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__________________________________________________________________________________________ UNITED STATES (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF For the Quarterly Period Ended June 30, 2006 OR TRANSITION REPORT PURSUANT TO SECTION 13 For the transition period from ____________ to ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
THE SECURITIES EXCHANGE ACT OF 1934
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Registrant, State of Incorporation, Address of |
|
Registrant, State of Incorporation, Address of |
|
1-11299 |
ENTERGY CORPORATION |
1-31508 |
ENTERGY MISSISSIPPI, INC. |
|
1-10764 |
ENTERGY ARKANSAS, INC. |
0-5807 |
ENTERGY NEW ORLEANS, INC. |
|
1-27031 |
ENTERGY GULF STATES, INC. |
1-9067 |
SYSTEM ENERGY RESOURCES, INC. |
|
1-32718 |
ENTERGY LOUISIANA, LLC |
|||
__________________________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes |
X |
No |
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large |
|
|
|||
Entergy Corporation |
Ö |
||||
Entergy Arkansas, Inc. |
Ö |
||||
Entergy Gulf States, Inc. |
Ö |
||||
Entergy Louisiana, LLC |
Ö |
||||
Entergy Mississippi, Inc. |
Ö |
||||
Entergy New Orleans, Inc. |
Ö |
||||
System Energy Resources, Inc. |
Ö |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
Yes |
|
No |
X |
Outstanding at July 31, 2006 |
||
Entergy Corporation |
($0.01 par value) |
208,357,426 |
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, LLC, 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, 2005, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2006
Page Number |
|||
Definitions |
1 |
||
Entergy Corporation and Subsidiaries |
|||
Management's Financial Discussion and Analysis |
|||
Hurricane Katrina and Hurricane Rita |
4 |
||
Results of Operations |
7 |
||
Liquidity and Capital Resources |
12 |
||
Significant Factors and Known Trends |
15 |
||
Critical Accounting Estimates |
22 |
||
Consolidated Statements of Income |
23 |
||
Consolidated Statements of Cash Flows |
24 |
||
Consolidated Balance Sheets |
26 |
||
Consolidated Statements of Retained Earnings, Comprehensive Income, and |
28 |
||
Selected Operating Results |
29 |
||
Notes to Consolidated Financial Statements |
30 |
||
Entergy Arkansas, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
43 |
||
Liquidity and Capital Resources |
45 |
||
Significant Factors and Known Trends |
47 |
||
Critical Accounting Estimates |
48 |
||
Income Statements |
50 |
||
Statements of Cash Flows |
51 |
||
Balance Sheets |
52 |
||
Selected Operating Results |
54 |
||
Entergy Gulf States, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Hurricane Rita and Hurricane Katrina |
55 |
||
Results of Operations |
56 |
||
Liquidity and Capital Resources |
60 |
||
Significant Factors and Known Trends |
61 |
||
Critical Accounting Estimates |
63 |
||
Income Statements |
64 |
||
Statements of Cash Flows |
65 |
||
Balance Sheets |
66 |
||
Statements of Retained Earnings and Comprehensive Income |
68 |
||
Selected Operating Results |
69 |
||
Entergy Louisiana, LLC |
|||
Management's Financial Discussion and Analysis |
|||
Hurricane Rita and Hurricane Katrina |
70 |
||
Results of Operations |
71 |
||
Liquidity and Capital Resources |
74 |
||
Significant Factors and Known Trends |
75 |
||
Critical Accounting Estimates |
76 |
||
Income Statements |
77 |
||
Statements of Cash Flows |
79 |
||
Balance Sheets |
80 |
||
Statements of Members' Equity |
82 |
||
Selected Operating Results |
83 |
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2006
Page Number |
|||
Entergy Mississippi, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Hurricane Katrina |
84 |
||
Results of Operations |
85 |
||
|
Liquidity and Capital Resources |
87 |
|
Significant Factors and Known Trends |
89 |
||
Critical Accounting Estimates |
90 |
||
Income Statements |
91 |
||
Statements of Cash Flows |
93 |
||
Balance Sheets |
94 |
||
Selected Operating Results |
96 |
||
Entergy New Orleans, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Hurricane Katrina |
97 |
||
Bankruptcy Proceedings |
97 |
||
Results of Operations |
98 |
||
Liquidity and Capital Resources |
100 |
||
Significant Factors and Known Trends |
102 |
||
Critical Accounting Estimates |
103 |
||
Income Statements |
104 |
||
Statements of Cash Flows |
105 |
||
Balance Sheets |
106 |
||
Selected Operating Results |
108 |
||
System Energy Resources, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
109 |
||
Liquidity and Capital Resources |
109 |
||
Significant Factors and Known Trends |
110 |
||
Critical Accounting Estimates |
110 |
||
Income Statements |
112 |
||
Statements of Cash Flows |
113 |
||
Balance Sheets |
114 |
||
Notes to Respective Financial Statements |
116 |
||
Part I, Item 4. Controls and Procedures |
130 |
||
Part II. Other Information |
|||
Item 1. Legal Proceedings |
131 |
||
Item 1A. Risk Factors |
132 |
||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
132 |
||
Item 4. Submission of Matters to a Vote of Security Holders |
132 |
||
Item 5. Other Information |
134 |
||
Item 6. Exhibits |
136 |
||
Signature |
139 |
FORWARD-LOOKING INFORMATION
In this filing and from time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to the risk factors in the Form 10-K as well as others described elsewhere in this report and in subsequent securities filings) include:
(Page left blank intentionally)
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym |
Term |
AFUDC |
Allowance for Funds Used During Construction |
ANO 1 and 2 |
Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas |
APSC |
Arkansas Public Service Commission |
average contract price per MWh or per kW per month |
Price at which generation output and/or capacity is expected to be sold to third parties, given existing contract or option exercise prices based on expected dispatch or capacity |
average contract revenue per MWh |
Price at which the combination of generation output and capacity are expected to be sold to third parties, given existing contract or option exercise prices based on expected dispatch |
Board |
Board of Directors of Entergy Corporation |
bundled capacity and energy contract |
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold |
capacity contract |
For Non-Utility Nuclear, a contract for the sale of the installed capacity product in regional markets managed by ISO New England and the New York Independent System Operator; For Energy Commodity Services, a contract for the sale of capacity and related energy, in which capacity and energy are priced separately |
capacity factor |
Actual plant output divided by maximum potential plant output for the period |
City Council or Council |
Council of the City of New Orleans, Louisiana |
DOE |
United States Department of Energy |
domestic utility companies |
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively |
EITF |
FASB's Emerging Issues Task Force |
Energy Commodity Services |
Entergy's business segment that includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business |
Entergy |
Entergy Corporation and its direct and indirect subsidiaries |
Entergy Corporation |
Entergy Corporation, a Delaware corporation |
Entergy-Koch |
Entergy-Koch, LP, a joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc. |
EPA |
United States Environmental Protection Agency |
FASB |
Financial Accounting Standards Board |
FEMA |
Federal Emergency Management Agency |
FERC |
Federal Energy Regulatory Commission |
firm liquidated damages |
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract |
1
DEFINITIONS (Continued)
Abbreviation or Acronym |
Term |
FSP |
FASB Staff Position |
Grand Gulf |
Unit No. 1 of Grand Gulf Steam Electric Generating Station (nuclear), 90% owned or leased by System Energy |
GWh |
Gigawatt-hour(s), which equals one million kilowatt-hours |
Independence |
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power |
IRS |
Internal Revenue Service |
ISO |
Independent System Operator |
kV |
Kilovolt |
kW |
Kilowatt |
kWh |
Kilowatt-hour(s) |
LDEQ |
Louisiana Department of Environmental Quality |
LPSC |
Louisiana Public Service Commission |
Mcf |
One thousand cubic feet of gas |
MMBtu |
One million British Thermal Units |
MPSC |
Mississippi Public Service Commission |
MW |
Megawatt(s), which equals one thousand kilowatt(s) |
MWh |
Megawatt-hour(s) |
Nelson Unit 6 |
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, owned 70% by Entergy Gulf States |
Net debt ratio |
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
Net MW in operation |
Installed capacity owned or operated |
Net revenue |
Operating revenue net of fuel, fuel-related, and purchased power expenses; and other regulatory credits |
Non-Utility Nuclear |
Entergy's business segment that owns and operates five nuclear power plants and sells electric power produced by those plants primarily to wholesale customers |
NRC |
Nuclear Regulatory Commission |
NYPA |
New York Power Authority |
OASIS |
Open Access Same Time Information Systems |
percent of planned generation sold forward |
Percent of planned generation output sold forward under contracts, forward physical contracts, forward financial contracts, or options that may or may not require regulatory approval |
planned net MW in operation |
Amount of capacity to be available to generate power considering uprates planned to be completed within the calendar year |
planned TWh of generation |
Amount of output expected to be generated by Non-Utility Nuclear for nuclear units, or by non-nuclear wholesale assets for fossil and wind units, considering plant operating characteristics, outage schedules, and expected market conditions that impact dispatch |
PPA |
Purchased power agreement |
PRP |
Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination) |
PUCT |
Public Utility Commission of Texas |
PUHCA 1935 |
Public Utility Holding Company Act of 1935, as amended |
PUHCA 2005 |
Public Utility Holding Company Act of 2005, which repealed PUHCA 1935, among other things |
2
DEFINITIONS
(Concluded)
Abbreviation or Acronym |
Term |
PURPA |
Public Utility Regulatory Policies Act of 1978 |
Ritchie Unit 2 |
Unit 2 of the R.E. Ritchie Steam Electric Generating Station (gas/oil) |
River Bend |
River Bend Steam Electric Generating Station (nuclear), owned by Entergy Gulf States |
SEC |
Securities and Exchange Commission |
SFAS |
Statement of Financial Accounting Standards as promulgated by the FASB |
SMEPA |
South Mississippi Electric Power Agency, which owns a 10% interest in Grand Gulf |
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. |
TWh |
Terawatt-hour(s), which equals one billion kilowatt-hours |
unit-contingent |
Transaction under which power is supplied from a specific generation asset; if the asset is unavailable, the seller is not liable to the buyer for any damages |
unit-contingent with |
Transaction under which power is supplied from a specific generation asset; if the asset is unavailable, the seller is not liable to the buyer for any damages unless the actual availability over a specified period of time is below an availability threshold specified in the contract |
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 |
Utility |
Entergy's business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Waterford 3 |
Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana |
weather-adjusted usage |
Electric usage excluding the estimated effects of deviations from normal weather |
White Bluff |
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
3
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.
In addition to its two primary, reportable, operating segments, Entergy also operates the Energy Commodity Services segment and the Competitive Retail Services business. Energy Commodity Services includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business. Entergy-Koch sold its businesses in the fourth quarter of 2004 and is no longer an operating entity. In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as part of All Other in its segment disclosures.
Hurricane Katrina and Hurricane Rita
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. Following are updates to the discussion in the Form 10-K.
Community Development Block Grants (CDBG)
As discussed in the Form 10-K, a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, with an additional $1 billion approved by Congress but not yet allocated to the states. The states, in turn, will administer the grants. Entergy is currently preparing applications to seek CDBG funding. In March 2006, Entergy New Orleans, Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials. The statements, which will be reviewed by the Louisiana Recovery Authority, include the estimated costs of Hurricanes Katrina and Rita damage, as well as for Entergy New Orleans a lost customer base component intended to help offset the need for storm-related rate increases. The statements include justification for requests for CDBG funding of $718 million by Entergy New Orleans, $472 million by Entergy Louisiana, and $164 million by Entergy Gulf States-Louisiana. As discussed further below, in June 2006 Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs.
Storm Costs Recovery Filings with Retail Regulators
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that
4
those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana an d Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearings on the application are scheduled for the first quarter 2007.
In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States-Texas allocates those costs among its retail customer classes. If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. The hearing before the PUCT on the filing is scheduled for November 2006. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A second filing will request securitization and recovery of the eligible costs through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's estimated $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed a law that established a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for Hurricane Katrina stor m restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation stated that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding.
In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount includes Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. The amount financed through the bonds will be reduced dollar for dollar by any CDBG funds that Entergy Mississippi receives. Pursuant to the legislation, the MPSC must issue a financing order by the end of October 2006.
5
See State and Local Rate Regulation below for a discussion of Entergy New Orleans' filings with the City Council directed at recovery of its storm costs.
Insurance Recovery
As discussed more fully in the Form 10-K, Entergy estimates that its net insurance recoveries for the losses caused by Hurricanes Katrina and Rita will be approximately $382 million. Entergy has received $15 million thus far on its insurance claims, as it continues working towards insurance payment of its covered losses.
Entergy New Orleans Bankruptcy
See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following is an update to the discussion in the Form 10-K. In April 2006, the bankruptcy judge extended the exclusivity period for filing a plan of reorganization by Entergy New Orleans to August 21, 2006. Entergy New Orleans has filed another motion to extend the exclusivity period for filing its plan of reorganization, requesting that the deadline be extended an additional 120 days until December 19, 2006. The court entered an order extending the August 21, 2006 date for Entergy New Orleans' exclusive right to file a plan of reorganization until the court can hear and rule on Entergy New Orleans' motion to extend, which was set for hearing on September 18, 2006. In order to file a plan of reorganization no later than December 2006, Entergy New Orleans believes that it needs resolution of its June 2006 formula rate plan and storm rider filings and commitme nt on timing and amount of CDBG funds. If the motion to extend is granted, Entergy New Orleans will have the exclusive right to file its plan of reorganization until December 19, 2006, and will have until February 15, 2007 to obtain acceptances of its plan by each class of impaired creditors.
In addition, the bankruptcy judge had set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Approximately 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding. Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed, and has begun seeking withdrawal or modification of claims or objecting to claims with which it disagrees.
Municipalization is one potential outcome of Entergy New Orleans' recovery effort. In June 2006 Louisiana passed a law that establishes a governance structure for a public power authority, if municipalization of Entergy New Orleans' utility business is pursued.
As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans for financial reporting purposes retroactive to January 1, 2005. Because Entergy owns all of the common stock of Entergy New Orleans, this change will not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' net income or loss being presented as "Equity in earnings of unconsolidated equity affiliates" rather than its results being included in each individual income statement line item, as is the case for periods prior to 2005.
6
Results of Operations
Second Quarter 2006 Compared to Second Quarter 2005
Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other business segments, and Entergy comparing the second quarter 2006 to the second quarter 2005 showing how much the line item increased or (decreased) in comparison to the prior period:
|
|
|
Non-Utility |
|
Parent & Other |
|
||
(In Thousands) |
||||||||
2nd Quarter 2005 Consolidated Net Income |
|
$217,260 |
|
$58,277 |
|
$17,011 |
$292,548 |
|
Net revenue (operating revenue less fuel |
|
|
|
|
|
|||
Other operation and maintenance expenses |
|
(1,957) |
10,196 |
6,260 |
14,499 |
|||
Taxes other than income taxes |
|
(2,164) |
(741) |
(981) |
(3,886) |
|||
Depreciation |
|
11,754 |
1,958 |
(189) |
13,523 |
|||
Other income |
|
7,721 |
4,822 |
(12,672) |
(129) |
|||
Interest charges |
|
10,107 |
(2,857) |
12,190 |
19,440 |
|||
Other expenses |
|
610 |
2,504 |
17 |
3,131 |
|||
Discontinued operations (net-of-tax) |
|
- |
- |
15,932 |
15,932 |
|||
Income taxes |
|
(38,317) |
6,353 |
3,016 |
(28,948) |
|||
2nd Quarter 2006 Consolidated Net Income |
|
$206,542 |
|
$63,379 |
|
$19,655 |
$289,576 |
Refer to "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS" for further information with respect to Utility operating statistics.
Net Revenue
Utility
Following is an analysis of the change in net revenue, which is Entergy's measure of gross margin, comparing the second quarter of 2006 to the second quarter of 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2nd Quarter 2005 net revenue |
|
$1,114.2 |
Price applied to unbilled electric sales |
(100.4) |
|
Volume/weather |
|
26.5 |
Base revenues/Attala cost deferral |
18.9 |
|
Fuel recovery |
|
15.8 |
Other |
|
0.8 |
2nd Quarter 2006 net revenue |
|
$1,075.8 |
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation at Entergy Louisiana and the Louisiana jurisdiction at Entergy Gulf States, which is in accordance with regulatory treatment. Entergy expects that the effect of this factor will be less for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein.
7
The volume/weather variance resulted primarily from more favorable weather in the second quarter of 2006 compared to the second quarter of 2005 in addition to an increase in weather-adjusted usage. Billed usage increased a total of 801 GWh in the residential and commercial sectors and decreased 87 GWh in the industrial sector. The increase was partially offset by decreased usage during the unbilled period.
The base revenues variance resulted primarily from increases at Entergy Gulf States in the Louisiana jurisdiction effective October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station, and increases at Entergy Gulf States in the Texas jurisdiction related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. The Attala cost deferral variance resulted from deferred under-recovered Attala power plant costs at Entergy Mississippi that will be recovered through the power management rider. The net income effect of the Attala cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
The fuel recovery variance resulted primarily from the under-recovery in 2005 of fuel costs from retail customers in addition to increased fuel cost recovery in 2006 as a result of special rate contracts.
Non-Utility Nuclear
Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to a power uprate completed since the second quarter of 2005, partially offset by the effect of refueling outages on available generation output. The total number of refueling days was essentially the same in the second quarter of 2006 compared to the second quarter of 2005. However, the outage in the second quarter of 2006 was at a larger unit, Indian Point 2, while most of the outage days in the second quarter of 2005 were at a smaller unit, Pilgrim. Following are key performance measures for Non-Utility Nuclear for the second quarters of 2006 and 2005:
|
|
2006 |
|
2005 |
|
|
|
|
|
|
4,200 |
|
4,105 |
|
Average realized price per MWh |
|
$43.93 |
|
$42.63 |
Generation in GWh for the quarter |
|
8,249 |
|
8,156 |
Capacity factor for the quarter |
|
90% |
|
91% |
Parent & Other
Net revenue increased for Parent & Other primarily due to the $14.1 million gain ($8.6 million net-of-tax) realized on the sale of the non-nuclear wholesale asset business' remaining interest in a power development project.
Other Operation and Maintenance Expenses
Other operation and maintenance expenses increased for Non-Utility Nuclear from $145 million for the second quarter of 2005 to $155 million for the second quarter of 2006 primarily due to higher refueling outage expenses.
Interest Charges
Interest charges increased for the Utility and Parent & Other primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricanes Katrina and Rita.
8
Discontinued Operations
Income from discontinued operations increased primarily due to the $17.1 million gain (net-of-tax) on the sale of the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas.
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 31.0% and 33.9%, respectively. The difference in the effective income tax rate for the second quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to the recognition of an income tax benefit related to ANO 1 steam generator removal cost and the favorable resolution of a tax audit issue, partially offset by state income taxes. The difference in the effective income tax rate for the second quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to tax benefits from the American Jobs Creation Act of 2004 and investment tax credit amortization, partially offset by state income taxes and book and tax differences on utility plant items.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other business segments, and Entergy comparing the six months ended June 30, 2006 to the six months ended June 30, 2005 showing how much the line item increased or (decreased) in comparison to the prior period:
|
|
|
Non-Utility |
|
Parent & Other |
|
||
(In Thousands) |
||||||||
2005 Consolidated Net Income |
|
$313,286 |
|
$136,242 |
|
$21,399 |
$470,927 |
|
Net revenue (operating revenue less fuel |
|
|
|
|
|
|||
Other operation and maintenance expenses |
|
11,147 |
17,995 |
11,147 |
40,289 |
|||
Taxes other than income taxes |
|
4,643 |
4,079 |
114 |
8,836 |
|||
Depreciation |
|
1,866 |
2,176 |
(651) |
3,391 |
|||
Other income |
|
20,475 |
(14,898) |
(21,492) |
(15,915) |
|||
Interest charges |
|
15,001 |
(3,349) |
25,008 |
36,660 |
|||
Other expenses |
|
1,562 |
2,316 |
31 |
3,909 |
|||
Discontinued operations (net-of-tax) |
|
- |
- |
15,056 |
15,056 |
|||
Income taxes |
|
(6,869) |
8,102 |
(3,593) |
(2,360) |
|||
2006 Consolidated Net Income |
|
$333,477 |
|
$144,908 |
|
$12,858 |
$491,243 |
Refer to "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS" for further information with respect to Utility operating statistics.
9
Net Revenue
Utility
Following is an analysis of the change in net revenue, which is Entergy's measure of gross margin, comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$1,972.9 |
Base revenues/Attala cost deferral |
46.5 |
|
Fuel recovery |
|
32.7 |
Volume/weather |
|
18.0 |
Transmission revenue |
11.9 |
|
Storm cost recovery |
7.3 |
|
Price applied to unbilled electric sales |
(95.8) |
|
Other |
|
6.5 |
2006 net revenue |
|
$2,000.0 |
The base revenues variance resulted primarily from increases at Entergy Gulf States in the Louisiana jurisdiction effective October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station, and increases at Entergy Gulf States in the Texas jurisdiction related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. The Attala cost deferral variance resulted from deferred under-recovered Attala power plant costs at Entergy Mississippi that will be recovered through the power management rider. The net income effect of the Attala cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction, the under-recovery in 2005 of fuel costs from retail customers, and increased recovery in 2006 of fuel costs as a result of special rate contracts. The increase was partially offset by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.
The volume/weather variance resulted primarily from increased usage, including the effect of weather on billed sales, compared to the same period in 2006. Billed usage increased a total of 657 GWh in the residential and commercial sectors and decreased 486 GWh in the industrial sector. The increase was partially offset by decreased usage during the unbilled period.
The transmission revenue variance is primarily due to new transmission customers in 2006. Also contributing to the increase was an increase in rates effective June 2006.
The storm cost recovery variance is due to the return earned on the interim recovery of storm-related costs at Entergy Louisiana and the Louisiana jurisdiction of Entergy Gulf States as allowed by the LPSC effective March 2006.
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation at Entergy Louisiana and the Louisiana jurisdiction at Entergy Gulf States, which is in accordance with regulatory treatment. Entergy expects that the effect of this factor will be less for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein.
10
Non-Utility Nuclear
Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to power uprates at certain plants completed in 2005 and 2006 and fewer refueling outages in 2006. Following are key performance measures for Non-Utility Nuclear for the six months ended June 30, 2006 and 2005:
|
|
2006 |
|
2005 |
|
|
|
|
|
Net MW in operation at June 30 |
|
4,200 |
|
4,105 |
Average realized price per MWh |
|
$44.16 |
|
$42.09 |
Generation in GWh for the period |
|
16,990 |
|
16,422 |
Capacity factor for the period |
|
94% |
|
92% |
Parent & Other
Net revenue increased for Parent & Other primarily due to the $14.1 million gain ($8.6 million net-of-tax) realized on the sale of the non-nuclear wholesale asset business' remaining interest in a power development project.
Other Operation and Maintenance Expenses
Other operation and maintenance expenses increased for the Utility from $750 million in 2005 to $761 million in 2006 primarily due to the following:
The increase was partially offset by a decrease of $10 million in benefits and payroll costs and a decrease of $10 million in distribution costs, including lower planned spending for vegetation maintenance.
Other operation and maintenance expenses increased for Non-Utility Nuclear from $288 million in 2005 to $306 million in 2006 primarily due to higher refueling outage expenses.
Other Income
Other income increased for the Utility from $59 million in 2005 to $79 million in 2006 primarily due to an increase in interest income recorded on the deferred fuel costs balance. Other income decreased for Non-Utility Nuclear from $48 million in 2005 to $33 million in 2006 primarily due to miscellaneous income of $26 million in 2005 resulting from a reduction in the decommissioning liability for a plant in conjunction with a new decommissioning cost study. The decrease for Non-Utility Nuclear was partially offset by an increase of $5 million in interest income. The decrease in other income for Parent & Other was primarily due to a decrease in interest income and the proceeds in 2005 from the sale of SO2 allowances.
Interest Charges
Interest charges increased for the Utility and Parent & Other primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricanes Katrina and Rita.
11
Discontinued Operations
Income from discontinued operations increased primarily due to the $17.1 million gain (net-of-tax) on the sale of the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas.
Income Taxes
The effective income tax rates for the six months ended June 30, 2006 and 2005 were 33.5% and 33.9%, respectively. The difference in the effective income tax rate for the six months ended June 30, 2006 versus the federal statutory rate of 35.0% is primarily due to the recognition of an income tax benefit related to ANO 1 steam generator removal cost and the favorable resolution of a tax audit issue, partially offset by state income taxes. The difference in the effective income tax rate for the six months ended June 30, 2005 versus the federal statutory rate of 35.0% is primarily due to tax benefits from the American Jobs Creation Act of 2004, investment tax credit amortization, and a downward revision in the estimate of federal income tax expense related to tax depreciation. These factors were partially offset by state income taxes and book and tax differences on utility plant items.
Liquidity and Capital Resources
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.
Debtor-in-Possession Credit Facility
See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Following is an update to that discussion.
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of June 30, 2006, Entergy New Orleans had approximately $40 million of outstanding borrowings under the DIP credit facility.
As discussed in the Form 10-K, borrowings under the DIP credit facility are due in full, and the agreement will terminate, at the earliest of several times or events, including August 23, 2006. Entergy and Entergy New Orleans have agreed to an amendment to the DIP credit agreement that extends the August 23, 2006 maturity date to August 23, 2007, and this amendment is subject to bankruptcy court approval. Entergy New Orleans has filed a motion with the bankruptcy court to authorize Entergy New Orleans to enter into the amendment, which is set for hearing August 16, 2006.
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
Net debt to net capital |
|
50.3% |
|
51.5% |
Effect of subtracting cash from debt |
|
2.1% |
|
1.6% |
Debt to capital |
|
52.4% |
|
53.1% |
12
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.
As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expires in May 2010 and the three-year facility expires in December 2008. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of June 30, 2006:
|
|
|
Letters |
Capacity |
||||
(In Millions) |
||||||||
5-Year Facility |
$2,000 |
$805 |
$144 |
$1,051 |
||||
3-Year Facility |
$1,500 |
$- |
$- |
$1,500 |
Entergy Arkansas, Entergy Gulf States, and Entergy Mississippi each have credit facilities available as of June 30, 2006 as follows:
|
|
|
|
Amount of |
|
Amount Drawn as of |
|
|
|
|
|
|
|
Entergy Arkansas |
|
April 2007 |
|
$85 million |
|
- |
Entergy Gulf States |
February 2011 |
$25 million (a) |
- |
|||
Entergy Mississippi |
|
May 2007 |
|
$30 million (b) |
|
- |
Entergy Mississippi |
May 2007 |
$20 million (b) |
- |
(a) |
The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of June 30, 2006, $1.4 million in letters of credit had been issued. |
(b) |
Borrowings under the Entergy Mississippi facilities may be secured by a security interest in its accounts receivable. |
See Note 4 to the consolidated financial statements for additional discussion of Entergy's credit facilities.
Capital Expenditure Plans and Other Uses of Capital
See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of planned construction and other capital investments by operating segment for 2006 through 2008. Following is an update to that discussion:
13
Cash Flow Activity
As shown in Entergy's Statements of Cash Flows, cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Millions) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$583 |
|
$620 |
|
|
|
|
|
|
|
Effect of deconsolidating Entergy New Orleans in 2005 |
- |
(8) |
|||
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
1,480 |
|
773 |
|
Investing activities |
|
(1,054) |
|
(674) |
|
Financing activities |
|
(279) |
|
(104) |
Effect of exchange rates on cash and cash equivalents |
(1) |
- |
|||
Net increase (decrease) in cash and cash equivalents |
|
146 |
|
(5) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$729 |
|
$607 |
Operating Activities
Entergy's cash flow provided by operating activities increased by $707 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to the following activity:
Entergy Corporation received a $344 million income tax refund (including $71 million attributable to Entergy New Orleans) as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, $273 million of the refund was distributed to the Utility (including Entergy New Orleans) in April 2006, with the remainder distributed primarily to Non-Utility Nuclear.
Investing Activities
Net cash used in investing activities increased by $380 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to the following activity:
14
The increase was partially offset by:
Financing Activities
Net cash used in financing activities increased by $175 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. Following is a description of the significant financing activity occurring during the first six months of 2006 and 2005:
See Note 4 to the consolidated financial statements for the details of long-term debt activity in the six months ended June 30, 2006.
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 rate regulation, federal regulation, market and credit risks, utility restructuring, and nuclear matters. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
See the Form 10-K for the chart summarizing material rate proceedings. Following are updates to that chart. See also Hurricanes Katrina and Rita above for updates regarding storm cost recovery proceedings.
Entergy Arkansas
In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh was proposed to replace the interim rate of $0.01900 per kWh that had been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.
15
On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.
Entergy Arkansas filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. Entergy Arkansas appealed the APSC's decision, but later filed a motion to dismiss the appeal following the APSC's decision described below.
In June 2006, Entergy Arkansas once again filed a motion with the APSC seeking to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing the APSC approved Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.
A hearing in the APSC energy cost recovery investigation is scheduled for October 2006.
On June 7, 2006, Entergy Arkansas filed the cost of service study ordered by the APSC. On that date Entergy Arkansas also filed notice with the APSC that it intends to file for a change in base rates within 60 to 90 days of its notice. Entergy Arkansas expects to make that filing in August 2006.
See "System Agreement Litigation" herein for a discussion of Entergy's compliance filing in that proceeding. If the FERC approves the compliance tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in setting the retail energy cost rate as part of the normal working of the energy cost recovery rider. As noted above the APSC has given notice that it is considering the prospective elimination of the energy cost recovery rider. Therefore, Entergy Arkansas plans to propose an alternative to the energy cost recovery rider for recovery of the costs allocated to it as a result of the System Agreement litigation should the energy cost recovery rider be lawfully terminated by the APSC. A separate exact recovery rider, similar to the energy cost recovery rider or a production cost allocation rider, would ensure that Entergy Arkansas' customers pay only the amount allocated by the FERC.
Entergy Gulf States-Louisiana
In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.
In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.
In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Gulf States' return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $7.1 million rate increase is required to recover LPSC-approved incremental
16
deferred and ongoing capacity requirements. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
Entergy Gulf States -Texas
As discussed in Note 2 to the consolidated financial statements in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.
Entergy Louisiana
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Louisiana's return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $121 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. Entergy Louisiana requested recovery of the capacity deferrals over a three-year period, including carrying charges. $51 million of the rate increase is associated with these deferrals. The remaining $70 million of the rate increase is associated with ongoing capacity costs. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
Entergy Mississippi
In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC. The filing was amended by an April 2006 filing. The amended filing showed that an increase of $3.1 million in electric revenues is warranted. The MPSC has approved a settlement providing for a $1.8 million rate increase, which will be implemented in August 2006.
Entergy New Orleans
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings show various alternatives to reflect the effect of Entergy New Orleans' lost customers and decreased revenue. Entergy New Orleans' recommended alternative adjusts for lost customers and assumes that the City Council's June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place (a portion of Grand Gulf costs was previously recovered through base rates). Under that alternative, annual increases of $6.4 million in electric base rate revenues (an increase of 4.4%) and $22.8 million in gas base rate revenues (an increase of 160.9%) are warranted. The filings triggered the prescribed four-month period for review by the City Council's Advisors and other parties, and rate adjustments, if any, could be implemented as soon as the first billing cycle of November 2006.
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans seeks to recover over a ten-year period the $114 million in electric restoration costs and the $25 million in gas restoration costs that it has actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may
17
receive. With the second rider, Entergy New Orleans seeks to establish over a ten-year period a $150 million storm reserve to provide for the risk of another storm. Entergy New Orleans requested that the City Council consider the proposed riders within the same time frame as the formula rate plans, which would allow implementation as soon as the first billing cycle of November 2006.
Federal Regulation
System Agreement Litigation
See the Form 10-K for a discussion of the System Agreement litigation proceedings at the FERC. In April 2006, Entergy filed with the FERC its compliance filing to implement the provisions of the FERC's decision. The filing amends the System Agreement to provide for the calculation of production costs, average production costs, and payments/receipts among the domestic utility companies to the extent required to maintain rough production cost equalization pursuant to the FERC's decision, and makes clear that all payments/receipts will be classified as energy costs. The payments/receipts would be based on calendar year 2006 production costs, with any payments/receipts among the domestic utility companies to be made in twelve equal monthly installments, commencing in June 2007.
Motions to intervene without protest were filed by the City of New Orleans, the MPSC, the Louisiana Energy Users Group, and Occidental Chemical Corporation. Protests to the compliance filing were filed by the APSC, the LPSC, Arkansas Electric Energy Consumers, Inc. (AEEC), and the Arkansas Attorney General (Arkansas AG). Among other things, the LPSC urged the FERC: (1) to require any payments/receipts to commence in January 2007, rather than June 2007, and to require such payments to be made in a single lump sum payment, rather than in twelve equal monthly installments, or in the alternative to require a paying utility company to complete all payments within the calendar year following the year in which the disparity occurred; (2) to find that the bandwidth remedy is analogous to a "cost-of-service tariff with deferred billing," as opposed to a prospective remedy, so that a utility company could be required to make a payment based on a previous year's production costs even if such utilit y company has exited the System Agreement and so that interest would be due on the amount of any payment; and (3) to order interest on any payments to the extent they are not made in a single lump sum amount. In addition to the above issues, the LPSC and the other parties filing protests urged the FERC to require the bandwidth calculation to be set forth in a separate service schedule within the System Agreement, rather than the existing Service Schedule MSS-3 as proposed by Entergy. The APSC's protest urged the FERC to require that the bandwidth formula include all bandwidth payments as a production cost of the paying utility company for the year in which the payment is made, instead of excluding such costs as proposed in the compliance filing. The AEEC, among other things, urges the FERC to segregate the capacity and energy cost components of any bandwidth payments/receipts. The domestic utility companies responded to the issues raised in the protests and urged the FERC to approve the compliance filing as submitted by Entergy. The LPSC filed a reply to Entergy's response reasserting its previous positions and alleging, among other things, that Entergy was trying to delay the bandwidth payment in an effort to protect purported excess profits at Entergy Arkansas.
Separately, in July 2006 the LPSC filed with the FERC a Motion for Summary Disposition on the same issues that the LPSC had raised in its protests to the compliance filing. The domestic utility companies filed an answer urging the FERC to reject the LPSC's Motion for Summary Disposition and asking the FERC for summary disposition of several issues in favor of the domestic utility companies' positions.
The FERC's decision in the System Agreement proceeding is currently pending before the United States Court of Appeals for the D.C. Circuit. The parties to the proceeding reached agreement on a proposed briefing schedule that would result in the various parties submitting initial and reply briefs between August and November 2006. The proposed briefing schedule has been submitted to the Court of Appeals.
The FERC's decision would reallocate total production costs of the domestic utility companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. This would be accomplished by payments from domestic utility companies whose production costs are more than 11% below Entergy System average production costs to domestic utility companies whose production costs are more than the Entergy System average production cost, with payments going first to those
18
domestic operating utilities whose total production costs are farthest above the Entergy System average. For purposes of the Entergy Arkansas rate filings discussed above in "State and Local Rate Regulation" that are expected to be made in mid-August 2006, an assessment of the potential effects of the FERC's June 2005 order, as amended by its December 2005 order on rehearing, has been calculated on the basis of a 2006 test year, using a 2006 gas price that consists of a non-weighted average of twelve months of gas prices calculated as follows: January through May 2006 are actual, volume-weighted monthly averages of day-ahead cash prices as reported by Energy Intelligence Natural Gas Week; the June 2006 price is the First of the Month Index price as reported by Platts Inside FERC's Gas Market Report; the July 2006 price is the 5/31/06 NYMEX Henry Hub settlement price; and August through December 2006 are 30 calendar - -day rolling averages as of May 31, 2006 of forward NYMEX Henry Hub gas contracts. For example the August 2006 price is an average of all the daily NYMEX settlement prices for the August 2006 contract for each trading day from the period 5/2/06 - - 5/31/06 inclusive. A similar calculation is made using the daily settlements of the September 2006 through December 2006 NYMEX contracts to arrive at those monthly prices. This resulted in an average annual gas price of $7.49/mmBtu. If the FERC's June 2005 order, as amended by its December 2005 order on rehearing, becomes final and if an annual average gas price of $7.49/ mmBtu occurs for 2006 as assumed, the following potential annual production cost reallocation among the domestic utility companies could result:
Annual Payments |
|
Entergy Arkansas |
$284 |
Entergy Gulf States |
($197) |
Entergy Louisiana |
($59) |
Entergy Mississippi |
($28) |
Entergy New Orleans |
$0 |
In calculating the production costs for this purpose under the FERC's order, output from the Vidalia hydroelectric power plant does not reflect the actual Vidalia price for the year but is priced at that year's average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the domestic utility companies' total production costs.
APSC Complaint at the FERC
In June 2006, the APSC filed a complaint with the FERC against Entergy Services as the representative of Entergy Corporation and the domestic utility companies, pursuant to Sections 205, 206 and 207 of the Federal Power Act. The APSC states that "The purpose of the complaint is to institute an investigation into the prudence of Entergy's practices affecting the wholesale rates that flow through its System Agreement." The complaint requests, among other things, that the FERC disallow any costs found to be imprudent, with a refund effective date to be set at the earliest possible time. Specific areas of requested investigation include:
The complaint also requests that the FERC exercise its authority under Section 207 of the FPA to investigate the adequacy of Entergy's transmission system and direct it to make all necessary upgrades to ensure that its transmission facilities provide reliable, adequate and economic service.
19
On July 31, 2006, the domestic utility companies submitted their answer to the APSC complaint. In their answer, the domestic utility companies acknowledge that while the FERC is the appropriate forum to consider the issues raised in the APSC's complaint, the APSC has provided no probative evidence supporting its allegations and has not met the standards under the Federal Power Act (FPA) to have a matter set for hearing. Under the FPA standards, the APSC must create "serious doubt" as to the propriety of the challenged actions. As indicated in the domestic utility companies' answer, the APSC complaint does not raise a "serious doubt" but instead largely relies on unsupported assertions, many of which have been investigated in other proceedings. In those limited instances when the APSC complaint references "evidence" in an attempt to support its request for a hearing, the "evidence" to which it refers in fact does nothing to support its position but, rather, shows that Entergy has acted prudently. As further indicated in the domestic utility companies' answer, following the issuance of the FERC's System Agreement decision, all of the production costs of the domestic utility companies are now inputs to a formula rate that will result in bandwidth payments among the domestic utility companies in order to roughly equalize production costs. Based on well-established Supreme Court precedent, the FERC has exclusive jurisdiction over all inputs that will be included in the System Agreement bandwidth formula rates filed in compliance with the FERC's System Agreement decision and retail regulators are preempted from taking any action that disturbs the FERC's findings with respect to these production cost inputs and the FERC-determined allocation of production costs among the domestic utility companies. The domestic utility companies believe that their conduct with respect to these issues has been prudent and will vigorously defend such conduct.
Several parties have intervened in the proceeding, including the MPSC, the LPSC, and the City Council. The LPSC's answer and comments in response to the APSC Complaint ask the FERC to investigate whether Entergy Arkansas' withdrawal from the System Agreement is fair, just, and reasonable.
