-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FwuS28XU0HOslZq6A/xx+ERzTlm2I+0rhF+Ky+40qzCm2vG8tvxiAIh2kweSE7yf oLntgCSO7mLgCoAPtuZQQg== 0000065984-01-500072.txt : 20020410 0000065984-01-500072.hdr.sgml : 20020410 ACCESSION NUMBER: 0000065984-01-500072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEM ENERGY RESOURCES INC CENTRAL INDEX KEY: 0000202584 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720752777 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09067 FILM NUMBER: 1780257 BUSINESS ADDRESS: STREET 1: ECHELON ONE STREET 2: 1340 ECHELON PKWY CITY: JACKSON STATE: MS ZIP: 39213 BUSINESS PHONE: 601-368-5000 MAIL ADDRESS: STREET 1: ECHELON ONE STREET 2: 1340 ECHELON PKWY CITY: JACKSON STATE: MS ZIP: 39213 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH ENERGY INC DATE OF NAME CHANGE: 19860803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY CORP /DE/ CENTRAL INDEX KEY: 0000065984 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 135550175 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11299 FILM NUMBER: 1780256 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045764000 MAIL ADDRESS: STREET 1: PO BOX 61000 CITY: NEW ORLEANS STATE: LA ZIP: 70161 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY CORP /FL/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY GSU HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH UTILITIES INC DATE OF NAME CHANGE: 19890521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY NEW ORLEANS INC CENTRAL INDEX KEY: 0000071508 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 720273040 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05807 FILM NUMBER: 1780258 BUSINESS ADDRESS: STREET 1: 1600 PERDIDO ST STREET 2: BLDG 505 CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 504-670-3674 MAIL ADDRESS: STREET 1: 1600 PERDIDO ST STREET 2: BLDG 505 CITY: NEW ORLEANS STATE: LA ZIP: 70112 FORMER COMPANY: FORMER CONFORMED NAME: NEW ORLEANS PUBLIC SERVICE INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY MISSISSIPPI INC CENTRAL INDEX KEY: 0000066901 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 640205830 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00320 FILM NUMBER: 1780259 BUSINESS ADDRESS: STREET 1: 308 EAST PEARL STREET CITY: JACKSON STATE: MS ZIP: 39201 BUSINESS PHONE: 601-368-5000 MAIL ADDRESS: STREET 1: 308 EAST PEARL STREET CITY: JACKSON STATE: MS ZIP: 39201 FORMER COMPANY: FORMER CONFORMED NAME: MISSISSIPPI POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY LOUISIANA INC CENTRAL INDEX KEY: 0000060527 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 720245590 STATE OF INCORPORATION: LA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08474 FILM NUMBER: 1780260 BUSINESS ADDRESS: STREET 1: 4809 JEFFERSON HGWY CITY: JEFFERSON STATE: LA ZIP: 70121 BUSINESS PHONE: 504-840-2734 MAIL ADDRESS: STREET 1: 4809 JEFFERSON HIGHWAY CITY: JEFFERSON STATE: LA ZIP: 70121 FORMER COMPANY: FORMER CONFORMED NAME: LOUISIANA POWER & LIGHT CO /LA/ DATE OF NAME CHANGE: 19960610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY GULF STATES INC CENTRAL INDEX KEY: 0000044570 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 740662730 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-27031 FILM NUMBER: 1780261 BUSINESS ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 BUSINESS PHONE: 409-838-6631 MAIL ADDRESS: STREET 1: 350 PINE ST CITY: BEAUMONT STATE: TX ZIP: 77701 FORMER COMPANY: FORMER CONFORMED NAME: GULF STATES UTILITIES CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENTERGY ARKANSAS INC CENTRAL INDEX KEY: 0000007323 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 710005900 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10764 FILM NUMBER: 1780262 BUSINESS ADDRESS: STREET 1: 425 WEST CAPITOL AVE STREET 2: 40TH FLOOR CITY: LITTLE ROCK STATE: AR ZIP: 72201 BUSINESS PHONE: 501-377-4000 MAIL ADDRESS: STREET 1: P O BOX 551 CITY: LITTLE ROCK STATE: AR ZIP: 72203 FORMER COMPANY: FORMER CONFORMED NAME: ARKANSAS POWER & LIGHT CO DATE OF NAME CHANGE: 19920703 10-Q 1 a13301.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 September 30, 2001 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-27031 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 840-2734 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 1600 Perdido Street, Building 505 New Orleans, Louisiana 70112 Telephone (504) 670-3674 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 __________________________________________________________________________ Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at October 31, 2001 Entergy Corporation ($0.01 par value) 221,039,413 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, 2000, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and June 30, 2001, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward-Looking Information The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, performance, strategies, prospects