $14,755 $79,534 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $58,943 $63,521 Income taxes ($9,983) $550 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($3,975) ($1,430) See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $14,755 $28,768 Temporary cash investments - at cost, which approximates market - 13,640 ---------- ---------- Total cash and cash equivalents 14,755 42,408 ---------- ---------- Other temporary investments - 6,152 Notes receivable 8 8 Accounts receivable: Customer 77,803 48,640 Allowance for doubtful accounts (1,771) (1,771) Associated companies 12,376 9,090 Other 11,262 47,965 Accrued unbilled revenues 133,100 71,200 ---------- ---------- Total accounts receivable 232,770 175,124 ---------- ---------- Deferred fuel costs 10,077 - Accumulated deferred income taxes 5,387 42,566 Materials and supplies - at average cost 73,289 77,523 Deferred nuclear refueling outage costs 14,441 4,096 Prepayments and other 26,763 9,000 ---------- ---------- TOTAL 377,490 356,877 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 14,230 14,230 Decommissioning trust funds 124,512 119,663 Non-utility property - at cost (less accumulated depreciation) 21,580 21,671 ---------- ---------- TOTAL 160,322 155,564 ---------- ---------- UTILITY PLANT Electric 5,499,463 5,456,093 Property under capital lease 239,395 239,395 Construction work in progress 147,067 110,792 Nuclear fuel under capital lease 67,917 70,316 ---------- ---------- TOTAL UTILITY PLANT 5,953,842 5,876,596 Less - accumulated depreciation and amortization 2,611,859 2,538,964 ---------- ---------- UTILITY PLANT - NET 3,341,983 3,337,632 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 172,847 179,368 Unamortized loss on reacquired debt 26,800 28,341 Other regulatory assets 62,308 73,754 Long-term receivables 1,503 1,515 Other 16,882 16,650 ---------- ---------- TOTAL 280,340 299,628 ---------- ---------- TOTAL ASSETS $4,160,135 $4,149,701 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $254,865 $185,627 Notes payable 15,000 - Accounts payable: Associated companies 116,337 73,208 Other 105,530 93,460 Customer deposits 62,763 61,359 Taxes accrued 79,054 20,410 Interest accrued 21,538 34,524 Deferred fuel costs - 67,493 Obligations under capital leases 34,171 34,171 Other 20,275 14,119 ---------- ---------- TOTAL 709,533 584,371 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 766,318 776,610 Accumulated deferred investment tax credits 109,241 111,942 Obligations under capital leases 33,745 36,144 Accumulated provisions 70,367 68,522 Other 76,347 82,780 ---------- ---------- TOTAL 1,056,018 1,075,998 ---------- ---------- Long-term debt 943,247 1,091,329 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 70,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 100,500 100,500 Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares in 2002 and 2001 1,088,900 1,088,900 Capital stock expense and other (1,718) (1,718) Retained earnings 193,655 140,321 ---------- ---------- TOTAL 1,381,337 1,328,003 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,160,135 $4,149,701 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 150.6 $ 163.5 ($12.9) (8) Commercial 100.5 114.9 (14.4) (13) Industrial 160.1 218.2 (58.1) (27) Governmental 8.8 10.5 (1.7) (16) ------- --------- ------ Total retail 420.0 507.1 (87.1) (17) Sales for resale Associated companies 5.8 7.3 (1.5) (21) Non-associated companies 3.4 6.5 (3.1) (48) Other 54.2 26.9 27.3 101 ------- --------- ------ Total $ 483.4 $ 547.8 ($64.4) (12) ======= ========= ====== Billed Electric Energy Sales (GWH): Residential 2,020 1,839 181 10 Commercial 1,352 1,291 61 5 Industrial 3,792 3,583 209 6 Governmental 122 120 2 2 ------- --------- ------ Total retail 7,286 6,833 453 7 Sales for resale Associated companies 68 108 (40) (37) Non-associated companies 40 79 (39) (49) ------- --------- ------ Total 7,394 7,020 374 5 ======= ========= ====== Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 270.0 $ 348.3 ($78.3) (22) Commercial 181.5 236.0 (54.5) (23) Industrial 289.6 463.4 (173.8) (38) Governmental 16.8 22.8 (6.0) (26) ------- --------- ------ Total retail 757.9 1,070.5 (312.6) (29) Sales for resale Associated companies 9.1 11.4 (2.3) (20) Non-associated companies 6.8 12.3 (5.5) (45) Other 79.6 2.5 77.1 3,084 ------- --------- ------ Total $ 853.4 $ 1,096.7 ($243.3) (22) ======= ========= ====== Billed Electric Energy Sales (GWH): Residential 3,942 3,783 159 4 Commercial 2,574 2,508 66 3 Industrial 7,370 7,157 213 3 Governmental 250 248 2 1 ------- --------- ------ Total retail 14,136 13,696 440 3 Sales for resale Associated companies 153 161 (8) (5) Non-associated companies 93 174 (81) (47) ------- --------- ------ Total 14,382 14,031 351 3 ======= ========= ====== ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 primarily due to decreased interest income and increased depreciation and amortization expenses, partially offset by increased other revenue. Net income decreased for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 primarily due to decreased interest income, increased depreciation and amortization expenses, and increased other operation and maintenance expenses. The decrease was partially offset by increased other revenue, increased unbilled revenue, and decreased interest expense. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences $0.8 $3.6 Grand Gulf rate rider (4.8) (11.5) Fuel cost recovery (14.4) (24.0) Sales volume/weather 1.5 (1.7) Unbilled revenue 1.1 3.4 Other revenue 3.4 5.8 Sales for resale - (52.5) ------ ------ Total ($12.4) ($76.9) ====== ====== Grand Gulf rate rider Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Grand Gulf rate rider revenue decreased for the three and six months ended June 30, 2002 as a result of a lower rate which became effective in October 2001. Fuel cost recovery Entergy Mississippi is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Mississippi's financial statements such that these costs generally have no net effect on earnings. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 primarily due to lower fuel and purchased power expenses as a result of decreases in the market prices of natural gas and purchased power. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and reversed the following month. Unbilled revenue for the six months ended June 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the six months ended June 30, 2002 compared to the six months ended June 30, 2001 is due to the effect on the June 2001 unbilled calculation of higher unbilled revenue in December 2000 caused by volume/weather. Other revenue Other revenue increased for the three and six months ended June 30, 2002 primarily due to increased forfeiture revenue as a result of Entergy Mississippi charging late fees to its customers beginning in October 2001. Sales for resale Sales for resale decreased for the six months ended June 30, 2002 primarily due to a decrease in sales volume to affiliated customers, coupled with a decrease in the average price of energy. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three and six months ended June 30, 2002 primarily due to the displacement of oil generation by lower priced gas generation and the decrease in the market price of purchased power. Oil generation was used in the first and second quarters of 2001 due to significant increases in the market price of natural gas. The decrease was partially offset by an over-recovery of fuel costs, including the effect of increased recoveries approved by the MPSC in 2001 to recover previous under- recoveries. Other operation and maintenance Other operation and maintenance expenses increased for the six months ended June 30, 2002 primarily due to: o an increase of $5.6 million in plant maintenance expense due to an unscheduled outage at a fossil plant in 2002; o an increase in injuries and damages expense of $1.3 million; and o an insurance reimbursement of $1.4 million received in 2001 in connection with a turbine generator failure. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Depreciation and amortization Depreciation and amortization increased for the three and six months ended June 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory credits - net Other regulatory credits decreased for the three months ended June 30, 2002 primarily due to the settlement of the System Energy rate proceeding in 2001 which ceased the deferral of costs associated with purchases from System Energy. See Note 2 to the financial statements in the Form 10-K for further discussion of the System Energy rate proceeding and FERC order. Other Other income Interest income decreased for the three and six months ended June 30, 2002 primarily due to interest recorded in 2001 on the deferred System Energy costs that Entergy Mississippi was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of a final FERC order. Interest and other charges Interest and other charges decreased for the six months ended June 30, 2002 primarily due to: o lower interest expense on decreased intercompany money pool borrowings; o lower interest expense on a $25 million credit facility obtained in February 2001, which was drawn on for most of the first half of 2001 compared with only being drawn in June during 2002; o lower interest expense on variable-rate First Mortgage Bonds; and o an increase in the allowance for borrowed funds used for construction because of a higher construction work in progress balance during 2002. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 36.7% and 33.4%, respectively. The effective income tax rates for the six months ended June 30, 2002 were 35.5% and 33.9%, respectively. The increase in the effective tax rate for the three months ended June 30, 2002 was primarily due to increased book and tax depreciation timing differences.
ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $261,743 $274,148 $453,433 $530,306 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 93,129 95,493 143,698 205,552 Purchased power 74,146 94,374 149,482 177,838 Other operation and maintenance 40,763 39,473 81,663 72,721 Taxes other than income taxes 11,774 11,792 23,507 23,065 Depreciation and amortization 13,745 10,941 27,251 24,215 Other regulatory credits - net (1,067) (9,572) (18,349) (19,256) -------- -------- -------- -------- TOTAL 232,490 242,501 407,252 484,135 -------- -------- -------- -------- OPERATING INCOME 29,253 31,647 46,181 46,171 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,076 592 2,146 1,015 Interest and dividend income 1,185 4,559 2,227 9,252 Miscellaneous - net (371) (558) (1,105) (1,106) -------- -------- -------- -------- TOTAL 1,890 4,593 3,268 9,161 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 11,250 12,159 21,212 23,303 Other interest - net 735 1,079 1,356 2,312 Allowance for borrowed funds used during construction (975) (516) (1,920) (863) -------- -------- -------- -------- TOTAL 11,010 12,722 20,648 24,752 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 20,133 23,518 28,801 30,580 Income taxes 7,381 7,845 10,220 10,373 -------- -------- -------- -------- NET INCOME 12,752 15,673 18,581 20,207 Preferred dividend requirements and other 842 842 1,685 1,685 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $11,910 $14,831 $16,896 $18,522 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $18,581 $20,207 Noncash items included in net income: Other regulatory credits - net (18,349) (19,256) Depreciation and amortization 27,251 24,215 Deferred income taxes and investment tax credits (7,826) 11,402 Allowance for equity funds used during construction (2,146) (1,015) Changes in working capital: Receivables (2,620) 699 Fuel inventory (758) (6,951) Accounts payable 7,488 (5,983) Taxes accrued 2,793 (15,104) Interest accrued (102) 2,884 Deferred fuel costs 22,792 (21,692) Other working capital accounts 122 (4,495) Provision for estimated losses and reserves (1,153) (4,733) Changes in other regulatory assets (10,604) (23,075) Other 23,735 34,461 -------- -------- Net cash flow provided by (used in) operating activities 59,204 (8,436) -------- -------- INVESTING ACTIVITIES Construction expenditures (77,812) (60,961) Allowance for equity funds used during construction 2,146 1,015 Changes in other temporary investments - net 18,566 - -------- -------- Net cash flow used in investing activities (57,100) (59,946) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 69,624 Retirement of long-term debt (65,000) - Changes in short-term borrowings 25,000 10,000 Dividends paid: Common stock (4,500) (5,500) Preferred stock (1,685) (1,685) -------- -------- Net cash flow provided by (used in) financing activities (46,185) 72,439 -------- -------- Net increase (decrease) in cash and cash equivalents (44,081) 4,057 Cash and cash equivalents at beginning of period 54,048 5,113 -------- -------- Cash and cash equivalents at end of period $9,967 $9,170 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $21,272 $21,406 See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $9,967 $12,883 Temporary cash investments - at cost, which approximates market - 41,165 ---------- ---------- Total cash and cash equivalents 9,967 54,048 ---------- ---------- Other temporary investments - 18,566 Accounts receivable: Customer 52,493 50,370 Allowance for doubtful accounts (1,044) (1,044) Associated companies 6,186 14,201 Other 3,704 2,892 Accrued unbilled revenues 38,000 30,300 ---------- ---------- Total accounts receivable 99,339 96,719 ---------- ---------- Deferred fuel costs 83,366 106,158 Fuel inventory - at average cost 5,582 4,824 Materials and supplies - at average cost 17,601 16,896 Prepayments and other 2,408 8,521 ---------- ---------- TOTAL 218,263 305,732 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,658 6,723 ---------- ---------- TOTAL 12,189 12,254 ---------- ---------- UTILITY PLANT Electric 1,985,589 1,939,182 Property under capital lease 193 211 Construction work in progress 132,329 110,450 ---------- ---------- TOTAL UTILITY PLANT 2,118,111 2,049,843 Less - accumulated depreciation and amortization 759,376 741,892 ---------- ---------- UTILITY PLANT - NET 1,358,735 1,307,951 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 23,444 22,387 Unamortized loss on reacquired debt 13,333 13,925 Other regulatory assets 23,050 13,503 Other 6,311 7,274 ---------- ---------- TOTAL 66,138 57,089 ---------- ---------- TOTAL ASSETS $1,655,325 $1,683,026 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $190,000 $65,000 Notes payable 25,000 - Accounts payable: Associated companies 41,831 45,554 Other 38,594 27,383 Customer deposits 32,727 29,421 Taxes accrued 34,277 31,484 Accumulated deferred income taxes 8,357 19,277 Interest accrued 17,565 17,667 Obligations under capital leases 37 36 System Energy refund 4,669 14,836 Other 3,539 1,964 ---------- ---------- TOTAL 396,596 252,622 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 272,825 266,498 Accumulated deferred investment tax credits 17,203 17,908 Obligations under capital leases 156 175 Accumulated provisions 6,474 7,627 Other 38,983 37,678 ---------- ---------- TOTAL 335,641 329,886 ---------- ---------- Long-term debt 399,936 589,762 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 50,381 50,381 Common stock, no par value, authorized 15,000,000 shares; issued and outstanding 8,666,357 shares in 2002 and 2001 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 273,504 261,108 ---------- ---------- TOTAL 523,152 510,756 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,655,325 $1,683,026 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 85.6 $ 89.1 ($3.5) (4) Commercial 76.1 80.9 (4.8) (6) Industrial 41.4 49.2 (7.8) (16) Governmental 7.3 8.0 (0.7) (9) ------- ------- ------ Total retail 210.4 227.2 (16.8) (7) Sales for resale Associated companies 27.0 26.0 1.0 4 Non-associated companies 4.1 5.1 (1.0) (20) Other 20.2 15.8 4.4 28 ------- ------- ------ Total $ 261.7 $ 274.1 ($12.4) (5) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 1,086 1,037 49 5 Commercial 1,046 1,024 22 2 Industrial 705 751 (46) (6) Governmental 92 93 (1) (1) ------ ------ ----- Total retail 2,929 2,905 24 1 Sales for resale Associated companies 563 459 104 23 Non-associated companies 50 57 (7) (12) ------ ------ ----- Total 3,542 3,421 121 4 ====== ====== ===== Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 158.6 $ 170.0 ($11.4) (7) Commercial 140.2 148.5 (8.3) (6) Industrial 77.6 90.5 (12.9) (14) Governmental 13.6 14.6 (1.0) (7) ------- ------- ------ Total retail 390.0 423.6 (33.6) (8) Sales for resale Associated companies 32.3 82.7 (50.4) (61) Non-associated companies 7.5 9.6 (2.1) (22) Other 23.6 14.4 9.2 64 ------- ------- ------ Total $ 453.4 $ 530.3 ($76.9) (15) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 2,212 2,252 (40) (2) Commercial 2,010 1,999 11 1 Industrial 1,377 1,485 (108) (7) Governmental 179 183 (4) (2) ------ ------ ----- Total retail 5,778 5,919 (141) (2) Sales for resale Associated companies 608 1,332 (724) (54) Non-associated companies 97 107 (10) (9) ------ ------ ----- Total 6,483 7,358 (875) (12) ====== ====== ===== ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Loss Entergy New Orleans experienced a net loss for the six months ended June 30, 2002 primarily due to accruals for potential rate actions and refunds and increased interest charges, partially offset by decreased taxes other than income taxes. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and six months ended June 30, 2002 compared with the three and six months ended June 30, 2001 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate differences ($0.5) ($3.6) Fuel cost recovery (33.5) (75.5) Sales volume/weather 2.7 3.7 Unbilled revenue (1.8) (1.1) Other revenue (0.2) (6.0) Sales for resale (1.3) (8.1) ------ ------ Total ($34.6) ($90.6) ====== ====== Fuel cost recovery Entergy New Orleans is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy New Orleans' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and six months ended June 30, 2002 primarily due to recovery, through the fuel adjustment clause, of lower fuel and purchased power expenses. The decrease in fuel and purchased power expenses was a result of decreased market prices of natural gas and purchased power. Other revenue Other revenue decreased for the six months ended June 30, 2002 primarily due to accruals for potential rate actions and refunds. Sales for resale Sales for resale decreased for the six months ended June 30, 2002 primarily due to a decrease in the average price of resale energy coupled with decreased sales volume to affiliated customers. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Gas operating revenues Gas operating revenues decreased for the three and six months ended June 30, 2002 primarily due to the decreased market price of natural gas coupled with decreased sales volume. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three and six months ended June 30, 2002 primarily due to the decreased market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended June 30, 2002 primarily due to an increase in rate proceedings costs of $1.1 million. Other operation and maintenance expenses increased for the six months ended June 30, 2002 primarily due to: o an increase in rate proceedings costs of $1.3 million; and o an increase in injuries and damages expense of $1.0 million. Taxes other than income taxes Taxes other than income taxes decreased for the three and six months ended June 30, 2002 primarily due to a decrease in local franchise taxes as a result of lower retail revenue. Other regulatory charges - net Other regulatory charges increased for the six months ended June 30, 2002 primarily due to a greater over-recovery of Grand Gulf costs compared to 2001. The increase was partially offset by the completion of the Grand Gulf 1 Rate Deferral Plan in September 2001. Other Other income Other income decreased for the six months ended June 30, 2002 primarily due to interest recorded in the first half of 2001 on deferred System Energy costs that Entergy New Orleans was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of a final FERC order. See Note 2 to the financial statements in the Form 10-K for further discussion of the System Energy rate proceeding and FERC order. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Interest and other charges Other interest increased for the three and six months ended June 30, 2002 primarily due to interest recorded for potential rate actions and refunds. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 44.7% and 40.9%, respectively. There was no meaningful effective income tax rate for the six months ended June 30, 2002 as a result of the net loss generated, while book and tax timing differences caused income tax expense for the period. The effective income tax rate for the six months ended June 30, 2001 was 43.3%. The increase for the three months ended June 30, 2002 in the effective tax rate was primarily due to increased book and tax depreciation timing differences.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF OPERATIONS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $104,465 $139,057 $177,688 $268,289 Natural gas 16,957 21,252 46,681 96,035 -------- -------- -------- -------- TOTAL 121,422 160,309 224,369 364,324 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 21,811 51,860 50,468 160,687 Purchased power 45,313 58,859 80,822 107,326 Other operation and maintenance 23,200 21,615 45,112 42,576 Taxes other than income taxes 9,134 11,308 18,426 24,994 Depreciation and amortization 6,891 6,181 13,734 12,507 Other regulatory charges - net 1,922 1,113 4,331 2,643 -------- -------- -------- -------- TOTAL 108,271 150,936 212,893 350,733 -------- -------- -------- -------- OPERATING INCOME 13,151 9,373 11,476 13,591 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 463 453 893 851 Interest and dividend income 89 1,055 363 2,161 Miscellaneous - net (377) (735) (837) (1,147) -------- -------- -------- -------- TOTAL 175 773 419 1,865 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 4,469 4,450 8,937 8,568 Other interest - net 3,547 386 3,998 812 Allowance for borrowed funds used during construction (472) (386) (866) (706) -------- -------- -------- -------- TOTAL 7,544 4,450 12,069 8,674 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 5,782 5,696 (174) 6,782 Income taxes 2,583 2,327 567 2,938 -------- -------- -------- -------- NET INCOME (LOSS) 3,199 3,369 (741) 3,844 Preferred dividend requirements and other 241 241 482 482 -------- -------- -------- -------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $2,958 $3,128 ($1,223) $3,362 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income (loss) ($741) $3,844 Noncash items included in net income (loss): Other regulatory charges - net 4,331 2,643 Depreciation and amortization 13,734 12,507 Deferred income taxes and investment tax credits 3,098 (2,588) Allowance for equity funds used during construction (893) (851) Changes in working capital: Receivables 654 (4,101) Fuel inventory 3,057 4,096 Accounts payable 14,518 (12,011) Taxes accrued - 3,971 Interest accrued 2,295 307 Deferred fuel costs (18,517) 11,719 Other working capital accounts (40,041) (8,049) Provision for estimated losses and reserves (2,258) (2,136) Changes in other regulatory assets 12 (12,295) Other 5,733 1,181 ------- ------- Net cash flow used in operating activities (15,018) (1,763) ------- ------- INVESTING ACTIVITIES Construction expenditures (31,036) (28,898) Allowance for equity funds used during construction 893 851 Changes in other temporary investments - net 14,859 - ------- ------- Net cash flow used in investing activities (15,284) (28,047) ------- ------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 29,769 Dividends paid: Preferred stock (482) (241) ------- ------- Net cash flow provided by (used in) financing activities (482) 29,528 ------- ------- Net decrease in cash and cash equivalents (30,784) (282) Cash and cash equivalents at beginning of period 38,184 6,302 ------- ------- Cash and cash equivalents at end of period $7,400 $6,020 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $10,377 $8,845 See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $7,400 $5,237 Temporary cash investments - at cost, which approximates market - 32,947 -------- -------- Total cash and cash equivalents 7,400 38,184 -------- -------- Other temporary investments - 14,859 Accounts receivable: Customer 32,545 33,827 Allowance for doubtful accounts (2,234) (2,234) Associated companies - 10,527 Other 6,885 4,511 Accrued unbilled revenues 28,808 20,027 -------- -------- Total accounts receivable 66,004 66,658 -------- -------- Deferred fuel costs 8,321 - Accumulated deferred income taxes - 4,882 Fuel inventory - at average cost 24 3,081 Materials and supplies - at average cost 7,496 8,273 Prepayments and other 41,359 26,239 -------- -------- TOTAL 130,604 162,176 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 610,725 597,575 Natural gas 147,030 142,741 Construction work in progress 52,366 43,166 -------- -------- TOTAL UTILITY PLANT 810,121 783,482 Less - accumulated depreciation and amortization 404,936 396,535 -------- -------- UTILITY PLANT - NET 405,185 386,947 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Unamortized loss on reacquired debt 655 761 Other regulatory assets 10,831 10,843 Other 1,276 2,051 -------- -------- TOTAL 12,762 13,655 -------- -------- TOTAL ASSETS $551,810 $566,037 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $25,000 $ - Accounts payable: Associated companies 22,399 18,199 Other 33,958 23,640 Customer deposits 19,087 18,931 Accumulated deferred income taxes 1,847 - Interest accrued 9,327 7,032 Deferred fuel costs - 10,196 System Energy Refund - 33,614 Other 9,559 1,799 -------- -------- TOTAL 121,177 113,411 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 17,035 25,326 Accumulated deferred investment tax credits 5,119 5,361 SFAS 109 regulatory liability - net 25,674 19,868 Accumulated provisions 3,544 5,802 Other 25,904 16,735 -------- -------- TOTAL 77,276 73,092 -------- -------- Long-term debt 204,143 229,097 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 19,780 19,780 Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2002 33,744 33,744 and 2001 Paid-in capital 36,294 36,294 Retained earnings 59,396 60,619 -------- -------- TOTAL 149,214 150,437 -------- -------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $551,810 $566,037 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Monts Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 37.0 $ 45.8 ($8.8) (19) Commercial 34.7 48.0 (13.3) (28) Industrial 5.3 8.4 (3.1) (37) Governmental 14.8 20.9 (6.1) (29) ------- ------- ------ Total retail 91.8 123.1 (31.3) (25) Sales for resale Associated companies 1.0 1.7 (0.7) (41) Non-associated companies 0.5 1.1 (0.6) (55) Other 11.2 13.2 (2.0) (15) ------- ------- ------ Total $ 104.5 $ 139.1 ($34.6) (25) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 504 457 47 10 Commercial 554 545 9 2 Industrial 96 104 (8) (8) Governmental 260 247 13 5 ------- ------- ------ Total retail 1,414 1,353 61 5 Sales for resale Associated companies 15 26 (11) (42) Non-associated companies 9 15 (6) (40) ------- ------- ------ Total 1,438 1,394 44 3 ======= ======= ====== Six Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 64.2 $ 86.8 ($22.6) (26) Commercial 65.4 96.9 (31.5) (33) Industrial 9.9 16.7 (6.8) (41) Governmental 27.4 41.8 (14.4) (34) ------- ------- ------ Total retail 166.9 242.2 (75.3) (31) Sales for resale Associated companies 1.3 8.7 (7.4) (85) Non-associated companies 1.0 1.7 (0.7) (41) Other 8.5 15.7 (7.2) (46) ------- ------- ------ Total $ 177.7 $ 268.3 ($90.6) (34) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 907 854 53 6 Commercial 1,059 1,033 26 3 Industrial 185 196 (11) (6) Governmental 490 475 15 3 ------- ------- ------ Total retail 2,641 2,558 83 3 Sales for resale Associated companies 31 90 (59) (66) Non-associated companies 20 27 (7) (26) ------- ------- ------ Total 2,692 2,675 17 1 ======= ======= ====== SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months and six months ended June 30, 2002 compared with the three months and six months ended June 30, 2001 primarily due to decreased interest charges, partially offset by decreased interest income. Revenues Operating revenues recover operating expenses, depreciation, and capital costs attributable to Grand Gulf 1. Capital costs are computed by allowing a return on System Energy's common equity funds allocable to its net investment in Grand Gulf 1 and adding to such amount System Energy's effective interest cost for its debt. Operating revenues decreased for the three and six months ended June 30, 2002 as a result of the suspension of the GGART for Entergy Arkansas in July 2001. The net income impact of the suspended tariff is substantially offset in other regulatory charges. See further discussion of the GGART in Note 2 to the financial statements in the Form 10-K. Expenses Nuclear refueling outage expenses Nuclear refueling outage expenses decreased for the three and six months ended June 30, 2002 due to lower monthly amortization of outage expenses resulting from lower expenses incurred during the April/May 2001 refueling and maintenance outage compared to the previous outage. Other operation and maintenance Other operation and maintenance expenses increased for the six months ended June 30, 2002 primarily due to: o lower nuclear insurance refunds of $1.7 million; and o an increase in outside services employed of $1.3 million. Depreciation and amortization Depreciation and amortization expenses decreased for the three and six months ended June 30, 2002 primarily due to a lower depreciation rate used in 2002 as mandated by FERC. See further discussion of the System Energy rate proceeding in Note 2 to the financial statements in the Form 10-K. Other regulatory charges - net Other regulatory charges decreased for the three and six months ended June 30, 2002 primarily due to the suspension of the GGART for Entergy Arkansas in July 2001. SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other Other income Interest income decreased for the three and six months ended June 30, 2002 as a result of decreased interest earned on System Energy's investments in the money pool due to lower advances to the money pool in 2002 compared to the same period in 2001. Interest and other charges Interest on long-term debt decreased for the three and six months ended June 30, 2002 primarily due to the retirement of $135 million of long-term debt in August 2001, combined with a decrease in interest expense related to the sale-leaseback of Grand Gulf 1. Other interest expense decreased for the three and six months ended June 30, 2002 due to interest recorded in 2001 on System Energy's reserve for rate refund. The refund was made in December 2001. Income taxes The effective income tax rates for the three months ended June 30, 2002 and 2001 were 43.1% and 45.7%, respectively. The effective income tax rates for the six months ended June 30, 2002 and 2001 were 41.8% and 45.7%, respectively. The decrease in the effective tax rate for the six months ended June 30, 2002 was primarily due to updating book and tax timing differences related to research and experimental expenses consistent with amended tax returns in addition to book and tax timing differences related to depreciation.
SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $142,892 $152,902 $285,222 $304,068 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 9,362 7,822 18,966 17,894 Nuclear refueling outage expenses 2,618 3,988 5,238 8,022 Other operation and maintenance 23,042 21,433 42,255 37,806 Decommissioning 4,014 4,736 8,028 9,472 Taxes other than income taxes 6,861 6,460 13,577 13,168 Depreciation and amortization 24,745 27,227 52,042 56,708 Other regulatory charges - net 13,128 19,955 26,054 39,122 -------- -------- -------- -------- TOTAL 83,770 91,621 166,160 182,192 -------- -------- -------- -------- OPERATING INCOME 59,122 61,281 119,062 121,876 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 700 484 1,250 754 Interest and dividend income 609 4,743 1,089 9,844 Miscellaneous - net (29) (20) (390) (50) -------- -------- -------- -------- TOTAL 1,280 5,207 1,949 10,548 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 15,544 18,756 30,651 37,767 Other interest - net 718 8,929 1,503 17,636 Allowance for borrowed funds used during construction (247) (224) (479) (361) -------- -------- -------- -------- TOTAL 16,015 27,461 31,675 55,042 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 44,387 39,027 89,336 77,382 Income taxes 19,137 17,825 37,359 35,382 -------- -------- -------- -------- NET INCOME $25,250 $21,202 $51,977 $42,000 ======== ======== ======== ======== See Notes to Financial Statements.
(Page left blank intentionally)
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $51,977 $42,000 Noncash items included in net income: Reserve for regulatory adjustments - 53,475 Other regulatory charges - net 26,054 39,122 Depreciation, amortization, and decommissioning 60,070 66,180 Deferred income taxes and investment tax credits (22,881) (44,214) Allowance for equity funds used during construction (1,250) (754) Changes in working capital: Receivables (38,756) (101,734) Accounts payable (1,293) (11,514) Taxes accrued 50,002 62,571 Interest accrued (27,075) (18,683) Other working capital accounts 2,448 (7,612) Provision for estimated losses and reserves (291) (425) Changes in other regulatory assets 15,148 20,394 Other 7,451 (3,295) -------- -------- Net cash flow provided by operating activities 121,604 95,511 -------- -------- INVESTING ACTIVITIES Construction expenditures (18,036) (22,758) Allowance for equity funds used during construction 1,250 754 Nuclear fuel purchases - (37,592) Proceeds from sale/leaseback of nuclear fuel - 37,592 Decommissioning trust contributions and realized change in trust assets (2,854) (11,676) Changes in other temporary investments - net 22,354 - -------- -------- Net cash flow provided by (used in) investing activities 2,714 (33,680) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (30,891) (16,800) Dividends paid: Common stock (49,900) (43,000) -------- -------- Net cash flow used in financing activities (80,791) (59,800) -------- -------- Net increase in cash and cash equivalents 43,527 2,031 Cash and cash equivalents at beginning of period 49,579 202,218 -------- -------- Cash and cash equivalents at end of period $93,106 $204,249 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $57,121 $71,878 Income taxes - $3,463 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($5,715) ($1,417) See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $92 $15 Temporary cash investments - at cost, which approximates market 93,014 49,564 ---------- ---------- Total cash and cash equivalents 93,106 49,579 ---------- ---------- Other temporary investments - 22,354 Accounts receivable: Associated companies 109,553 70,755 Other 1,151 1,193 ---------- ---------- Total accounts receivable 110,704 71,948 ---------- ---------- Materials and supplies - at average cost 52,659 51,665 Deferred nuclear refueling outage costs 3,551 8,728 Prepayments and other 3,963 1,631 ---------- ---------- TOTAL 263,983 205,905 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 135,685 138,546 ---------- ---------- UTILITY PLANT Electric 3,100,775 3,098,446 Property under capital lease 450,014 450,014 Construction work in progress 51,370 36,868 Nuclear fuel under capital lease 48,347 61,905 ---------- ---------- TOTAL UTILITY PLANT 3,650,506 3,647,233 Less - accumulated depreciation and amortization 1,467,793 1,416,337 ---------- ---------- UTILITY PLANT - NET 2,182,713 2,230,896 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 154,944 173,470 Unamortized loss on reacquired debt 46,593 48,381 Other regulatory assets 161,327 157,949 Other 8,865 8,894 ---------- ---------- TOTAL 371,729 388,694 ---------- ---------- TOTAL ASSETS $2,954,110 $2,964,041 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY June 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $81,375 $100,891 Accounts payable: Associated companies 993 2,404 Other 14,434 14,316 Taxes accrued 162,524 112,522 Accumulated deferred income taxes 353 2,360 Interest accrued 20,020 47,095 Obligations under capital leases 26,503 26,503 Other 2,180 1,583 ---------- ---------- TOTAL 308,382 307,674 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 468,808 498,404 Accumulated deferred investment tax credits 84,302 86,040 Obligations under capital leases 21,844 35,401 Other regulatory liabilities 179,921 135,878 Decommissioning 142,957 140,103 Accumulated provisions 414 705 Other 36,024 39,117 ---------- ---------- TOTAL 934,270 935,648 ---------- ---------- Long-term debt 818,700 830,038 SHAREHOLDER'S EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350 Retained earnings 103,408 101,331 ---------- ---------- TOTAL 892,758 890,681 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,954,110 $2,964,041 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (including nuclear fuel but excluding AFUDC), as updated by the following paragraph, long-term debt and preferred stock maturities, and cash sinking fund requirements. ANO 1 Steam Generator Replacement (Entergy Corporation and Entergy Arkansas) See "ANO Matters" in Part I of the Form 10-K for discussion of the ANO 1 steam generators and reactor vessel closure head. On July 25, 2002, the Board authorized Entergy Arkansas and Entergy Operations to replace the ANO 1 steam generators and reactor vessel closure head. Entergy management estimates the cost of the fabrication and replacement to be approximately $235 million, of which approximately $135 million will be incurred through 2004. Management expects a contractor for the installation of the replacement steam generators and reactor vessel closure head to be selected by December 2002. Management expects that the replacement will occur during a planned refueling outage in 2005. Sales Warranties and Indemnities (Entergy Corporation) See Note 9 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Entergy London and CitiPower sales transactions. See Note 14 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Saltend sale transaction. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements 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 Entergy's nuclear power plants. Regarding nuclear insurance, the Price-Anderson Act expired on August 1, 2002, and the U.S. Congress is currently considering a number of proposals for its renewal. Entergy's current nuclear operating licenses will not be affected by the expiration, because operating licenses issued prior to August 2002 are not affected by the expiration. In July 2002, Entergy's domestic non-utility nuclear business purchased the Vermont Yankee nuclear power plant from Vermont Yankee Nuclear Power Corporation (VYNPC). Entergy's domestic non-utility nuclear business has accepted assignment of the Vermont Yankee spent fuel disposal contract with the DOE previously held by VYNPC. VYNPC has paid or retained liability for the DOE fees for all generation prior to the purchase date of Vermont Yankee. Vermont Yankee currently has sufficient spent fuel storage capacity until approximately 2007. As part of the Vermont Yankee purchase, VYNPC transferred a $310 million decommissioning trust fund, along with the liability to decommission Vermont Yankee, to Entergy's domestic non-utility nuclear business. Entergy believes that Vermont Yankee's decommissioning trust fund will be adequate to cover future decommissioning costs for the plant without any additional deposits to the trust. Environmental Issues (Entergy Arkansas) In previous years, Entergy Arkansas has received notices from the EPA and the ADEQ alleging that Entergy Arkansas, along with others, may be a potentially responsible party (PRP) for clean-up costs associated with a site in Arkansas. As of June 30, 2002, a remaining recorded liability of approximately $5.0 million existed related to the cleanup of that site. (Entergy Gulf States) Entergy Gulf States has been designated as a PRP for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the cleanup of these sites. As of June 30, 2002, a remaining recorded liability of approximately $14.7 million existed related to the cleanup of the remaining sites at which the EPA has designated Entergy Gulf States as a PRP. (Entergy Louisiana and Entergy New Orleans) During 1993, the LDEQ issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana and Entergy New Orleans have determined that certain of their power plant wastewater impoundments were affected by these regulations and have chosen to upgrade or close them. Recorded liabilities in the amounts of $5.8 million for Entergy Louisiana and $0.5 million for Entergy New Orleans existed at June 30, 2002 for wastewater upgrades and closures. Completion of this work is awaiting LDEQ approval. City Franchise Ordinances (Entergy New Orleans) Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical 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 termination of the lease transactions and may be required to assume the outstanding bonds issued to finance, in part, the lessors' acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10- K for further information. Off Balance Sheet Turbine Financing Arrangement (Entergy Corporation) As discussed in Note 9 to the financial statements in the Form 10-K, EWO obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special- purpose entity in May 2001. For the six months ended June 30, 2002, Entergy recorded a $180.2 million ($117.1 million net of tax) provision for Entergy's estimate of the impairments resulting from cancellation or sale of the turbines subject to purchase commitments with the special-purpose entity. The Consolidated Statement of Operations reflects the pre-tax effect of this liability in operation and maintenance expenses. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies are vigorously defending these suits and deny any liability to the plaintiffs. Nevertheless, no assurance can be given as to the outcome of these cases. Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) Numerous lawsuits have been filed in federal and state courts in Texas and Louisiana primarily by contractor employees in the 1950- 1980 timeframe against Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans, as premises owners of power plants, for damages caused by alleged exposure to asbestos or other hazardous material. See Note 9 to the financial statements in the Form 10-K for further information. Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In addition to those proceedings discussed elsewhere herein and in the Form 10-K, Entergy and the domestic utility companies are involved in a number of other legal proceedings and claims in the ordinary course of their businesses. While management is unable to predict the outcome of these other legal proceedings and claims, it is not reasonably expected that their ultimate resolution individually or collectively will have a material adverse effect on the results of operations, cash flows, or financial condition of these entities. NOTE 2. RATE AND REGULATORY MATTERS Electric Industry Restructuring and the Continued Application of SFAS 71 Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Texas (Entergy Corporation and Entergy Gulf States) Retail open access legislation is in place in Texas, but the implementation of retail open access in Entergy Gulf States' service territory is delayed until at least September 15, 2002. Management does not expect that retail open access in Entergy Gulf States' Texas service territory within the context of a functional FERC-approved RTO is likely to begin before January 2004. Several proceedings necessary to implement retail open access are still pending, including the proceeding to set the price-to-beat fuel rate that will be charged by Entergy's retail electric service provider. In addition, the LPSC has not approved for the Louisiana jurisdictional operations the transfer of generation assets to, or a power purchase agreement with, Entergy's Texas generation company. Given the delay, Entergy Gulf States cannot predict what, if any, additional changes to previously approved plans may be required by the PUCT or the LPSC. Therefore, neither the necessary regulatory actions nor the opportunity for a reasonable determination of the effect of deregulation has occurred that are prerequisites for Entergy Gulf States to discontinue the application of regulatory accounting principles to its Texas generation operations. Retail Rate Proceedings Filings with the APSC (Entergy Corporation and Entergy Arkansas) March 2002 Settlement Agreement As discussed in the Form 10-K, in March 2002, Entergy Arkansas, the APSC staff, and the Arkansas Attorney General submitted a settlement agreement to the APSC for approval. The settlement agreement proposed a resolution of issues discussed in the Form 10-K under "Retail Rates," "Transition Cost Account," and "December 2000 Ice Storm Cost Recovery." In May 2002, the APSC approved the March 2002 settlement agreement without revision. Transition Cost Account In May 2002, Entergy Arkansas filed its 2001 earnings evaluation report with the APSC. In June 2002, the APSC approved a contribution of $5.9 million to the TCA. The balance in the TCA after this contribution was $155.5 million, including interest, through June 2002. A principal provision in the March 2002 settlement agreement is to offset $137.4 million of ice storm recovery costs with the TCA on a rate class basis. In accordance with the settlement agreement and following the APSC's approval of Entergy Arkansas' 2001 earnings review, Entergy Arkansas filed to return $18.1 million of the TCA to certain large general service class customers that paid more into the TCA than their allocation of storm costs. The APSC approved the return of funds to the large general service customer class in the form of refund checks in August 2002. December 2000 Ice Storm Cost Recovery The March 2002 settlement agreement provisions allow Entergy Arkansas to offset incremental ice storm expenses with the funds accumulated in the TCA on a rate class basis, and any excess of ice storm costs over the amount available in the TCA will be deferred for recovery. The allocated ice storm expenses exceed the available TCA funds by $15.8 million. This excess amount was recorded as a regulatory asset in June 2002 and will be amortized over a 30-year period. Fuel Cost Recovery In March 2002, Entergy Arkansas filed its annually redetermined energy cost rate with the APSC, including a new energy allocation factor. The filing reflected a decrease due to reduced fuel and purchased power costs in 2001 and the accumulated over-recovery of 2001 energy costs. The decreased energy cost rate is effective April 2002 through March 2003. Filings with the PUCT and Texas Cities (Entergy Corporation and Entergy Gulf States) Recovery of River Bend Costs In March 1998, the PUCT disallowed recovery of $1.4 billion of company-wide abeyed River Bend plant costs, which have been held in abeyance since 1988. Entergy Gulf States appealed the PUCT's decision on this matter to the Travis County District Court in Texas. In June 1999, subsequent to the settlement agreement discussed in the Form 10-K, Entergy Gulf States removed the reserve for River Bend plant costs held in abeyance and reduced the value of the plant asset. The settlement agreement limits potential recovery of the remaining plant asset, less depreciation, to $115 million as of January 1, 2002. In a settlement in its transition to competition proceedings, and consistent with the June 1999 settlement, Entergy Gulf States agreed not to prosecute its appeal until January 1, 2002. Entergy Gulf States also agreed that it will not seek recovery of the abeyed plant costs through any additional charge to Texas ratepayers. In its interim order approving this settlement, however, the PUCT recognized that any additional River Bend investment found prudent, subject to the $115 million cap, could be used as an offset against stranded benefits, should legislation be passed requiring Entergy Gulf States to return stranded benefits to retail customers. Entergy Gulf States is now prosecuting its appeal and in April 2002, the Travis County District Court issued an order affirming the PUCT's order on remand. Entergy Gulf States has appealed this ruling to the Third District Court of Appeals. The financial statement impact of the retail rate settlement agreement on the remaining abeyed plant costs will ultimately depend on several factors, including the possible discontinuance of SFAS 71 accounting treatment for the Texas generation business, the determination of the market value of generation assets, and any future legislation in Texas addressing the pass-through or sharing of any stranded benefits with Texas ratepayers. While Entergy Gulf States expects to prevail in its lawsuit, no assurance can be given that additional reserves or write- offs will not be required in the future. PUCT Fuel Cost Review As determined in the June 1999 retail rate settlement agreement, Entergy Gulf States adopted a methodology for calculating its fixed fuel factor based on the market price of natural gas. This calculation and any necessary adjustments occur semi-annually. The settlement that delayed implementation of retail open access in Texas for Entergy Gulf States provides that Entergy Gulf States will continue the use of this methodology until retail open access begins. The amounts collected under Entergy Gulf States' fixed fuel factor until the date retail open access commences are subject to fuel reconciliation proceedings before the PUCT. The interim surcharge discussed below will also be subject to the fuel reconciliation proceeding. In January 2001, Entergy Gulf States filed a fuel reconciliation case covering the period from March 1999 through August 2000. Entergy Gulf States is reconciling approximately $583.0 million of fuel and purchased power costs. As part of this filing, Entergy Gulf States requested a surcharge to collect $28.0 million, plus interest, of under-recovered fuel and purchased power costs. A hearing on the merits concluded in August 2001, and the ALJ has recommended that the surcharge be reduced to $7.0 million. The PUCT considered the ALJ's recommendation in February 2002, but did not reach a final decision. The PUCT remanded certain issues related to the eligibility of costs for Entergy Gulf States 30% non-regulated share of River Bend for further consideration by the ALJ. After considering the remanded issues in June 2002, the PUCT issued an oral ruling indicating that the surcharge request should be reduced to approximately $5.0 million. Approximately $4.7 million of the total reduction to the requested surcharge relates to nuclear fuel costs that the PUCT deferred ruling on at this time. The PUCT issued a written order supporting its decisions, which will be subject to rehearing. No assurance can be given as to the final outcome of this proceeding. In November 2001, Entergy Gulf States filed an application with the PUCT requesting an interim surcharge to collect $71 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through September 2001. Entergy Gulf States made the application pursuant to one of the terms of the settlement agreement that delayed implementation of retail open access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf States revised its request to collect $30.3 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through February 2002. Entergy Gulf States requested that the surcharge begin in April 2002 and extend through August 2002, or until the fuel cost is fully recovered, whichever is sooner. In March 2002, the PUCT issued an order approving the surcharge. The surcharge was implemented in the first billing cycle of April 2002. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In May 2001, Entergy Gulf States filed its eighth required post- merger earnings review with the LPSC. This filing is subject to review by the LPSC and may result in a change in rates. In April 2002, the LPSC staff filed testimony recommending a $16.5 million rate refund and a $40.1 million prospective rate reduction. The prospective reduction includes a recommended reduction in the rate of return on common equity (ROE) that would not take effect until the later of June 2003 or the date of the LPSC's order. Hearings were held in April 2002 and will continue in August 2002. In May 2002, Entergy Gulf States filed its ninth and last required post-merger earnings analysis with the LPSC. The filing was based on the 2001 test year and resulted in a rate decrease of $11.5 million, which was implemented effective June 2002. This filing is subject to review by the LPSC and may result in additional or different changes in rates than those sought in the filing. No procedural schedule has been adopted. In June 2002, an ALJ issued a proposed recommendation to the LPSC with regard to issues raised in Entergy Gulf States' fifth annual post-merger earnings review. The ALJ recommended adoption of the LPSC Staff's position on most issues, including the recommendation that Entergy Gulf States' authorized ROE be set at 10.0%. However, due to a settlement agreement currently in effect, Entergy Gulf States' currently authorized ROE of 11.1% will remain in effect through May 2003. Entergy Gulf States cannot predict the timing or outcome of this proceeding. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In May 1997, Entergy Louisiana made its second annual performance-based formula rate plan filing with the LPSC for the 1996 test year. This filing resulted in a total rate reduction of approximately $54.5 million, which was implemented in July 1997. At the same time, rates were reduced by an additional $0.7 million and by an additional $2.9 million effective March 1998. Upon completion of the hearing process in December 1998, the LPSC issued an order requiring an additional rate reduction and refund, although the resulting amounts were not quantified. Entergy Louisiana appealed this order and obtained a preliminary injunction pending a final decision on appeal. The Louisiana Supreme Court rendered a non- unanimous decision in April 2002 affirming the LPSC's order. Entergy Louisiana has filed an application for rehearing. In May 2000, Entergy Louisiana submitted its fifth annual performance-based formula rate plan filing for the 1999 test year. As a result of this filing, Entergy Louisiana implemented a $24.8 million base rate reduction in August 2000. In September 2001, the LPSC approved a settlement in which Entergy Louisiana agreed to increase to $28.2 million the total base rate reduction, effective August 2000. The additional rate reduction and the associated credit were implemented in September 2001. The settlement resolved all issues in the proceeding except for Entergy Louisiana's claim for an increase in its allowed return on common equity from 10.5% to 11.6%. A hearing to address the return on common equity issue was held in March 2002. This issue was resolved in the June 2002 settlement between Entergy Louisiana and the LPSC discussed below. In April 2001, Entergy Louisiana submitted its sixth annual performance-based formula rate plan filing, which used a 2000 test year. The filing indicated that an immaterial base rate reduction might be appropriate. Subsequently, Entergy Louisiana agreed to implement a $3.4 million rate reduction effective August 2001. This stipulation resolved all issues relating to the 2000 test year, except issues relating to its return on common equity and the treatment of certain capacity costs in the formula rate plan process. These issues were addressed in a hearing in June 2002 and were resolved in the settlement discussed below. In June 2002, Entergy Louisiana and the LPSC Staff reached a settlement that resolved all remaining issues in the 2000 and 2001 formula rate plan proceedings. Entergy Louisiana has agreed to a $5 million annual rate reduction effective August 2001. The prospective rate reduction will be implemented beginning in August 2002 and the refund for the retroactive period will occur in September 2002. As part of the settlement, Entergy Louisiana's rates, including its previously authorized ROE of 10.5%, would then remain in effect until changed pursuant to a new formula rate plan filing or a revenue requirement analysis to be filed by June 30, 2003. The settlement was approved by the LPSC in July 2002. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) Formula Rate Plan Filings In March 2002, Entergy Mississippi submitted its annual performance-based formula rate plan filing for the 2001 test year. The submittal indicated that a $2.8 million rate increase was appropriate under the formula rate plan. In April 2002, the MPSC Staff and Entergy Mississippi entered into a stipulation, which the MPSC approved, that provided for an increase of $1.95 million effective in May 2002. Filings with the Council (Entergy Corporation and Entergy New Orleans) Retail Rate Filings In May 2002, Entergy New Orleans filed a cost of service study and revenue requirement filing with the Council for the 2001 test year. The filing indicated that a revenue deficiency exists and that a $28.9 million electric rate increase and a $15.3 million gas rate increase are appropriate. Additionally, Entergy New Orleans has proposed a $6.0 million public benefit fund. The Council has not established a procedural schedule for consideration of the filing. Natural Gas In a resolution adopted in August 2001, the Council ordered Entergy New Orleans to account for $36 million of certain natural gas costs charged to its gas distribution customers from July 1997 through May 2001. The resolution suggests that refunds may be due to the gas distribution customers if Entergy New Orleans cannot account satisfactorily for these costs. Entergy New Orleans filed a response to the Council in September 2001. Entergy New Orleans has documented a full reconciliation for the natural gas costs during that period. The ultimate outcome of the proceeding cannot be predicted at this time. Fuel Adjustment Clause Litigation In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. Entergy filed exceptions to the plaintiffs' allegations, asserting, among other things, that jurisdiction over these issues rests with the Council and FERC. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also filed this complaint with the Council in order to initiate a review by the Council of the plaintiffs' allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Testimony was filed on behalf of the plaintiffs in this proceeding in April 2000 and has been supplemented. The testimony, as supplemented, asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices and included costs in Entergy New Orleans' fuel adjustment that could have resulted in New Orleans customers being overcharged by more than $100 million over a period of years. In June 2001, the Council's advisors filed testimony on these issues in which they allege that Entergy New Orleans ratepayers may have been overcharged by more than $32 million, the vast majority of which is reflected in the plaintiffs' claim. However, it is not clear precisely what periods and damages are being alleged in the proceeding. Entergy intends to defend this matter vigorously, both in court and before the Council. Hearings were held in February and March 2002. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) The domestic utility companies requested that the APSC, the LPSC, the MPSC, and the Council to approve the sale of power by Entergy Gulf States from its unregulated, undivided 30% interest in River Bend formerly owned by Cajun to the other domestic utility companies during the summer of 2000. These applications were approved subject to subsequent prudence reviews. In addition, Entergy Gulf States and Entergy Louisiana filed an application with the LPSC for authorization to purchase capacity and electric power from third parties for the summer of 2000, and filed a similar application for the summer of 2001. The LPSC approved these applications, with reservation of its rights to review the prudence of the purchases and the appropriate categorization of the costs as either capacity or energy charges for purposes of recovery. The LPSC reviewed the 2000 purchases and found that Entergy Louisiana's and Entergy Gulf States' costs were prudently incurred, but decided that approximately 34% of the costs should be categorized as capacity charges, and therefore should be recovered through base rates and not through the fuel adjustment clause. In November 2000, the LPSC ordered refunds of $11.1 million for Entergy Louisiana and $3.6 million for Entergy Gulf States, for which adequate provisions were made. In May 2001, the LPSC determined that 24% of Entergy Louisiana's and Entergy Gulf States' costs relating to summer 2001 purchases should be categorized as capacity charges, and has reviewed certain prudence issues related to the 2001 purchases. The LPSC has questioned the system's contract mix and raised issues relating to potential uprates at nuclear facilities. Hearings on those issues were conducted in May 2002, and briefs have been filed by the parties. Those costs that are categorized as capacity charges will be included in the costs of service used to determine the base rates of Entergy Louisiana and Entergy Gulf States. In 2001, these companies recorded a regulatory asset for the capacity charges incurred in both 2000 and 2001. The capacity charges for 2000 were amortized through May 2002 for Entergy Gulf States and through July 2002 for Entergy Louisiana. The capacity charges for 2001 are being amortized over a twelve-month period, which began in June 2002 for Entergy Gulf States and will begin in August 2002 for Entergy Louisiana. In March 2002, Entergy Louisiana and Entergy Gulf States filed an application with the LPSC for the summer of 2002 similar to the applications filed for the summers of 2000 and 2001. A procedural schedule has been adopted for that docket. Entergy Louisiana, Entergy Gulf States, and the LPSC Staff reached a settlement in which those parties agreed that 14% of Entergy Louisiana's and Entergy Gulf States' costs relating to summer 2002 purchases should be categorized as capacity charges. A fairness hearing was held in May 2002 and no party to this proceeding opposed the settlement. The LPSC approved the settlement at its July 2002 public meeting. A procedural schedule has been adopted to address any prudence issues relating to summer 2002 purchases. A hearing is expected in October 2002. System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in the Form 10-K, FERC denied requests for rehearing in the System Energy rate increase proceeding and the July 2000 order became final. System Energy made a compliance tariff filing in August 2001 and it was accepted by FERC in November 2001. System Energy made refunds to the domestic utility companies in December 2001. A portion of the refund to the domestic utility companies has been or will be refunded to customers. Entergy Arkansas refunded $54.3 million, including interest, through the issuance of refund checks in March 2002 as approved by the APSC. Entergy Mississippi is refunding $14.8 million to its customers through credits to the Grand Gulf Riders. The credits began in October 2001 and will occur through September 2002. Entergy New Orleans refunded $27.0 million to its customers through the issuance of refund checks in the first quarter of 2002. Entergy Louisiana will refund $4.9 million, including interest, to its customers through a credit on the September 2002 bills as approved by the LPSC. NOTE 3. COMMON STOCK (Entergy Corporation) The average number of common shares outstanding for the presentation of diluted earnings per share was greater by 4,517,098 and 4,592,823 shares for the three months ended June 30, 2002 and 2001, respectively, and 4,445,242 and 4,230,700 shares for the six months ended June 30, 2002 and 2001, respectively, than the number of such shares for the presentation of basic earnings per share due to Entergy's stock option and other stock compensation plans discussed more thoroughly in Note 5 to the financial statements in the Form 10- K. The dilutive effect of the stock options on earnings per share for the three months ended June 2002 and 2001 was $.02 for both periods. The dilutive effect of the stock options on earnings per share for the six months ended June 30, 2002 and 2001 was $.01 and $.03, respectively. During the six months ended June 30, 2002, Entergy Corporation issued 3,941,176 shares of its previously repurchased common stock to satisfy stock option exercises. NOTE 4. LONG-TERM DEBT (Entergy Corporation) As discussed in Note 7 to the financial statements in the Form 10-K, the Damhead Creek credit facility requires that the annual debt service coverage ratio be at least 1.05 to 1 for the previous 12 months at semi-annual dates commencing with June 30, 2002. Given the low electricity prices currently affecting the UK market, Damhead Creek would not have met the annual debt service coverage ratio test in respect of the 12 months ended June 30, 2002, but the lenders amended the facility so that the coverage ratio calculations would not commence until December 31, 2002. Damhead Creek is currently in negotiations with the lenders to develop and implement a debt restructuring for the project prior to December 2002. If a debt restructuring agreement cannot be reached, however, Damhead Creek will likely not meet the debt service coverage ratio provisions of the credit facility on December 31, 2002. In the event the annual debt service coverage ratio is deficient at December 31, 2002, Damhead Creek will seek a waiver of the default from the lenders. There is no requirement for Entergy or EPDC to make capital contributions or provide credit support to Damhead Creek following the occurrence of an event of default. (Entergy Arkansas) On March 1, 2002, Entergy Arkansas retired, at maturity, $85 million of 7% Series First Mortgage Bonds with internally generated funds. On March 28, 2002, Entergy Arkansas issued $100 million of 6.70% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $85 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds were used to replace a portion of the cash that was used to meet the maturity of the $85 million 7% Series First Mortgage Bonds retired on March 1, 2002 discussed above. (Entergy Gulf States) On January 1, 2002, Entergy Gulf States retired, at maturity, $148 million of 8.21% Series First Mortgage Bonds with internally generated funds. (Entergy Louisiana) On January 1, 2002, Entergy Louisiana retired, at maturity, $23 million of 7.5% Series First Mortgage Bonds. On March 1, 2002, Entergy Louisiana retired, at maturity, $75 million of 5.80% Series First Mortgage Bonds. On March 27, 2002, Entergy Louisiana issued $150 million of 7.60% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $115 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds will be used to reduce short-term debt which, among other things, was incurred to meet the maturities of the First Mortgage Bonds discussed above. On June 1, 2002, Entergy Louisiana remarketed $55 million St. Charles Parish Pollution Control Revenue Refunding Bonds due 2030, accruing interest at a rate of 4.9% through May 31, 2005. On July 1, 2002, Entergy Louisiana retired, at maturity, $56.4 million of 7.74% Series First Mortgage Bonds with internally generated funds. (Entergy Mississippi) On June 1, 2002, Entergy Mississippi retired, at maturity, $65 million of 6.875% Series First Mortgage Bonds with internally generated funds. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On July 26, 2002, Entergy Corporation's Board of Directors declared a common stock dividend of $0.33 per share, payable on September 1, 2002, to holders of record as of August 13, 2002. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) Entergy's reportable segments as of June 30, 2002 are domestic utility, domestic non-utility nuclear, and energy commodity services. "All Other" includes the parent company, Entergy Corporation, and other business activity, which is principally gains or losses on the sales of businesses and the earnings on the proceeds of those sales. Entergy's segment financial information for the three months ended June 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Eliminations Consolidated Utility Utility Commodity Other* Nuclear* Services* 2002 Operating Revenues $1,712,248 $297,072 $81,071 $8,586 ($2,396) $2,096,581 Equity in earnings of unconsolidated equity affiliates - - 17,740 - - 17,740 Income Taxes (Benefit) 136,536 35,656 (20,171) (3,487) - 148,534 Net Income (Loss) 200,782 53,531 (1,688) (5,040) - 247,585 2001 Operating Revenues $2,022,354 $150,041 $327,031 $8,092 ($1,243) $2,506,275 Equity in earnings of unconsolidated equity affiliates - - 70,780 - - 70,780 Income Taxes 115,228 21,403 26,972 2,239 - 165,842 Net Income 175,155 33,101 30,179 7,148 - 245,583
Entergy's segment financial information for the six months ended June 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Other* Eliminations Consolidated Utility Utility Commodity Nuclear* Services* 2002 Operating Revenues $3,160,047 $575,968 $206,832 $17,587 ($3,019) $3,957,415 Equity in earnings of unconsolidated equity affiliates - - 92,804 - - 92,804 Income Taxes (Benefit) 201,912 61,909 (133,508) (7,677) - 122,636 Net Income (Loss) 309,026 93,596 (216,814) (11,207) - 174,601 Total Assets 19,993,613 3,790,815 2,469,812 977,658 (1,230,564) 26,001,334 2001 Operating Revenues $4,006,062 $329,416 $804,981 $20,482 ($2,235) $5,158,706 Equity in earnings of unconsolidated equity affiliates - - 95,543 - - 95,543 Income Taxes (Benefit) 200,733 42,089 34,569 (3,119) - 274,272 Net Income (Loss) 295,593 64,484 48,524 (2,147) - 406,454 Total Assets 20,706,094 2,093,291 2,604,398 958,379 (995,320) 25,366,842
Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Energy commodity services' net loss for the six months ended June 30, 2002 includes charges of $419.5 million to operating expenses ($271.5 million net of tax), including $18.1 million ($10.6 million net of tax) in the second quarter, to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in the United States and the United Kingdom. The charges consist of the following: o as discussed in Note 1, $180.2 million (($36) million in the second quarter) of the charges is a provision for the net costs resulting from cancellation or sale of the turbines subject to purchase commitments with a special-purpose entity; o $167.5 million ($15 million in the second quarter) of the charges result from the write-off of EPDC's equity investment in the Damhead Creek project ($55.0 million) and the impairment of the values of the Warren Power power plant, the Crete project, and the RS Cogen project ($112.5 million combined). This portion of the charges reflects Entergy's estimate of the effects of reduced spark spreads in the United States and the United Kingdom. These estimates are based on various sources of information, including discounted cash flow projections and current market prices; o $39.1 million ($39.1 million in the second quarter) of the charges relates to the restructuring of EWO, including impairments of EWO administrative fixed assets, estimated sublease losses, and employee-related costs for approximately 135 affected employees. These restructuring costs, which are included in the "Provision for turbine commitments, asset impairments and restructuring charges" in the accompanying consolidated statement of income as of June 30, 2002, were comprised of the following (in millions): Accrual for Expected Paid Cash in Non- Total Payments Cash Cash Expense Fixed asset impairments - - $22.5 $22.5 Sublease losses $10.7 - - 10.7 Severance and related costs 5.9 - - 5.9 ----- ----- ----- Total $16.6 - $22.5 $39.1 ===== ===== ===== Management expects the restructuring of EWO to be substantially complete by the end of 2002; and o $32.7 million (none in the second quarter) of the charges results from the write-off of capitalized project development costs for projects that will not be completed. NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation) As discussed in the Form 10-K, Entergy implemented SFAS 142, "Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets" effective January 1, 2002. The implementation of SFAS 142 resulted in the cessation of Entergy's amortization of the remaining plant acquisition adjustment recorded in conjunction with its acquisition of Entergy Gulf States; this will increase Entergy's annual net income by approximately $16.3 million. The following table is a reconciliation of reported earnings applicable to common stock to earnings applicable to common stock without goodwill amortization for the three and six months ended June 30, 2002 and 2001.