APSC System Agreement Investigation
In 2004, the APSC commenced an investigation into whether Entergy Arkansas' continued participation in the System Agreement is in the best interests of its customers. Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective 96 months from December 19, 2005 or such earlier date as authorized by the FERC. Entergy Arkansas indicated, however, that a properly structured replacement agreement could be a viable alternative. In June 2006 the APSC issued an order in its investigation requiring Entergy Arkansas President Hugh McDonald to file testimony in response to several questions involving details of what action Entergy Arkansas or Entergy has taken to insure that Entergy Arkansas' customers are protected from additional costs including those related to the following area s: construction of new generating plants located outside of Arkansas, costs of the Entergy New Orleans bankruptcy, and costs associated with restoration of facilities damaged by Hurricanes Katrina and Rita. Mr. McDonald was also directed to describe actions taken since December 19, 2005 to encourage or persuade the FERC to authorize Entergy Arkansas to exit the Entergy System Agreement sooner than 96 months, and to describe current and future actions related to development of a replacement system agreement. Responsive testimony was filed with the APSC in July 2006. A public hearing for the purpose of cross-examination of Mr. McDonald on his testimony and for questioning by the APSC was also conducted in July 2006.
Independent Coordinator of Transmission (ICT)
In April 2006 the FERC issued an order approving with modification Entergy's ICT proposal filed in May 2005. In its order, the FERC: (1) approved the establishment of the ICT, with modifications; (2) approved Entergy's proposed pricing policy, with modifications; (3) approved the implementation of a weekly procurement process (WPP); and (4) ordered Entergy to submit a compliance filing and an executed contract with the Southwest Power Pool (SPP), the approved ICT, within 60 days of the order. Several parties have filed requests for rehearing of the FERC order, and those requests are still pending.
The proposed modifications include, among other things: (1) Entergy must file with the FERC the criteria used to grant and deny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to four years; and Entergy is precluded from terminating the ICT prior to the end of the four year period; (3) the
20
establishment of a transmission users group that will provide input directly to the ICT on the effectiveness of the ICT Proposal and also will propose to the FERC an appropriate means by which they could be given access to inputs in the process and models under the direction of the ICT; (4) with regard to any dispute between the ICT and Entergy concerning transmission service requests, transmission planning, and interconnection requests, the ICT's position will prevail during the pendency of the dispute resolution; and (5) the WPP must be operational within approximately 14 months of the FERC order or the FERC may reevaluate all approvals to proceed with the ICT.
Entergy made its compliance filing with the FERC on May 24, 2006, including the executed ICT agreement with SPP. Entergy informed the FERC that, assuming it has received all required approvals, Entergy intends to install SPP as the ICT within 30 days of FERC approval of the ICT agreement. Several parties have filed protests regarding Entergy's compliance filing, and consideration of Entergy's compliance filing is pending at the FERC.
The LPSC voted to approve the ICT proposal in July 2006.
Market and Credit Risks
Commodity Price Risk
Power Generation
As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business and Energy Commodity Services business, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward under physical or financial contracts (2006 represents the remaining two quarters of the year):
2006 |
2007 |
2008 |
2009 |
2010 |
|||||||
Non-Utility Nuclear: |
|||||||||||
Percent of planned generation sold forward: |
|||||||||||
Unit-contingent |
34% |
39% |
34% |
25% |
12% |
||||||
Unit-contingent with guarantee of availability (1) |
53% |
47% |
32% |
13% |
5% |
||||||
Firm liquidated damages |
4% |
8% |
0% |
0% |
0% |
||||||
Total |
91% |
94% |
66% |
38% |
17% |
||||||
Planned generation (TWh) |
17 |
34 |
34 |
35 |
34 |
||||||
Average contracted price per MWh |
$41 |
$49 |
$53 |
$58 |
$46 |
See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants and a discussion of the Vermont Yankee PPA price adjustment clause.
Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary will be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary form of collateral to satisfy these requirements would be an Entergy Corporation guaranty. Cash and letters of credit are also acceptable
21
forms of collateral. At June 30, 2006, based on power prices at that time, Entergy had in place as collateral $1,275 million of Entergy Corporation guarantees for wholesale transactions, including $100 million of guarantees that support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount up to $445 million if gas prices increase $1 per MMBtu in both the short- and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.
In addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward (2006 represents the remaining two quarters of the year):
2006 |
2007 |
2008 |
2009 |
2010 |
|||||||
Non-Utility Nuclear: |
|||||||||||
Percent of capacity sold forward: |
|||||||||||
Bundled capacity and energy contracts |
13% |
12% |
12% |
12% |
12% |
||||||
Capacity contracts |
77% |
48% |
36% |
24% |
3% |
||||||
Total |
90% |
60% |
48% |
36% |
15% |
||||||
Planned net MW in operation |
4,200 |
4,200 |
4,200 |
4,200 |
4,200 |
||||||
Average capacity contract price per kW per month |
$1.1 |
$1.1 |
$1.1 |
$1.0 |
$0.9 |
||||||
Blended Capacity and Energy (based on revenues) |
|||||||||||
% of planned generation and capacity sold forward |
86% |
88% |
57% |
33% |
11% |
||||||
Average contract revenue per MWh |
$42 |
$50 |
$53 |
$59 |
$46 |
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies. Following is an update to that discussion.
Unbilled Revenue
As discussed in Note 10 to the consolidated financial statements, effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
22
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands, Except Share Data) | ||||||||
OPERATING REVENUES | ||||||||
Domestic electric | $2,177,710 | $2,044,666 | $4,270,646 | $3,746,683 | ||||
Natural gas | 13,612 | 12,532 | 51,027 | 39,387 | ||||
Competitive businesses | 437,180 | 388,193 | 874,864 | 769,502 | ||||
TOTAL | 2,628,502 | 2,445,391 | 5,196,537 | 4,555,572 | ||||
OPERATING EXPENSES | ||||||||
Operating and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 661,619 | 419,360 | 1,501,791 | 918,345 | ||||
Purchased power | 577,408 | 608,562 | 1,038,778 | 1,040,184 | ||||
Nuclear refueling outage expenses | 42,546 | 39,150 | 84,540 | 78,960 | ||||
Other operation and maintenance | 573,234 | 558,735 | 1,102,664 | 1,062,375 | ||||
Decommissioning | 36,258 | 36,525 | 71,854 | 73,524 | ||||
Taxes other than income taxes | 91,130 | 95,016 | 194,468 | 185,632 | ||||
Depreciation and amortization | 217,943 | 204,420 | 423,332 | 419,941 | ||||
Other regulatory credits - net | (58,929) | (31,951) | (102,946) | (49,971) | ||||
TOTAL | 2,141,209 | 1,929,817 | 4,314,481 | 3,728,990 | ||||
OPERATING INCOME | 487,293 | 515,574 | 882,056 | 826,582 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 8,908 | 10,918 | 24,367 | 23,521 | ||||
Interest and dividend income | 35,139 | 34,441 | 78,968 | 65,059 | ||||
Equity in earnings of unconsolidated equity affiliates | 8,483 | 10,291 | 12,070 | 13,593 | ||||
Miscellaneous - net | (7,965) | (10,956) | (14,170) | 14,977 | ||||
TOTAL | 44,565 | 44,694 | 101,235 | 117,150 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 122,670 | 105,781 | 243,151 | 213,048 | ||||
Other interest - net | 15,235 | 13,275 | 32,495 | 24,761 | ||||
Allowance for borrowed funds used during construction | (5,405) | (5,996) | (14,450) | (13,273) | ||||
TOTAL | 132,500 | 113,060 | 261,196 | 224,536 | ||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 399,358 | 447,208 | 722,095 | 719,196 | ||||
Income taxes | 122,901 | 151,849 | 241,732 | 244,092 | ||||
INCOME FROM CONTINUING OPERATIONS | 276,457 | 295,359 | 480,363 | 475,104 | ||||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (net of income tax | ||||||||
expense (benefit) of $7,190, ($1,502), $5,986 and ($2,234) , respectively) | 13,119 | (2,811) | 10,880 | (4,177) | ||||
CONSOLIDATED NET INCOME | 289,576 | 292,548 | 491,243 | 470,927 | ||||
Preferred dividend requirements and other | 7,774 | 6,398 | 15,812 | 12,781 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $281,802 | $286,150 | $475,431 | $458,146 | ||||
Basic earnings (loss) per average common share: | ||||||||
Continuing operations | $1.29 | $1.37 | $2.24 | $2.17 | ||||
Discontinued operations | $0.06 | ($0.01) | $0.05 | ($0.02) | ||||
Basic earnings per average common share | $1.35 | $1.36 | $2.29 | $2.15 | ||||
Diluted earnings (loss) per average common share: | ||||||||
Continuing operations | $1.27 | $1.34 | $2.20 | $2.13 | ||||
Discontinued operations | $0.06 | ($0.01) | $0.05 | ($0.02) | ||||
Diluted earnings per average common share | $1.33 | $1.33 | $2.25 | $2.11 | ||||
Dividends declared per common share | $0.54 | $0.54 | $1.08 | $1.08 | ||||
Basic average number of common shares outstanding | 207,982,485 | 211,134,467 | 207,858,104 | 212,622,976 | ||||
Diluted average number of common shares outstanding | 211,557,985 | 215,568,534 | 211,467,674 | 217,091,580 | ||||
See Notes to Consolidated Financial Statements. | ||||||||
23
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Consolidated net income | $491,243 | $470,927 | ||
Adjustments to reconcile consolidated net income to net cash flow | ||||
provided by operating activities: | ||||
Reserve for regulatory adjustments | 41,683 | (73,922) | ||
Other regulatory credits - net | (102,946) | (49,971) | ||
Depreciation, amortization, and decommissioning | 496,632 | 494,458 | ||
Deferred income taxes and investment tax credits | (84,441) | 92,579 | ||
Equity in earnings of unconsolidated equity affiliates - net of dividends | (9,896) | (11,993) | ||
Changes in working capital: | ||||
Receivables | 318,480 | (124,234) | ||
Fuel inventory | (13,650) | 9,065 | ||
Accounts payable | (285,750) | (14,685) | ||
Taxes accrued | 535,654 | 68,495 | ||
Interest accrued | (21,754) | (17,715) | ||
Deferred fuel | 272,835 | (76,262) | ||
Other working capital accounts | 103,790 | (48,972) | ||
Provision for estimated losses and reserves | 25,037 | 11,536 | ||
Changes in other regulatory assets | (165,527) | 21,298 | ||
Other | (120,847) | 22,548 | ||
Net cash flow provided by operating activities | 1,480,543 | 773,152 | ||
INVESTING ACTIVITIES | ||||
Construction/capital expenditures | (942,102) | (616,004) | ||
Allowance for equity funds used during construction | 24,367 | 23,521 | ||
Nuclear fuel purchases | (124,250) | (184,445) | ||
Proceeds from sale/leaseback of nuclear fuel | 41,109 | 125,680 | ||
Proceeds from sale of assets and businesses | 77,159 | - | ||
Payment for purchase of plant | (88,199) | (162,075) | ||
Decrease in other investments | 50,070 | 63,193 | ||
Purchases of other temporary investments | - | (1,591,025) | ||
Liquidation of other temporary investments | - | 1,778,975 | ||
Proceeds from nuclear decommissioning trust fund sales | 523,806 | 430,226 | ||
Investment in nuclear decommissioning trust funds | (573,921) | (478,753) | ||
Other regulatory investments | (42,479) | (63,800) | ||
Net cash flow used in investing activities | (1,054,440) | (674,507) | ||
See Notes to Consolidated Financial Statements. | ||||
24 | ||||
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of: | ||||
Long-term debt | 1,237,865 | 1,362,424 | ||
Preferred stock | 73,354 | 30,000 | ||
Common stock and treasury stock | 15,372 | 89,868 | ||
Retirement of long-term debt | (1,143,746) | (701,914) | ||
Repurchase of common stock | - | (639,820) | ||
Redemption of preferred stock | (181,060) | (2,250) | ||
Changes in credit line borrowings - net | (40,000) | (150) | ||
Dividends paid: | ||||
Common stock | (224,458) | (229,353) | ||
Preferred stock | (16,760) | (12,779) | ||
Net cash flow used in financing activities | (279,433) | (103,974) | ||
Effect of exchange rates on cash and cash equivalents | (556) | 129 | ||
Net increase (decrease) in cash and cash equivalents | 146,114 | (5,200) | ||
Cash and cash equivalents at beginning of period | 582,820 | 619,786 | ||
Effect of the deconsolidation of Entergy New Orleans on cash and cash equivalents | - | (7,954) | ||
Cash and cash equivalents at end of period | $728,934 | $606,632 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid (received) during the period for: | ||||
Interest - net of amount capitalized | $282,454 | $242,420 | ||
Income taxes | ($231,325) | $80,781 | ||
Noncash financing activities: | ||||
Proceeds from long-term debt issued for the purpose | ||||
of refunding other long-term debt | $54,700 | - | ||
See Notes to Consolidated Financial Statements. | ||||
25
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
ASSETS | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $120,273 | $221,773 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 608,661 | 361,047 | ||
Total cash and cash equivalents | 728,934 | 582,820 | ||
Note receivable - Entergy New Orleans DIP loan | 39,749 | 90,000 | ||
Notes receivable | 1,135 | 3,227 | ||
Accounts receivable: | ||||
Customer | 435,254 | 629,717 | ||
Allowance for doubtful accounts | (24,591) | (30,805) | ||
Other | 531,553 | 459,152 | ||
Accrued unbilled revenues | 279,696 | 477,570 | ||
Total receivables | 1,221,912 | 1,535,634 | ||
Deferred fuel costs | 246,969 | 543,927 | ||
Fuel inventory - at average cost | 219,845 | 206,195 | ||
Materials and supplies - at average cost | 578,557 | 610,932 | ||
Deferred nuclear refueling outage costs | 131,484 | 157,764 | ||
Prepayments and other | 133,389 | 325,795 | ||
TOTAL | 3,301,974 | 4,056,294 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 307,817 | 296,784 | ||
Decommissioning trust funds | 2,637,784 | 2,606,765 | ||
Non-utility property - at cost (less accumulated depreciation) | 219,507 | 228,833 | ||
Other | 41,480 | 81,535 | ||
TOTAL | 3,206,588 | 3,213,917 | ||
PROPERTY, PLANT AND EQUIPMENT | ||||
Electric | 30,225,525 | 29,161,027 | ||
Property under capital lease | 724,290 | 727,565 | ||
Natural gas | 88,029 | 86,794 | ||
Construction work in progress | 836,016 | 1,524,085 | ||
Nuclear fuel under capital lease | 273,878 | 271,615 | ||
Nuclear fuel | 383,817 | 436,646 | ||
TOTAL PROPERTY, PLANT AND EQUIPMENT | 32,531,555 | 32,207,732 | ||
Less - accumulated depreciation and amortization | 13,223,563 | 13,010,687 | ||
PROPERTY, PLANT AND EQUIPMENT - NET | 19,307,992 | 19,197,045 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 730,503 | 735,221 | ||
Other regulatory assets | 2,394,171 | 2,133,724 | ||
Deferred fuel costs | 168,122 | 120,489 | ||
Long-term receivables | 23,640 | 25,572 | ||
Goodwill | 377,172 | 377,172 | ||
Other | 1,053,511 | 991,835 | ||
TOTAL | 4,747,119 | 4,384,013 | ||
TOTAL ASSETS | $30,563,673 | $30,851,269 | ||
See Notes to Consolidated Financial Statements. | ||||
26 | ||||
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $108,191 | $103,517 | ||
Notes payable | 41 | 40,041 | ||
Accounts payable | 984,941 | 1,655,787 | ||
Customer deposits | 232,607 | 222,206 | ||
Taxes accrued | 212,100 | 188,159 | ||
Accumulated deferred income taxes | 101,045 | 143,409 | ||
Nuclear refueling outage costs | 1,022 | 15,548 | ||
Interest accrued | 133,101 | 154,855 | ||
Obligations under capital leases | 136,943 | 130,882 | ||
Other | 323,413 | 473,510 | ||
TOTAL | 2,233,404 | 3,127,914 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 5,625,264 | 5,279,228 | ||
Accumulated deferred investment tax credits | 367,618 | 376,550 | ||
Obligations under capital leases | 165,324 | 175,005 | ||
Other regulatory liabilities | 409,041 | 408,667 | ||
Decommissioning and retirement cost liabilities | 1,991,617 | 1,923,971 | ||
Transition to competition | 79,098 | 79,101 | ||
Regulatory reserves | 17,397 | 18,624 | ||
Accumulated provisions | 566,796 | 556,028 | ||
Long-term debt | 8,979,735 | 8,824,493 | ||
Preferred stock with sinking fund | 11,700 | 13,950 | ||
Other | 1,562,709 | 1,879,017 | ||
TOTAL | 19,776,299 | 19,534,634 | ||
Commitments and Contingencies | ||||
Preferred stock without sinking fund | 344,893 | 445,974 | ||
SHAREHOLDERS' EQUITY | ||||
Common stock, $.01 par value, authorized 500,000,000 | ||||
shares; issued 248,174,087 shares in 2006 and in 2005 | 2,482 | 2,482 | ||
Paid-in capital | 4,817,628 | 4,817,637 | ||
Retained earnings | 5,676,094 | 5,428,407 | ||
Accumulated other comprehensive loss | (153,825) | (343,819) | ||
Less - treasury stock, at cost (40,104,825 shares in 2006 and | ||||
40,644,602 shares in 2005) | 2,133,302 | 2,161,960 | ||
TOTAL | 8,209,077 | 7,742,747 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $30,563,673 | $30,851,269 | ||
See Notes to Consolidated Financial Statements. | ||||
27 |
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL | ||||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
2006 | 2005 | |||||||||
(In Thousands) | ||||||||||
RETAINED EARNINGS | ||||||||||
Retained Earnings - Beginning of period | $5,509,897 | $5,040,655 | ||||||||
Add: Earnings applicable to common stock | 281,802 | $281,802 | 286,150 | $286,150 | ||||||
Deduct: | ||||||||||
Dividends declared on common stock | 112,295 | 113,820 | ||||||||
Capital stock and other expenses | 3,310 | - | ||||||||
Total | 115,605 | 113,820 | ||||||||
Retained Earnings - End of period | $5,676,094 | $5,212,985 | ||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ||||||||||
Balance at beginning of period | ||||||||||
Accumulated derivative instrument fair value changes | ($201,301) | ($161,446) | ||||||||
Other accumulated comprehensive income items | 52,295 | 44,649 | ||||||||
Total | (149,006) | (116,797) | ||||||||
Net derivative instrument fair value changes | ||||||||||
arising during the period (net of tax expense (benefit) of $11,151 and ($25,082)) | 6,672 | 6,672 | (46,621) | (46,621) | ||||||
Foreign currency translation (net of tax expense (benefit) of $206 and ($46)) | 383 | 383 | (85) | (85) | ||||||
Net unrealized investment gains (net of tax expense (benefit) of ($10,117) and $13,692) | (11,874) | (11,874) | 16,496 | 16,496 | ||||||
Balance at end of period: | ||||||||||
Accumulated derivative instrument fair value changes | ($194,629) | ($208,067) | ||||||||
Other accumulated comprehensive income items | 40,804 | 61,060 | ||||||||
Total | ($153,825) | ($147,007) | ||||||||
Comprehensive Income | $276,983 | $255,940 | ||||||||
PAID-IN CAPITAL | ||||||||||
Paid-in Capital - Beginning of period | $4,816,037 | $4,826,797 | ||||||||
Add: Common stock issuances related to stock plans | 1,591 | 18,240 | ||||||||
Paid-in Capital - End of period | $4,817,628 | $4,845,037 | ||||||||
Six Months Ended | ||||||||||
2006 | 2005 | |||||||||
(In Thousands) | ||||||||||
RETAINED EARNINGS | ||||||||||
Retained Earnings - Beginning of period | $5,428,407 | $4,984,302 | ||||||||
Add: Earnings applicable to common stock | 475,431 | $475,431 | 458,146 | $458,146 | ||||||
Deduct: | ||||||||||
Dividends declared on common stock | 224,434 | 229,448 | ||||||||
Capital stock and other expenses | 3,310 | 15 | ||||||||
Total | 227,744 | 229,463 | ||||||||
Retained Earnings - End of period | $5,676,094 | $5,212,985 | ||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ||||||||||
Balance at beginning of period | ||||||||||
Accumulated derivative instrument fair value changes | ($392,614) | ($141,411) | ||||||||
Other accumulated comprehensive income items | 48,795 | 47,958 | ||||||||
Total | (343,819) | (93,453) | ||||||||
Net derivative instrument fair value changes | ||||||||||
arising during the period (net of tax expense (benefit) of $131,543 and ($37,692)) | 197,985 | 197,985 | (66,655) | (66,655) | ||||||
Foreign currency translation (net of tax expense (benefit) of $299 and ($69)) | 556 | 556 | (129) | (129) | ||||||
Minimum pension liability (net of tax benefit of ($1,344)) | - | - | (2,054) | (2,054) | ||||||
Net unrealized investment gains (net of tax expense (benefit) of ($7,802) and $9,445) | (8,547) | (8,547) | 15,284 | 15,284 | ||||||
Balance at end of period: | ||||||||||
Accumulated derivative instrument fair value changes | ($194,629) | ($208,066) | ||||||||
Other accumulated comprehensive income items | 40,804 | 61,059 | ||||||||
Total | ($153,825) | ($147,007) | ||||||||
Comprehensive Income | $665,425 | $404,592 | ||||||||
PAID-IN CAPITAL | ||||||||||
Paid-in Capital - Beginning of period | $4,817,637 | $4,835,375 | ||||||||
Add: Common stock issuances related to stock plans | (9) | 9,662 | ||||||||
Paid-in Capital - End of period | $4,817,628 | $4,845,037 | ||||||||
See Notes to Consolidated Financial Statements. | ||||||||||
28 |
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars in Millions) | ||||||||
Utility Electric Operating Revenues: | ||||||||
Residential | $697 | $569 | $128 | 23 | ||||
Commercial | 546 | 440 | 106 | 24 | ||||
Industrial | 620 | 551 | 69 | 13 | ||||
Governmental | 36 | 32 | 4 | 13 | ||||
Total retail | 1,899 | 1,592 | 307 | 19 | ||||
Sales for resale | 161 | 148 | 13 | 9 | ||||
Other | 118 | 305 | (187) | (61) | ||||
Total | $2,178 | $2,045 | $133 | 7 | ||||
Utility Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 7,034 | 6,558 | 476 | 7 | ||||
Commercial | 6,060 | 5,735 | 325 | 6 | ||||
Industrial | 9,561 | 9,648 | (87) | (1) | ||||
Governmental | 378 | 377 | 1 | - - | ||||
Total retail | 23,033 | 22,318 | 715 | 3 | ||||
Sales for resale | 2,816 | 2,944 | (128) | (4) | ||||
Total | 25,849 | 25,262 | 587 | 2 | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars in Millions) | ||||||||
Utility Electric Operating Revenues: | ||||||||
Residential | $1,394 | $1,162 | $232 | 20 | ||||
Commercial | 1,087 | 868 | 219 | 25 | ||||
Industrial | 1,287 | 1,100 | 187 | 17 | ||||
Governmental | 76 | 64 | 12 | 19 | ||||
Total retail | 3,844 | 3,194 | 650 | 20 | ||||
Sales for resale | 336 | 287 | 49 | 17 | ||||
Other | 91 | 266 | (175) | (66) | ||||
Total | $4,271 | $3,747 | $524 | 14 | ||||
Utility Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 13,997 | 13,728 | 269 | 2 | ||||
Commercial | 11,594 | 11,206 | 388 | 3 | ||||
Industrial | 18,613 | 19,100 | (487) | (3) | ||||
Governmental | 760 | 761 | (1) | - - | ||||
Total retail | 44,964 | 44,795 | 169 | - - | ||||
Sales for resale | 5,577 | 5,627 | (50) | (1) | ||||
Total | 50,541 | 50,422 | 119 | - - | ||||
29
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Entergy New Orleans Bankruptcy
See Note 9 to the consolidated financial statements for information on the Entergy New Orleans bankruptcy proceeding.
Nuclear Insurance
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy's nuclear power plants
Non-Nuclear Property Insurance
See Note 8 to the consolidated financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited (OIL) for any one occurrence was reduced to $500 million. Most of Entergy's non-nuclear excess property insurance coverage includes a $75 million drop-down feature in the event of an OIL aggregation loss to which an Entergy loss contributes.
Nuclear Decommissioning and Other Asset Retirement Costs
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.
Employment Litigation
Entergy Corporation and certain subsidiaries 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 deny any liability to the plaintiffs.
NOTE 2. RATE AND REGULATORY MATTERS
Storm Costs Recovery Filings with Retail Regulators
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5)
30
declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearings on the application are scheduled for the first quarter 2007.
In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States-Texas allocates those costs among its retail customer classes. If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. The hearing before the PUCT on the filing is scheduled for November 2006. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A second filing will request securitization and recovery of the eligible costs through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's estimated $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed a law that established a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for H urricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation stated that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding.
In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount includes Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. The amount financed through the bonds will be reduced dollar for dollar by any CDBG funds that Entergy Mississippi receives. Pursuant to the legislation, the MPSC must issue a financing order by the end of October 2006.
Deferred Fuel Costs
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies.
Entergy Arkansas
In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh was proposed to replace the interim rate of $0.01900 per kWh that had been in place since October 2005. The interim energy cost rate is discussed in the Form
31
10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.
On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.
Entergy Arkansas filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. Entergy Arkansas appealed the APSC's decision, but later filed a motion to dismiss the appeal following the APSC's decision described below.
In June 2006, Entergy Arkansas once again filed a motion with the APSC seeking to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing the APSC approved Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.
A hearing in the APSC energy cost recovery investigation is scheduled for October 2006.
On June 7, 2006, Entergy Arkansas filed the cost of service study ordered by the APSC. On that date Entergy Arkansas also filed notice with the APSC that it intends to file for a change in base rates within 60 to 90 days of its notice. Entergy Arkansas expects to make that filing in August 2006.
Entergy Gulf States
On March 1, 2006, Entergy Gulf States filed with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97 million including interest of eligible fuel costs for the period August 2005 through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States entered into a unanimous settlement that reduced the requested surcharge for actual over-collections from the months of February and March 2006, resulting in a surcharge of $78.8 million to be implemented over a twelve-month period beginning in June 2006. The PUCT approved the surcharge in June 2006. Amounts collected through the interim fuel surcharges are subject to final reconciliation in a future fuel reconciliation proceeding.
In May 2006, Entergy Gulf States filed with the PUCT a fuel and purchased power reconciliation case covering the period September 2003 through December 2005 for costs recoverable through the Texas fixed fuel factor rate and the incremental purchased capacity recovery rider. Entergy Gulf States is reconciling $1.6 billion of fuel and purchased power costs on a Texas retail basis. Hearings are scheduled for February 2007 and a PUCT decision is expected in July 2007.
32
Entergy Gulf States and Entergy Louisiana
In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities of Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006, the LPSC accepted the LPSC Staff's audit report finding that the prices paid for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and Entergy Gulf States acted reasonably and prudently in response to an extremely difficult environment.
Retail Rate Proceedings
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Filings with the PUCT and Texas Cities
As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in tr ansition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.
Filings with the LPSC
Retail Rates - Electric
(Entergy Gulf States)
In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.
In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Gulf States' return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $7.1 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
(Entergy Louisiana)
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Louisiana's return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $121 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. Entergy Louisiana requested recovery of the capacity deferrals over a three-year period, including carrying charges. $51 million of the rate
33
increase is associated with these deferrals. The remaining $70 million of the rate increase is associated with ongoing capacity costs. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
Retail Rates - Gas (Entergy Gulf States)
In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.
Filings with the MPSC
In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC. The filing was amended by an April 2006 filing. The amended filing showed that an increase of $3.1 million in electric revenues is warranted. The MPSC has approved a settlement providing for a $1.8 million rate increase, which will be implemented in August 2006.
Filings with the City Council
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings show various alternatives to reflect the effect of Entergy New Orleans' lost customers and decreased revenue. Entergy New Orleans' recommended alternative adjusts for lost customers and assumes that the City Council's June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place (a portion of Grand Gulf costs was previously recovered through base rates). Under that alternative, annual increases of $6.4 million in electric base rate revenues (an increase of 4.4%) and $22.8 million in gas base rate revenues (an increase of 160.9%) are warranted. The filings triggered the prescribed four-month period for review by the City Council's Advisors and other parties, and rate adjustments, if any, could be implemented as soon as the first billing cycle of November 2006.
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans seeks to recover over a ten-year period the $114 million in electric restoration costs and the $25 million in gas restoration costs that it has actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans seeks to establish over a ten-year period a $150 million storm reserve to provide for the risk of another storm. Entergy New Orleans requested that the City Council consider the proposed riders within the same time frame as the formula rate plans, which would allow implementation as soon as the first billing cycle of November 2006.
NOTE 3. COMMON EQUITY
Common Stock
Earnings per Share
The following tables present Entergy's basic and diluted earnings per share (EPS) calculations included on the consolidated income statement:
34
|
|
For the Three Months Ended June 30, |
|||||||
|
|
2006 |
|
2005 |
|||||
|
|
(In Millions, Except Per Share Data) |
|||||||
|
|
|
|
$/share |
|
|
|
$/share |
|
Earnings applicable to common stock |
|
$281.8 |
|
|
|
$286.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares |
|
|
|
|
|
|
|
|
|
Average dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
3.4 |
|
(0.022) |
|
4.2 |
|
(0.027) |
|
Deferred Units |
|
0.2 |
|
(0.001) |
|
0.2 |
|
(0.001) |
Average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|||||||
|
|
2006 |
|
2005 |
|||||
|
|
(In Millions, Except Per Share Data) |
|||||||
|
|
|
|
$/share |
|
|
|
$/share |
|
Earnings applicable to common stock |
|
$475.4 |
|
|
|
$458.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares |
|
|
|
|
|
|
|
|
|
Average dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
3.4 |
|
(0.037) |
|
4.3 |
|
(0.042) |
|
Deferred Units |
|
0.2 |
|
(0.002) |
|
0.2 |
|
(0.002) |
Average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy's stock option and other equity compensation plans are discussed in Note 7 to the consolidated financial statements in the Form 10-K.
Treasury Stock
During the six months ended June 30, 2006, Entergy Corporation issued 539,777 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards.
Retained Earnings
On August 4, 2006, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54 per share, payable on September 1, 2006 to holders of record as of August 15, 2006.
Accumulated Other Comprehensive Income
Cash flow hedges with net unrealized losses of approximately $126 million net-of-tax at June 30, 2006 are scheduled to mature during the next twelve months.
35
NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion, of which $805 million was outstanding as of June 30, 2006. The three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion, none of which was outstanding as of June 30, 2006. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities, and letters of credit totaling $144 million had been issued against the five-year facility at June 30, 2006. The total unused capacity for these facilities as of June 30, 2006 was approximately $2.6 billion. The commitment fee for this facility is currently 0.13% per annum of the unused amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior debt ratings of the domestic utility companie s.
Entergy Arkansas, Entergy Gulf States, and Entergy Mississippi, each have credit facilities available as of June 30, 2006 as follows:
|
|
|
|
Amount of |
|
Amount Drawn as of |
|
|
|
|
|
|
|
Entergy Arkansas |
|
April 2007 |
|
$85 million |
|
- |
Entergy Gulf States |
February 2011 |
$25 million (a) |
- |
|||
Entergy Mississippi |
May 2007 |
$30 million (b) |
- |
|||
Entergy Mississippi |
|
May 2007 |
|
$20 million (b) |
|
- |
(a) |
The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of June 30, 2006, $1.4 million in letters of credit had been issued. |
(b) |
Borrowings under the Entergy Mississippi facilities may be secured by a security interest in its accounts receivable. |
In May 2006, Entergy Mississippi increased its $25 million credit facility to $30 million and renewed it through May 2007. Entergy Mississippi also entered into a new $20 million credit facility through May 2007.
In August 2006, Entergy Gulf States increased the capacity of its credit facility to $50 million.
The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.
The FERC has issued an order ("FERC Short-Term Order") approving the short-term borrowing limits of the domestic utility companies (except Entergy New Orleans) and System Energy through March 31, 2008. Entergy New Orleans may rely on existing SEC PUHCA 1935 orders for its financing authority, subject to bankruptcy court approval. In addition to borrowings from commercial banks, the FERC Short-Term Order authorized the domestic utility companies (except Entergy New Orleans which is authorized by an SEC PUHCA 1935 order) and System Energy to continue as participants in the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the authorized limits. As of June 30, 2006, Entergy's subsidiaries' aggregate authorized limit was $2.0 billion and the aggregate outstanding borrowing fr om the money pool was $200.6 million.
36
Long-term Debt
The following long-term debt has been issued by Entergy in 2006:
|
Issue Date |
|
Amount |
|
|
|
(In Thousands) |
U.S. Utility |
|
|
|
Mortgage Bonds: |
|
|
|
5.92% Series due February 2016 - Entergy Mississippi |
January 2006 |
|
$100,000 |
Other Long-term Debt: |
|
|
|
4.60% Series due October 2017, Jefferson County - Arkansas |
|
|
The following long-term debt was retired by Entergy in 2006:
|
Retirement Date |
|
Amount |
|
|
|
(In Thousands) |
U.S. Utility |
|
|
|
Other Long-term Debt: |
|
|
|
5.95% Series due December 2023, St. Charles Parish - |
June 2006 |
$25,000 |
|
Grand Gulf Lease Obligation payment |
N/A |
$22,989 |
|
Retirements after the balance sheet date: |
|||
5.6% Series due October 2017, Jefferson County - Arkansas |
July 2006 |
$45,500 |
|
6.3% Series due June 2018, Jefferson County - |
July 2006 |
$9,200 |
Entergy Mississippi used the proceeds from the January 2006 issuance to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.
Entergy Arkansas used the proceeds from the June 2006 issuance to redeem, prior to maturity, $45.5 million of 5.6% Series of Jefferson County bonds and $9.2 million of 6.3% Series of Jefferson County bonds in July 2006. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
NOTE 5. PREFERRED STOCK
In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which were outstanding as of June 30, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. In April 2006, Entergy Arkansas used the proceeds from this issuance to redeem the following preferred stock:
Series of Entergy Arkansas Preferred Stock |
Redemption Price Per Share |
|
7.32% Preferred Stock, Cumulative, $100.00 par value |
$103.17 |
|
7.80% Preferred Stock, Cumulative, $100.00 par value |
$103.25 |
|
7.40% Preferred Stock, Cumulative, $100.00 par value |
$102.80 |
|
7.88% Preferred Stock, Cumulative, $100.00 par value |
$103.00 |
|
$1.96 Preferred Stock, Cumulative, $0.01 par value |
$ 25.00 |
37
In June 2006, Entergy Louisiana Holdings redeemed all of its preferred stock and amended its charter to eliminate authority to issue any future series of preferred stock. The redemption was made at the following respective redemption prices as provided in the Entergy Louisiana Holdings amended and restated articles of incorporation:
Series of Entergy Louisiana Holdings Preferred Stock |
Redemption Price Per Share |
|
4.96% Preferred Stock, Cumulative, $100.00 par value |
$104.25 |
|
4.16% Preferred Stock, Cumulative, $100.00 par value |
$104.21 |
|
4.44% Preferred Stock, Cumulative, $100.00 par value |
$104.06 |
|
5.16% Preferred Stock, Cumulative, $100.00 par value |
$104.18 |
|
5.40% Preferred Stock, Cumulative, $100.00 par value |
$103.00 |
|
6.44% Preferred Stock, Cumulative, $100.00 par value |
$102.92 |
|
7.84% Preferred Stock, Cumulative, $100.00 par value |
$103.78 |
|
7.36% Preferred Stock, Cumulative, $100.00 par value |
$103.36 |
|
8% Preferred Stock, Cumulative, $25.00 par value |
$ 25.00 |
NOTE 6. STOCK-BASED COMPENSATION PLANS
Entergy grants stock options, which are described more fully in Note 7 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The impact of adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the second quarter 2006 and six months ended June 30, 2006 is $2.0 million and $3.7 million, respective ly. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the second quarter 2005 and six months ended June 30, 2005 is $2.0 million and $3.8 million, respectively.
NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
Entergy's qualified pension cost, including amounts capitalized, for the second quarters of 2006 and 2005, included the following components:
|
|
2006 |
|
2005 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$23,176 |
|
$21,010 |
Interest cost on projected benefit obligation |
|
41,814 |
|
37,484 |
Expected return on assets |
|
(44,482) |
|
(38,781) |
Amortization of transition asset |
|
- |
|
(166) |
Amortization of prior service cost |
|
1,365 |
|
1,306 |
Amortization of loss |
|
10,931 |
|
7,305 |
Net pension costs |
|
$32,804 |
|
$28,158 |
38
Entergy's qualified pension cost, including amounts capitalized, for the six months ended June 30, 2006 and 2005, included the following components:
|
|
2006 |
|
2005 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$46,352 |
|
$42,020 |
Interest cost on projected benefit obligation |
|
83,628 |
|
74,968 |
Expected return on assets |
|
(88,964) |
|
(77,563) |
Amortization of transition asset |
|
- |
|
(332) |
Amortization of prior service cost |
|
2,730 |
|
2,611 |
Amortization of loss |
|
21,862 |
|
14,612 |
Net pension costs |
|
$65,608 |
|
$56,316 |
Entergy recognized $3.9 million and $4.0 million in pension cost for its non-qualified pension plans in the second quarters of 2006 and 2005, respectively. Entergy recognized $7.8 million and $8.1 million in pension cost for its non-qualified pension plans for the six months ended June 30, 2006 and 2005, respectively.
Components of Net Other Postretirement Benefit Cost
Entergy's other postretirement benefit cost, including amounts capitalized, for the second quarters of 2006 and 2005, included the following components:
|
|
2006 |
|
2005 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$10,370 |
|
$9,208 |
Interest cost on APBO |
|
14,316 |
|
13,501 |
Expected return on assets |
|
(4,756) |
|
(4,363) |
Amortization of transition obligation |
|
542 |
|
1,340 |
Amortization of prior service cost |
|
(3,688) |
|
(1,989) |
Amortization of loss |
|
5,698 |
|
5,271 |
Net other postretirement benefit cost |
|
$22,482 |
|
$22,968 |
Entergy's other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2006 and 2005, included the following components:
|
|
2006 |
|
2005 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$20,740 |
|
$18,416 |
Interest cost on APBO |
|
28,632 |
|
27,002 |
Expected return on assets |
|
(9,512) |
|
(8,726) |
Amortization of transition obligation |
|
1,084 |
|
2,680 |
Amortization of prior service cost |
|
(7,376) |
|
(3,978) |
Amortization of loss |
|
11,396 |
|
10,542 |
Net other postretirement benefit cost |
|
$44,964 |
|
$45,936 |
Employer Contributions
Entergy expects to contribute $349 million to its qualified pension plans in 2006 (including $107 million delayed from 2005 as a result of the Katrina Emergency Tax Relief Act). As of the end of July 2006, Entergy contributed $189 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $160 million to fund its pension plans in 2006.
39
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation by $176 million, and reduced the second quarter 2006 and 2005 other postretirement benefit cost by $6.9 million and $6.4 million, respectively. It reduced the six months ended June 30, 2006 and 2005 other postretirement benefit cost by $13.9 million and $12.9 million, respectively. Refer to Note 10 to the consolidated financial statements in the Form 10-K for further discussion.
NOTE 8. BUSINESS SEGMENT INFORMATION
Entergy's reportable segments as of June 30, 2006 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the Energy Commodity Services segment, the Competitive Retail Services business, and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy has discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005, and is reporting Entergy New Orleans results under the equity method of accounting in the Utility segment.