and other aspects of the business of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. and their affiliated companies may involve risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: the effects of weather, the performance of generating units and transmission systems, the possession of nuclear materials, fuel and purchased power prices and availability, the effects of regulatory decisions and changes in law, litigation, capital spending requirements, the onset of competition, including the ability to recover net regulatory assets and other potential stranded costs, the effects of recent developments in the California electricity market on the utility industry nationally, advances in technology, changes in accounting standards, corporate restructuring and changes in capital structure, the success of new business ventures, changes in the markets for electricity and other energy-related commodities, changes in interest rates and in financial and foreign currency markets generally, the economic climate and growth in Entergy's service territories, changes in corporate strategies, and other factors. ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 2001 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 7 Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations 13 Consolidated Statements of Income 21 Consolidated Statements of Cash Flows 22 Consolidated Balance Sheets 24 Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital 26 Selected Operating Results 27 Entergy Arkansas, Inc.: Results of Operations 28 Income Statements 32 Statements of Cash Flows 33 Balance Sheets 34 Selected Operating Results 36 Entergy Gulf States, Inc.: Results of Operations 37 Income Statements 40 Statements of Cash Flows 41 Balance Sheets 42 Selected Operating Results 44 Entergy Louisiana, Inc.: Results of Operations 45 Income Statements 48 Statements of Cash Flows 49 Balance Sheets 50 Selected Operating Results 52 Entergy Mississippi, Inc.: Results of Operations 53 Income Statements 56 Statements of Cash Flows 57 Balance Sheets 58 Selected Operating Results 60 Entergy New Orleans, Inc.: Results of Operations 61 Income (Loss) Statements 64 Statements of Cash Flows 65 Balance Sheets 66 Selected Operating Results 68 System Energy Resources, Inc.: Results of Operations 69 Income Statements 71 Statements of Cash Flows 73 Balance Sheets 74 Notes to Financial Statements for Entergy Corporation and Subsidiaries 76 Part II: Item 1. Legal Proceedings 89 Item 4. Submission of Matters to a Vote of Security Holders 89 Item 5. Other Information 89 Item 6. Exhibits and Reports on Form 8-K 90 Signature 93 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) APSC Arkansas Public Service Commission Board Board of Directors of Entergy Corporation BPS British pounds sterling Cajun Cajun Electric Power Cooperative, Inc. CitiPower CitiPower Pty., an electric distribution company serving Melbourne, Australia and surrounding suburbs, which was sold by Entergy effective December 31, 1998 Council Council of the City of New Orleans, Louisiana DOE United States Department of Energy domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively EPA United States Environmental Protection Agency EPDC Entergy Power Development Corporation EWO Entergy Wholesale Operations, which primarily consists of Entergy's global power development business Entergy Entergy Corporation and its various direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc. Entergy Gulf States Entergy Gulf States, Inc., including its wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company Entergy-Koch Entergy-Koch, L.P., a joint venture equally owned by Entergy and Koch Industries, Inc. Entergy London Entergy London Investments plc, formerly Entergy Power UK plc (including its wholly owned subsidiary, London Electricity plc), which was sold by Entergy effective December 4, 1998 Entergy Louisiana Entergy Louisiana, Inc. Entergy Mississippi Entergy Mississippi, Inc. Entergy New Orleans Entergy New Orleans, Inc. Entergy Power Entergy Power, Inc. FERC Federal Energy Regulatory Commission FitzPatrick James A. FitzPatrick nuclear power plant, 825 MW facility located near Oswego, New York, purchased in November 2000, from NYPA by Entergy's domestic non-utility nuclear business Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 2000 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generation Plant GGART Grand Gulf Accelerated Recovery Tariff GWH Gigawatt hours, which equals one million kilowatt- hours Indian Point 2 Indian Point 2 nuclear power plant, 951 MW facility located in Westchester County, New York, purchased in September 2001 from Consolidated Edison by Entergy's domestic non-utility nuclear business Indian Point 3 Indian Point 3 nuclear power plant, 980 MW facility located in Westchester County, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business Abbreviation or