Three Months Ended Six Months Ended 2002 2001 2002 2001 (In Thousands, Except Share Data) Reported earnings (loss) applicable to common stock $241,653 $238,906 $162,729 $393,061 Add back: Goodwill amortization - 4,066 - 8,133 Earnings (loss) applicable to common stock without -------- -------- -------- -------- goodwill amortization $241,653 $242,972 $162,729 $401,194 ======== ======== ======== ======== Basic earnings (loss) per average common share: Reported earnings (loss) applicable to common stock $1.08 $1.08 $0.73 $1.78 Goodwill amortization - 0.02 - 0.04 Earnings (loss) applicable to common stock without -------- -------- -------- -------- goodwill amortization $1.08 $1.10 $0.73 $1.82 ======== ======== ======== ======== Diluted earnings (loss) per average common share: Reported earnings (loss) applicable to common stock $1.06 $1.06 $0.72 $1.75 Goodwill amortization - 0.02 - 0.04 Earnings (loss) applicable to common stock without -------- -------- -------- -------- goodwill amortization $1.06 $1.08 $0.72 $1.79 ======== ======== ======== ========
NOTE 8. EQUITY METHOD INVESTMENTS (Entergy Corporation) See Note 13 to the financial statements in the Form 10-K for a discussion of Entergy's equity method investments. In the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru, including Generandes Peru S.A. and Compania Electrica San Isidro S.A. EWO had $100.8 million reflected in "Investments in affiliates - at equity" for these investments as of December 31, 2001, and reported $11.6 million of "Equity in earnings of unconsolidated equity affiliates" from these investments for the year ended December 31, 2001. After impairment provisions recorded for these interests in 2001, the net loss realized on the sale in the first quarter of 2002 is insignificant. Approximately $66 million of cumulative translation adjustments were realized in the sale. As discussed in Note 6, for the six months ended June 30, 2002, Entergy recorded an impairment of $78.3 million against the book value of its investments in Crete Energy Ventures, LLC and RS Cogen LLC. __________________________________ In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of 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 and System Energy is subject to seasonal fluctuations with the peak periods occurring during the third quarter. 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 See "PART I, Item 1, Other Regulation and Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Murphy Oil Lawsuit (Entergy Corporation) Residents located near the Murphy Oil Refinery in Meraux, Louisiana filed several lawsuits in state court in St. Bernard Parish, Louisiana against Murphy Oil, Entergy Louisiana, and others for injuries they allegedly suffered as a result of an explosion at the refinery in June 1995. The lawsuits were consolidated and a class of plaintiffs was certified. Plaintiffs alleged, among other things, that an electrical fault at an Entergy Louisiana substation contributed to causing the explosion. Murphy Oil filed a cross-claim against Entergy Louisiana based on the same allegation, in which Murphy Oil seeks recovery of any damages it has paid to the plaintiffs. Claiborne P. Deming, who became a director of Entergy Corporation in 2002, is the President and Chief Executive Officer of Murphy Oil. Murphy Oil and other defendants settled with the plaintiffs for $8.8 million, but Entergy Louisiana did not participate in the settlement. Entergy Louisiana believes the claims against it are without merit and is vigorously defending itself. Entergy Louisiana also has insurance in place for claims of this type. The proceeding is currently recessed pending rescheduling for trial involving the remaining parties in the proceeding. Franchise Service Area Litigation (Entergy Gulf States) See "Franchise Service Area Legislation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation with Beaumont Power & Light (BP&L). In July 2002, the ALJ in that proceeding recommended denial of BP&L's certificate of convenience and necessity request. The PUCT has not yet issued a decision. Ratepayer Lawsuits (Entergy New Orleans) See "Entergy New Orleans Rate of Return Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the litigation filed by ratepayers against Entergy New Orleans. The hearing scheduled for June 2002 was postponed and the proceeding has been continued without date. Franchise Fee Litigation (Entergy Corporation and Entergy Gulf States) See "Franchise Fee Legislation" in Item 1 of Part I of the Form 10-K for a discussion of the lawsuit filed by the City of Nederland. The proceeding has now been abated. Item 4. Submission of Matters to a Vote of Security Holders Election of Board of Directors Entergy Corporation The annual meeting of stockholders of Entergy Corporation was held on May 10, 2002. The following matters were voted on and received the specified number of votes for, abstentions, votes withheld (against), and broker non-votes: 1. Election of Directors: Votes Broker Name of Nominee Votes For Abstentions Withheld Non-Votes Maureen S. Bateman 181,918,377 N/A 3,014,980 N/A W. Frank Blount 177,813,782 N/A 7,119,575 N/A George W. Davis 181,933,748 N/A 2,999,609 N/A Simon D. deBree 183,053,198 N/A 1,880,159 N/A Claiborne P. Deming 183,088,815 N/A 1,844,542 N/A Norman C. Francis 183,072,393 N/A 1,860,964 N/A J. Wayne Leonard 183,168,265 N/A 1,765,092 N/A Robert v.d. Luft 183,156,928 N/A 1,776,429 N/A Kathleen A. Murphy 181,950,155 N/A 2,983,202 N/A Paul W. Murrill 183,097,772 N/A 1,835,585 N/A James R. Nichols 183,182,464 N/A 1,750,893 N/A William A. Percy, II 183,164,972 N/A 1,768,385 N/A Dennis H. Reilley 181,933,742 N/A 2,999,615 N/A Wm. Clifford Smith 183,159,657 N/A 1,773,700 N/A Bismark A. Steinhagen 181,962,498 N/A 2,970,859 N/A 2. Stockholder proposal that Management and Directors change the format of Entergy's proxy card in two areas: 149,636,941 votes against; 15,596,344 broker non-votes; 16,554,434 votes for; and 3,145,638 abstentions. 3. Stockholder proposal that the Board of Directors seek shareholder approval prior to adopting any poison pill: 132,733,146 votes for; 34,192,716 votes against; 15,596,345 broker non-votes; and 2,411,150 abstentions. (Entergy Arkansas) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Arkansas: Hugh T. McDonald, Donald C. Hintz, Richard J. Smith, and C. John Wilder. (Entergy Gulf States) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Gulf States: Joseph F. Domino, E. Renae Conley, Donald C. Hintz, Richard J. Smith, and C. John Wilder. (Entergy Louisiana) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Louisiana: E. Renae Conley, Donald C. Hintz, Richard J. Smith, and C. John Wilder. (Entergy Mississippi) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Mississippi: Carolyn C. Shanks, Donald C. Hintz, Richard J. Smith, and C. John Wilder. (Entergy New Orleans) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy New Orleans: Daniel F. Packer, Donald C. Hintz, Richard J. Smith, and C. John Wilder. (System Energy) A consent in lieu of the annual meeting of common stockholders was executed on June 28, 2002. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of System Energy: Jerry W. Yelverton, Donald C. Hintz, and C. John Wilder. Item 5. Other Information Environmental Regulation (Entergy Gulf States) The State of Louisiana is implementing emission control strategies to address continued ozone non-attainment status of areas in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued a final rule for control of NOx as part of the State Implementation Plan (SIP) to bring this area into attainment with the National Ambient Air Quality standards for ozone by May 2005. The rule contains provisions that will lead to installation of new NOx control equipment at Entergy Gulf States generating units. The latest analyses indicate compliance costs may be as much as $44 million in new capital spending. Most of the related expenditures would take place in 2003 and 2004. A final revision to the rule was issued in July 2002. Cost estimates will be refined to include this final revision, but preliminary analyses indicate that compliance costs will be lower. Entergy Gulf States will be required to obtain revised operating permits from the LDEQ and meet new, lower emission limits for NOx. In March 2002 however, a federal district court issued a judgment ordering EPA to determine the ozone non-attainment status of the Baton Rouge area and, if appropriate, reclassify the area as a result of the determination. As a result of the Court's order, the EPA issued on June 24, 2002 a final rule determining that the Baton Rouge area did not attain the ozone national air quality standard, and reclassifying the area from a "serious" to a "severe" non- attainment area for ozone. Also on June 24, 2002, however, the EPA proposed to delay the effective date of its ozone non-attainment decision until October 4, 2002, in order to consider LDEQ's December 31, 2001 request for an extension of the ozone attainment deadline based on transport or migration of ozone into the Baton Rouge area from Texas (the Attainment Plan/Transport SIP). On July 28, 2002 the EPA announced that it will issue a proposed rule approving Baton Rouge's Attainment Plan/Transport SIP, extending the ozone attainment date until November 15, 2005, and withdrawing the "severe" ozone non-attainment designation. The proposed rule has been published in the Federal Register, and is now subject to public comment before a final rule is promulgated. Additionally, in litigation involving the District of Columbia metropolitan area ozone attainment status, the federal appeals court for the Washington D.C. Circuit ruled on July 2, 2002 that the EPA's regulations providing for attainment deadline extensions based on ozone transport are invalid. That decision is not controlling authority for the Baton Rouge transport extension, and it is also subject to further appeal. Accordingly, EPA's authority to extend Baton Rouge's deadline for ozone compliance based on ozone transport is uncertain at this time. Accordingly, the final schedule for Entergy Gulf States' compliance with the new NOx emission limits, and for corresponding expenditures, also cannot be determined at this time. Wholesale Rate Matters (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in Part I, Item 1 of the Form 10-K, Entergy is involved in litigation before the FERC and the LPSC regarding production cost equalization under the System Agreement. Negotiations among the parties have not resolved the proceeding before the FERC, and that proceeding is now set for hearing in February 2003. In the ex-parte proceeding commenced by the LPSC, the procedural schedule has changed and an evidentiary hearing is now set to commence in November 2002. FERC Notice of Proposed Rulemaking (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) On July 31, 2002, FERC issued a notice of proposed rulemaking to establish a standardized transmission service and wholesale electric market design. The proposed rules would o establish a network access transmission service applicable to all transmission users; o require utilities to take the transmission component of bundled transmission service under an open access transmission tariff; o require transmission facilities to be operated by an independent transmission provider; o require that the independent transmission provider administer the day-ahead and real-time energy and ancillary services markets; o establish an access charge for embedded transmission costs; o use location marginal pricing for transmission congestion management and provide tradable congestion revenue rights; o establish open imbalance energy markets; o establish procedures to mitigate market power in the day-ahead and real-time markets o require under certain conditions that generation owners submit offers to supply energy at prices that do not exceed specified price ceilings; and o establish procedures to assure adequate transmission, generation and demand-side resources. Comments on the proposed rule are due by mid-October 2002. Some of the retail regulators in Entergy's service territory have publicly expressed opposition to the proposed rulemaking. Management is in the process of evaluating this complex and lengthy proposal. Sarbanes-Oxley Act and Other Corporate Governance Standards (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In response to recent corporate collapses resulting from accounting irregularities and perceived failures of ethics and controls, the U.S. Congress passed the Sarbanes-Oxley Act on July 25, 2002. President Bush signed the Act on July 30, 2002. The stated purpose of the Act is to increase the reliability and accuracy of corporate reporting and accounting and audit practices and to ensure the independence of securities analyst advice and recommendations. The Act purports to strengthen accounting oversight and corporate accountability by enhancing disclosure requirements, increasing accounting and auditor regulation, creating new federal crimes and increasing penalties for existing federal crimes. In addition, on August 1, 2002, the New York Stock Exchange adopted, subject to approval by the Securities and Exchange Commission, new standards and changes in corporate governance and practices for companies whose securities are listed on that exchange. Management and the Board are reviewing the new law and regulations so that Entergy can adopt new policies or procedures necessary to comply with the new law and regulations as their various provisions become effective. Labor Relations (Entergy Gulf States) The contract covering the approximately 270 employees at River Bend who are represented by the International Brotherhood of Electrical Workers Union expired in June 2002. The employees continue to work without a contract as negotiations continue. Entergy Corporation and Entergy Gulf States Merger See "Entergy Corporation and Entergy Gulf States Merger" in Part I, Item 1 of the Form 10-K for a discussion of the appeal to the D.C. Circuit by the APSC, Arkansas Cities and Cooperatives, Arkansas Electric Energy Consumers, the MPSC, and the State of Mississippi of the FERC's approval of the merger of Entergy Corporation and Gulf States Utilities. In May 2002 the D.C. Circuit denied the petitions for review, thereby upholding the FERC's decision approving the merger. Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S-K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, June 30, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 2.86 Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.36 Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.79 Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.17 Entergy New Orleans 2.70 2.65 3.00 2.66 (b) (c) System Energy 2.31 2.52 1.90 2.41 2.12 2.45 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, June 30, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.59 Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.20 Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 3.49 Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 1.98 Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c) (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock for the twelve months ended 1997, 1998, and 1999. (b) Earnings for the twelve months ended December 31, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. (c) Earnings for the twelve months ended June 30, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $13.5 million and $15.7 million, respectively. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 4(a) - Credit Agreement, dated as of May 16, 2002, among Entergy Corporation, the Banks (Citibank, N.A., ABN AMRO Bank N.V., The Bank of New York, Barclays Bank PLC, Mizuho Corporate Bank Limited, BNP Paribas, Bayerische Hypo-und Vereinsbank AG (New York Branch), J. P. Morgan Chase Bank, The Royal Bank of Scotland plc, Societe Generale, Wachovia Bank (National Association), Bank One, NA, Mellon Bank, N.A., The Bank of Nova Scotia, Morgan Stanley Bank, Union Bank of California, N.A., Deutsche Bank AG New York Branch, KBC Bank N.V., Lehman Commercial Paper Inc., Regions Bank, and Westdeutsche Landesbank Girozentrale), and Citibank, N.A., as Administrative Agent. 4(b)- Assumption Agreement, dated July 15, 2002, among Entergy Corporation, CO BANK, ACB, (as Additional Lender), and Citibank, N.A., (as Administrative Agent). 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. ___________________________ Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of Entergy Corporation and its subsidiaries on a consolidated basis. * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended June 30, 2002, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended June 30, 2002. (b) Reports on Form 8-K Entergy Corporation A Current Report on Form 8-K, dated April 11, 2002, was filed with the SEC on April 11, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated April 25, 2002, was filed with the SEC on April 25, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated May 1, 2002, was filed with the SEC on May 1, 2002, reporting information under Item 5. "Other Events and Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated June 14, 2002, was filed with the SEC on June 14, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated June 21, 2002, was filed with the SEC on June 21, 2002, reporting information under Item 5. "Other Events and Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 8, 2002, was filed with the SEC on July 8, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 30, 2002, was filed with the SEC on July 30, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". 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 Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: August 12, 2002 EX-4 3 a167024a.txt Exhibit 4(a) U.S. $1,425,000,000 CREDIT AGREEMENT Dated as of May 16, 2002 Among ENTERGY CORPORATION as Borrower THE BANKS NAMED HEREIN as Banks CITIBANK, N.A. as Administrative Agent SALOMON SMITH BARNEY INC. as Sole Lead Arranger & Book Manager ABN AMRO BANK N.V., THE BANK OF NEW YORK, and BARCLAYS BANK PLC as Co-Syndication Agents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1 SECTION 1.01. CERTAIN DEFINED TERMS. 1 SECTION 1.02. COMPUTATION OF TIME PERIODS. 9 SECTION 1.03. ACCOUNTING TERMS. 10 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 10 SECTION 2.01. THE ADVANCES. 10 SECTION 2.02. MAKING THE ADVANCES. 10 SECTION 2.03. FEES. 11 SECTION 2.04. ADJUSTMENT OF THE COMMITMENTS. 12 SECTION 2.05. REPAYMENT OF ADVANCES. 13 SECTION 2.06. INTEREST ON ADVANCES. 13 SECTION 2.07. ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. 14 SECTION 2.08. INTEREST RATE DETERMINATION. 14 SECTION 2.09. CONVERSION OF ADVANCES. 15 SECTION 2.10. PREPAYMENTS. 16 SECTION 2.11. INCREASED COSTS. 16 SECTION 2.12. ILLEGALITY. 17 SECTION 2.13. PAYMENTS AND COMPUTATIONS. 17 SECTION 2.14. TAXES. 18 SECTION 2.15. SHARING OF PAYMENTS, ETC. 20 SECTION 2.16. EXTENSION OF TERMINATION DATE. 20 SECTION 2.17. NOTELESS AGREEMENT; EVIDENCE OF INDEBTEDNESS. 22 ARTICLE III CONDITIONS OF LENDING 23 SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL ADVANCES. 23 SECTION 3.02. CONDITIONS PRECEDENT TO EACH BORROWING. 24 SECTION 3.03. CONDITIONS PRECEDENT TO EACH EXTENSION OF THE REVOLVING PERIOD. 24 ARTICLE IV REPRESENTATIONS AND WARRANTIES 25 SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. 25 ARTICLE V COVENANTS OF THE BORROWER 27 SECTION 5.01. AFFIRMATIVE COVENANTS. 27 SECTION 5.02. NEGATIVE COVENANTS. 30 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES 32 SECTION 6.01. EVENTS OF DEFAULT. 32 SECTION 6.02. REMEDIES. 33 ARTICLE VII THE AGENT 33 SECTION 7.01. AUTHORIZATION AND ACTION. 33 SECTION 7.02. ADMINISTRATIVE AGENT'S RELIANCE, ETC. 34 SECTION 7.03. CITIBANK AND AFFILIATES. 34 SECTION 7.04. LENDER CREDIT DECISION. 35 SECTION 7.05. INDEMNIFICATION. 35 SECTION 7.06. SUCCESSOR ADMINISTRATIVE AGENT. 35 ARTICLE VIII MISCELLANEOUS 36 SECTION 8.01. AMENDMENTS, ETC. 36 SECTION 8.02. NOTICES, ETC. 36 SECTION 8.03. NO WAIVER; REMEDIES. 37 SECTION 8.04. COSTS AND EXPENSES; INDEMNIFICATION. 37 SECTION 8.05. RIGHT OF SET-OFF. 38 SECTION 8.06. BINDING EFFECT. 39 SECTION 8.07. ASSIGNMENTS AND PARTICIPATIONS. 39 SECTION 8.08. GOVERNING LAW. 43 SECTION 8.09. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. 43 SECTION 8.10. EXECUTION IN COUNTERPARTS. 44 SCHEDULES Schedule I - List of Applicable Lending Offices Schedule II - Commitment Schedule EXHIBITS Exhibit A-1 - Form of Notice of Borrowing Exhibit A-2 - Form of Notice of Conversion Exhibit B - Form of Assignment and Acceptance Exhibit C - Form of Opinion of Counsel for the Borrower Exhibit D - Form of Opinion of Special New York Counsel to the Administrative Agent CREDIT AGREEMENT Dated as of May 16, 2002 ENTERGY CORPORATION, a Delaware corporation (the "Borrower"), the banks (the "Banks") listed on the signature pages hereof and Citibank, N.A. ("Citibank"), as administrative agent (the "Administrative Agent") for the Lenders hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Lender" has the meaning specified in Section 2.04(c)(i). "Advance" means an advance by a Lender to the Borrower as part of a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type" of Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. "Agreement" means this Credit Agreement, as amended, supplemented or modified from time to time. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Applicable Margin" means, (i) for any Base Rate Advance, the Base Rate Margin interest rate per annum set forth below in the columns identified as Level 1, Level 2, Level 3, Level 4 and Level 5, and (ii) for any Eurodollar Rate Advance, (A) on any date the Utilization Percentage equals or is less than 33%, the Eurodollar Margin interest rate per annum set forth below in the columns identified as Level 1, Level 2, Level 3, Level 4 and Level 5, and (B) on any date the Utilization Percentage exceeds 33%, the Utilized Eurodollar Margin interest rate per annum set forth below in the columns identified as Level 1, Level 2, Level 3, Level 4 and Level 5, in each case, determined by reference to the Relevant Rating. Level 1 Level 2 Level 3 Level 4 Level 5 Relevant Relevant Relevant Relevant Relevant Ratings Ratings Ratings Ratings Ratings Less than Less than Less than below A- or Level 1 Level 2 Level 3 BBB-* S&P better and BBB+ and and or Moody's and or better BBB or BBB- or below A3 or and better better Baa3* better Baa1 or and and better Baa2 or Baa3 or better better Interest Rate Per Annum Eurodollar Margin 0.750% 0.850% 1.050% 1.125% 1.875% Base Rate Margin 0.000% 0.000% 0.000% 0.000% 1.000% Utilized Eurodollar 0.875% 0.975% 1.175% 1.250% 2.125% Margin *or unrated Any change in the Applicable Margin will be effective as of the date on which S&P or Moody's, as the case may be, announces the applicable change in any Senior Debt Rating. "Approved Fund" means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee of that Lender, and accepted by the Administrative Agent, in substantially the form of Exhibit B hereto. "Base Rate" means, for any period, a fluctuating interest rate per annum at all times equal to the higher of: (i) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; and (ii) 1/2 of 1% per annum above the Federal Funds Rate in effect from time to time. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.06(a). "Borrowing" means a borrowing consisting of simultaneous Advances of the same Type made by each of the Lenders pursuant to Section 2.01 or Converted pursuant to Section 2.08 or 2.09. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "Capitalization" means, as of any date of determination, with respect to the Borrower and its subsidiaries determined on a consolidated basis, an amount equal to the sum of (i) the total principal amount of all Debt of the Borrower and its subsidiaries outstanding on such date, (ii) Consolidated Net Worth as of such date and (iii) to the extent not otherwise included in Capitalization, all preferred stock and other preferred securities of the Borrower and its subsidiaries, including preferred securities issued by any subsidiary trust, outstanding on such date. "Commitment" has the meaning specified in Section 2.01. "Commitment Increase" has the meaning specified in Section 2.04(c)(i). "Commitment Increase Approvals" means any governmental or regulatory authorization or approval or resolution of the Board of Directors of the Borrower not obtained by or on behalf of the Borrower and in full force and effect on the date hereof, which governmental or regulatory authorization or approval or resolution is required to be obtained in order to authorize the Commitment Increase and the performance by the Borrower of its obligations under this Agreement after giving effect to the Commitment Increase. "Consolidated Net Worth" means the sum of the capital stock (excluding treasury stock and capital stock subscribed for and unissued) and surplus (including earned surplus, capital surplus and the balance of the current profit and loss account not transferred to surplus) accounts of the Borrower and its subsidiaries appearing on a consolidated balance sheet of the Borrower and its subsidiaries prepared as of the date of determination in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e), after eliminating all intercompany transactions and all amounts properly attributable to minority interests, if any, in the stock and surplus of subsidiaries. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances pursuant to Section 2.08 or 2.09. "Debt" of any Person means (without duplication) all liabilities, obligations and indebtedness (whether contingent or otherwise) of such Person (i) for borrowed money or evidenced by bonds, debentures, notes, or other similar instruments, (ii) to pay the deferred purchase price of property or services (other than such obligations incurred in the ordinary course of business on customary trade terms, provided that such obligations are not more than 30 days past due), (iii) as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iv) under reimbursement agreements or similar agreements with respect to the issuance of letters of credit (other than obligations in respect of letters of credit opened to provide for the payment of goods or services purchased in the ordinary course of business), (v) under any Guaranty Obligations and (vi) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eligible Assignee" means a Person (a) (i) that is (A) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $500,000,000; (B) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $500,000,000, provided that such bank is acting through a branch or agency located in the United States or another country which is also a member of OECD; or (C) a Lender, a financial institution Affiliate of any Lender or an Approved Fund of any Lender immediately prior to an assignment and (ii) whose long-term public senior debt securities are rated at least "BBB-" by S&P or at least "Baa3" by Moody's; or (b) that is approved by the Borrower (whose approval shall not be unreasonably withheld) and the Administrative Agent. "Entergy Arkansas" means Entergy Arkansas, Inc., an Arkansas corporation. "Entergy Gulf States" means Entergy Gulf States, Inc., a Texas corporation. "Entergy Louisiana" means Entergy Louisiana, Inc., a Louisiana corporation. "Entergy Mississippi" means Entergy Mississippi, Inc., a Mississippi corporation. "Entergy New Orleans" means Entergy New Orleans, Inc., a Louisiana corporation. "Environmental Laws" means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relating to pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relating to reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder, each as amended and modified from time to time. "ERISA Affiliate" of a Person or entity means any trade or business (whether or not incorporated) that is a member of a group of which such Person or entity is a member and that is under common control with such Person or entity within the meaning of Section 414 of the Internal Revenue Code of 1986, and the regulations promulgated and rulings issued thereunder, each as amended or modified from time to time. "ERISA Plan" means an employee benefit plan maintained for employees of any Person or any ERISA Affiliate of such Person subject to Title IV of ERISA. "ERISA Termination Event" means (i) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to PBGC), or (ii) the withdrawal of the Borrower or any of its ERISA Affiliates from an ERISA Plan during a plan year in which the Borrower or any of its ERISA Affiliates was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate an ERISA Plan or the treatment of an ERISA Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate an ERISA Plan by the PBGC or to appoint a trustee to administer any ERISA Plan, or (v) any other event or condition that would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer any ERISA Plan. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate Advance made as part of the same Borrowing, an interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurodollar Rate Advance made as part of such Borrowing and for a period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance made as part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(b). "Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Existing Credit Agreement" means the Third Amended and Restated Credit Agreement, dated as of May 17, 2001, among the Borrower, certain banks and Citibank, as agent for such banks. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" means that certain letter agreement, dated as of April 17, 2002, among the Borrower, the Administrative Agent and Salomon Smith Barney Inc. "Granting Lender" has the meaning specified in Section 8.07(j). "Guaranty Obligations" means (i) direct or indirect guaranties in respect of, and obligations to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, Debt of any Person and (ii) other guaranty or similar obligations in respect of the financial obligations of others, including, without limitation, Support Obligations. "Increasing Lender" has the meaning specified in Section 2.04(c)(i). "Interest Period" means, for each Advance made as part of the same Borrowing, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be 1, 2, 3 or 6 months (or any period of less than one month that ends on the last day of the Revolving Period or on the first anniversary of the last day of the Revolving Period, in the event the Borrower shall have made the Term Election) in the case of a Eurodollar Rate Advance, as the Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (i) the Borrower may not select any Interest Period that ends after the Termination Date; (ii) Interest Periods commencing on the same date for Advances made as part of the same Borrowing shall be of the same duration; and (iii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, in the case of any Interest Period for a Eurodollar Rate Advance, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day. "Junior Subordinated Debentures" means any junior subordinated deferrable interest debentures issued by any Significant Subsidiary or Entergy New Orleans from time to time. "Lenders" means the Banks listed on the signature pages hereof and each Person that shall become a party hereto pursuant to Section 8.07. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person or any of its subsidiaries shall be deemed to own, subject to a Lien, any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Majority Lenders" means at any time Lenders to which are owed at least 66-2/3% of the then aggregate unpaid principal amount of the Advances, or, if no such principal amount is then outstanding, Lenders having at least 66-2/3% of the Commitments (without giving effect to any termination in whole of the Commitments pursuant to Section 6.02), provided, that for purposes hereof, neither the Borrower, nor any of its Affiliates, if a Lender, shall be included in (i) the Lenders holding such amount of the Advances or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Advances or the total Commitments. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding three plan years made or accrued an obligation to make contributions. "Non-Recourse Debt" means any Debt of any subsidiary of the Borrower that does not constitute Debt of the Borrower, any Significant Subsidiary or Entergy New Orleans. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "OECD" means the Organization for Economic Cooperation and Development. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Prepayment Event" means the occurrence of any event or the existence of any condition under any agreement or instrument relating to any Debt of the Borrower or of a Significant Subsidiary that, in either case, is outstanding in a principal amount in excess of $50,000,000 in the aggregate, which occurrence or event results in the declaration of such Debt being due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof. "Reference Banks" means Citibank, ABN Amro Bank, N.V., The Bank of New York and Barclays Bank PLC. "Register" has the meaning specified in Section 8.07(c). "Relevant Rating" means the Senior Debt Ratings of the Significant Subsidiary (other than SERI) having the second lowest Senior Debt Ratings from Moody's and S&P of all Significant Subsidiaries (other than SERI). "Reportable Event" has the meaning assigned to that term in Title IV of ERISA. "Revolving Period" means the period beginning the date hereof and ending on May 15, 2003, or such later date as to which the Lenders may from time to time agree pursuant to Section 2.16. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto. "SEC" means the United States Securities and Exchange Commission. "SEC Order" has the meaning specified in Section 3.01(a)(iii). "Senior Debt Rating" means, as to any Person, the rating assigned by Moody's or S&P to the senior secured long- term debt of such Person. "SERI" means Systems Energy Resources, Inc., an Arkansas corporation. "Significant Subsidiary" means Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, SERI and any other domestic regulated utility subsidiary of the Borrower: (i) the total assets (after intercompany eliminations) of which exceed 5% of the total assets of the Borrower and its subsidiaries or (ii) the net worth of which exceeds 5% of the Consolidated Net Worth of the Borrower and its subsidiaries, in each case as shown on the most recent audited consolidated balance sheet of the Borrower and its subsidiaries. "SPC" has the meaning specified in Section 8.07(j). "Support Obligations" means any financial obligation, contingent or otherwise, of any Person guaranteeing or otherwise supporting any Debt or other obligation of any other Person in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (ii) to purchase property, securities or services for the purpose of assuring the owner of such Debt of the payment of such Debt, (iii) to maintain working capital, equity capital, available cash or other financial statement condition of the primary obligor so as to enable the primary obligor to pay such Debt, (iv) to provide equity capital under or in respect of equity subscription arrangements so as to assure any Person with respect to the payment of such Debt or the performance of such obligation, or (v) to provide financial support for the performance of, or to arrange for the performance of, any non-monetary obligations or non-funded debt payment obligations (including, without limitation, guaranties of payments under power purchase or other similar arrangements) of the primary obligor. "Term Election" has the meaning assigned to that term in Section 2.16(a). "Termination Date" means the earlier to occur of (i) the last day of the Revolving Period, or, if the Borrower shall have made the Term Election, the first anniversary of the last day of the Revolving Period, and (ii) date of termination in whole of the Commitments pursuant to Section 2.04 or Section 6.02 hereof. "Utilization Percentage" means, as of any time for the determination thereof, the percentage obtained by dividing the aggregate outstanding Advances by the aggregate Commitments then in effect. SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(e) hereof. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the date hereof until the last day of the Revolving Period in an aggregate amount not to exceed at any time outstanding the amount set opposite such Lender's name on Schedule II hereto or, if such Lender has entered into any Assignment and Acceptance, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04(a) or (b) or Section 2.16 or increased pursuant to Section 2.04(c) (such Lender's "Commitment"). Each Borrowing shall be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Advances of the same Type and, in the case of Eurodollar Rate Advances, having the same Interest Period made or Converted on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may from time to time borrow, prepay pursuant to Section 2.10 and reborrow under this Section 2.01; provided, however, that at no time may the principal amount outstanding hereunder exceed the aggregate amount of the Commitments; provided further that, on the date hereof, the aggregate amount of the Commitments shall not exceed $1,500,000,000. SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on notice, given (i) in the case of a Borrowing comprising Eurodollar Rate Advances, not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing, and (ii) in the case of a Borrowing comprising Base Rate Advances, not later than 11:00 A.M. (New York City time) on the date of the proposed Borrowing, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof. Each such notice of a Borrowing (a "Notice of Borrowing") shall be transmitted by telecopier, telex or cable, confirmed immediately in writing, in substantially the form of Exhibit A-1 hereto, specifying therein the requested (A) date of such Borrowing, (B) Type of Advances to be made in connection with such Borrowing, (C) aggregate amount of such Borrowing, and (D) in the case of a Borrowing comprising Eurodollar Rate Advances, initial Interest Period for each such Advance. Each Lender shall, before (x) 12:00 noon (New York City time) on the date of any Borrowing comprising Eurodollar Rate Advances, and (y) 1:00 P.M. (New York City time) on the date of any Borrowing comprising Base Rate Advances, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02, in same day funds, such Lender's ratable portion of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. (b) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Notice of Borrowing requesting Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower (following the Administrative Agent's demand on such Lender for the corresponding amount) severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Advances made in connection with such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. (d) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on the average daily amount of such Lender's Commitment from the date hereof in the case of each Bank, and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in the case of each other Lender, until the earlier to occur of the Termination Date and, in the case of the termination in whole of a Lender's Commitment pursuant to Section 2.04, the date of such termination, payable on the last day of each March, June, September and December during such period, and on the Termination Date at the rate per annum set forth below in the columns identified as Level 1, Level 2, Level 3, Level 4, and Level 5, determined by reference to the Relevant Rating: Level 1 Level 2 Level 3 Level 4 Level 5 Relevant Relevant Relevant Relevant Relevant Ratings Ratings Ratings Ratings Ratings Less Less Less below A- or than than than BBB-* S&P better Level 1 Level 2 Level 3 or Moody's and and BBB+ and and below A3 or or BBB or BBB- or Baa3* better better better better and and and Baa1 or Baa2 or Baa3 or better better better Rate Per Annum Facility Fee 0.125% 0.150% 0.200% 0.250% 0.375% *or unrated Any change in the facility fee will be effective as of the date on which S&P or Moody's, as the case may be, announces the applicable change in any Senior Debt Rating. SECTION 2.04. Adjustment of the Commitments. (a) The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders, provided that each partial reduction shall be in the aggregate amount of $1,000,000 or an integral multiple thereof. (b) If the Borrower shall make the Term Election, then on the last day of the Revolving Period, the Commitments shall be permanently reduced to an amount equal to the aggregate principal amount of Advances then outstanding. In addition, if on any date following the last day of the Revolving Period the aggregate principal amount of Advances then outstanding shall be less than the Commitments, then on such date the Commitments shall be permanently reduced to an amount equal to the aggregate principal amount of Advances then outstanding. (c) (i) On any date on or prior to the last day of the Revolving Period, the Borrower may increase the aggregate amount of the Commitments by an amount not less than $5,000,000 and to an amount not to exceed $2,000,000,000 (any such increase, a "Commitment Increase") by designating either one or more of the existing Lenders (each of which, in its sole discretion, may determine whether and to what degree to participate in such Commitment Increase) or one or more other Eligible Assignees reasonably acceptable to the Administrative Agent that at the time agree, in the case of any such Eligible Assignee that is an existing Lender, to increase its Commitment (an "Increasing Lender") and, in the case of any other Eligible Assignee (an "Additional Lender"), to become a party to this Agreement. The sum of the increases in the Commitments of the Increasing Lenders pursuant to this subsection (c) plus the Commitments of the Additional Lenders upon giving effect to the Commitment Increase shall not in the aggregate exceed the amount of the Commitment Increase. The Borrower shall provide prompt notice of any proposed Commitment Increase pursuant to this Section 2.04(c) to the Administrative Agent, which shall promptly provide a copy of such notice to the Lenders. (ii) Any Commitment Increase shall become effective upon (A) the receipt by the Administrative Agent of (1) an agreement in form and substance satisfactory to the Administrative Agent signed by the Borrower, each Increasing Lender and each Additional Lender, setting forth the new Commitments of each such Lender and setting forth the agreement of each Additional Lender to become a party to this Agreement and to be bound by all the terms and provisions hereof binding upon each Lender, and (2) certified copies of the Commitment Increase Approvals and such opinions of counsel for the Borrower with respect to the Commitment Increase as the Administrative Agent may reasonably request, (B) the funding by each Lender of the Advance(s) to be made by each such Lender described in paragraph (iii) below and (C) receipt by the Administrative Agent of a certificate (the statements contained in which shall be true) of a duly authorized officer of the Borrower stating that both before and after giving effect to such Commitment Increase (1) no Event of Default and no Prepayment Event has occurred and is continuing, (2) all representations and warranties made by such Borrower in this Agreement are true and correct in all material respects, and (3) all Commitment Increase Approvals have been obtained and are in full force and effect. (iii) Upon the effective date of any Commitment Increase, the Borrower shall prepay the outstanding Borrowings (if any) in full, and shall simultaneously make new Borrowings hereunder in an amount equal to such prepayment, so that, after giving effect thereto, the Borrowings are held ratably by the Lenders in accordance with their respective Commitments (after giving effect to such Commitment Increase). Prepayments made under this paragraph (iii) shall not be subject to the notice requirements of Section 2.10. (iv) Notwithstanding any provision contained herein to the contrary, from and after the date of any Commitment Increase and the making of any Advances on such date pursuant to paragraph (iii) above, all calculations and payments of the facility fee and of interest on the Advances shall take into account the actual Commitment of each Lender and the principal amount outstanding of each Advance made by such Lender during the relevant period of time. SECTION 2.05. Repayment of Advances. The Borrower shall repay the principal amount of each Advance made by each Lender on the Termination Date. SECTION 2.06. Interest on Advances. The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (a) Base Rate Advances. If such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time plus the Applicable Margin for such Base Rate Advance in effect from time to time, payable quarterly on the last day of each March, June, September and December and on the date such Base Rate Advance shall be Converted or paid in full. (b) Eurodollar Rate Advances. Subject to Section 2.07, if such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin for such Eurodollar Rate Advance in effect from time to time, payable on the last day of each Interest Period for such Eurodollar Rate Advance and on the date such Eurodollar Rate Advance shall be Converted or paid in full and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period. SECTION 2.07. Additional Interest on Eurodollar Rate Advances. The Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by such Lender and notified to the Borrower through the Administrative Agent, and such determination shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a) and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(b). (c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate Advances, (i) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such Eurodollar Rate Advances, (ii) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligation of the Lenders to make, or to Convert Advances into Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders notify the Administrative Agent that the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 2.09. Conversion of Advances. (a) Voluntary. The Borrower may, upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12, on any Business Day, Convert all Advances of one Type made in connection with the same Borrowing into Advances of another Type; provided, however, that any Conversion of, or with respect to, any Eurodollar Rate Advances into Advances of another Type shall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances, unless the Borrower shall also reimburse the Lenders in respect thereof pursuant to Section 8.04(b) on the date of such Conversion. Each such notice of a Conversion (a "Notice of Conversion") shall be by telecopier, telex or cable, confirmed immediately in writing, in substantially the form of Exhibit A-2 hereto, specifying therein (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into, or with respect to, Eurodollar Rate Advances, the duration of the Interest Period for each such Advance. (b) Mandatory. If a Borrower shall fail to select the Type of any Advance or the duration of any Interest Period for any Borrowing comprising Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01 and Section 2.09(a), or if any proposed Conversion of a Borrowing that is to comprise Eurodollar Rate Advances upon Conversion shall not occur as a result of the circumstances described in paragraph (c) below, the Administrative Agent will forthwith so notify the Borrower and the Lenders, and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (c) Failure to Convert. Each notice of Conversion given pursuant to subsection (a) above shall be irrevocable and binding on the Borrower. In the case of any Borrowing that is to comprise Eurodollar Rate Advances upon Conversion, the Borrower agrees to indemnify each Lender against any loss, cost or expense incurred by such Lender if, as a result of the failure of the Borrower to satisfy any condition to such Conversion (including, without limitation, the occurrence of any Prepayment Event or Event of Default, or any event that would constitute an Event of Default or a Prepayment Event with notice or lapse of time or both), such Conversion does not occur. The Borrower's obligations under this subsection (c) shall survive the repayment of all other amounts owing to the Lenders and the Administrative Agent under this Agreement and the termination of the Commitments. SECTION 2.10. Prepayments. The Borrower may, upon notice received by the Administrative Agent prior to 11:00 A.M. (New York City time) on any Business Day, with respect to Base Rate Advances, and upon at least two Business Days' notice to the Administrative Agent, with respect to Eurodollar Rate Advances, stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the Advances made as part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (i) each partial prepayment shall be in an aggregate principal amount not less than $1,000,000 or any integral multiple of $100,000 in excess thereof and (ii) in the case of any such prepayment of an Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(b) on the date of such prepayment. SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type (including such Lender's commitment to lend hereunder) or the Advances, then, upon demand by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall immediately pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder or the Advances made by such Lender. A certificate in reasonable detail as to such amounts submitted to the Borrower and the Administrative Agent by such Lender shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.12. Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of, any change in or any change in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then outstanding, together with interest accrued thereon, unless the Borrower, within five Business Days of notice from the Administrative Agent, Converts all Eurodollar Rate Advances of all Lenders then outstanding into Advances of another Type in accordance with Section 2.09. SECTION 2.13. Payments and Computations. (a) The Borrower shall make each payment hereunder not later than 12:00 noon (New York City time) on the day when due in U.S. dollars to the Administrative Agent at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Section 2.02(c), 2.03, 2.07, 2.11, 2.14 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due hereunder, to charge from time to time to the extent permitted by law against any or all of the Borrower's accounts with such Lender any amount so due. (c) All computations of interest based on clause (i) of the definition of "Base Rate" shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, the Federal Funds Rate or clause (ii) of the definition of "Base Rate" and of facility fees shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by a Lender, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or facility fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fee, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. (f) Notwithstanding anything to the contrary contained herein, any amount payable by the Borrower hereunder that is not paid when due (whether at stated maturity, by acceleration or otherwise) shall (to the fullest extent permitted by law) bear interest from the date when due until paid in full at a rate per annum equal at all times to the Base Rate plus 2%, payable upon demand. SECTION 2.14. Taxes. (a) Any and all payments by the Borrower hereunder shall be made, in accordance with Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, (i) the sum payable shall be increased (unless and to the extent that (x) the Borrower is required to deduct such Taxes because any Lender fails to provide the Administrative Agent and the Borrower with the forms described in subsection (d) below and (y) such Lender is entitled to an exemption from United States withholding taxes with respect to such sum payable) as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (hereinafter referred to as "Other Taxes"). (c) The Borrower will indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. Nothing herein shall preclude the right of the Borrower to contest any such Taxes or Other Taxes so paid, and the Lenders in question or the Administrative Agent (as the case may be) will, following notice from, and at the expense of, the Borrower, take such actions as the Borrower may reasonably request to preserve the Borrower's rights to contest such Taxes or Other Taxes, and, promptly following receipt of any refund of amounts with respect to Taxes or Other Taxes for which such Lenders or the Administrative Agent were previously indemnified under this Section 2.14, pay to the Borrower such refunded amounts (including any interest paid by the relevant taxing authority with respect to such amounts). (d) Prior to the date of the initial Borrowing in the case of each Bank, and on the date of the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, and from time to time thereafter if requested by the Borrower or the Administrative Agent, each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower with the forms prescribed by the Internal Revenue Service of the United States certifying that such Lender is exempt from United States withholding taxes with respect to all payments to be made to such Lender hereunder. If for any reason during the term of this Agreement, any Lender becomes unable to submit the forms referred to above or the information or representations contained therein are no longer accurate in any material respect, such Lender shall notify the Administrative Agent and the Borrower in writing to that effect. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder are not subject to United States withholding tax, the Borrower or, if the Borrower fails to do so, the Administrative Agent, shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Lender organized under the laws of a jurisdiction outside the United States. (e) Any Lender claiming any additional amounts payable pursuant to this Section 2.14 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office or take other actions customary or otherwise reasonable under the circumstances if the making of such a change or the taking of such actions would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.14 shall survive the payment in full of principal and interest hereunder. SECTION 2.15. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.02(c), 2.07, 2.11, 2.14 or 8.04(b)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.16. Extension of Termination Date. (a) At least 30 but no more than 45 days prior to the end of the then-current Revolving Period, the Borrower may, by delivering a written request to the Administrative Agent (each such request being irrevocable), request that the Revolving Period be extended for an additional period of 364 days, commencing on the last day of the then-current Revolving Period. Any such notice shall also indicate whether the Borrower elects, in the event that the Lenders determine not to extend the Revolving Period as requested by the Borrower, to extend the then-stated Termination Date from the last day of the then-current Revolving Period to the first anniversary of the last day of the then-current Revolving Period (any such election to so extend the Termination Date being the "Term Election"). Upon receipt of any such notice, the Administrative Agent shall promptly communicate such request to the Lenders. (b) No earlier than 30 days prior, and no later than 20 days prior, to the end of the then-current Revolving Period, each Lender may indicate to the Administrative Agent whether the Borrower's request to so extend the then-current Revolving Period is acceptable to such Lender, it being understood that the determination by each Lender will be in its sole and absolute discretion and that the failure of any Lender to so respond within such period shall be deemed to constitute a refusal by such Lender to consent to such requests (any Lender refusing or deemed to refuse any such request, a "Non-Consenting Lender"). The Administrative Agent will notify the Borrower, in writing, of the Lenders' decisions no later than 15 days prior to the end of the then-current Revolving Period. (c) Subject to the satisfaction of the conditions set forth in Section 3.03, in the event that Lenders having more than 50% of the Commitments have consented to the Borrower's request to extend the then-current Revolving Period, the then-current Revolving Period shall be extended for an additional period of 364 days with respect to the Commitments of such Lenders. The Commitments of Non-Consenting Lenders with respect to such request shall automatically terminate on the last day of the then- current Revolving Period (and the principal amount of all Advances made by such Non-Consenting Lenders, together with accrued interest to such date, shall be repaid), unless assigned pursuant to Section 8.07(g) hereof in which case the then-current Revolving Period shall be extended for such additional period with respect to such Commitments. (d) Subject to the satisfaction of the conditions set forth in Section 3.03, in the event that (i) Lenders having 50% or less of the Commitments have consented to the Borrower's request to extend the then-current Revolving Period and (ii) Commitments and Advances of Non-Consenting Lenders with respect to such request which have been assigned pursuant to Section 8.07(g) hereof, when aggregated with the Commitments of such consenting Lenders, comprise more than 50% of the Commitments, the then-current Revolving Period shall be extended for an additional period of 364 days with respect to such Commitments. The Commitments of the Non-Consenting Lenders shall automatically terminate on the last day of the then-current Revolving Period (and the principal amount of all Advances made by such Non-Consenting Lenders, together with accrued interest to such date, shall be repaid), unless assigned pursuant to Section 8.07(g) hereof. (e) Subject to the satisfaction of the condition set forth in Section 3.03(d)(ii), in the event that any request by the Borrower pursuant to subsection (a) above shall be denied and the Borrower shall have indicated in such request that, in the event of such denial, it has determined to effect the Term Election, then, effective as of the last day of the Revolving Period, the Termination Date shall be extended to the first anniversary of such day. In addition, in the event that the Borrower shall not have requested an extension of the then-current Revolving Period pursuant to subsection (a) above, the Borrower may nonetheless make the Term Election by giving written notice to such effect to the Administrative Agent at least ten Business Days prior to the last day of the then-current Revolving Period (which shall promptly give notice thereof to the Lenders), whereupon, subject to the satisfaction of the condition set forth in Section 3.03(d)(ii), the Termination Date shall, effective as of such last day, be extended to the first anniversary of such last day. (f) Notwithstanding anything contained herein to the contrary, the Borrower's right to effect the Term Election as provided in either subsection (a) or (e), above, shall not affect any rights or remedies that the Lenders or the Administrative Agent may have at such time under Section 6.01 as a result of any Event of Default or Prepayment Event, or event that would constitute an Event of Default or Prepayment Event with notice or lapse of time or both, which may have occurred and then be continuing, either at the time of the giving of such notice or on the last day of the then-current Revolving Period. (g) Notwithstanding any other provision of this Agreement, the Revolving Period may be extended more than once pursuant to this Section 2.16 and the Term Election may be effected on the last day of the Revolving Period whether or not the same has been extended one or more times pursuant to this Section 2.16. SECTION 2.17. Noteless Agreement; Evidence of Indebtedness. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Administrative Agent shall also maintain accounts in which it will record (i) the amount of each Advance made hereunder, the Type thereof and the Interest Period (if any) with respect thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (c) The entries maintained in the accounts maintained pursuant to subsections (a) and (b) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay such obligations in accordance with their terms. (d) Any Lender may request that its Advances be evidenced by one or more promissory notes. In such event, the Borrower shall prepare, execute and deliver to such Lender one or more promissory notes payable to the order of such Lender and in a form acceptable to the Borrower and the Administrative Agent. Thereafter, the Advances evidenced by such note(s) and interest thereon shall at all times (including after any assignment pursuant to Section 8.07) be represented by notes from the Borrower, payable to the order of the payee named therein or any assignee pursuant to Section 8.07, except to the extent that any such Lender or assignee subsequently returns any such notes for cancellation and requests that such Borrowings once again be evidenced as in subsections (a) and (b) above. ARTICLE III CONDITIONS OF LENDING SECTION 3.01. Conditions Precedent to Initial Advances. The obligation of each Lender to make its initial Advance is subject to the conditions precedent that on or before the date of such Advance: (a) The Administrative Agent shall have received the following, each dated the same date (except for the financial statements referred to in paragraph (iv) below), in form and substance satisfactory to the Administrative Agent and (except for the notes described in paragraph (i)) with one copy for each Lender: (i) A promissory note payable to the order of each Lender that requests one pursuant to Section 2.17. (ii) Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement, and of all documents evidencing other necessary corporate action with respect to this Agreement (other than any Commitment Increase Approvals); (iii) A certificate of the Secretary or an Assistant Secretary of the Borrower certifying (A) the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered hereunder; (B) that attached thereto are true and correct copies of the Certificate of Incorporation and the By Laws of the Borrower, in each case in effect on such date; and (C) that attached thereto are true and correct copies of all governmental and regulatory authorizations and approvals (other than any Commitment Increase Approvals) required for the due execution, delivery and performance of this Agreement, including, without limitation, a copy of the order (File No. 70-9749) of the SEC under the Public Utility Holding Company Act of 1935 authorizing the Borrower's execution, delivery and performance of this Agreement (the "SEC Order"); (iv) Copies of the consolidated balance sheets of the Borrower and its subsidiaries as of December 31, 2001, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its subsidiaries for the fiscal year then ended, and copies of the consolidated financial statements of the Borrower and its subsidiaries as of March 31, 2002, in each case certified by a duly authorized officer of the Borrower as having been prepared in accordance with generally accepted accounting principles consistently applied; (v) A favorable opinion of counsel for the Borrower, acceptable to the Administrative Agent, substantially in the form of Exhibit C hereto and as to such other matters as any Lender through the Administrative Agent may reasonably request; and (vi) A favorable opinion of King & Spalding, Special New York counsel for the Administrative Agent, substantially in the form of Exhibit D hereto. (b) The Administrative Agent shall have received the fees payable pursuant to the Fee Letter. (c) The commitments of the lenders under the Existing Credit Agreement shall have been terminated, and the obligations of the Borrower under the Existing Credit Agreement to such lenders shall have been paid in full. SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing) shall be subject to the further conditions precedent that on the date of such Borrowing: (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Conversion and the acceptance by the Borrower of any proceeds of a Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or Conversion, as applicable, such statements are true): (i) The representations and warranties contained in Section 4.01 (excluding those contained in subsections (e) and (f) thereof if such Borrowing does not increase the aggregate outstanding principal amount of Advances over the aggregate outstanding principal amount of all Advances immediately prior to the making of such Borrowing) are correct on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (ii) No event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom, that constitutes a Prepayment Event or an Event of Default or would constitute a Prepayment Event or an Event of Default with notice or lapse of time or both. (b) The Administrative Agent shall have received such other approvals, opinions or documents with respect to the truth of the foregoing statements (i) and (ii) as any Lender through the Administrative Agent may reasonably request. SECTION 3.03. Conditions Precedent to Each Extension of the Revolving Period. In the event that the Borrower shall request an extension of the Revolving Period pursuant to Section 2.16, such extension shall take effect only upon the satisfaction of the following conditions precedent, together with such other conditions precedent as the extending Lenders may require in connection with such extension: (a) The Administrative Agent shall have prepared and delivered to the Borrower and each Lender (including each new bank and other financial institution to which a Non-Consenting Lender's Commitment has been assigned pursuant to Section 8.07(g) hereof) a revised Schedule II which reflects the Commitments, as applicable, of each Lender. (b) The Borrower shall have paid all fees under or referenced in Section 2.03 hereof, to the extent then due and payable. (c) The Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated by Section 2.16 as the Administrative Agent shall reasonably request, including, without limitation, copies of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing the extension of the Termination Date. (d) The following statements shall be true on and as of the last day of the then-current Revolving Period: (i) The representations and warranties contained in Section 4.01 are correct, provided that, the representations contained in subsections (e) and (f) thereof are made with respect to the Borrower's Annual Report on Form 10-K most recently filed with the SEC and Quarterly Reports on Form 10-Q, if any, filed with the SEC after such Form 10-K; and (ii) No event has occurred and is continuing, or would result from such extension of the Termination Date, that constitutes a Prepayment Event or an Event of Default or would constitute a Prepayment Event or an Event of Default with notice or lapse of time or both. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business as a foreign corporation in each jurisdiction in which the nature of the business conducted or the property owned, operated or leased by it requires such qualification, except where failure to so qualify would not materially adversely affect its condition (financial or otherwise), operations, business, properties, or prospects. (b) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action (other than any corporate action constituting a Commitment Increase Approval, which, on and at all times following the date of any Commitment Increase, will have been obtained and will not have been revoked), and do not contravene (i) the Borrower's charter or by-laws, (ii) law applicable to the Borrower or its properties, subject to the receipt of all Commitment Increase Approvals, or (iii) any contractual or legal restriction binding on or affecting the Borrower or its properties. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than any authorization or approval or other action constituting a Commitment Increase Approval, which, on and at all times following the date of any Commitment Increase, will have been obtained and will be final and in full force and effect and not subject to appeal, rehearing, review or reconsideration) is required for the due execution, delivery and performance by the Borrower of this Agreement, except for the following (each of which has been duly filed or obtained, and is final and in full force and effect): (i) the filing of the Declaration on Form U-1 and amendments and exhibits thereto in File No. 70-9749 and (ii) the SEC Order. (d) This Agreement is the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject, however, to any applicable bankruptcy, reorganization, rearrangement, moratorium or similar laws affecting generally the enforcement of creditors' rights and remedies and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). (e) The consolidated financial statements of the Borrower and its subsidiaries as of December 31, 2001 and for the year ended on such date, as set forth in the Borrower's Annual Report on Form 10-K for the fiscal year ended on such date, as filed with the SEC, accompanied by an opinion of Deloitte & Touche LLP, and the consolidated financial statements of the Borrower and its subsidiaries as of March 31, 2002, and for the three-month period ended on such date set forth in the Borrower's Quarterly Report on Form 10-Q for the fiscal quarter ended on such date, as filed with the SEC, copies of each of which have been furnished to each Bank, fairly present (subject, in the case of such statements dated March 31, 2002, to year-end adjustments) the consolidated financial condition of the Borrower and its subsidiaries as at such dates and the consolidated results of the operations of the Borrower and its subsidiaries for the periods ended on such dates, in accordance with generally accepted accounting principles consistently applied. Except as disclosed in the Borrower's Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2002, since December 31, 2001, there has been no material adverse change in the financial condition or operations of the Borrower. (f) Except as disclosed in the Borrower's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and the Borrower's Quarterly Report on Form 10-Q for the period ended March 31, 2002, there is no pending or threatened action or proceeding affecting the Borrower or any of its subsidiaries before any court, governmental agency or arbitrator that, if determined adversely, could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), operations, business, properties or prospects of the Borrower or on its ability to perform its obligations under this Agreement, or that purports to affect the legality, validity, binding effect or enforceability of this Agreement. There has been no change in any matter disclosed in such filings that could reasonably be expected to result in such a material adverse effect. (g) No event has occurred and is continuing that constitutes a Prepayment Event or an Event of Default or that would constitute a Prepayment Event or an Event of Default but for the requirement that notice be given or time elapse or both. (h) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and not more than 25% of the value of the assets of the Borrower and its subsidiaries subject to the restrictions of Section 5.02(a), (c) or (d) is, on the date hereof, represented by margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System). (i) The Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment advisor" within the meaning of the Investment Company Act of 1940, as amended. The Borrower is a "holding company" as that term is defined in, and is registered under, the Public Utility Holding Company Act of 1935. (j) No ERISA Termination Event has occurred, or is reasonably expected to occur, with respect to any ERISA Plan that may materially and adversely affect the condition (financial or otherwise), operations, business, properties or prospects of the Borrower and its subsidiaries, taken as a whole. (k) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) with respect to each ERISA Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Banks, is complete and accurate and fairly presents the funding status of such ERISA Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (l) The Borrower has not incurred, and does not reasonably expect to incur, any withdrawal liability under ERISA to any Multiemployer Plan. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) Keep Books; Corporate Existence; Maintenance of Properties; Compliance with Laws; Insurance; Taxes; Inspection Rights. (i) keep proper books of record and account, all in accordance with generally accepted accounting principles; (ii) except as otherwise permitted by Section 5.02(c), preserve and keep in full force and effect its existence and preserve and keep in full force and effect its licenses, rights and franchises to the extent necessary to carry on its business; (iii) maintain and keep, or cause to be maintained and kept, its properties in good repair, working order and condition, and from time to time make or cause to be made all needful and proper repairs, renewals, replacements and improvements, in each case to the extent such properties are not obsolete and not necessary to carry on its business; (iv) comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or its property, except to the extent being contested in good faith by appropriate proceedings, and compliance with ERISA and Environmental Laws; (v) maintain insurance with responsible and reputable insurance companies or associations or through its own program of self- insurance in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which it operates and furnish to the Administrative Agent, within a reasonable time after written request therefor, such information as to the insurance carried as any Lender, through the Administrative Agent, may reasonably request; (vi) pay and discharge its obligations and liabilities in the ordinary course of business, except to the extent that such obligations and liabilities are being contested in good faith by appropriate proceedings; and (vii) from time to time upon reasonable notice, permit or arrange for the Administrative Agent, the Lenders and their respective agents and representatives to inspect the records and books of account of the Borrower and its subsidiaries during regular business hours. (b) Use of Proceeds. The Borrower may use the proceeds of the Borrowings for only (i) general corporate purposes and (ii) subject to the terms and conditions of this Agreement, repurchases of common stock of the Borrower and/or investments in nonregulated and/or nonutility businesses. (c) Reporting Requirements. Furnish to the Lenders: (i) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, (A) consolidated balance sheets of the Borrower and its subsidiaries as of the end of such quarter and (B) consolidated statements of income and retained earnings of the Borrower and its subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, each certified by a duly authorized officer of the Borrower as having been prepared in accordance with generally accepted accounting principles, consistently applied; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its subsidiaries, containing consolidated financial statements for such year certified without qualification by Deloitte & Touche LLP (or such other nationally recognized public accounting firm as the Administrative Agent may approve), and certified by a duly authorized officer of the Borrower as having been prepared in accordance with generally accepted accounting principles, consistently applied; (iii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower and within 120 days after the end of the fiscal year of the Borrower, a certificate of a duly authorized officer of the Borrower, stating that no Prepayment Event or Event of Default has occurred and is continuing, or if a Prepayment Event or an Event of Default has occurred and is continuing, a statement setting forth details of such Prepayment Event or Event of Default, as the case may be, and the action that the Borrower has taken and proposes to take with respect thereto; (iv) as soon as possible and in any event within five days after the Borrower has knowledge of the occurrence of each Prepayment Event, Event of Default and each event that, with the giving of notice or lapse of time or both, would constitute a Prepayment Event or an Event of Default, continuing on the date of such statement, a statement of the duly authorized officer of the Borrower setting forth details of such Prepayment Event or Event of Default or event, as the case may be, and the actions that the Borrower has taken and proposes to take with respect thereto; (v) as soon as possible and in any event within five days after the Borrower receives notice of the commencement of any litigation against, or any arbitration, administrative, governmental or regulatory proceeding involving, the Borrower or any of its subsidiaries, that, if adversely determined, could reasonably be expected to have a material adverse effect on the condition (financial or otherwise), operations, business, properties or prospects of the Borrower, notice of such litigation describing in reasonable detail the facts and circumstances concerning such litigation and the Borrower's or such subsidiary's proposed actions in connection therewith; (vi) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its securities holders, and copies of all reports and registration statements which the Borrower files with the SEC or any national securities exchange pursuant to the Securities Act of 1933 or the Exchange Act, and of all certificates pursuant to Rule 24 which the Borrower files with the SEC pursuant to the Public Utility Holding Company Act of 1935 in connection with the proceeding of the SEC in File No. 70-9749 related to the SEC Order or any subsequent proceedings related thereto; (vii) as soon as possible and in any event (A) within 30 days after the Borrower knows or has reason to know that any ERISA Termination Event described in clause (i) of the definition of ERISA Termination Event with respect to any ERISA Plan has occurred and (B) within 10 days after the Borrower knows or has reason to know that any other ERISA Termination Event with respect to any ERISA Plan has occurred, a statement of the chief financial officer of the Borrower describing such ERISA Termination Event and the action, if any, that the Borrower proposes to take with respect thereto; (viii) promptly and in any event within two Business Days after receipt thereof by the Borrower from the PBGC, copies of each notice received by the Borrower of the PBGC's intention to terminate any ERISA Plan or to have a trustee appointed to administer any ERISA Plan; (ix) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each ERISA Plan; (x) promptly and in any event within five Business Days after receipt thereof by the Borrower from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower concerning the imposition of withdrawal liability pursuant to Section 4202 of ERISA; (xi) promptly and in any event within five Business Days after Moody's or S&P has changed any Senior Debt Rating of any Significant Subsidiary, notice of such change; and (xii) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request. SECTION 5.02. Negative Covenants. So long as any amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders: (a) Liens, Etc. Create or suffer to exist any Lien upon or with respect to any of its properties (including, without limitation, any shares of any class of equity security of any of its Significant Subsidiaries or of Entergy New Orleans), in each case to secure or provide for the payment of Debt, other than: (i) Liens in existence on the date of this Agreement; (ii) Liens for taxes, assessments or governmental charges or levies to the extent not past due, or which are being contested in good faith in appropriate proceedings diligently conducted and for which the Borrower has provided adequate reserves for the payment thereof in accordance with generally accepted accounting principles; (iii) pledges or deposits in the ordinary course of business to secure obligations under worker's compensation laws or similar legislation; (iv) other pledges or deposits in the ordinary course of business (other than for borrowed monies) that, in the aggregate, are not material to the Borrower; (v) purchase money mortgages or other liens or purchase money security interests upon or in any property acquired or held by the Borrower in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property; (vi) Liens imposed by law such as materialmen's, mechanics', carriers', workers' and repairmen's Liens and other similar Liens arising in the ordinary course of business for sums not yet due or currently being contested in good faith by appropriate proceedings diligently conducted; (vii) attachment, judgment or other similar Liens arising in connection with court proceedings, provided that such Liens, in the aggregate, shall not exceed $50,000,000 at any one time outstanding, (viii) other Liens not otherwise referred to in the foregoing clauses (i) through (vii) above, provided that such Liens, in the aggregate, shall not exceed $100,000,000 at any one time and (ix) Liens created for the sole purpose of extending, renewing or replacing in whole or in part Debt secured by any Lien referred in the foregoing clauses (i) through (vi) above, provided that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement and that such extension, renewal or replacement, as the case may be, shall be limited to all or a part of the property or Debt that secured the Lien so extended, renewed or replaced (and any improvements on such property); provided, further, that no Lien permitted under the foregoing clauses (i) through (ix) shall be placed upon any shares of any class of equity security of any Significant Subsidiary or of Entergy New Orleans unless the obligations of the Borrower to the Lenders hereunder are simultaneously and ratably secured by such Lien pursuant to documentation satisfactory to the Lenders. (b) Limitation on Debt. Permit the total principal amount of all Debt of the Borrower and its subsidiaries, determined on a consolidated basis and without duplication of liability therefor, at any time to exceed 65% of Capitalization determined as of the last day of the most recently ended fiscal quarter of the Borrower; provided, however, that for purposes of this Section 5.02(b) "Debt" and "Capitalization" shall not include (i) Junior Subordinated Debentures issued to a subsidiary trust which has issued preferred securities that are included in the calculation of "Capitalization" and (ii) any Debt of any subsidiary of the Borrower that is Non-Recourse Debt. (c) Mergers, Etc. Merge with or into or consolidate with or into any other Person, except that the Borrower may merge with any other Person, provided that, immediately after giving effect to any such merger, (i) the Borrower is the surviving corporation or (A) the surviving corporation is organized under the laws of one of the states of the United States of America and assumes the Borrower's obligations hereunder in a manner acceptable to the Majority Lenders, and (B) after giving effect to such merger, the senior unsecured long-term debt of such Person shall be at least BBB- and Baa3, (ii) no event shall have occurred and be continuing that constitutes a Prepayment Event or an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both, and (iii) the Borrower shall not be liable with respect to any Debt or allow its property to be subject to any Lien which would not be permissible with respect to it or its property under this Agreement on the date of such transaction. (d) Disposition of Assets. Sell, lease, transfer, convey or otherwise dispose of (whether in one transaction or in a series of transactions) any shares of voting common stock (or of stock or other instruments convertible into voting common stock) of any Significant Subsidiary or of Entergy New Orleans, or permit any Significant Subsidiary or Entergy New Orleans to issue, sell or otherwise dispose of any of its shares of voting common stock (or of stock or other instruments convertible into voting common stock), except to the Borrower or a Significant Subsidiary. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES SECTION 6.01. Events of Default. Each of the following events shall constitute an "Event of Default" hereunder: (a) The Borrower shall fail to pay any principal of any Advance when the same becomes due and payable, or shall fail to pay interest thereon or any other amount payable under this Agreement within three Business Days after the same becomes due and payable; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect or misleading in any material respect when made; or (c) The Borrower shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01(b) or 5.02 or (ii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if the failure to perform or observe such other term, covenant or agreement shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (d) The Borrower shall fail to pay any principal of or premium or interest on any Debt of the Borrower that is outstanding in a principal amount in excess of $50,000,000 in the aggregate (but excluding Debt hereunder) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or (e) The Borrower, any Significant Subsidiary or Entergy New Orleans shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower, any Significant Subsidiary or Entergy New Orleans seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower, any Significant Subsidiary or Entergy New Orleans shall take any corporate action to authorize or to consent to any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) (i) An ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower shall fail to maintain the minimum funding standards required by Section 412 of the Internal Revenue Code of 1986 for any plan year or a waiver of such standard is sought or granted under Section 412(d) of the Internal Revenue Code of 1986, or (ii) an ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower is, shall have been or will be terminated or the subject of termination proceedings under ERISA, or (iii) the Borrower or any ERISA Affiliate of the Borrower has incurred or will incur a liability to or on account of an ERISA Plan under Section 4062, 4063 or 4064 of ERISA and there shall result from such event either a liability or a material risk of incurring a liability to the PBGC or an ERISA Plan, or (iv) any ERISA Termination Event with respect to an ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower shall have occurred, and in the case of any event described in clauses (i) through (iv), (A) such event (if correctable) shall not have been corrected and (B) the then- present value of such ERISA Plan's vested benefits exceeds the then-current value of assets accumulated in such ERISA Plan by more than the amount of $25,000,000 (or in the case of an ERISA Termination Event involving the withdrawal of a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of such excess shall exceed such amount). SECTION 6.02. Remedies. If any Prepayment Event or Event of Default shall occur and be continuing, then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower, any Significant Subsidiary or Entergy New Orleans under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Advances), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.02. Administrative Agent's Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (iv) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, this Agreement or any other instrument or document furnished pursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. Citibank and Affiliates. With respect to its Commitment and the Advances made by it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its subsidiaries and any Person who may do business with or own securities of the Borrower or any such subsidiary, all as if Citibank were not the Administrative Agent and without any duty to account therefor to the Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Advances then outstanding to each of them (or if no Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that such expenses are reimbursable by the Borrower but for which the Administrative Agent is not reimbursed by the Borrower. SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent, which, for so long as no Prepayment Event or Event of Default has occurred and is continuing, shall be a Lender and shall be approved by the Borrower (with such approval not to be unreasonably withheld or delayed). If no successor Administrative Agent shall have been so appointed by the Majority Lenders and approved by the Borrower, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States or of any other country that is a member of the OECD having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Notwithstanding the foregoing, if no Prepayment Event or Event of Default, and no event that with the giving of notice or the passage of time, or both, would constitute a Prepayment Event or an Event of Default, shall have occurred and be continuing, then no successor Administrative Agent shall be appointed under this Section 7.06 without the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than any Lender that is the Borrower or an Affiliate of the Borrower), do any of the following: (a) waive any of the conditions specified in Section 3.01, 3.02 or 3.03, (b) increase the Commitments of the Lenders (other than pursuant to Section 2.04(c)) or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, (d) other than pursuant to Section 2.16 hereof, postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, (e) other than pursuant to Section 2.04(b) or Section 2.16 hereof, change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or the number of Lenders that shall be required for the Lenders or any of them to take any action hereunder or (f) amend this Section 8.01 or Section 2.16; and provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement, and provided further, that this Agreement may be amended and restated without the consent of any Lender or the Administrative Agent if, upon giving effect to such amendment and restatement, such Lender or the Administrative Agent, as the case may be, shall no longer be a party to this Agreement (as so amended and restated) or have any Commitment or other obligation hereunder and shall have been paid in full all amounts payable hereunder to such Lender or the Administrative Agent, as the case may be. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at 639 Loyola Avenue, New Orleans, LA 70113, Attention: Treasurer; if to any Bank, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; and if to the Administrative Agent, at its address at Two Penns Way, Suite 200, New Castle, Delaware 19720, Attention: Bank Loan Syndications, Paul Joseph (Telephone: 302-894-6016, Telecopier: 302-894-6120); or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Administrative Agent pursuant to Article II or VII shall not be effective until received by the Administrative Agent. Except as otherwise provided in Section 5.01(c), notices and other communications given by the Borrower to the Administrative Agent shall be deemed given to the Lenders. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses; Indemnification. (a) The Borrower agrees to pay on demand all costs and expenses incurred by the Administrative Agent in connection with the preparation, execution, delivery, syndication administration, modification and amendment of this Agreement and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement. Any invoices to the Borrower with respect to the aforementioned expenses shall describe such costs and expenses in reasonable detail. The Borrower further agrees to pay on demand all costs and expenses, if any (including, without limitation, counsel fees and expenses of outside counsel and of internal counsel), incurred by the Administrative Agent and the Lenders in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of, and the protection of the rights of the Lenders under, this Agreement and the other documents to be delivered hereunder, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 8.04(a). (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.04(c)(iii), 2.08(d), 2.09, 2.10 or 2.12, acceleration of the maturity of the Advances pursuant to Section 6.02, assignment to another Lender upon demand of the Borrower pursuant to Section 8.07(g) or (h) or for any other reason, the Borrower shall, upon demand by any Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (including loss of anticipated profits upon such Lender's representation to the Borrower that it has made reasonable efforts to mitigate such loss), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. Any Lender making a demand pursuant to this Section 8.04(b) shall provide the Borrower with a written certification of the amounts required to be paid to such Lender, showing in reasonable detail the basis for the Lender's determination of such amounts; provided, however, that no Lender shall be required to disclose any confidential or proprietary information in any certification provided pursuant hereto, and the failure of any Lender to provide such certification shall not affect the obligations of the Borrower hereunder. (c) The Borrower hereby agrees to indemnify and hold each Lender, the Administrative Agent and their respective Affiliates and their respective officers, directors, employees and professional advisors (each, an "Indemnified Person") harmless from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable attorney's fees and expenses, whether or not such Indemnified Person is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding) that any of them may incur or which may be claimed against any of them by any Person or entity by reason of or in connection with the execution, delivery or performance of this Agreement or any transaction contemplated hereby, or the use by the Borrower or any of its subsidiaries of the proceeds of any Advance, except that no Indemnified Person shall be entitled to any indemnification hereunder to the extent that such claims, damages, losses, liabilities, costs or expenses are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Person. The Borrower's obligations under this Section 8.04(c) shall survive the repayment of all amounts owing to the Lenders and the Administrative Agent under this Agreement and the termination of the Commitments. If and to the extent that the obligations of the Borrower under this Section 8.04(c) are unenforceable for any reason, the Borrower agrees to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law. The Borrower also agrees not to assert any claim against any Lender, any of such Lender's affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances. SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any Prepayment Event or Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.02 to authorize the Administrative Agent to declare the Advances due and payable pursuant to the provisions of Section 6.02, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement, whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. SECTION 8.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, the Lenders and the Administrative Agent and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it); provided, however, that (i) the Borrower (unless a Prepayment Event or an Event of Default shall have occurred and be continuing) and the Administrative Agent shall have consented to such assignment (with each such consent not to be unreasonably withheld or delayed) by signing the Assignment and Acceptance referred to in clause (iv) below; (ii) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement; (iii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $10,000,000 and shall be an integral multiple of $1,000,000 (or shall be the total amount of the assigning Lender's Commitment); and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any promissory notes held by the assigning Lender and a processing and recordation fee of $3,500 (plus an amount equal to out-of-pocket legal expenses of the Administrative Agent, estimated by the Administrative Agent and advised to such parties). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). Notwithstanding anything to the contrary contained in this Agreement, any Lender at any time may assign all or any portion of its rights and obligations under this Agreement to any Affiliate or Approved Fund of such Lender. (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, together with any promissory notes held by the assigning Lender, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (e) Each Lender may sell participations to one or more banks, financial institutions or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Advances owing to it); provided, however, that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the maker of any such Advance for all purposes of this Agreement and (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender. (g) If any Lender shall fail to consent to the extension of the Termination Date pursuant to Section 2.16, then upon notification by the Administrative Agent of such Lender's refusal pursuant to Section 2.16(b), the Borrower may demand that such Lender assign, prior to the last day of the then-current Revolving Period, in accordance with this Section 8.07 to one or more assignees designated by the Borrower and acceptable to the Administrative Agent all (but not less than all) of such Lender's Commitment and the Advances owing to it. If any such assignee designated by the Borrower shall fail to consummate such assignment on terms acceptable to such Lender, or if the Borrower shall fail to designate any such assignee for all of such Lender's Commitment or Advances, then such Lender may assign, prior to the last day of the then-current Revolving Period, such Commitment and Advances to any other assignee acceptable to the Administrative Agent in accordance with this Section 8.07; it being understood for purposes of this Section 8.07(g) that such assignment shall be conclusively deemed to be on terms acceptable to such Lender, and such Lender shall be compelled to consummate such assignment to an assignee designated by the Borrower, if such assignee (i) shall agree to such assignment in substantially the form of Exhibit B hereto and (ii) shall offer compensation to such Lender in an amount equal to the sum of the principal amount of all Advances outstanding to such Lender plus all interest accrued thereon to the date of such payment plus all other amounts payable by the Borrower to such Lender hereunder (whether or not then due) as of the date of such payment accrued in favor of such Lender hereunder. (h) If any Lender shall make any demand for payment under Section 2.11 or 2.14, or if any Lender shall be the subject of any notification or assertion of illegality under Section 2.12, then within 30 days after any such demand (if, but only if, such demanded payment has been made by the Borrower) or notification or assertion, the Borrower may, with the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and provided that no Prepayment Event, Event of Default or event that, with the giving of notice or lapse of time or both, would constitute an Event of Default, shall then have occurred and be continuing, demand that such Lender assign in accordance with this Section 8.07 to one or more assignees designated by the Borrower and acceptable to the Administrative Agent all (but not less than all) of such Lender's Commitment and the Advances owing to it within the period ending on the later to occur of such 30th day and the last day of the longest of the then current Interest Periods for such Advances. If any such assignee designated by the Borrower and approved by the Administrative Agent shall fail to consummate such assignment on terms acceptable to such Lender, or if the Borrower shall fail to designate any such assignees acceptable to the Administrative Agent for all or part of such Lender's Commitment or Advances, then such demand by the Borrower shall become ineffective; it being understood for purposes of this subsection (h) that such assignment shall be conclusively deemed to be on terms acceptable to such Lender, and such Lender shall be compelled to consummate such assignment to an Eligible Assignee designated by the Borrower, if such Eligible Assignee (A) shall agree to such assignment by entering into an Assignment and Acceptance with such Lender and (B) shall offer compensation to such Lender in an amount equal to all amounts then owing by the Borrower to such Lender hereunder, whether for principal, interest, fees, costs or expenses (other than the demanded payment referred to above and payable by the Borrower as a condition to the Borrower's right to demand such assignment), or otherwise. In addition, in the event that the Borrower shall be entitled to demand the replacement of any Lender pursuant to this subsection (h), the Borrower may, in the case of any such Lender, with the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and provided that no Prepayment Event, Event of Default or event that, with the giving of notice or lapse of time or both, would constitute an Event of Default, shall then have occurred and be continuing, terminate all (but not less than all) such Lender's Commitment and prepay all (but not less than all) such Lender's Advances not so assigned, together with all interest accrued thereon to the date of such prepayment and all fees, costs and expenses and other amounts then owing by the Borrower to such Lender hereunder, at any time from and after such later occurring day in accordance with Sections 2.04 and 2.10 hereof (but without the requirement stated therein for ratable treatment of the other Lenders), if and only if, after giving effect to such termination and prepayment, the sum of the aggregate principal amount of the Advances of all Lenders then outstanding does not exceed the then remaining Commitments of the Lenders. Notwithstanding anything set forth above in this subsection (h) to the contrary, the Borrower shall not be entitled to compel the assignment by any Lender demanding payment under Section 2.11(a) of its Commitment and Advances or terminate and prepay the Commitment and Advances of such Lender if, prior to or promptly following any such demand by the Borrower, such Lender shall have changed or shall change, as the case may be, its Applicable Lending Office for its Eurodollar Rate Advances so as to eliminate the further incurrence of such increased cost. In furtherance of the foregoing, any such Lender demanding payment or giving notice as provided above agrees to use reasonable efforts to so change its Applicable Lending Office if, to do so, would not result in the incurrence by such Lender of additional costs or expenses which it deems material or, in the sole judgment of such Lender, be inadvisable for regulatory, competitive or internal management reasons. (i) Anything in this Section 8.07 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of its Commitment and the Advances owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (j) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Advance that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any such SPC to make any Advance, (ii) if such SPC elects not to exercise such option or otherwise fails to provide all or any part of such Advance, the Granting Lender shall be obligated to make such Advance pursuant to the terms hereof and (iii) no SPC or Granting Lender shall be entitled to receive any greater amount pursuant to Section 2.11 or 8.04(b) than the Granting Lender would have been entitled to receive had the Granting Lender not otherwise granted such SPC the option to provide any Advance to the Borrower. The making of an Advance by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would otherwise be liable so long as, and to the extent that, the related Granting Lender provides such indemnity or makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against or join any other person in instituting against such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. Notwithstanding the foregoing, the Granting Lender unconditionally agrees to indemnify the Borrower, the Administrative Agent and each Lender against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be incurred by or asserted against the Borrower, the Administrative Agent or such Lender, as the case may be, in any way relating to or arising as a consequence of any such forbearance or delay in the initiation of any such proceeding against its SPC. Each party hereto hereby acknowledges and agrees that no SPC shall have the rights of a Lender hereunder, such rights being retained by the applicable Granting Lender. Accordingly, and without limiting the foregoing, each party hereby further acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable to any Advance made by an SPC shall be exercised only by the relevant Granting Lender and that each Granting Lender shall serve as the administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC receive any and all payments made for the benefit of such SPC and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. In addition, notwithstanding anything to the contrary contained in this Agreement any SPC may (i) with notice to, but without the prior written consent of any other party hereto, assign all or a portion of its interest in any Advances to the Granting Lender and (ii) disclose on a confidential basis any information relating to its Advances to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 8.07(j) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Advance is being funded by an SPC at the time of such amendment. SECTION 8.08. Governing Law. THIS AGREEMENT AND ANY NOTE ISSUED PURSUANT TO SECTION 2.17 SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 8.09. Consent to Jurisdiction; Waiver of Jury Trial. (a) To the fullest extent permitted by law, the Borrower hereby irrevocably (i) submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding arising out of or relating to this Agreement and (ii) agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Borrower also irrevocably consents, to the fullest extent permitted by law, to the service of any and all process in any such action or proceeding by the mailing by certified mail of copies of such process to the Borrower at its address specified in Section 8.02. The Borrower agrees, to the fullest extent permitted by law, that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER. SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. [The remainder of this page intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ENTERGY CORPORATION By /s/ Steven C. McNeal Steven C. McNeal Vice President and Treasurer CITIBANK, N.A., as Administrative Agent and Bank By /s/ Anita J. Brickell Name: Anita J. Brickell Title: Vice President BANKS ABN AMRO BANK N.V. By /s/ Mark Lasek Name: Mark Lasek Title: Senior Vice President By /s/ Frank van Deur Name: Frank van Deur Title: Assistant Vice President THE BANK OF NEW YORK By /s/ Steven Kalachman Name: Steven Kalachman Title: Vice President BARCLAYS BANK PLC By /s/ Douglas Bernegger Name: Douglas Bernegger Title: Director MIZUHO CORPORATE BANK LIMITED By /s/ Toru Meada Name: Toru Maeda Title: General Manager, Houston Agency BNP PARIBAS By /s/ Francis J. DeLaney Name: Francis J. DeLaney Title: Director By /s/ Mark A. Renaud Name: Mark A. Renaud Title: Director BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH By /s/ William W. Hunter Name: William W. Hunter Title: Director By /s/ Marianne Weinzinger Name: Marianne Weinzinger Title: Director JPMORGAN CHASE BANK By /s/ Steven Wood Name: Steven Wood Title: Vice President THE ROYAL BANK OF SCOTLAND PLC By /s/ Brian J. McInnes Name: Brian J. McInnes Title: Senior Vice President SOCIETE GENERALE By /s/ Gordon R. Eaton Name: Gordon R. Eaton Title: Director WACHOVIA BANK, NATIONAL ASSOCIATION By /s/ Rotcher Watkins Name: Rotcher Watkins Title: Managing Director BANK ONE, NA (Main Office-Chicago) By /s/ Mary Lu D. Cramer Name: Mary Lu D. Cramer Title: Director MELLON BANK, N.A. By /s/ Mark W. Rogers Name: Mark W. Rogers Title: Vice President THE BANK OF NOVA SCOTIA By /s/ N. Bell Name: N. Bell Title: Senior Manager MORGAN STANLEY BANK By /s/ Jaap L. Tonckens Name: Jaap L. Tonckens Title: Vice President UNION BANK OF CALIFORNIA, N.A. By /s/ David M. Musicant Name: David M. Musicant Title: Senior Vice President DEUTSCHE BANK AG NEW YORK BRANCH By /s/ Michael E. Keating Name: Michael E. Keating Title: Managing Director By /s/ Hans-C Narberhaus Name: Hans-C. Narberhaus Title: Vice President KBC BANK N.V. By /s/ Robert Snauffer Name: Robert Snauffer Title: First Vice president By /s/ Eric Raskin Name: Eric Raskin Title: Vice President LEHMAN COMMERCIAL PAPER INC. By /s/ Michele Swanson Name: Michele Swanson Title: Authorized Signatory REGIONS BANK By /s/ Bill Pope Name: Bill Pope Title: F.V. P. WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By /s/ Anthony Alessandro Name: Anthony Alessandro Title: Associate Director By /s/ Paul Verdi Name: Anthony Alessandro Title: Associate Director SCHEDULE I ENTERGY CORPORATION U.S. $1,425,000,000 Credit Agreement Name of Bank Domestic Eurodollar Lending Office Lending Office ABN AMRO Bank N.V. 135 South LaSalle 135 South LaSalle Street Street Suite 2805 Suite 2805 Chicago, IL 60603 Chicago, IL 60603 Attn: Credit Attn: Credit Administration Administration Telephone: 312-904- Telephone: 312-904- 8835 8835 Fax: 312-904-8840 Fax: 312-904-8840 Bank One, NA 1 Bank One Plaza, 1 Bank One Plaza, Suite IL1-0634 Suite IL1-0634 Chicago, IL 60670 Chicago, IL 60670 Attn: Mattie Attn: Mattie Flournoy, Client Flournoy, Client Service Associate Service Associate Telephone: 312-732- Telephone: 312-732- 5219 5219 Fax: 312-732-4840 Fax: 312-732-4840 Barclays Bank PLC 222 Broadway 222 Broadway 8th Floor 8th Floor New York, NY 10038 New York, NY 10038 Bayerische Hypo-und Bayerische Hypo-und Bayerische Hypo-und Vereinsbank AG, New Vereinsbank Vereinsbank York Branch AG, New York AG, Grand Cayman Branch Branch 150 East 42nd c/o Bayerische Hypo- Street und New York, NY 10017 Vereinsbank AG 150 East 42nd Street New York, NY 10017 BNP Paribas 787 Seventh Avenue 787 Seventh Avenue New York, N.Y. New York, N.Y. 10019 10019 Telephone: 212-841- Telephone: 212-841- 2000 2000 Fax: 212-841-2555 Fax: 212-841-2555 Citibank, N.A. One Court Square One Court Square Seventh Floor, Zone Seventh Floor, Zone 1 1 Long Island City, Long Island City, NY NY 11120 11120 Attn: John Mann Attn: John Mann Telephone: 718-248- Telephone: 718-248- 4504 4504 Fax: 718-248-4844 Fax: 718-248-4844 Deutsche Bank AG New 31 West 52nd Street 31 West 52nd Street York Branch New York, N.Y. New York, N.Y. 10019 10019 JPMorgan Chase Bank 1 Chase Manhattan 1 Chase Manhattan Plaza, 8th Floor Plaza, 8th Floor New York, N.Y. New York, N.Y. 10081 10081 Attn: Thomas Attn: Thomas Albertelli Albertelli Telephone: 212-552- Telephone: 212-552- 7451 7451 Fax: 212-552-5701 Fax: 212-552-5701 KBC Bank N.V. KBC Bank N.V. KBC Bank N.V. New York Branch New York Branch 125 West 55th 125 West 55th Street Street New York, NY 10019 New York, NY 10019 Lehman Commercial 745 7th Avenue 745 7th Avenue Paper Inc. New York, N.Y. New York, N.Y. 10019 10019 Mellon Bank, N.A. Three Mellon Three Mellon Center, Center, Room 1203 Room 1203 Pittsburgh, PA Pittsburgh, PA 15259- 15259-0003 0003 Attn: Brenda Attn: Brenda Leierzapf Leierzapf Telephone: 412-234- Telephone: 412-234- 8161 8161 Fax: 412-209-6146 Fax: 412-209-6146 Mizuho Corporate 1221 McKinney 1221 McKinney Street Bank Limited Street Suite 4100 Suite 4100 Houston, TX 77010 Houston, TX 77010 Morgan Stanley Bank 1585 Broadway 1585 Broadway New York N.Y. 10036 New York N.Y., 10036 Regions Bank 301 St. Charles 301 St. Charles Avenue Avenue New Orleans, LA New Orleans, LA 70130 70130 Societe Generale 560 Lexington 560 Lexington Avenue Avenue New York, N.Y. 10022 New York, N.Y. Attn: Margaret Ayala 10022 Telephone: 212-278- Attn: Margaret 6971 Ayala Fax: 212-278-7490 or Telephone: 212-278- 212-278-7343 6971 Fax: 212-278-7490 or 212-278- 7343 The Bank of New York One Wall Street One Wall Street New York, NY 10286 New York, NY 10286 Attn: Dennis M. Attn: Dennis M. Pidherny/ Pidherny/ Jo-Anne Evans Jo-Anne Evans Telephone: 212-635- Telephone: 212-635- 7547 7547 Fax: 212-635-7923 Fax: 212-635-7923 The Bank of Nova The Bank of Nova The Bank of Nova Scotia Scotia Scotia Atlanta Agency Atlanta Agency 600 Peachtree 600 Peachtree Street Street N.E. N.E. Suite 2700 Suite 2700 Atlanta, GA 30308 Atlanta, GA 30308 The Royal Bank of 101 Park Avenue 101 Park Avenue Scotland plc. 12th Floor 12th Floor New York, NY 10178 New York, NY 10178 Attn: Sheila Shaw/ Attn: Sheila Shaw/ Juanita Baird Juanita Baird Telephone: 212-401- Telephone: 212-401- 1406/1420 1406/1420 Fax: 212-401-1336 Fax: 212-401-1336 Union Bank of 445 South Figueroa 445 South Figueroa California Street Street 15th Floor 15th Floor Los Angeles, CA Los Angeles, CA 90071 90071 Wachovia Bank, 191 Peachtree 191 Peachtree Street National Association Street Atlanta, Georgia Atlanta, Georgia 30303 30303 Attn: Loan Attn: Loan Administration Administration Westdeutsche 1211 Avenue of the 1211 Avenue of the Landesbank Americas Americas Girozentrale, New New York, NY 10036 New York, NY 10036 York Branch SCHEDULE II COMMITMENT SCHEDULE Name of Lender Commitment Amount Citibank, N.A. 150,000,000 ABN AMRO Bank N.V. 125,000,000 The Bank of New York 125,000,000 Barclays Bank PLC 125,000,000 Mizuho Corporate Bank Limited 75,000,000 BNP Paribas 75,000,000 Bayerische Hypo-und Vereinsbank AG, New 75,000,000 York Branch JPMorgan Chase Bank 75,000,000 The Royal Bank of Scotland plc 75,000,000 Societe Generale 75,000,000 Wachovia Bank, National Association 75,000,000 Bank One, NA 50,000,000 Mellon Bank, N.A. 50,000,000 The Bank of Nova Scotia 50,000,000 Morgan Stanley Bank 50,000,000 Union Bank of California, N.A. 50,000,000 Deutsche Bank AG New York Branch 25,000,000 KBC Bank N.V. 25,000,000 Lehman Commercial Paper Inc. 25,000,000 Regions Bank 25,000,000 Westdeutsche Landesbank Girozentrale, New 25,000,000 York Branch -------------- Total Commitment: $1,425,000,000 ============== EXHIBIT A-1 FORM OF NOTICE OF BORROWING Citibank, N.A., as Administrative Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way, Suite 200 New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Ladies and Gentlemen: The undersigned, Entergy Corporation, refers to the Credit Agreement, dated as of May 16, 2002 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Administrative Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is , 20 . (ii) The Type of Advances to be made in connection with the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iii) The aggregate amount of the Proposed Borrowing is $ .. (iv) The Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is ___ month[s]1. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: _______________________________ 1 Delete for Base Rate Advances. (A) the representations and warranties contained in Section 4.01 of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Prepayment Event or an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. Very truly yours, ENTERGY CORPORATION By Name: Title: EXHIBIT A-2 FORM OF NOTICE OF CONVERSION Citibank, N.A., as Administrative Agent for the Lenders parties to the Credit Agreement referred to below Two Penns Way, Suite 200 New Castle, Delaware 19720 [Date] Attention: Bank Loan Syndications Ladies and Gentlemen: The undersigned, Entergy Corporation, refers to the Credit Agreement, dated as of May 16, 2002 (the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders party thereto and Citibank, N.A., as Administrative Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.09 of the Credit Agreement, that the undersigned hereby requests a Conversion under the Credit Agreement, and in that connection sets forth below the information relating to such Conversion (the "Proposed Conversion") as required by Section 2.09 of the Credit Agreement: (i) The Business Day of the Proposed Conversion is __________, _____. (ii) The Type of Advances comprising the Proposed Conversion is [Base Rate Advances] [Eurodollar Rate Advances]. (iii) The aggregate amount of the Proposed Conversion is $__________. (iv) The Type of Advances to which such Advances are proposed to be Converted is [Base Rate Advances] [Eurodollar Rate Advances]. (v) The Interest Period for each Advance made as part of the Proposed Conversion is ___ month(s).2 The undersigned hereby represents and warrants that the following statements are true on the date hereof, and will be true on the date of the Proposed Conversion: _______________________________ 2 Delete for Base Rate Advances (A) The Borrower's request for the Proposed Conversion is made in compliance with Section 2.09 of the Credit Agreement; and (B) The statements contained in Section 3.02 of the Credit Agreement are true. Very truly yours, ENTERGY CORPORATION By Name: Title: EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE Dated ___________, 20__ Reference is made to the Credit Agreement, dated as of May 16, 2002 (as amended, modified or supplemented from time to time, the "Credit Agreement"), among Entergy Corporation, a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank, N.A., as Administrative Agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning. ____________ (the "Assignor") and ___________ (the "Assignee") agree as follows: (a) The Assignor hereby sells and assigns to the Assignee without recourse, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement, including, without limitation, such interest in the Assignor's Commitment and the Advances owing to the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth in Section b of Schedule 1. (b) The Assignor (A) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (B) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (C) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. Except as specified in this Section b, the assignment hereunder shall be without recourse to the Assignor. (c) The Assignee (A) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (B) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (C) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (D) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (E) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [and (F) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that it is exempt from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement].1 (d) Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date"); provided, however, that in no event shall this Assignment and Acceptance become effective prior to the payment for the processing and recordation fee to the Administrative Agent as provided in Section 8.07(a) of the Credit Agreement. (e) Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (A) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (B) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. (f) Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and facility fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves. (g) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (h) This Assignment and Acceptance may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were up on the same instrument. - --------------------------- 1 If the Assignee is organized under the laws of a jurisdiction outside the United States. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. [NAME OF ASSIGNOR] By Name: Title: [NAME OF ASSIGNEE] By Name: Title: Domestic Lending Office (and address for notices): [Address] Eurodollar Lending Office: [Address] Accepted this ___ day of ___________, 20__ CITIBANK, N.A., as Administrative Agent By Name: Title: Schedule 1 to Assignment and Acceptance Dated __________, 20__ Section (a) Percentage Interest: % Section (b) Assignee's Commitment: $ Aggregate Outstanding Principal Amount of Advances owing $ to the Assignee: Section (c) Effective Date1: _________, 20__ - -------------------- 1 This date should be no earlier than the date of acceptance by the Administrative Agent. EXHIBIT C FORM OF OPINION OF COUNSEL FOR THE BORROWER [Date] To each of the Lenders parties to the Credit Agreement referred to below, and to Citibank, N.A., as Administrative Agent Entergy Corporation Ladies and Gentlemen: I have acted as counsel to Entergy Corporation, a Delaware corporation (the "Borrower"), in connection with the preparation, execution and delivery of the Credit Agreement, dated as of May 16, 2002, by and among the Borrower, the Banks parties thereto and the other Lenders from time to time parties thereto and Citibank, N.A., as Administrative Agent. This opinion is furnished to you at the request of the Borrower pursuant to Section 3.01(a)(v) of the Credit Agreement. Unless otherwise defined herein or unless the context otherwise requires, terms defined in the Credit Agreement are used herein as therein defined. In such capacity, I have examined: (i) Counterparts of the Credit Agreement, executed by the Borrower; (ii) The Certificate of Incorporation of the Borrower (the "Charter"); (iii) The Bylaws of the Borrower (the "Bylaws"); (iv) A certificate of the Secretary of State of the State of Delaware, dated May __, 2002, attesting to the continued corporate existence and good standing of the Borrower in that State; (v) A Certificate of the Secretary of State of the State of Louisiana, dated May __, 2002, attesting that the Borrower is a foreign corporation duly qualified to conduct business in that state; (vi) A copy of the Order dated April 3, 2001 of the Securities and Exchange Commission (File No. 70-9749) under the Public Utility Holding Company Act of 1935 (the "SEC Order"); and (vii) The other documents furnished by the Borrower to the Administrative Agent pursuant to Section 3.01(a) of the Credit Agreement. I have also examined such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions expressed below. In my examination, I have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, and the conformity with the originals of all documents submitted to me as copies. In making my examination of documents and instruments executed or to be executed by persons other than the Borrower, I have assumed that each such other person had the requisite power and authority to enter into and perform fully its obligations thereunder, the due authorization by each such other person for the execution, delivery and performance thereof and the due execution and delivery thereof by or on behalf of such person of each such document and instrument. In the case of any such person that is not a natural person, I have also assumed, insofar as it is relevant to the opinions set forth below, that each such other person is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was created, and is duly qualified and in good standing in each other jurisdiction where the failure to be so qualified could reasonably be expected to have a material effect upon its ability to execute, deliver and/or perform its obligations under any such document or instrument. I have further assumed that each document, instrument, agreement, record and certificate reviewed by me for purposes of rendering the opinions expressed below has not been amended by any oral agreement, conduct or course of dealing between the parties thereto. As to questions of fact material to the opinions expressed herein, I have relied upon certificates and representations of officers of the Borrower (including but not limited to those contained in the Credit Agreement and certificates delivered upon the execution and delivery of the Credit Agreement) and of appropriate public officials, without independent verification of such matters except as otherwise described herein. Whenever my opinions herein with respect to the existence or absence of facts are stated to be to my knowledge or awareness, it is intended to signify that no information has come to my attention or the attention of other counsel working under my direction in connection with the preparation of this opinion letter that would give me or them actual knowledge of the existence or absence of such facts. However, except to the extent expressly set forth herein, neither I nor they have undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to my or their knowledge of the existence or absence of such facts should be assumed. On the basis of the foregoing, having regard for such legal consideration as I deem relevant, and subject to the other limitations and qualifications contained in this letter, I am of the opinion that: (a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business as a foreign corporation in each jurisdiction in which the nature of the business conducted or the property owned, operated or leased by it requires such qualification. (b) The execution, delivery and performance by the Borrower of the Credit Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action (other than any corporate action constituting a Commitment Increase) and do not contravene (i) the Charter or the Bylaws or (ii) law, subject to the receipt of all Commitment Increase Approvals, or (iii) any contractual or legal restriction binding on or affecting the Borrower. The Credit Agreement has been duly executed and delivered on behalf of the Borrower. (c) No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than any authorization or approval or other action constituting a Commitment Increase Approval), is required for the due execution, delivery and performance by the Borrower of the Credit Agreement, except for the SEC Order, which has been obtained, is final and in full force and effect, and is not the subject of any appeal. (d) Except as disclosed in the Borrower's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and in the Borrower's Quarterly Report on Form 10-Q for the period ended March 31, 2002, there is no pending or, to the best of my knowledge, threatened action or proceeding affecting the Borrower or any of its subsidiaries before any court, governmental agency or arbitrator that reasonably could be expected to affect materially and adversely the condition (financial or otherwise), operations, business, properties or prospects of the Borrower or its ability to perform its obligations under the Credit Agreement, or that purports to affect the legality, validity, binding effect or enforceability of the Credit Agreement. To the best of my knowledge, after inquiry, there has been no change in any matter disclosed in such filings that reasonably could be expected to result in such a material adverse effect. (e) The Borrower is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended, or an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as amended. (f) The Credit Agreement constitutes the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. My opinions above are subject to the following qualifications: (i) My opinions are subject, as to enforceability, to (A) bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights generally and (B) the application of general principles of equity, including but not limited to the right to have specific performance of contract obligations, regardless of whether considered in a proceeding in equity or at law. (ii) My opinion in paragraph (a) above, insofar as it relates to the due incorporation, valid existence and good standing of the Borrower under Delaware law, is given exclusively in reliance upon a certification of the Secretary of State of Delaware, upon which I believe I am justified in relying. A copy of such certification has been provided to you. (iii) My opinion set forth in paragraph (c) above as to the obtaining of necessary governmental and regulatory approvals is based solely upon a review of those laws that, in my experience, are normally applicable to the Borrower in connection with transactions of the type contemplated by the Credit Agreement. (iv) My opinion in paragraph (f) above as to the legality, validity, binding nature and enforceability of the Credit Agreement is given in reliance upon a legal opinion of even date herewith of [Thelen Reid & Priest LLP], New York counsel to the Borrower, and is subject to the assumptions, limitations and qualifications contained therein. A copy of the legal opinion of [Thelen Reid & Priest LLP], is being provided to you contemporaneously herewith. Notwithstanding the qualifications set forth above, I have no actual knowledge of any matter within the scope of said qualifications that would cause me to change the opinions set forth in this letter. I am licensed to practice law only in the State of Louisiana and, except as otherwise provided herein, my role as counsel to the Borrower is limited to matters involving the laws of the State of Louisiana and the federal laws of the United States of America. Except to the extent otherwise expressly set forth herein, and except with respect to matters governed by the General Corporation Law of Delaware, I render no opinion on the laws of any other jurisdiction or any subdivision thereof, and have made no independent investigation into any such laws except as specifically provided herein. My opinions are expressed as of the date hereof, and I do not assume any obligation to update or supplement my opinions to reflect any fact or circumstance that hereafter comes to my attention, or any change in law that hereafter occurs. This opinion letter is being provided exclusively to and for the benefit of the addressees hereof. It is not to be furnished to or relied upon by any other party for any other purpose, without prior express written authorization from us, except that (A) Thelen Reid & Priest LLP may rely hereon in connection with their opinion to you of even date herewith on behalf of the Borrower as to matters of New York law, (B) King & Spalding hereby is authorized to rely on this letter in the rendering of their opinion to the Lenders dated as of the date hereof; and (C) any addressee of this letter may deliver a copy hereof to any person that becomes a Lender under the Credit Agreement after the date hereof, and such person may rely on this opinion as if it had been addressed and delivered to it on the date hereof as an original Bank that was a party to the Credit Agreement. Very truly yours, Denise C. Redmann Assistant General Counsel Bank Addressees: EXHIBIT D OPINION OF SPECIAL NEW YORK COUNSEL TO THE AGENT [DATE] To each of the Lenders parties to the Credit Agreement referred to below, and to Citibank, N.A., as Administrative Agent Entergy Corporation Ladies and Gentlemen: We have acted as special New York counsel to Citibank, N.A., individually and as Administrative Agent, in connection with the preparation, execution and delivery of the Credit Agreement, dated as of May 16, 2002 (the "Credit Agreement"), among Entergy Corporation, the Banks parties thereto and Citibank, N.A., as Administrative Agent. Terms defined in the Credit Agreement are used herein as therein defined. In this connection, we have examined the following documents: (a) a counterpart of the Credit Agreement, executed by the parties thereto; and (b) the other documents furnished to the Administrative Agent pursuant to Section 3.01(a) of the Credit Agreement, including (without limitation) the opinion (the "Opinion") of Denise C. Redmann, counsel to the Borrower. In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents and the conformity to the originals of all such documents submitted to us as copies. We have also assumed that you have independently evaluated, and are satisfied with, the creditworthiness of the Borrower and the business terms reflected in the Credit Agreement. We have relied, as to factual matters, on the documents we have examined. To the extent that our opinions expressed below involve conclusions as to matters governed by law other than the law of the State of New York, we have relied upon the Opinion and have assumed without independent investigation the correctness of the matters set forth therein, our opinions expressed below being subject to the assumptions, qualifications and limitations set forth in the Opinion. Based upon and subject to the foregoing, and subject to the qualifications set forth below, we are of the opinion that the Credit Agreement is the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. Our opinion is subject to the following qualifications: (i) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar law affecting creditors' rights generally. (ii) The enforceability of the Borrower's obligations under the Credit Agreement is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). Such principles of equity are of general application, and, in applying such principles, a court, among other things, might not allow a contracting party to exercise remedies in respect of a default deemed immaterial, or might decline to order an obligor to perform covenants. (iii) We note further that, in addition to the application of equitable principles described above, courts have imposed an obligation on contracting parties to act reasonably and in good faith in the exercise of their contractual rights and remedies, and may also apply public policy considerations in limiting the right of parties seeking to obtain indemnification under circumstances where the conduct of such parties is determined to have constituted negligence. (iv) We express no opinion herein as to (A) Section 8.05 of the Credit Agreement, (B) the enforceability of provisions purporting to grant to a party conclusive rights of determination, (C) the availability of specific performance or other equitable remedies, (D) the enforceability of rights to indemnity under federal or state securities laws or (E) the enforceability of waivers by parties of their respective rights and remedies under law. (v) Our opinions expressed above are limited to the law of the State of New York, and we do not express any opinion herein concerning any other law. The foregoing opinion is solely for your benefit and may not be relied upon by any other person or entity, other than any Person that may become a Lender under the Credit Agreement after the date hereof. Very truly yours, EX-4 4 a167024b.txt Exhibit 4(b) ASSUMPTION AGREEMENT July 15, 2002 Reference is made to the Credit Agreement, dated as of May 16, 2002 (as amended, modified or supplemented from time to time, the "Credit Agreement"), among Entergy Corporation, a Delaware corporation (the "Borrower"), the banks party thereto and Citibank, N.A., as administrative agent for such banks (the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein with the same meanings. CO BANK, ACB (the "Additional Lender") and the Borrower hereby agree as follows: (a) The Additional Lender hereby agrees, that effective as of July 15, 2002 (the "Effective Date"), and subject to the satisfaction, on or prior to the Effective Date of the conditions set forth in clauses (A)(2), (B) and (C) of Section 2.04(c)(ii) of the Credit Agreement, (i) the Additional Lender will become a Lender under the Credit Agreement, (ii) the Commitment of the Additional Lender will be $25,000,000, and (iii) the Additional Lender will be bound by all the terms and provisions of the Credit Agreement binding upon each Lender, including, without limitation, Section 2.04(c)(iii). (b) The Borrower consents to the foregoing and agrees to deliver to the Administrative Agent, on or prior to the Effective Date, the evidence of corporate authorization, opinions and certificates described in clauses (A)(2) and (C) of Section 2.04(c)(ii) of the Credit Agreement. (c) THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (d) This Assumption Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were up on the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CO BANK, ACB By /s/ Daniel K. Hansen Name: Daniel K. Hansen Title: Assistant Vice President Domestic Lending Office (and address for notices): 5500 South Quebec Street Greenwood Village, CO 80111 Attn.: Dan Hansen Title: Assistant Vice President (p) (303) 740-6485 (f) (303) 604-5892 Eurodollar Lending Office: 5500 South Quebec Street Greenwood Village, CO 80111 Attn.: Dan Hansen Title: Assistant Vice President (p) (303) 740-6485 (f) (303) 604-5892 ENTERGY CORPORATION By /s/ Steven C. McNeal Name: Steven C. McNeal Title: Vice President and Treasurer Accepted this 15th day of July, 2002 CITIBANK, N.A., as Administrative Agent By /s/ Anita J. Brickell Name: Anita J. Brickell Title: Vice President EX-99 5 a1670299a.txt
Exhibit 99(a) Entergy Arkansas, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest Charges $104,165 $96,685 $97,023 $101,600 $109,523 $109,146 Interest applicable to rentals 17,529 15,511 17,289 16,449 14,563 13,350 ---------------------------------------------------------- Total fixed charges, as defined 121,694 112,196 114,312 118,049 124,086 122,496 Preferred dividends, as defined (a) 16,073 16,763 17,836 13,479 12,348 12,435 ---------------------------------------------------------- Combined fixed charges and preferred dividends, $137,767 $128,959 $132,148 $131,528 $136,434 $134,931 as defined ========================================================== Earnings as defined: Net Income $127,977 $110,951 $69,313 $137,047 $178,185 $144,254 Add: Provision for income taxes: Total 59,220 71,374 54,012 100,512 105,933 82,985 Fixed charges as above 121,694 112,196 114,312 118,049 124,086 122,496 ---------------------------------------------------------- Total earnings, as defined $308,891 $294,521 $237,637 $355,608 $408,204 $349,735 ========================================================== Ratio of earnings to fixed charges, as defined 2.54 2.63 2.08 3.01 3.29 2.86 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.24 2.28 1.80 2.70 2.99 2.59 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 6 a1670299b.txt
Exhibit 99(b) Entergy Gulf States, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest charges $180,073 $178,220 $153,034 $158,949 $174,368 $159,261 Interest applicable to rentals 15,747 16,927 16,451 18,307 18,520 17,972 ----------------------------------------------------------- Total fixed charges, as defined 195,820 195,147 169,485 177,256 192,888 177,233 Preferred dividends, as defined (a) 30,028 32,031 29,355 15,742 13,017 12,987 ----------------------------------------------------------- Combined fixed charges and preferred dividends, as $225,848 $227,178 $198,840 $192,998 $205,905 $190,220 defined =========================================================== Earnings as defined: Income (loss) from continuing operations before extraordinary items and the cumulative effect of accounting changes $59,976 $46,393 $125,000 $180,343 $179,444 $162,290 Add: Income Taxes 22,402 31,773 75,165 103,603 82,038 78,372 Fixed charges as above 195,820 195,147 169,485 177,256 192,888 177,233 ----------------------------------------------------------- Total earnings, as defined (b) $278,198 $273,313 $369,650 $461,202 $454,370 $417,895 =========================================================== Ratio of earnings to fixed charges, as defined 1.42 1.40 2.18 2.60 2.36 2.36 =========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.23 1.20 1.86 2.39 2.21 2.20 =========================================================== (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 7 a1670299c.txt
Exhibit 99(c) Entergy Louisiana, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $128,900 $122,890 $117,247 $111,743 $116,076 $105,733 Interest applicable to rentals 9,203 9,564 9,221 6,458 7,951 6,951 ---------------------------------------------------------- Total fixed charges, as defined 138,103 132,454 126,468 118,201 124,027 $112,684 Preferred dividends, as defined (a) 22,103 20,925 16,006 16,102 12,374 $9,648 ---------------------------------------------------------- Combined fixed charges and preferred dividends, $160,206 $153,379 $142,474 $134,303 $136,401 $122,332 as defined ========================================================== Earnings as defined: Net Income $141,757 $179,487 $191,770 $162,679 $132,550 $193,996 Add: Provision for income taxes: Total Taxes 98,965 109,104 122,368 112,645 86,287 120,246 Fixed charges as above 138,103 132,454 126,468 118,201 124,027 112,684 ---------------------------------------------------------- Total earnings, as defined $378,825 $421,045 $440,606 $393,525 $342,864 $426,926 ========================================================== Ratio of earnings to fixed charges, as defined 2.74 3.18 3.48 3.33 2.76 3.79 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.36 2.75 3.09 2.93 2.51 3.49 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 8 a1670299d.txt
Exhibit 99(d) Entergy Mississippi, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $45,274 $40,927 $38,840 $44,877 $50,991 $47,944 Interest applicable to rentals 1,947 1,864 2,261 1,596 1,849 2,020 --------------------------------------------------------- Total fixed charges, as defined 47,221 42,791 41,101 46,473 52,840 $49,964 Preferred dividends, as defined (a) 5,123 4,878 4,878 5,347 4,674 4,736 --------------------------------------------------------- Combined fixed charges and preferred dividends, $52,344 $47,669 $45,979 $51,820 $57,514 $54,700 as defined ========================================================= Earnings as defined: Net Income $66,661 $62,638 $41,588 $38,973 $39,620 $37,994 Add: Provision for income taxes: Total income taxes 26,744 28,031 17,537 22,868 20,464 20,311 Fixed charges as above 47,221 42,791 41,101 46,473 52,840 49,964 ---------------------------------------------------------- Total earnings, as defined $140,626 $133,460 $100,226 $108,314 $112,924 $108,269 ========================================================== Ratio of earnings to fixed charges, as defined 2.98 3.12 2.44 2.33 2.14 2.17 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.69 2.80 2.18 2.09 1.96 1.98 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 9 a1670299e.txt
Exhibit 99(e) Entergy New Orleans, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $15,287 $14,792 $14,680 $15,891 $19,661 $23,216 Interest applicable to rentals 911 1,045 1,281 1,008 977 1,027 ------------------------------------------------------- Total fixed charges, as defined 16,198 15,837 15,961 16,899 20,638 24,243 Preferred dividends, as defined (a) 1,723 1,566 1,566 1,643 2,898 2,161 ------------------------------------------------------- Combined fixed charges and preferred dividends, $17,921 $17,403 $17,527 $18,542 $23,536 $26,404 as defined ======================================================= Earnings as defined: Net Income $15,451 $16,137 $18,961 $16,518 ($2,195) (6,780) Add: Provision for income taxes: Total 12,142 10,042 13,030 11,597 (4,396) (6,767) Fixed charges as above 16,198 15,837 15,961 16,899 20,638 24,243 ------------------------------------------------------- Total earnings, as defined $43,791 $42,016 $47,952 $45,014 $14,047 $10,696 ======================================================= Ratio of earnings to fixed charges, as defined 2.70 2.65 3.00 2.66 0.68 0.44 ======================================================= Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.44 2.41 2.74 2.43 0.60 0.41 ======================================================= - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) For Entergy New Orleans, earnings for the twelve months ended December 31, 2001 were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. (c) For Entergy New Orleans, earnings for the twelve months ended March 31, 2002 were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $13.6 million and $16.3 million, respectively.
EX-99 10 a1670299f.txt
Exhibit 99(f) System Energy Resources, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges Twelve Months Ended June 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $128,653 $116,060 $147,982 $118,519 $138,018 $114,769 Interest applicable to rentals 6,065 5,189 3,871 5,753 4,458 4,107 --------------------------------------------------------- Total fixed charges, as defined $134,718 $121,249 $151,853 $124,272 $142,476 $118,876 ========================================================= Earnings as defined: Net Income $102,295 $106,476 $82,375 $93,745 $116,355 126,332 Add: Provision for income taxes: Total 74,654 77,263 53,851 81,263 43,761 45,738 Fixed charges as above 134,718 121,249 151,853 124,272 142,476 118,876 --------------------------------------------------------- Total earnings, as defined $311,667 $304,988 $288,079 $299,280 $302,592 $290,946 ========================================================= Ratio of earnings to fixed charges, as defined 2.31 2.52 1.90 2.41 2.12 2.45 =========================================================
-----END PRIVACY-ENHANCED MESSAGE-----