Entergy's segment financial information for the second quarters of 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
||||||||||
2006 |
|
|
|
|
|
|
|
|
|
|
Operating revenues |
$2,191,891 |
|
$362,363 |
|
$82,785 |
|
($8,537) |
|
$2,628,502 |
|
Equity in earnings (loss) of |
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit) |
93,776 |
|
41,331 |
|
(12,206) |
|
- |
|
122,901 |
|
Income from continuing operations |
206,542 |
63,379 |
6,619 |
(83) |
276,457 |
|||||
Income from discontinued |
|
- |
13,119 |
- |
13,119 |
|||||
Net income |
206,542 |
|
63,379 |
|
19,738 |
|
(83) |
|
289,576 |
|
|
|
|
|
|
|
|
||||
2005 |
|
|
|
|
|
|
|
|
|
|
Operating revenues |
$2,057,526 |
|
$347,706 |
|
$59,092 |
|
($18,933) |
|
$2,445,391 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of |
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit) |
132,093 |
|
34,978 |
|
(15,222) |
|
- |
|
151,849 |
|
Income from continuing operations |
217,260 |
58,277 |
19,795 |
27 |
295,359 |
|||||
Loss from discontinued operations |
|
|
|
|
|
|||||
Net income |
217,260 |
|
58,277 |
|
16,984 |
|
27 |
|
292,548 |
40
Entergy's segment financial information for the six months ended June 30, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|||||||||
2006 |
|
|
|
|
|
|
|
|
|
Operating revenues |
$4,322,913 |
|
$750,372 |
|
$149,476 |
|
($26,224) |
|
$5,196,537 |
Equity in earnings (loss) of |
|
|
|
|
|
|
|
|
|
Income taxes (benefit) |
170,749 |
|
94,248 |
|
(23,265) |
|
- |
|
241,732 |
Income from continuing operations |
333,477 |
144,908 |
2,093 |
(115) |
480,363 |
||||
Income from discontinued |
|
|
|
|
|
||||
Net income |
333,477 |
|
144,908 |
|
12,973 |
|
(115) |
|
491,243 |
Total assets |
24,763,451 |
|
5,138,175 |
|
3,127,773 |
|
(2,465,726) |
|
30,563,673 |
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
Operating revenues |
$3,786,866 |
|
$691,281 |
|
$113,418 |
|
($35,993) |
|
$4,555,572 |
Equity in earnings (loss) of |
|
|
|
|
|
|
|
|
|
Income taxes (benefit) |
177,618 |
|
86,146 |
|
(19,672) |
|
- |
|
244,092 |
Income from continuing operations |
313,287 |
136,242 |
25,621 |
(46) |
475,104 |
||||
Loss from discontinued operations |
|
|
|
|
|
||||
Net income |
313,287 |
|
136,242 |
|
21,444 |
|
(46) |
|
470,927 |
Total assets |
22,674,291 |
|
4,733,230 |
|
3,260,502 |
|
(2,512,415) |
|
28,155,608 |
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.
In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy realized a $26.3 million gain ($17.1 million net-of-tax) on the sale.
NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING
See Note 16 to the consolidated financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding, and a discussion of Entergy's decision to deconsolidate its investment in Entergy New Orleans and report it under the equity method of accounting. Entergy's income statement for the three and six months ended June 30, 2006 includes $67 million and $128 million, respectively, in operating revenues and $4 million and $11 million, respectively, in purchased power expenses from transactions with Entergy New Orleans. Entergy's income statement for the three and six months ended June 30, 2005 includes $44 million and $87 million, respectively, in operating revenues and $35 million and $81 million, respectively, in purchased power from transactions with Entergy New Orleans. Entergy's balance sheet as of June 30, 2006 includes $111.4 million of accounts receivable that are payable to Entergy or its subsidiaries by Entergy New Orleans, includi ng $64.9 million of pre-petition accounts.
As discussed in the Form 10-K, because Entergy owns all of the common stock of Entergy New Orleans, Entergy's deconsolidation of Entergy New Orleans does not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations.
41
NOTE 10. ACCOUNTING POLICY UPDATE
Revenue and Fuel Costs
Entergy recognizes revenue from electric power and gas sales when it delivers power or gas to its customers. To the extent that deliveries have occurred but a bill has not been issued, the domestic utility companies accrue an estimate of the revenues for energy delivered since the latest billings. Entergy calculates the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in the domestic utility companies' various jurisdictions. Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month's estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are so recorded and re versed.
Prior to 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States included a component of fuel cost recovery in their unbilled revenue calculations. Effective January 1, 2006, this fuel component of unbilled accounts receivable was reclassified to deferred fuel and is no longer included in the unbilled revenue calculations for Entergy Louisiana and the Louisiana portion of Entergy Gulf States, which is in accordance with regulatory treatment.
__________________________________
In the opinion of the management of Entergy Corporation, 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. The business of the Utility segment, however, 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.
42
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2006 Compared to Second Quarter 2005
Net income increased $7.4 million primarily due to a lower effective income tax rate, partially offset by lower net revenue, higher depreciation and amortization expenses, and lower other income.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net income increased $4.4 million primarily due to a lower effective income tax rate, partially offset by higher depreciation and amortization expenses and higher other operation and maintenance expenses.
Net Revenue
Second Quarter 2006 Compared to Second Quarter 2005
Net revenue, which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the second quarter of 2006 to the second quarter of 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$266.2 |
Capacity costs |
(6.3) |
|
Volume/weather |
4.3 |
|
Other |
|
(4.4) |
2006 net revenue |
|
$259.8 |
The capacity costs variance is primarily due to higher capacity-related costs including the revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
The volume/weather variance is primarily due to an increase in billed electricity usage, including the effect of more favorable weather during the second quarter of 2006 compared to the second quarter of 2005, partially offset by a decrease in usage during the unbilled sales period. Billed electricity usage increased a total of 309 GWh in all sectors.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues increased primarily due to an increase of $30.3 million in fuel cost recovery revenues due to an increase in the energy cost recovery rider effective October 2005 and an increase of $25.3 million in gross wholesale revenue resulting from higher wholesale prices and volume.
Fuel and purchased power expenses increased primarily due to increased deferred fuel expense resulting primarily from higher purchased energy costs as a result of higher natural gas prices and increased power purchases. Also contributing to the increase was a slight increase in demand.
43
Other regulatory credits increased primarily due to an increase of $3.6 million resulting from the under-recovery of Grand Gulf costs due to a decrease in the Grand Gulf rider effective January 2006.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net revenue, which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$489.9 |
Net wholesale revenue |
10.1 |
|
Volume/weather |
9.9 |
|
Deferred fuel cost revisions |
|
(6.1) |
Capacity costs |
(11.3) |
|
Other |
|
(1.0) |
2006 net revenue |
|
$491.5 |
The net wholesale revenue variance is primarily due to higher wholesale prices and improved results related to co-owner contracts.
The volume/weather variance is primarily due to an increase in electricity usage, including the effect of more favorable weather during the six months ended June 30, 2006 compared to the six months ended June 30, 2005. Billed electricity usage increased a total of 471 GWh in all sectors.
The deferred fuel cost revisions variance is primarily due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4 million.
The capacity costs variance is primarily due to higher capacity-related costs including the revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues increased primarily due to an increase of $75.2 million in fuel cost recovery revenues due to increases in the energy cost recovery rider effective April 2005 and October 2005 and an increase of $62.2 million in gross wholesale revenue resulting from higher wholesale prices and volume.
Fuel and purchased power expenses increased primarily due to increased deferred fuel expense resulting primarily from higher purchased energy costs as a result of higher natural gas prices and increased power purchases. Also contributing to the increase was a slight increase in demand.
Other regulatory credits increased primarily due to an increase of $8.7 million resulting from the under-recovery of Grand Gulf costs due to a decrease in the Grand Gulf rider effective January 2006.
Other Income Statement Variances
Second Quarter 2006 Compared to Second Quarter 2005
Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 2005 of estimated depreciable lives involving certain intangible assets.
44
Other income decreased primarily due to:
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Other operation and maintenance expenses increased primarily due to $4.1 million applied as a credit against bad debt expense in the first quarter of 2005 in accordance with a settlement agreement with the APSC.
Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 2005 of estimated depreciable lives involving certain intangible assets.
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 8.9% and 37.0%, respectively. The difference in the effective income tax rate for the second quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to the recognition of an income tax benefit related to the steam generator removal cost and the flow through of a pension item. The difference in the effective income tax rate for the second quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items, partially offset by amortization of investment tax credits and book and tax differences related to the allowance for funds used during construction.
The effective income tax rates for the six months ended June 30, 2006 and 2005 were 25.0% and 36.3%, respectively. The difference in the effective income tax rate for the six months ended June 30, 2006 versus the federal statutory rate of 35.0% is primarily due to the recognition of an income tax benefit related to the steam generator removal cost and the flow through of a pension item. The difference in the effective income tax rate for the six months ended June 30, 2005 versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items, partially offset by a downward revision in the estimate of federal income tax expense related to tax depreciation, the amortization of investment tax credits, and book and tax differences related to the allowance for funds used during construction.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$9,393 |
|
$89,744 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
225,953 |
|
210,270 |
|
Investing activities |
|
(147,364) |
|
(246,232) |
|
Financing activities |
|
(68,931) |
|
57,634 |
Net increase in cash and cash equivalents |
|
9,658 |
|
21,672 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$19,051 |
|
$111,416 |
45
Operating Activities
Cash flow from operations increased $15.7 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to increased recovery of deferred fuel costs and income tax refunds of $23.5 million in 2006 compared to income tax payments of $19.5 million in 2005. These increases were partially offset by the timing of the collection of receivables from customers and the timing of payments to vendors.
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $12 million of the refund to Entergy Arkansas.
Investing Activities
Net cash flow used in investing activities decreased $98.9 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to money pool activity.
Financing Activities
Financing activities used $68.9 million in cash flows for the six months ended June 30, 2006 compared to providing $57.6 million in cash flows for the six months ended June 30, 2005 primarily due to the net issuance of $92.9 million of long-term debt for the six months ended June 30, 2005 in addition to money pool activity.
See "Uses and Sources of Capital" below for the details of Entergy Arkansas' preferred stock activity in 2006.
Capital Structure
Entergy Arkansas' capitalization is balanced between equity and debt, as shown in the following table.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
Net debt to net capital |
|
47.9% |
|
47.4% |
Effect of subtracting cash from debt |
|
0.3% |
|
0.1% |
Debt to capital |
|
48.2% |
|
47.5% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas' financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which were outstanding as of June 30, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. In April 2006, Entergy Arkansas used the proceeds from this issuance to redeem the following preferred stock:
46
Series of Entergy Arkansas Preferred Stock |
Redemption Price Per Share |
|
7.32% Preferred Stock, Cumulative, $100.00 par value |
$103.17 |
|
7.80% Preferred Stock, Cumulative, $100.00 par value |
$103.25 |
|
7.40% Preferred Stock, Cumulative, $100.00 par value |
$102.80 |
|
7.88% Preferred Stock, Cumulative, $100.00 par value |
$103.00 |
|
$1.96 Preferred Stock, Cumulative, $0.01 par value |
$ 25.00 |
In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 30, 2007. The facility is no longer subject to a combined borrowing limit with Entergy Louisiana's credit facility. There were no outstanding borrowings under the Entergy Arkansas credit facility as of June 30, 2006.
In June 2006, Entergy Arkansas issued $54.7 million of 4.60% Series of Jefferson County bonds due October 2017. The proceeds were used to redeem, prior to maturity, $45.5 million of 5.6% Series of Jefferson County bonds and $9.2 million of 6.3% Series of Jefferson County bonds in July 2006. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
Entergy Arkansas' receivables from or (payables to) the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$15,567 |
|
($27,346) |
|
$132,315 |
|
$23,561 |
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of utility restructuring, federal regulation and proceedings, market and credit risks, state and local rate regulatory risks, nuclear matters, and environmental risks.
In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh was proposed to replace the interim rate of $0.01900 per kWh that had been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.
On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.
47
Entergy Arkansas filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. Entergy Arkansas appealed the APSC's decision, but later filed a motion to dismiss the appeal following the APSC's decision described below.
In June 2006, Entergy Arkansas once again filed a motion with the APSC seeking to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing the APSC approved Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.
A hearing in the APSC energy cost recovery investigation is scheduled for October 2006.
On June 7, 2006, Entergy Arkansas filed the cost of service study ordered by the APSC. On that date Entergy Arkansas also filed notice with the APSC that it intends to file for a change in base rates within 60 to 90 days of its notice. Entergy Arkansas expects to make that filing in August 2006.
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for a discussion of Entergy's compliance filing in that proceeding. If the FERC approves the compliance tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in setting the retail energy cost rate as part of the normal working of the energy cost recovery rider. As noted above the APSC has given notice that it is considering the prospective elimination of the energy cost recovery rider. Therefore, Entergy Arkansas plans to propose an alternative to the energy cost recovery rider for recovery of the costs allocated to it as a result of the System Agreement litigation should the energy cost recovery rider be lawfully terminated by the APSC. A separate exact recovery rider, similar to the energy cost rec overy rider or a production cost allocation rider, would ensure that Entergy Arkansas' customers pay only the amount allocated by the FERC.
Federal Regulation
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation, APSC Complaint filed with the FERC, and APSC System Agreement Investigation" for updates regarding proceedings involving the System Agreement.
Independent Coordinator of Transmission (ICT)
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.
48
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy Arkansas in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy Arkansas does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
49
ENTERGY ARKANSAS, INC. | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $504,223 | $450,097 | $951,845 | $817,457 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 84,806 | 46,612 | 187,277 | 83,415 | ||||
Purchased power | 167,981 | 139,899 | 286,911 | 247,531 | ||||
Nuclear refueling outage expenses | 7,371 | 7,019 | 14,726 | 13,336 | ||||
Other operation and maintenance | 105,895 | 105,727 | 197,650 | 191,556 | ||||
Decommissioning | 7,608 | 8,246 | 15,091 | 16,359 | ||||
Taxes other than income taxes | 8,982 | 10,051 | 18,602 | 19,888 | ||||
Depreciation and amortization | 54,143 | 48,023 | 106,961 | 99,800 | ||||
Other regulatory credits - net | (8,359) | (2,589) | (13,886) | (3,384) | ||||
TOTAL | 428,427 | 362,988 | 813,332 | 668,501 | ||||
OPERATING INCOME | 75,796 | 87,109 | 138,513 | 148,956 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 1,916 | 3,491 | 3,818 | 7,450 | ||||
Interest and dividend income | 3,998 | 5,078 | 11,673 | 9,370 | ||||
Miscellaneous - net | (687) | (47) | (1,572) | (679) | ||||
TOTAL | 5,227 | 8,522 | 13,919 | 16,141 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 19,361 | 19,968 | 38,339 | 40,750 | ||||
Other interest - net | 1,328 | 798 | 2,868 | 2,224 | ||||
Allowance for borrowed funds used during construction | (822) | (1,725) | (1,679) | (3,736) | ||||
TOTAL | 19,867 | 19,041 | 39,528 | 39,238 | ||||
INCOME BEFORE INCOME TAXES | 61,156 | 76,590 | 112,904 | 125,859 | ||||
Income taxes | 5,421 | 28,300 | 28,246 | 45,638 | ||||
NET INCOME | 55,735 | 48,290 | 84,658 | 80,221 | ||||
Preferred dividend requirements and other | 2,085 | 1,944 | 4,123 | 3,888 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $53,650 | $46,346 | $80,535 | $76,333 | ||||
See Notes to Respective Financial Statements. | ||||||||
50
ENTERGY ARKANSAS, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $84,658 | $80,221 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 6,789 | - - | ||
Other regulatory credits - net | (13,886) | (3,384) | ||
Depreciation, amortization, and decommissioning | 122,052 | 116,159 | ||
Deferred income taxes and investment tax credits | (44,980) | 17,049 | ||
Changes in working capital: | ||||
Receivables | (41,738) | 33,568 | ||
Fuel inventory | (1,659) | (773) | ||
Accounts payable | (44,275) | (13,773) | ||
Taxes accrued | 95,543 | 11,418 | ||
Interest accrued | (804) | 1,196 | ||
Deferred fuel costs | 85,047 | (720) | ||
Other working capital accounts | 8,588 | (10,700) | ||
Provision for estimated losses and reserves | (829) | (3,645) | ||
Changes in other regulatory assets | (15,484) | 25,435 | ||
Other | (13,069) | (41,781) | ||
Net cash flow provided by operating activities | 225,953 | 210,270 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (121,269) | (123,690) | ||
Allowance for equity funds used during construction | 3,818 | 7,450 | ||
Nuclear fuel purchases | - - | (62,307) | ||
Proceeds from sale/leaseback of nuclear fuel | - - | 62,248 | ||
Proceeds from nuclear decommissioning trust fund sales | 74,895 | 111,352 | ||
Investment in nuclear decommissioning trust funds | (79,353) | (116,437) | ||
Change in money pool receivable - net | (15,567) | (108,754) | ||
Other regulatory investments | (9,888) | (16,094) | ||
Net cash flow used in investing activities | (147,364) | (246,232) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - - | 272,817 | ||
Retirement of long-term debt | - - | (179,895) | ||
Proceeds from the issuance of preferred stock | 73,355 | - - | ||
Redemption of preferred stock | (75,885) | - - | ||
Change in money pool payable - net | (27,346) | - - | ||
Dividends paid: | ||||
Common stock | (34,800) | (31,400) | ||
Preferred stock | (4,255) | (3,888) | ||
Net cash flow provided by (used in) financing activities | (68,931) | 57,634 | ||
Net increase in cash and cash equivalents | 9,658 | 21,672 | ||
Cash and cash equivalents at beginning of period | 9,393 | 89,744 | ||
Cash and cash equivalents at end of period | $19,051 | $111,416 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $36,185 | $37,395 | ||
Income taxes | ($23,543) | $19,476 | ||
Noncash financing activities: | ||||
Proceeds from long-term debt issued for the purpose | ||||
of refunding other long-term debt | $54,700 | - - | ||
See Notes to Respective Financial Statements. |
51
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $3,014 | $9,393 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 16,037 | - - | ||
Total cash and cash equivalents | 19,051 | 9,393 | ||
Accounts receivable: | ||||
Customer | 93,536 | 115,321 | ||
Allowance for doubtful accounts | (13,464) | (15,777) | ||
Associated companies | 55,602 | 30,902 | ||
Other | 104,335 | 63,702 | ||
Accrued unbilled revenues | 79,872 | 68,428 | ||
Total accounts receivable | 319,881 | 262,576 | ||
Deferred fuel costs | 129,023 | 153,136 | ||
Fuel inventory - at average cost | 14,001 | 12,342 | ||
Materials and supplies - at average cost | 94,509 | 87,875 | ||
Deferred nuclear refueling outage costs | 17,821 | 30,967 | ||
Prepayments and other | 62,204 | 9,628 | ||
TOTAL | 656,490 | 565,917 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 11,206 | 11,206 | ||
Decommissioning trust funds | 404,525 | 402,124 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,448 | 1,449 | ||
Other | 2,976 | 2,976 | ||
TOTAL | 420,155 | 417,755 | ||
UTILITY PLANT | ||||
Electric | 6,435,831 | 6,344,435 | ||
Property under capital lease | 6,649 | 9,900 | ||
Construction work in progress | 150,928 | 139,208 | ||
Nuclear fuel under capital lease | 105,801 | 92,181 | ||
Nuclear fuel | 19,205 | 22,616 | ||
TOTAL UTILITY PLANT | 6,718,414 | 6,608,340 | ||
Less - accumulated depreciation and amortization | 2,928,168 | 2,843,904 | ||
UTILITY PLANT - NET | 3,790,246 | 3,764,436 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 69,884 | 61,236 | ||
Other regulatory assets | 470,283 | 461,015 | ||
Deferred fuel costs | - - | 51,046 | ||
Other | 48,102 | 46,605 | ||
TOTAL | 588,269 | 619,902 | ||
TOTAL ASSETS | $5,455,160 | $5,368,010 | ||
See Notes to Respective Financial Statements. | ||||
52 | ||||
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $76,966 | $135,357 | ||
Other | 103,694 | 120,090 | ||
Customer deposits | 47,149 | 45,432 | ||
Taxes accrued | 34,327 | - - | ||
Accumulated deferred income taxes | 22,971 | 56,186 | ||
Interest accrued | 18,403 | 19,207 | ||
Obligations under capital leases | 48,281 | 46,857 | ||
Other | 21,474 | 21,836 | ||
TOTAL | 373,265 | 444,965 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,166,404 | 1,105,712 | ||
Accumulated deferred investment tax credits | 61,917 | 64,001 | ||
Obligations under capital leases | 64,169 | 55,224 | ||
Other regulatory liabilities | 74,450 | 76,507 | ||
Decommissioning | 457,206 | 442,115 | ||
Accumulated provisions | 28,244 | 29,073 | ||
Long-term debt | 1,356,585 | 1,298,238 | ||
Other | 284,502 | 306,034 | ||
TOTAL | 3,493,477 | 3,376,904 | ||
Commitments and Contingencies | ||||
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 2006 | ||||
and 2005 | 470 | 470 | ||
Paid-in capital | 588,529 | 591,102 | ||
Retained earnings | 883,069 | 838,219 | ||
TOTAL | 1,588,418 | 1,546,141 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $5,455,160 | $5,368,010 | ||
See Notes to Respective Financial Statements. | ||||
53
ENTERGY ARKANSAS, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 138 | $ 124 | $ 14 | 11 | ||||
Commercial | 91 | 80 | 11 | 14 | ||||
Industrial | 95 | 84 | 11 | 13 | ||||
Governmental | 4 | 4 | - | - - | ||||
Total retail | 328 | 292 | 36 | 12 | ||||
Sales for resale | ||||||||
Associated companies | 106 | 64 | 42 | 66 | ||||
Non-associated companies | 33 | 50 | (17) | (34) | ||||
Other | 37 | 44 | (7) | (16) | ||||
Total | $ 504 | $ 450 | $ 54 | 12 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,591 | 1,481 | 110 | 7 | ||||
Commercial | 1,391 | 1,305 | 86 | 7 | ||||
Industrial | 1,836 | 1,720 | 116 | 7 | ||||
Governmental | 63 | 66 | (3) | (5) | ||||
Total retail | 4,881 | 4,572 | 309 | 7 | ||||
Sales for resale | ||||||||
Associated companies | 2,432 | 1,622 | 810 | 50 | ||||
Non-associated companies | 674 | 1,065 | (391) | (37) | ||||
Total | 7,987 | 7,259 | 728 | 10 | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 289 | $ 259 | $ 30 | 12 | ||||
Commercial | 171 | 149 | 22 | 15 | ||||
Industrial | 183 | 156 | 27 | 17 | ||||
Governmental | 9 | 9 | - | - - | ||||
Total retail | 652 | 573 | 79 | 14 | ||||
Sales for resale | ||||||||
Associated companies | 183 | 105 | 78 | 74 | ||||
Non-associated companies | 84 | 100 | (16) | (16) | ||||
Other | 33 | 39 | (6) | (15) | ||||
Total | $ 952 | $ 817 | $ 135 | 17 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 3,501 | 3,371 | 130 | 4 | ||||
Commercial | 2,670 | 2,554 | 116 | 5 | ||||
Industrial | 3,615 | 3,384 | 231 | 7 | ||||
Governmental | 128 | 134 | (6) | (4) | ||||
Total retail | 9,914 | 9,443 | 471 | 5 | ||||
Sales for resale | ||||||||
Associated companies | 4,297 | 2,977 | 1,320 | 44 | ||||
Non-associated companies | 1,531 | 2,172 | (641) | (30) | ||||
Total | 15,742 | 14,592 | 1,150 | 8 | ||||
54
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Rita and Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which hit Entergy Gulf States' service territory in the Texas and Louisiana jurisdictions in August and September 2005. The storms resulted in power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations. Following is an update to the discussion in the Form 10-K.
Entergy Gulf States currently estimates that its total restoration costs for the repair or replacement of its electric and gas facilities damaged by Hurricanes Katrina and Rita and business continuity costs will be $633 million, the majority of which is due to Hurricane Rita.
As discussed in the Form 10-K, a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, with an additional $1 billion approved by Congress but not yet allocated to the states. The states, in turn, will administer the grants. Entergy Gulf States is currently preparing applications to seek CDBG funding. In March 2006 Entergy Gulf States provided a justification statement to state and local officials in Louisiana. The statement, which will be reviewed by the Louisiana Recovery Authority, includes t he estimated costs of Hurricanes Katrina and Rita damage in the Louisiana jurisdiction. The statement includes justification for a request for $164 million in CDBG funding attributable to the Louisiana portion of Entergy Gulf States' business.
Storm Costs Recovery Filings with Retail Regulators
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearing s on the application are scheduled for the first quarter 2007.
55
In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States-Texas allocates those costs among its retail customer classes. If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. The hearing before the PUCT on the filing is scheduled for November 2006. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A second filing will request securitization and recovery of the eligible costs through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.
Results of Operations
Net Income
Second Quarter 2006 Compared to Second Quarter 2005
Net income increased $7.4 million primarily due to higher net revenue partially offset by higher interest and other charges and higher taxes other than income taxes.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net income increased $29.1 million primarily due to higher net revenue and higher other income, partially offset by higher other operation and maintenance expenses, higher taxes other than income taxes, and higher interest and other charges.
Net Revenue
Second Quarter 2006 Compared to Second Quarter 2005
Net revenue, which is Entergy Gulf States' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the second quarter of 2006 to the second quarter of 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$302.8 |
Base revenues |
15.8 |
|
Volume/weather |
|
13.3 |
Fuel recovery |
|
10.5 |
Net wholesale revenue |
8.7 |
|
Price applied to unbilled electric sales |
(23.8) |
|
Purchased power capacity |
(11.8) |
|
Other |
|
11.2 |
2006 net revenue |
|
$326.7 |
Base revenues increased due to increases in the Louisiana jurisdiction effective October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station, and increases in the Texas jurisdiction related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006.
56
The volume/weather variance is primarily due to an increase in electricity usage, including the effect of more favorable weather compared to the same period in 2005. Billed electricity usage increased a total of 326 GWh in all sectors.
The fuel recovery variance resulted primarily from the under-recovery in 2005 of fuel costs from retail customers in addition to increased fuel cost recovery in 2006 as a result of special rate contracts.
The net wholesale revenue variance is primarily due to increased volume and higher margins on sales to municipal and co-op customers.
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation, which is in accordance with regulatory treatment. Entergy Gulf States expects that the effect of this factor will be an approximately $40 million decrease in its annual net revenue for 2006 compared to 2005. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.
The purchased power capacity variance is primarily due to an increase in capacity charges primarily associated with power purchases from the Perryville generating station in addition to new purchase power contracts in 2006.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues increased primarily due to an increase in fuel cost recovery revenues of $107.1 million due to higher fuel rates. Also contributing to the increase were the base revenue and volume/weather variances discussed above.
Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense as a result of higher fuel rates.
Other regulatory charges increased primarily due to the deferral of under-recovered purchased power capacity costs in 2005 combined with the recovery of purchased power capacity costs in 2005. A rider was implemented in December 2005 in the Texas jurisdiction to recover incremental purchased power capacity costs. Partially offsetting the increase was a regulatory credit of $4.5 million recorded during the second quarter of 2006 as a result of Entergy Gulf States reinstating the application of regulatory accounting principles to its wholesale business. Refer to "Application of SFAS 71" in Note 7 to the domestic utility companies and System Energy financial statements for further discussion.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net revenue, which is Entergy Gulf States' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
57
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$544.5 |
Base revenues |
30.6 |
|
Fuel recovery |
29.7 |
|
Volume/weather |
20.5 |
|
Net wholesale revenue |
13.4 |
|
Price applied to unbilled electric sales |
|
(20.0) |
Purchased power capacity costs |
|
(17.5) |
Other |
|
20.4 |
2006 net revenue |
|
$621.6 |
Base revenues increased due to increases in the Louisiana jurisdiction effective October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station, and increases in the Texas jurisdiction related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006.
The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction. The variance is also due to the under-recovery in 2005 of fuel costs from retail customers and increased fuel cost recovery in 2006 as a result of special rate contracts.
The volume/weather variance is due to increased weather-adjusted usage on billed sales in addition to an increase in usage during the unbilled sales period. Billed usage increased a total of 370 GWh in the residential and commercial sectors and decreased 350 GWh in the industrial sector.
The net wholesale revenue variance is primarily due to increased volume and higher margins on sales to municipal and co-op customers.
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation, which is in accordance with regulatory treatment. Entergy Gulf States expects that the effect of this factor will be an approximately $40 million decrease in its annual net revenue for 2006 compared to 2005. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.
The purchased power capacity variance is primarily due to an increase in capacity charges primarily associated with power purchases from the Perryville generating station in addition to new purchase power contracts in 2006.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues increased primarily due to an increase of $268 million in fuel cost recovery revenues due to higher fuel rates. Also contributing to the increase were the base revenue and volume/weather variances discussed above.
Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense in addition to increases in the market prices of natural gas and purchased power. The increase in deferred fuel expense was due to higher fuel rates.
Other regulatory charges increased primarily due to the deferral of under-recovered purchased power capacity costs in 2005 combined with the recovery of purchased power capacity costs in 2005. A rider was implemented in December 2005 in the Texas jurisdiction to recover incremental purchased power capacity costs. Partially offsetting the increase was a regulatory credit of
58
$4.5 million recorded during the second quarter of 2006 as a result of Entergy Gulf States reinstating the application of regulatory accounting principles to its wholesale business. Refer to "Application of SFAS 71" in Note 7 to the domestic utility companies and System Energy financial statements for further discussion.
Other Income Statement Variances
Second Quarter 2006 Compared to Second Quarter 2005
Taxes other than income taxes increased primarily due to higher Louisiana local franchise taxes primarily due to higher revenues as discussed above.
Interest and other charges increased primarily due to the increase in long-term debt outstanding as a result of the funding of the storm restoration costs resulting from Hurricanes Katrina and Rita.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Other operation and maintenance expenses increased primarily due to:
Taxes other than income taxes increased primarily due to higher Louisiana local franchise taxes primarily due to higher revenues as discussed above.
Other income increased primarily due to:
Interest and other charges increased primarily due to the increase in long-term debt outstanding as a result of the funding of the storm restoration costs resulting from Hurricanes Katrina and Rita.
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 39.1% and 38%, respectively. The difference in the effective income tax rates for the second quarter of 2006 and 2005 versus the federal statutory rate of 35% is primarily due to state income taxes and book and tax differences related to utility plant items, partially offset by the amortization of investment tax credits.
The effective income tax rates for the six months ended June 30, 2006 and 2005 were 34.2% and 32.7%, respectively. The difference in the effective income tax rate for the six months ended June 30, 2006 versus the federal statutory rate of 35% is primarily due to amortization of investment tax credits and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. The difference in the effective income tax rate for the six months ended June 30, 2005 versus the federal statutory rate of 35% is primarily due to amortization of investment tax credits, book and tax differences related to the allowance for equity funds used during construction, and a downward revision in the estimate of federal income tax expense related to tax depreciation, partially offset by state income taxes and book and tax differences related to utility plant items.
59
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$25,373 |
|
$6,974 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
290,950 |
|
186,084 |
|
Investing activities |
|
(220,594) |
|
(175,285) |
|
Financing activities |
|
(87,268) |
|
(15,446) |
Net decrease in cash and cash equivalents |
|
(16,912) |
|
(4,647) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$8,461 |
|
$2,327 |
Operating Activities
Cash flow from operations increased $104.9 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to the timing of collections of receivables from customers, income tax refunds of $60.1 million for the six months ended June 30, 2006 compared to income tax payments of $14.5 million for the same period in 2005, and an increase in the recovery of deferred fuel costs, partially offset by the timing of payments to vendors.
In the first quarter 2006, Entergy Corporation received an income tax refund as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $23 million of the refund to Entergy Gulf States.
Investing Activities
Net cash used in investing activities increased $45.3 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to an increase in construction expenditures of $116.2 million due to storm-related projects, partially offset by money pool activity and a decrease in under-recovered fuel and purchased power expenses of $14.3 million in Texas that have been deferred and are expected to be collected over a period greater than twelve months.
Financing Activities
Net cash used in financing activities increased $71.8 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to an increase of $57.4 million in common stock dividends paid and the net issuance of $14.5 million of long-term debt in 2005.
60
Capital Structure
Entergy Gulf States' capitalization is balanced between equity and debt, as shown in the following table.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
Net debt to net capital |
|
51.7% |
|
51.4% |
|
Effect of subtracting cash from debt |
|
- |
|
0.3% |
|
Debt to capital |
|
51.7% |
|
51.7% |
|
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States' financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Gulf States' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Gulf States' receivables from or (payables to) the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$2,982 |
|
$64,011 |
|
($149,447) |
|
($59,720) |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
In February 2006, Entergy Gulf States established a $25 million line of credit. The line of credit allows Entergy Gulf States to borrow money and to issue letters of credit. $1.4 million in letters of credit were issued under the facility at June 30, 2006, and no borrowings were outstanding. The line of credit terminates in February 2011. In August 2006, Entergy Gulf States increased the capacity of the credit facility to $50 million.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of transition to retail competition, state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, state and local rate regulatory risk, industrial, commercial, and wholesale customers, market and credit risks, nuclear matters, environmental risks, and litigation risks. Following are updates to the information disclosed in the Form 10-K.
Jurisdictional Separation Plan
See the Form 10-K for a discussion of business and jurisdictional separation plans concerning Entergy Gulf States. In January 2006, the LPSC directed that Entergy Gulf States file a complete jurisdictional separation plan as soon as possible. Therefore, on April 26, 2006, Entergy Gulf States filed its plan for jurisdictional separation with the LPSC and requested that it grant approval no later than September 30, 2006. The plan provides for Entergy Gulf States to be separated into two vertically integrated utilities, one subject solely to the retail jurisdiction of the LPSC and the other subject solely to the retail jurisdictional of the PUCT. The plan also provides that the Texas utility should own all the distribution and transmission assets located in Texas, the gas-fired
61
generating plants located in Texas, and undivided ownership shares of Entergy Gulf States' 70% interest in Nelson 6 and 42% interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana. The Louisiana utility would own all of the remaining assets currently owned by Entergy Gulf States. The Texas utility would purchase from the Louisiana utility pursuant to a life-of-the unit purchase power agreement (PPA) a share of capacity and energy of River Bend. Each separated utility also would purchase pursuant to a PPA a share of capacity and energy of the gas-fired generating plants owned by the other utility. The PPAs associated with the gas-fired generating plants would terminate when retail open access commences in the Texas utility's service territory. Until that time, each utility will participate in the System Agreement and the Entergy System generation will continue to be dispatched in the same manner as before the jurisdictional separation. Und er the provisions of the System Agreement, the Texas utility will terminate its participation in the System Agreement, except for the aspects related to transmission equalization, when Texas implements retail open access for Entergy Gulf States. The plan also provides that the operation of the generating plants will not change as a result of the jurisdictional separation. A hearing is scheduled for September 25 to October 4, 2006 on the jurisdictional separation filing. Approvals of the FERC and the NRC may also be required for certain matters before any implementation of the jurisdictional separation of Entergy Gulf States. Although formal approval of the PUCT is not required for implementation of the jurisdictional separation, Entergy Gulf States will seek input from the PUCT and continue to keep it informed of the status of the proceedings.
State and Local Rate Regulation
As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million pe r year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.
In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.
In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Gulf States' return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $7.1 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.
Federal Regulation
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation, APSC Complaint filed with the FERC, and APSC System Agreement Investigation" for updates regarding proceedings involving the System Agreement.
62
Independent Coordinator of Transmission (ICT)
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States' accounting for nuclear decommissioning costs, the application of SFAS 71, unbilled revenue, and qualified pension and other postretirement benefits. Following is an update to that discussion.