Acronym Term LDEQ Louisiana Department of Environmental Quality LPSC Louisiana Public Service Commission 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, which was mutually terminated on April 1, 2001 MPSC Mississippi Public Service Commission MW Megawatt(s), which equals one thousand kilowatt- hours Net revenue Operating revenue net of fuel, fuel-related, and purchased power expenses; other regulatory credits; and amortization of rate deferrals NRC Nuclear Regulatory Commission NYPA New York Power Authority Pilgrim Pilgrim Nuclear Station, 670 MW facility located in Plymouth, Massachusetts, purchased in July 1999 from Boston Edison by Entergy's domestic non- utility nuclear business PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended River Bend River Bend Steam Electric Generating Station (nuclear) SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board 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. 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 weather-adjusted usage electric usage excluding the effects of weather deviations 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. See "Item 1. Business - BUSINESS OF ENTERGY - Industry Restructuring and Competition" in the Form 10-K for issues concerning the timing and implementation of Entergy's transition to competition, including potential conflicts among Entergy's regulated jurisdictions. Set forth below are updates to the information contained therein. Domestic Transition to Competition State Regulatory Activity Arkansas As discussed in Note 2 to the financial statements in the Form 10-K, the target date for retail open access has been delayed until no sooner than October 1, 2003 and no later than October 1, 2005. In September 2001, the APSC staff issued a report recommending the following: o the APSC use its statutory authority to delay retail open access until October 1, 2004; o the APSC recommend to the Arkansas General Assembly that legislation be enacted to further delay or repeal retail open access, with repeal as the better approach; and o further suspension of all rulemaking activity to implement retail open access. Entergy Arkansas agreed in reply testimony to the APSC's proposed additional delay of retail open access, but opposed repeal of deregulation legislation as premature at this time. A hearing is currently scheduled for November 2001. Texas Since the filing of the Form 10-K, several developments have occurred in the Texas retail open access proceedings and in Texas and Louisiana proceedings for the separation of the utility operations of Entergy Gulf States among new corporate and partnership entities, including delay in the implementation of retail competition until September 15, 2002. See Note 2 to the financial statements herein for a discussion of these developments. Louisiana In July 2001, the LPSC staff concluded that retail competition is not in the public interest at this time for any customer class. Nevertheless, the LPSC staff has recommended that retail open access be made available for certain large industrial customers as early as January 2003. An eligible customer choosing open access would be required to provide its utility with a minimum of six months notice prior to the date of retail open access. The LPSC staff report also recommended that all customers who do not currently co- or self-generate, or have co- or self- generation under construction as of a date specified by the LPSC, remain liable for their share of stranded costs. During its October 2001 meeting, the LPSC adopted dates by which a total of 800 MW of co- or self- generation could be developed in Louisiana without being affected by stranded costs. During its November 2001 meeting, the LPSC decided not to adopt a plan for retail open access at this time, but to have collaborative group meetings concerning open access from time to time, and to have the LPSC staff monitor developments in neighboring states and to report to the LPSC regarding the progress of retail access developments in those states. At this time, no further moves toward retail access in Louisiana appear likely until sometime during or after 2004. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Federal Regulatory Activity System Agreement Proceedings See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of the proposed amendments to the System Agreement filed with FERC by the domestic utility companies. The proposed amendments were designed to facilitate the implementation of retail competition in Arkansas and Texas. See Note 2 to the financial statements herein for retail competition developments, including delay in the implementation of retail open access. As discussed in the Form 10-K, the LPSC and the Council also filed a complaint with FERC seeking revisions to the System Agreement. In June 2001, in connection with these proceedings, the parties filed an offer of settlement with FERC. The offer