10-Q 1 0001.txt _________________________________________________________________________ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2000 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-27031 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 840-2734 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 1600 Perdido Building New Orleans, Louisiana 70112 Telephone (504) 670-3674 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 _________________________________________________________________________ Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at July 31, 2000 Entergy Corporation ($0.01 par value) 222,903,941 Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 1999, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward Looking Information The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, performance, strategies, prospects and other aspects of the business of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., System Energy Resources, Inc., and their affiliated companies may involve risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: the effects of weather, the performance of generating units and transmission systems, the possession of nuclear materials, fuel prices and availability, the effects of regulatory decisions and changes in law, litigation, capital spending requirements, the onset of competition, advances in technology, changes in accounting standards, corporate restructuring and changes in capital structure, consummation of the business combination with FPL Group, Inc., movements in the markets for electricity and other energy-related commodities, changes in interest rates and in financial and foreign currency markets generally, changes in corporate strategies, and other factors. ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q June 30, 2000 Page Number Definitions 1 Management's Financial Discussion and Analysis - Significant Factors and Known Trends 3 Management's Financial Discussion and Analysis - Liquidity and Capital Resources 8 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 14 Consolidated Statements of Income 21 Consolidated Statements of Cash Flows 22 Consolidated Balance Sheets 24 Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital 26 Selected Operating Results 27 Entergy Arkansas, Inc.: Results of Operations 28 Income Statements 31 Statements of Cash Flows 33 Balance Sheets 34 Selected Operating Results 36 Entergy Gulf States, Inc.: Results of Operations 37 Income Statements 40 Statements of Cash Flows 41 Balance Sheets 42 Selected Operating Results 44 Entergy Louisiana, Inc.: Results of Operations 45 Income Statements 47 Statements of Cash Flows 49 Balance Sheets 50 Selected Operating Results 52 Entergy Mississippi, Inc.: Results of Operations 53 Income Statements 55 Statements of Cash Flows 57 Balance Sheets 58 Selected Operating Results 60 Entergy New Orleans, Inc.: Results of Operations 61 Income Statements 63 Statements of Cash Flows 65 Balance Sheets 66 Selected Operating Results 68 System Energy Resources, Inc.: Results of Operations 69 Income Statements 70 Statements of Cash Flows 71 Balance Sheets 72 Notes to Financial Statements for Entergy Corporation and Subsidiaries 74 Part II: Item 1. Legal Proceedings 85 Item 4. Submission of Matters to a Vote of Security Holders 86 Item 5. Other Information 87 Item 6. Exhibits and Reports on Form 8-K 88 Signature 90 DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term AFUDC Allowance for Funds Used During Construction ALJ Administrative Law Judge ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas APSC Arkansas Public Service Commission Board Board of Directors of Entergy Corporation BPS British pounds sterling Cajun Cajun Electric Power Cooperative, Inc. Capital Funds Agreement Agreement, dated as of June 21, 1974, as amended, between System Energy and Entergy Corporation, and the assignments thereof CitiPower CitiPower Pty., an electric distribution company serving Melbourne, Australia and surrounding suburbs, which was acquired by Entergy effective January 5, 1996, and was sold by Entergy effective December 31, 1998 Council Council of the City of New Orleans, Louisiana domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively EWG Exempt wholesale generator under PUHCA Entergy Entergy Corporation and its various direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc., an Arkansas corporation Entergy Corporation Entergy Corporation, a Delaware corporation Entergy Gulf States Entergy Gulf States, Inc., a Texas corporation (including wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company) Entergy Louisiana Entergy Louisiana, Inc., a Louisiana corporation Entergy Mississippi Entergy Mississippi, Inc., a Mississippi corporation Entergy New Orleans Entergy New Orleans, Inc., a Louisiana corporation FERC Federal Energy Regulatory Commission FUCO Exempt foreign utility company under PUHCA Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 1999 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy FPL Group FPL Group, Inc., a Florida Corporation and parent company of Florida Power & Light Company Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation Plant Independence Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power London Electricity London Electricity plc - a regional electric company serving London, England, which was acquired by Entergy London Investments plc, effective February 1, 1997, and was sold by Entergy effective December 4, 1998 LPSC Louisiana Public Service Commission Merger The business combination transaction pursuant to which the outstanding shares of FPL Group and the outstanding shares of Entergy Corporation will be converted into the right to receive 1.00 and 0.585 shares, respectively, of a new company Merger Agreement Agreement and Plan of Merger dated July 30, 2000 by and between FPL Group, Entergy Corporation, WCB Holding Corporation, Ranger Acquisition Corporation and Ring Acquisition Corporation MPSC Mississippi Public Service Commission MW Megawatt(s) Abbreviation or Acronym Term NRC Nuclear Regulatory Commission Pilgrim Pilgrim Nuclear Station, 670 MW facility located in Plymouth, Massachusetts purchased in July 1999 from Boston Edison by Entergy's non-utility nuclear power business PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended River Bend River Bend Nuclear Generation Plant SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board System Agreement Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc., an Arkansas corporation UK The United Kingdom of Great Britain and Northern Ireland Unit Power Sales Agreement Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf 1 Waterford 3 Unit No. 3 (nuclear) of the Waterford Plant White Bluff White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the increasing competitive pressures facing Entergy and the electric utility industry, as well as market risks and other significant issues affecting Entergy. Set forth below are recent updates to the information contained therein. Business Combination With FPL Group On July 30, 2000, Entergy Corporation and FPL Group entered into a Merger Agreement, providing for a business combination that results in the creation of a new company. Each outstanding share of FPL Group common stock will be converted into the right to receive one share of the new company's common stock, and each outstanding share of Entergy Corporation common stock will be converted into the right to receive 0.585 of a share of the new company's common stock. It is expected that FPL Group's shareholders will own approximately 57% of the common equity of the new company and Entergy's shareholders will own approximately 43%. The initial board of directors of the new company will consist of eight directors designated by FPL Group and seven directors designated by Entergy. The new company will be given a new name that will be agreed upon between the Boards of Directors of FPL and Entergy prior to the consummation of the Merger. The new company will maintain its principal corporate offices and headquarters in Juno Beach, Florida, and will maintain its utility headquarters in New Orleans, Louisiana. The Merger Agreement generally allows Entergy to continue business in the ordinary course consistent with past practice and contains certain restrictions on Entergy's capital activities, including restrictions on the issuance of securities, capital expenditures, dispositions, incurrence or guarantee of indebtedness, and trading or marketing of energy. Entergy generally will be permitted to take actions pursuant to restructuring legislation in the domestic utility companies' jurisdictions of operation and reorganize its transmission business. Under certain circumstances, if the Merger Agreement is terminated, a termination fee of $215 million may be payable by one of the parties. Both the FPL Group and Entergy Boards of Directors unanimously approved the Merger. The Merger is conditioned, among other things, upon approvals of the shareholders of FPL Group and Entergy and the receipt of required regulatory approvals of various local, state, and federal regulatory agencies and commissions, including the SEC and FERC. Entergy and FPL Group will seek to consummate the Merger by late 2001. Reference is made to Entergy's Form 8-K dated July 31, 2000, which attached copies of the Merger Agreement and a joint press release of Entergy and FPL Group announcing the execution of the Merger Agreement, and Entergy's Form 8-K dated August 3, 2000, which described the terms of the Merger Agreement and attached preliminary pro-forma financial statements of the new company. Domestic Transition to Competition State Regulatory and Legislative Activity Arkansas In April 1999, the Arkansas legislature enacted a law providing for competition in the electric utility industry through retail open access on January 1, 2002. When retail open access is achieved, the generation operations will become a competitive business, but transmission and distribution operations will continue to be regulated. The APSC may delay implementation of retail open access, but not beyond June 30, 2003. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS The implementation of the Arkansas retail open access law through rulemakings and company filings is ongoing. Rulemakings associated with energy service provider licensing rules and affiliate rules have been completed. In June 2000, the APSC declared that billing would become a competitive service at the beginning of retail open access. Entergy Arkansas filed a functional, but not corporate, unbundling plan with the APSC on August 8, 2000. The plan initially establishes separate business units for distribution, generation, and a new retail energy service provider. The plan contemplates the transfer of transmission assets to the Transco discussed in the Form 10-K at "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS." The functional unbundling plan is tentative because the regulatory requirements to implement the retail open access law have not been finalized, and changes to the plan are possible. Texas In June 1999, the Texas legislature enacted a law providing for competition in the electric utility industry through retail open access. The law provides for retail open access by most electric utilities, including Entergy Gulf States, on January 1, 2002. When retail open access is achieved, the generation business and a new retail electricity provider function will become competitive businesses, but transmission and distribution operations will continue to be regulated. The new retail electricity provider function will be the primary point of contact with customers for most services beyond initiation of electric service and restoration of service following outages. In January 2000, as required by the Texas restructuring legislation, Entergy Gulf States filed a business separation plan with the PUCT, which was amended in June 2000. The plan provides that, by January 2002, Entergy Gulf States will be divided into a Texas distribution company, a Texas transmission company, a Texas generation company, a Texas retail electricity provider, and a Louisiana company that will encompass distribution, generation, and transmission operations. In July 2000, the PUCT issued an interim order to approve the amended business separation plan. The plan provides that the Louisiana company would retain the liability for all debt obligations of Entergy Gulf States and that the property of the Texas companies would be released from the lien of Entergy Gulf States' mortgage. Each of the Texas companies would assume a portion of Entergy Gulf States' debt obligations, which assumptions would not act to release the Louisiana company's obligations. Each of the Texas companies would also grant a lien on properties in favor of the Louisiana company to secure its obligations to the Louisiana company in respect of the assumed obligations. In addition, under the plan Entergy Gulf States will refinance or retire existing debt through 2004. Regulatory approvals from FERC, the SEC, and the LPSC will be required before the business separation plan can be implemented. Remaining business separation issues in Texas will be addressed in the unbundled costs proceeding before the PUCT. The LPSC has opened a docket to identify the changes in corporate structure of Entergy Gulf States, and their potential impact on Louisiana retail ratepayers, resulting from restructuring in Texas and Arkansas. Entergy Gulf States filed testimony in that proceeding in August 2000 and hearings are scheduled in February 2001. Pursuant to the Texas restructuring legislation, Entergy Gulf States filed its separated business cost data and proposed transmission, distribution, and competition tariffs with the PUCT on March 31, 2000. This filing also included a proposal for a performance-based enhancement to the authorized rate of return on equity. Management does not agree with the arbitrary level of return on equity set by PUCT rules (200 basis points over the cost of a distribution utility's debt) and is seeking a higher return in its separated cost filing. At a pre-hearing conference held in April 2000, a procedural schedule for the case was established, calling for a hearing in January 2001. Management cannot predict the outcome of this proceeding. In connection with unbundled cost filings made by all Texas investor owned utilities, the PUCT has opened a "generic docket" to determine issues that may be resolved on an industry-wide basis, including incentive mechanisms to enhance the authorized rate of return, before the individual utility hearings begin. See Note 2 to the financial statements for further information on this filing. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Mississippi In May 2000, after two years of studies and hearings, the MPSC announced that it was suspending its docket studying the opening of the state's retail electricity markets to competition. The MPSC based its decision on its finding that competition could raise the electric rates paid by residential and small commercial customers. The final decision ultimately lies with the Mississippi Legislature, which has adjourned its 2000 session. Federal Regulatory Activity See "Part I, Item 1, Competition" in the Form 10-K for a discussion of changes that may result from retail competition and unbundling. In April 2000, the LPSC and the Council filed a complaint with FERC seeking revisions to the System Agreement that they allege are necessary to accommodate the introduction of retail competition in Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas provide utility service, and to protect Entergy's Louisiana customers from any adverse impact that may occur due to the introduction of such retail competition in some jurisdictions but not others. The LPSC and the Council request that FERC immediately institute a proceeding to permit changes to be adopted prior to January 1, 2002, and request, among other things, that FERC cap certain of the System Agreement obligations of Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans and fix these companies' access to pool energy at the average level existing for the three years prior to the date that retail access is initiated in Texas and Arkansas. Alternatively, the LPSC and the Council request that FERC require Entergy to provide wholesale power contracts to these companies to satisfy their energy requirements at costs no higher than would have been incurred if retail competition were not implemented. The LPSC and the Council request that the relief be made available for at least eight years after implementation of retail competition or the withdrawal of Entergy Arkansas and Entergy Gulf States from the System Agreement, or until retail access is implemented in Louisiana and New Orleans. In addition, among other things, the LPSC and the Council assert in their complaint that: o unless the requested relief is granted, the restructuring legislation adopted in Texas and Arkansas, to the extent such legislation requires, or has the effect of, altering the rights of parties under the System Agreement, will result in violations of the interstate commerce clause, the due process clause, and the impairment of contracts clause in the U.S. Constitution; and o the failure of the domestic utility companies to honor a right of first refusal with respect to any sale of generating capacity and associated energy under the System Agreement, and any attempt to eliminate such right of first refusal from the System Agreement, would violate the Federal Power Act and constitute a breach of the System Agreement. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS In June 2000, Entergy's domestic utility companies filed proposed amendments to the System Agreement with FERC to facilitate the implementation of retail competition in Arkansas and Texas and to provide for continued equalization of costs among the domestic utilities in Louisiana and Mississippi. The amendments provide the following: o cessation of participation in all aspects of the System Agreement, other than those related to transmission equalization, for any jurisdictional division of a domestic utility operating in a jurisdiction that initiates retail access; o certain sections of the System Agreement will no longer apply to the sales of generating capacity, whether through the sale of the asset or the output thereof, by a domestic utility operating in a jurisdiction that has established a date by which it will implement retail access; and o modification of the service schedule developed to track changes in energy costs resulting from the Entergy-Gulf States Utilities merger to include one final true-up of fuel costs upon cessation of one company's participation in the System Agreement, which thereafter will no longer be applicable for any purpose. Entergy believes that the proceedings relating to the proposed amendments serve as a response to the complaint by the LPSC and the Council and anticipates that the proceedings would be consolidated. In response to Entergy's proposal, the LPSC and the Council have requested that FERC dismiss the proposed amendments and proceed with the complaint proceedings. Several other parties have also intervened in the proceeding. In the event that the proceedings relating to the proposed amendments proceed, the LPSC and the Council have asserted that the charges to the domestic utility companies under the Unit Power Sales Agreement need to be reconsidered. Entergy has requested an expedited hearing on the proposed amendments and that FERC issue a final decision by October 1, 2001. A procedural schedule has not been established. Neither the timing, nor the ultimate outcome of these proceedings at FERC can be predicted at this time. For a discussion of FERC's August 2000 order in the System Energy proposed rate increase proceeding, see Note 2 to the financial statements. State and Local Rate Regulation The domestic utility companies' retail and wholesale rate matters and other regulatory proceedings are discussed more thoroughly in Note 2 to the financial statements in the Form 10-K. In June 2000, the LPSC approved a settlement between Entergy Gulf States and the LPSC staff to refund $83 million resolving refund issues in Entergy Gulf States' second, third, fourth, and fifth post- Merger earnings reviews filed with the LPSC relating to the period January 1, 1994 through December 31, 1997. This refund, for which adequate reserves have been made, will occur over a three-month period beginning July 2000. In May 2000, Entergy Gulf States filed its seventh required post-Merger earnings analysis with the LPSC. This filing will be subject to review by the LPSC and may result in a change in rates. Entergy Gulf States also is proposing that the allowed return on common equity be increased to 11.60%. A schedule for this proceeding has not yet been established by the LPSC. In May 2000, the LPSC ordered Entergy Louisiana to refund an additional $6.4 million based on its fourth annual performance-based rate plan filed with the LPSC in April 1999 for the 1998 test year. The refund, for which an adequate reserve has been established, was effective April 2000. In May 2000, Entergy Louisiana submitted its fifth annual performance-based rate plan filing for the 1999 test year. The filing indicated that a $24.8 million base rate reduction might be appropriate for implementation effective August 2000. Entergy Louisiana is proposing to increase prospectively the allowed return on common equity from 10.5% to 11.6%, which would reduce the amount of any rate reduction. This filing will be subject to review by the LPSC. A procedural schedule has not yet been established by the LPSC in this proceeding. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Continued Application of SFAS 71 and Stranded Cost Exposure See "Continued Application of SFAS 71 and Stranded Cost Exposure" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the potential effects of discontinuation of SFAS 71 for the generation portion of Entergy's business as well as Entergy's exposure to stranded costs. Because management believes that definitive outcomes have not yet been determined regarding the transition to competition in any of Entergy's jurisdictions, the regulated operations of the domestic utility companies and System Energy continue to apply SFAS 71. The restructuring laws enacted in Arkansas and Texas provide an opportunity for the recovery of stranded costs following review and approval by the APSC or the PUCT. Nearly all of Entergy's exposure to stranded costs involves commitments that were approved by regulators. The actual amount of costs and obligations that will be identified as stranded will be determined in regulatory proceedings. The outcome of the Texas and Arkansas stranded cost proceedings cannot be predicted and will depend upon a number of variables, including the timing of stranded cost determination, the values attributable to certain strandable assets, and the assumptions concerning future market prices for electricity. In June 2000, Entergy Arkansas filed an application to continue the stranded cost mitigation efforts agreed upon in the 1997 settlement agreement approved by the APSC. These mitigation efforts include the funding of a transition cost account with excess earnings to offset future stranded costs and the accelerated amortization of Entergy Arkansas' share of the Grand Gulf purchased power obligation under the Unit Power Sales Agreement. The filing included an updated stranded cost estimate intended to support Entergy Arkansas' recommendation that the mitigation efforts continue. The filing presents an estimated range of stranded costs based upon the comparison of possible generation asset market values to the generation assets' book values and contractual obligations. The range of possible generation asset market values used in the estimate was determined using generation asset sales in other jurisdictions. The estimated range of stranded costs in Arkansas set forth in the filing is $254 million to $1.64 billion. Entergy Gulf States included an estimate of its Texas stranded costs in its March 31, 2000 separated costs filing with the PUCT. Using the model established by the PUCT staff, Entergy Gulf States' estimate of Texas stranded costs is $117.2 million. Entergy Gulf States disagrees with certain of the assumptions and estimates included in the PUCT model and believes that the model understates actual stranded costs. The model offsets potential strandable costs against mitigating factors, including the estimated fair value of existing generation plants, to determine an estimated stranded cost figure. The model, however, does not include estimated River Bend decommissioning costs. The Texas cost filing is discussed more thoroughly in Note 2 to the financial statements. Market Risks Disclosure In May 2000, to mitigate currency exchange rate risk, Entergy entered into separate foreign currency forward contracts to hedge the U.S. dollar equivalent amounts of its net equity investments to be made in the Saltend and Damhead Creek projects located in the United Kingdom. The forward contracts are in the notional amounts of BPS48 million and BPS36.1 million for Saltend and Damhead Creek, respectively. The forward contract for Saltend matured in July 2000 when the equity investment was made and locked in an average spot rate of $1.48338 to BPS1. The forward contract for Damhead Creek will mature in October 2000 and locks in an average spot rate of $1.48424 to BPS1. The banks obligated on these forward contracts are rated by Standard & Poor's at A-1 or above on their short-term obligations. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flows Operations Net cash flow provided by (used in) operations for Entergy, the domestic utility companies, and System Energy for the six months ended June 30, 2000 and 1999 was as follows: Six Months Ended Six Months Ended Company June 30, 2000 June 30, 1999 (In Millions) Entergy $737.8 $591.3 Entergy Arkansas $109.7 $121.0 Entergy Gulf States $105.6 $ 91.7 Entergy Louisiana $ 77.2 $154.7 Entergy Mississippi $(35.9) $ 55.5 Entergy New Orleans $ 16.9 $ 19.9 System Energy $325.1 $175.0 Entergy's consolidated cash flow from operations increased primarily due to its competitive businesses providing $88.7 million to consolidated operating cash flow compared with using $60.8 million for the six months ended June 30, 2000 and 1999, respectively. The increase is primarily due to: o net income from operations of Pilgrim; and o less cash used by the power marketing and trading business. Pilgrim was purchased in July 1999 and provided positive operating cash flow in the six months ended June 30, 2000 compared to no cash flow in the six months ended June 30, 1999. The power marketing and trading business had net income for the six months ended June 30, 2000 compared to a net loss in 1999, which caused this business to provide operating cash flow in 2000 whereas it had used operating cash flow in 1999. The operating cash flows of the domestic utility companies and System Energy were affected by the following money pool activity for the six months ended June 30, 2000: o System Energy's operating cash flow increased primarily due to payments received from affiliated companies; and o Entergy Louisiana and Entergy Mississippi used proceeds from debt issuances in 2000 to pay off borrowings from the money pool and create receivables from the money pool, resulting in an overall decrease in their respective operating cash flows. The money pool is an inter-company funding arrangement designed to reduce the domestic utility companies' and System Energy's dependence on external short-term borrowings. The money pool provides a means by which, on a daily basis, the excess funds of Entergy Corporation, the domestic utility companies, and System Energy may be used by the domestic utilities or System Energy when they have short-term cash requirements. See "Capital Resources" below for a discussion of the limitations on these borrowings. Operating cash flows for the domestic utility companies were also affected by increased use of cash related to deferred fuel costs. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Investing Activities Net cash used in investing activities increased for the six months ended June 30, 2000 due to increased construction expenditures in 2000. The increased construction expenditures were primarily due to: o spending on customer service and reliability improvements by the domestic utility companies; o construction of the Saltend and Damhead Creek power plants by Entergy's global power development business; and o construction costs of turbines incurred by Entergy's global power development business. The maturity of other temporary investments combined with the proceeds from the sale of the Freestone power project provided cash from investing activities in 2000. These sources of cash, however, were largely offset by the proceeds from the sales of Entergy Security, Inc. in January 1999 and Entergy Power Edesur Holdings and several telecommunications businesses in June 1999. Financing Activities Net cash provided by financing activities increased for the six months ended June 30, 2000 primarily due to: o the issuance of debt at Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi; o additional borrowings under the Entergy Corporation credit facility in 2000 compared to repayments on that facility for the six months ended June 30, 1999; o increased borrowings under the credit facilities for the construction of the Saltend and Damhead Creek power projects by Entergy's global power development business; and o a reduction in the retirement of long-term debt. Partially offsetting the overall increase in cash provided was the increased repurchase of Entergy Corporation common stock and the redemption of Entergy Gulf States' preference stock in 2000. Business Combination With FPL Group Entergy Corporation and FPL Group entered into a Merger Agreement on July 30, 2000. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" for a description of the Merger. The Merger Agreement generally allows Entergy to continue business in the ordinary course consistent with past practice and contains certain restrictions on Entergy's activities, including restrictions on the issuance of securities, capital expenditures, dispositions, incurrence or guarantee of indebtedness, and trading or marketing of energy. Entergy does not believe that these covenants will constrain its capital investment plan. Under certain circumstances, if the Merger Agreement is terminated, a termination fee of $215 million may be payable by one of the parties. In addition, under the terms of the Merger Agreement, Entergy will use its commercially reasonable efforts to purchase in open market transactions $430 million of shares of its common stock prior to the closing of the Merger. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Capital Resources Entergy's sources of funds to meet its capital requirements include: o internally generated funds; o cash on hand; o debt or preferred stock issuances; o bank financing under new or existing facilities; o short-term borrowings; and o sales of assets. Entergy requires capital resources for: o construction and other capital expenditures; o debt and preferred stock maturities; o common stock repurchases; o capital investments; o funding of subsidiaries; and o dividend and interest payments. Management provides more information on construction expenditures, capital investments, and long-term debt and preferred stock maturities in Notes 5, 6, 7, and 9 to the financial statements in the Form 10-K. Sources of Capital Resources All of the domestic utility companies have issued debt in 2000, including an issuance by Entergy New Orleans in July 2000. The net proceeds of these issuances have been or will be used for general corporate purposes, including capital expenditures, the retirement of short-term indebtedness, and, in the case of Entergy Gulf States, the mandatory redemption of preference stock. See Note 4 to the financial statements for details regarding issuances of debt in 2000. All debt and common and preferred stock issuances require prior regulatory approval. Preferred stock and debt issuances are subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. The domestic utility companies may also establish special purpose trusts or limited partnerships as financing subsidiaries for the purpose of issuing preferred securities. The domestic utility companies and System Energy expect to continue refinancing or redeeming higher cost debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable. Short-term borrowings by the domestic utility companies and System Energy are limited to amounts authorized by the SEC. The current SEC-authorized limit of $1.078 billion for these companies is effective through November 30, 2001. Borrowings from the money pool and external borrowings combined may not exceed the SEC-authorized limit. As of June 30, 2000, only Entergy New Orleans had borrowings outstanding from the money pool, in the amount of $2.8 million. Other Entergy subsidiaries have SEC authorization to borrow from Entergy Corporation through the money pool, or from external sources, in an aggregate principal amount up to $265 million. These companies had $117.6 million of outstanding borrowings from the money pool as of June 30, 2000. Some of these borrowings are restricted as to use and are collateralized by certain assets. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In May 2000, Entergy Corporation amended its 364-day bank credit facility, increasing the capacity from $250 million to $500 million, of which $435 million of borrowings were outstanding as of June 30, 2000. Proceeds from this credit facility were used for general corporate purposes, for working capital needs, and to repay the $120 million 364-day term loan discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K. Uses of Capital Resources Entergy's global power development business is currently constructing two combined-cycle gas turbine merchant power plants, Saltend and Damhead Creek, in the UK. These projects are discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K. The financing of the construction of these two power plants is discussed in Note 7 to the financial statements in the Form 10-K. Saltend was originally scheduled for commercial operations in January 2000, but is now expected to be complete by the end of 2000. The engineering, procurement, and construction contract with the construction contractor and the turbine manufacturer provides for liquidated damages for lost operating margin and incremental costs. For the six months ended June 30, 2000, Entergy recorded liquidated damages for lost operating margins of $32.9 million ($23 million net of tax). In October 1999, Entergy's global power development business obtained an option to acquire twenty-four GE7FA advanced technology gas turbines, four steam turbines, and eight GE7EA advanced technology gas turbines. The financing of these turbines is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K. In the sale of the Freestone power project, Entergy sold the rights to acquire four of the GE7FA turbines and two of the steam turbines. In March 2000, Entergy's non-utility nuclear business signed an agreement, subject to regulatory approvals, to purchase the New York Power Authority's (NYPA) 825 MW James A. FitzPatrick nuclear power plant located near Oswego, New York and NYPA's 980 MW Indian Point 3 nuclear power plant located in Westchester County, New York. Management expects to close the acquisition during the fourth quarter of 2000. Entergy will pay NYPA $50 million in cash at the closing of the purchase, plus seven annual installments of approximately $108 million commencing one year from the date of the closing, and eight annual installments of $20 million commencing eight years from the date of the closing. Entergy currently projects that these installments will be paid primarily from the proceeds of the sale of power from the plants and that Entergy will provide an additional $100 million of funding. Pursuant to the terms of the agreement with NYPA, the installment payments due by Entergy to NYPA must be secured by a letter of credit from an eligible financial institution. This letter of credit may be secured, in whole or in part, by an Entergy guarantee. Subject to certain conditions, Entergy's non-utility nuclear business has agreed to pay NYPA up to $10 million annually for up to 10 years, beginning on the second anniversary date of such acquisition, if Entergy acquires ownership of the Indian Point 2 nuclear power plant located in Westchester County, New York. If Entergy acquires the Nine Mile Point nuclear power plants (referred to in the following paragraph), it will pay NYPA up to $2 million annually for up to 10 years, commencing on the second anniversary date of such acquisition. NYPA also will be paid $2.5 million annually, for up to twenty years, by Entergy if the NRC grants an extension of the current nuclear operating licenses for the plants. These payments would commence on the first anniversary of the expiration of the respective current licenses and would continue during the extension period. In December 1999, Entergy's non-utility nuclear business signed an agreement with Rochester Gas and Electric Corporation (RG&E) to lease and operate the Nine Mile Point 1 and 2 nuclear power plants, totaling 1,754 MW, located in Scriba, New York. Nine Mile Point 1 is owned by Niagara Mohawk Power Corporation (NiMo), and Nine Mile Point 2 is co-owned by RG&E, NiMo, New York State Electric & Gas Corporation (NYSEG), Long Island Lighting Company doing business as LIPA, and Central Hudson Gas & Electric Corporation. The lease and operating agreement is subject to RG&E's acquisition of NiMo and NYSEG's ownership interests in the plants under RG&E's right of first refusal and is subject to approval by the New York Public Service Commission (NYPSC). NiMo and NYSEG initiated a proceeding before the NYPSC seeking authorization for the sale of their ownership interests in Nine Mile Point 1 and 2 to a third party. Entergy intervened in the proceedings, but on April 25, 2000, NiMo and NYSEG moved to withdraw the request for authority to transfer their interests in the Nine Mile plants on the grounds that there are multiple parties who wish to acquire them. The NYPSC encouraged the owners of the Nine Mile plants to determine the market ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES value of the plants through an open bid process, which will likely take place during the fall of 2000. Entergy expects to participate in the bidding to acquire the Nine Mile plants, or will seek a contract to lease and operate them. In May 2000, Entergy and Koch Industries, Inc. agreed to form a new joint venture company to be called Entergy-Koch L.P. Entergy will contribute to the venture its power marketing and trading business in the United States and the United Kingdom as well as approximately $350 million in cash. Of the $350 million, management expects approximately $200 million will be funded with debt that is non-recourse to Entergy Corporation, and approximately $150 million will be provided by Entergy from available cash. Koch Industries, Inc. will contribute to the venture its 10,000-mile Koch Gateway Pipeline, gas storage facilities including the Bistineau storage facility near Shreveport, Louisiana, and Koch Energy Trading, which markets and trades electricity, gas, weather derivatives and other energy-related commodities and services. The parties will have equal ownership interests in Entergy-Koch L.P., which will be governed by an eight-member board of directors. Entergy will have the right to appoint four members of the board. The venture, which will require prior approval from FERC and from the SEC under PUHCA, is expected to become operational near the end of 2000. In June 2000, Entergy announced a plan with The Shaw Group Inc. to form a new joint venture to be called Entergy-Shaw. The joint venture will provide management, engineering, procurement, construction, and commissioning services for electric power plants. Entergy-Shaw plans to operate in the rapidly growing electric power generation market, including providing services for Entergy's power development plans in North America and Europe. Entergy-Shaw is developing a market-driven reference plant design that is expected to reduce power plant capital costs significantly, while also reducing construction, commissioning, and operating risks. Entergy and Shaw will each own a 50% interest in the joint venture. Entergy does not expect to make a material capital contribution to this joint venture. Entergy's ability to invest in domestic and foreign generation businesses is subject to the SEC's regulations under PUHCA. These regulations limit the total amount that Entergy may invest in domestic and foreign generation businesses to 50 percent of consolidated retained earnings at the time an investment is made. In June 2000, the SEC issued an order that allows Entergy's EWG and FUCO investments to increase from 50% to 100% of Entergy's consolidated retained earnings. Entergy's ability to issue guarantees to its non- utility companies is currently limited by the SEC to a total of $750 million. Entergy currently has an application pending before the SEC to increase this limit by $2 billion. Under PUHCA, the SEC imposes a limit equal to 15% of consolidated capitalization on the amount that may be invested in "energy-related" businesses without specific SEC approval. Entergy has made investments in energy-related businesses, including power marketing and trading. Entergy's available capacity to make additional investments at June 30, 2000 was approximately $1.8 billion. Management expects the available capacity to be partially reduced by Entergy's anticipated investment in Entergy-Koch L.P. In the six months ended June 30, 2000, Entergy Corporation paid $139.6 million in cash dividends on its common stock and received dividend payments totaling $338.8 million from subsidiaries. Declarations of dividends on Entergy's common stock are made at the discretion of the Board. The Board evaluates the level of dividends based upon Entergy's earnings and financial strength. Dividend restrictions are discussed in Note 8 to the financial statements in the Form 10-K. Under the Merger Agreement Entergy can continue to pay dividends at existing levels with increases permitted up to 5% of the amount of the previous twelve-month period. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES In October 1998, the Board approved a plan for the repurchase of Entergy common stock through December 31, 2001 to fulfill the requirements of various compensation and benefit plans. This stock repurchase plan provides for purchases in the open market of up to 5 million shares for an aggregate consideration of up to $250 million. In July 1999, the Board approved the commitment of up to an additional $750 million for the repurchase of Entergy common stock through December 31, 2001. Shares are purchased on a discretionary basis. As of June 30, 2000, Entergy has repurchased 24.7 million shares for an aggregate amount of $636.5 million under these authorizations. As discussed previously, under the terms of the July 30, 2000 Merger Agreement between Entergy and FPL Group, Entergy will use its commercially reasonable efforts to purchase in open market transactions $430 million of shares of its common stock prior to the close of the Merger. Entergy issues shares under its Dividend Reinvestment and Stock Purchase Plan and other compensation and benefit plans. See Note 3 to the financial statements for stock repurchases and issuances made during the six months ended June 30, 2000. See Notes 4, 5, 6, 7, 9, and 10 to the financial statements in the Form 10-K for further discussion of Entergy's capital and refinancing requirements and available lines of credit. Entergy Corporation and System Energy Pursuant to the Capital Funds Agreement, Entergy Corporation has agreed to supply System Energy with sufficient capital to: o maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); o permit the continued commercial operation of Grand Gulf 1; o pay in full all System Energy indebtedness for borrowed money when due; and o enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy's rights in the agreement as security for the specific debt. The Capital Funds Agreement and other Grand Gulf 1-related agreements are more thoroughly discussed in Note 9 to the financial statements in the Form 10-K. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's results of operations are discussed in two business categories, "Domestic Utility Companies and System Energy" and "Competitive Businesses". Domestic Utility Companies and System Energy is Entergy's predominant business segment, contributing 79% and 78% of Entergy's operating revenue for the three and six months ended June 30, 2000, respectively, and 76% and 77% of its net income for the three and six months ended June 30, 2000, respectively. Competitive Businesses include the following segments discussed in Note 6 to the financial statements: "Power Marketing and Trading" and "All Other". "All other" principally includes global power development, non-utility nuclear power, and the parent holding company, Entergy Corporation. The elimination of power marketing and trading mark-to-market profits on intercompany power transactions is also included in "All Other". Net Income Entergy Corporation's consolidated net income increased for the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999 primarily due to: o overall increases of $12.1 million and $16.8 million in net income for the three and six months ended June 30, 2000, respectively, from the domestic utility companies and System Energy, primarily due to a decrease in reserves recorded in 2000 for potential rate actions and a decrease in interest and other charges at System Energy. The overall increases in net income were partially offset by increases in other operation and maintenance expenses at the domestic utility companies and an increase in the effective income tax rate; and o increases in net income of $20.0 million and $25.4 million for the three and six months ended June 30, 2000, respectively, from competitive businesses, primarily resulting from the operation of Pilgrim and liquidated damages received from the Saltend contractor as compensation for lost operating margin from the Saltend plant due to construction delays. The increases were partially offset by an increase in the effective tax rate. Pilgrim did not generate any revenues for Entergy in the six months ended June 30, 1999 because Entergy did not acquire it until July 1999. Consolidated net income also increased for the six months ended June 30, 2000 due to an increase in net income of $29.3 million for the power marketing and trading business primarily resulting from improved trading results and higher summer 2000 forward electricity prices affecting the mark-to-market valuation. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Domestic Utility Companies and System Energy Revenues and Sales The changes in electric operating revenues associated with the domestic utility companies for the three and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base revenues ($52.5) ($76.3) Rate riders (4.8) (10.6) Fuel cost recovery 97.4 198.7 Sales volume/weather 6.9 24.9 Other revenue (including unbilled) (1.5) 16.9 Sales for resale 6.1 12.3 ----- ------ Total $51.6 $165.9 ===== ====== Base revenues Base revenues decreased for the three and six months ended June 30, 2000 primarily due to the reversal of regulatory reserves associated with the accelerated amortization of accounting order deferrals in 1999 in conjunction with the Texas rate settlement at Entergy Gulf States. The net income effect of this reversal was largely offset by the amortization of rate deferrals in 1999 discussed below. Base revenues also decreased for the six months ended June 30, 2000 due to provisions for potential rate refunds at Entergy Louisiana. The decrease was partially offset by reserves of $33 million recorded in 1999 for actual and potential refunds to Louisiana and Texas retail customers at Entergy Gulf States. Rate riders Rate rider revenues do not affect net income because they are offset by specific incurred expenses. Rate rider revenues decreased for the three and six months ended June 30, 2000 as a result of the decreased ANO Decommissioning and Grand Gulf 1 riders at Entergy Arkansas, both of which became effective in January 2000. Fuel cost recovery Fuel cost recovery revenues do not affect net income because they are an increase to revenues that is offset by specific incurred fuel costs. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues increased for the three and six months ended June 30, 2000 due to: o an increased fuel factor implemented in September 1999 in Texas for Entergy Gulf States; o a fuel surcharge implemented in January 2000 in Texas for Entergy Gulf States; o an increase in the energy cost recovery rate that became effective in April 2000 at Entergy Arkansas; o higher fuel costs at Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans due to the increased market price of gas; and o an increase in the energy cost recovery rate at Entergy Mississippi that became effective in January 2000. Sales volume/weather Sales volume increased for the three and six months ended June 30, 2000 due to more favorable weather as well as increased usage by industrial customers at Entergy Gulf States and Entergy Louisiana. Other revenue (including unbilled) Other revenue increased for the six months ended June 30, 2000 primarily due to increased unbilled revenue volume and the addition of unbilled revenue for wholesale customers in Arkansas to the unbilled balance, partially offset by the effect of a change in estimate on unbilled revenues in the second quarter of 1999. The changed estimate more closely aligned the fuel component of unbilled revenues with regulatory treatment. Sales for resale Sales for resale increased for the three and six months ended June 30, 2000 due to increased generation and subsequent sales from River Bend in 2000 at Entergy Gulf States as a result of a refueling outage in the second quarter of 1999. Sales for resale also increased for the six months ended June 30, 2000 due to increased nuclear generation compared with 1999 at Entergy Arkansas, coupled with an increase in the market price of energy. Expenses Fuel and purchased power expenses Fuel and purchased power expenses increased $93.1 million and $222.6 million for the three and six months ended June 30, 2000, respectively, primarily due to: o a shift from lower priced coal to higher priced gas and purchased power at Entergy Arkansas due to scheduled maintenance outages; o an increase in the market prices of purchased power and gas in 2000; o a shift to higher priced purchased power at Entergy Louisiana due to a planned outage at Waterford 3 in June 2000 and reduced gas generation; and o increased nuclear fuel expense in the second quarter of 2000 due to a scheduled outage at Entergy Gulf States in the second quarter of 1999. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel and purchased power expenses also increased for the six months ended June 30, 2000 primarily due to an adjustment of Entergy Gulf States' Texas jurisdiction deferred fuel balance as a result of the fuel reconciliation settlement with the PUCT. The increase was also due to a shift from lower priced coal to higher priced purchased power and gas at Entergy Gulf States as a result of scheduled outages in the first quarter of 2000. These increases were partially offset by an adjustment that increased the deferred fuel balance at Entergy Arkansas. Other operation and maintenance Other operation and maintenance expenses increased $38.0 million and $20.4 million for the three and six months ended June 30, 2000, respectively, primarily due to: o maintenance and planned outages for Entergy Louisiana at Waterford 3 and certain fossil plants; o the capitalization of costs associated with return-to-service generation projects in 1999 for Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans; o increased environmental reserves at Entergy Louisiana; and o an increase in customer service expenses, such as vegetation management at Entergy Arkansas and Entergy Louisiana. The increases were partially offset by the following at Entergy Gulf States: o decreased general plant maintenance in 2000; and o decreased environmental and injuries and damages reserves in 2000. Amortization of rate deferrals Amortization of rate deferrals decreased $80 million for the three and six months ended June 30, 2000 primarily due to the large reduction in the rate deferral balance resulting from the PUCT's approval in June 1999 of the Texas rate settlement at Entergy Gulf States. Other Other income Other income decreased $8.1 million and $6.6 million for the three and six months ended June 30, 2000, respectively, due to the reversal of the provision for abeyed River Bend plant costs at Entergy Gulf States in 1999, which exceeded the write-down of the plant, as the result of the June 1999 PUCT approval of the settlement agreement. Interest charges Interest on long-term debt decreased $8.1 million for the six months ended June 30, 2000 primarily due to the retirement and refinancing of certain long-term debt at Entergy Gulf States, Entergy Louisiana, and System Energy in 1999. Other interest decreased $22.7 million and $15.7 million for the three and six months ended June 30, 2000, respectively, due to an adjustment in 1999 at System Energy to the interest recorded for the potential refund to customers of its proposed rate increase pending at FERC. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Competitive Businesses Revenues and Sales Competitive business revenues decreased approximately $229 million and $172 million for the three and six months ended June 30, 2000, respectively. The decrease was primarily due to a decrease in revenue from the power marketing and trading business resulting from decreased electricity and gas trading volumes. Partially offsetting the decrease in 2000 was the increase in revenues for the non-utility nuclear business. For the three and six months ended June 30, 2000, the non-utility nuclear business had increased revenues of $60 million and $120 million, respectively, primarily from the operation of Pilgrim, which was purchased in July 1999. Although revenues for the power marketing and trading business decreased, the power marketing and trading business had an increase in net income of $29.3 million for the six months ended June 30, 2000 due to: o decreased purchased power expenses as discussed below; o improved trading performance; and o higher summer 2000 forward market electricity prices affecting the mark-to-market valuation. Expenses Fuel and purchased power expenses Fuel and purchased power expenses decreased $289 million and $320 million for the three and six months ended June 30, 2000, respectively. The decrease is attributable to decreased electricity and gas trading volumes in the power marketing and trading business. The overall decrease was partially offset by an increase in fuel and purchased power expenses related to the operation of Pilgrim. Other operation and maintenance Other operation and maintenance expenses increased $28 million for the six months ended June 30, 2000. The increase is primarily attributable to expenses incurred by the non-utility nuclear business from the operation of Pilgrim. Other Other income Other income increased $25 million and $17 million for the three and six months ended June 30, 2000, respectively, due to the following: o liquidated damages of $32.9 million ($23.0 million net of tax) received from the Saltend contractor as compensation for lost operating margin from the plant due to construction delays; o a $20.5 million ($13.3 million net of tax) gain on the sale in June 2000 of the global power development business' investment in the Freestone project located in Fairfield, Texas; and o an increase in interest and dividend income in 2000. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Partially offsetting these increases were the following in 1999: o a $26.7 million ($17 million net of tax) gain on the sale of Entergy Power Edesur Holdings in June; o a $12.9 million ($8 million net of tax) gain on sale of the Entergy Hyperion Telecommunications in June; o a $12.5 million ($.6 million net of tax) gain on the sale of Entergy Security, Inc. in January; and o a $7.6 million ($4.9 million net of tax) favorable adjustment to the final sale price of CitiPower in January. Interest charges Other interest charges increased $10 million and $16 million for the three and six months ended June 30, 2000, respectively, primarily due to the accretion of the decommissioning liability associated with Pilgrim and higher interest expense from increased borrowings on Entergy Corporation's short-term credit facility. Income Taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 37.9% and 29.2%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 39.6% and 31.8%, respectively. The increase was primarily due to the recognition in 1999 of deferred tax benefits related to the expected utilization of foreign tax credits resulting in lower income taxes. ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands, Except Share Data) OPERATING REVENUES Domestic electric $1,664,688 $1,613,136 $3,017,570 $2,851,719 Natural gas 28,396 22,149 74,292 59,880 Steam products - 7,254 - 15,550 Competitive businesses 444,704 673,865 857,418 1,029,177 ----------------------------------------------------- TOTAL 2,137,788 2,316,404 3,949,280 3,956,326 ----------------------------------------------------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 464,436 490,871 962,190 893,844 Purchased power 502,521 676,827 872,064 1,050,626 Nuclear refueling outage expenses 16,629 17,135 35,186 36,820 Other operation and maintenance 450,223 410,707 827,634 778,338 Decommissioning 6,169 10,758 17,106 23,432 Taxes other than income taxes 83,540 83,053 163,158 166,121 Depreciation and amortization 178,749 176,707 357,025 361,549 Other regulatory credits - net (5,900) (2,372) (20,506) (18,970) Amortization of rate deferrals 7,883 88,767 15,279 97,180 ----------------------------------------------------- TOTAL 1,704,250 1,952,453 3,229,136 3,388,940 ----------------------------------------------------- OPERATING INCOME 433,538 363,951 720,144 567,386 ----------------------------------------------------- OTHER INCOME Allowance for equity funds used during construction 8,041 7,348 15,735 12,759 Gain on sale of assets 21,057 40,718 21,574 61,301 Miscellaneous - net 73,651 40,064 102,633 60,016 ----------------------------------------------------- TOTAL 102,749 88,130 139,942 134,076 ----------------------------------------------------- INTEREST AND OTHER CHARGES Interest on long-term debt 118,462 120,164 232,121 242,695 Other interest - net 23,369 36,942 43,652 45,483 Distributions on preferred securities of subsidiary 4,709 4,710 9,419 9,419 Allowance for borrowed funds used during Construction (5,889) (5,926) (11,977) (10,405) ----------------------------------------------------- TOTAL 140,651 155,890 273,215 287,192 ----------------------------------------------------- INCOME BEFORE INCOME TAXES 395,636 296,191 586,871 414,270 Income taxes 149,863 86,433 232,688 131,606 ----------------------------------------------------- CONSOLIDATED NET INCOME 245,773 209,758 354,183 282,664 Preferred dividend requirements and other 8,581 9,981 18,131 20,706 ----------------------------------------------------- EARNINGS APPLICABLE TO COMMON STOCK $237,192 $199,777 $336,052 $261,958 ===================================================== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited)
2000 1999 (In Thousands) OPERATING ACTIVITIES Consolidated net income $354,183 $282,664 Noncash items included in net income: Amortization of rate deferrals 15,279 97,180 Reserve for regulatory adjustments 37,113 13,344 Other regulatory credits - net (20,506) (18,970) Depreciation, amortization, and decommissioning 374,131 384,981 Deferred income taxes and investment tax credits (25,070) (180,410) Allowance for equity funds used during construction (15,735) (12,759) Gain on sale of assets - net (21,574) (61,301) Changes in working capital: Receivables (219,406) (427,677) Fuel inventory (28,416) (36,600) Accounts payable 185,462 353,302 Taxes accrued 131,612 262,406 Interest accrued 26,391 (35,306) Deferred fuel (154,214) (18,029) Other working capital accounts 59,295 (86,458) Provision for estimated losses and reserves (28,396) (24,632) Changes in other regulatory assets (32,028) (32,960) Other 99,715 132,513 ------------------------ Net cash flow provided by operating activities 737,836 591,288 ------------------------ INVESTING ACTIVITIES Construction/capital expenditures (822,584) (545,842) Allowance for equity funds used during construction 15,735 12,759 Nuclear fuel purchases (73,533) (92,196) Proceeds from sale/leaseback of nuclear fuel 43,758 75,097 Proceeds from sale of businesses 61,519 351,082 Investment in other nonregulated/nonutility properties (98,493) (14,406) Proceeds from other temporary investments 298,251 - Decommissioning trust contributions and realized change in trust assets (26,732) (35,738) Other 5,624 11,909 ------------------------ Net cash flow used in investing activities (596,455) (237,335) ------------------------ See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 925,889 617,220 Common stock 9,385 11,664 Retirement of long-term debt (103,970) (608,112) Repurchase of common stock (392,591) (14,957) Redemption of preferred and preference stock (152,493) (76,758) Changes in short-term borrowings - net 315,000 (215,500) Dividends paid: Common stock (139,585) (144,059) Preferred stock (16,715) (21,671) ------------------------- Net cash flow provided by (used in) financing activities 444,920 (452,173) ------------------------- Effect of exchange rates on cash and cash equivalents (2,946) (541) ------------------------- Net increase (decrease) in cash and cash equivalents 583,355 (98,761) Cash and cash equivalents at beginning of period 1,213,719 1,184,495 ------------------------- Cash and cash equivalents at end of period $1,797,074 $1,085,734 ========================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $224,697 $319,456 Income taxes $94,478 $50,819 Noncash investing and financing activities: Change in unrealized appreciation of decommissioning trust assets $7,379 $24,544 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $156,068 $108,198 Temporary cash investments - at cost, which approximates market 1,637,028 1,105,521 Special deposits 3,978 - ------------------------- Total cash and cash equivalents 1,797,074 1,213,719 ------------------------- Other temporary investments - at cost, which approximates market 23,100 321,351 Notes receivable 3,643 2,161 Accounts receivable: Customer 299,948 290,331 Allowance for doubtful accounts (9,007) (9,507) Other 354,719 207,898 Accrued unbilled revenues 375,983 298,616 ------------------------- Total receivables 1,021,643 787,338 ------------------------- Deferred fuel costs 394,875 240,661 Fuel inventory - at average cost 122,835 94,419 Materials and supplies - at average cost 358,217 392,403 Rate deferrals 24,265 30,394 Deferred nuclear refueling outage costs 33,708 58,119 Prepayments and other 101,796 78,567 ------------------------- TOTAL 3,881,156 3,219,132 ------------------------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 214 214 Decommissioning trust funds 1,284,301 1,246,023 Non-utility property - at cost (less accumulated depreciation) 327,191 317,165 Non-regulated investments 264,442 198,003 Other - at cost (less accumulated depreciation) 22,145 16,714 ------------------------- TOTAL 1,898,293 1,778,119 ------------------------- UTILITY PLANT Electric 23,421,808 23,163,161 Plant acquisition adjustment 398,797 406,929 Property under capital lease 771,466 768,500 Natural gas 190,000 186,041 Construction work in progress 1,960,517 1,500,617 Nuclear fuel under capital lease 262,996 286,476 Nuclear fuel 109,098 87,693 ------------------------- TOTAL UTILITY PLANT 27,114,682 26,399,417 Less - accumulated depreciation and amortization 11,248,370 10,898,661 ------------------------- UTILITY PLANT - NET 15,866,312 15,500,756 ------------------------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Rate deferrals 7,430 16,581 SFAS 109 regulatory asset - net 1,031,503 1,068,006 Unamortized loss on reacquired debt 192,493 198,631 Other regulatory assets 706,401 637,870 Long-term receivables 30,970 32,260 Other 709,718 533,732 ------------------------- TOTAL 2,678,515 2,487,080 ------------------------- TOTAL ASSETS $24,324,276 $22,985,087 ========================= See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $194,108 $194,555 Notes payable 435,716 120,715 Accounts payable 796,560 707,678 Customer deposits 164,986 161,909 Taxes accrued 580,593 445,677 Accumulated deferred income taxes 115,987 72,640 Nuclear refueling outage costs 2,329 11,216 Interest accrued 153,388 129,028 Co-owner advances 14,382 7,018 Obligations under capital leases 175,466 178,247 Other 173,865 125,749 ------------------------- TOTAL 2,807,380 2,154,432 ------------------------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,224,430 3,310,340 Accumulated deferred investment tax credits 506,142 519,910 Obligations under capital leases 177,874 205,464 FERC settlement - refund obligation 34,143 37,337 Other regulatory liabilities 225,843 199,139 Decommissioning 725,858 703,453 Transition to competition 176,722 157,034 Regulatory reserves 415,420 378,307 Accumulated provisions 280,378 279,425 Other 818,711 535,156 ------------------------- TOTAL 6,585,521 6,325,565 ------------------------- Long-term debt 7,378,602 6,612,583 Preferred stock with sinking fund 69,650 69,650 Preference stock - 150,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holdingsolely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 335,961 338,455 Common stock, $.01 par value, authorized 500,000,000 shares; issued 247,172,239 shares in 2000 and 247,082,345 shares in 1999 2,472 2,471 Paid-in capital 4,636,407 4,636,163 Retained earnings 2,982,495 2,786,467 Accumulated other comprehensive income: Cumulative foreign currency translation adjustment (69,811) (68,782) Net unrealized investment losses (6,275) (5,023) Less - treasury stock, at cost (23,709,144 shares in 2000 and 8,045,434 shares in 1999) 613,126 231,894 ------------------------- TOTAL 7,268,123 7,457,857 ------------------------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,324,276 $22,985,087 ========================= See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended 2000 1999 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $2,814,499 $2,514,735 Add - Earnings applicable to common stock 237,192 $237,192 199,777 $199,777 Deduct: Dividends declared on common stock 68,393 74,031 Capital stock and other expenses 803 108 ---------- ---------- Total 69,196 74,139 ---------- ---------- Retained Earnings - End of period $2,982,495 $2,640,373 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($79,447) ($46,360) Foreign currency translation adjustments (322) (322) (1,337) (1,337) Net unrealized investment gains 3,683 3,683 - - ---------- --------- Balance at end of period ($76,086) ($47,697) ========== -------- ========= -------- Comprehensive Income $240,553 $198,440 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,636,474 $4,631,040 Other paid in capital (67) 1,486 ---------- ---------- Paid-in Capital - End of period $4,636,407 $4,632,526 ========== ========== Six Months Ended 2000 1999 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $2,786,467 $2,526,888 Add - Earnings applicable to common stock 336,052 $336,052 261,958 $261,958 Deduct: Dividends declared on common stock 140,051 148,020 Capital stock and other expenses (27) 453 ---------- ---------- Total 140,024 148,473 ---------- ---------- Retained Earnings - End of period $2,982,495 $2,640,373 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($73,805) ($46,739) Foreign currency translation adjustments (1,029) (1,029) (958) (958) Net unrealized investment losses (1,252) (1,252) - - ---------- ---------- Balance at end of period ($76,086) ($47,697) ========== -------- ========== -------- Comprehensive Income $333,771 $261,000 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,636,163 $4,630,609 Other paid in capital 244 1,917 ---------- ---------- Paid-in Capital - End of period $4,636,407 $4,632,526 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $524.9 $497.8 $27.1 5 Commercial 387.7 358.8 28.9 8 Industrial 497.1 449.6 47.5 11 Governmental 41.3 38.4 2.9 8 ----------------------------------- Total retail 1,451.0 1,344.6 106.4 8 Sales for resale 92.9 86.8 6.1 7 Other 120.8 181.7 (60.9) (34) ----------------------------------- Total $1,664.7 $1,613.1 $51.6 3 =================================== Billed Electric Energy Sales (GWH): Residential 6,857 6,850 7 - Commercial 5,880 5,741 139 2 Industrial 11,021 10,827 194 2 Governmental 635 624 11 2 ----------------------------------- Total retail 24,393 24,042 351 1 Sales for resale 2,523 2,094 429 20 ----------------------------------- Total 26,916 26,136 780 3 =================================== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $993.1 $929.8 $63.3 7 Commercial 734.5 675.0 59.5 9 Industrial 950.5 856.2 94.3 11 Governmental 80.1 74.4 5.7 8 ---------------------------------- Total retail 2,758.2 2,535.4 222.8 9 Sales for resale 176.2 163.9 12.3 8 Other 83.2 152.4 (69.2) (45) ----------------------------------- Total $3,017.6 $2,851.7 $165.9 6 =================================== Billed Electric Energy Sales (GWH): Residential 13,369 13,267 102 1 Commercial 11,160 10,910 250 2 Industrial 21,638 21,043 595 3 Governmental 1,222 1,213 9 1 ----------------------------------- Total retail 47,389 46,433 956 2 Sales for resale 4,795 4,303 492 11 ----------------------------------- Total 52,184 50,736 1,448 3 ===================================
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999 primarily due to increased electric operating revenues, partially offset by an increase in other operation and maintenance expenses. Revenues and Sales The changes in electric operating revenues for the three months and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease Increase/(Decrease) (In Millions) Base revenues $1.7 $2.4 Rate riders (5.6) (12.0) Fuel cost recovery 10.9 21.7 Sales volume/weather 1.7 3.0 Other revenue (including unbilled) 19.6 27.0 Sales for resale 32.3 53.4 ----- ----- Total $60.6 $95.5 ===== ===== Rate riders Rate rider revenues do not affect net income because they are offset by specific incurred expenses. Rate rider revenues decreased for the three and six months ended June 30, 2000 as a result of the decreased ANO Decommissioning and Grand Gulf rate riders, both of which became effective in January 2000. The ANO Decommissioning rider allows Entergy Arkansas to recover the decommissioning costs associated with ANO 1 and 2. The Grand Gulf rate rider allows Entergy Arkansas to recover its share of operating costs for Grand Gulf 1. Fuel cost recovery Fuel cost recovery revenues do not affect net income because they are an increase to revenues that is offset by specific incurred fuel costs. Fuel cost recovery revenues increased for the three months ended June 30, 2000 primarily due to an increase in the energy cost recovery rider (ECR) in April 2000. The increase in the ECR allows Entergy Arkansas to recover previously deferred fuel expenses. Fuel cost recovery revenues increased for the six months ended June 30, 2000 primarily due to the increase in the ECR in April 1999 affecting first quarter revenues and the increase in the ECR in April 2000 affecting second quarter revenues. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other revenue (including unbilled) Other revenue increased for the three and six months ended June 30, 2000 primarily due to increased unbilled revenue volume for retail customers, the addition of unbilled revenue for wholesale customers to the unbilled balance, and the effect of a change in estimate on unbilled revenues in the second quarter of 1999. The changed estimate more closely aligned the fuel component of unbilled revenues with regulatory treatment. Sales for resale Sales for resale increased for the three and six months ended June 30, 2000 primarily due to an increase in the market price of electricity. Expenses Fuel and purchased power expenses Fuel and purchased power expenses increased for the three and six months ended June 30, 2000 primarily due to a shift to higher priced gas generation from lower priced coal generation resulting from planned maintenance outages at the White Bluff and Independence coal plants as well as an increase in the market price of purchased power and increased purchased power volume. Fuel and purchased power expenses also increased for the six months ended June 30, 2000 due to increased nuclear generation in 2000 due to a refueling outage at ANO 2 in the first quarter of 1999. The increased fuel and purchased power expenses for the six months ended June 30, 2000 were partially offset by an adjustment to the deferred fuel balance to reflect deferred fuel costs that Entergy Arkansas expects to recover in the future. Other operation and maintenance Other operation and maintenance expenses increased for the three and six months ended June 30, 2000 primarily due to: o capitalization of costs in June 1999 associated with return-to- service projects for certain fossil plants; o increased vegetation management costs; and o increased expenses for outside services employed. These increased expenses for the six months ended June 30, 2000 were partially offset by a larger nuclear insurance refund in 2000 compared to 1999. Decommissioning Decommissioning expense decreased for the three and six months ended June 30, 2000 primarily due to a true-up of the decommissioning liability in June 2000 for previous over-accruals. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other regulatory credits Other regulatory credits increased for the three and six months ended June 30, 2000 primarily due to an increased under-recovery of Grand Gulf 1 costs as a result of the decreased rate rider that became effective in January 2000 as ordered by the APSC. This increase was partially offset by an adjustment to the transition cost account as discussed in Note 2 to the financial statements. Other Income taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 38.5% and 32.4%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 39.6% and 29.3%, respectively. The increases in the effective tax rates were due to increased pre-tax income for the three and six months ended June 30, 2000 combined with decreased flow-through tax benefits during those periods. These flow-through items include a tax liability on nuclear fuel purchases for 2000 compared with a tax credit on nuclear fuel purchases for 1999. ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $447,823 $387,191 $794,700 $699,160 -------------------------------------------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 102,179 84,855 149,856 133,647 Purchased power 120,163 102,800 218,960 197,743 Nuclear refueling outage expenses 6,439 7,464 12,878 15,530 Other operation and maintenance 99,583 83,255 175,508 165,464 Decommissioning (2,741) 2,317 (713) 4,777 Taxes other than income taxes 8,979 9,259 17,695 18,516 Depreciation and amortization 41,695 40,929 82,996 82,598 Other regulatory credits - net (11,405) (3,900) (22,170) (11,487) --------------------------------------------- TOTAL 364,892 326,979 635,010 606,788 --------------------------------------------- OPERATING INCOME 82,931 60,212 159,690 92,372 --------------------------------------------- OTHER INCOME Allowance for equity funds used during construction 3,842 3,434 7,420 5,845 Miscellaneous - net 695 (194) 2,239 742 -------------------------------------------- TOTAL 4,537 3,240 9,659 6,587 -------------------------------------------- INTEREST AND OTHER CHARGES Interest on long-term debt 23,229 20,024 44,134 40,698 Other interest - net 2,111 1,565 4,408 3,090 Distributions on preferred securities of subsidiary 1,275 1,275 2,550 2,550 Allowance for borrowed funds used during construction (2,512) (2,221) (4,816) (3,878) -------------------------------------------- TOTAL 24,103 20,643 46,276 42,460 -------------------------------------------- INCOME BEFORE INCOME TAXES 63,365 42,809 123,073 56,499 Income taxes 24,387 13,880 48,781 16,559 -------------------------------------------- NET INCOME 38,978 28,929 74,292 39,940 Preferred dividend requirements and other 1,944 2,403 3,888 4,824 -------------------------------------------- EARNINGS APPLICABLE TO COMMON STOCK $37,034 $26,526 $70,404 $35,116 ============================================ See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited)