Unbilled Revenue
As discussed in Note 7 to the domestic utility companies and System Energy financial statements, effective January 1, 2006, the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy Gulf States in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy Gulf States does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
63
ENTERGY GULF STATES, INC. | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $867,504 | $746,987 | $1,723,294 | $1,399,383 | ||||
Natural gas | 13,611 | 12,532 | 51,027 | 39,387 | ||||
TOTAL | 881,115 | 759,519 | 1,774,321 | 1,438,770 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 215,255 | 147,889 | 500,130 | 367,845 | ||||
Purchased power | 337,834 | 314,372 | 650,926 | 532,108 | ||||
Nuclear refueling outage expenses | 4,427 | 4,525 | 9,101 | 8,596 | ||||
Other operation and maintenance | 123,996 | 124,428 | 245,553 | 233,121 | ||||
Decommissioning | 2,676 | 2,346 | 5,297 | 4,644 | ||||
Taxes other than income taxes | 31,663 | 28,937 | 67,688 | 59,475 | ||||
Depreciation and amortization | 52,484 | 50,605 | 101,179 | 99,341 | ||||
Other regulatory charges (credits) - net | 1,369 | (5,581) | 1,638 | (5,702) | ||||
TOTAL | 769,704 | 667,521 | 1,581,512 | 1,299,428 | ||||
OPERATING INCOME | 111,411 | 91,998 | 192,809 | 139,342 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 1,755 | 4,207 | 7,801 | 9,006 | ||||
Interest and dividend income | 6,366 | 3,415 | 14,469 | 6,850 | ||||
Miscellaneous - net | 510 | (24) | (402) | 624 | ||||
TOTAL | 8,631 | 7,598 | 21,868 | 16,480 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 34,339 | 28,214 | 67,992 | 56,438 | ||||
Other interest - net | 1,901 | 2,397 | 3,997 | 4,382 | ||||
Allowance for borrowed funds used during construction | (1,093) | (2,499) | (4,401) | (5,505) | ||||
TOTAL | 35,147 | 28,112 | 67,588 | 55,315 | ||||
INCOME BEFORE INCOME TAXES | 84,895 | 71,484 | 147,089 | 100,507 | ||||
Income taxes | 33,191 | 27,197 | 50,336 | 32,871 | ||||
NET INCOME | 51,704 | 44,287 | 96,753 | 67,636 | ||||
Preferred dividend requirements and other | 1,009 | 1,063 | 2,031 | 2,126 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $50,695 | $43,224 | $94,722 | $65,510 | ||||
See Notes to Respective Financial Statements. |
64
ENTERGY GULF STATES, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $96,753 | $67,636 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 5,947 | (62,423) | ||
Other regulatory charges (credits) - net | 1,638 | (5,702) | ||
Depreciation, amortization, and decommissioning | 106,476 | 103,985 | ||
Deferred income taxes and investment tax credits | (5,903) | 25,014 | ||
Changes in working capital: | ||||
Receivables | 121,874 | (28,123) | ||
Fuel inventory | (11,349) | (259) | ||
Accounts payable | (75,267) | (509) | ||
Taxes accrued | 115,690 | 3,395 | ||
Interest accrued | (772) | 266 | ||
Deferred fuel costs | 55,433 | (3,267) | ||
Other working capital accounts | 16,379 | 5,914 | ||
Provision for estimated losses and reserves | (2,856) | 345 | ||
Changes in other regulatory assets | (124,690) | (7,960) | ||
Other | (8,182) | (1,955) | ||
Net cash flow provided by operating activities | 291,171 | 96,357 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (269,310) | (153,136) | ||
Allowance for equity funds used during construction | 7,801 | 9,006 | ||
Nuclear fuel purchases | (38,233) | (371) | ||
Proceeds from sale/leaseback of nuclear fuel | 37,523 | 438 | ||
Proceeds from nuclear decommissioning trust fund sales | 35,710 | 15,131 | ||
Investment in nuclear decommissioning trust funds | (42,406) | (21,076) | ||
Change in money pool receivable - net | 61,028 | - | ||
Changes in other investments - net | 915 | 2,629 | ||
Other regulatory investments | (13,622) | (27,906) | ||
Net cash flow used in investing activities | (220,594) | (175,285) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - | 282,772 | ||
Retirement of long-term debt | - | (268,229) | ||
Redemption of preferred stock | (2,250) | (2,250) | ||
Change in money pool payable - net | - | 89,727 | ||
Dividends paid: | ||||
Common stock | (83,000) | (25,600) | ||
Preferred stock | (2,018) | (2,139) | ||
Net cash flow provided by (used in) financing activities | (87,268) | 74,281 | ||
Net decrease in cash and cash equivalents | (16,691) | (4,647) | ||
Cash and cash equivalents at beginning of period | 25,373 | 6,974 | ||
Cash and cash equivalents at end of period | $8,682 | $2,327 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $68,007 | $56,788 | ||
Income taxes | ($60,096) | $14,450 | ||
See Notes to Respective Financial Statements. |
65
ENTERGY GULF STATES, INC. | ||||||
BALANCE SHEETS | ||||||
ASSETS | ||||||
June 30, 2006 and December 31, 2005 | ||||||
(Unaudited) | ||||||
2006 | 2005 | |||||
(In Thousands) | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents: | ||||||
Cash | $3,452 | $7,341 | ||||
Temporary cash investments - at cost, | ||||||
which approximates market | 5,230 | 18,032 | ||||
Total cash and cash equivalents | 8,682 | 25,373 | ||||
Accounts receivable: | ||||||
Customer | 162,091 | 203,205 | ||||
Allowance for doubtful accounts | (2,886) | (4,794) | ||||
Associated companies | 45,260 | 90,223 | ||||
Other | 47,608 | 50,445 | ||||
Accrued unbilled revenues | 90,631 | 186,527 | ||||
Total accounts receivable | 342,704 | 525,606 | ||||
Deferred fuel costs | 182,458 | 254,950 | ||||
Fuel inventory - at average cost | 71,545 | 60,196 | ||||
Materials and supplies - at average cost | 115,764 | 112,544 | ||||
Prepayments and other | 7,538 | 36,996 | ||||
TOTAL | 728,691 | 1,015,665 | ||||
OTHER PROPERTY AND INVESTMENTS | ||||||
Decommissioning trust funds | 316,068 | 310,779 | ||||
Non-utility property - at cost (less accumulated depreciation) | 99,021 | 91,589 | ||||
Other | 22,563 | 22,498 | ||||
TOTAL | 437,652 | 424,866 | ||||
UTILITY PLANT | ||||||
Electric | 8,844,296 | 8,569,073 | ||||
Natural gas | 87,610 | 86,375 | ||||
Construction work in progress | 157,542 | 526,017 | ||||
Nuclear fuel under capital lease | 77,454 | 55,155 | ||||
Nuclear fuel | 10,857 | 11,338 | ||||
TOTAL UTILITY PLANT | 9,177,759 | 9,247,958 | ||||
Less - accumulated depreciation and amortization | 4,103,135 | 4,075,724 | ||||
UTILITY PLANT - NET | 5,074,624 | 5,172,234 | ||||
DEFERRED DEBITS AND OTHER ASSETS | ||||||
Regulatory assets: | ||||||
SFAS 109 regulatory asset - net | 473,980 | 459,136 | ||||
Other regulatory assets | 789,420 | 604,419 | ||||
Deferred fuel costs | 100,124 | 69,443 | ||||
Long-term receivables | 13,156 | 16,151 | ||||
Other | 35,810 | 41,195 | ||||
TOTAL | 1,412,490 | 1,190,344 | ||||
TOTAL ASSETS | $7,653,457 | $7,803,109 | ||||
See Notes to Respective Financial Statements. | ||||||
66 | ||||||
ENTERGY GULF STATES, INC. | ||||||
BALANCE SHEETS | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
June 30, 2006 and December 31, 2005 | ||||||
(Unaudited) | ||||||
2006 | 2005 | |||||
(In Thousands) | ||||||
CURRENT LIABILITIES | ||||||
Accounts payable: | ||||||
Associated companies | $101,332 | $100,313 | ||||
Other | 181,490 | 479,232 | ||||
Customer deposits | 64,741 | 57,756 | ||||
Taxes accrued | 40,836 | - - | ||||
Accumulated deferred income taxes | 59,905 | 71,196 | ||||
Nuclear refueling outage costs | 1,022 | 15,548 | ||||
Interest accrued | 33,566 | 34,338 | ||||
Obligations under capital leases | 24,935 | 33,516 | ||||
Other | 33,219 | 14,945 | ||||
TOTAL | 541,046 | 806,844 | ||||
NON-CURRENT LIABILITIES | ||||||
Accumulated deferred income taxes and taxes accrued | 1,700,037 | 1,619,890 | ||||
Accumulated deferred investment tax credits | 130,055 | 132,909 | ||||
Obligations under capital leases | 52,518 | 20,724 | ||||
Other regulatory liabilities | 41,379 | 37,482 | ||||
Decommissioning and retirement cost liabilities | 183,101 | 175,480 | ||||
Transition to competition | 79,098 | 79,098 | ||||
Regulatory reserves | 15,794 | 16,153 | ||||
Accumulated provisions | 69,384 | 67,747 | ||||
Long-term debt | 2,358,211 | 2,358,130 | ||||
Preferred stock with sinking fund | 11,700 | 13,950 | ||||
Other | 189,199 | 203,665 | ||||
TOTAL | 4,830,476 | 4,725,228 | ||||
Commitments and Contingencies | ||||||
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 2006 and 2005 | 114,055 | 114,055 | ||||
Paid-in capital | 1,457,486 | 1,457,486 | ||||
Retained earnings | 665,300 | 653,578 | ||||
Accumulated other comprehensive loss | (2,233) | (1,409) | ||||
TOTAL | 2,281,935 | 2,271,037 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $7,653,457 | $7,803,109 | ||||
See Notes to Respective Financial Statements. |
67
ENTERGY GULF STATES, INC. | ||||||||||
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME | ||||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
2006 | 2005 | |||||||||
(In Thousands) | ||||||||||
RETAINED EARNINGS | ||||||||||
Retained Earnings - Beginning of period | $697,605 | $531,068 | ||||||||
Add: Net Income | 51,704 | $51,704 | 44,287 | $44,287 | ||||||
Deduct: | ||||||||||
Dividends declared on common stock | 83,000 | 21,200 | ||||||||
Preferred dividend requirements and other | 1,009 | 1,009 | 1,063 | 1,063 | ||||||
84,009 | 22,263 | |||||||||
Retained Earnings - End of period | $665,300 | $553,092 | ||||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||||
INCOME (LOSS) (Net of Taxes): | ||||||||||
Balance at beginning of period: | ||||||||||
Other accumulated comprehensive income items | ($1,354) | $722 | ||||||||
Net unrealized investment gains | (879) | (879) | 64 | 64 | ||||||
Balance at end of period: | ||||||||||
Other accumulated comprehensive income items | ($2,233) | $786 | ||||||||
Comprehensive Income | $49,816 | $43,288 | ||||||||
Six Months Ended | ||||||||||
2006 | 2005 | |||||||||
(In Thousands) | ||||||||||
RETAINED EARNINGS | ||||||||||
Retained Earnings - Beginning of period | $653,578 | $513,182 | ||||||||
Add: Net Income | 96,753 | $96,753 | 67,636 | $67,636 | ||||||
Deduct: | ||||||||||
Dividends declared on common stock | 83,000 | 25,600 | ||||||||
Preferred dividend requirements and other | 2,031 | 2,031 | 2,126 | 2,126 | ||||||
85,031 | 27,726 | |||||||||
Retained Earnings - End of period | $665,300 | $553,092 | ||||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||||
INCOME (LOSS) (Net of Taxes): | ||||||||||
Balance at beginning of period: | ||||||||||
Other accumulated comprehensive income items | ($1,409) | $714 | ||||||||
Net unrealized investment gains | (824) | (824) | 72 | 72 | ||||||
Balance at end of period: | ||||||||||
Other accumulated comprehensive income items | ($2,233) | $786 | ||||||||
Comprehensive Income | $93,898 | $65,582 | ||||||||
See Notes to Respective Financial Statements. |
68
ENTERGY GULF STATES, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $258 | $174 | $84 | 48 | ||||
Commercial | 212 | 146 | 66 | 45 | ||||
Industrial | 284 | 223 | 61 | 27 | ||||
Governmental | 11 | 9 | 2 | 22 | ||||
Total retail | 765 | 552 | 213 | 39 | ||||
Sales for resale | ||||||||
Associated companies | 21 | 21 | - - | - - | ||||
Non-associated companies | 48 | 43 | 5 | 12 | ||||
Other | 34 | 131 | (97) | (74) | ||||
Total | $868 | $747 | $121 | 16 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 2,352 | 2,124 | 228 | 11 | ||||
Commercial | 2,158 | 2,013 | 145 | 7 | ||||
Industrial | 3,831 | 3,879 | (48) | (1) | ||||
Governmental | 110 | 109 | 1 | 1 | ||||
Total retail | 8,451 | 8,125 | 326 | 4 | ||||
Sales for resale | ||||||||
Associated companies | 567 | 729 | (162) | (22) | ||||
Non-associated companies | 678 | 726 | (48) | (7) | ||||
Total | 9,696 | 9,580 | 116 | 1 | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $498 | $370 | $128 | 35 | ||||
Commercial | 422 | 305 | 117 | 38 | ||||
Industrial | 601 | 467 | 134 | 29 | ||||
Governmental | 24 | 19 | 5 | 26 | ||||
Total retail | 1,545 | 1,161 | 384 | 33 | ||||
Sales for resale | ||||||||
Associated companies | 48 | 47 | 1 | 2 | ||||
Non-associated companies | 99 | 75 | 24 | 32 | ||||
Other | 31 | 116 | (85) | (73) | ||||
Total | $1,723 | $1,399 | $324 | 23 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 4,448 | 4,279 | 169 | 4 | ||||
Commercial | 4,128 | 3,927 | 201 | 5 | ||||
Industrial | 7,510 | 7,860 | (350) | (4) | ||||
Governmental | 222 | 214 | 8 | 4 | ||||
Total retail | 16,308 | 16,280 | 28 | - - | ||||
Sales for resale | ||||||||
Associated companies | 1,153 | 1,294 | (141) | (11) | ||||
Non-associated companies | 1,295 | 1,265 | 30 | 2 | ||||
Total | 18,756 | 18,839 | (83) | - - | ||||
69
ENTERGY LOUISIANA, LLC
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Rita and Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which caused catastrophic damage to Entergy Louisiana's service territory in August and September 2005, including the effect of extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory. Following is an update to the discussion in the Form 10-K.
Entergy Louisiana currently estimates that total restoration costs for the repair and/or replacement of its electric facilities damaged by Hurricanes Katrina and Rita and business continuity costs will be $541 million.
As discussed in the Form 10-K, a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, with an additional $1 billion approved by Congress but not yet allocated to the states. The states, in turn, will administer the grants. Entergy Louisiana is currently preparing an application to seek CDBG funding. In March 2006, Entergy Louisiana provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, incl udes the estimated costs of Hurricanes Katrina and Rita damage. The statement includes justification for a request for $472 million in CDBG funding.
Storm Costs Recovery Filing with Retail Regulator
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearing s on the application are scheduled for the first quarter 2007.
70
Results of Operations
Net Income
Second Quarter 2006 Compared to Second Quarter 2005
Net income decreased $36.2 million primarily due to lower net revenue partially offset by higher other income.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net income decreased $20.6 million primarily due to lower net revenue partially offset by higher other income, lower other operation and maintenance expenses, and lower depreciation and amortization expenses.
Net Revenue
Second Quarter 2006 Compared to Second Quarter 2005
Net revenue, which is Entergy Louisiana's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the second quarter of 2006 to the second quarter of 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$310.8 |
Price applied to unbilled electric sales |
(72.7) |
|
Net wholesale revenue |
|
6.1 |
Other |
|
0.8 |
2006 net revenue |
|
$245.0 |
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation, which is in accordance with regulatory treatment. Entergy Louisiana expects that the effect of this factor will be significantly less for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.
The net wholesale revenue variance is primarily due to the sale of 75% of the generation from the Perryville plant to Entergy Gulf States pursuant to a long-term purchased power agreement.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues decreased primarily due to:
The decrease was partially offset by an increase of $20.9 million in gross wholesale revenue due to increased sales to affiliated systems and the sale of a portion of the generation from Perryville.
Fuel and purchased power expenses decreased primarily due to a shift from higher priced gas and oil generation and purchased power to lower priced nuclear generation primarily as a result of a refueling outage in 2005. The decrease was partially offset by an increase in the recovery from customers of deferred fuel costs.
71
Other regulatory credits decreased primarily due to the LPSC order for the interim recovery of storm costs effective March 2006. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - - State and Local Regulation" in the Form 10-K for a discussion of Entergy Louisiana's filing with the LPSC regarding storm cost recovery.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net revenue, which is Entergy Louisiana's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2005 net revenue |
|
$495.5 |
Price applied to unbilled electric sales |
|
(69.3) |
Volume/weather |
(21.8) |
|
Net wholesale revenue |
12.4 |
|
Rate refund provisions |
6.9 |
|
Storm cost recovery |
4.9 |
|
Other |
|
3.9 |
2006 net revenue |
|
$432.5 |
The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation, which is in accordance with regulatory treatment. Entergy Louisiana expects that the effect of this factor will be significantly less for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.
The volume/weather variance is due to a decrease in usage in all sectors primarily due to load losses caused by Hurricane Katrina and decreased usage during the unbilled sales period.
The net wholesale revenue variance is primarily due to the sale of 75% of the generation from the Perryville plant to Entergy Gulf States pursuant to a long-term purchased power agreement.
The rate refund provisions variance is primarily due to additional provisions recorded in 2005 related to LPSC-approved settlements in March and May 2005.
The storm cost recovery variance is due to the return earned on the interim recovery of storm-related costs as allowed by the LPSC effective March 2006.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
72
The decrease was substantially offset by:
Fuel and purchased power expenses increased primarily due to an increase in the recovery from customers of deferred fuel costs, partially offset by a shift from higher priced gas and oil generation and purchased power to lower priced nuclear generation primarily as a result of a refueling outage in 2005.
Other Income Statement Variances
Second Quarter 2006 Compared to Second Quarter 2005
Other income increased primarily due to the write-off of $7.1 million in June 2005 of a portion of the customer care system investment and the related allowance for equity funds used during construction pursuant to an LPSC-approved settlement.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Other operation and maintenance expenses decreased primarily due to:
The decrease was offset by:
Depreciation and amortization expenses decreased primarily due to a change in the depreciation rate for Waterford 3 as approved by the LPSC effective April 2005 and a revision in 2005 of estimated depreciable lives involving certain intangible assets.
Other income increased primarily due to:
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 38.4% and 40.0%, respectively. The effective income tax rates for the six months ended June 30, 2006 and 2005 were 38.9% and 39.8%, respectively. The difference in the effective income tax rate for the second quarter of 2006 and the six months ended June 30, 2006 and 2005 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant and state income taxes, partially offset by book and tax differences related to the allowance for equity
73
funds used during construction and the amortization of investment tax credits. The difference in the effective income tax rate for the second quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to state income taxes, book and tax differences related to utility plant items, and a federal tax reserve estimate revision necessary to appropriately provide for prior tax periods.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$105,285 |
|
$146,049 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
231,532 |
|
69,063 |
|
Investing activities |
|
(287,999) |
|
(295,005) |
|
Financing activities |
|
(45,979) |
|
82,412 |
Net decrease in cash and cash equivalents |
|
(102,446) |
|
(143,530) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$2,839 |
|
$2,519 |
Operating Activities
Cash flow from operations increased $162.5 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to timing of collections of receivables from customers.
Investing Activities
Cash flow used by investing activities decreased $7.0 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. Following are the significant investing activities occurring during the first six months of 2006 and 2005:
Financing Activities
Entergy Louisiana used $46.0 million of cash for financing activities for the six months ended June 30, 2006 compared to providing $82.4 million for the six months ended June 30, 2005 primarily due to:
Partially offsetting the above was the payment of $24.5 million of common stock dividends in 2005.
74
Capital Structure
Entergy Louisiana's capitalization is balanced between equity and debt, as shown in the following table. The decrease in debt to capital for Entergy Louisiana is primarily due to an increase in members' equity due to additional equity from its parent because of a revision in the estimate of the tax liabilities allocated to Entergy Louisiana Holdings in the merger-by-division that created Entergy Louisiana, LLC.
|
|
June 30, |
December 31, |
|
|
|
|||
Net debt to net capital |
|
47.1% |
49.2% |
|
Effect of subtracting cash from debt |
|
0.1% |
2.1% |
|
Debt to capital |
|
47.2% |
51.3% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and members' equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana's financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Louisiana's uses and sources of capital.
Entergy Louisiana's receivables from or (payables to) the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
($90,879) |
|
($68,677) |
|
($110,658) |
|
$40,549 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
In April 2006, Entergy Louisiana's $85 million credit facility expired and was not renewed. Also, Entergy Louisiana's $15 million credit facility expired in May 2006 and was not renewed.
In June 2006, Entergy Louisiana redeemed, prior to maturity, $25 million of 5.95% Series of St. Charles Parish bonds.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, utility restructuring, market and credit risks, nuclear matters, environmental risks, and litigation risks.
State and Local Rate Regulation
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Louisiana's return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $121 million rate increase is required to recover LPSC-approved incremental
75
deferred and ongoing capacity requirements. Entergy Louisiana requested recovery of the capacity deferrals over a three-year period, including carrying charges. $51 million of the rate increase is associated with these deferrals. The remaining $70 million of the rate increase is associated with ongoing capacity costs. The filing is subject to a period of LPSC Staff review.
Federal Regulation
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation, APSC Complaint filed with the FERC, and APSC System Agreement Investigation" for updates regarding proceedings involving the System Agreement.
Independent Coordinator of Transmission (ICT)
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement costs. Following is an update to that discussion.
Unbilled Revenue
As discussed in Note 7 to the domestic utility companies and System Energy financial statements, effective January 1, 2006, Entergy Louisiana reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy Louisiana in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy Louisiana does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
76
ENTERGY LOUISIANA, LLC | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $550,580 | $647,748 | $1,102,637 | $1,128,421 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 105,470 | 127,564 | 309,474 | 265,341 | ||||
Purchased power | 212,053 | 226,690 | 388,667 | 397,996 | ||||
Nuclear refueling outage expenses | 4,263 | 3,397 | 8,497 | 6,821 | ||||
Other operation and maintenance | 98,462 | 99,518 | 182,564 | 188,156 | ||||
Decommissioning | 4,271 | 5,155 | 8,467 | 10,872 | ||||
Taxes other than income taxes | 15,173 | 18,300 | 31,179 | 36,657 | ||||
Depreciation and amortization | 47,417 | 43,645 | 89,502 | 95,453 | ||||
Other regulatory credits - net | (11,906) | (17,323) | (28,044) | (30,407) | ||||
TOTAL | 475,203 | 506,946 | 990,306 | 970,889 | ||||
OPERATING INCOME | 75,377 | 140,802 | 112,331 | 157,532 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 3,590 | 1,840 | 9,177 | 4,377 | ||||
Interest and dividend income | 3,810 | 5,074 | 9,252 | 8,140 | ||||
Miscellaneous - net | (620) | (6,481) | (1,418) | (6,848) | ||||
TOTAL | 6,780 | 433 | 17,011 | 5,669 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 20,625 | 16,852 | 41,003 | 34,691 | ||||
Other interest - net | 2,623 | 1,804 | 4,331 | 4,823 | ||||
Allowance for borrowed funds used during construction | (2,662) | (990) | (6,513) | (2,489) | ||||
TOTAL | 20,586 | 17,666 | 38,821 | 37,025 | ||||
INCOME BEFORE INCOME TAXES | 61,571 | 123,569 | 90,521 | 126,176 | ||||
Income taxes | 23,617 | 49,406 | 35,171 | 50,242 | ||||
NET INCOME | 37,954 | 74,163 | 55,350 | 75,934 | ||||
Preferred dividend requirements and other | 1,737 | - - | 3,475 | - - | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON EQUITY | $36,217 | $74,163 | $51,875 | $75,934 | ||||
See Notes to Respective Financial Statements. |
77
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78
ENTERGY LOUISIANA, LLC | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $55,350 | $75,934 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 1,369 | (11,724) | ||
Other regulatory credits - net | (28,044) | (30,407) | ||
Depreciation, amortization, and decommissioning | 97,969 | 106,325 | ||
Deferred income taxes and investment tax credits | 13,810 | 38,961 | ||
Changes in working capital: | ||||
Receivables | 142,012 | (11,462) | ||
Accounts payable | (24,674) | 8,483 | ||
Taxes accrued | 33,040 | 23,337 | ||
Interest accrued | (4,294) | (715) | ||
Deferred fuel costs | (75,432) | (80,330) | ||
Other working capital accounts | 25,539 | (22,957) | ||
Provision for estimated losses and reserves | 5,164 | 2,179 | ||
Changes in other regulatory assets | (2,634) | 17,229 | ||
Other | (7,643) | (45,790) | ||
Net cash flow provided by operating activities | 231,532 | 69,063 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (273,527) | (151,902) | ||
Allowance for equity funds used during construction | 9,177 | 4,377 | ||
Nuclear fuel purchases | - - | (54,158) | ||
Proceeds from the sale/leaseback of nuclear fuel | - - | 54,158 | ||
Payment for purchase of plant | - - | (162,075) | ||
Proceeds from nuclear decommissioning trust fund sales | 11,739 | 12,484 | ||
Investment in nuclear decommissioning trust funds | (16,415) | (18,637) | ||
Change in money pool receivable - net | - - | 40,549 | ||
Other regulatory investments | (18,969) | (19,801) | ||
Net cash flow used in investing activities | (287,995) | (295,005) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - - | 54,611 | ||
Retirement of long-term debt | (25,000) | (55,000) | ||
Change in money pool payable - net | 22,202 | 110,658 | ||
Changes in short-term borrowings | (40,000) | - - | ||
Distributions paid: | ||||
Common equity | - - | (24,500) | ||
Preferred membership interests | (3,185) | (3,357) | ||
Net cash flow provided by (used in) financing activities | (45,983) | 82,412 | ||
Net decrease in cash and cash equivalents | (102,446) | (143,530) | ||
Cash and cash equivalents at beginning of period | 105,285 | 146,049 | ||
Cash and cash equivalents at end of period | $2,839 | $2,519 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $47,609 | $38,574 | ||
Income taxes | - - | $11,114 | ||
See Notes to Respective Financial Statements. |
79
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | $2,839 | $105,285 | ||
Accounts receivable: | ||||
Customer | 95,335 | 176,169 | ||
Allowance for doubtful accounts | (7,445) | (6,141) | ||
Associated companies | 41,245 | 24,453 | ||
Other | 12,718 | 12,553 | ||
Accrued unbilled revenues | 73,081 | 149,908 | ||
Total accounts receivable | 214,934 | 356,942 | ||
Deferred fuel costs | 29,319 | 21,885 | ||
Accumulated deferred income taxes | - - | 3,884 | ||
Materials and supplies - at average cost | 95,928 | 92,275 | ||
Deferred nuclear refueling outage costs | 6,334 | 15,337 | ||
Prepayments and other | 9,567 | 173,055 | ||
TOTAL | 358,921 | 768,663 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Decommissioning trust funds | 191,274 | 187,101 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,761 | 1,852 | ||
Other | 4 | 4 | ||
TOTAL | 193,039 | 188,957 | ||
UTILITY PLANT | ||||
Electric | 6,495,427 | 6,233,711 | ||
Property under capital lease | 250,610 | 250,610 | ||
Construction work in progress | 220,952 | 415,475 | ||
Nuclear fuel under capital lease | 40,289 | 58,492 | ||
TOTAL UTILITY PLANT | 7,007,278 | 6,958,288 | ||
Less - accumulated depreciation and amortization | 2,808,533 | 2,805,944 | ||
UTILITY PLANT - NET | 4,198,745 | 4,152,344 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 76,018 | 104,893 | ||
Other regulatory assets | 607,328 | 599,451 | ||
Deferred fuel costs | 67,998 | - - | ||
Long-term receivables | 6,557 | 8,222 | ||
Other | 31,305 | 32,523 | ||
TOTAL | 789,206 | 745,089 | ||
TOTAL ASSETS | $5,539,911 | $5,855,053 | ||
See Notes to Respective Financial Statements. | ||||
80 |
||||
ENTERGY LOUISIANA, LLC | ||||
BALANCE SHEETS | ||||
LIABILITIES AND MEMBERS' EQUITY | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Notes payable | $- | $40,000 | ||
Accounts payable: | ||||
Associated companies | 168,936 | 121,382 | ||
Other | 205,865 | 398,507 | ||
Customer deposits | 68,617 | 66,705 | ||
Taxes accrued | 47,037 | 88,548 | ||
Accumulated deferred income taxes | 21,524 | - - | ||
Interest accrued | 24,148 | 28,442 | ||
Obligations under capital leases | 33,463 | 22,753 | ||
Other | 33,058 | 8,721 | ||
TOTAL | 602,648 | 775,058 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,860,334 | 2,055,083 | ||
Accumulated deferred investment tax credits | 90,841 | 92,439 | ||
Obligations under capital leases | 6,826 | 35,740 | ||
Other regulatory liabilities | 42,383 | 58,129 | ||
Decommissioning | 229,759 | 221,291 | ||
Accumulated provisions | 98,329 | 93,165 | ||
Long-term debt | 1,147,412 | 1,172,400 | ||
Other | 138,776 | 146,576 | ||
TOTAL | 3,614,660 | 3,874,823 | ||
Commitments and Contingencies | ||||
MEMBERS' EQUITY | ||||
Preferred membership interests without sinking fund | 100,000 | 100,000 | ||
Members' equity | 1,222,603 | 1,105,172 | ||
TOTAL | 1,322,603 | 1,205,172 | ||
TOTAL LIABILITIES AND MEMBERS' EQUITY | $5,539,911 | $5,855,053 | ||
See Notes to Respective Financial Statements. |
81
ENTERGY LOUISIANA, LLC | ||||
STATEMENTS OF MEMBERS' EQUITY | ||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
Three Months Ended | ||||
2006 | 2005 | |||
(In Thousands) | ||||
MEMBERS' EQUITY | ||||
Members' Equity - Beginning of period | $1,186,436 | $1,029,317 | ||
Add: | ||||
Net income | 37,954 | 74,163 | ||
Deduct: | ||||
Distributions declared: | ||||
Common equity | - - | 22,700 | ||
Preferred membership interests | 1,737 | - - | ||
Other | 50 | - - | ||
1,787 | 22,700 | |||
Members' Equity - End of period | $1,222,603 | $1,080,780 | ||
Six Months Ended | ||||
2006 | 2005 | |||
(In Thousands) | ||||
MEMBERS' EQUITY | ||||
Members' Equity - Beginning of period | $1,105,172 | $1,029,346 | ||
Add: | ||||
Net income | 55,350 | 75,934 | ||
Additional equity from parent | 65,703 | - | ||
121,053 | 75,934 | |||
Deduct: | ||||
Distributions declared: | ||||
Common equity | - - | 24,500 | ||
Preferred membership interests | 3,475 | - - | ||
Other | 147 | - - | ||
3,622 | 24,500 | |||
Members' Equity - End of period | $1,222,603 | $1,080,780 | ||
See Notes to Respective Financial Statements. |
82
ENTERGY LOUISIANA, LLC | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $163 | $172 | ($9) | (5) | ||||
Commercial | 116 | 122 | (6) | (5) | ||||
Industrial | 177 | 198 | (21) | (11) | ||||
Governmental | 9 | 10 | (1) | (10) | ||||
Total retail | 465 | 502 | (37) | (7) | ||||
Sales for resale | ||||||||
Associated companies | 53 | 32 | 21 | 66 | ||||
Non-associated companies | 3 | 3 | - | - - | ||||
Other | 30 | 111 | (81) | (73) | ||||
Total | $551 | $648 | ($97) | (15) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,947 | 1,894 | 53 | 3 | ||||
Commercial | 1,382 | 1,361 | 21 | 2 | ||||
Industrial | 3,175 | 3,341 | (166) | (5) | ||||
Governmental | 105 | 108 | (3) | (3) | ||||
Total retail | 6,609 | 6,704 | (95) | (1) | ||||
Sales for resale | ||||||||
Associated companies | 571 | 285 | 286 | 100 | ||||
Non-associated companies | 25 | 31 | (6) | (19) | ||||
Total | 7,205 | 7,020 | 185 | 3 | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $324 | $337 | ($13) | (4) | ||||
Commercial | 235 | 237 | (2) | (1) | ||||
Industrial | 370 | 387 | (17) | (4) | ||||
Governmental | 19 | 20 | (1) | (5) | ||||
Total retail | 948 | 981 | (33) | (3) | ||||
Sales for resale | ||||||||
Associated companies | 133 | 47 | 86 | 183 | ||||
Non-associated companies | 5 | 5 | - | - - | ||||
Other | 17 | 95 | (78) | (82) | ||||
Total | $1,103 | $1,128 | ($25) | (2) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 3,718 | 3,823 | (105) | (3) | ||||
Commercial | 2,628 | 2,647 | (19) | (1) | ||||
Industrial | 6,069 | 6,457 | (388) | (6) | ||||
Governmental | 216 | 226 | (10) | (4) | ||||
Total retail | 12,631 | 13,153 | (522) | (4) | ||||
Sales for resale | ||||||||
Associated companies | 1,295 | 430 | 865 | 201 | ||||
Non-associated companies | 39 | 45 | (6) | (13) | ||||
Total | 13,965 | 13,628 | 337 | 2 | ||||
83
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricane Katrina, which hit Entergy Mississippi's service territory in August 2005 causing power outages and significant infrastructure damage to Entergy Mississippi's distribution and transmission systems. Entergy Mississippi currently estimates that its total restoration costs for the repair and/or replacement of its electric facilities damaged by Hurricane Katrina, and business continuity costs, and a small amount of damage caused by Hurricane Rita, will be $107 million.
As discussed in the Form 10-K, a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, with an additional $1 billion approved by Congress but not yet allocated to the states. The states, in turn, will administer the grants. As discussed below, in June 2006 Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's estimated $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed a law that established a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for Hurricane Katrina storm res toration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation stated that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding.
In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount includes Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. The amount financed through the bonds will be reduced dollar for dollar by any CDBG funds that Entergy Mississippi receives. Pursuant to the legislation, the MPSC must issue a financing order by the end of October 2006.
84
Results of Operations
Net Income
Second Quarter 2006 Compared to Second Quarter 2005
Net income increased $2.0 million primarily due to higher net revenue, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expense, and higher interest expense.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net income decreased $1.9 million primarily due to higher other operation and maintenance expense, higher taxes other than income taxes, and higher interest expense, partially offset by higher net revenue.
Net Revenue
Second Quarter 2006 Compared to Second Quarter 2005
Net revenue, which is Entergy Mississippi's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the second quarter of 2006 to the second quarter of 2005.
Amount |
||
(In Millions) |
||
2005 net revenue |
$116.4 |
|
Deferral of Attala costs |
6.6 |
|
Volume/weather |
4.3 |
|
Reserve equalization |
(2.1) |
|
Other |
(0.4) |
|
2006 net revenue |
$124.8 |
The deferral of Attala costs variance is primarily due to the under-recovery of Attala power plant costs that will be recovered through the power management rider. The net income effect of this cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
The volume/weather variance is primarily due to an increase in electricity usage, including the effect of more favorable weather during the second quarter of 2006 compared to the second quarter of 2005. Billed electricity usage increased a total of 173 GWh in the service territory.
The reserve equalization variance is primarily due to changes in the Entergy System generation mix compared to the same period in 2005 and a revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues increased primarily due to an increase of $104 million in fuel cost recovery revenues due to higher fuel rates.
Fuel and purchased power expenses increased primarily due to increased recovery of fuel and purchased power costs due to an increase in fuel rates. The increase was also due to an increase in demand.
85
Other regulatory credits increased primarily due to the refunding through the power management recovery rider in 2006 of over-recoveries in 2005 as a result of gains recorded on gas hedging contracts, in addition to the under-recovery of Attala costs, discussed above. There is no material effect on net income due to quarterly adjustments to the power management recovery rider.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net revenue, which is Entergy Mississippi's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
Amount |
||
(In Millions) |
||
2005 net revenue |
$207.9 |
|
Deferral of Attala costs |
14.5 |
|
Reserve equalization |
(4.2) |
|
Other |
(3.1) |
|
2006 net revenue |
$215.1 |
The deferral of Attala costs variance is primarily due to the under-recovery of Attala power plant costs that will be recovered through the power management rider. The net income effect of this cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
The reserve equalization variance is primarily due to changes in the Entergy System generation mix compared to the same period in 2005 and a revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues increased primarily due to an increase of $239 million in fuel cost recovery revenues due to higher fuel rates.
Fuel and purchased power expenses increased primarily due to increased recovery of fuel and purchased power costs due to an increase in fuel rates. The increase was also due to an increase in demand.
Other regulatory credits increased primarily due to the refunding through the power management recovery rider in 2006 of over-recoveries in 2005 as a result of gains recorded on gas hedging contracts, in addition to the under-recovery of Attala costs, discussed above. There is no material effect on net income due to quarterly adjustments to the power management recovery rider.
Other Income Statement Variances
Second Quarter 2006 Compared to Second Quarter 2005
Other operation and maintenance expense increased primarily due to:
86
The increase was partially offset by a decrease of $1.6 million in vegetation maintenance costs in 2006.
Depreciation and amortization expense increased primarily due to an increase in plant in service.
Interest expense increased primarily due to additional long-term debt issued to finance the Attala power plant purchase.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Other operation and maintenance expense increased primarily due to:
The increase was partially offset by a decrease of $2.8 million in vegetation maintenance costs in 2006.
Taxes other than income taxes increased primarily due to higher assessed values for ad valorem tax purposes as a result of the Attala plant purchase and higher franchise taxes in 2006 due to higher revenues.
Interest expense increased primarily due to additional long-term debt issued to finance the Attala power plant purchase.
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 35.1% and 34.9%, respectively. The effective income tax rates for the six months ended June 30, 2006 and 2005 were 31.7% and 33.5%, respectively. The difference in the effective tax rate for the six months ended June 30, 2006 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to the allowance for equity funds used during construction, the amortization of investment tax credits, and book and tax differences related to utility plant items, partially offset by state income taxes. The difference in the effective tax rate for the six months ended June 30, 2005 versus the federal statutory rate of 35% is primarily due to book and tax differences related to the allowance of equity funds used during construction and the amortization of investment tax credits, partially offset by state income taxes.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$4,523 |
|
$80,396 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
221,502 |
|
48,399 |
|
Investing activities |
|
(200,314) |
|
(99,320) |
|
Financing activities |
|
12,293 |
|
16,255 |
Net increase (decrease) in cash and cash equivalents |
|
33,481 |
|
(34,666) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$38,004 |
|
$45,730 |
87
Operating Activities
Cash flow from operations increased $173.1 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to increased collection of deferred fuel and purchased power costs and the income tax refund discussed below, partially offset by the timing of payments to vendors.
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $66 million of the refund to Entergy Mississippi.
Investing Activities
Net cash used in investing activities increased $101 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to the purchase of the 480 MW Attala power plant for $88 million in January 2006 and also due to storm-related spending.
Financing Activities
Net cash provided by financing activities decreased $4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to money pool activity and the issuance of $30 million of preferred stock in 2005, partially offset by the issuance of $100 million of first mortgage bonds during 2006 and a decrease of $10 million in common stock dividends paid.
Capital Structure
Entergy Mississippi's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage as of June 30, 2006 is primarily due to the issuance of $100 million of First Mortgage Bonds in January 2006.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
Net debt to net capital |
|
54.0% |
|
52.6% |
|
Effect of subtracting cash from debt |
|
1.3% |
|
0.1% |
|
Debt to capital |
|
55.3% |
|
52.7% |
|
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi's financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Mississippi's uses and sources of capital. Following are updates to the information presented in the Form 10-K.
See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYIS - Liquidity and Capital Resources - Uses of Capital" which sets forth the amounts of Entergy Mississippi's planned construction and other capital investments for 2006 through 2008. In January 2006, Entergy Mississippi purchased for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company. Entergy Mississippi plans to invest approximately $20 million in
88
facility upgrades at the Attala plant plus $3 million in other costs, bringing the total capital cost of the project to approximately $111 million. In November 2005, the MPSC issued an order approving the acquisition of the Attala plant. In December 2005, the MPSC issued an order approving the investment cost recovery through the power management rider and limited the recovery through the rider to a period that begins with the closing date of the purchase and ends the earlier of the date costs are incorporated into base rates or December 31, 2006. Entergy Mississippi intends to make an appropriate filing with the MPSC in 2006 to extend recovery in rates beyond 2006 of Entergy Mississippi's Attala costs. The planned construction and other capital investments line includes the majority of the estimated cost of the Attala acquisition as a 2006 capital commitment.
Entergy Mississippi's receivables from or (payables to) the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$30,499 |
|
($84,066) |
|
$53,488 |
|
$21,584 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
In May 2006, Entergy Mississippi increased its $25 million credit facility to $30 million and renewed it through May 2007. Entergy Mississippi also entered into a new $20 million credit facility through May 2007. Borrowings on these credit facilities may be secured by a security interest in Entergy Mississippi's accounts receivable. No borrowings were outstanding on either facility as of June 30, 2006.
In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant and to repay short-term indebtedness.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of, state and local rate regulation, federal regulation and proceedings and the Energy Policy Act of 2005, and market and credit risks. The following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC. The filing was amended by an April 2006 filing. The amended filing showed that an increase of $3.1 million in electric revenues is warranted. The MPSC has approved a settlement providing for a $1.8 million rate increase, which will be implemented in August 2006.
Federal Regulation
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation, APSC Complaint filed with the FERC, and APSC System Agreement Investigation" for updates regarding proceedings involving the System Agreement.
89
Independent Coordinator of Transmission (ICT)
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi's accounting for unbilled revenue and pension and other retirement costs.