of settlement provides for the following amendments to the System Agreement: o the Texas retail jurisdictional division of Entergy Gulf States will terminate its participation in the System Agreement, except for the aspects related to transmission equalization, when Texas implements retail open access for Entergy Gulf States; o five percent of Entergy Gulf States' megawatt capacity allocated to the Texas retail load by the LPSC will be made available to the domestic utility companies remaining under the System Agreement. Each company has until December 15, 2001 to elect to purchase its pro rata share of this capacity. Entergy Arkansas' pro rata share is 27.3%, Entergy Gulf States - Louisiana's pro rata share is 20.2%, Entergy Louisiana's pro rata share is 30.2%, Entergy Mississippi's pro rata share is 15.9%, and Entergy New Orleans' pro rata share is 6.4%. If a company elects to purchase capacity it will be for the period from the inception of retail open access in Texas for Entergy Gulf States through June 30, 2008. If a company elects not to purchase, the other companies are not entitled to purchase that company's share of the capacity; and o the service schedule developed to track changes in energy costs resulting from the Entergy-Gulf States Utilities merger is modified to include one final true-up of fuel costs when the Texas retail jurisdictional division of Entergy Gulf States ceases participation in the System Agreement, after which the service schedule will no longer be applicable for any purpose. The proceeding on the complaint filed with FERC in 1995 by the LPSC requesting modification of the System Agreement to exclude curtailable load from the cost allocation determination was not settled. In July 2001, an ALJ issued decisions certifying the offer of settlement to the FERC and generally continuing to include curtailable load served during 1995 in cost allocation determinations. FERC approved the settlement in July 2001. As anticipated by the offer of settlement, the LPSC and the Council commenced a new proceeding at FERC in June 2001. In this proceeding, the LPSC and the Council allege that the rough production cost equalization required by FERC under the System Agreement and the Unit Power Sales Agreement has been disrupted by changed circumstances. The LPSC and the Council have requested that FERC amend the System Agreement or the Unit Power Sales Agreement or both to achieve full production cost equalization or to restore rough production cost equalization. Their complaint does not seek a change in the total amount of the costs allocated under the Unit Power Sales Agreement. Several parties have filed interventions in the proceeding, including the APSC and the MPSC. Entergy filed its response to the complaint in July 2001 denying the allegations of the LPSC and the Council. The APSC and the MPSC also filed responses opposing the relief sought by the LPSC and the Council. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS In their complaint, the LPSC and Council allege that the domestic utility companies' annual production costs over the period 2002 to 2007 will be over or (under) the average for the domestic utility companies by the following amounts: Entergy Arkansas ($130) to ($278) million Entergy Gulf States - LA $11 to $87 million Entergy Louisiana $139 to $132 million Entergy Mississippi ($27) to $13 million Entergy New Orleans $7 to $46 million This range of results is a function of assumptions regarding such things as future natural gas prices, the future market price of electricity, and other factors. If FERC grants the relief requested, the relief may result in a material increase in production costs allocated to companies whose costs currently are projected to be less than the average and a material decrease in production costs allocated to companies whose costs currently are projected to exceed the average. Management believes that any changes in the allocation of production costs resulting from a FERC decision should result in similar rate changes for retail customers. Therefore, management does not believe that this proceeding will have a material effect on the financial condition of any of the domestic utility companies, although neither the timing nor the outcome of the proceedings at FERC can be predicted at this time. Open Access Transmission and Entergy's Transco Proposal See "Open Access Transmission and Entergy's Transco Proposal" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for a discussion of FERC's Order 2000 and Entergy's proposed Transco. In July 2001, FERC issued orders on various proposals for transmission owners in the United States to commit their assets to regional transmission organizations (RTOs). In the orders, FERC indicated that it envisions the establishment of four RTOs in the United States, one in each of the Northeast, Southeast, Midwest, and West. FERC further required utilities within