2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $74,292 $39,940 Noncash items included in net income: Other regulatory credits - net (22,170) (11,487) Depreciation, amortization, and decommissioning 82,283 87,375 Deferred income taxes and investment tax credits (7,228) (8,302) Allowance for equity funds used during construction (7,420) (5,845) Loss on sale of assets - 2 Changes in working capital: Receivables (54,442) (6,379) Fuel inventory (4,858) (14,509) Accounts payable (46,445) 3,009 Taxes accrued 47,006 12,283 Interest accrued 5,535 (927) Deferred fuel costs 1,441 23,797 Other working capital accounts 28,184 8,018 Provision for estimated losses and reserves (2,577) (13,954) Changes in other regulatory assets (17,793) (29,612) Other 33,887 37,603 ----------------------- Net cash flow provided by operating activities 109,695 121,012 ----------------------- INVESTING ACTIVITIES Construction expenditures (156,875) (122,428) Allowance for equity funds used during construction 7,420 5,845 Nuclear fuel purchases (148) (25,859) Proceeds from sale/leaseback of nuclear fuel 148 25,859 Decommissioning trust contributions and realized change in trust assets (5,670) (10,111) ----------------------- Net cash flow used in investing activities (155,125) (126,694) ----------------------- FINANCING ACTIVITIES Proceeds from issuance of: Long-term debt 99,487 - Retirement of: Long-term debt - (39,267) Redemption of preferred stock - (2,027) Dividends paid: Common stock (5,600) (8,200) Preferred stock (1,859) (4,873) ---------------------- Net cash flow provided by (used in) financing activities 92,028 (54,367) ---------------------- Net increase (decrease) in cash and cash equivalents 46,598 (60,049) Cash and cash equivalents at beginning of period 6,862 93,105 ---------------------- Cash and cash equivalents at end of period $53,460 $33,056 ====================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $43,037 $44,738 Income taxes ($883) $12,250 Noncash investing and financing activities: Change in unrealized appreciation of decommissioning trust assets $4,506 $13,289 See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited)
2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $6,233 $6,862 Temporary cash investments - at cost, which approximates market 47,227 - ----------------------- Total cash and cash equivalents 53,460 6,862 ----------------------- Accounts receivable: Customer 70,257 73,357 Allowance for doubtful accounts (1,768) (1,768) Associated companies 50,636 27,073 Other 18,770 5,583 Accrued unbilled revenues 74,392 53,600 ----------------------- Total receivables 212,287 157,845 ----------------------- Deferred fuel costs 40,179 41,620 Fuel inventory - at average cost 29,343 24,485 Materials and supplies - at average cost 79,144 85,612 Deferred nuclear refueling outage costs 15,408 28,119 Prepayments and other 8,426 6,480 ----------------------- TOTAL 438,247 351,023 ----------------------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 11,215 11,215 Decommissioning trust funds 354,187 344,011 Non-utility property - at cost (less accumulated depreciation) 1,461 1,463 Other - at cost (less accumulated depreciation) 3,034 3,033 ----------------------- TOTAL 369,897 359,722 ----------------------- UTILITY PLANT Electric 4,912,483 4,854,433 Property under capital lease 43,480 44,471 Construction work in progress 363,311 267,091 Nuclear fuel under capital lease 79,405 85,725 Nuclear fuel 8,085 9,449 ----------------------- TOTAL UTILITY PLANT 5,406,764 5,261,169 Less - accumulated depreciation and amortization 2,480,896 2,401,021 ----------------------- UTILITY PLANT - NET 2,925,868 2,860,148 ----------------------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 185,987 192,344 Unamortized loss on reacquired debt 46,295 48,193 Other regulatory assets 131,109 106,959 Other 12,461 14,125 ----------------------- TOTAL 375,852 361,621 ----------------------- TOTAL ASSETS $4,109,864 $3,932,514 ======================= See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $220 $220 Notes payable 667 667 Accounts payable Associated companies 50,143 81,958 Other 88,330 102,959 Customer deposits 28,043 26,320 Taxes accrued 85,537 38,532 Accumulated deferred income taxes 42,138 38,649 Interest accrued 27,913 22,378 Co-owner advances 22,470 15,338 Obligations under capital leases 55,265 55,150 Other 15,724 11,598 ----------------------- TOTAL 416,450 393,769 ----------------------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 701,715 713,622 Accumulated deferred investment tax credits 90,822 94,852 Obligations under capital leases 67,620 75,045 Other regulatory liabilities 93,070 88,563 Transition to competition 116,982 109,933 Accumulated provisions 40,711 43,288 Other 51,099 51,080 ----------------------- TOTAL 1,162,019 1,176,383 ----------------------- Long-term debt 1,235,070 1,130,801 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued 46,980,196 shares in 2000 and 1999 470 470 Paid-in capital 591,127 591,127 Retained earnings 528,378 463,614 ----------------------- TOTAL 1,236,325 1,171,561 ----------------------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,109,864 $3,932,514 ======================= See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $112.4 $110.9 $1.5 1 Commercial 72.3 68.5 3.8 6 Industrial 83.9 80.6 3.3 4 Governmental 3.7 3.6 0.1 3 ----------------------------- Total retail 272.3 263.6 8.7 3 Sales for resale Associated companies 93.4 60.9 32.5 53 Non-associated companies 49.1 49.3 (0.2) - Other 33.0 13.4 19.6 146 ----------------------------- Total $447.8 $387.2 $60.6 16 ============================= Billed Electric Energy Sales (GWH): Residential 1,302 1,310 (8) (1) Commercial 1,161 1,128 33 3 Industrial 1,714 1,694 20 1 Governmental 58 57 1 2 ----------------------------- Total retail 4,235 4,189 46 1 Sales for resale Associated companies 2,584 2,734 (150) (5) Non-associated companies 1,341 1,295 46 4 ----------------------------- Total 8,160 8,218 (58) (1) ============================= Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $230.1 $227.6 $2.5 1 Commercial 134.5 128.1 6.4 5 Industrial 157.5 151.4 6.1 4 Governmental 7.0 6.9 0.1 1 ----------------------------- Total retail 529.1 514.0 15.1 3 Sales for resale Associated companies 138.1 90.3 47.8 53 Non-associated companies 91.4 85.8 5.6 7 Other 36.1 9.1 27.0 297 ----------------------------- Total $794.7 $699.2 $95.5 14 ============================= Billed Electric Energy Sales (GWH): Residential 2,852 2,865 (13) - Commercial 2,237 2,187 50 2 Industrial 3,366 3,300 66 2 Governmental 112 112 - - ----------------------------- Total retail 8,567 8,464 103 1 Sales for resale Associated companies 4,265 4,270 (5) - Non-associated companies 2,491 2,116 375 18 ----------------------------- Total 15,323 14,850 473 3 ============================= ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999 due to increased sales volume, decreased other operation and maintenance expenses, decreased depreciation and amortization expenses, and decreases in regulatory reserves. The increase for the six months ended June 30, 2000 was partially offset by an adjustment to the deferred fuel balance to reflect regulatory actions in the first quarter of 2000. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base revenues ($54.3) ($45.9) Fuel cost recovery 65.5 116.6 Sales volume/weather 7.9 14.8 Other revenue (including unbilled) 6.8 5.0 Sales for resale 20.2 22.6 ----- ------ Total $46.1 $113.1 ===== ====== Base revenues Base revenues decreased for the three and six months ended June 30, 2000 primarily due to the reversal of regulatory reserves associated with the accelerated amortization of accounting order deferrals in 1999 in conjunction with the Texas rate settlement, the net income effect in 1999 of which was largely offset by the amortization of rate deferrals discussed below. These decreases were partially offset by reserves recorded in 1999 for actual and potential refunds to Louisiana and Texas retail customers at Entergy Gulf States. Fuel cost recovery Fuel cost recovery revenues do not affect net income because they are an increase to revenues that is offset by specific incurred fuel costs. Fuel cost recovery revenues increased for the three and six months ended June 30, 2000 due to a higher fuel factor that became effective in September 1999 and a fuel surcharge implemented in January 2000 in the Texas jurisdiction. Fuel cost recovery revenues also increased due to higher fuel and purchased power costs in the Louisiana jurisdiction due to increased market prices. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Sales volume increased for the three and six months ended June 30, 2000 due to more favorable weather as well as increased usage primarily by industrial customers in both Louisiana and Texas. Sales for resale Sales for resale increased for the three and six months ended June 30, 2000 primarily due to increased generation and subsequent sales from River Bend in the second quarter of 2000 as a result of a refueling outage in the second quarter of 1999. Steam operating revenues Steam operating revenues decreased for the three and six months ended June 30, 2000 due to a new lease arrangement that began in June 1999 for the Louisiana Station generating facility. Under the terms of this new lease, revenues and expenses are now classified as other income rather than steam operating revenues and other operation and maintenance expenses, respectively, which were the previous classifications. Expenses Fuel and purchased power expenses Fuel and purchased power expenses increased for the three and six months ended June 30, 2000 due to: o an adjustment of the Texas jurisdiction deferred fuel balance as a result of the fuel reconciliation settlement with the PUCT; o increased nuclear fuel expense in the second quarter of 2000 due to a scheduled outage at River Bend in the second quarter of 1999; and o higher market prices for gas and purchased power. Other operation and maintenance Other operation and maintenance expenses decreased for the three and six months ended June 30, 2000 primarily due to: o decreased maintenance of general plant in 2000; o decreased requirements for environmental and injuries and damages reserves in 2000; and o lower salary expense. Depreciation and amortization Depreciation and amortization decreased for the three and six months ended June 30, 2000 primarily due to reduced River Bend depreciation expense as a result of the write-down of the River Bend abeyed plant required by the Texas rate settlement in June 1999. Amortization of rate deferrals Amortization of rate deferrals decreased for the three and six months ended June 30, 2000 primarily due to the large reduction in the rate deferral balance upon the PUCT's approval in June 1999 of the Texas rate settlement. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other Other income Other income decreased for the three and six months ended June 30, 2000 due to the reversal of the provision for abeyed River Bend plant costs in 1999, which exceeded the write-down of the plant as the result of the June 1999 PUCT approval of the settlement agreement. Income taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 32.8% and 48.6%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 35.4% and 49.0%, respectively. The decreases in effective income tax rates for the three and six months ended June 30, 2000 are primarily due to tax adjustments in June 2000 for River Bend abeyed plant and an increase in flow-through and permanent items. ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)
Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $580,103 $534,022 $1,050,905 $937,828 Natural gas 6,283 5,267 18,697 16,984 Steam products - 7,254 - 15,550 --------------------------------------------- TOTAL 586,386 546,543 1,069,602 970,362 --------------------------------------------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 168,989 132,690 360,539 271,265 Purchased power 115,145 86,937 187,280 132,529 Nuclear refueling outage expenses 3,090 2,678 8,583 5,357 Other operation and maintenance 100,340 106,500 197,240 206,055 Decommissioning 1,568 1,510 3,136 4,790 Taxes other than income taxes 27,904 26,085 54,758 55,810 Depreciation and amortization 46,560 49,325 93,378 99,832 Other regulatory credits - net (3,645) (2,892) (11,790) (12,287) Amortization of rate deferrals 1,402 82,124 2,804 84,393 --------------------------------------------- TOTAL 461,353 484,957 895,928 847,744 --------------------------------------------- OPERATING INCOME 125,033 61,586 173,674 122,618 --------------------------------------------- OTHER INCOME Allowance for equity funds used during construction 1,745 1,091 3,486 2,317 Gain on sale of assets 532 462 1,047 909 Miscellaneous - net (20) 5,957 3,410 6,554 -------------------------------------------- TOTAL 2,257 7,510 7,943 9,780 -------------------------------------------- INTEREST AND OTHER CHARGES Interest on long-term debt 34,812 34,288 67,188 69,528 Other interest - net 1,705 888 3,110 1,572 Distributions on preferred securities of subsidiary 1,859 1,859 3,719 3,719 Allowance for borrowed funds used during construction (1,602) (1,026) (3,213) (2,135) -------------------------------------------- TOTAL 36,774 36,009 70,804 72,684 -------------------------------------------- INCOME BEFORE INCOME TAXES 90,516 33,087 110,813 59,714 Income taxes 29,701 16,065 39,241 29,255 -------------------------------------------- NET INCOME 60,815 17,022 71,572 30,459 Preferred dividend requirements and other 3,175 4,115 7,319 8,666 -------------------------------------------- EARNINGS APPLICABLE TO COMMON STOCK $57,640 $12,907 $64,253 $21,793 ============================================ See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $71,572 $30,459 Noncash items included in net income: Amortization of rate deferrals 2,804 84,393 Reserve for regulatory adjustments (638) (53,479) Other regulatory credits - net (11,790) (12,287) Depreciation, amortization, and 96,514 104,622 decommissioning Deferred income taxes and investment tax (12,174) 367 credits Allowance for equity funds used during (3,486) (2,317) construction Gain on sale of assets (1,047) (909) Changes in working capital: Receivables (76,632) (32,098) Fuel inventory (6,898) (13,939) Accounts payable 25,972 (2,652) Taxes accrued 19,347 26,997 Interest accrued 16,507 (754) Deferred fuel costs (24,849) (10,501) Other working capital accounts 5,945 (15,889) Provision for estimated losses and reserves (3,075) 2,694 Changes in other regulatory assets (18,426) 13,228 Other 25,930 (26,190) -------------------- Net cash flow provided by operating activities 105,576 91,745 -------------------- INVESTING ACTIVITIES Construction expenditures (138,464) (77,340) Allowance for equity funds used during construction 3,486 2,317 Nuclear fuel purchases (33,510) (37,930) Proceeds from sale/leaseback of nuclear fuel 13,797 37,930 Decommissioning trust contributions and realized change in trust assets (5,489) (5,866) -------------------- Net cash flow used in investing activities (160,180) (80,889) -------------------- FINANCING ACTIVITIES Proceeds from issuance of: Long-term debt 299,086 21,775 Retirement of: Long-term debt - (47,095) Redemption of preferred and preference (152,493) (24,731) stock Dividends paid: Common stock (14,200) - Preferred stock (8,174) (8,758) -------------------- Net cash flow provided by (used in) 124,219 (58,809) financing activities -------------------- Net increase (decrease) in cash and cash equivalents 69,615 (47,953) Cash and cash equivalents at beginning of period 32,312 115,736 -------------------- Cash and cash equivalents at end of period $101,927 $67,783 ==================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $54,877 $72,247 Income taxes $33,835 $10,934 Noncash investing and financing activities: Change in unrealized appreciation of decommissioning trust assets $2,128 $9,658 See Notes to Financial Statements. ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $9,792 $8,607 Temporary cash investments - at cost, which approximates market 92,135 23,705 ----------------------- Total cash and cash equivalents 101,927 32,312 ----------------------- Accounts receivable: Customer 83,936 73,215 Allowance for doubtful accounts (1,828) (1,828) Associated companies 13,352 1,706 Other 40,658 15,030 Accrued unbilled revenues 119,034 90,396 ----------------------- Total receivables 255,152 178,519 ----------------------- Deferred fuel costs 159,306 134,458 Fuel inventory - at average cost 45,170 38,271 Materials and supplies - at average cost 103,523 112,585 Rate deferrals 5,606 5,606 Prepayments and other 22,483 21,750 ----------------------- TOTAL 693,167 523,501 ----------------------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 242,294 234,677 Non-utility property - at cost (less accumulated depreciation) 192,762 187,759 Other - at cost (less accumulated depreciation) 14,672 13,681 ----------------------- TOTAL 449,728 436,117 ----------------------- UTILITY PLANT Electric 7,444,157 7,365,407 Property under capital lease 42,847 46,210 Natural gas 54,163 52,473 Construction work in progress 190,003 145,492 Nuclear fuel under capital lease 53,416 70,801 Nuclear fuel 18,905 - ----------------------- TOTAL UTILITY PLANT 7,803,491 7,680,383 Less - accumulated depreciation and amortization 3,620,455 3,534,473 ----------------------- UTILITY PLANT - NET 4,183,036 4,145,910 ----------------------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Rate deferrals 2,803 5,606 SFAS 109 regulatory asset - net 389,734 385,405 Unamortized loss on reacquired debt 39,694 40,576 Other regulatory assets 154,255 140,157 Long-term receivables 30,970 32,260 Other 16,181 23,490 ----------------------- TOTAL 633,637 627,494 ----------------------- TOTAL ASSETS $5,959,568 $5,733,022 ======================= See Notes to Financial Statements. ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Accounts payable: Associated companies $53,446 $79,962 Other 166,932 114,444 Customer deposits 36,275 33,360 Taxes accrued 121,146 101,798 Accumulated deferred income taxes 41,455 27,960 Nuclear refueling outage costs 2,329 11,216 Interest accrued 45,077 28,570 Obligations under capital leases 50,611 51,973 Other 17,226 14,557 ----------------------- TOTAL 534,497 463,840 ----------------------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,082,644 1,098,882 Accumulated deferred investment tax credits 174,750 178,500 Obligations under capital leases 45,651 65,038 Other regulatory liabilities 19,185 20,089 Decommissioning 140,524 139,194 Transition to competition 59,741 47,101 Regulatory reserves 109,898 110,536 Accumulated provisions 66,320 69,395 Other 105,974 117,804 ----------------------- TOTAL 1,804,687 1,846,539 ----------------------- Long-term debt 1,931,698 1,631,581 Preferred stock with sinking fund 34,650 34,650 Preference stock - 150,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 85,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 48,951 51,444 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2000 and 1999 114,055 114,055 Paid-in capital 1,153,195 1,153,131 Retained earnings 252,835 202,782 ----------------------- TOTAL 1,569,036 1,521,412 ----------------------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,959,568 $5,733,022 ======================= See Notes to Financial Statements. ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $159.1 $137.2 $21.9 16 Commercial 120.8 103.0 17.8 17 Industrial 208.2 170.4 37.8 22 Governmental 8.0 6.8 1.2 18 ---------------------------- Total retail 496.1 417.4 78.7 19 Sales for resale Associated companies 11.6 0.9 10.7 256 Non-associated companies 24.8 15.3 9.5 62 Other 47.6 100.4 (52.8) (53) --------------------------- Total $580.1 $534.0 $46.1 9 =========================== Billed Electric Energy Sales (GWH): Residential 2,100 2,039 61 3 Commercial 1,864 1,784 80 4 Industrial 4,545 4,442 103 2 Governmental 109 102 7 7 --------------------------- Total retail 8,618 8,367 251 3 Sales for resale Associated companies 44 17 27 159 Non-associated companies 974 428 546 128 --------------------------- Total 9,636 8,812 824 9 =========================== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $296.9 $253.4 $43.5 17 Commercial 229.1 194.5 34.6 18 Industrial 392.6 326.6 66.0 20 Governmental 15.8 13.3 2.5 19 ----------------------------- Total retail 934.4 787.8 146.6 19 Sales for resale Associated companies 18.0 4.7 13.3 104 Non-associated companies 45.3 36.0 9.3 26 Other 53.2 109.3 (56.1) (51) ----------------------------- Total $1,050.9 $937.8 $113.1 12 ============================= Billed Electric Energy Sales (GWH): Residential 3,934 3,842 92 2 Commercial 3,506 3,384 122 4 Industrial 8,915 8,556 359 4 Governmental 214 202 12 6 ----------------------------- Total retail 16,569 15,984 585 4 Sales for resale Associated companies 231 170 61 36 Non-associated companies 1,773 1,413 360 25 ----------------------------- Total 18,573 17,567 1,006 6 ============================= ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999 primarily due to a decrease in unbilled revenues and an increase in other operation and maintenance expenses. Net income also decreased for the six months ended June 30, 2000 due to an increase in provisions for potential rate refunds. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base revenues $0.6 ($28.9) Fuel cost recovery 4.9 26.3 Sales volume/weather (1.8) 6.8 Other revenue (including unbilled) (52.8) (57.0) Sales for resale (8.4) (10.0) ------ ------ Total ($57.5) ($62.8) ====== ====== Base revenues Base revenues decreased for the six months ended June 30, 2000 primarily due to accruals for potential rate refunds. Fuel cost recovery Fuel cost recovery revenues do not affect net income because they are an increase to revenues that is offset by specific incurred fuel costs. Fuel cost recovery revenues increased for the three and six months ended June 30, 2000 as a result of higher fuel and purchased power expenses primarily due to the increased market price of natural gas. Sales volume/weather Sales volume increased for the six months ended June 30, 2000 primarily due to increased usage by industrial customers, as well as more favorable weather in the residential and commercial sectors. Other revenue (including unbilled) Other revenue decreased for the three and six months ended June 30, 2000 primarily due to the effect of a change in estimate on unbilled revenues in the second quarter of 1999. The changed estimate more closely aligned the fuel component of unbilled revenues with regulatory treatment. The decrease was partially offset by more favorable weather in the second quarter of 2000. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales for resale Sales for resale decreased for the three and six months ended June 30, 2000 primarily due to a decrease in gas generation coupled with increased sales to retail customers resulting in less electricity available for resale. Expenses Fuel and purchased power expenses Fuel and purchased power expenses decreased for the three months ended June 30, 2000 primarily due to an increased under- recovery of fuel costs compared to 1999 due to higher fuel prices in May and June 2000. These under-recoveries will be recovered in future months at which time the effect of the increased prices will be reflected in fuel expense. Fuel and purchased power expenses increased for the six months ended June 30, 2000 primarily due to a shift to higher priced purchased power due to reduced gas and nuclear generation and higher market prices for gas. The decrease in nuclear generation was due to a planned maintenance outage at Waterford 3 in June 2000. Other operation and maintenance Other operation and maintenance expenses increased for the three and six months ended June 30, 2000 primarily due to: o capitalization of costs in 1999 associated with return-to- service projects; o maintenance and planned maintenance outages at Waterford 3 and certain fossil plants; o insurance settlement proceeds received in 1999; o increased vegetation management costs; and o increased environmental reserves. Other Interest charges Interest on long-term debt decreased for the three and six months ended June 30, 2000 primarily due to the refinancing and net redemption of $77 million of long-term debt in 1999, partially offset by the issuance of $150 million of long-term debt in May 2000. Income taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 40.1% and 39.4%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 41.2% and 40.0%, respectively.
ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $448,067 $505,601 $794,888 $857,736 -------- -------- -------- -------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 48,748 104,399 131,940 162,623 Purchased power 145,243 92,119 234,119 184,582 Nuclear refueling outage expenses 3,410 3,487 6,820 8,923 Other operation and maintenance 85,098 65,511 148,173 133,315 Decommissioning 2,606 2,197 5,211 4,393 Taxes other than income taxes 17,953 18,426 34,715 36,670 Depreciation and amortization 42,182 40,184 84,329 81,963 Other regulatory charges - net 240 - 480 - -------- -------- -------- -------- TOTAL 345,480 326,323 645,787 612,469 -------- -------- -------- -------- OPERATING INCOME 102,587 179,278 149,101 245,267 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 1,196 1,732 1,879 2,493 Miscellaneous - net 435 621 543 579 -------- -------- -------- -------- TOTAL 1,631 2,353 2,422 3,072 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 23,779 26,691 47,942 53,744 Other interest - net 1,896 1,041 3,946 2,212 Distributions on preferred securities of subsidiary 1,575 1,575 3,150 3,150 Allowance for borrowed funds used during construction (911) (1,716) (1,868) (2,367) -------- -------- -------- -------- TOTAL 26,339 27,591 53,170 56,739 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 77,879 154,040 98,353 191,600 Income taxes 31,192 60,669 40,474 76,742 -------- -------- -------- -------- NET INCOME 46,687 93,371 57,879 114,858 Preferred dividend requirements and other 2,378 2,378 4,757 5,048 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $44,309 $90,993 $53,122 $109,810 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $57,879 $114,858 Noncash items included in net income: Other regulatory charges - net 480 - Depreciation, amortization, and decommissioning 89,540 86,356 Deferred income taxes and investment tax credits 15,191 8,042 Allowance for equity funds used during construction (1,879) (2,493) Changes in working capital: Receivables (12,108) (60,053) Fuel inventory - (489) Accounts payable (57,456) (16,718) Taxes accrued 25,659 79,628 Interest accrued 10,250 (23,195) Deferred fuel costs (80,801) (17,934) Other working capital accounts 29,378 (11,062) Provision for estimated losses and reserves 3,375 112 Changes in other regulatory assets 6,663 13,901 Other (8,977) (16,283) -------- -------- Net cash flow provided by operating activities 77,194 154,670 -------- -------- INVESTING ACTIVITIES Construction expenditures (90,488) (55,932) Allowance for equity funds used during construction 1,879 2,493 Nuclear fuel purchases (29,806) (11,308) Proceeds from sale/leaseback of nuclear fuel 29,806 11,308 Decommissioning trust contributions and realized change in trust assets (4,030) (8,497) -------- -------- Net cash flow used in investing activities (92,639) (61,936) -------- -------- FINANCING ACTIVITIES Proceeds from issuance of: Long-term debt 149,003 188,226 Retirement of: Long-term debt (100,000) (129,147) Redemption of preferred stock - (50,000) Dividends paid: Common stock (6,200) (31,900) Preferred stock (4,757) (5,632) -------- -------- Net cash flow provided by (used in) financing activities 38,046 (28,453) -------- -------- Net increase in cash and cash equivalents 22,601 64,281 Cash and cash equivalents at beginning of period 7,734 83,030 -------- -------- Cash and cash equivalents at end of period $30,335 $147,311 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $40,981 $79,593 Income taxes $17,572 $12,270 Noncash investing and financing activities: Change in unrealized appreciation of decommissioning trust assets $545 $2,389 See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $8,940 $7,734 Temporary cash investments - at cost, which approximates market 21,395 - ---------- ---------- Total cash and cash equivalents 30,335 7,734 ---------- ---------- Notes receivable 1,503 3 Accounts receivable: Customer 86,169 79,335 Allowance for doubtful accounts (1,615) (1,615) Associated companies 8,775 14,601 Other 10,762 10,762 Accrued unbilled revenues 117,300 106,200 ---------- ---------- Total receivables 221,391 209,283 ---------- ---------- Deferred fuel costs 82,963 2,161 Accumulated deferred income taxes - 12,520 Materials and supplies - at average cost 77,595 84,027 Deferred nuclear refueling outage costs 4,139 11,336 Prepayments and other 11,953 6,011 ---------- ---------- TOTAL 429,879 333,075 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 14,230 14,230 Decommissioning trust funds 105,518 100,943 Non-utility property - at cost (less accumulated depreciation) 21,800 21,433 ---------- ---------- TOTAL 141,548 136,606 ---------- ---------- UTILITY PLANT Electric 5,226,394 5,178,808 Property under capital lease 236,272 236,271 Construction work in progress 146,868 108,106 Nuclear fuel under capital lease 66,945 51,930 ---------- ---------- TOTAL UTILITY PLANT 5,676,479 5,575,115 Less - accumulated depreciation and amortization 2,377,723 2,294,394 ---------- ---------- UTILITY PLANT - NET 3,298,756 3,280,721 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 219,846 230,899 Unamortized loss on reacquired debt 35,719 35,856 Other regulatory assets 54,582 50,191 Other 13,996 17,302 ---------- ---------- TOTAL 324,143 334,248 ---------- ---------- TOTAL ASSETS $4,194,326 $4,084,650 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $35,088 $116,388 Accounts payable Associated companies 55,786 137,869 Other 115,395 90,768 Customer deposits 57,539 61,096 Taxes accrued 51,522 25,863 Accumulated deferred income taxes 15,763 - Interest accrued 30,486 20,236 Obligations under capital leases 28,387 28,387 Other 86,487 59,737 ---------- ---------- TOTAL 476,453 540,344 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 772,345 792,290 Accumulated deferred investment tax credits 120,154 123,155 Obligations under capital leases 38,558 23,543 Other regulatory liabilities 15,966 15,421 Accumulated provisions 61,462 58,087 Other 34,116 34,564 ---------- ---------- TOTAL 1,042,601 1,047,060 ---------- ---------- Long-term debt 1,276,567 1,145,463 Preferred stock with sinking fund 35,000 35,000 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 70,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 100,500 100,500 Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares in 2000 and 1999 1,088,900 1,088,900 Capital stock expense and other (2,171) (2,171) Retained earnings 106,476 59,554 ---------- ---------- TOTAL 1,293,705 1,246,783 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,194,326 $4,084,650 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $143.3 $145.2 ($1.9) (1) Commercial 94.9 94.0 0.9 1 Industrial 160.8 156.3 4.5 3 Governmental 8.4 8.2 0.2 2 ------ ------ ------ Total retail 407.4 403.7 3.7 1 Sales for resale Associated companies 0.2 5.4 (5.2) (96) Non-associated companies 10.0 13.2 (3.2) (24) Other 30.5 83.3 (52.8) (63) ------ ------ ------ Total $448.1 $505.6 ($57.5) (11) ====== ====== ====== Billed Electric Energy Sales (GWH): Residential 1,939 1,971 (32) (2) Commercial 1,296 1,287 9 1 Industrial 3,881 3,777 104 3 Governmental 117 115 2 2 ------ ------ ------ Total retail 7,233 7,150 83 1 Sales for resale Associated companies 3 142 (139) (98) Non-associated companies 110 233 (123) (53) ------ ------ ------ Total 7,346 7,525 (179) (2) ====== ====== ====== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $262.3 $257.4 $4.9 2 Commercial 178.2 173.2 5.0 3 Industrial 313.5 294.6 18.9 6 Governmental 16.4 15.9 0.5 3 ------ ------ ------ Total retail 770.4 741.1 29.3 4 Sales for resale Associated companies 0.7 7.9 (7.2) (91) Non-associated companies 21.5 24.3 (2.8) (12) Other 2.3 84.4 (82.1) (97) ------ ------ ------ Total $794.9 $857.7 ($62.8) (7) ====== ====== ====== Billed Electric Energy Sales (GWH): Residential 3,672 3,661 11 - Commercial 2,444 2,418 26 1 Industrial 7,642 7,403 239 3 Governmental 231 230 1 - ------ ------ ------ Total retail 13,989 13,712 277 2 Sales for resale Associated companies 17 240 (223) (93) Non-associated companies 313 477 (164) (34) ------ ------ ------ Total 14,319 14,429 (110) (1) ====== ====== ====== ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and six months ended June 30, 2000 compared to the three and six months ended June 30, 1999 primarily due to an increase in unbilled revenues and other income, partially offset by increased rate reductions and increased other operation and maintenance expenses. Revenues and Sales The changes in electric operating revenues for the three and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base revenues ($0.6) ($3.9) Grand Gulf rate rider 0.8 1.4 Fuel cost recovery 11.2 22.3 Sales volume/weather 0.1 1.2 Other revenue (including unbilled) 10.6 17.3 Sales for resale (1.1) (17.0) ----- ----- Total $21.0 $21.3 ===== ===== Base revenues Base revenues decreased for the six months ended June 30, 2000 primarily due to base rate reductions that became effective in May 1999 and May 2000. Fuel cost recovery Fuel cost recovery revenues do not affect net income because they are an increase to revenues that is offset by specific incurred fuel costs. Fuel cost recovery revenues increased for the three and six months ended June 30, 2000 primarily due to an increase in the energy cost recovery rider effective January 2000. Other revenue (including unbilled) Other revenue increased for the three and six months ended June 30, 2000 primarily due to the effect of favorable weather in the second quarter of 2000 and the effect of a change in estimate on unbilled revenues in the second quarter of 1999. The changed estimate more closely aligned the fuel component of unbilled revenues with regulatory treatment. Sales for resale Sales for resale decreased for the six months ended June 30, 2000 primarily due to a decrease in sales to associated companies as a result of decreased oil generation due to plant outages at Entergy Mississippi in early 2000. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Fuel and purchased power expenses Fuel and purchased power expenses increased for the three months ended June 30, 2000 primarily due to: o a shift to higher priced gas generation and purchased power from lower priced coal generation due to a planned outage at Independence in May 2000; o increased purchased power prices; and o increased oil prices. Other operation and maintenance Other operation and maintenance expenses increased for the six months ended June 30, 2000 primarily due to increased plant maintenance and an increase in property insurance expense. Other regulatory credits - net Other regulatory credits decreased for the three and six months ended June 30, 2000 primarily due to a decrease in the deferral of Grand Gulf expenses. Other Other Income The increase in other income for the six months ended June 30, 2000 is primarily due to an increase in AFUDC as a result of higher construction expenditures and an increase in the interest income from the deferral of Grand Gulf 1 expenses. Income taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 35.8% and 35.1%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 33.9% and 33.7%, respectively.
ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $215,606 $194,637 $398,381 $377,080 -------- -------- -------- -------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 31,043 37,341 75,330 96,775 Purchased power 95,038 79,804 171,866 148,269 Other operation and maintenance 43,082 41,795 78,705 72,913 Taxes other than income taxes 11,091 11,042 21,267 21,744 Depreciation and amortization 11,977 10,984 23,702 22,500 Other regulatory credits - net (5,409) (6,958) (14,487) (17,971) -------- -------- -------- -------- TOTAL 186,822 174,008 356,383 344,230 -------- -------- -------- -------- OPERATING INCOME 28,784 20,629 41,998 32,850 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 613 225 1,250 368 Miscellaneous - net 2,380 1,872 4,411 3,490 -------- -------- -------- -------- TOTAL 2,993 2,097 5,661 3,858 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 10,561 9,800 20,014 19,022 Other interest - net 676 601 1,696 1,444 Allowance for borrowed funds used during construction (479) (341) (983) (696) -------- -------- -------- -------- TOTAL 10,758 10,060 20,727 19,770 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 21,019 12,666 26,932 16,938 Income taxes 7,516 4,444 9,132 5,701 -------- -------- -------- -------- NET INCOME 13,503 8,222 17,800 11,237 Preferred dividend requirements and other 842 842 1,685 1,685 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $12,661 $7,380 $16,115 $9,552 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $17,800 $11,237 Noncash items included in net income: Other regulatory credits - net (14,487) (17,971) Depreciation and amortization 23,702 22,500 Deferred income taxes and investment tax credits 2,554 16,220 Allowance for equity funds used during construction (1,250) (368) Changes in working capital: Receivables (14,566) 20,306 Fuel inventory (885) (2,837) Accounts payable (32,666) 21,636 Taxes accrued 8,947 149 Interest accrued 1,908 (3,108) Deferred fuel costs (33,512) (1,341) Other working capital accounts 2,557 5,988 Provision for estimated losses and reserves (591) 848 Changes in other regulatory assets (18,550) (34,867) Other 23,127 17,079 -------- -------- Net cash flow provided by (used in) operating activities (35,912) 55,471 -------- -------- INVESTING ACTIVITIES Construction expenditures (63,770) (34,622) Allowance for equity funds used during construction 1,250 368 -------- -------- Net cash flow used in investing activities (62,520) (34,254) -------- -------- FINANCING ACTIVITIES Proceeds from issuance of: Long-term debt 119,175 153,762 Retirement of: Long-term debt - (133,277) Dividends paid: Common stock (5,800) (9,100) Preferred stock (1,685) (1,685) -------- -------- Net cash flow provided by financing activities 111,690 9,700 -------- -------- Net increase in cash and cash equivalents 13,258 30,917 Cash and cash equivalents at beginning of period 4,787 2,640 -------- -------- Cash and cash equivalents at end of period $18,045 $33,557 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $18,600 $22,648 Income taxes ($5,830) $23,711 See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $5,112 $4,787 Temporary cash investments - at cost, which approximates market 12,933 - ---------- ---------- Total cash and cash equivalents 18,045 4,787 ---------- ---------- Accounts receivable: Customer 35,241 35,675 Allowance for doubtful accounts (886) (886) Associated companies 4,219 1,370 Other 3,942 2,391 Accrued unbilled revenues 39,200 28,600 ---------- ---------- Total receivables 81,716 67,150 ---------- ---------- Deferred fuel costs 81,451 47,939 Accumulated deferred income taxes 3,797 - Fuel inventory - at average cost 4,659 3,774 Materials and supplies - at average cost 16,323 17,068 Prepayments and other 7,592 7,114 ---------- ---------- TOTAL 213,583 147,832 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,915 6,965 ---------- ---------- TOTAL 12,446 12,496 ---------- ---------- UTILITY PLANT Electric 1,818,497 1,763,636 Property under capital lease 338 384 Construction work in progress 73,524 66,789 ---------- ---------- TOTAL UTILITY PLANT 1,892,359 1,830,809 Less - accumulated depreciation and amortization 729,340 709,543 ---------- ---------- UTILITY PLANT - NET 1,163,019 1,121,266 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 24,408 24,051 Unamortized loss on reacquired debt 15,725 16,345 Other regulatory assets 150,436 132,243 Other 6,549 5,784 ---------- ---------- TOTAL 197,118 178,423 ---------- ---------- TOTAL ASSETS $1,586,166 $1,460,017 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Accounts payable Associated companies $41,431 $84,382 Other 42,755 32,470 Customer deposits 25,128 23,303 Taxes accrued 44,914 35,968 Accumulated deferred income taxes - 526 Interest accrued 11,946 10,038 Obligations under capital leases 98 95 Other 2,603 2,137 ---------- ---------- TOTAL 168,875 188,919 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 307,007 298,477 Accumulated deferred investment tax credits 20,158 20,908 Obligations under capital leases 240 290 Accumulated provisions 6,783 7,374 Other 12,268 3,368 ---------- ---------- TOTAL 346,456 330,417 ---------- ---------- Long-term debt 584,305 464,466 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 2000 and 1999 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 236,882 226,567 ---------- ---------- TOTAL 486,530 476,215 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,586,166 $1,460,017 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $73.4 $70.1 $3.3 5 Commercial 65.3 60.1 5.2 9 Industrial 39.3 36.7 2.6 7 Governmental 6.3 5.9 0.4 7 ------ ------ ----- Total retail 184.3 172.8 11.5 7 Sales for resale Associated companies 7.0 8.4 (1.4) (17) Non-associated companies 6.9 6.6 0.3 5 Other 17.4 6.8 10.6 156 ------ ------ ----- Total $215.6 $194.6 $21.0 11 ====== ====== ===== Billed Electric Energy Sales (GWH): Residential 1,013 1,028 (15) (1) Commercial 1,008 986 22 2 Industrial 786 787 (1) - Governmental 89 88 1 1 ------ ------ ----- Total retail 2,896 2,889 7 - Sales for resale Associated companies 82 188 (106) (56) Non-associated companies 62 89 (27) (30) ------ ------ ----- Total 3,040 3,166 (126) (4) ====== ====== ===== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $139.5 $132.4 $7.1 5 Commercial 124.7 115.2 9.5 8 Industrial 76.7 72.8 3.9 5 Governmental 12.1 11.6 0.5 4 ------ ------ ----- Total retail 353.0 332.0 21.0 6 Sales for resale Associated companies 13.0 30.3 (17.3) (57) Non-associated companies 13.7 13.4 0.3 2 Other 18.7 1.4 17.3 1,236 ------ ------ ----- Total $398.4 $377.1 $21.3 6 ====== ====== ===== Billed Electric Energy Sales (GWH): Residential 2,036 2,032 4 - Commercial 1,926 1,875 51 3 Industrial 1,529 1,542 (13) (1) Governmental 169 170 (1) (1) ------ ------ ----- Total retail 5,660 5,619 41 1 Sales for resale Associated companies 207 1,165 (958) (82) Non-associated companies 139 201 (62) (31) ------ ------ ----- Total 6,006 6,985 (979) (14) ====== ====== ===== ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2000 compared to the three months ended June 30, 1999 primarily due to an increase in other operation and maintenance expenses. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and six months ended June 30, 2000 are as follows: Three Months Ended Six Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base revenues $0.1 $- Fuel cost recovery 4.9 11.8 Sales volume/weather (1.0) (0.9) Other revenue (including unbilled) (2.9) (1.3) Sales for resale 9.0 6.8 ----- ----- Total $10.1 $16.4 ===== ===== Fuel cost recovery revenues Fuel cost recovery revenues do not affect net income because they are an increase to revenues that are offset by specific incurred fuel costs. Fuel cost recovery revenues increased for the three and six months ended June 30, 2000 due to the increased market price of natural gas. Sales for resale Sales for resale increased for the three and six months ended June 30, 2000 primarily due to reduced generation at affiliate plants combined with an increase in the average price of electricity supplied for resale. Gas operating revenues Gas operating revenues increased for the three and six months ended June 30, 2000 primarily due to the increased market price of natural gas. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Fuel and purchased power Fuel expenses increased for the three and six months ended June 30, 2000 primarily due to increased market prices for gas, along with increased generation in the second quarter due to an outage at Michoud Unit 3 in May 1999. The increase in fuel expenses for the three months ended June 30, 2000 was partially offset by decreased deferred fuel expenses. The increase in fuel expenses for the six months ended June 30, 2000 was partially offset by decreased purchased power volume due to displacement by increased gas generation in 2000. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended June 30, 2000 primarily due to the capitalization of costs in 1999 associated with return-to-service projects. Other regulatory credits Other regulatory credits decreased for the six months ended June 30, 2000 primarily due to an over-recovery of Grand Gulf 1 related costs in 2000 compared to an under-recovery in 1999 and the amortization of Y2K cost deferrals in 2000. Other Income taxes For the three months ended June 30, 2000 and 1999, the effective income tax rates were 43.0% and 39.6%, respectively. For the six months ended June 30, 2000 and 1999, the effective income tax rates were 45.0% and 41.1%, respectively.