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy Mississippi in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy Mississippi does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
90
ENTERGY MISSISSIPPI, INC. | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $387,849 | $288,244 | $761,083 | $539,490 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 184,001 | 29,924 | 363,158 | 73,291 | ||||
Purchased power | 115,334 | 144,226 | 239,760 | 260,284 | ||||
Other operation and maintenance | 50,047 | 47,750 | 91,012 | 88,731 | ||||
Taxes other than income taxes | 14,707 | 14,900 | 32,223 | 28,666 | ||||
Depreciation and amortization | 19,074 | 17,982 | 36,070 | 35,919 | ||||
Other regulatory credits - net | (36,266) | (2,331) | (56,908) | (1,966) | ||||
TOTAL | 346,897 | 252,451 | 705,315 | 484,925 | ||||
OPERATING INCOME | 40,952 | 35,793 | 55,768 | 54,565 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 873 | 1,060 | 2,114 | 2,061 | ||||
Interest and dividend income | 726 | 690 | 955 | 1,328 | ||||
Miscellaneous - net | (470) | (322) | (1,032) | (691) | ||||
TOTAL | 1,129 | 1,428 | 2,037 | 2,698 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 11,492 | 9,839 | 22,607 | 19,673 | ||||
Other interest - net | 757 | 828 | 2,869 | 1,445 | ||||
Allowance for borrowed funds used during construction | (583) | (681) | (1,397) | (1,344) | ||||
TOTAL | 11,666 | 9,986 | 24,079 | 19,774 | ||||
INCOME BEFORE INCOME TAXES | 30,415 | 27,235 | 33,726 | 37,489 | ||||
Income taxes | 10,668 | 9,516 | 10,682 | 12,548 | ||||
NET INCOME | 19,747 | 17,719 | 23,044 | 24,941 | ||||
Preferred dividend requirements and other | 707 | 858 | 1,414 | 1,700 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $19,040 | $16,861 | $21,630 | $23,241 | ||||
See Notes to Respective Financial Statements. |
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92
ENTERGY MISSISSIPPI, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $23,044 | $24,941 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory credits - net | (56,908) | (1,966) | ||
Depreciation and amortization | 36,070 | 35,919 | ||
Deferred income taxes and investment tax credits | (32,541) | (499) | ||
Changes in working capital: | ||||
Receivables | (6,727) | 1,572 | ||
Fuel inventory | (5,295) | (776) | ||
Accounts payable | (23,111) | (8,553) | ||
Taxes accrued | 76,333 | (8,091) | ||
Interest accrued | (377) | 525 | ||
Deferred fuel costs | 207,786 | 8,056 | ||
Other working capital accounts | 70,785 | (9) | ||
Provision for estimated losses and reserves | (31) | 319 | ||
Changes in other regulatory assets | (36,761) | (4,326) | ||
Other | (30,765) | 1,287 | ||
Net cash flow provided by operating activities | 221,502 | 48,399 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (82,229) | (69,477) | ||
Payment for purchase of plant | (88,199) | - - | ||
Allowance for equity funds used during construction | 2,114 | 2,061 | ||
Changes in other temporary investments - net | (1,501) | - - | ||
Change in money pool receivable - net | (30,499) | (31,904) | ||
Net cash flow used in investing activities | (200,314) | (99,320) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | 99,173 | - - | ||
Proceeds from the issuance of preferred stock | - | 29,340 | ||
Change in money pool payable - net | (84,066) | - - | ||
Dividends paid: | ||||
Common stock | (1,400) | (11,400) | ||
Preferred stock | (1,414) | (1,685) | ||
Net cash flow provided by financing activities | 12,293 | 16,255 | ||
Net increase (decrease) in cash and cash equivalents | 33,481 | (34,666) | ||
Cash and cash equivalents at beginning of period | 4,523 | 80,396 | ||
Cash and cash equivalents at end of period | $38,004 | $45,730 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $24,777 | $19,549 | ||
Income taxes | ($52,278) | $4,446 | ||
93
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $2,753 | $4,523 | ||
Temporary cash investments - cost, | ||||
which approximates market | 35,251 | - - | ||
Total cash and cash equivalents | 38,004 | $4,523 | ||
Accounts receivable: | ||||
Customer | 100,371 | 102,202 | ||
Allowance for doubtful accounts | (797) | (1,826) | ||
Associated companies | 39,851 | 5,415 | ||
Other | 10,730 | 9,254 | ||
Accrued unbilled revenues | 35,828 | 33,712 | ||
Total accounts receivable | 185,983 | 148,757 | ||
Deferred fuel costs | - - | 113,956 | ||
Accumulated deferred income taxes | 8,632 | - - | ||
Fuel inventory - at average cost | 8,382 | 3,087 | ||
Materials and supplies - at average cost | 25,387 | 21,521 | ||
Prepayments and other | 8,862 | 62,759 | ||
TOTAL | 275,250 | 354,603 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 5,531 | 5,531 | ||
Non-utility property - at cost (less accumulated depreciation) | 6,130 | 6,199 | ||
TOTAL | 11,661 | 11,730 | ||
UTILITY PLANT | ||||
Electric | 2,657,008 | 2,473,035 | ||
Property under capital lease | 26 | 50 | ||
Construction work in progress | 66,756 | 119,354 | ||
TOTAL UTILITY PLANT | 2,723,790 | 2,592,439 | ||
Less - accumulated depreciation and amortization | 901,307 | 886,687 | ||
UTILITY PLANT - NET | 1,822,483 | 1,705,752 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 18,234 | 17,073 | ||
Other regulatory assets | 206,850 | 186,197 | ||
Long-term receivable | 2,567 | 3,270 | ||
Other | 32,776 | 32,418 | ||
TOTAL | 260,427 | 238,958 | ||
TOTAL ASSETS | $2,369,821 | $2,311,043 | ||
See Notes to Respective Financial Statements. | ||||
94 | ||||
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $ 38,478 | $ 158,579 | ||
Other | 68,621 | 83,306 | ||
Customer deposits | 47,848 | 44,025 | ||
Taxes accrued | 30,161 | 33,121 | ||
Accumulated deferred income taxes | - - | 13,233 | ||
Interest accrued | 13,274 | 13,651 | ||
Deferred fuel costs | 93,830 | - - | ||
Obligations under capital leases | 28 | 40 | ||
Other | 19,669 | 2,739 | ||
TOTAL | 311,909 | 348,694 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 509,276 | 491,857 | ||
Accumulated deferred investment tax credits | 11,702 | 12,358 | ||
Obligations under capital leases | - - | 11 | ||
Other regulatory liabilities | - - | 34,368 | ||
Retirement cost liabilities | 4,133 | 4,016 | ||
Accumulated provisions | 9,405 | 9,436 | ||
Long-term debt | 795,150 | 695,146 | ||
Other | 84,455 | 91,588 | ||
TOTAL | 1,414,121 | 1,338,780 | ||
Commitments and Contingencies | ||||
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 2006 and 2005 | 199,326 | 199,326 | ||
Capital stock expense and other | (690) | (682) | ||
Retained earnings | 394,774 | 374,544 | ||
TOTAL | 643,791 | 623,569 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,369,821 | $2,311,043 | ||
See Notes to Respective Financial Statements. | ||||
95
ENTERGY MISSISSIPPI, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 137 | $ 99 | $ 38 | 38 | ||||
Commercial | 128 | 91 | 37 | 41 | ||||
Industrial | 64 | 46 | 18 | 39 | ||||
Governmental | 12 | 9 | 3 | 33 | ||||
Total retail | 341 | 245 | 96 | 39 | ||||
Sales for resale | ||||||||
Associated companies | 15 | 12 | 3 | 25 | ||||
Non-associated companies | 11 | 8 | 3 | 38 | ||||
Other | 21 | 23 | (2) | (9) | ||||
Total | $ 388 | $ 288 | $ 100 | 35 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,144 | 1,060 | 84 | 8 | ||||
Commercial | 1,128 | 1,057 | 71 | 7 | ||||
Industrial | 720 | 708 | 12 | 2 | ||||
Governmental | 100 | 94 | 6 | 6 | ||||
Total retail | 3,092 | 2,919 | 173 | 6 | ||||
Sales for resale | ||||||||
Associated companies | 183 | 104 | 79 | 76 | ||||
Non-associated companies | 114 | 109 | 5 | 5 | ||||
Total | 3,389 | 3,132 | 257 | 8 | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 282 | $ 195 | $ 87 | 45 | ||||
Commercial | 258 | 176 | 82 | 47 | ||||
Industrial | 132 | 90 | 42 | 47 | ||||
Governmental | 25 | 18 | 7 | 39 | ||||
Total retail | 697 | 479 | 218 | 46 | ||||
Sales for resale | ||||||||
Associated companies | 23 | 18 | 5 | 28 | ||||
Non-associated companies | 19 | 17 | 2 | 12 | ||||
Other | 22 | 25 | (3) | (12) | ||||
Total | $ 761 | $ 539 | $ 222 | 41 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 2,329 | 2,256 | 73 | 3 | ||||
Commercial | 2,168 | 2,078 | 90 | 4 | ||||
Industrial | 1,421 | 1,400 | 21 | 2 | ||||
Governmental | 193 | 186 | 7 | 4 | ||||
Total retail | 6,111 | 5,920 | 191 | 3 | ||||
Sales for resale | ||||||||
Associated companies | 254 | 121 | 133 | 110 | ||||
Non-associated companies | 182 | 177 | 5 | 3 | ||||
Total | 6,547 | 6,218 | 329 | 5 | ||||
96
ENTERGY NEW ORLEANS, INC. (Debtor-in-possession)
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Hurricane Katrina
See the Form 10-K for a discussion of the effects of Hurricane Katrina, which in August 2005 caused catastrophic damage to Entergy New Orleans' service territory, including the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area. Following is an update to the discussion in the Form 10-K.
As discussed in the Form 10-K, a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, with an additional $1 billion approved by Congress but not yet allocated to the states. The states, in turn, will administer the grants. Entergy New Orleans is currently preparing an application to seek CDBG funding. In March 2006, Entergy New Orleans provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, includes all the est imated costs of Hurricane Katrina damage, as well as a lost customer base component intended to help offset the need for storm-related rate increases. The statement includes justification for a request for $718 million in CDBG funding.
In the first quarter 2006, Entergy New Orleans reduced its accrued accounts payable for storm restoration costs by $97.4 million, with corresponding reductions of $88.7 million in construction work in progress and $8.7 million in regulatory assets, based on a reassessment of the nature and timing of expected restoration and rebuilding costs and the obligations associated with restoring service. Although Entergy New Orleans reduced its accrual for restoration spending by these amounts, it continues to expect to incur the related costs over time and Entergy New Orleans still expects its storm restoration and business continuity costs to total approximately $275 million. As discussed further in the Form 10-K, Entergy New Orleans still expects the cost of the longer-term accelerated replacement of the gas distribution system in New Orleans to be $355 million.
See "State and Local Rate Regulation" below for a discussion of rate filings made by Entergy New Orleans directed towards recovery of its storm losses and restoration costs.
Bankruptcy Proceedings
See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following are updates to that discussion.
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.
In April 2006, the bankruptcy judge extended the exclusivity period for filing a plan of reorganization by Entergy New Orleans to August 21, 2006. Entergy New Orleans has filed another motion to extend the exclusivity period for filing its plan of reorganization, requesting that the deadline be extended an additional 120 days until December 19, 2006. The court entered an order extending the August 21, 2006 date for Entergy New Orleans' exclusive right to file a plan of reorganization until the court can hear and rule on Entergy New Orleans' motion to extend, which was set for hearing on September 18, 2006. In order to file a plan of reorganization no later than December 2006, Entergy New Orleans believes that it needs resolution of its June 2006 formula rate plan and storm rider filings and commitment on timing and amount of CDBG funds. If the motion to extend is granted, Entergy New Orleans will have the exclusive right to file its plan of reorganization until December 19, 2006, a nd will have until February 15, 2007 to obtain acceptances of its plan by each class of impaired creditors.
97
The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Approximately 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding. Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed, and has begun seeking withdrawal or modification of claims or objecting to claims with which it disagrees.
Municipalization is one potential outcome of Entergy New Orleans' recovery effort. In June 2006 Louisiana passed a law that establishes a governance structure for a public power authority, if municipalization of Entergy New Orleans' utility business is pursued.
Results of Operations
Net Income
Second Quarter 2006 Compared to Second Quarter 2005
Net income increased $2.4 million primarily due to lower operation and maintenance expense, interest charges, and taxes other than income taxes, partially offset by lower net revenue.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net income increased $2.3 million primarily due to lower operation and maintenance expense, interest charges, and taxes other than income taxes, and higher other income, partially offset by lower net revenue.
Net Revenue
Second Quarter 2006 Compared to Second Quarter 2005
Net revenue, which is Entergy New Orleans' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the second quarter of 2006 to the second quarter of 2005.
Amount |
||
(In Millions) |
||
2005 net revenue |
$67.8 |
|
Volume/weather |
(30.5) |
|
Net wholesale revenue |
16.0 |
|
Other |
(2.0) |
|
2006 net revenue |
$51.3 |
The volume/weather variance is due to a decrease in electricity usage in the service territory caused by customer losses following Hurricane Katrina. Billed retail electricity usage decreased a total of 494 GWh compared to the second quarter of 2005, a decline of 35%.
The net wholesale revenue variance is due to an increase in energy available for sales for resale due to the decrease in retail usage caused by customer losses following Hurricane Katrina. The increased revenue includes the sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in Entergy New Orleans' retail customer demand caused by Hurricane Katrina and provide revenue support for the costs of Entergy New Orleans' share
98
of Grand Gulf. Beginning July 1, 2006, the City Council approved the return of Grand Gulf output to the service of Entergy New Orleans' load. The City Council also approved the recovery of all Grand Gulf costs through Entergy New Orleans' fuel adjustment clause (a portion of Grand Gulf costs was previously recovered through base rates). The City Council may consider alternative rate treatment for non-fuel Grand Gulf costs in connection with Entergy New Orleans' June 2006 electric formula rate plan filing.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Net revenue, which is Entergy New Orleans' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the six months ended June 30, 2006 to the six months ended June 30, 2005.
Amount |
||
(In Millions) |
||
2005 net revenue |
$120.0 |
|
Volume/weather |
(53.2) |
|
Net gas revenue |
(7.5) |
|
Price applied to unbilled electric sales |
(3.3) |
|
Net wholesale revenue |
41.2 |
|
Other |
(5.6) |
|
2006 net revenue |
$91.6 |
The volume/weather variance is due to a decrease in electricity usage in the service territory caused by customer losses following Hurricane Katrina. Billed retail electricity usage decreased a total of 1,075 GWh compared to the six months ended June 30, 2005, a decline of 40%.
The net gas revenue variance is due to a decrease in gas usage in the service territory caused by customer losses following Hurricane Katrina, partially offset by a revised estimate of deferred fuel costs.
The price applied to unbilled electric sales variance is due to a decrease in the fuel cost component of the price applied to unbilled sales. The decrease in the fuel cost component is due to a decrease in the average cost of generation due to a change in the generation mix from natural gas to solid fuel resources. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K and Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.
The net wholesale revenue variance is due to an increase in energy available for sales for resale due to the decrease in retail usage caused by customer losses following Hurricane Katrina. The increased revenue includes the sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in Entergy New Orleans' retail customer demand caused by Hurricane Katrina and provide revenue support for the costs of Entergy New Orleans' share of Grand Gulf. Beginning July 1, 2006, the City Council approved the return of Grand Gulf output to the service of Entergy New Orleans' load. The City Council also approved the recovery of all Grand Gulf costs through Entergy New Orleans' fuel adjustment clause (a portion of Grand Gulf costs was previously recovered through base rates). The City Council may consider alternative rate treatment for non-fuel Grand Gulf costs in co nnection with Entergy New Orleans' June 2006 electric formula rate plan filing.
99
Other Income Statement Variances
Second Quarter 2006 Compared to Second Quarter 2005
Other operation and maintenance expenses decreased primarily due to shifts in costs from normal operations and maintenance work to storm restoration work as a result of Hurricane Katrina.
Taxes other than income taxes decreased primarily due to lower franchise taxes in 2006 due to lower revenues.
Interest and other charges decreased primarily due to the cessation of interest accruals on the first mortgage bonds as a result of the bankruptcy filing, partially offset by interest accrued on the DIP credit facility.
Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
Other operation and maintenance expenses decreased primarily due to shifts in costs from normal operations and maintenance work to storm restoration work as a result of Hurricane Katrina.
Taxes other than income taxes decreased primarily due to lower franchise taxes in 2006 due to lower revenues.
Interest and other charges decreased primarily due to the cessation of interest accruals on the first mortgage bonds as a result of the bankruptcy filing, partially offset by interest accrued on the DIP credit facility.
Income Taxes
The effective income tax rates for the second quarters of 2006 and 2005 were 38.6% and 41.9%, respectively. The effective income tax rates for the six months ended June 30, 2006 and 2005 were 38.3% and 40.4%, respectively. The differences in the effective income tax rates for the periods presented versus the federal statutory rate of 35.0% are primarily due to state income taxes and book and tax differences related to utility plant items.
Preferred Dividends
No preferred dividends were declared during the first quarter of 2006. Due to its bankruptcy, Entergy New Orleans did not pay the preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006.
As discussed further in the Form 10-K, if dividends with respect to the 4.75% preferred stock are not paid for four quarters, the holders of these shares would have the right to elect a majority of the Entergy New Orleans board of directors. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006, and thereafter, unless objections are filed by creditors forty-five days in advance of a dividend payment date. If any objections are filed, the matter would be heard by the bankruptcy court. Entergy New Orleans declared and paid the dividend due on July 1, 2006, and intends to declare and pay the dividends on the 4.75% preferred shares each quarter pending resolution of its pl an of reorganization.
Liquidity and Capital Resources
Debtor-in-Possession Credit Facility
See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility. Following is an update to that discussion.
100
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of June 30, 2006, Entergy New Orleans had approximately $40 million of outstanding borrowings under the DIP credit facility. Management currently expects the bankruptcy court-authorized funding level to be sufficient to fund Entergy New Orleans' expected level of operations.
As discussed in the Form 10-K, borrowings under the DIP credit facility are due in full, and the agreement will terminate, at the earliest of several times or events, including August 23, 2006. Entergy and Entergy New Orleans have agreed to an amendment to the DIP credit agreement that extends the August 23, 2006 maturity date to August 23, 2007, and this amendment is subject to bankruptcy court approval. Entergy New Orleans has filed a motion with the bankruptcy court to authorize Entergy New Orleans to enter into the amendment, which is set for hearing August 16, 2006.
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$48,056 |
|
$7,954 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
78,453 |
|
1,864 |
|
Investing activities |
|
(47,845) |
|
(29,464) |
|
Financing activities |
|
(50,343) |
|
27,704 |
Net increase (decrease) in cash and cash equivalents |
|
(19,735) |
|
104 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$28,321 |
|
$8,058 |
Operating Activities
Net cash provided by operating activities increased $76.6 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to receipt of the income tax refund discussed below along with a decrease in interest paid.
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006, Entergy Corporation distributed $71 million of the refund to Entergy New Orleans. As discussed above, Entergy New Orleans used the income tax refund to repay a portion of the borrowings outstanding under the DIP credit facility.
Investing Activities
Net cash used in investing activities increased $18.4 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to capital expenditure activity related to Hurricane Katrina in addition to money pool activity in 2005.
101
Financing Activities
Financing activities used $50.3 million of cash for the six months ended June 30, 2006 because of the net repayment in 2006 of $50.3 million of borrowings under the DIP credit facility.
Capital Structure
Entergy New Orleans' capitalization is shown in the following table.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
Debt to capital |
|
60.5% |
|
66.4% |
|
Debt consists of notes payable and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy New Orleans' uses and sources of capital. The following are updates to the Form 10-K.
Entergy New Orleans' receivables from or (payables to) the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
($35,558) |
|
($35,558) |
|
$7,758 |
|
$1,413 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool. Entergy New Orleans remains a participant in the money pool, but Entergy New Orleans has not made, and does not expect to make, any additional borrowings from the money pool while it is in bankruptcy proceedings. The money pool borrowings reflected on Entergy New Orleans' balance sheet as of June 30, 2006 are classified as a pre-petition obligation subject to compromise.
In addition, Entergy New Orleans had a 364-day credit facility in the amount of $15 million which expired in May 2006. As of June 30, 2006, the full amount of the credit facility remains outstanding under bankruptcy protection. In July 2006, the bankruptcy judge authorized Entergy New Orleans to set off $15 million of its cash currently held by the lender against the outstanding debt on the credit facility.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, market and credit risks, environmental risks, and litigation risks. Following are updates to the discussion in the Form 10-K.
State and Local Rate Regulation
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings show various alternatives to reflect the effect of Entergy New Orleans' lost customers and decreased revenue. Entergy New Orleans' recommended alternative adjusts for lost customers and assumes that the City Council's June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place (a portion of Grand Gulf costs was previously recovered through base rates). Under that alternative, annual increases of $6.4
102
million in electric base rate revenues (an increase of 4.4%) and $22.8 million in gas base rate revenues (an increase of 160.9%) are warranted. The filings triggered the prescribed four-month period for review by the City Council's Advisors and other parties, and rate adjustments, if any, could be implemented as soon as the first billing cycle of November 2006.
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans seeks to recover over a ten-year period the $114 million in electric restoration costs and the $25 million in gas restoration costs that it has actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans seeks to establish over a ten-year period a $150 million storm reserve to provide for the risk of another storm. Entergy New Orleans requested that the City Council consider the proposed riders within the same time frame as the formula rate plans, which would allow implementation as soon as the first billing cycle of November 2006.
Federal Regulation
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation, APSC Complaint filed with the FERC, and APSC System Agreement Investigation" for updates regarding proceedings involving the System Agreement.
Independent Coordinator of Transmission (ICT)
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans' accounting for unbilled revenue and pension and other retirement costs.
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy New Orleans in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy New Orleans does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
103
ENTERGY NEW ORLEANS, INC. | ||||||||
(DEBTOR-IN-POSSESSION) | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $117,827 | $158,799 | $217,076 | $289,971 | ||||
Natural gas | 18,128 | 31,128 | 55,140 | 91,223 | ||||
TOTAL | 135,955 | 189,927 | 272,216 | 381,194 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 16,433 | 54,843 | 51,101 | 135,939 | ||||
Purchased power | 67,211 | 66,001 | 127,448 | 122,783 | ||||
Other operation and maintenance | 16,279 | 30,143 | 30,089 | 50,990 | ||||
Taxes other than income taxes | 8,089 | 10,693 | 16,689 | 21,373 | ||||
Depreciation and amortization | 8,508 | 9,059 | 15,972 | 17,145 | ||||
Reorganization items | 2,115 | - - | 3,793 | - - | ||||
Other regulatory charges - net | 1,037 | 1,254 | 2,080 | 2,509 | ||||
TOTAL | 119,672 | 171,993 | 247,172 | 350,739 | ||||
OPERATING INCOME | 16,283 | 17,934 | 25,044 | 30,455 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 909 | 246 | 1,988 | 528 | ||||
Interest and dividend income | 786 | 308 | 1,589 | 526 | ||||
Miscellaneous - net | 20 | (254) | (132) | (377) | ||||
TOTAL | 1,715 | 300 | 3,445 | 677 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 185 | 3,518 | 369 | 7,004 | ||||
Other interest - net | 997 | 484 | 3,138 | 868 | ||||
Allowance for borrowed funds used during construction | (743) | (185) | (1,606) | (417) | ||||
TOTAL | 439 | 3,817 | 1,901 | 7,455 | ||||
INCOME BEFORE INCOME TAXES | 17,559 | 14,417 | 26,588 | 23,677 | ||||
Income taxes | 6,785 | 6,043 | 10,171 | 9,567 | ||||
NET INCOME | 10,774 | 8,374 | 16,417 | 14,110 | ||||
Preferred dividend requirements and other | 92 | 241 | 92 | 482 | ||||
EARNINGS APPLICABLE TO | ||||||||
COMMON STOCK | $10,682 | $8,133 | $16,325 | $13,628 | ||||
See Notes to Respective Financial Statements. | ||||||||
104
ENTERGY NEW ORLEANS, INC. | ||||
(DEBTOR-IN-POSSESSION) | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $16,417 | $14,110 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory charges - net | 2,080 | 2,509 | ||
Depreciation and amortization | 15,972 | 17,145 | ||
Deferred income taxes and investment tax credits | 2,811 | 3,407 | ||
Changes in working capital: | ||||
Receivables | 8,438 | 4,130 | ||
Fuel inventory | 6,068 | 4,181 | ||
Accounts payable | (3,613) | (13,223) | ||
Taxes accrued | 64,541 | 6,045 | ||
Interest accrued | 549 | (403) | ||
Deferred fuel costs | (3,022) | (20,837) | ||
Other working capital accounts | (6,911) | (5,334) | ||
Provision for estimated losses and reserves | (81) | (317) | ||
Changes in pension liability | 2,929 | (9,955) | ||
Changes in other regulatory assets | (32,658) | 3,936 | ||
Other | 4,933 | (3,530) | ||
Net cash flow provided by operating activities | 78,453 | 1,864 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (49,833) | (23,647) | ||
Allowance for equity funds used during construction | 1,988 | 528 | ||
Change in money pool receivable - net | - - | (6,345) | ||
Net cash flow used in investing activities | (47,845) | (29,464) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - - | 29,791 | ||
Retirement of long-term debt | - - | (5) | ||
Repayment of DIP credit facility | (50,251) | - - | ||
Dividends paid: | ||||
Common stock | - - | (1,600) | ||
Preferred stock | (92) | (482) | ||
Net cash flow provided by (used in) financing activities | (50,343) | 27,704 | ||
Net increase (decrease) in cash and cash equivalents | (19,735) | 104 | ||
Cash and cash equivalents at beginning of period | 48,056 | 7,954 | ||
Cash and cash equivalents at end of period | $28,321 | $8,058 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $2,589 | $7,882 | ||
Income taxes | ($59,730) | - - | ||
See Notes to Respective Financial Statements. | ||||
105
ENTERGY NEW ORLEANS, INC. | ||||
(DEBTOR-IN-POSSESSION) | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents | $28,321 | $48,056 | ||
Accounts receivable: | ||||
Customer | 69,307 | 82,052 | ||
Allowance for doubtful accounts | (18,558) | (25,422) | ||
Associated companies | 10,839 | 17,895 | ||
Other | 6,989 | 6,530 | ||
Accrued unbilled revenues | 27,738 | 23,698 | ||
Total accounts receivable | 96,315 | 104,753 | ||
Deferred fuel costs | 33,615 | 30,593 | ||
Fuel inventory - at average cost | 1,980 | 8,048 | ||
Materials and supplies - at average cost | 7,046 | 8,961 | ||
Prepayments and other | 7,485 | 61,581 | ||
TOTAL | 174,762 | 261,992 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 3,259 | 3,259 | ||
Non-utility property at cost (less accumulated depreciation) | 1,107 | 1,107 | ||
TOTAL | 4,366 | 4,366 | ||
UTILITY PLANT | ||||
Electric | 739,678 | 691,045 | ||
Natural gas | 191,799 | 189,207 | ||
Construction work in progress | 59,685 | 202,353 | ||
TOTAL UTILITY PLANT | 991,162 | 1,082,605 | ||
Less - accumulated depreciation and amortization | 430,333 | 428,053 | ||
UTILITY PLANT - NET | 560,829 | 654,552 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
Other regulatory assets | 173,045 | 166,133 | ||
Long term receivables | 1,090 | 1,812 | ||
Other | 22,641 | 31,266 | ||
TOTAL | 196,776 | 199,211 | ||
TOTAL ASSETS | $936,733 | $1,120,121 | ||
See Notes to Respective Financial Statements. | ||||
106 | ||||
ENTERGY NEW ORLEANS, INC. | ||||
(DEBTOR-IN-POSSESSION) | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
June 30, 2006 and December 31, 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
DIP credit facility | $39,749 | $90,000 | ||
Notes payable | 15,000 | 15,000 | ||
Accounts payable: | ||||
Associated companies | 46,464 | 55,923 | ||
Other | 62,613 | 228,496 | ||
Customer deposits | 12,321 | 16,930 | ||
Taxes accrued | 5,510 | - - | ||
Accumulated deferred income taxes | 5,017 | 1,898 | ||
Interest accrued | 1,744 | 1,195 | ||
Other | 3,200 | 2,018 | ||
TOTAL CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE | 191,618 | 411,460 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 121,008 | 127,680 | ||
Accumulated deferred investment tax credits | 3,358 | 3,570 | ||
SFAS 109 regulatory liability - net | 59,053 | 52,229 | ||
Other regulatory liabilities | - - | 591 | ||
Retirement cost liability | 2,505 | 2,421 | ||
Accumulated provisions | 2,099 | 2,119 | ||
Pension liability | 38,623 | 35,694 | ||
Other | 5,492 | 5,730 | ||
TOTAL NON-CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE | 232,138 | 230,034 | ||
LIABILITIES SUBJECT TO COMPROMISE | 326,942 | 308,917 | ||
TOTAL LIABILITIES | 750,698 | 950,411 | ||
Commitments and Contingencies | ||||
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 2006 | ||||
and 2005 | 33,744 | 33,744 | ||
Paid-in capital | 36,294 | 36,294 | ||
Retained earnings | 96,217 | 79,892 | ||
TOTAL | 186,035 | 169,710 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $936,733 | $1,120,121 | ||
See Notes to Respective Financial Statements. |
107
ENTERGY NEW ORLEANS, INC. | ||||||||
(DEBTOR-IN-POSSESSION) | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $22 | $38 | ($16) | (42) | ||||
Commercial | 37 | 40 | (3) | (8) | ||||
Industrial | 10 | 9 | 1 | 11 | ||||
Governmental | 14 | 17 | (3) | (18) | ||||
Total retail | 83 | 104 | (21) | (20) | ||||
Sales for resale | ||||||||
Associated companies | 4 | 35 | (31) | (89) | ||||
Non-associated companies | 18 | - | 18 | - - | ||||
Other | 13 | 20 | (7) | (35) | ||||
Total | $118 | $159 | ($41) | (26) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 206 | 447 | (241) | (54) | ||||
Commercial | 402 | 552 | (150) | (27) | ||||
Industrial | 141 | 162 | (21) | (13) | ||||
Governmental | 161 | 243 | (82) | (34) | ||||
Total retail | 910 | 1,404 | (494) | (35) | ||||
Sales for resale | ||||||||
Associated companies | 6 | 400 | (394) | (99) | ||||
Non-associated companies | 369 | 6 | 363 | 6,050 | ||||
Total | 1,285 | 1,810 | (525) | (29) | ||||
Six Months Ended | Increase/ | |||||||
Description | 2006 | 2005 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $39 | $67 | ($28) | (42) | ||||
Commercial | 72 | 74 | (2) | (3) | ||||
Industrial | 19 | 16 | 3 | 19 | ||||
Governmental | 24 | 29 | (5) | (17) | ||||
Total retail | 154 | 186 | (32) | (17) | ||||
Sales for resale | ||||||||
Associated companies | 11 | 81 | (70) | (86) | ||||
Non-associated companies | 45 | 1 | 44 | 4,400 | ||||
Other | 7 | 22 | (15) | (68) | ||||
Total | $217 | $290 | ($73) | (25) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 344 | 847 | (503) | (59) | ||||
Commercial | 762 | 1,071 | (309) | (29) | ||||
Industrial | 244 | 306 | (62) | (20) | ||||
Governmental | 267 | 468 | (201) | (43) | ||||
Total retail | 1,617 | 2,692 | (1,075) | (40) | ||||
Sales for resale | ||||||||
Associated companies | 126 | 1,006 | (880) | (87) | ||||
Non-associated companies | 776 | 10 | 766 | 7,660 | ||||
Total | 2,519 | 3,708 | (1,189) | (32) | ||||
108
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy's principal asset consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy's only source of operating revenues. Net income increased by $3.7 million for the second quarter of 2006 compared to the second quarter of 2005 primarily due to an increase in rate base in 2006 resulting in higher operating income. Net income increased by $8.2 million for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 primarily due to an increase in rate base in 2006 resulting in higher opera ting income combined with higher interest income earned on money pool investments.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2006 and 2005 were as follows:
|
|
2006 |
|
2005 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$75,704 |
|
$216,355 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
(83,809) |
|
120,292 |
|
Investing activities |
|
162,738 |
|
(119,859) |
|
Financing activities |
|
(92,989) |
|
(81,590) |
Net decrease in cash and cash equivalents |
|
(14,060) |
|
(81,157) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$61,644 |
|
$135,198 |
Operating Activities
Operating activities used $83.8 million in cash flow for the six months ended June 30, 2006 compared to providing $120.3 million in cash flow for the six months ended June 30, 2005 primarily due to an increase of $208.5 million in income tax payments.
Investing Activities
Investing activities provided $162.7 million in cash flow for the six months ended June 30, 2006 compared to using $119.9 million in cash flow for the six months ended June 30, 2005 primarily due to money pool activity. Partially offsetting the increase in cash provided was an increase in construction expenditures primarily resulting from capital spending on dry fuel storage.
109
Financing Activities
The increase of $11.4 million in net cash used in financing activities for the six months ended June 30, 2006 compared to the six months ended June 30, 2005 was primarily due to an increase of $17.2 million in common stock dividends paid, partially offset by a decrease of $5.8 million in the January 2006 principal payment made on the Grand Gulf sale-leaseback compared to the January 2005 principal payment.
Capital Structure
System Energy's capitalization is balanced between equity and debt, as shown in the following table.
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
Net debt to net capital |
|
48.5% |
|
49.0% |
|
Effect of subtracting cash from debt |
|
1.8% |
|
2.1% |
|
Debt to capital |
|
50.3% |
|
51.1% |
|
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder's equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy's financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of System Energy's uses and sources of capital. The following is an update to the Form 10-K.
System Energy's receivables from the money pool were as follows:
June 30, |
|
December 31, |
|
June 30, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$88,331 |
|
$277,287 |
|
$163,416 |
|
$61,592 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of market risks, nuclear matters, litigation risks, and environmental risks.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy's accounting for nuclear decommissioning costs and pension and other retirement benefits.
110
Recently Issued Accounting Pronouncements
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for System Energy in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. System Energy does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.
111
SYSTEM ENERGY RESOURCES, INC. | ||||||||
INCOME STATEMENTS | ||||||||
For the Three and Six Months Ended June 30, 2006 and 2005 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Six Months Ended | |||||||
2006 | 2005 | 2006 | 2005 | |||||
(In Thousands) | (In Thousands) | |||||||
OPERATING REVENUES | ||||||||
Domestic electric | $129,176 | $126,364 | $260,830 | $251,154 | ||||
OPERATING EXPENSES | ||||||||
Operation and Maintenance: | ||||||||
Fuel, fuel-related expenses, and | ||||||||
gas purchased for resale | 10,168 | 10,139 | 21,381 | 19,858 | ||||
Nuclear refueling outage expenses | 3,962 | 3,026 | 7,535 | 6,019 | ||||
Other operation and maintenance | 26,563 | 27,346 | 49,815 | 50,482 | ||||
Decommissioning | 5,925 | 6,240 | 11,744 | 12,368 | ||||
Taxes other than income taxes | 5,817 | 6,322 | 12,006 | 12,371 | ||||
Depreciation and amortization | 23,811 | 24,158 | 49,488 | 50,702 | ||||
Other regulatory credits - net | (3,766) | (4,126) | (5,746) | (8,511) | ||||
TOTAL | 72,480 | 73,105 | 146,223 | 143,289 | ||||
OPERATING INCOME | 56,696 | 53,259 | 114,607 | 107,865 | ||||
OTHER INCOME | ||||||||
Allowance for equity funds used during construction | 775 | 321 | 1,458 | 627 | ||||
Interest and dividend income | 4,271 | 3,672 | 9,900 | 6,517 | ||||
Miscellaneous - net | (91) | (108) | (198) | (221) | ||||
TOTAL | 4,955 | 3,885 | 11,160 | 6,923 | ||||
INTEREST AND OTHER CHARGES | ||||||||
Interest on long-term debt | 11,996 | 12,812 | 24,529 | 25,668 | ||||
Other interest - net | 26 | 6 | 54 | 8 | ||||
Allowance for borrowed funds used during construction | (244) | (102) | (459) | (199) | ||||
TOTAL | 11,778 | 12,716 | 24,124 | 25,477 | ||||
INCOME BEFORE INCOME TAXES | 49,873 | 44,428 | 101,643 | 89,311 | ||||
Income taxes | 20,265 | 18,503 | 41,287 | 37,154 | ||||
NET INCOME | $29,608 | $25,925 | $60,356 | $52,157 | ||||
See Notes to Respective Financial Statements. | ||||||||
112
SYSTEM ENERGY RESOURCES, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Six Months Ended June 30, 2006 and 2005 | ||||
(Unaudited) | ||||
2006 | 2005 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $60,356 | $52,157 | ||
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | ||||
Other regulatory credits - net | (5,746) | (8,511) | ||
Depreciation, amortization, and decommissioning | 61,231 | 63,070 | ||
Deferred income taxes and investment tax credits | (9,633) | (12,140) | ||
Changes in working capital: | ||||
Receivables | 5,111 | 6,179 | ||
Accounts payable | (901) | (4,750) | ||
Taxes accrued | (180,245) | 28,065 | ||
Interest accrued | (31,520) | (27,831) | ||
Other working capital accounts | (602) | 153 | ||
Provision for estimated losses and reserves | 1 | 50 | ||
Changes in other regulatory assets | (9,921) | (9,080) | ||
Other | 28,060 | 32,930 | ||
Net cash flow provided by (used in) operating activities | (83,809) | 120,292 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (14,557) | (7,982) | ||
Allowance for equity funds used during construction | 1,458 | 627 | ||
Nuclear fuel purchases | (370) | - | ||
Proceeds from sale/leaseback of nuclear fuel | 370 | - | ||
Proceeds from nuclear decommissioning trust fund sales | 52,562 | 52,287 | ||
Investment in nuclear decommissioning trust funds | (65,681) | (62,967) | ||
Changes in money pool receivable - net | 188,956 | (101,824) | ||
Net cash flow provided by (used in) investing activities | 162,738 | (119,859) | ||
FINANCING ACTIVITIES | ||||
Retirement of long-term debt | (22,989) | (28,790) | ||
Dividends paid: | ||||
Common stock | (70,000) | (52,800) | ||
Net cash flow used in financing activities | (92,989) | (81,590) | ||
Net decrease in cash and cash equivalents | (14,060) | (81,157) | ||
Cash and cash equivalents at beginning of period | 75,704 | 216,355 | ||
Cash and cash equivalents at end of period | $61,644 | $135,198 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $53,199 | $50,605 | ||
Income taxes | $220,423 | $11,914 | ||
See Notes to Respective Financial Statements. | ||||
113
SYSTEM ENERGY RESOURCES, INC. | ||||||
BALANCE SHEETS | ||||||
ASSETS | ||||||
June 30, 2006 and December 31, 2005 | ||||||
(Unaudited) | ||||||
2006 | 2005 | |||||
(In Thousands) | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents: | ||||||
Cash | $13 | $204 | ||||
Temporary cash investments - at cost, | ||||||
which approximates market | 61,631 | 75,500 | ||||
Total cash and cash equivalents | 61,644 | 75,704 | ||||
Accounts receivable: | ||||||
Associated companies | 134,078 | 327,454 | ||||
Other | 2,594 | 3,285 | ||||
Total accounts receivable | 136,672 | 330,739 | ||||
Materials and supplies - at average cost | 57,315 | 55,183 | ||||
Deferred nuclear refueling outage costs | 14,193 | 17,853 | ||||
Prepayments and other | 3,853 | 1,878 | ||||
TOTAL | 273,677 | 481,357 | ||||
OTHER PROPERTY AND INVESTMENTS | ||||||
Decommissioning trust funds | 249,517 | 236,003 | ||||
UTILITY PLANT | ||||||
Electric | 3,222,080 | 3,212,596 | ||||
Property under capital lease | 467,005 | 467,005 | ||||
Construction work in progress | 51,220 | 47,178 | ||||
Nuclear fuel under capital lease | 72,048 | 87,500 | ||||
TOTAL UTILITY PLANT | 3,812,353 | 3,814,279 | ||||
Less - accumulated depreciation and amortization | 1,944,612 | 1,889,886 | ||||
UTILITY PLANT - NET | 1,867,741 | 1,924,393 | ||||
DEFERRED DEBITS AND OTHER ASSETS | ||||||
Regulatory assets: | ||||||
SFAS 109 regulatory asset - net | 92,386 | 92,883 | ||||
Other regulatory assets | 302,492 | 292,968 | ||||
Other | 17,071 | 18,435 | ||||
TOTAL | 411,949 | 404,286 | ||||
TOTAL ASSETS | $2,802,884 | $3,046,039 | ||||
See Notes to Respective Financial Statements. | ||||||
114 | ||||||
SYSTEM ENERGY RESOURCES, INC. | ||||||
BALANCE SHEETS | ||||||
LIABILITIES AND SHAREHOLDER'S EQUITY | ||||||
June 30, 2006 and December 31, 2005 | ||||||
(Unaudited) | ||||||
2006 | 2005 | |||||
(In Thousands) | ||||||
CURRENT LIABILITIES | ||||||
Currently maturing long-term debt | $23,335 | $22,989 | ||||
Accounts payable: | ||||||
Associated companies | (745) | - | ||||
Other | 22,614 | 22,770 | ||||
Taxes accrued | 48,074 | 228,168 | ||||
Accumulated deferred income taxes | 5,276 | 6,678 | ||||
Interest accrued | 13,589 | 45,109 | ||||
Obligations under capital leases | 30,236 | 27,716 | ||||
Other | 1,656 | 1,811 | ||||
TOTAL | 144,035 | 355,241 | ||||
NON-CURRENT LIABILITIES | ||||||
Accumulated deferred income taxes and taxes accrued | 256,573 | 267,913 | ||||
Accumulated deferred investment tax credits | 70,398 | 72,136 | ||||
Obligations under capital leases | 41,812 | 63,307 | ||||
Other regulatory liabilities | 250,828 | 224,997 | ||||
Decommissioning | 330,670 | 318,927 | ||||
Accumulated provisions | 2,400 | 2,399 | ||||
Long-term debt | 799,872 | 819,642 | ||||
Other | 22,312 | 27,849 | ||||
TOTAL | 1,774,865 | 1,797,170 | ||||
Commitments and Contingencies | ||||||
SHAREHOLDER'S EQUITY | ||||||
Common stock, no par value, authorized 1,000,000 shares; | ||||||
issued and outstanding 789,350 shares in 2006 and 2005 | 789,350 | 789,350 | ||||
Retained earnings | 94,634 | 104,278 | ||||
TOTAL | 883,984 | 893,628 | ||||
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $2,802,884 | $3,046,039 | ||||
See Notes to Respective Financial Statements. | ||||||
115
ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS (DEBTOR-IN-POSSESSION), AND SYSTEM ENERGY
NOTES TO RESPECTIVE FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Entergy New Orleans Bankruptcy (Entergy New Orleans)
See Note 6 to the domestic utility companies and System Energy financial statements for information on the Entergy New Orleans bankruptcy proceeding.