the Northeast and Southeast, including Entergy, to participate in mediation proceedings for the purpose of facilitating the establishment of these two RTOs. In September 2001 an ALJ issued a report on the mediation in the Southeast, and a decision from FERC is pending. The ALJ's recommendation contains a structure that would continue to allow Entergy to pursue the development of an independent transmission company that operates within and under the oversight of a larger RTO. Transco proceedings with state and local regulatory commissions have been suspended for the domestic utility companies pending further action in the FERC-mandated mediation proceedings. In September 2001, the LPSC ordered Entergy Gulf States and Entergy Louisiana to show cause as to why these companies should not be enjoined from transferring their transmission assets to a Transco or any similar organization, asserting that FERC does not have jurisdiction to mandate a Transco or RTO. In October 2001, Entergy Gulf States and Entergy Louisiana filed a response to the LPSC's show cause directives. A procedural schedule in this proceeding has been established, and hearings are scheduled for November 2001. The ultimate outcome of this proceeding cannot be predicted at this time. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS State and Local Rate Regulation The domestic utility companies' retail and wholesale rate matters and other regulatory proceedings are discussed more thoroughly in the Form 10- K and are updated in Note 2 to the financial statements herein. Filings with the APSC In April 2001, Entergy Arkansas filed with the APSC a proposal to recover costs plus carrying charges associated with power restoration caused by the December 2000 ice storms. In an order issued in June 2001, the APSC decided not to give final approval to Entergy Arkansas' proposed storm cost recovery rider outside of a fully developed cost-of-service study in a general rate proceeding. The APSC action resulted in the deferral in 2001 of previously expensed storm damage costs as reflected in Entergy Arkansas' financial statements. In a subsequent decision, the APSC ordered Entergy Arkansas to commence such a proceeding by January 2002. In the subsequent order, the APSC also established a procedural schedule to consider putting an interim rider in place to recover the ice storm costs, subject to refund. The schedule calls for a January 2002 hearing date and the issuance of a decision by February 2002. In accord with the schedule, Entergy Arkansas filed its final storm damage cost determination, which reflects costs of approximately $195 million. The filing asks for recovery of approximately $170 million through the rider over approximately a six and one-half year period. The remainder of the costs is primarily capital expenditures that will be included in rate base in the general rate proceeding that is currently scheduled to be filed in January 2002. No assurance can be give as to the timing or outcome of these proceedings before the APSC. 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. Resolution of the regulatory proceedings affecting the transition to competition of Entergy Gulf States' Texas generation business may require the discontinuance of the application of SFAS 71 accounting treatment to that business. Management does not expect a material adverse effect on Entergy's and Entergy Gulf States' results of operations if SFAS 71 accounting treatment for the Texas generation business is discontinued. The regulatory proceedings in Texas and Louisiana affecting the Texas transition to competition are discussed in "Domestic Transition to Competition - State Regulatory and Legislative Activity - Texas" in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K and that discussion is updated in Note 2 to the financial statements herein. As discussed in Note 2, several uncertainties still exist in the transition to competition in Texas, including the effects of the settlement agreement that the PUCT approved that delays retail open access until at least September 15, 2002. Therefore, the criteria under EITF 97-4 for discontinuing SFAS 71 treatment have not been met as of September 30, 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Attacks of September 11, 2001 Since the attacks on New York and Washington, D.C. on September 11, 2001, security at Entergy's nuclear power plants has been at a heightened alert level. Entergy is working with the NRC and other government agencies on security at the nuclear sites. Based on current security plans, management does not expect a material effect on Entergy's financial statements to result from additional security measures that may be implemented at its nuclear sites. As the NRC, other governmental entities, and the industry continue to consider security issues, it is possible that more extensive security plans requiring higher than expected costs