ENTERGY NEW ORLEANS, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $114,539 $104,404 $200,797 $184,446 Natural gas 22,112 16,882 55,595 42,897 -------- -------- -------- -------- TOTAL 136,651 121,286 256,392 227,343 -------- -------- -------- -------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 40,231 20,140 82,032 51,076 Purchased power 38,784 41,464 73,895 77,916 Other operation and maintenance 22,806 17,293 39,657 40,272 Taxes other than income taxes 9,184 10,519 18,696 18,137 Depreciation and amortization 5,809 5,300 11,510 10,928 Other regulatory credits - net (1,732) (2,162) (3,333) (6,610) Amortization of rate deferrals 6,482 6,643 12,476 12,786 -------- -------- -------- -------- TOTAL 121,564 99,197 234,933 204,505 -------- -------- -------- -------- OPERATING INCOME 15,087 22,089 21,459 22,838 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 270 217 595 423 Miscellaneous - net 819 559 1,417 972 -------- -------- -------- -------- TOTAL 1,089 776 2,012 1,395 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 3,319 3,319 6,638 6,638 Other interest - net 410 333 826 654 Allowance for borrowed funds used during construction (207) (156) (445) (311) -------- -------- -------- -------- TOTAL 3,522 3,496 7,019 6,981 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 12,654 19,369 16,452 17,252 Income taxes 5,437 7,675 7,418 7,092 -------- -------- -------- -------- NET INCOME 7,217 11,694 9,034 10,160 Preferred dividend requirements and other 241 241 482 482 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $6,976 $11,453 $8,552 $9,678 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $9,034 $10,160 Noncash items included in net income: Amortization of rate deferrals 12,476 12,786 Other regulatory credits - net (3,333) (6,610) Depreciation and amortization 11,510 10,928 Deferred income taxes and investment tax credits 2,405 1,819 Allowance for equity funds used during (595) (423) construction Changes in working capital: Receivables (2,623) (6,041) Fuel inventory 1,920 1,229 Accounts payable 6,956 5,798 Taxes accrued 2,348 6,587 Interest accrued (417) (412) Deferred fuel costs (16,493) (12,050) Other working capital accounts (4,787) (718) Provision for estimated losses and reserves (509) (1,568) Changes in other regulatory assets (4,977) (7,499) Other 3,983 5,956 -------- -------- Net cash flow provided by operating activities 16,898 19,942 -------- -------- INVESTING ACTIVITIES Construction expenditures (17,463) (25,718) Allowance for equity funds used during construction 595 423 -------- -------- Net cash flow used in investing activities (16,868) (25,295) -------- -------- FINANCING ACTIVITIES Dividends paid: Preferred stock (241) (723) -------- -------- Net cash flow used in financing activities (241) (723) -------- -------- Net decrease in cash and cash equivalents (211) (6,076) Cash and cash equivalents at beginning of period 4,454 17,153 -------- -------- Cash and cash equivalents at end of period $4,243 $11,077 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $7,702 $7,524 Income taxes ($2,386) ($4,644) See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents $4,243 $4,454 Accounts receivable: Customer 24,254 28,658 Allowance for doubtful accounts (846) (846) Associated companies 724 404 Other 6,694 6,225 Accrued unbilled revenues 26,057 19,820 -------- -------- Total receivables 56,883 54,261 -------- -------- Deferred fuel costs 30,976 14,483 Fuel inventory - at average cost 1,373 3,293 Materials and supplies - at average cost 9,613 10,127 Rate deferrals 18,659 24,788 Prepayments and other 8,634 2,528 -------- -------- TOTAL 130,381 113,934 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in subsidiary companies - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 551,596 541,525 Natural gas 135,838 133,568 Construction work in progress 33,741 29,780 -------- -------- TOTAL UTILITY PLANT 721,175 704,873 Less - accumulated depreciation and amortization 392,316 382,797 -------- -------- UTILITY PLANT - NET 328,859 322,076 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Rate deferrals 4,627 10,974 Unamortized loss on reacquired debt 1,080 1,187 Other regulatory assets 38,016 33,039 Other 822 1,277 -------- -------- TOTAL 44,545 46,477 -------- -------- TOTAL ASSETS $507,044 $485,746 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Accounts payable Associated companies $18,046 $24,350 Other 41,521 28,261 Customer deposits 18,001 17,830 Taxes accrued 2,777 429 Accumulated deferred income taxes 15,030 10,863 Interest accrued 4,538 4,956 Other 6,399 5,524 -------- -------- TOTAL 106,312 92,213 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 40,156 43,878 Accumulated deferred investment tax credits 6,122 6,378 SFAS 109 regulatory liability - net 10,140 7,528 Other regulatory liabilities 1,141 1,753 Accumulated provisions 8,328 8,836 Other 8,833 7,733 -------- -------- TOTAL 74,720 76,106 -------- -------- Long-term debt 169,116 169,083 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 19,780 19,780 Common stock, $4 par value, authorized 10,000,000 shares; issued 8,435,900 shares in 2000 and 1999 33,744 33,744 Paid-in capital 36,294 36,294 Retained earnings 67,078 58,526 -------- -------- TOTAL 156,896 148,344 -------- -------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $507,044 $485,746 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $36.7 $34.4 $2.3 7 Commercial 34.4 33.3 1.1 3 Industrial 5.1 5.5 (0.4) (7) Governmental 14.8 13.8 1.0 7 ------ ------ ----- Total retail 91.0 87.0 4.0 5 Sales for resale Associated companies 10.9 1.6 9.3 581 Non-associated companies 2.2 2.5 (0.3) (12) Other 10.4 13.3 (2.9) (22) ------ ------ ----- Total $114.5 $104.4 $10.1 10 ====== ====== ===== Billed Electric Energy Sales (GWH): Residential 503 502 1 - Commercial 550 556 (6) (1) Industrial 95 127 (32) (25) Governmental 264 263 1 - ------ ------ ----- Total retail 1,412 1,448 (36) (2) Sales for resale Associated companies 218 56 162 289 Non-associated companies 35 49 (14) (29) ------ ------ ----- Total 1,665 1,553 112 7 ====== ====== ===== Six Months Ended Increase/ Description 2000 1999 (Decrease) % (In Millions) Electric Operating Revenues: Residential $64.2 $59.0 $5.2 9 Commercial 68.1 64.1 4.0 6 Industrial 10.1 10.7 (0.6) (6) Governmental 28.9 26.6 2.3 9 ------ ------ ----- Total retail 171.3 160.4 10.9 7 Sales for resale Associated companies 13.6 6.7 6.9 103 Non-associated companies 4.4 4.5 (0.1) (2) Other 11.5 12.8 (1.3) (10) ------ ------ ----- Total $200.8 $184.4 $16.4 9 ====== ====== ===== Billed Electric Energy Sales (GWH): Residential 876 866 10 1 Commercial 1,047 1,046 1 - Industrial 186 242 (56) (23) Governmental 497 498 (1) - ------ ------ ----- Total retail 2,606 2,652 (46) (2) Sales for resale Associated companies 301 288 13 5 Non-associated companies 79 96 (17) (18) ------ ------ ----- Total 2,986 3,036 (50) (2) ====== ====== ===== SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended June 30, 2000 compared to the three months ended June 30, 1999 primarily due to an increase in the effective tax rate. Net income increased for the six months ended June 30, 2000 compared to the six months ended June 30, 1999 primarily due to increased operating revenues and decreased interest charges, partially offset by an increase in the effective tax rate. Revenues Operating revenues recover operating expenses, depreciation, and capital costs attributable to Grand Gulf 1. Capital costs are computed by allowing a return on System Energy's common equity funds allocable to its net investment in Grand Gulf 1 and adding to such amount System Energy's effective interest cost for its debt. Operating revenues increased for the six months ended June 30, 2000 as compared to the same period in 1999 due to additional reserves recorded in the first quarter of 1999 for the potential refund of tariffs collected in System Energy's pending rate case before FERC. System Energy's proposed rate increase, which is subject to refund, and FERC's recent decision in the proceeding, is discussed in Note 2 to the financial statements. Other Interest charges Interest on long-term debt decreased for the three and six months ended June 30, 2000 as a result of the refinancing and redemption of pollution control revenue bonds and the redemption of first mortgage bonds in 1999. Other interest decreased for the six months ended June 30, 2000 due to an adjustment in the first quarter of 1999 to record interest on the potential refund of System Energy's proposed rate increase. Income taxes The effective income tax rates for the three months ended June 30, 2000 and 1999 were 48.9% and 31.1%, respectively. The effective income tax rates for the six months ended June 30, 2000 and 1999 were 47.9% and 38.8%, respectively. The increase was primarily due to the amortization of investment tax credits related to Grand Gulf Unit 2 affecting the 1999 tax rates.
SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three and Six Months Ended June 30, 2000 and 1999 (Unaudited) Three Months Ended Six Months Ended 2000 1999 2000 1999 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $159,389 $159,505 $316,479 $300,122 -------- -------- -------- -------- OPERATING EXPENSES Operating and Maintenance: Fuel, fuel related expenses, and gas purchased for resale 10,858 12,157 21,540 20,793 Nuclear refueling outage expenses 3,690 3,505 6,904 7,011 Other operation and maintenance 23,059 22,547 38,332 40,992 Decommissioning 4,736 4,736 9,472 9,472 Taxes other than income taxes 6,225 6,767 12,168 13,518 Depreciation and amortization 27,875 27,559 55,931 56,419 Other regulatory charges - net 16,051 13,540 30,796 29,385 -------- -------- -------- -------- TOTAL 92,494 90,811 175,143 177,590 -------- -------- -------- -------- OPERATING INCOME 66,895 68,694 141,336 122,532 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 374 648 1,106 1,313 Miscellaneous - net 5,096 4,145 9,192 8,204 -------- -------- -------- -------- TOTAL 5,470 4,793 10,298 9,517 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 22,636 25,270 46,762 51,099 Other interest - net 7,298 5,891 14,141 32,642 Allowance for borrowed funds used during construction (177) (466) (653) (1,017) -------- -------- -------- -------- TOTAL 29,757 30,695 60,250 82,724 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 42,608 42,792 91,384 49,325 Income taxes 20,822 13,309 43,811 19,142 -------- -------- -------- -------- NET INCOME $21,786 $29,483 $47,573 $30,183 ======== ======== ======== ======== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2000 and 1999 (Unaudited) 2000 1999 (In Thousands) OPERATING ACTIVITIES Net income $47,573 $30,183 Noncash items included in net income: Reserve for regulatory adjustments 37,751 82,492 Other regulatory charges - net 30,796 29,385 Depreciation, amortization, and decommissioning 65,403 65,891 Deferred income taxes and investment tax credits (39,621) (62,462) Allowance for equity funds used during construction (1,106) (1,313) Changes in working capital: Receivables 186,754 (59,956) Accounts payable (14,193) 25,103 Taxes accrued 2,751 45,944 Interest accrued (9,375) (7,686) Other working capital accounts 12,218 3,149 Provision for estimated losses and reserves (106) (228) Changes in other regulatory assets 19,298 11,889 Other (13,084) 12,630 -------- -------- Net cash flow provided by operating activities 325,059 175,021 -------- -------- INVESTING ACTIVITIES Construction expenditures (24,557) (11,200) Allowance for equity funds used during construction 1,106 1,313 Decommissioning trust contributions and realized change in trust assets (11,544) (11,264) -------- -------- Net cash flow used in investing activities (34,995) (21,151) -------- -------- FINANCING ACTIVITIES Proceeds from issuance of: Long-term debt - 101,862 Retirement of: Long-term debt (2,947) (182,884) Dividends paid: Common stock (47,000) (32,500) -------- -------- Net cash flow used in financing activities (49,947) (113,522) -------- -------- Net increase in cash and cash equivalents 240,117 40,348 Cash and cash equivalents at beginning of period 35,152 236,841 -------- -------- Cash and cash equivalents at end of period $275,269 $277,189 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $54,870 $70,231 Income taxes $37,045 $19,744 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets $199 ($792) See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $39 $136 Temporary cash investments - at cost, which approximates market 275,230 35,016 ---------- ---------- Total cash and cash equivalents 275,269 35,152 ---------- ---------- Accounts receivable: Associated companies 113,845 301,287 Other 1,358 670 ---------- ---------- Total receivables 115,203 301,957 ---------- ---------- Materials and supplies - at average cost 50,541 61,264 Deferred nuclear refueling outage costs 14,161 18,665 Prepayments and other 5,114 2,251 ---------- ---------- TOTAL 460,288 419,289 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 147,127 135,384 ---------- ---------- UTILITY PLANT Electric 3,062,317 3,060,324 Property under capital lease 444,850 434,993 Construction work in progress 71,196 58,510 Nuclear fuel under capital lease 63,231 78,020 ---------- ---------- TOTAL UTILITY PLANT 3,641,594 3,631,847 Less - accumulated depreciation and amortization 1,371,577 1,312,559 ---------- ---------- UTILITY PLANT - NET 2,270,017 2,319,288 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 221,668 242,834 Unamortized loss on reacquired debt 53,980 56,474 Other regulatory assets 187,779 185,910 Other 9,351 9,869 ---------- ---------- TOTAL 472,778 495,087 ---------- ---------- TOTAL ASSETS $3,350,210 $3,369,048 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY June 30, 2000 and December 31, 1999 (Unaudited) 2000 1999 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $91,800 $77,947 Accounts payable Associated companies 1,372 15,237 Other 18,142 18,470 Taxes accrued 58,134 55,383 Accumulated deferred income taxes 5,378 7,162 Interest accrued 30,624 40,000 Obligations under capital leases 38,421 38,421 Other 1,505 1,651 ---------- ---------- TOTAL 245,376 254,271 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 435,323 481,945 Accumulated deferred investment tax credits 91,254 93,219 Obligations under capital leases 24,809 39,599 FERC settlement - refund obligation 34,143 37,337 Other regulatory liabilities 96,481 73,313 Decommissioning 141,048 129,503 Regulatory reserves 305,521 267,771 Accumulated provisions 1,910 2,016 Other 16,475 16,014 ---------- ---------- TOTAL 1,146,964 1,140,717 ---------- ---------- Long-term debt 1,065,817 1,082,579 SHAREHOLDERS' EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2000 and 1999 789,350 789,350 Retained earnings 102,703 102,131 ---------- ---------- TOTAL 892,053 891,481 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,350,210 $3,369,048 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (excluding nuclear fuel), long-term debt and preferred stock maturities, and cash sinking fund requirements. Sales Warranties and Indemnities (Entergy Corporation) See Note 9 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Entergy London and CitiPower sales transactions. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on nuclear liability, property and replacement power insurance, related NRC regulations, the disposal of spent nuclear fuel, other high-level radioactive waste, and decommissioning costs associated with ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf 1, and Pilgrim. ANO Matters (Entergy Corporation and Entergy Arkansas) See Note 9 to the financial statements in the Form 10-K for information on cracks in a number of steam generator tubes at ANO 2 that were discovered and repaired during an outage in March 1992, and the replacement of the steam generators scheduled for September 2000. On July 21, 2000, ANO 2 went offline to conduct additional inspections on the steam generator tubes as requested by the NRC. Management expects that ANO 2 will go back online in mid-August 2000. Environmental Issues (Entergy Gulf States) Entergy Gulf States has been designated as a potentially responsible party (PRP) for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is in periodic negotiations with the U.S. Environmental Protection Agency and state authorities regarding the cleanup of certain of these sites. As of June 30, 2000, a remaining recorded liability of approximately $17.7 million existed related to the cleanup of the remaining sites at which Entergy Gulf States has been designated a PRP. See "Environmental Regulation" in Item 1 of Part I of the Form 10-K for additional discussion of Entergy Gulf States' environmental clean-up activity and related litigation. (Entergy Louisiana and Entergy New Orleans) During 1993, the Louisiana Department of Environmental Quality (LDEQ) issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana and Entergy New Orleans have determined that certain of their power plant wastewater impoundments were affected by these regulations and chose to upgrade or close them. Completion of this work is awaiting LDEQ approval. LDEQ has issued notices of deficiencies for certain of these sites. Additional notices of deficiencies are expected in the third quarter of 2000. Recorded liabilities in the amounts of $5.8 million and $0.5 million existed at June 30, 2000 for wastewater upgrades and closures for Entergy Louisiana and Entergy New Orleans, respectively. Management of Entergy Louisiana and Entergy New Orleans believe these reserves are adequate based on current estimates. 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 to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3, which were refinanced in 1997. Entergy Louisiana is obligated under certain circumstances to pay amounts sufficient to permit the Owner Participants to withdraw from these lease transactions. Additionally, Entergy Louisiana may be required to assume the outstanding bonds issued by the Owner Trustee under these leases to finance, in part, its acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10-K for further information. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, and/or sex. The defendant companies are vigorously defending these suits and deny any liability to the plaintiffs. However, no assurance can be given as to the outcome of these cases. Reimbursement Agreement (System Energy) Under a bank letter of credit and reimbursement agreement, System Energy has agreed to a number of covenants relating to the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the agreement, to maintain its equity at not less than 33% of its adjusted capitalization (defined in the agreement to include certain amounts not included in capitalization for financial statement purposes). In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the agreement, a ratio of adjusted net income to interest expense (calculated, in each case, as specified in the agreement) of at least 1.60 times earnings. System Energy was in compliance with the above covenants at June 30, 2000. See Note 9 to the financial statements in the Form 10-K for further information. Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In addition to those proceedings discussed elsewhere herein and in the Form 10-K, Entergy and the domestic utility companies are involved in a number of other legal proceedings and claims in the ordinary course of their businesses. While management is unable to predict the outcome of these other legal proceedings and claims, it is not expected that their ultimate resolution individually or collectively will have a material adverse effect on the results of operations, cash flows, or financial condition of these entities. NOTE 2. RATE AND REGULATORY MATTERS Electric Industry Restructuring Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Arkansas (Entergy Corporation and Entergy Arkansas) As discussed in Note 2 to the financial statements in the Form 10-K, in April 1999 the Arkansas legislature enacted a law providing for competition in the electric utility industry through retail open access on January 1, 2002. When retail open access is achieved, the generation operations will become a competitive business, but transmission and distribution operations will continue to be regulated. The APSC may delay implementation of retail open access, but not beyond June 30, 2003. The implementation of the Arkansas retail open access law through rulemakings and company filings is ongoing. Rulemakings associated with energy service provider licensing rules and affiliate rules have been completed. In June 2000, the APSC declared that billing would become a competitive service at the beginning of retail open access. Entergy Arkansas filed a functional, but not corporate, unbundling plan with the APSC on August 8, 2000. The plan initially establishes separate business units for distribution, generation, and a new retail energy service provider. The plan contemplates the transfer of transmission assets to the Transco discussed in the Form 10-K in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS." The functional unbundling plan is tentative because the regulatory requirements to implement the retail open access law have not been finalized, and changes to the details of the plan are likely. In June 2000, Entergy Arkansas filed an application to continue the stranded cost mitigation efforts agreed upon in the 1997 settlement agreement approved by the APSC. These mitigation efforts include the funding of a transition cost account with excess earnings to offset future stranded costs and the accelerated amortization of Entergy Arkansas' share of the Grand Gulf purchased power obligation under the Unit Power Sales Agreement. The filing included an updated stranded cost estimate intended to support Entergy Arkansas' recommendation that the mitigation efforts continue. The filing presents an estimated range of stranded costs based upon the comparison of possible generation asset market values to the generation assets' book values and contractual obligations. The range of possible generation asset market values used in the estimate was determined using generation asset sales in other jurisdictions. The estimated range of stranded costs in Arkansas set forth in the filing is $254 million to $1.64 billion. Texas (Entergy Corporation and Entergy Gulf States) As discussed in Note 2 to the financial statements in the Form 10-K, in June 1999 the Texas legislature enacted a law providing for competition in the electric utility industry through retail open access. The law provides for retail open access by most electric utilities, including Entergy Gulf States, on January 1, 2002. When retail open access is achieved, the generation business and a new retail electricity provider function will become competitive businesses, but transmission and distribution operations will continue to be regulated. The new retail provider function will be the primary point of contact with the customers for most services beyond initiation of electric service and restoration of service following outages. In January 2000, as required by the Texas restructuring legislation, Entergy Gulf States filed a business separation plan with the PUCT, which was amended in June 2000. The plan provided that, by January 2002, Entergy Gulf States would ultimately be divided into a Texas distribution company, a Texas transmission company, a Texas generation company, a Texas retail electricity provider, and a Louisiana company that will encompass distribution, generation, and transmission operations. In July 2000, the PUCT issued an interim order to approve the amended business separation plan. The plan provides that the Louisiana company would retain the liability for all debt obligations of Entergy Gulf States and that the property of the Texas companies would be released from the lien of Entergy Gulf States' mortgage. Each of the Texas companies would assume a portion of Entergy Gulf States' debt obligations, which assumptions would not act to release the Louisiana company's obligations. Each of the Texas companies would also grant a lien on properties in favor of the Louisiana company to secure its obligations to the Louisiana company in respect of the assumed obligations. In addition, under the plan Entergy Gulf States will refinance or retire existing debt through 2004. Regulatory approvals from FERC, the SEC, and the LPSC will be required before the business separation plan can be implemented. Remaining business separation issues in Texas will be addressed in the unbundled costs proceeding before the PUCT. The LPSC has opened a docket to identify the changes in corporate structure of Entergy Gulf States, and their potential impact on Louisiana retail ratepayers, resulting from restructuring in Texas and Arkansas. Entergy Gulf States filed testimony in that proceeding in August 2000 and hearings are scheduled in February 2001. On March 31, 2000, pursuant to the Texas restructuring legislation, Entergy Gulf States filed cost data with the PUCT for its unbundled business functions and proposed tariffs for its unbundled distribution utility. In the filing, Entergy Gulf States is seeking approval for recovery of the following, among other things: o the unbundled distribution utility's cost of service; o a 12% return on equity for the unbundled distribution utility; and o a ten-year non-bypassable charge to recover estimated stranded costs and a non-bypassable charge to recover nuclear decommissioning costs. At a prehearing conference held in April 2000, a procedural schedule for the case was established, calling for a hearing in January 2001. Management cannot predict the outcome of this proceeding. In connection with unbundled cost filings made by all Texas investor-owned utilities, the PUCT has opened a "generic docket" to determine issues that may be resolved on an industry-wide basis before the individual utility hearings begin. These issues include updating gas prices to be used in the model established by the PUCT for estimating stranded costs and incentive mechanisms to enhance the authorized rate of return. Federal Regulatory Activity (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In April 2000, the LPSC and the Council filed a complaint with FERC seeking revisions to the System Agreement that they allege are necessary to accommodate the introduction of retail competition in Texas and Arkansas, where Entergy Gulf States and Entergy Arkansas provide utility service, and to protect Entergy's Louisiana customers from any adverse impact that may occur due to the introduction of such retail competition in some jurisdictions but not others. The LPSC and the Council request that FERC immediately institute a proceeding to permit changes to be adopted prior to January 1, 2002, and request, among other things, that FERC cap certain of the System Agreement obligations of Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans and fix these companies' access to pool energy at the average level existing for the three years prior to the date that retail access is initiated in Texas and Arkansas. Alternatively, the LPSC and the Council request that FERC require Entergy to provide wholesale power contracts to these companies to satisfy their energy requirements at costs no higher than would have been incurred if retail competition were not implemented. The LPSC and the Council request that the relief be made available for at least eight years after implementation of retail competition or the withdrawal of Entergy Arkansas and Entergy Gulf States from the System Agreement, or until retail access is implemented in Louisiana and New Orleans. In addition, among other things, the LPSC and the Council assert in their complaint that: o unless the requested relief is granted, the restructuring legislation adopted in Texas and Arkansas, to the extent such legislation requires, or has the effect of, altering the rights of parties under the System Agreement, will result in violations of the interstate commerce clause, the due process clause, and the impairment of contracts clause in the U.S. Constitution; and o the failure of the domestic utility companies to honor a right of first refusal with respect to any sale of generating capacity and associated energy under the System Agreement, and any attempt to eliminate such right of first refusal from the System Agreement, would violate the Federal Power Act and constitute a breach of the System Agreement. In June 2000, Entergy's domestic utility companies filed proposed amendments to the System Agreement with FERC to facilitate the implementation of retail competition in Arkansas and Texas and to provide for continued equalization of costs among the domestic utilities in Louisiana and Mississippi. The amendments provide the following: o cessation of participation in all aspects of the System Agreement, other than those related to transmission equalization, for any jurisdictional division of a domestic utility operating in a jurisdiction that initiates retail access; o certain sections of the System Agreement will no longer apply to the sales of generating capacity, whether through the sale of the asset or the output thereof, by a domestic utility operating in a jurisdiction that has established a date by which it will implement retail access; and o modification of the service schedule developed to track changes in energy costs resulting from the Entergy-Gulf States Utilities merger to include one final true-up of fuel costs upon cessation of one company's participation in the System Agreement, which thereafter will no longer be applicable for any purpose. Entergy believes that the proceedings relating to the proposed amendments serve as a response to the complaint by the LPSC and the Council and anticipates that the proceedings would be consolidated. In response to Entergy's proposal, the LPSC and the Council have requested that FERC dismiss the proposed amendments and proceed with the complaint proceedings. Several other parties have also intervened in the proceeding. In the event that the proceedings relating to the proposed amendments proceed, the LPSC and the Council have asserted that the charges to the domestic utility companies under the Unit Power Sales Agreement need to be reconsidered. Entergy has requested an expedited hearing on the proposed amendments and that FERC issue a final decision by October 1, 2001. A procedural schedule has not been established. Neither the timing, nor the ultimate outcome of these proceedings at FERC can be predicted at this time. Retail Rate Proceedings Previous developments and information related to retail rate proceedings are presented in Note 2 to the financial statements in the Form 10-K. Filings with the APSC (Entergy Corporation and Entergy Arkansas) In March 2000, Entergy Arkansas filed its annually redetermined energy cost recovery (ECR) rate with the APSC in accordance with the energy cost recovery rider formula. The filing reflected that an increase was warranted to collect an under-recovery of energy costs for 1999. The increased ECR rate is effective April 2000 through March 2001. As discussed in Note 2 to the financial statements in the Form 10-K, Entergy Arkansas is operating under the terms of a settlement agreement approved by the APSC in December 1997 that allows the collection of excess earnings in a transition cost account. An adjustment was made to the transition cost account in May 2000 resulting in a negative net income impact of $4.4 million ($2.7 million after tax). Interest of $2.6 million ($1.6 million net of tax) was also recorded in the transition cost account for the first six months of 2000. The results of operations reflect these charges in operating expenses. Filings with the PUCT and Texas Cities PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States) As determined in the settlement agreement discussed in Note 2 to the financial statements in the Form 10-K, Entergy Gulf States adopted a methodology for calculating its fixed fuel factor based on the market price of natural gas. This calculation and any necessary adjustments occur semi-annually and will continue until December 2001. The amounts collected under Entergy Gulf States' fixed fuel factor through December 2001 are subject to fuel reconciliation proceedings before the PUCT, including a fuel reconciliation case filed by Entergy Gulf States in July 1999. In February 2000, Entergy Gulf States reached a settlement with all but one of the parties to that proceeding. Entergy Gulf States reconciled approximately $731 million (after excluding approximately $14 million related to Cajun issues to be handled in a subsequent proceeding) of fuel and purchased power costs. The settlement reduces Entergy Gulf States' requested surcharge in the reconciliation filing from $14.7 million to $2.2 million. This settlement was approved by the PUCT in April 2000, confirming an interim order that allowed Entergy Gulf States to begin the recovery of the $2.2 million surcharge between April 2000 and January 2001. In addition, Entergy Gulf States agreed to file a fuel reconciliation case by January 12, 2001 covering the period from March 1, 1999 through August 31, 2000. The decrease in the requested surcharge was recorded in March 2000 and is reflected in Entergy Gulf States' operating income. In September 1999, the PUCT approved the final adjustment of the rate refunds ordered as a result of Entergy Gulf States' November 1996 rate case. These refunds were completed in the October 1999 billing month. Pursuant to the September 1999 order, a true-up proceeding was initiated, which required Entergy Gulf States to refund an additional $25 million. This refund was concluded in December 1999. The PUCT approved the final refund and concluded the proceeding in June 2000. In September 1999, Entergy Gulf States filed an application with the PUCT requesting an interim fuel surcharge to collect under- recovered fuel and purchased power expenses incurred from March 1999 through July 1999. In December 1999, the PUCT approved the collection of $33.9 million over a five-month period beginning January 2000. An administrative appeal of the interim fuel surcharge was filed by certain cities in Travis County District Court. The fuel and purchased power expenses contained in this surcharge will be subject to future fuel reconciliation proceedings. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In June 2000, the LPSC approved a settlement between Entergy Gulf States and the LPSC staff to refund $83 million, including interest, resolving refund issues in Entergy Gulf States' second, third, fourth, and fifth post-Merger earnings reviews by the LPSC. The refund, for which adequate reserves have been made, will occur over a three-month period beginning July 2000. In May 2000, Entergy Gulf States filed its seventh required post- Merger earnings analysis with the LPSC. This filing will be subject to review by the LPSC, which may result in a change in rates. Entergy Gulf States also is proposing that the allowed return on common equity be increased to 11.60%. A procedural schedule has not yet been established by the LPSC. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In April 1999, Entergy Louisiana submitted its fourth annual performance-based rate plan filing for the 1998 test year. A rate reduction of $15 million was implemented effective August 1, 1999. In May 2000, the LPSC ordered an additional $6.4 million refund effective April 2000. Entergy Louisiana has provided reserves for these refunds. In addition, the LPSC extended Entergy Louisiana's formula rate plan for an additional year with the last filing to be made on April 15, 2001. In May 2000, Entergy Louisiana submitted its fifth annual performance-based rate plan filing for the 1999 test year. The filing indicated that a $24.8 million base rate reduction might be appropriate for implementation effective August 2000. Entergy Louisiana is proposing to increase prospectively the allowed return on common equity from 10.5% to 11.6%, which would reduce the amount of any rate reduction implemented. This filing will be subject to review by the LPSC. A procedural schedule has not yet been established by the LPSC. Fuel Adjustment Clause Litigation (Entergy Corporation and Entergy Louisiana) In May 1998, a group of ratepayers filed a complaint against Entergy Corporation, Entergy Power, and Entergy Louisiana in state court in Orleans Parish purportedly on behalf of all Entergy Louisiana ratepayers. The plaintiffs seek treble damages for alleged injuries arising from alleged violations by the defendants of Louisiana's antitrust laws in connection with the costs included in fuel filings with the LPSC and passed through to ratepayers. Among other things, the plaintiffs allege that Entergy Louisiana improperly introduced certain costs into the calculation of the fuel charges, including high-cost electricity imprudently purchased from its affiliates and high-cost gas imprudently purchased from independent third party suppliers. In addition, plaintiffs seek to recover interest and attorney's fees. Exceptions were filed by Entergy, asserting that this dispute should be litigated before the LPSC and FERC. At the appropriate time, if necessary, Entergy will raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also requested that the LPSC initiate a review of Entergy Louisiana's monthly fuel adjustment charge filings and force restitution to ratepayers of all costs that the plaintiffs allege were improperly included in those fuel adjustment filings. Marathon Oil Company and Louisiana Energy Users Group have also intervened in the LPSC proceeding. Discovery at the LPSC has been conducted and is expected to continue. Direct testimony was filed with the LPSC by plaintiffs and the intervenors in July 1999. In their testimony for the period 1989 through 1998, plaintiffs purport to quantify many of their claims in an amount totaling $544 million, plus interest. The plaintiffs will likely assert additional damages for the period 1974 through 1988. The Entergy companies filed responsive and rebuttal testimony in September 1999. Rebuttal testimony by the plaintiffs and intervenors was filed in November 1999. Entergy Louisiana and the staff of the LPSC have reached an agreement in principle for the settlement of the matter before the LPSC. The terms of the proposed settlement have not as yet been agreed to by other parties to the LPSC proceeding, and must be approved by the LPSC after any parties contesting the settlement are afforded the opportunity for a hearing. Entergy Louisiana would agree under the proposed settlement terms to refund to customers approximately $72 million to resolve all claims arising out of or relating to Entergy Louisiana's fuel adjustment clause filings from January 1, 1975 through December 31, 1999, except with respect to purchased power and associated costs included in the fuel adjustment clause filings for the period May 1 through September 30, 1999. Reserves were previously provided by Entergy Louisiana for the refund. If the proposed settlement is approved, Entergy Louisiana would also consent to future fuel cost recovery under a long-term gas contract based on a formula that would likely result in an under- recovery of actual costs under that contract for the remainder of its term, which runs through 2013. The future under-recovery cannot be precisely estimated at this time because it will depend upon factors that are not certain, such as the price of gas and the amount of gas purchased under the long-term contract. In recent years, Entergy Louisiana has made purchases under that contract totaling from $91 million to $121 million annually. Had the proposed settlement terms been applicable to such purchases, the under-recoveries would have ranged from $4 million to $9 million per year. Hearings in this proceeding are scheduled for September 2000, which will include consideration of the proposed settlement. In its intervention, Marathon Oil Company and Louisiana Energy Users Group requested that the LPSC review the prudence of a contract entered into by Entergy Louisiana to purchase energy generated by a hydroelectric facility known as the Vidalia project through the year 2031. Note 9 to the financial statements in the Form 10-K contains further discussions of the obligations related to the Vidalia project. By orders entered by the LPSC in 1985 and 1990, the LPSC approved Entergy Louisiana's entry into the Vidalia contract and Entergy Louisiana's right to recover, through the fuel adjustment clause, the costs of power purchased thereunder. Additionally, the wholesale electric rates under the Vidalia power purchase contract were filed at FERC. In December 1999, the LPSC instituted a review of the following issues relating to the Vidalia project: (i) the LPSC's jurisdiction over the Vidalia project; (ii) Entergy Louisiana's management of the Vidalia contract, including opportunities to restructure or otherwise reform the contract; (iii) the appropriateness of Entergy Louisiana's recovery of 100% of the Vidalia contract costs from ratepayers; (iv) the appropriateness of the fuel adjustment clause as the method for recovering all or part of the Vidalia contract costs; (v) the appropriate regulatory treatment of the Vidalia contract in the event the LPSC approves implementation of retail competition; and (vi) Entergy Louisiana's communication of pertinent information to the LPSC regarding the Vidalia project and contract. Based on its review, the LPSC will determine whether it should disallow any of the costs of the Vidalia project included in the fuel adjustment clause. In March 2000, Entergy Louisiana filed testimony in this sub- docket asserting that the prudence of the Vidalia contract already has been approved by final orders of the LPSC and that recovery of all amounts paid by Entergy Louisiana related to the Vidalia project pursuant to the FERC-filed rate is appropriate. Direct testimony was filed by intervenor Marathon Oil Company in May 2000 and by the LPSC staff and intervenor Louisiana Energy Users Group in July 2000. In its testimony the LPSC staff alleges that Entergy Louisiana was imprudent for not declaring to the LPSC that the Vidalia project had become uneconomic and not threatening to block the Vidalia project's owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985 order (approving the Entergy Louisiana/Vidalia project power purchase agreement), unless the Vidalia project's owners' shared with Entergy Louisiana's ratepayers some portion of what the LPSC staff quantifies as approximately $90 million of tax consequences available to the project. The LPSC staff's testimony does not quantify how much of the potential tax savings Entergy Louisiana should have demanded in exchange for not attempting to block the Vidalia project's owners' request for clarification; however, that testimony does suggest various alternatives by which some portion of the $90 million, perhaps $45 million plus interest since 1990, could be returned to the ratepayers. The direct testimony of the intervenor Louisiana Energy Users Group alleges that Entergy Louisiana was imprudent for not attempting to block the Vidalia project's owners' July 30, 1990 request that the LPSC clarify the LPSC's 1985 order approving the Entergy Louisiana/Vidalia project power purchase agreement; however, that intervenor does not quantify the amount of damage alleged to have been caused by this alleged imprudence. The direct testimony of the intervenor Marathon Oil Company alleges with respect to Entergy Louisiana that imprudent Vidalia project costs should be disallowed and that Entergy Louisiana's customers should not be charged 100% of the Vidalia costs. It is anticipated that hearings in this sub- docket concerning the Vidalia contract will be completed by the end of 2000. (Entergy Corporation and Entergy New Orleans) In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorney's fees. Exceptions to the plaintiffs' allegations were filed by Entergy, asserting, among other things, that jurisdiction over these issues rests with the Council and FERC. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims. At present, the suit in state court is stayed by stipulation of the parties. Plaintiffs also filed this complaint with the Council in order to initiate a review by the Council of their allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Discovery has begun in the proceedings before the Council. In April 2000, testimony was filed on behalf of the plaintiffs in this proceeding. The testimony asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices that could have resulted in New Orleans customers being overcharged by more than $45 million over a period of years. However, it is not clear precisely what periods and damages are being alleged. Entergy intends to defend this matter vigorously, both in court and before the Council. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) In March 2000, Entergy Mississippi submitted its annual performance-based formula rate plan filing for the 1999 test year. The filing indicated that no change in rate levels was warranted and the current rate levels remain in effect. Purchased Power for Summer 2000 (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) The domestic utility companies filed applications with the APSC, the LPSC, the MPSC, and the Council to approve the sale of power by Entergy Gulf States from its unregulated, undivided 30% interest in River Bend formerly owned by Cajun to the other domestic utility companies during the summer of 2000. In addition, Entergy Gulf States and Entergy Louisiana filed an application with the LPSC for authorization to purchase capacity and electric power from third parties for the summer of 2000. The commissions and Council have approved the applications, with a reservation of their right to review the prudence of the purchases and the appropriate catagorization of the costs as either capacity or energy charges for purposes of recovery. Proposed Rate Increase (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in Note 2 to the financial statements in the Form 10-K, System Energy applied to FERC in May 1995 for a $65.5 million rate increase. The request sought changes to System Energy's rate schedule, including increases in the revenue requirement associated with decommissioning costs, the depreciation rate, and the rate of return on common equity. In December 1995, System Energy implemented the $65.5 million rate increase, subject to refund, for which a portion has been reserved. After a hearing, FERC issued an order in August 2000 in the proceeding. FERC affirmed the ALJ's adoption of a 10.8% return on equity, but modified the return to reflect changes in capital market conditions since the ALJ's decision. FERC adjusted the rate of return to 10.58% for the period December 1995 to the date of FERC's decision, and prospectively adjusted the rate of return to 10.94% from the date of FERC's decision. FERC's decision also changed other aspects of System Energy's proposed rate schedule, including the depreciation rate and decommissioning costs and their methodology. System Energy has provided reserves for a potential refund to the rate level of the initial ALJ decision, including interest. Management is analyzing the effect of FERC's decision, but a refund to the FERC decision rate level is not expected to have a material adverse effect on Entergy's, System Energy's, or the domestic utility companies results of operations. Management's analysis may result in a request for rehearing or an appeal of FERC's order. NOTE 3. COMMON STOCK (Entergy Corporation) During the six months ended June 30, 2000, Entergy Corporation repurchased 16,126,000 shares of common stock in the open market for an aggregate purchase price of approximately $389 million. These shares were purchased pursuant to Entergy's stock repurchase plan and also to fulfill the requirements of various stock-based compensation and benefit plans. Under the terms of the Merger Agreement, Entergy will use its commercially reasonable efforts to purchase in open market transactions an additional $430 million of shares of its common stock. During the six months ended June 30, 2000, Entergy Corporation issued 462,290 shares of its previously repurchased common stock to satisfy stock options exercised and employee stock purchases. In addition, Entergy Corporation received proceeds of approximately $2.0 million from the issuance of 89,894 shares of common stock under its dividend reinvestment and stock purchase plan. NOTE 4. LONG-TERM DEBT (Entergy Mississippi) On February 15, 2000, Entergy Mississippi issued $120 million of 7.75% Series First Mortgage Bonds due February 15, 2003. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for working capital needs and capital expenditures. (Entergy Arkansas) On March 9, 2000, Entergy Arkansas issued $100 million of 7.72% Series First Mortgage Bonds due March 1, 2003. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for working capital needs and capital expenditures. (Entergy Louisiana) On March 1, 2000, Entergy Louisiana redeemed, at maturity, $100 million of 6.00% Series First Mortgage Bonds using funds received from an open-account advance from Entergy Corporation. On May 23, 2000, Entergy Louisiana issued $150 million of 8.50% Series First Mortgage Bonds due June 1, 2003. The proceeds are being used for general corporate purposes, including the repayment of the open account advance from Entergy Corporation and of short-term indebtedness that was incurred for capital needs and capital expenditures. (Entergy Gulf States) On June 1, 2000, Entergy Gulf States issued $300 million of First Mortgage Bonds due June 2, 2003 bearing interest at an initial rate of 8.04%. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for capital needs and capital expenditures, and the mandatory redemption of $150 million of preference stock. (Entergy New Orleans) On July 25, 2000, Entergy New Orleans issued $30 million of 8.125% Series First Mortgage Bonds due July 15, 2005. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness that was incurred for capital needs and capital expenditures. (Entergy Corporation) In May 2000, Entergy's global power development business entered into 10-year interest rate swap agreements with an average fixed rate of 6.568% for approximately 75% of the debt outstanding under the Damhead Creek bridge and term loan portion of the Senior Credit Facility. The global power development business is exposed to market risks from movements in interest rates for the hedged portion of the debt only in the unlikely event that the counterparties to the interest rate swap agreements were to default on contractual payments. At June 30, 2000, Entergy's global power development business had outstanding interest rate swap agreements totalling a notional amount of $362.8 million. Under the Senior Credit Facility and the Subordinated Credit Facility, the ability of the global power development business to make distributions of dividends, loans, or advances to Entergy Corporation is restricted by, among other things, the requirement to pay permitted project costs, make debt repayments, and maintain cash reserves. See Note 7 to the financial statements in the Form 10-K for further discussion on the financing of the Damhead Creek project. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On July 28, 2000, Entergy Corporation's Board of Directors declared a common stock dividend of $0.30 per share, payable on September 1, 2000, to holders of record on August 14, 2000. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) See Note 14 to the financial statements in the Form 10-K for information regarding Entergy's adoption of SFAS 131 and its operating segments. Entergy's segment financial information for the three months ended June 30, 2000 and 1999 is as follows (in thousands):
Domestic Power Utility and Marketing System and All Energy Trading* Other* Eliminations Consolidated 2000 Operating Revenues $1,697,577 $372,803 $ 79,988 $ (12,580) $2,137,788 Income Taxes 120,306 2,061 27,496 - 149,863 Net Income 186,946 3,823 55,004 - 245,773 1999 Operating Revenues $1,646,027 $ 668,797 $ 9,868 $ (8,288) $ 2,316,404 Income Taxes 107,903 1,187 (22,657) - 86,433 Net Income 174,868 (142) 35,032 - 209,758
Entergy's segment financial information for the six months ended June 30, 2000 and 1999 is as follows (in thousands):
Domestic Power Utility and Marketing System and Energy Trading* All Other* Eliminations Consolidated 2000 Operating Revenues $3,098,921 $718,960 $ 155,839 $ (24,440) $ 3,949,280 Income Taxes 191,497 7,797 33,394 - 232,688 Net Income 274,284 15,120 64,779 - 354,183 Total Assets 20,228,032 849,718 3,780,569 (534,043) 24,324,276 1999 Operating Revenues $2,932,729 $1,013,595 $ 21,731 $ (11,729) $ 3,956,326 Income Taxes 167,497 (7,036) (28,855) - 131,606 Net Income 257,444 (14,155) 39,375 - 282,664 Total Assets 19,515,460 952,960 2,838,509 (223,197) 23,083,732
Businesses marked with * are referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation, which is also included in the "All Other" column. The "All Other" category includes the parent, Entergy Corporation, segments below the quantitative threshold for separate disclosure, and other business activities. Other segments principally include global power development and non-utility nuclear power operations and management. Other business activities principally include the gains on the sales of businesses. The elimination of power marketing and trading mark-to-market profits on intercompany power transactions is also included in "All Other." Eliminations are primarily intersegment activity. NOTE 7. SUBSEQUENT EVENT (Entergy Corporation) On July 30, 2000, Entergy Corporation and FPL Group entered into a Merger Agreement, providing for a business combination that results in the creation of a new company. The Merger will be accounted for under the purchase method of accounting as an acquisition of Entergy by FPL Group. Each outstanding share of FPL Group common stock will be converted into the right to receive one share of the new company's common stock, and each outstanding share of Entergy Corporation common stock will be converted into the right to receive 0.585 of a share of the new company's common stock. It is expected that FPL Group's shareholders will own approximately 57% of the common equity of the new company and Entergy's shareholders will own approximately 43%. The new company will be given a new name that will be agreed upon between the Boards of Directors of FPL and Entergy prior to the consummation of the Merger. The new company will maintain its principal corporate offices and headquarters in Juno Beach, Florida, and will maintain its utility headquarters in New Orleans, Louisiana. The Merger is conditioned, among other things, upon approvals of the shareholders of FPL Group and Entergy and approvals of various local, state, and federal regulatory agencies and commissions. Entergy and FPL Group will seek to consummate the Merger by late 2001. __________________________________ In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited condensed financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. However, the business of the domestic utility companies and System Energy is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year. ENTERGY CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings See "PART I, Item 1, Other Regulation and Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Set forth below are updates to the information contained in the Form 10-K. Union Pacific Railroad (Entergy Corporation and Entergy Arkansas) See "Union Pacific Railroad" in Item 1 of Part 1 of the Form 10- K for information relating to the civil suit filed by Entergy Arkansas and Entergy Services against Union Pacific Railroad Company (Union Pacific) seeking damages and the termination of coal shipping contracts with Union Pacific because of its failure to meet its contractual obligations to ship coal to Entergy Arkansas' two coal- fired plants. In addition to rescission of the contracts and monetary damages, Entergy is seeking restitution for amounts paid to Union Pacific since the date of material breach that are above reasonable market rates. The case is scheduled for trial beginning in October 2000. Aquila Power Corporation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) See "Aquila Power Corporation" in Item 1 of Part 1 of the Form 10-K and in Item 1 of Part II of the 2000 first quarter Form 10-Q for information relating to the lawsuit filed by Aquila Power Corporation (Aquila) against Entergy Services, as agent for the domestic utility companies. Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) See "Ratepayer Lawsuits" in Item 1 of Part I of the Form 10-K for a discussion of the lawsuits filed by ratepayers with the LPSC, the Council, and in Louisiana state courts in Orleans and East Baton Rouge Parishes. See "Fuel Adjustment Clause Litigation" in Note 2 to the financial statements herein for developments that have occurred since the filing of the Form 10-K. In the lawsuit filed in state court in Orleans Parish alleging violations of Entergy New Orleans' limit on rate of return, in May 2000 a court of appeal granted Entergy New Orleans' exception to jurisdiction in the case and dismissed the proceeding. Franchise Service Area Litigation (Entergy Gulf States) See "Franchise Service Area Litigation" in Item 1 of Part 1 of the Form 10-K for information relating to the request filed by Beaumont Power and Light Company (BP&L) with the PUCT to obtain a certificate of convenience and necessity for those portions of Jefferson County, Texas, outside the boundaries of any municipality, except for the city of Beaumont, for which Entergy Gulf States provides retail electric service. In April 2000, the ALJ recommended denial of BP&L's application. In May 2000, the PUCT voted to remand the proceeding back to the ALJ to allow BP&L to provide further evidence. No procedural schedule has been set. Ice Storm Litigation (Entergy Corporation and Entergy Gulf States) See "Ice Storm Litigation" in Part I of the Form 10-K for information relating to the lawsuit filed by a group of Entergy Gulf States customers in Texas against Entergy Corporation, Entergy Gulf States, and other Entergy subsidiaries in state court in Jefferson County, Texas purportedly on behalf of all Entergy Gulf States customers in Texas who sustained outages in a January 1997 ice storm. In March 2000, an appellate court affirmed the district court's decision to certify the class. In response to Entergy's motion for rehearing the appellate court reversed the district court, denied class certification, and remanded the case to the district court for proceedings consistent with its ruling. Litigation Environment (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The four states in which Entergy and the domestic utility companies operate have proven to be unusually litigious environments. Judges and juries in these states, and in particular Louisiana and Texas, have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases. Entergy uses all appropriate legal means to contest litigation threatened or filed against it, but the litigation environment in these states poses a business risk. 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, 2000. The following matters were voted on and received the specified number of votes for, abstentions, votes withheld (against), and broker non-votes:
1. Election of Directors: Broker Name of Nominee Votes For Abstentions Votes Withheld Non-Votes W. Frank Blount 198,741,281 N/A 2,074,693 N/A George W. Davis 198,679,193 N/A 2,136,781 N/A Norman C. Francis 198,690,587 N/A 2,125,387 N/A J. Wayne Leonard 198,748,165 N/A 2,067,809 N/A Robert v.d. Luft 198,678,214 N/A 2,137,760 N/A Thomas F. McLarty, III 198,492,950 N/A 2,323,024 N/A Paul W. Murrill 197,859,191 N/A 2,956,783 N/A James R. Nichols 198,736,072 N/A 2,079,902 N/A William A. Percy, II 198,689,700 N/A 2,126,274 N/A D. H. Reilley 198,702,828 N/A 2,113,146 N/A Wm. Clifford Smith 197,940,015 N/A 2,875,959 N/A Bismark A. Steinhagen 198,737,362 N/A 2,078,612 N/A
2. Ratify the appointment of independent public accountants, PricewaterhouseCoopers LLP for the year 2000: 199,568,691 votes for; 470,300 votes against; 791,145 abstentions; and broker non-votes are not applicable. (Entergy Arkansas) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Arkansas: Hugh T. McDonald, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Gulf States) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. 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: E. Renae Conley, Joseph F. Domino, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Louisiana) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Louisiana: E. Renae Conley, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy Mississippi) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy Mississippi: Carolyn C. Shanks, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (Entergy New Orleans) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of Entergy New Orleans: Daniel F. Packer, Donald C. Hintz, Jerry D. Jackson, and C. John Wilder. (System Energy) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2000. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of System Energy: Jerry W. Yelverton, Donald C. Hintz, and C. John Wilder. Item 5. Other Information Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S-K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, June 30, 1995 1996 1997 1998 1999 2000 Entergy Arkansas 2.56 2.93 2.54 2.63 2.08 2.62 Entergy Gulf States 1.86 1.47 1.42 1.40 2.18 2.49 Entergy Louisiana 3.18 3.16 2.74 3.18 3.48 2.82 Entergy Mississippi 2.92 3.40 2.98 3.12 2.44 2.66 Entergy New Orleans 3.93 3.51 2.70 2.65 3.00 2.99 System Energy 2.07 2.21 2.31 2.52 1.90 2.38 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, June 30, 1995 1996 1997 1998 1999 2000 Entergy Arkansas 2.12 2.44 2.24 2.28 1.80 2.26 Entergy Gulf States (a) 1.54 1.19 1.23 1.20 1.86 2.16 Entergy Louisiana 2.60 2.64 2.36 2.75 3.09 2.50 Entergy Mississippi 2.51 2.95 2.69 2.80 2.18 2.39 Entergy New Orleans 3.56 3.22 2.44 2.41 2.74 2.67 (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* ** 2(a) - Agreement and Plan of Merger dated as of July 30, 2000, among FPL Group, Inc., Entergy Corporation, WCB Holding Corp., Ranger Acquisition Corp. and Ring Acquisition Corp (filed as Exhibit 2.1 to Form 8-K dated July 31, 2000 in 1-11299). ** 4(a) - Fifty-fifth Supplemental Indenture, dated as of May 15, 2000, to Entergy Louisiana's Mortgage and Deed of Trust, dated as of April 1,1944 (filed as Exhibit A-2(c) to Rule 24 Certificate dated June 2, 2000 in File No. 70-9141). 4(b) - Second Amended and Restated Credit Agreement, dated as of May 18, 2000, among Entergy, the Banks (The Bank of New York, The Chase Manhattan Bank, Citibank, N.A., ABN AMRO Bank N.V., The Bank of Nova Scotia, Bank One, N.A., Bayerische Landesbank Girozentrale, The Royal Bank of Scotland PLC, Barclays Bank PLC, Credit Agricole Indosuez, The Industrial Bank of Japan, KBC Bank NV, Union Bank of California, N.A., Westdeutsche Landesbank Girozentrale, and Mellon Bank, N.A.), and Citibank, N.A., as Agent. ** 4(c) - Fifty-ninth Supplemental Indenture, dated as of June 1, 2000, to Entergy Gulf States' Mortgage and Deed of Trust, dated as of September 1, 1926 (filed as Exhibit A-2(a) to Rule 24 Certificate dated June 23, 2000 in File No. 70- 8721). 4(d) - Eighth Supplemental Indenture, dated as of July 1, 2000, to Entergy New Orleans' Mortgage and Deed of Trust, dated as of May 1, 1987. 27(a) - Financial Data Schedule for Entergy Corporation and Subsidiaries as of June 30, 2000. 27(b) - Financial Data Schedule for Entergy Arkansas as of June 30, 2000. 27(c) - Financial Data Schedule for Entergy Gulf States as of June 30, 2000. 27(d) - Financial Data Schedule for Entergy Louisiana as of June 30, 2000. 27(e) - Financial Data Schedule for Entergy Mississippi as of June 30, 2000. 27(f) - Financial Data Schedule for Entergy New Orleans as of June 30, 2000. 27(g) - Financial Data Schedule for System Energy as of June 30, 2000. 99(a) - Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(b) - Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(c) - Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(d) - Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(e) - Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(f) - System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined. ** 99(g) - Annual Reports on Form 10-K of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the fiscal year ended December 31, 1999, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1-2703, 1-8474, 0-320, 0- 5807, and 1-9067, respectively). ** 99(h) - Quarterly Reports on Form 10-Q of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy for the quarter ended March 31, 2000, portions of which are incorporated herein by reference as described elsewhere in this document (filed with the SEC in File Nos. 1-11299, 1-10764, 1-27031, 1-8474, 0-320, 0-5807, and 1-9067, respectively). ___________________________ Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of Entergy Corporation and its subsidiaries on a consolidated basis. * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended June 30, 2000, 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, 2000. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation A Current Report on Form 8-K, dated April 24, 2000, was filed with the SEC on April 28, 2000, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated July 26, 2000, was filed with the SEC on July 27, 2000, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated July 30, 2000, was filed with the SEC on July 31, 2000, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated July 30, 2000, was filed with the SEC on August 3, 2000, reporting information under Item 5. "Other Events" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries. ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY GULF STATES, INC. ENTERGY LOUISIANA, INC. ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. SYSTEM ENERGY RESOURCES, INC. /s/ Nathan E. Langston Nathan E. Langston Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: August 8, 2000