Nuclear Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's, and System Energy's nuclear power plants.
Non-Nuclear Property Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited for any one occurrence was reduced to $500 million. Most of Entergy's non-nuclear excess property insurance coverage includes a $75 million drop-down feature in the event of an OIL aggregation loss to which an Entergy loss contributes.
Nuclear Decommissioning and Other Asset Retirement Costs (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.
CashPoint Bankruptcy (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.
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.
Employment Litigation (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy 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 deny any liability to the plaintiffs.
116
Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding asbestos and hazardous material litigation at Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
NOTE 2. RATE AND REGULATORY MATTERS
Storm Costs Recovery Filings with Retail Regulators
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearing s on the application are scheduled for the first quarter 2007.
In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States-Texas allocates those costs among its retail customer classes. If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. The hearing before the PUCT on the filing is scheduled for November 2006. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A second filing will request securitization and recovery of the eligible costs through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's estimated $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed a law that established a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for Hurricane Katrina stor m restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi
117
Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation stated that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding.
In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount includes Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. The amount financed through the bonds will be reduced dollar for dollar by any CDBG funds that Entergy Mississippi receives. Pursuant to the legislation, the MPSC must issue a financing order by the end of October 2006.
Deferred Fuel Costs
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Entergy Arkansas
In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh was proposed to replace the interim rate of $0.01900 per kWh that had been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.
On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.
Entergy Arkansas filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. Entergy Arkansas appealed the APSC's decision, but later filed a motion to dismiss the appeal following the APSC's decision described below.
In June 2006, Entergy Arkansas once again filed a motion with the APSC seeking to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing the APSC approved Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.
118
A hearing in the APSC energy cost recovery investigation is scheduled for October 2006.
On June 7, 2006, Entergy Arkansas filed the cost of service study ordered by the APSC. On that date Entergy Arkansas also filed notice with the APSC that it intends to file for a change in base rates within 60 to 90 days of its notice. Entergy Arkansas expects to make that filing in August 2006.
Entergy Gulf States
On March 1, 2006, Entergy Gulf States filed with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97 million including interest of eligible fuel costs for the period August 2005 through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States entered into a unanimous settlement that reduced the requested surcharge for actual over-collections from the months of February and March 2006, resulting in a surcharge of $78.8 million to be implemented over a twelve-month period beginning in June 2006. The PUCT approved the surcharge in June 2006. Amounts collected through the interim fuel surcharges are subject to final reconciliation in a future fuel reconciliation proceeding.
In May 2006, Entergy Gulf States filed with the PUCT a fuel and purchased power reconciliation case covering the period September 2003 through December 2005 for costs recoverable through the Texas fixed fuel factor rate and the incremental purchased capacity recovery rider. Entergy Gulf States is reconciling $1.6 billion of fuel and purchased power costs on a Texas retail basis. Hearings are scheduled for February 2007 and a PUCT decision is expected in July 2007.
Entergy Gulf States and Entergy Louisiana
In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities of Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006, the LPSC accepted the LPSC Staff's audit report finding that the prices paid for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and Entergy Gulf States acted reasonably and prudently in response to an extremely difficult environment.
Retail Rate Proceedings
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Filings with the APSC (Entergy Arkansas)
As discussed above in "Deferred Fuel Costs," on June 7, 2006, Entergy Arkansas filed notice with the APSC that it intends to file for a change in base rates within 60 to 90 days of its notice. Entergy Arkansas expects to make that filing in August 2006.
Filings with the PUCT and Texas Cities (Entergy Gulf States)
As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs
119
projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.
Filings with the LPSC
Retail Rates - Electric
(Entergy Gulf States)
In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Gulf States' return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $7.1 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
(Entergy Louisiana)
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. The filing shows that Entergy Louisiana's return on equity was within the allowed bandwidth. The filing also indicates that under the formula rate plan rider for approved capacity additions, a $121 million rate increase is required to recover LPSC-approved incremental deferred and ongoing capacity requirements. Entergy Louisiana requested recovery of the capacity deferrals over a three-year period, including carrying charges. $51 million of the rate increase is associated with these deferrals. The remaining $70 million of the rate increase is associated with ongoing capacity costs. The filing is subject to a period of LPSC Staff review, and rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle of September 2006.
Retail Rates - Gas (Entergy Gulf States)
In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC. The filing was amended by an April 2006 filing. The amended filing showed that an increase of $3.1 million in electric revenues is warranted. The MPSC has approved a settlement providing for a $1.8 million rate increase, which will be implemented in August 2006.
120
Filings with the City Council (Entergy New Orleans)
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings show various alternatives to reflect the effect of Entergy New Orleans' lost customers and decreased revenue. Entergy New Orleans' recommended alternative adjusts for lost customers and assumes that the City Council's June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place (a portion of Grand Gulf costs was previously recovered through base rates). Under that alternative, annual increases of $6.4 million in electric base rate revenues (an increase of 4.4%) and $22.8 million in gas base rate revenues (an increase of 160.9%) are warranted. The filings triggered the prescribed four-month period for review by the City Council's Advisors and other parties, and rate adjustments, if any, could be implemented as soon as the first billing cycle of November 2006.
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans seeks to recover over a ten-year period the $114 million in electric restoration costs and the $25 million in gas restoration costs that it has actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans seeks to establish over a ten-year period a $150 million storm reserve to provide for the risk of another storm. Entergy New Orleans requested that the City Council consider the proposed riders within the same time frame as the formula rate plans, which would allow implementation as soon as the first billing cycle of November 2006.
NOTE 3. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
The short-term borrowings of the domestic utility companies (other than Entergy New Orleans) and System Energy are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008. In addition to borrowing from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC authorized limits. There were no external short-term borrowings outstanding for the domestic utility companies (other than Entergy New Orleans) and System Energy as of June 30, 2006. The following are the FERC-authorized limits for short-term borrowings effective February 2006 and the outstanding short-term borrowings from the money pool for the domestic utility companies (other than Ent ergy New Orleans) and System Energy as of June 30, 2006:
|
|
Authorized |
|
Borrowings |
|
|
(In Millions) |
||
|
|
|
|
|
Entergy Arkansas |
|
$250 |
|
- |
Entergy Gulf States |
|
$350 |
|
- |
Entergy Louisiana |
|
$250 |
|
$90.9 |
Entergy Mississippi |
|
$175 |
|
- |
System Energy |
|
$200 |
|
- |
Under a savings provision in PUHCA 2005, which repealed PUHCA 1935, Entergy New Orleans may continue to be a participant in the money pool to the extent authorized by its SEC PUHCA 1935 order. However, Entergy New Orleans has not, and does not expect to make, any additional money pool borrowings while it is in bankruptcy proceedings. Entergy New Orleans had $35.6 million in borrowings outstanding from the money pool as of its bankruptcy filing date, September 23, 2005. The money pool borrowings reflected on Entergy New Orleans' Balance Sheet as of June 30, 2006 are classified as a pre-petition obligation subject to compromise.
121
Entergy Arkansas, Entergy Gulf States, and Entergy Mississippi, each have credit facilities available as of June 30, 2006 as follows:
|
|
|
|
Amount of |
|
Amount Drawn as of |
|
|
|
|
|
|
|
Entergy Arkansas |
|
April 2007 |
|
$85 million |
|
- |
Entergy Gulf States |
February 2011 |
$25 million (a) |
- |
|||
Entergy Mississippi |
|
May 2007 |
|
$30 million (b) |
|
- |
Entergy Mississippi |
May 2007 |
$20 million (b) |
- |
(a) |
The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of June 30, 2006, $1.4 million in letters of credit had been issued. |
(b) |
Borrowings under the Entergy Mississippi facilities may be secured by a security interest in its accounts receivable. |
In May 2006, Entergy Mississippi increased its $25 million credit facility to $30 million and renewed it through May 2007. Entergy Mississippi also entered into a new $20 million credit facility through May 2007.
In August 2006, Entergy Gulf States increased the capacity of its credit facility to $50 million.
In addition, Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, had a 364-day credit facility in the amount of $15 million which expired in May 2006. As of June 30, 2006, the full amount of the credit facility remains outstanding under bankruptcy protection. In July 2006, the bankruptcy judge authorized Entergy New Orleans to set off $15 million of its cash currently held by the lender against the outstanding debt on the credit facility.
The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets. In July 2005, Entergy New Orleans granted the lender a security interest in its customer accounts receivables to secure its borrowings under its facility.
Entergy New Orleans Debtor-in-Possession Credit Facility
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of June 30, 2006, Entergy New Orleans had approximately $40 million of outstanding borrowings under the DIP credit facility.
As discussed in the Form 10-K, borrowings under the DIP credit facility are due in full, and the agreement will terminate, at the earliest of several times or events, including August 23, 2006. Entergy and Entergy New Orleans have agreed to an amendment to the DIP credit agreement that extends the August 23, 2006 maturity date to August 23, 2007, and this amendment is subject to bankruptcy court approval. Entergy New Orleans has filed a motion with the bankruptcy court to authorize Entergy New Orleans to enter into the amendment, which is set for hearing August 16, 2006.
The interest rate on borrowings under the DIP credit agreement will be the average interest rate of borrowings outstanding under Entergy Corporation's $2 billion revolving credit facility, which is currently approximately 5.8% per annum.
122
Long-term Debt
The following long-term debt has been issued by the domestic utility companies and System Energy in 2006:
|
Issue Date |
|
Amount |
|
|
|
(In Thousands) |
Mortgage Bonds: |
|
|
|
5.92% Series due February 2016 - Entergy Mississippi |
January 2006 |
|
$100,000 |
Other Long-term Debt: |
|
|
|
4.60% Series due October 2017, Jefferson County - Arkansas |
|
|
The following long-term debt was retired by domestic utility companies and System Energy in 2006:
|
Retirement Date |
|
Amount |
|
|
|
(In Thousands) |
Other Long-term Debt: |
|
|
|
5.95% Series due December 2023, St. Charles Parish - (Entergy Louisiana) |
June 2006 |
$25,000 |
|
Grand Gulf Lease Obligation payment |
N/A |
$22,989 |
|
Retirements after the balance sheet date: |
|||
5.6% Series due October 2017, Jefferson County - Arkansas (Entergy |
|
|
|
6.3% Series due June 2018, Jefferson County - Arkansas (Entergy Arkansas) |
July 2006 |
$9,200 |
Entergy Mississippi used the proceeds from the January 2006 issuance to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.
Entergy Arkansas used the proceeds from the June 2006 issuance to redeem, prior to maturity, $45.5 million of 5.6% Series of Jefferson County bonds and $9.2 million of 6.3% Series of Jefferson County bonds in July 2006. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
NOTE 4. PREFERRED STOCK
(Entergy Arkansas)
In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which were outstanding as of June 30, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. In April 2006, Entergy Arkansas used the proceeds from this issuance to redeem the following preferred stock:
Series of Entergy Arkansas Preferred Stock |
Redemption Price Per Share |
|
7.32% Preferred Stock, Cumulative, $100.00 par value |
$103.17 |
|
7.80% Preferred Stock, Cumulative, $100.00 par value |
$103.25 |
|
7.40% Preferred Stock, Cumulative, $100.00 par value |
$102.80 |
|
7.88% Preferred Stock, Cumulative, $100.00 par value |
$103.00 |
|
$1.96 Preferred Stock, Cumulative, $0.01 par value |
$ 25.00 |
123
(Entergy New Orleans)
Since the filing of the bankruptcy proceedings, Entergy New Orleans has not been able to declare and pay dividends on its 4.75% preferred stock for three quarters. As discussed further in the Form 10-K, if dividends with respect to the 4.75% preferred stock are not paid for four quarters, the holders of these shares would have the right to elect a majority of the Entergy New Orleans board of directors. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006, and thereafter, unless objections are filed by creditors forty-five days in advance of a dividend payment date. If any objections are filed, the matter would be heard by the bankruptcy court. Entergy New Orleans dec lared and paid the dividend due on July 1, 2006, and intends to declare and pay the dividends on the 4.75% preferred shares each quarter pending resolution of its plan of reorganization.
NOTE 5. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
The domestic utility companies' and System Energy's qualified pension cost, including amounts capitalized, for the second quarters of 2006 and 2005, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2006 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$3,626 |
|
$2,993 |
|
$2,182 |
|
$1,077 |
|
$501 |
|
$1,031 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
9,915 |
|
7,914 |
|
6,052 |
|
3,252 |
|
1,282 |
|
1,604 |
Expected return on assets |
|
(9,834) |
|
(10,176) |
|
(7,114) |
|
(3,683) |
|
(884) |
|
(1,775) |
Amortization of prior service cost |
|
415 |
|
309 |
|
141 |
|
128 |
|
56 |
|
12 |
Amortization of loss |
|
2,438 |
|
640 |
|
1,509 |
|
725 |
|
509 |
|
167 |
Net pension cost |
|
$6,560 |
|
$1,680 |
|
$2,770 |
|
$1,499 |
|
$1,464 |
|
$1,039 |
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$3,329 |
|
$2,704 |
|
$1,957 |
|
$1,005 |
|
$436 |
|
$944 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
9,115 |
|
7,235 |
|
5,525 |
|
2,998 |
|
1,148 |
|
1,413 |
Expected return on assets |
|
(9,009) |
|
(9,709) |
|
(6,666) |
|
(3,566) |
|
(731) |
|
(1,324) |
Amortization of transition asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(69) |
Amortization of prior service cost |
|
415 |
|
378 |
|
163 |
|
128 |
|
57 |
|
17 |
Amortization of loss |
|
1,613 |
|
1,213 |
|
730 |
|
527 |
|
151 |
|
229 |
Net pension cost |
|
$5,463 |
|
$1,821 |
|
$1,709 |
|
$1,092 |
|
$1,061 |
|
$1,210 |
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The domestic utility companies' and System Energy's pension cost, including amounts capitalized, for the six months ended June 30, 2006 and 2005, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2006 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$7,252 |
|
$5,986 |
|
$4,365 |
|
$2,154 |
|
$1,002 |
|
$2,062 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
19,830 |
|
15,828 |
|
12,103 |
|
6,504 |
|
2,563 |
|
3,209 |
Expected return on assets |
|
(19,668) |
|
(20,351) |
|
(14,227) |
|
(7,366) |
|
(1,767) |
|
(3,551) |
Amortization of prior service cost |
|
831 |
|
617 |
|
281 |
|
257 |
|
112 |
|
24 |
Amortization of loss |
|
4,875 |
|
1,280 |
|
3,018 |
|
1,449 |
|
1,018 |
|
334 |
Net pension cost |
|
$13,120 |
|
$3,360 |
|
$5,540 |
|
$2,998 |
|
$2,928 |
|
$2,078 |
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$6,658 |
|
$5,408 |
|
$3,914 |
|
$2,010 |
|
$872 |
|
$1,888 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
18,230 |
|
14,470 |
|
11,050 |
|
5,996 |
|
2,296 |
|
2,826 |
Expected return on assets |
|
(18,018) |
|
(19,418) |
|
(13,332) |
|
(7,132) |
|
(1,462) |
|
(2,648) |
Amortization of transition asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(138) |
Amortization of prior service cost |
|
830 |
|
756 |
|
326 |
|
256 |
|
114 |
|
34 |
Amortization of loss |
|
3,226 |
|
2,426 |
|
1,460 |
|
1,054 |
|
302 |
|
458 |
Net pension cost |
|
$10,926 |
|
$3,642 |
|
$3,418 |
|
$2,184 |
|
$2,122 |
|
$2,420 |
The domestic utility companies recognized the following pension cost for their non-qualified pension plans in the second quarters of 2006 and 2005:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
|
|
(In Thousands) |
|||||||||
Non-Qualified Pension Cost |
|
$113 |
|
$220 |
|
$5 |
|
$36 |
|
$54 |
|
Non-Qualified Pension Cost |
|
$101 |
|
$296 |
|
$6 |
|
$37 |
|
$51 |
|
The domestic utility companies recognized the following pension cost for their non-qualified pension plans for the six months ended June 30, 2006 and 2005:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
|
|
(In Thousands) |
|||||||||
Non-Qualified Pension Cost Six |
|
$226 |
|
$439 |
|
$11 |
|
$73 |
|
$107 |
|
Non-Qualified Pension Cost Six |
|
$203 |
|
$593 |
|
$11 |
|
$75 |
|
$102 |
|
125
Components of Net Other Postretirement Benefit Cost
The domestic utility companies' and System Energy's other postretirement benefit cost, including amounts capitalized, for the second quarters of 2006 and 2005, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2006 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$1,337 |
|
$1,254 |
|
$854 |
|
$419 |
|
$232 |
|
$414 |
Interest cost on APBO |
|
2,844 |
|
2,747 |
|
1,856 |
|
944 |
|
856 |
|
407 |
Expected return on assets |
|
(1,797) |
|
(1,489) |
|
- |
|
(709) |
|
(611) |
|
(421) |
Amortization of transition obligation |
|
205 |
|
151 |
|
96 |
|
88 |
|
416 |
|
2 |
Amortization of prior service cost |
|
(408) |
|
- |
|
(24) |
|
(137) |
|
10 |
|
(301) |
Amortization of loss |
|
1,671 |
|
1,002 |
|
893 |
|
644 |
|
343 |
|
207 |
Net other postretirement benefit cost |
|
$3,852 |
|
$3,665 |
|
$3,675 |
|
$1,249 |
|
$1,246 |
|
$308 |
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$1,157 |
|
$1,634 |
|
$689 |
|
$363 |
|
$192 |
|
$415 |
Interest cost on APBO |
|
2,589 |
|
2,924 |
|
1,673 |
|
833 |
|
789 |
|
394 |
Expected return on assets |
|
(1,637) |
|
(1,366) |
|
- |
|
(669) |
|
(579) |
|
(387) |
Amortization of transition obligation |
|
205 |
|
947 |
|
95 |
|
88 |
|
435 |
|
4 |
Amortization of prior service cost |
|
(173) |
|
- |
|
18 |
|
(46) |
|
10 |
|
(139) |
Amortization of loss |
|
1,276 |
|
770 |
|
691 |
|
471 |
|
211 |
|
146 |
Net other postretirement benefit cost |
|
$3,417 |
|
$4,909 |
|
$3,166 |
|
$1,040 |
|
$1,058 |
|
$433 |
The domestic utility companies' and System Energy's other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2006 and 2005, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2006 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$2,674 |
|
$2,508 |
|
$1,708 |
|
$838 |
|
$464 |
|
$828 |
Interest cost on APBO |
|
5,688 |
|
5,494 |
|
3,712 |
|
1,888 |
|
1,712 |
|
814 |
Expected return on assets |
|
(3,594) |
|
(2,978) |
|
- |
|
(1,418) |
|
(1,222) |
|
(842) |
Amortization of transition obligation |
|
410 |
|
302 |
|
192 |
|
176 |
|
832 |
|
4 |
Amortization of prior service cost |
|
(816) |
|
- |
|
(48) |
|
(274) |
|
20 |
|
(602) |
Amortization of loss |
|
3,342 |
|
2,004 |
|
1,786 |
|
1,288 |
|
686 |
|
414 |
Net other postretirement benefit cost |
|
$7,704 |
|
$7,330 |
|
$7,350 |
|
$2,498 |
|
$2,492 |
|
$616 |
126
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$2,314 |
|
$3,268 |
|
$1,378 |
|
$726 |
|
$384 |
|
$830 |
Interest cost on APBO |
|
5,178 |
|
5,848 |
|
3,346 |
|
1,666 |
|
1,578 |
|
788 |
Expected return on assets |
|
(3,274) |
|
(2,732) |
|
- |
|
(1,338) |
|
(1,158) |
|
(774) |
Amortization of transition obligation |
|
410 |
|
1,894 |
|
190 |
|
176 |
|
870 |
|
8 |
Amortization of prior service cost |
|
(346) |
|
- |
|
36 |
|
(92) |
|
20 |
|
(278) |
Amortization of loss |
|
2,552 |
|
1,540 |
|
1,382 |
|
942 |
|
422 |
|
292 |
Net other postretirement benefit cost |
|
$6,834 |
|
$9,818 |
|
$6,332 |
|
$2,080 |
|
$2,116 |
|
$866 |
Employer Contributions
The domestic utility companies and System Energy expect to contribute the following to pension plans in 2006. A portion of these contributions were planned to be made in 2005, but were delayed until January 2006 in accordance with the Katrina Emergency Tax Relief Act. For further information on pension funding refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
|
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Expected 2006 pension contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Pension contributions made through |
|
$48,614 |
|
$13,398 |
|
|
|
$7,211 |
|
$ - |
|
$8,262 |
Remaining estimated pension |
|
$65,930 |
|
$8,704 |
|
|
|
$9,146 |
|
$ - |
|
$4,775 |
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation (APBO), the second quarters 2006 and 2005 other postretirement benefit cost, and the six months ended June 30, 2006 and 2005 for the domestic utility companies and System Energy as follows:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Reduction in 12/31/2005 APBO |
|
($42,337) |
|
($36,740) |
|
($23,640) |
|
($14,407) |
|
($11,206) |
|
($5,972) |
Reduction in second quarter 2006 |
|
($1,562) |
|
($1,332) |
|
($865) |
|
($512) |
|
($376) |
|
($268) |
Reduction in second quarter 2005 |
|
($1,446) |
|
($1,269) |
|
($790) |
|
($476) |
|
($350) |
|
($245) |
Reduction in six months ended June 30, |
($3,124) |
|
($2,664) |
|
($1,730) |
|
($1,024) |
|
($752) |
|
($536) |
|
Reduction in six months ended June 30, |
($2,892) |
|
($2,538) |
|
($1,580) |
|
($952) |
|
($700) |
|
($490) |
127
For further information on the Medicare Act refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.
NOTE 6. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING
See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K
for a discussion of the Entergy New Orleans bankruptcy proceeding. Following are updates to that discussion.As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession (DIP) credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.
In April 2006, the bankruptcy judge extended the exclusivity period for filing a plan of reorganization by Entergy New Orleans to August 21, 2006. Entergy New Orleans has filed another motion to extend the exclusivity period for filing its plan of reorganization, requesting that the deadline be extended an additional 120 days until December 19, 2006. The court entered an order extending the August 21, 2006 date for Entergy New Orleans' exclusive right to file a plan of reorganization until the court can hear and rule on Entergy New Orleans' motion to extend, which was set for hearing on September 18, 2006. In order to file a plan of reorganization no later than December 2006, Entergy New Orleans believes that it needs resolution of its June 2006 formula rate plan and storm rider filings and commitment on timing and amount of CDBG funds. If the motion to extend is granted, Entergy New Orleans will have the exclusive right to file its plan of reorganization until December 19, 2006, a nd will have until February 15, 2007 to obtain acceptances of its plan by each class of impaired creditors.
The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Approximately 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding. Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed, and has begun seeking withdrawal or modification of claims or objecting to claims with which it disagrees.
Certain pre-petition liabilities have been classified as liabilities subject to compromise in Entergy New Orleans' Balance Sheet as of June 30, 2006 and December 31, 2005. The following table summarizes the components of liabilities subject to compromise as of June 30, 2006 and December 31, 2005:
June 30, 2006 |
December 31, 2005 |
|||
(In Thousands) |
||||
Accounts payable - Associated companies |
$ 64,893 |
$46,815 |
||
Accounts payable - Other |
25,000 |
25,000 |
||
Interest accrued |
1,473 |
1,473 |
||
Accumulated provisions |
5,709 |
5,770 |
||
Long-term debt |
229,867 |
229,859 |
||
Total Liabilities Subject to Compromise |
$ 326,942 |
$308,917 |
Payment terms for the amount classified as subject to compromise will be established in connection with a plan of reorganization.
The accompanying financial statements have been prepared on the basis that Entergy New Orleans will continue as a going concern. Entergy New Orleans' filing for protection under Chapter 11 of the United States Bankruptcy Code as a result of the liquidity issues caused by Hurricane Katrina gives rise to substantial doubt regarding Entergy New Orleans' ability to continue as a going concern for a reasonable period of time, primarily because of the loss of control inherent in the bankruptcy process. The financial statements do not include any adjustments that might
128
result from the outcome of this uncertainty including adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary if Entergy New Orleans is unable to continue as a going concern. The financial statements also do not attempt to reflect liabilities at the priority or status of any claims that the holders of such liabilities will have.
Entergy continues to work with the federal, state, and local authorities to resolve the bankruptcy in a manner that allows Entergy New Orleans' customers to be served by a financially viable entity as required by law. Key factors that will influence the timing and outcome of the Entergy New Orleans bankruptcy include:
NOTE 7. ACCOUNTING POLICY UPDATES
Revenue and Fuel Costs
Entergy recognizes revenue from electric power and gas sales when it delivers power or gas to its customers. To the extent that deliveries have occurred but a bill has not been issued, the domestic utility companies accrue an estimate of the revenues for energy delivered since the latest billings. Entergy calculates the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in the domestic utility companies' various jurisdictions. Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month's estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are so recorded and re versed.
Prior to 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States included a component of fuel cost recovery in their unbilled revenue calculations. Effective January 1, 2006, this fuel component of unbilled accounts receivable was reclassified to deferred fuel and is no longer included in the unbilled revenue calculations for Entergy Louisiana and the Louisiana portion of Entergy Gulf States, which is in accordance with regulatory treatment.
Application of SFAS 71
During 2005 and 2006 Entergy filed notices with the FERC to withdraw its market-based rate authority for wholesale transactions in the Entergy control area and submitted new cost-based rates to the FERC for approval. During the second quarter of 2006, the FERC issued an order accepting the cost based rates filed by Entergy. As described further in Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K, the domestic utility companies and System Energy apply the provisions of SFAS 71 to operations that meet three criteria including that rates are approved by a regulator, are cost-based and can be charged to and collected from customers. As also described in Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K, Entergy Gulf States did not apply regulatory accounting principles to its wholesale jurisdiction. The FERC decision in the second quarter of 2006 results in Entergy Gulf States meeting the SFA S 71 criteria discussed above for its wholesale jurisdiction and, therefore, Entergy Gulf States reinstated the application of regulatory accounting principles to its wholesale business which resulted in a regulatory credit of approximately $4.5 million during the second quarter of 2006.
__________________________________
129
In the opinion of the management of 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. The business of the domestic utility companies and System Energy is subject to seasonal fluctuations, however, 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.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of June 30, 2006, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (individually "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrant's or Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commis sion rules and forms; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.
130
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Following are updates to that discussion.
Texas Power Price Lawsuit
See "Texas Power Price Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class apparently of the Texas retail customers of Entergy Gulf States who were billed and paid for electric power from January 1, 1994 to the present. In April 2006, the Court of Appeals denied a motion for rehearing of the decision to remand the case to the district court. In May 2006, Entergy filed a petition for discretionary review with the Texas Supreme Court.
Entergy New Orleans Rate of Return Lawsuit and Entergy New Orleans Fuel Clause Litigation
See "Entergy New Orleans Rate of Return Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed by a group of residential and business ratepayers against Entergy New Orleans in state court in Orleans Parish purportedly on behalf of all ratepayers in New Orleans. In accordance with the procedural schedule, the evidentiary record and post-hearing briefs of the parties were submitted to the City Council in March 2006. In April 2006, the City Council unanimously approved a resolution dismissing with prejudice the plaintiffs' claims. The plaintiffs appealed the resolution to the Civil District Court for the Parish of Orleans. The district court has not yet issued a procedural schedule for the appeal.
Additionally, in the Entergy New Orleans bankruptcy proceeding, the complaint filed by the named plaintiffs in the Entergy New Orleans rate of return lawsuit, together with the named plaintiffs in the Entergy New Orleans fuel clause lawsuit, asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans rate of return lawsuit and the Entergy New Orleans fuel clause lawsuit, was dismissed on April 26, 2006. The matter is on appeal to the U.S. District Court for the Eastern District of Louisiana. In addition, in April 2006, proofs of claim were filed by the plaintiffs in the Entergy New Orleans rate of return lawsuit and by the plaintiffs in the Entergy New Orleans fuel adjustment clause litigation relating to both the City Council and class action proceedings. The plaintiffs in the Entergy New Orleans rate of retur n lawsuit and the plaintiffs in the Entergy New Orleans fuel adjustment clause litigation also filed for class certification. In July 2006, the bankruptcy court denied the request for class certification. The individual claims of the approximately 14 individual named plaintiffs remain pending in the bankruptcy proceeding, and it is uncertain whether the bankruptcy judge will re-open the bar date for other ratepayers to file individual proofs of claim based on the allegations in the two lawsuits.
Murphy Oil Lawsuit
See "Murphy Oil Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the several lawsuits filed 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. Claiborne P. Deming, who became a director of Entergy Corporation in 2002, is the President and Chief Executive Officer of Murphy Oil. Mr. Deming did not stand for re-election to the Entergy Corporation Board of Directors and his term expired in May 2006. In June 2006, the Louisiana Fourth Circuit Court of Appeal affirmed the trial court's allocation of fault against Entergy Louisiana, but reduced the amount of damages owed by Entergy Louisiana to approximately $1.2 million. Murphy Oil filed a motion for rehearing seeking to have the appellate court reverse its decision to reduce the damages.
131
Environmental Regulation and Proceedings
On April 19, 2006, an environmental advocacy organization served a notice of intent to bring an environmental citizen's suit pursuant to the federal Resource Conservation and Recovery Act (RCRA) against Entergy. Notice of suit is required by RCRA sixty days before actual filing. The suit, if filed, will allege that Entergy violated an EPA regulation by failing formally to report a discovered release of radioactive material into the environment at Indian Point. These allegations relate to the ongoing site investigation of radionuclides found in groundwater wells at the site. It is expected that the environmental advocacy organization will ask the court to require Entergy formally to notify EPA of the site condition, will seek to have EPA formally involved in the ongoing site investigation and any required remediation, will seek attorney's fees under the statute, and may seek to have the judge impose statutory penalties. Entergy continues to investigate the matter. P>
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in "PART I, Item 1A, Risk Factors" in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to its employees that may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. See Note 7 to the consolidated financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. Entergy's management has been authorized to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans, and this authorization does not have an expiration date. In August 2004, Entergy announced a program under which Entergy Corporation will repurchase up to $1.5 billion of its common stock. This repurchase program is incremental to the existing authority to repurchase shares to fund the exercise of employee stock options. As a result of Hurricanes Katrina and Rita, the $1.5 billion program w as temporarily suspended, and the Board extended authorization for its completion through 2008. Entergy Corporation did not repurchase any shares of common stock during the six months ended June 30, 2006. At any point in time through 2008, Entergy Corporation may elect to repurchase shares to complete the remaining $400 million of authorization under the $1.5 billion program or to fund the exercise of grants under its employee based compensation plans.
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 12, 2006. The following matters were voted on and received the specified number of votes for, abstentions, votes withheld (against), and broker non-votes:
132
Name of Nominee |
|
Votes For |
|
Votes Withheld |
Maureen S. Bateman |
|
181,913,615 |
|
3,159,171 |
W. Frank Blount |
|
177,995,619 |
|
7,077,167 |
Simon D. deBree |
|
181,832,243 |
|
3,240,543 |
Gary W. Edwards |
181,813,592 |
3,259,194 |
||
Alexis M. Herman |
|
180,732,615 |
|
4,340,171 |
Donald C. Hintz |
|
181,413,474 |
|
3,659,312 |
J. Wayne Leonard |
|
181,518,863 |
|
3,553,923 |
Stuart L. Levenick |
182,579,969 |
2,492,817 |
||
Robert v.d. Luft* |
|
181,366,991 |
|
3,705,795 |
James R. Nichols |
|
181,459,874 |
|
3,612,912 |
William A. Percy, II |
|
182,578,764 |
|
2,494,022 |
W. J. "Billy" Tauzin |
|
182,310,093 |
|
2,762,693 |
Steven V. Wilkinson |
|
182,683,898 |
|
2,388,888 |
Mr. Luft retired from the Board effective August 1, 2006.
Entergy Arkansas
A consent in lieu of a meeting of common stockholders was executed on June 22, 2006. 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, Chairman, Leo P. Denault, Mark Savoff, and Richard J. Smith.
Entergy Gulf States
A consent in lieu of a meeting of common stockholders was executed on June 22, 2006. 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, Chairman, E. Renae Conley, Leo P. Denault, Mark Savoff, and Richard J. Smith.
Entergy Louisiana
A consent in lieu of a meeting of members was executed on June 22, 2006. The consent was signed on behalf of Entergy Louisiana Holdings, Inc., the holder of all issued and outstanding common membership interests. The holder of the common membership interests by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Louisiana: E. Renae Conley, Chair, Leo P. Denault, Mark Savoff, and Richard J. Smith.
133
Entergy Mississippi
A consent in lieu of a meeting of common stockholders was executed on June 22, 2006. 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, Chairman, Leo P. Denault, Mark Savoff, and Richard J. Smith.
Entergy New Orleans
A consent in lieu of a meeting of common stockholders was executed on July 31, 2006. 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, Chairman, Tracie L. Boutte, and Roderick K. West.
System Energy
A consent in lieu of a meeting of common stockholders was executed on June 22, 2006. 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: Gary J. Taylor, Chairman, Steven C. McNeal, and Leo P. Denault.
Item 5. Other Information
Executive Agreements (Entergy Corporation)
Grant of Restricted Stock Units to Chairman of the Board and Chief Executive Officer. On August 3, 2006, the Personnel Committee of the Board of Directors of Entergy Corporation approved a grant of 100,000 restricted stock units ("Restricted Units") to Mr. J. Wayne Leonard, Entergy Corporation's Chairman of the Board and Chief Executive Officer. The units were issued under Entergy's 1998 Equity Ownership Plan ("EOP") pursuant to a restricted unit agreement ("Restricted Unit Agreement"). Subject to Mr. Leonard's continued employment within the Entergy System, the Restricted Units will vest in equal installments on August 3, 2008 (50,000 units) and August 3, 2009 (50,000 units). On the vesting date, Mr. Leonard will receive in cash for each vested unit the cash equivalent of a share of Entergy Corporation's common stock. The Restricted Units do not accrue dividend equivalents.
Under certain conditions, Mr. Leonard's Restricted Units may vest on an earlier date under the terms and conditions set forth in the Restricted Unit Agreement, Mr. Leonard's October 2000 Retention Agreement ("Retention Agreement"), or the EOP, although Mr. Leonard will receive payment for accelerated vesting of the restricted units under only one of the acceleration provisions. Under the Restricted Unit Agreement, these accelerated vesting conditions include any one of the following events, as defined under the agreement: (i) termination of employment by Mr. Leonard for Good Reason; (ii) death or Disability; or (iii) termination of Mr. Leonard's employment for any reason other than Cause. "Good Reason" is generally defined in the Restricted Unit Agreement as (i) a substantial reduction in duties or responsibilities, (ii) a five percent or greater reduction in base salary, (iii) relocation to a location other than Entergy Corporation's corporate headquarters, and/or (iv) discontinuation o f participation in certain compensation and other benefit plans (other than as a result of changes similarly affecting other executive officers). Under the Retention Agreement, among other things, the Restricted Units may vest on an earlier date if Mr. Leonard's employment is terminated on account of a Qualifying Termination or a Merger Related Termination, as those terms are defined in the Retention Agreement. Under the EOP, the Restricted Units may vest on an earlier date if Mr. Leonard's employment is terminated on account of a Qualifying Event, as that term is defined in the EOP.
For additional information regarding Mr. Leonard's employment arrangements, see "Executive Retention Agreements- Retention Agreement with Mr. Leonard" in Entergy Corporation's proxy statement dated March 24, 2006.
134
Retention Agreement with Executive Vice President and Chief Financial Officer. On August 3, 2006, the Personnel Committee of the Board of Directors approved a retention agreement to be entered into between Entergy Corporation and Leo P. Denault, its Executive Vice President and Chief Financial Officer ("Retention Agreement"). The Retention Agreement entitles Mr. Denault to receive certain benefits if his employment with a System Company is terminated under specified circumstances. If Mr. Denault's employment should terminate prior to attainment of age 55 on account of a Termination Event, as defined in the Retention Agreement and described below, then Mr. Denault is entitled to receive, among other things, (a) 2.99 times his base salary and annual cash bonus, as described in the Retention Agreement; (b) Target LTIP Awards, described as the value of his unvested performance shares units (calculated at target payout levels) under the EOP and under the 2007 Equity Ow nership and Long Term Cash Incentive Plan ("Equity Plan"), and (c) Other EOP Awards, described as the value of any unvested restricted shares, stock options, and other equity awards that may be granted under the Equity Plan. If Mr. Denault's employment should terminate on or after attainment of age 55 on account of a Termination Event, as defined in the Retention Agreement and described below, then Mr. Denault is entitled to receive (a) SERP Credited Service and SERP Permission to Retire, as defined in the Retention Agreement; (b) Target LTIP Awards (as described above); and (c) Other EOP Awards (as described above).
"Termination Event" is generally defined to include (i) termination of Mr. Denault's employment by Entergy for reasons other than Cause or Disability, as defined in the Retention Agreement or (ii) Mr. Denault's termination of employment for "Good Reason" (as defined in the Retention Agreement and described above in the description of Mr. Leonard's Restricted Unit Agreement).
Should Mr. Denault, on or after attainment of 55, terminate employment for any reason other than a Termination Event, death or disability, then he shall be entitled to SERP Credited Service but not SERP Permission to Retire. If Mr. Denault should terminate employment at any time on account of death or Disability, then he or his estate shall receive (a) SERP Credited Service and SERP Permission to Retire or separate, in the case of Disability; (b) Target LTIP Awards (as described above); and (c) Other EOP Awards (as described above).
For additional information regarding Mr. Denault's employments arrangements, including his participation in an Entergy-sponsored executive severance plan, see "System Executive Continuity Plans" in Entergy Corporation's proxy statement dated March 24, 2006. Cash payments otherwise payable under the Retention Agreement shall be offset, on a dollar for dollar basis, by cash payments under the System Executive Continuity Plan or any other severance program or arrangement.
The terms and conditions of Mr. Leonard's Restricted Unit Agreement and Mr. Denault's Retention Agreement are summaries and are qualified in their entirety by reference to the terms and conditions of the actual agreements, which are filed as Exhibits 10(a) and 10(b) to this Form 10-Q.
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/distributions 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, |
||||||||||
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
||||||
Entergy Arkansas |
3.29 |
2.79 |
3.17 |
3.37 |
3.75 |
3.71 |
|||||
Entergy Gulf States |
2.36 |
2.49 |
1.51 |
3.04 |
3.34 |
3.46 |
|||||
Entergy Louisiana |
2.76 |
3.14 |
3.93 |
3.60 |
3.50 |
2.98 |
|||||
Entergy Mississippi |
2.14 |
2.48 |
3.06 |
3.41 |
3.16 |
2.89 |
|||||
Entergy New Orleans |
(a) |
(b) |
1.73 |
3.60 |
1.22 |
1.62 |
|||||
System Energy |
2.12 |
3.25 |
3.66 |
3.95 |
3.85 |
4.08 |
135
Ratios of Earnings to Combined Fixed Charges |
|||||||||||
Twelve Months Ended |
|||||||||||
December 31, |
June 30, |
||||||||||
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
||||||
Entergy Arkansas |
2.99 |
2.53 |
2.79 |
2.98 |
3.34 |
3.29 |
|||||
Entergy Gulf States |
2.21 |
2.40 |
1.45 |
2.90 |
3.18 |
3.32 |
|||||
Entergy Louisiana |
2.76 |
3.14 |
3.93 |
3.60 |
3.50 |
2.81 |
|||||
Entergy Mississippi |
1.96 |
2.27 |
2.77 |
3.07 |
2.83 |
2.64 |
|||||
Entergy New Orleans |
(a) |
(b) |
1.59 |
3.31 |
1.12 |
1.54 |
(a) |
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. |
(b) |
Earnings for the twelve months ended December 31, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively. |
Item 6. Exhibits *
3(a) - |
Certificate of Amendment of the Certificate of Incorporation of Entergy Corporation dated June 12, 2006. |
|
4(a) - |
Sixty-sixth Supplemental Indenture, dated as of June 1, 2006, to Entergy Arkansas' Mortgage and Deed of Trust, dated as of October 1, 1944. |
|
+10(a) |
Restricted Unit Agreement between J. Wayne Leonard and Entergy Corporation. |
|
+10(b) |
Retention Agreement effective August 3, 2006 between Leo P. Denault and Entergy Corporation. |
|
31(a) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
|
31(b) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
|
31(c) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
|
31(d) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
|
31(e) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States. |
|
31(f) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States. |
|
31(g) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States. |
|
31(h) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
|
31(i) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
|
31(j) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
|
31(k) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
|
31(l) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
136 | ||
31(m) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
|
31(n) - |
Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
|
31(o) - |
Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
|
32(a) - |
Section 1350 Certification for Entergy Corporation. |
|
32(b) - |
Section 1350 Certification for Entergy Corporation. |
|
32(c) - |
Section 1350 Certification for Entergy Arkansas. |
|
32(d) - |
Section 1350 Certification for Entergy Arkansas. |
|
32(e) - |
Section 1350 Certification for Entergy Gulf States. |
|
32(f) - |
Section 1350 Certification for Entergy Gulf States. |
|
32(g) - |
Section 1350 Certification for Entergy Gulf States. |
|
32(h) - |
Section 1350 Certification for Entergy Louisiana. |
|
32(i) - |
Section 1350 Certification for Entergy Louisiana. |
|
32(j) - |
Section 1350 Certification for Entergy Mississippi. |
|
32(k) - |
Section 1350 Certification for Entergy Mississippi. |
|
32(l) - |
Section 1350 Certification for Entergy New Orleans. |
|
32(m) - |
Section 1350 Certification for Entergy New Orleans. |
|
32(n) - |
Section 1350 Certification for System Energy. |
|
32(o) - |
Section 1350 Certification for System Energy. |
|
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, LLC's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, 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 the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
137
* |
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, 2006, 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, 2006. |
+ | Management contracts or compensatory plans or arrangements. |
138
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 |
/s/ Nathan E. Langston Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) |
Date: August 8, 2006
139
Exhibit 3(a)
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
ENTERGY CORPORATION
Entergy Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That at a meeting of the Board of Directors of ENTERGY CORPORATION held on December 2, 2005 resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and proposing such amendment to the stockholders of the corporation for consideration at the next annual meeting of the corporation. The resolution setting forth the proposed amendment is as follows:
RESOLVED, That Article NINTH of the Certificate of Incorporation of this corporation be amended and said Article shall read as follows:
SECOND: That thereafter, pursuant to resolution of its Board of Directors, at the 2006 Annual Meeting of Stockholders of said corporation, which was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, ENTERGY CORPORATION has caused this certificate to be signed this 12thday of June 2006.
ENTERGY CORPORATION
By:
s/s Robert D. Sloan
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:30 AM 08/19/1992
922325053 - 2307137
CERTIFICATE OF INCORPORATION
OF
ENTERGY-GSU HOLDINGS, INC.
FIRST: The name of the Corporation is Entergy-GSU Holdings, Inc. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code.
FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 500,000,000 shares, par value $.01 per share, of common stock.
FIFTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which shall, prior to the Effective Time defined in and contemplated by the Agreement and Plan of Reorganization, dated as of June 5, 1992, between Entergy Corporation and Gulf States Utilities Company, as the same may be amended from time to time, consist of two (2) directors, and thereafter consist of not less than nine (9) nor more than nineteen (19) directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. A director shall hold office until the next succeeding annual meeting of stockholders and until his successor shall be elected, subject, however, to prior death, resignation, retirement or removal from office. Vacancies occurring in the Board of Directors and newly created directorships resulting from an increase in the authorized number of directo rs may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall serve until the next succeeding annual meeting of stockholders and until his or her successor shall be elected and qualified.
SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, adopt, alter, amend, change or repeal the By-Laws of the Corporation. In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the statutes of Delaware, this Certificate of Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders or otherwise shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
SEVENTH: Notwithstanding any other provision of this Certificate of Incorporation or the By-Laws of the Corporation to the contrary, no action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken by written consent without such a meeting except any action taken upon the signing of a consent in writing by the holders of not less than the greater of (a) a majority of the outstanding stock of the Corporation entitled to vote thereon and (b) that number of shares of stock of the Corporation that would be required to take such action at a special or annual meeting of stockholders where holders of all outstanding stock of the Corporation were present, setting forth the action to be taken. Special meetings of stockholders of the Corporation may be called only by the Board of Directors, the Chairman of the Board, the person, if any, designated by the Board of Directors as the Chief Executive Officer of the Corporation , a majority of the members of the entire Executive Committee of the Board of Directors, if there shall be one, or by the holders of not less than a majority of the outstanding stock of the Corporation entitled to vote at the special meeting.
EIGHTH: A. To the fullest extent authorized or permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Section A of Article EIGHTH shall not have any effect on the liability or alleged liability of any director of this Corporation for any act or omission of such director occurring prior to such repeal or modification, or otherwise adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
B. The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, and such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and administrators: provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or administrators) in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section B of Article EIGHTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise partici pating in any proceeding in advance of its final disposition.
The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation who are not directors or officers similar to those conferred in this Section B of Article EIGHTH to directors and officers of the Corporation.
The rights to indemnification and to the advancement of expenses conferred in this Section B of Article EIGHTH shall not be exclusive or any other right which any person may have or hereafter acquire under this Certificate of Incorporation, the By-laws, any statute, agreement, vote of stockholders or disinterested directors, or otherwise.
Any repeal or modification of this Section B of Article EIGHTH by the stockholders of the Corporation shall not adversely affect any rights to indemnification and advancement of expenses of a director or officer of the Corporation existing pursuant to this Section B of Article EIGHTH with respect to any acts or omissions occurring prior to such repeal or modification.
C. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. The Corporation may also obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate for the protection of any or all such persons.
NINTH: Each of the directors of the Corporation may be removed from office at any time, with or without cause, but a director may be removed without cause only by the affirmative vote of the holders of not less than two-thirds of the outstanding stock of the Corporation then entitled to vote for the election of such director.
TENTH: The name and mailing address of the Sole Incorporator is as follows:
Name |
Mailing Address |
Deborah M. Reusch |
P.O. Box 636 |
ELEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept (subject to any provision contained in the General Corporation Law of the State of Delaware) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 19th day of August, 1992.
_________________________ |
Deborah M. Reusch |
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:30 PM 11/04/1992
923095234 - 2307137
CERTIFICATE OF CORRECTION
OF
ENTERGY-GSU HOLDINGS, INC.
Pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware
ENTERGY-GSU HOLDINGS, INC., a Delaware corporation (the "Corporation"), does hereby certify as follows:
FIRST: The Corporation filed its Certificate of Incorporation on August l9, 1992.
SECOND: The Certificate of Incorporation included, in Article EIGHTH, Section C, an erroneous word. This error is an inaccurate record of the corporate intent.
THIRD: Article EIGHTH, Section C is hereby corrected to read in its entirety as follows:
C. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. The Corporation may also obtain a letter of credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or other fund or account, enter into indemnification agreements, pledge or grant a security interest in any assets or properties of the Corporation, or use any other mechanism or arrangement whatsoever in such amounts, at such costs, and upon such other terms and conditions as the Board of Directors shall deem appropriate for the protection of any or all such persons.
FOURTH: This Certificate of Correction has been prepared in accordance with the provisions of Section 103(f) of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed in its corporate name this 26th day of October, 1992.
ENTERGY-GSU HOLDINGS, INC. |
|
By _________________________ |
|
ATTEST: |
|
By ______________________ |
|
Name: Leslie Cobb |
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 05:33 PM 12/31/93
933655544 - 2307137
CERTIFICATE OF OWNERSHIP AND MERGER
OF
ENTERGY CORPORATION
MERGING INTO
ENTERGY-GSU HOLDINGS, INC.
Pursuant to Section 253 of the
Genera1 Corporation Law of the State of
Delaware
Entergy-GSU Holdings, Inc., a Delaware corporation ("Parent"), hereby certifies as follows:
FIRST: That the name and state of incorporation of each of the constituent corporations to the merger are as follows:
|
State of |
Entergy-GSU Holdings, Inc. |
Delaware |
Entergy Corporation |
Florida |
SECOND: Parent owns all of the outstanding shares of common stock, par value $5.00 per share, which is only outstanding class of capital stock of Entergy Corporation ("Sub").
THIRD: The Board of Directors of Parent, acting by written consent pursuant to Section 141(f) of the General Corporation Law of the State of Delaware ("DGCL") this 31st day of December, 1993, has duly adopted resolutions authorizing the merger of Sub with and into Parent pursuant to Section 253 of the DGCL. A true copy of such resolutions is annexed hereto as Exhibit A. Such resolutions have not been modified or rescinded and are in full force and effect on the date hereof.
FOURTH: The Certificate of Incorporation of Parent shall be the Certificate of Incorporation of the surviving corporation except that ARTICLE FIRST of the Certificate of Incorporation of the surviving corporation shall be amended to read as follows:
"The name of the Corporation is Entergy Corporation (hereinafter the "Corporation")."
FIFTH: The merger shall become effective on December 31, 1993 at 5:33 p.m., New York City time.
IN WITNESS WHEREOF, Entergy-GSU Holdings, Inc. has caused this Certificate of Ownership and Merger to be signed by its duly authorized officers this 31st day of December, 1993.
ENTERGY-GSU HOLDINGS, INC. |
|
By _________________________ |
|
Chairman |
|
ATTEST: |
|
By ______________________ |
|
Secretary |
EXHIBIT A
TO
CERTIFICATE OF OWNERSHIP AND MERGER MERGING
ENTERGY CORPORATION INTO
ENTERGY-GSU HOLDINGS, INC.
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF ENTERGY-GSU HOLDINGS, INC. (THE "CORPORATION")
RESOLVED, that it is deemed advisable that Entergy Corporation, a Florida corporation ("Entergy"), merge with and into the Corporation, at which time the Corporation will change its corporate name to ''Entergy Corporation"; and
FURTHER RESOLVED, that the merger of Entergy with and into the Corporation shall become effective, the corporate existence of Entergy shall cease and all outstanding shares of capital stock of Entergy shall be cancelled and no consideration paid therefor, upon the filing of a Certificate of Ownership and Merger, prepared in accordance with the Delaware General Corporation Law (the "DGCL"), with the Secretary of State of the State of Delaware in accordance with Sections 103 and 253 of the DGCL, and the filing of articles of merger, prepared in accordance with the Florida Business Corporation Act (the "FBCA"), with the Secretary of State of the State of Florida in accordance with Section 607.1105 of the FBCA or (at such later date and time as may be specified in such Certificate and articles of merger); and
FURTHER RESOLVED, that the President and the Secretary of the Corporation or other appropriate officers are authorized to execute and cause to be filed with the Secretary of State of the State of Delaware the Certificate of Ownership and Merger merging Entergy into the Corporation and with the Secretary of State of the State of Florida such articles of merger merging Entergy into the Corporation and to take any and all other actions necessary or appropriate to accomplish the purpose and intent of the foregoing resolutions; and
FURTHER RESOLVED, that all actions heretofore taken by any officer or director of the Corporation in connection with any matter referred to or contemplated in any of the foregoing resolutions be, and they hereby are, approved, ratified and confirmed in all respects.
Exhibit 4(a)
ENTERGY ARKANSAS, INC.
TO
DEUTSCHE BANK TRUST COMPANY AMERICAS
(successor to Guaranty Trust Company of New York)
AND
STANLEY BURG
(successor to Henry A. Theis)
AND
(as to property, real or personal, situated or being in Missouri)
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION
(successor to Marvin A. Mueller)
As Trustees under Entergy Arkansas, Inc.'s Mortgage and Deed of Trust,
Dated as of October 1, 1944
___________________________
SIXTY-SIXTH SUPPLEMENTAL INDENTURE
Providing among other things for
First Mortgage Bonds, Pollution Control Series F (Seventy-third Series)
__________________________
Dated as of June 1, 2006
SIXTY-SIXTH SUPPLEMENTAL INDENTURE
INDENTURE, dated as of June 1, 2006, between ENTERGY ARKANSAS, INC., a corporation of the State of Arkansas, whose post office address is 425 West Capitol, Little Rock, Arkansas 72201 (hereinafter sometimes called the "Company"), and DEUTSCHE BANK TRUST COMPANY AMERICAS (successor to Guaranty Trust Company of New York), a New York banking corporation, whose post office address is 60 Wall Street, MS NYC 60-2710, New York, New York 10005 (hereinafter sometimes called the "Corporate Trustee"), and STANLEY BURG (successor to Henry A. Theis) (hereinafter sometimes called the "Co-Trustee"), and (as to property, real or personal, situated or being in Missouri) THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION (successor to Marvin A. Mueller), whose mailing address is 10161 Centurion Parkway, Jacksonville, Florida 32256 (said The Bank of New York Trust Company, National Association being hereinafter sometimes called the "Missouri Co-Trustee," and the Corporate Trustee, the Co-Trustee and the Missouri Co-Trustee being hereinafter together sometimes called the "Trustees"), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the "Mortgage"), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the "Sixty-sixth Supplemental Indenture") being supplemental thereto.
WHEREAS, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and
WHEREAS, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co-Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and
WHEREAS, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co-Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and
WHEREAS, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and
WHEREAS, by the Thirty-third Supplemental Indenture mentioned below, the Company, among other things, appointed Marvin A. Mueller as Missouri Co-Trustee under the Mortgage, and Marvin A. Mueller accepted said appointment; and
WHEREAS, by the Thirty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed The Boatmen's National Bank of St. Louis as Missouri Co-Trustee in succession to Marvin A. Mueller (resigned) under the Mortgage, and The Boatmen's National Bank of St. Louis accepted said appointment; and
WHEREAS, an instrument, dated as of September 1, 1994, was executed by the Company appointing Bankers Trust Company as Trustee, and Stanley Burg as Co-Trustee, in succession to Morgan Guaranty Trust Company of New York (resigned) and John W. Flaherty (resigned), respectively, under the Mortgage and Bankers Trust Company and Stanley Burg accepted said appointments, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and
WHEREAS, by the Fifty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed Peter D. Van Cleve as Missouri Co-Trustee in succession to The Boatmen's National Bank of St. Louis (resigned) under the Mortgage, and Peter D. Van Cleve accepted said appointment; and
WHEREAS, by an instrument, dated as of May 31, 2000, the Company appointed BNY Trust Company of Missouri as Missouri Co-Trustee in succession to Peter D. Van Cleve (resigned) under the Mortgage, and BNY Trust Company of Missouri accepted said appointment, and said instrument was appropriately filed or recorded in various official records in the State of Missouri; and
WHEREAS, by an instrument, dated as of April 15, 2002, filed with the Banking Department of the State of New York, Bankers Trust Company, Trustee, effected a corporate name change pursuant to which, effective such date, it is known as Deutsche Bank Trust Company Americas; and
WHEREAS, by an instrument dated November 1, 2004, filed with the Office of the Comptroller of the Currency in Colorado, BNY Trust Company of Missouri merged into BNY Missouri Interim Trust Company, National Association, and by an instrument dated November 1, 2004, filed with the Office of the Comptroller of the Currency in Colorado, BNY Missouri Interim Trust Company, National Association, merged into The Bank of New York Trust Company, National Association; and
WHEREAS, by the Sixty-third Supplemental Indenture mentioned below, the Company, the Corporate Trustee, Stanley Burg, as Co-Trustee, and The Bank of New York Trust Company, National Association, as Missouri Co-Trustee, appointed Jeffrey Schroeder to serve as a Missouri Co-Trustee under the Mortgage, and Jeffrey Schroeder accepted such appointment; and
WHEREAS, by an instrument effective as of February 28, 2005, Jeffrey Schroeder resigned as a Missouri Co-Trustee; and
WHEREAS, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
WHEREAS, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation |
Dated as of |
First Supplemental Indenture |
July 1, 1947 |
Second Supplemental Indenture |
August 1, 1948 |
Third Supplemental Indenture |
October 1, 1949 |
Fourth Supplemental Indenture |
June 1, 1950 |
Fifth Supplemental Indenture |
October 1, 1951 |
Sixth Supplemental Indenture |
September 1, 1952 |
Seventh Supplemental Indenture |
June 1, 1953 |
Eighth Supplemental Indenture |
August 1, 1954 |
Ninth Supplemental Indenture |
April 1, 1955 |
Tenth Supplemental Indenture |
December 1, 1959 |
Eleventh Supplemental Indenture |
May 1, 1961 |
Twelfth Supplemental Indenture |
February 1, 1963 |
Thirteenth Supplemental Indenture |
April 1, 1965 |
Fourteenth Supplemental Indenture |
March 1, 1966 |
Fifteenth Supplemental Indenture |
March 1, 1967 |
Sixteenth Supplemental Indenture |
April 1, 1968 |
Seventeenth Supplemental Indenture |
June 1, 1968 |
Eighteenth Supplemental Indenture |
December 1, 1969 |
Nineteenth Supplemental Indenture |
August 1, 1970 |
Twentieth Supplemental Indenture |
March 1, 1971 |
Twenty-first Supplemental Indenture |
August 1, 1971 |
Twenty-second Supplemental Indenture |
April 1, 1972 |
Twenty-third Supplemental Indenture |
December 1, 1972 |
Twenty-fourth Supplemental Indenture |
June 1, 1973 |
Twenty-fifth Supplemental Indenture |
December 1, 1973 |
Twenty-sixth Supplemental Indenture |
June 1, 1974 |
Twenty-seventh Supplemental Indenture |
November 1, 1974 |
Twenty-eighth Supplemental Indenture |
July 1, 1975 |
Twenty-ninth Supplemental Indenture |
December 1, 1977 |
Thirtieth Supplemental Indenture |
July 1, 1978 |
Thirty-first Supplemental Indenture |
February 1, 1979 |
Thirty-second Supplemental Indenture |
December 1, 1980 |
Thirty-third Supplemental Indenture |
January 1, 1981 |
Thirty-fourth Supplemental Indenture |
August 1, 1981 |
Thirty-fifth Supplemental Indenture |
February 1, 1982 |
Thirty-sixth Supplemental Indenture |
December 1, 1982 |
Thirty-seventh Supplemental Indenture |
February 1, 1983 |
Thirty-eighth Supplemental Indenture |
December 1, 1984 |
Thirty-ninth Supplemental Indenture |
December 1, 1985 |
Fortieth Supplemental Indenture |
July 1, 1986 |
Forty-first Supplemental Indenture |
July 1, 1989 |
Forty-second Supplemental Indenture |
February 1, 1990 |
Forty-third Supplemental Indenture |
October 1, 1990 |
Forty-fourth Supplemental Indenture |
November 1, 1990 |
Forty-fifth Supplemental Indenture |
January 1, 1991 |
Forty-sixth Supplemental Indenture |
August 1, 1992 |
Forty-seventh Supplemental Indenture |
November 1, 1992 |
Forty-eighth Supplemental Indenture |
June 15, 1993 |
Forty-ninth Supplemental Indenture |
August 1, 1993 |
Fiftieth Supplemental Indenture |
October 1, 1993 |
Fifty-first Supplemental Indenture |
October 1, 1993 |
Fifty-second Supplemental Indenture |
June 15, 1994 |
Fifty-third Supplemental Indenture |
March 1, 1996 |
Fifty-fourth Supplemental Indenture |
March 1, 1997 |
Fifty-fifth Supplemental Indenture |
March 1, 2000 |
Fifty-sixth Supplemental Indenture |
July 1, 2001 |
Fifty-seventh Supplemental Indenture |
March 1, 2002 |
Fifty-eighth Supplemental Indenture |
November 1, 2002 |
Fifty-ninth Supplemental Indenture |
May 1, 2003 |
Sixtieth Supplemental Indenture |
June 1, 2003 |
Sixty-first Supplemental Indenture |
June 15, 2003 |
Sixty-second Supplemental Indenture |
October 1, 2004 |
Sixty-third Supplemental Indenture |
January 1, 2005 |
Sixty-fourth Supplemental Indenture |
March 1, 2005 |
Sixty-fifth Supplemental Indenture |
May 1, 2005 |
which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming, as applicable; and
WHEREAS, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:
Series |
Principal |
Principal |
3 1/8% Series due 1974 |
$30,000,000 |
None |
2 7/8% Series due 1977 |
11,000,000 |
None |
3 1/8% Series due 1978 |
7,500,000 |
None |
2 7/8% Series due 1979 |
8,700,000 |
None |
2 7/8% Series due 1980 |
6,000,000 |
None |
3 5/8% Series due 1981 |
8,000,000 |
None |
3 1/2% Series due 1982 |
15,000,000 |
None |
4 1/4% Series due 1983 |
18,000,000 |
None |
3 1/4% Series due 1984 |
7,500,000 |
None |
3 3/8% Series due 1985 |
18,000,000 |
None |
5 5/8% Series due 1989 |
15,000,000 |
None |
4 7/8% Series due 1991 |
12,000,000 |
None |
4 3/8% Series due 1993 |
15,000,000 |
None |
4 5/8% Series due 1995 |
25,000,000 |
None |
5 3/4% Series due 1996 |
25,000,000 |
None |
5 7/8% Series due 1997 |
30,000,000 |
None |
7 3/8% Series due 1998 |
15,000,000 |
None |
9 1/4% Series due 1999 |
25,000,000 |
None |
9 5/8% Series due 2000 |
25,000,000 |
None |
7 5/8% Series due 2001 |
30,000,000 |
None |
8 % Series due August 1, 2001 |
30,000,000 |
None |
7 3/4% Series due 2002 |
35,000,000 |
None |
7 1/2% Series due December 1, 2002 |
15,000,000 |
None |
8 % Series due 2003 |
40,000,000 |
None |
8 1/8% Series due December 1, 2003 |
40,000,000 |
None |
10 1/2% Series due 2004 |
40,000,000 |
None |
9 1/4% Series due November 1, 1981 |
60,000,000 |
None |
10 1/8% Series due July 1, 2005 |
40,000,000 |
None |
9 1/8% Series due December 1, 2007 |
75,000,000 |
None |
9 7/8% Series due July 1, 2008 |
75,000,000 |
None |
10 1/4% Series due February 1, 2009 |
60,000,000 |
None |
16 1/8% Series due December 1, 1986 |
70,000,000 |
None |
4 1/2% Series due September 1, 1983 |
1,202,000 |
None |
5 1/2% Series due January 1, 1988 |
598,310 |
None |
5 5/8% Series due May 1, 1990 |
1,400,000 |
None |
6 1/4% Series due December 1, 1996 |
3,560,000 |
None |
9 3/4% Series due September 1, 2000 |
4,600,000 |
None |
8 3/4% Series due March 1, 1998 |
9,800,000 |
None |
17 3/8% Series due August 1, 1988 |
75,000,000 |
None |
16 1/2% Series due February 1, 1991 |
80,000,000 |
None |
13 3/8% Series due December 1, 2012 |
75,000,000 |
None |
13 1/4% Series due February 1, 2013 |
25,000,000 |
None |
14 1/8% Series due December 1, 2014 |
100,000,000 |
None |
Pollution Control Series A |
128,800,000 |
None |
10 1/4% Series due July 1, 2016 |
50,000,000 |
None |
9 3/4% Series due July 1, 2019 |
75,000,000 |
None |
10% Series due February 1, 2020 |
150,000,000 |
None |
10 3/8% Series due October 1, 2020 |
175,000,000 |
None |
Solid Waste Disposal Series A |
21,066,667 |
None |
Solid Waste Disposal Series B |
28,440,000 |
None |
7 1/2% Series due August 1, 2007 |
100,000,000 |
None |
7.90% Series due November 1, 2002 |
25,000,000 |
None |
8.70% Series due November 1, 2022 |
25,000,000 |
None |
Pollution Control Series B |
46,875,000 |
None |
6.65% Series due August 1, 2005 |
115,000,000 |
None |
6 % Series due October 1, 2003 |
155,000,000 |
None |
7 % Series due October 1, 2023 |
175,000,000 |
None |
Pollution Control Series C |
20,319,000 |
20,319,000 |
Pollution Control Series D |
9,586,400 |
9,586,400 |
8 3/4% Series due March 1, 2026 |
85,000,000 |
None |
7% Series due March 1, 2002 |
85,000,000 |
None |
7.72 % Series due March 1, 2003 |
100,000,000 |
None |
6 1/8 % Series due July 1, 2005 |
100,000,000 |
None |
6.70% Series due April 1, 2032 |
100,000,000 |
100,000,000 |
6.00% Series due November 1, 2032 |
100,000,000 |
100,000,000 |
5.40% Series due May 1, 2018 |
150,000,000 |
150,000,000 |
5.90% Series due June 1, 2033 |
100,000,000 |
100,000,000 |
5% Series due July 1, 2018 |
115,000,000 |
115,000,000 |
6.38% Series due November 1, 2034 |
60,000,000 |
60,000,000 |
5.66% Series due February 1, 2025 |
175,000,000 |
175,000,000 |
5% Pollution Control Series E |
45,000,000 |
45,000,000 |
4.50% Series due June 1, 2010 |
100,000,000 |
100,000,000 |
which bonds are also hereinafter sometimes called bonds of the First through Seventy-second Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds, hereinafter referred to as bonds of the Seventy-third Series, unless the context otherwise requires, and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Sixty-sixth Supplemental Indenture, and the terms of the bonds of the Seventy-third Series, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto The Bank of New York Trust Company, National Association (as to property, real or personal, situated or being i n Missouri) and Stanley Burg (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) to Deutsche Bank Trust Company Americas, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing o r of any general description contained in this Sixty-sixth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof, all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the M ortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Sixty-sixth Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the C ompany; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company's contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company's franchise to be a corporation; (7) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas, in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (8) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Sixty-sixth Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that any or all of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto The Bank of New York Trust Company, National Association (as to property, real or personal, situated or being in Missouri), and unto Stanley Burg (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) unto Deutsche Bank Trust Company Americas, as Trustees, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Sixty-sixth Supplemental Indenture being supplemental to the Mortgage.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows:
ARTICLE I
SEVENTY-THIRD SERIES OF BONDS
The Bonds of the Seventy-third Series, and the Corporate Trustee's authentication certificate to be executed on the Bonds of the Seventy-third Series, shall be in substantially the following forms, respectively:
[FORM OF BOND OF SEVENTY-THIRD SERIES]
(TEMPORARY REGISTERED BOND)
This bond is not transferable except to a successor trustee under the Trust Indenture, dated as of June 1, 2006 (the "Trust Indenture"), between Jefferson County, Arkansas (the "Issuer") relating to its Pollution Control Revenue Refunding Bonds (Entergy Arkansas, Inc. Project) Series 2006 (the "Series 2006 Bonds") and Simmons First Trust Company, National Association, as trustee (the "Trust Indenture Trustee").
ENTERGY ARKANSAS, INC.
FIRST MORTGAGE BOND
Pollution Control Series F
No. TR-1
ENTERGY ARKANSAS, INC., a corporation of the State of Arkansas (the "Company"), for value received, hereby promises to pay to Simmons First Trust Company, National Association, or registered assigns, on October 1, 2017 at the office or agency of the Company in the Borough of Manhattan, The City of New York,
FIFTY SIX MILLION THREE HUNDRED SEVENTY EIGHT THOUSAND DOLLARS
in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, without interest until the principal of this bond shall have become due and payable, and to pay interest on any overdue principal at the rate of 6% per annum.
This bond is a temporary bond and is one of an issue of bonds of the Company issuable in series and is one of a series known as its First Mortgage Bonds, Pollution Control Series F, all bonds of all series issued and to be issued under and equally secured (except insofar as any sinking or other fund, established in accordance with the provisions of the Mortgage hereinafter mentioned, may afford additional security for the bonds of any particular series) by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, including the Sixty-sixth Supplemental Indenture dated as of June 1, 2006, called the Mortgage), dated as of October 1, 1944, executed by the Company to Guaranty Trust Company of New York (Deutsche Bank Trust Company Americas, successor) (hereinafter sometimes called the "Corporate Trustee"), and Henry A. Theis (Stanley Burg, successor) and, as to property, real or personal, situated or being in Missouri, Marvin A. Mueller (The Bank of New Y ork Trust Company, National Association, successor), as Trustees. Reference is made to the Mortgage for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds and of the Trustees in respect thereof, the duties and immunities of the Trustees and the terms and conditions upon which the bonds are and are to be secured and the circumstances under which additional bonds may be issued. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds and/or coupons and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then outstanding as are specified in the Mortgage.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a default as in the Mortgage provided.
This bond is not transferable except to any successor trustee under the Trust Indenture, any such transfer to be made in the manner prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, upon surrender and cancellation of this bond, together with a written instrument of transfer duly executed by the registered owner or by his duly authorized attorney, and thereupon a new fully registered temporary or definitive bond of the same series for a like principal amount will be issued to the transferee in exchange herefor as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
In the manner prescribed in the Mortgage, any bonds of this series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, are exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
In the manner prescribed in the Mortgage, this temporary bond is exchangeable at the office or agency of the Company in the Borough of Manhattan, The City of New York, without charge, for a definitive bond or bonds of the same series of a like aggregate principal amount when such definitive bonds are prepared and ready for delivery.
As provided in the Mortgage, the Company shall not be required to make transfers or exchanges of bonds of any series for a period of ten days immediately preceding any interest payment date for bonds of said series, or immediately preceding any designation of bonds of said series to be redeemed, and the Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.
The bonds of this series are subject to redemption as provided in the Sixty-sixth Supplemental Indenture.
The bonds of this series have been issued in order to evidence in part the obligation of the Company to make certain payments under the Loan Agreement, dated as of June 1, 2006, between the Issuer and the Company.
The obligation of the Company to make any payment of the principal of or interest on the bonds of this series, whether at maturity, upon redemption or otherwise, shall be reduced by the amount of any reduction under the Trust Indenture of the amount of the corresponding payment required to be made by the Issuer thereunder in respect of the principal of or interest on the Series 2006 Bonds.
The Trustees may conclusively presume that the obligation of the Company to pay the principal of and interest on the bonds of this series as the same shall become due and payable shall have been fully satisfied and discharged unless and until the Corporate Trustee shall have received a written notice (which may be a facsimile followed by a hard copy) from the Trust Indenture Trustee, signed by its President, a Vice President or a Trust Officer, stating that the corresponding payment of principal of or interest on the Series 2006 Bonds has become due and payable and has not been fully paid and specifying the amount of funds required to make such payment.
The Trustees may conclusively presume that no redemption of bonds of this series is required unless and until the Corporate Trustee shall have received a written notice (which may be a facsimile followed by a hard copy) from the Trust Indenture Trustee signed by its President, a Vice President or a Trust Officer, stating that the Series 2006 Bonds have become immediately due and payable pursuant to Section 8.02 of the Trust Indenture, upon the occurrence of an Event of Default under Section 8.01 (a), (b) or (d) of said Trust Indenture (a default by the Issuer in the performance or observance of any covenants, agreements or conditions (other than payment covenants) in the Trust Indenture or the Series 2006 Bonds will not result in an obligation of the Company to redeem the bonds of this series), or that the Series 2006 Bonds are to be redeemed pursuant to Article III of the Trust Indenture and specifying the date fixed for the redemption and the principal amount thereof. Said notice shall also contain a waiver of notice under the Mortgage of such redemption by the Trust Indenture Trustee, as the holder of all the bonds of this series then Outstanding.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
This bond shall be construed in accordance with and governed by the laws of the State of New York.
This bond shall not become obligatory until Deutsche Bank Trust Company Americas, the Corporate Trustee under the Mortgage, or its successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, ENTERGY ARKANSAS, INC. has caused this bond to be signed in its corporate name by its President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries, by her signature or a facsimile thereof, on June 13, 2006.
&n bsp; ENTERGY ARKANSAS, INC.
&n
bsp; By
 
; Steven C. McNeal
&nb
sp; Vice President and Treasurer
Attest:
Dawn Abuso
Assistant Secretary
CORPORATE TRUSTEE'S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned Mortgage.
&n bsp; DEUTSCHE BANK TRUST COMPANY AMERICAS,
&n bsp; as Corporate Trustee
&n
bsp; By ________________________
&nb
sp; Authorized Officer
(II) The bonds of the Seventy-third Series shall be issued in the aggregate principal amount of $56,378,000 and delivered to, and registered in the name of and held by, Simmons First Trust Company, National Association (hereinafter the "Trust Indenture Trustee"), the trustee under the Trust Indenture, dated as of June 1, 2006 (the "Trust Indenture") between Jefferson County, Arkansas (the "Issuer"), the issuer of the Pollution Control Revenue Refunding Bonds (Entergy Arkansas, Inc. Project) Series 2006 (hereinafter the "Series 2006 Bonds"), in order to evidence in part the Company's obligation to make certain payments under the Loan Agreement dated as of June 1, 2006, between the Issuer and the Company.
The obligation of the Company to make any payment of principal of or interest on the bonds of the Seventy-third Series, whether at maturity, upon redemption or otherwise, shall be reduced by the amount of any reduction under the Trust Indenture of the amount of the corresponding payment required to be made by the Issuer thereunder in respect of the principal of or interest on the Series 2006 Bonds. The Trustees may conclusively presume that the obligation of the Company to pay the principal of or interest on the bonds of the Seventy-third Series as the same shall become due and payable shall have been fully satisfied and discharged unless and until the Corporate Trustee shall have received a written notice (which may be a facsimile followed by a hard copy) from the Trust Indenture Trustee, signed by its President, a Vice President or a Trust Officer, stating that the corresponding payment of principal of or interest on the Series 2006 Bonds has become due and payable and has not been full y paid and specifying the amount of funds required to make such payment.
(III) In the event that any Series 2006 Bonds outstanding under the Trust Indenture shall become immediately due and payable pursuant to Section 8.02 of the Trust Indenture upon the occurrence of an Event of Default under Section 8.01 (a), (b) or (d) of the Trust Indenture, all bonds of the Seventy-third Series then Outstanding shall be redeemed by the Company, on the date such Series 2006 Bonds shall have become immediately due and payable, at a redemption price of 100% of the principal amount thereof. A default by the Issuer in the performance or observance of any covenants, agreements or conditions (other than payment covenants) in the Trust Indenture or the Series 2006 Bonds will not result in an obligation of the Company to redeem the bonds of the Seventy-third Series.
In the event that any Series 2006 Bonds are to be redeemed pursuant to Article III of the Trust Indenture, bonds of the Seventy-third Series, in a principal amount equal, as nearly as practicable, to the sum of (i) the principal amount of such Series 2006 Bonds being redeemed and (ii) eight-twelfths (8/12) of the annual interest due on such Series 2006 Bonds being redeemed, shall be redeemed by the Company, on the date fixed for redemption of such Series 2006 Bonds, at a redemption price of 100% of the principal amount thereof.
The Trustees may conclusively presume that no redemption of bonds of the Seventy-third Series is required pursuant to this subsection (III) unless and until the Corporate Trustee shall have received a written notice (which may be a facsimile followed by a hard copy) from the Trust Indenture Trustee signed by its President, a Vice President or a Trust Officer, stating that the Series 2006 Bonds have become immediately due and payable pursuant to Section 8.02 of the Trust Indenture upon the occurrence of an Event of Default under Section 8.01 (a), (b) or (d) of the Trust Indenture, or that the Series 2006 Bonds (or any portion thereof) are to be redeemed pursuant to Article III of the Trust Indenture and specifying the date fixed for the redemption and the principal amount thereof. Said notice shall also contain a waiver of notice under the Mortgage of such redemption by the Trust Indenture Trustee, as the holder of all the bonds of the Seventy-third Series then Outstanding.
(IV) The Company hereby waives its right to have any notice of redemption pursuant to subsection (III) of this Section 1 state that such notice is subject to the receipt of the redemption moneys by the Corporate Trustee before the date fixed for redemption. Notwithstanding the provisions of Section 52 of the Mortgage, any such notice under such Section shall not be conditional
(V) At the option of the registered owner, any bonds of the Seventy-third Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
Bonds of the Seventy-third Series shall not be transferable except to any successor trustee under the Trust Indenture, and any such transfer shall be made (subject to the provisions of Section 12 of the Mortgage) at the office or agency of the Company in the Borough of Manhattan, The City of New York.
The Company hereby waives any right to make a charge for any exchange or transfer of bonds of the Seventy-third Series.
Upon the delivery of this Sixty-sixth Supplemental Indenture and upon compliance with the applicable provisions of the Mortgage, as heretofore supplemented, there shall be an initial issue of bonds of the Seventy-third Series for the aggregate principal amount of $56,378,000.
ARTICLE II
MISCELLANEOUS PROVISIONS
The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Sixty-sixth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Sixty-sixth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Sixty-sixth Supplemental Indenture.
IN WITNESS WHEREOF, ENTERGY ARKANSAS, INC. has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and DEUTSCHE BANK TRUST COMPANY AMERICAS has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Assistant Vice Presidents, and its corporate seal to be attested by one of its Associates for and in its behalf, and STANLEY BURG has hereunto set his hand and affixed his seal, and THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or one of its Assistant Vice Presidents, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Treasurers or one of its Assistant Vice Presidents for and in its behalf, as of the day and year first above written.
&n bsp; ENTERGY ARKANSAS, INC.
&n bsp; By /s/ Steven C. McNeal
  ; Steven C. McNeal
&nb sp; Vice President and Treasurer
Attest:
/s/ Dawn Abuso
Dawn Abuso
Assistant Secretary
Executed, sealed and delivered by
ENTERGY ARKANSAS, INC.
in the presence of:
/s/Carol Gardsbane
Carol Gardsbane
/s/ Shannon Ryerson
Shannon Ryerson
DEUTSCHE BANK TRUST COMPANY AMERICAS,
As Corporate Trustee
By: /s/ Wanda Camacho
Wanda Camacho
Vice President
By: /s/ Richard L. Buckwalter
Richard L. Buckwalter
Vice President
Attest:
/s/ Jennifer Davis
Jennifer Davis
Associate
STANLEY BURG,
As Co-Trustee
/s/ Stanley Burg [L..S.]
Executed, sealed and delivered by
DEUTSCHE BANK TRUST COMPANY AMERICAS and STANLEY BURG
in the presence of:
/s/ Janet Robinson
Janet Robinson
/s/ Stacy Coulon
Stacy Coulon
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION,
As Co-Trustee as to property, real or personal, situated or being in Missouri
By: /s/ William Cardozo
William Cardozo
Vice President
Attest:
/s/ Craig A. Kaye
Craig A. Kaye
Assistant Vice President
Executed, sealed and delivered by
THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION
in the presence of:
/s/ Geraldine Creswell
Geraldine Creswell
/s/ Jamie Jarvis
Jamie Jarvis
STATE OF LOUISIANA )
) SS.:
PARISH OF ORLEANS )
On this 1st day of June, 2006, before me, Jennifer B. Favalora, a Notary Public duly commissioned, qualified and acting within and for said Parish and State, appeared in person the within named Steven C. McNeal and Dawn Abuso, to me personally well known, who stated that they were the Vice President and Treasurer and Assistant Secretary, respectively, of ENTERGY ARKANSAS, INC., a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 1st day of June, 2006, before me personally came Steven C. McNeal, to me known, who, being by me duly sworn, did depose and say that he resides at 7903 Winner's Circle, Mandeville, Louisiana 70448; that he is the Vice President and Treasurer of ENTERGY ARKANSAS, INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 1st day of June, 2006, before me appeared Dawn Abuso, to me personally known, who, being by me duly sworn, did say that she is the Assistant Secretary of ENTERGY ARKANSAS, INC., and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and she acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said Parish and State the day and year last above written.
/s/ Jennifer B. Favalora
Jennifer B. Favalora
Notary Public (ID# 57639)
Parish of Orleans, State of Louisiana
My Commission is Issued For Life
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 9th day of June, 2006, before me, Annie Jaghatspanyan, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared Wanda Camacho, Richard L. Buckwalter and Jennifer Davis, to me personally well known, who stated that they were a Vice President and an Associate, respectively, of DEUTSCHE BANK TRUST COMPANY AMERICAS, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 9th day of June, 2006, before me personally came Wanda Camacho, to me known, who, being by me duly sworn, did depose and say that she resides at 267 Delano Place, Fairview, New Jersey 07022; that she is a Vice President of DEUTSCHE BANK TRUST COMPANY AMERICAS, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
On the 9th day of June, 2006, before me personally came Richard L. Buckwalter, to me known, who, being by me duly sworn, did depose and say that he resides at 411 12th Street, Brooklyn, NY 11215; that he is a Vice President of DEUTSCHE BANK TRUST COMPANY AMERICAS, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
On the 9th day of June, 2006, before me appeared Jennifer Davis, to me personally known, who, being by me duly sworn, did say that he is an Associate of DEUTSCHE BANK TRUST COMPANY AMERICAS, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
/s/ Annie Jaghatspanyan
Annie Jaghatspanyan
Notary Public, State of New York
No 01JA6062022
Qualified in New York County
Commission Expires September 23, 2009
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 9th day of June, 2006, before me, Annie Jaghatspanyan, the undersigned, personally appeared, STANLEY BURG, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained.
On the 9th day of June, 2006, before me personally appeared STANLEY BURG, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Annie Jaghatspanyan
Annie Jaghatspanyan
Notary Public, State of New York
No 01JA6062022
Qualified in New York County
Commission Expires September 23, 2009
STATE OF FLORIDA )
) SS.:
CITY OF DUVAL )
On this 31st day of May, 2006, before me, Lillie C. Mariano, a Notary Public duly commissioned, qualified and acting within and for said county and state, appeared William Cardozo and Craig A. Kaye, to me personally known, who stated that they were a Vice President and Assistant Vice President, respectively, of THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, a National Association, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and on behalf of said Company; and further stated that they had so signed, executed and delivered the same for the consideration, uses and purposes therein mentioned and set forth.
On the 31st day of May, 2006, before me personally appeared Geraldine Creswell, to me personally known, who, being by me duly sworn, did depose and say that he resided at Jacksonville, Florida; that he is a Assistant Treasurer of THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, one of the companies described in and which executed the above instrument; that he knows the seal of said National Association; that the seal affixed to said instrument is such seal; that it was so affixed by authority of its Board of Directors, and that he signed his name thereto by like authority.
On the 31st day of May, 2006, before me appeared Jamie Jarvis, to me personally known, who, being by me duly sworn, did say that he is a Trust Associate of THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION, and that the seal affixed to the foregoing instrument is the seal of said National Association, and that said instrument was signed and sealed in behalf of said National Association by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said entity.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said City and State the day and year last above written.
/s/ Lillie C. Mariano
Lillie C. Mariano
Notary Public, State of Florida
Qualified in Duval County
Commission Expires 09/29/08
Exhibit 10(a)
RESTRICTED UNIT AGREEMENT
This RESTRICTED UNIT AGREEMENT, by and between Entergy Corporation and J. Wayne Leonard ("Grantee"), shall be effective as of the date approved by the Personnel Committee of the Entergy Corporation Board of Directors, contingent upon execution by the parties. The definitions of capitalized terms used in this Agreement are provided in Section 19, unless otherwise noted.
- 50,000 Restricted Units shall vest on August 3, 2008.
- 50,000 Restricted Units shall vest on August 3, 2009.
Grantee must be a full-time employee of a System Company (as defined in the EOP) continuously from the Effective Date of this agreement through the applicable vesting date in order to vest in the Restricted Units that are scheduled to become vested on such vesting date. Notwithstanding the foregoing, the following subsections sets forth the entitlement of Grantee or his beneficiary(ies) to certain benefits under specified circumstances described in each subsection, and in no event shall Grantee and his beneficiary(ies) be entitled to payments and benefits under more than one such subsection.
2.1 The Restricted Units constitute "Other EOP Awards," as that term is defined in Grantee's Retention Agreement and, therefore, the vesting of such Restricted Units shall accelerate in the event Grantee experiences a Qualifying Termination or a Merger Related Termination, as those terms are defined in Grantee's Retention Agreement with the Company, executed on November 21, 2000 and effective as of October 27, 2000 ("Retention Agreement").2.2 The Restricted Units shall be eligible for accelerated vesting under Section 11.2 of the EOP in the event Grantee experiences a Qualifying Event (as defined in the EOP) while a System Management Participant (as defined in the EOP).
2.3 Any portion of Grantee's Restricted Unit grant that is not already vested in accordance with the above schedule shall immediately vest upon (a) Grantee's termination of employment for Good Reason (as defined in Section 19.9 of this Agreement); (b) Grantee's death or Disability (as defined in Section 19.6 of this Agreement); or (c) Company's termination of Grantee's employment for any reason other than Cause (as defined in Section 19.2 of this Agreement).
Payment or Deferral of Restricted Units.
3.1 Except as elected by Grantee in accordance with Section 3.2, as soon as reasonably practicable after each date on which the Restricted Units vest hereunder but in no event later than the date that is 2 1/2 months from the end of the Company's taxable year in which such amount is no longer subject to a substantial risk of forfeiture, the Company shall pay to Grantee a cash amount equal to the Fair Market Value of a share of Common Stock on the date of vesting, multiplied by the number of Restricted Units which vested on such date. Notwithstanding the aforementioned timing of payment, such payment shall be made in accordance with the short term deferral exception of Code Section 409A regulations, as may be amended after the Effective Date of this Agreement.
3.2 In lieu of receiving payment of any vested Restricted Units at the time set forth in Section 3.1 above, Grantee may elect, to the extent allowed under the EOP in accordance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended from time to time, to defer payment in accordance with the EOP. Any such election to defer must be made at least 12 months prior to the vesting date of such amount and, if an initial deferral election, within 30 days of the Effective Date.
Termination, Forfeiture and/or Repayment of Restricted Units. Except as otherwise provided herein, the Restricted Units for which restrictions have not yet lifted shall terminate on the date on which the Grantee's full-time System employment terminates. In addition, Grantee agrees to the following:
4.1 In the event Grantee vests in all or a portion of the Restricted Units granted under this Agreement, then for a period of two years following the Date of Termination, Grantee shall not engage (without the prior written consent of Company) in any employment or other activity (either in his individual capacity or together with any other person, corporation, governmental agency or body, or other entity) with any entity that is (i) listed in the Standard & Poor's Electric Index, Philadelphia Utility Index, or the Dow Jones Utilities Index; or (ii) in competition with, or similar in nature to, any business conducted by any System Company at any time during such period, where such competing employer is located in, or servicing in any way customers located in, those parishes and counties in which any System Company services customers during such period. In the event of any violation by Grantee of this subsection 4.1, or in the event that all or any part or application of this subsection 4.1 is held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, then (i) Grantee shall repay to Company, within 5 business days of Company's written request therefor, any Restricted Unit amount previously paid to him pursuant to this Agreement, (ii) Grantee shall forfeit any amount previously awarded to him and deferred under the EOP or otherwise pursuant to this Agreement, and (iii) Grantee shall have no further entitlement to receive any additional payments or benefits under this Agreement.4.2 For a period of two years following the Date of Termination, Grantee agrees not to take any action or make any statement, written or oral, to any current or former employee of any System Company, or to any other person, which disparages any System Company, its management, directors or shareholders, or its practices, or which could reasonably be expected to disrupt or impair their normal operations, including actions or statements (i) that could reasonably be expected to harm the reputation of any System Company with its clients, suppliers, employees or the public; or (ii) that could reasonably be expected to interfere with existing or prospective contractual or employment relationships with any System Company or its clients, suppliers or employees. In the event of any violation by Grantee of this subsection 4.2, or in the event that all or any part or application of this subsection 4.2 is held or found invalid or unenforceable for any reason whatsoever by a court of competent juri sdiction , then (i) Grantee shall repay to Company, within 5 business days of Company's written request therefor, any Restricted Unit amount previously paid to him pursuant to this Agreement, (ii) Grantee shall forfeit any amount previously awarded to him and deferred under the EOP or otherwise pursuant to this Agreement, and (iii) Grantee shall have no further entitlement to receive any additional payments or benefits under this Agreement.
Amendment and Code Section 409A Limitations. This Agreement may be amended or modified only by a written instrument signed by Grantee and by an expressly authorized representative of Company. The parties acknowledge that certain provisions of this Agreement may be required to be amended, following the issuance of additional guidance by the Internal Revenue Service with respect to Section 409A of the Internal Revenue Code of 1986, as amended from time to time, to avoid the possible imposition of additional tax under Section 409A with respect to certain payments and benefits under this Agreement. Company agrees that it will not unreasonably withhold its consent to any such amendments which in its determination are (i) feasible and necessary to avoid adverse tax treatment under Section 409A for the Grantee, and (ii) not adverse to the interests of Company.
Settlement of Disputes. The Committee shall have full authority to interpret and construe the terms of the EOP and this Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, binding and conclusive.
12.1 All claims by Grantee for benefits under this Agreement shall be directed to and determined by the Committee and shall be in writing. The Committee shall have the sole and exclusive power and discretion to make factual determinations, construe and interpret the Agreement. Any denial by the Committee of a claim for benefits under this Agreement shall be delivered to Grantee in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Committee shall afford a reasonable opportunity to Grantee for a review of the decision denying a claim and shall further allow Grantee to appeal to the Committee a decision of the Committee within sixty (60) days after notification by the Committee that Grantee's claim has been denied.12.2 If Grantee elects to challenge the Committee's decision in judicial proceedings, that action must be filed within 180 days following the day the Committee makes a final determination on the claim.
Successors. In addition to any obligations imposed by law upon any successor to Company, Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Grantee to compensation from Company in the same amount and on the same terms as Grantee would be entitled to hereunder if Grantee were to be terminated without Cause, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.
If to Company:
Entergy Corporation
Attention: General Counsel
639 Loyola Avenue, 26th Floor
New Orleans, LA 70113-3125
19.1 Agreement shall mean this Restricted Unit Agreement. 19.2 Cause shall mean:
For purposes of clause (b) of this Section 19.2, no act, or failure to act, on Grantee's part shall be deemed "willful" unless done, or omitted to be done, by Grantee not in good faith and without reasonable belief that Grantee's act, or failure to act, was in the best interests of the System.
19.3 Committee shall mean the Personnel Committee of the Entergy Corporation Board of Directors.19.4 Company shall mean Entergy Corporation and shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.
19.5 Date of Termination shall mean (i) if Grantee's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Grantee shall not have returned to the full-time performance of Grantee's duties during such thirty (30) day period), and (ii) if Grantee's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by Grantee, shall not be less than thirty (30) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).
19.6 Disability shall be deemed the reason for the termination by a System employer of Grantee's employment, if, as a result of Grantee's incapacity due to physical or mental illness, Grantee shall have been absent from the full-time performance of Grantee's duties with the System for a period of six (6) consecutive months, Company shall have given Grantee a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, Grantee shall not have returned to the full-time performance of Grantee's duties.
19.7 Effective Date shall mean the date the Agreement is approved by the Committee.
19.8 EOP shall mean the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries (As Amended and Restated Effective for Grants and Elections after February 13, 2003), as may be amended from time to time.
19.9 Good Reason for purposes of this Agreement shall mean the occurrence, without Grantee's express written consent, of any of the following events during Grantee's employment:
Grantee's right to terminate his employment for Good Reason shall not be affected by Grantee's incapacity due to physical or mental illness. Grantee's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason.
19.10 Notice of Termination for purposes of this Agreement shall mean the notice of purported termination of Grantee's employment (other than by reason of death), which shall be communicated by written notice indicating the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Grantee's employment under the provision so indicated.
19.11 System shall mean Company and all other System Companies.
19.12 System Company(ies) shall mean Company and any other corporation 80% or more of whose stock (based on voting power or value) is owned directly or indirectly by Company and any partnership or trade or business which is 80% of more controlled, directly or indirectly, by Company, and any successor to the business and/or assets of any such entity.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement, which is effective on the day and year first above written.
ENTERGY CORPORATION
By /s/ William E. Madison
William E. Madison
Senior Vice-President,
Human Resources and Administration
The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Agreement and to all the terms and provisions of the EOP herein incorporated by reference. The undersigned further acknowledges that the EOP Prospectus is available to him for review on the Company's internal Web page.
/s/ J. Wayne Leonard
J. Wayne Leonard, Grantee
Exhibit 10(b)
RETENTION AGREEMENT
THIS AGREEMENT, executed on August 3, 2006, effective as of August 3, 2006, by and between Entergy Corporation, a Delaware corporation ("Company"), and Leo P. Denault ("Executive");
WHEREAS, Executive is currently employed by Entergy Services, Inc., a System employer, and serves in the position of Executive Vice President and Chief Financial Officer of Company;
WHEREAS, Company wishes to encourage Executive to remain employed by a System employer and provide services to the System; and
WHEREAS, Executive wishes to remain in the employ of a System employer and to provide services to the System;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Company and Executive hereby agree as follows:
2.1 Company's Covenants. In order to induce Executive to remain in the employ of a System employer and to provide services to the System, Company agrees, under the conditions described herein, to pay Executive the payments and benefits described herein upon the circumstances described in Sections 3 and 4 below. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between Executive and Company, Executive shall not have any right to be retained in the employ of any System Company.2.2 Executive's Covenants. Executive agrees to the following:
3.1 Physical or Mental Illness. During any period that Executive fails to perform Executive's full-time duties within the System as a result of incapacity due to physical or mental illness, his System employer shall pay Executive's full salary to Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to Executive under the terms of any compensation or benefit plan, program or arrangement (other than Company's short- or long-term disability plan, as applicable) maintained by Company during such period, until Executive's employment is terminated by his System employer for Disability. If Executive is entitled to and receives payments under Company's short term disability program, such payments shall offset the amount of salary otherwise payable to Executive under this Section 3.1.
3.2 Termination of Employment Prior to Attainment of Age 55.
3.3 Termination of Employment On or After Attainment of Age 55.
3.4 Termination On Account of Death or Disability. If Executive's employment should terminate at any time on account of death or Disability, Executive or his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees (in the event of death) shall receive Executive's Accrued Obligations, Normal Post-Termination Compensation and Benefits, SERP Credited Service, Target LTIP Award and Other EOP Awards. Additionally, if Executive's employment should terminate at any time on account of Disability, Executive shall be entitled to SERP Permission to Retire or SERP permission to separate, as may be applicable.3.5 Termination for Cause. Notwithstanding any other provision to the contrary, if Executive's employment with the System should terminate for Cause at any time, Executive shall be entitled only to Executive's Accrued Obligations and Normal Post-Termination Compensation and Benefits.
4.1 Regardless of whether Executive becomes entitled to any payments or benefits under this Agreement, if any of the payments or benefits received or to be received by Executive (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with any System Company) (all such payments and benefits, excluding the Gross-Up Payment, being hereinafter referred to as the "Total Payments") will be subject to the Excise Tax, Company shall pay to Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.4.2 For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to Executive and selected by the accounting firm which was, immediately prior to the Closing, Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount a llocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of this Section 4), net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
4.3 In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, Executive shall repay to Company, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by Executive, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in Executive's taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calc ulating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. Executive and Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.
8.1 Notice of Termination. Any purported termination of Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with this Section 8. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated.8.2 Date of Termination. "Date of Termination," shall mean (i) if Executive's employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of Executive's duties during such thirty (30) day period), and (ii) if Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by Executive, shall not be less than thirty (30) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).
10.1 In addition to any obligations imposed by law upon any successor to Company, Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from Company in the same amount and on the same terms as Executive would be entitled to hereunder if Executive were to experience a Termination Event, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.10.2 This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amount would still be payable to Executive hereunder (other than amounts which, by their terms, terminate upon the death of Executive) if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of Executive's estate.
If to Company:
Entergy Corporation
Attention: General Counsel,
639 Loyola Avenue, 26th Floor,
New Orleans, LA 70113-3125.
12.1 No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer as may be specifically designated by the Committee. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.12.2 The laws of the State of Delaware shall govern the validity, interpretation, construction and performance of this Agreement.
12.3 All references to sections of the Code shall be deemed also to refer to any successor provisions to such sections. Unless otherwise explicitly stated in this Agreement, any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which Executive has agreed.12.4 Nothing in this Agreement shall be construed or interpreted to provide greater rights, participation, coverage, or benefits under such benefit plans and programs than provided pursuant to the terms and conditions of such plans and programs, except as otherwise specifically provided in this Agreement and then only with respect to (a) the Equity Plan and EOP and the accelerated vesting provisions outlined herein relating to the Equity Plan and EOP, as may be applicable; (b) the SERP Permission to retire, under the terms and conditions outlined in this Agreement; and (c) the SERP Credited Service forfeiture provisions contained in this Agreement. In all other respects, the terms and conditions of the equity grants and other benefit plans and programs shall apply. Unless specifically provided for in a written plan document properly adopted pursuant to such plan, none of the benefits or arrangements described in this Agreement shall be secured or funded in any way, and each shall ins tead constitute an unfunded and unsecured promise to pay money in the future exclusively from the general assets of Executive's System Company employer.
5.1 All claims by Executive for benefits under this Agreement shall be directed to and determined by the Committee and shall be in writing. All claims by Executive for benefits under this Agreement shall be directed to and determined by the Committee and shall be in writing. Company and Executive agree that both parties have had input into the terms of this Agreement and, as such, both should be deemed to have drafted the document. The Committee shall have the sole and exclusive power and discretion to make factual determinations, construe and interpret the Agreement. Any denial by the Committee of a claim for benefits under this Agreement shall be delivered to Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Committee shall afford a reasonable opportunity to Executive for a review of the decision denying a claim and shall further allow Executive to appeal to the Committee a decision of the Comm ittee within sixty (60) days after notification by the Committee that Executive's claim has been denied.15.2 If Executive elects to challenge the Committee's decision in judicial proceedings, that action must be filed within 180 days following the day the Committee makes a final determination on the claim.
16.1 Accrued Obligations shall mean Executive's annual base salary through the Date of Termination to the extent not theretofore paid, together with all unpaid compensation and benefits payable to Executive through the Date of Termination under the terms of Company's compensation and benefit plans, programs or arrangements as in effect from time to time. In no event shall Accrued Obligations include Normal Post-Termination Compensation and Benefits, Severance Payment, SERP Credited Service, SERP Permission to Retire, Target LTIP Award, Other EOP Awards, or Subsidized COBRA. 16.2 Auditor shall have the meaning set forth in Section 4.2 hereof. 16.3 Base Amount shall have the meaning set forth in section 280G(b)(3) of the Code. 16.4 Board shall mean the Board of Directors of Company. 16.5 Cause shall mean:
For purposes of clause (b) of this Section 16.5, no act, or failure to act, on Executive's part shall be deemed "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that Executive's act, or failure to act, was in the best interests of the System.
16.6 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.16.7 Committee shall mean the Personnel Committee of the Board.
16.8 Company shall mean Entergy Corporation and shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.
16.9 Date of Termination shall have the meaning set forth in Section 8.2 hereof.
16.10 Disability shall be deemed the reason for the termination by a System employer of Executive's employment, if, as a result of Executive's incapacity due to physical or mental illness, Executive shall have been absent from the full-time performance of Executive's duties with the System for a period of six (6) consecutive months, Company shall have given Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, Executive shall not have returned to the full-time performance of Executive's duties.16.11 EAIP shall mean Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries, or any successor or replacement plan.
16.12 EOP shall mean the Equity Ownership Plan of Entergy Corporation and Subsidiaries.
16.13 Equity Plan shall mean the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries, or any successor or replacement plan.
16.14 Excise Tax shall mean any excise tax imposed under section 4999 of the Code.
16.15 Executive shall mean the individual named in the first paragraph of this Agreement.
16.16 Good Reason shall mean the occurrence, without Executive's express written consent, of any of the following events during Executive's employment:
16.17 Gross-Up Payment shall have the meaning set forth in Section 4.1 hereof.Executive's right to terminate his employment for Good Reason shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason.
16.18 LTIP shall mean the Long Term Incentive Program under the EOP, the Equity Plan, or any successor or replacement long-term incentive program.
16.19 Normal Post-Termination Compensation and Benefits shall mean Executive's normal post-termination compensation and benefits as such payments become due, and determined under, and paid in accordance with, Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect from time to time. In no event shall Normal Post-Termination Compensation and Benefits include Accrued Obligations, Severance Payment, SERP Credited Service, SERP Permission to Retire, Target LTIP Award, Other EOP Awards, or Subsidized COBRA.
16.20 Notice of Termination shall have the meaning set forth in Section 8.1 hereof. 16.21 Other EOP Awards shall mean the vesting of, and lapse of restrictions on, all restricted shares, stock options, and other awards (excluding awards under the LTIP), as applicable, granted to Executive under the Equity Plan (but not the EOP) prior to the Date of Termination, to the extent such shares, options or other awards have not already vested or restrictions thereon have not yet lifted.
16.22 SECP shall mean the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, or any successor plan thereto.
16.23 SERP shall mean the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, or any successor plan thereto.16.24 SERP Credited Service shall mean 15 additional "Years of Service" granted to Executive under the SERP for purposes of computing Executive's SERP benefit, which shall be reflected in Executive's SERP Participant Application.
16.25 SERP Permission to Retire shall mean permission automatically given to Executive by his Employer to retire solely for the purpose of being eligible to receive any benefit then payable to Executive under the SERP.
16.26 Severance Payment shall mean the payment of a lump sum retention payment, in cash, equal to the product of 2.99 times the sum of: (a) Executive's annual base salary as in effect at any time within one year prior to the effective date of the Agreement or, if higher, immediately prior to a circumstance constituting Good Reason plus (b) the higher of: (i) the annual incentive award actually awarded to the Executive under the EAIP for Company's fiscal year immediately preceding the fiscal year in which Executive's Date of Termination occurs; (ii) the EAIP target award for the Executive for Company's fiscal year in which Executive's Date of Termination occurs; or (iii) the EAIP target award for the Executive for Company's fiscal year in which the effective date of the Agreement occurs. Such Severance Payment shall be made in accordance with the short term deferral exception of Code Section 409A regulations.
16.27 Subsidized COBRA shall mean COBRA continuation coverage, as subsidized by Executive's former Employer to the level that would be paid by a similarly situated active participant under Company-sponsored health plans for similar coverage or benefit options; provided, that such Subsidized COBRA shall end on the earlier of the applicable COBRA continuation period or 18 months from the date of Executive's COBRA qualifying event and shall be available only to the extent that providing such subsidized coverage will not cause adverse tax consequences to Executive or under Company's group health plans.
16.28 System shall mean Company and all other System Companies. 16.29 System Company(ies) shall mean Company and any other corporation 80% or more of whose stock (based on voting power or value) is owned directly or indirectly by Company and any partnership or trade or business which is 80% of more controlled, directly or indirectly, by Company, and any successor to the business and/or assets of any such entity.
16.30 Target LTIP Award shall mean the number of performance share units that Executive shall be entitled to receive under the LTIP with respect to any performance period (as defined in the applicable program or plan) that includes the Date of Termination, such number to be determined as if Executive satisfied the remaining performance requirements and was entitled to the target pay out level under the long term incentive program with respect to such performance periods.
16.31 Tax Counsel shall have the meaning set forth in Section 4.2 hereof.
16.32 Termination Event shall mean a termination of Executive's employment (i) by Executive for Good Reason, or (ii) by Company other than for Cause or Disability. 16.33 Total Payments shall mean those payments so described in Section 4.1 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written and effective as of August 3, 2006 in accordance with the resolution of the Committee of that same date.
ENTERGY CORPORATION EXECUTIVE
By: /s/ William E. Madison
/s/ Leo P. Denault
William E. Madison Leo P. Denault
Senior Vice-President, Executive Vice President and
Human Resources and Administration Chief Financial Officer,
Entergy Corporation
Exhibit 31(a)
CERTIFICATIONS
I, J. Wayne Leonard, certify that: |
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1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ J. Wayne Leonard |
Date: August 8, 2006
Exhibit 31(b)
CERTIFICATIONS
I, Leo P. Denault, certify that: |
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1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Leo P. Denault |
Date: August 8, 2006
Exhibit 31(c)
CERTIFICATIONS
I, Hugh T. McDonald, certify that: |
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1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Hugh T. McDonald |
Date: August 8, 2006
Exhibit 31(d)
CERTIFICATIONS
I, Jay A. Lewis, certify that: |
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1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 31(e)
CERTIFICATIONS
I, Joseph F. Domino, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Joseph F. Domino |
Date: August 8, 2006
Exhibit 31(f)
CERTIFICATIONS
I, E. Renae Conley, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ E. Renae Conley |
Date: August 8, 2006
Exhibit 31(g)
CERTIFICATIONS
I, Jay A. Lewis, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 31(h)
CERTIFICATIONS
I, E. Renae Conley, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Louisiana, LLC; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ E. Renae Conley |
Date: August 8, 2006
Exhibit 31(i)
CERTIFICATIONS
I, Jay A. Lewis, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Louisiana, LLC; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 31(j)
CERTIFICATIONS
I, Carolyn C. Shanks, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Carolyn C. Shanks |
Date: August 8, 2006
Exhibit 31(k)
CERTIFICATIONS
I, Jay A. Lewis, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 31(l)
CERTIFICATIONS
I, Daniel F. Packer, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Daniel F. Packer |
Date: August 8, 2006
Exhibit 31(m)
CERTIFICATIONS
I, Jay A. Lewis, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 31(n)
CERTIFICATIONS
I, Gary J. Taylor, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Gary J. Taylor |
Date: August 8, 2006
Exhibit 31(o)
CERTIFICATIONS
I, Theodore H. Bunting, Jr., certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Theodore H. Bunting, Jr. |
Date: August 8, 2006
Exhibit 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Wayne Leonard, Chief Executive Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ J. Wayne Leonard |
Date: August 8, 2006
Exhibit 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Leo P. Denault, Chief Financial Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Leo P. Denault |
Date: August 8, 2006
Exhibit 32(c)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Hugh T. McDonald, Chairman, President and Chief Executive Officer of Entergy Arkansas, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Hugh T. McDonald |
Date: August 8, 2006
Exhibit 32(d)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy Arkansas, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 32(e)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Joseph F. Domino, Chairman, President and Chief Executive Officer-Texas of Entergy Gulf States, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Joseph F. Domino |
Date: August 8, 2006
Exhibit 32(f)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, E. Renae Conley, President and Chief Executive Officer-Louisiana of Entergy Gulf States, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ E. Renae Conley |
Date: August 8, 2006
Exhibit 32(g)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy Gulf States, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 32(h)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, E. Renae Conley, Chair of the Board, President and Chief Executive Officer of Entergy Louisiana, LLC (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ E. Renae Conley |
Date: August 8, 2006
Exhibit 32(i)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy Louisiana, LLC (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 32(j)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Carolyn C. Shanks, Chairman, President and Chief Executive Officer of Entergy Mississippi, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Carolyn C. Shanks |
Date: August 8, 2006
Exhibit 32(k)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy Mississippi, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 32(l)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Daniel F. Packer, Chairman, President and Chief Executive Officer of Entergy New Orleans, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Daniel F. Packer |
Date: August 8, 2006
Exhibit 32(m)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy New Orleans, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Jay A. Lewis |
Date: August 8, 2006
Exhibit 32(n)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary J. Taylor, Chairman, President and Chief Executive Officer of System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Gary J. Taylor |
Date: August 8, 2006
Exhibit 32(o)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Theodore H. Bunting, Jr., Chief Financial Officer of System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
____/s/ Theodore H. Bunting, Jr. |
Date: August 8, 2006
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 | |||||||
December 31, | June 30, | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Total Interest Charges | $101,600 | $109,523 | $103,210 | $91,221 | $84,430 | $84,992 | $83,225 |
Interest applicable to rentals | 16,449 | 14,563 | 12,762 | 15,425 | 13,171 | 13,911 | 12,224 |
Total fixed charges, as defined | 118,049 | 124,086 | 115,972 | 106,646 | 97,601 | 98,903 | 95,449 |
Preferred dividends, as defined (a) | 13,479 | 12,348 | 11,869 | 14,274 | 12,646 | 12,093 | 12,291 |
Combined fixed charges and preferred dividends, as defined | $131,528 | $136,434 | $127,841 | $120,920 | $110,247 | $110,996 | $107,740 |
Earnings as defined: | |||||||
Net Income | $137,047 | $178,185 | $135,643 | $126,009 | $142,210 | $174,635 | $168,326 |
Add: | |||||||
Provision for income taxes: | |||||||
Total | 100,512 | 105,933 | 71,404 | 105,296 | 89,064 | 96,949 | 90,303 |
Fixed charges as above | 118,049 | 124,086 | 115,972 | 106,646 | 97,601 | 98,903 | 95,449 |
Total earnings, as defined | $355,608 | $408,204 | $323,019 | $337,951 | $328,875 | $370,487 | $354,078 |
Ratio of earnings to fixed charges, as defined | 3.01 | 3.29 | 2.79 | 3.17 | 3.37 | 3.75 | 3.71 |
Ratio of earnings to combined fixed charges and | |||||||
preferred dividends, as defined | 2.70 | 2.99 | 2.53 | 2.79 | 2.98 | 3.34 | 3.29 |
- ------------------------ | |||||||
(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. | |||||||
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 | |||||||
December 31, | June 30, | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Fixed charges, as defined: | |||||||
Total Interest charges | $158,949 | $174,368 | $144,840 | $157,343 | $133,598 | $126,788 | $137,957 |
Interest applicable to rentals | 18,307 | 18,520 | 16,483 | 16,694 | 13,707 | 8,832 | 9,826 |
Total fixed charges, as defined | 177,256 | 192,888 | 161,323 | 174,037 | 147,305 | 135,620 | 147,783 |
Preferred dividends, as defined (a) | 15,742 | 13,017 | 6,190 | 6,845 | 6,991 | 6,444 | 6,373 |
Combined fixed charges and preferred dividends, as defined | $192,998 | $205,905 | $167,513 | $180,882 | $154,296 | $142,064 | $154,156 |
Earnings as defined: | |||||||
Income (loss) from continuing operations before extraordinary items and | |||||||
the cumulative effect of accounting changes | $180,343 | $179,444 | $174,078 | $63,895 | $192,264 | $206,497 | $235,614 |
Add: | |||||||
Income Taxes | 103,603 | 82,038 | 65,997 | 24,249 | 108,288 | 110,270 | 127,735 |
Fixed charges as above | 177,256 | 192,888 | 161,323 | 174,037 | 147,305 | 135,620 | 147,783 |
Total earnings, as defined (b) | $461,202 | $454,370 | $401,398 | $262,181 | $447,857 | $452,387 | $511,132 |
Ratio of earnings to fixed charges, as defined | 2.60 | 2.36 | 2.49 | 1.51 | 3.04 | 3.34 | 3.46 |
Ratio of earnings to combined fixed charges and | |||||||
preferred dividends, as defined | 2.39 | 2.21 | 2.40 | 1.45 | 2.90 | 3.18 | 3.32 |
(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. |
|||||||
Exhibit 99(c) | ||||||
Entergy Louisiana, LLC | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Distributions | ||||||
Twelve Months Ended | ||||||
December 31 |
June 30,
|
|||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Fixed charges, as defined: | ||||||
Total Interest | $116,076 | $100,667 | $76,756 | $74,141 | $85,418 | $91,238 |
Interest applicable to rentals | 7,951 | 6,496 | 6,359 | 5,595 | 4,585 | 4,336 |
Total fixed charges, as defined | $124,027 | $107,163 | $83,115 | $79,736 | $90,003 | $95,574 |
Preferred dividends, as defined (a) | 0 | 0 | 0 | 0 | 0 | 5,683 |
Combined fixed charges and preferred dividends, as defined | $124,027 | $107,163 | $83,115 | $79,736 | $90,003 | $101,257 |
Earnings as defined: | ||||||
Net Income | $132,550 | $144,709 | $146,154 | $127,495 | $128,082 | $107,498 |
Add: | ||||||
Provision for income taxes: | ||||||
Total Taxes | 86,287 | 84,765 | 97,408 | 79,475 | 96,819 | 81,748 |
Fixed charges as above | 124,027 | 107,163 | 83,115 | 79,736 | 90,003 | 95,574 |
Total earnings, as defined | $342,864 | $336,637 | $326,677 | $286,706 | $314,904 | $284,820 |
Ratio of earnings to fixed charges, as defined | 2.76 | 3.14 | 3.93 | 3.60 | 3.50 | 2.98 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.76 | 3.14 | 3.93 | 3.60 | 3.50 | 2.81 |
(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. |
||||||
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 | |||||||
December 31, | June 30, | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Fixed charges, as defined: | |||||||
Total Interest | $44,877 | $50,991 | $45,464 | $47,464 | $44,637 | $43,707 | $48,065 |
Interest applicable to rentals | 1,596 | 1,849 | 1,916 | 1,880 | 1,162 | 771 | 783 |
Total fixed charges, as defined | 46,473 | 52,840 | $47,380 | $49,344 | $45,799 | $44,478 | $48,848 |
Preferred dividends, as defined (a) | 5,347 | 4,674 | 4,490 | 5,099 | 5,067 | 5,129 | 4,643 |
Combined fixed charges and preferred dividends, as defined | $51,820 | $57,514 | $51,870 | $54,443 | $50,866 | $49,607 | $53,491 |
Earnings as defined: | |||||||
Net Income | $38,973 | $39,620 | $52,408 | $67,058 | $73,497 | $62,103 | $60,205 |
Add: | |||||||
Provision for income taxes: | |||||||
Total income taxes | 22,868 | 20,464 | 17,846 | 34,431 | 37,040 | 33,952 | 32,086 |
Fixed charges as above | 46,473 | 52,840 | 47,380 | 49,344 | 45,799 | 44,478 | 48,848 |
Total earnings, as defined | $108,314 | $112,924 | $117,634 | $150,833 | $156,336 | $140,533 | $141,139 |
Ratio of earnings to fixed charges, as defined | 2.33 | 2.14 | 2.48 | 3.06 | 3.41 | 3.16 | 2.89 |
Ratio of earnings to combined fixed charges and | |||||||
preferred dividends, as defined | 2.09 | 1.96 | 2.27 | 2.77 | 3.07 | 2.83 | 2.64 |
- ------------------------ | |||||||
(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. |
|||||||
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 | |||||||
December 31, | June 30, | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Fixed charges, as defined: | |||||||
Total Interest | $15,891 | $19,661 | $27,950 | $17,786 | $16,610 | $13,555 | $9,190 |
Interest applicable to rentals | 1,008 | 977 | 1,043 | 910 | 644 | 426 | 422 |
Total fixed charges, as defined | 16,899 | 20,638 | 28,993 | 18,696 | 17,254 | 13,981 | 9,612 |
Preferred dividends, as defined (a) | 1,643 | 2,898 | 2,736 | 1,686 | 1,545 | 1,172 | 512 |
Combined fixed charges and preferred dividends, as defined | $18,542 | $23,536 | $31,729 | $20,382 | $18,799 | $15,153 | $10,124 |
Earnings as defined: | |||||||
Net Income | $16,518 | ($2,195) | ($230) | $7,859 | $28,072 | $1,250 | 3,557 |
Add: | |||||||
Provision for income taxes: | |||||||
Total | 11,597 | (4,396) | (422) | 5,875 | 16,868 | 1,790 | 2,394 |
Fixed charges as above | 16,899 | 20,638 | 28,993 | 18,696 | 17,254 | 13,981 | 9,612 |
Total earnings, as defined | $45,014 | $14,047 | $28,341 | $32,430 | $62,194 | $17,021 | $15,563 |
Ratio of earnings to fixed charges, as defined | 2.66 | 0.68 | 0.98 | 1.73 | 3.60 | 1.22 | 1.62 |
Ratio of earnings to combined fixed charges and | |||||||
preferred dividends, as defined | 2.43 | 0.60 | 0.89 | 1.59 | 3.31 | 1.12 | 1.54 |
- ------------------------ | |||||||
(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 combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively. |
|||||||
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 | |||||||
December 31, | June 30, | ||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
Fixed charges, as defined: | |||||||
Total Interest | $118,519 | $138,018 | $76,639 | $64,620 | $58,928 | $60,424 | $59,332 |
Interest applicable to rentals | 5,753 | 4,458 | 3,250 | 3,793 | 3,426 | 3,039 | 3,450 |
Total fixed charges, as defined | $124,272 | $142,476 | $79,889 | $68,413 | $62,354 | $63,463 | $62,782 |
Earnings as defined: | |||||||
Net Income | $93,745 | $116,355 | $103,352 | $106,003 | $105,948 | $111,644 | 119,843 |
Add: | |||||||
Provision for income taxes: | |||||||
Total | 81,263 | 43,761 | 76,177 | 75,845 | 78,013 | 69,343 | 73,476 |
Fixed charges as above | 124,272 | 142,476 | 79,889 | 68,413 | 62,354 | 63,463 | 62,782 |
Total earnings, as defined | $299,280 | $302,592 | $259,418 | $250,261 | $246,315 | $244,450 | $256,101 |
Ratio of earnings to fixed charges, as defined | 2.41 | 2.12 | 3.25 | 3.66 | 3.95 | 3.85 | 4.08 |