could be required. Business Combination with FPL Group On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into a Merger Agreement providing for a business combination that would have resulted in the creation of a new company. On April 1, 2001, Entergy Corporation and FPL Group terminated the Merger Agreement by mutual decision. Both companies agreed that no termination fee is payable under the terms of the Merger Agreement, unless within nine months of the termination one party agrees to a substantially similar transaction with another party. Each company will bear its own merger-related expenses. Entergy has withdrawn its merger-related filings submitted to FERC, the SEC, and state and local regulatory agencies. New Accounting Pronouncements The FASB issued several new accounting pronouncements in mid-2001. See Note 10 to the financial statements for a discussion of the expected effects of these pronouncements on Entergy. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flows Operating Activities Following are net cash flows provided by operating activities for Entergy, the domestic utility companies, and System Energy for the nine months ended September 30, 2001 and 2000: Company 2001 2000 (In Millions) Entergy $1,228.8 $1,439.2 Entergy Arkansas $186.5 $261.7 Entergy Gulf States $248.9 $242.3 Entergy Louisiana $312.3 $214.5 Entergy Mississippi $63.1 $120.7 Entergy New Orleans $17.2 $10.2 System Energy $322.1 $372.2 Entergy's consolidated net cash flow provided by operating activities decreased primarily due to: o a decrease, after eliminating the effect of money pool activity, of $65 million in cash provided by the domestic utility companies and System Energy; o net cash used of $108 million by the energy commodity services segment thus far in 2001. The energy commodity services segment includes the EWO business and the Entergy-Koch joint venture. In 2001, EWO used $68 million of net cash in operating activities compared with EWO providing $30 million of operating cash flow in 2000. This fluctuation is primarily due to a net loss, excluding the gain on the sale of the Saltend plant, generated in 2001 compared with net income generated in 2000. Entergy-Koch/power marketing and trading used $40 million of net cash in operating activities in 2001 compared with power marketing and trading providing $48 million of operating cash flow in 2000. This fluctuation is primarily because, although income from this activity is higher in 2001, Entergy has not received dividends from Entergy-Koch. Entergy did not expect to receive dividends from Entergy-Koch in 2001 as the joint venture retains capital for its liquidity needs; and o an increase, after eliminating the effect of money pool activity, of $38 million in cash used by the parent company, Entergy Corporation, primarily due to increased interest costs and the payment of merger- related costs. These decreases in consolidated net operating cash flow were partially offset by a $99 million increase in cash provided by the domestic non-utility nuclear business, primarily from the operation of the FitzPatrick and Indian Point 3 plants, purchased in the fourth quarter of 2000. Payments for power restoration costs associated with the December 2000 ice storms in Arkansas, along with lower net income, contributed to the overall decrease in operating cash flow provided by the domestic utility companies and System Energy. Increases in income taxes accrued resulting from book and tax income timing differences added operating cash flow in 2001 compared to 2000. Management expects that these timing differences may continue to increase operating cash flow in future periods. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Money pool activity also affected the operating cash flows of the domestic utility companies and System Energy. The increases (decreases) in money pool borrowings during 2001 and 2000 are as follows: Nine Months Ended Nine Months Ended Company Sept. 30, 2001 Sept. 30, 2000 (In Millions) Entergy Arkansas $48.2 ($30.5) Entergy Gulf States - ($36.1) Entergy Louisiana - ($91.5) Entergy Mississippi $13.6 ($43.2) Entergy New Orleans $13.2 ($6.7) For the lenders to the money pool for the first nine months of 2001, Entergy Gulf States' money pool associated company receivables increased $49.3 million, Entergy Louisiana's money pool associated company receivables decreased $14.1 million, and System Energy's money pool associated company receivables decreased $8.3 million, in each case for the nine months ended September 30, 2001. For the nine months ended September 30, 2000, System Energy's money pool associated company receivables decreased $144.5 million. The money pool is an inter-company funding arrangement designed to reduce the domestic utility companies' and System Energy's dependence on external short-term borrowings. The money pool provides a means by which, on a daily basis, the excess funds of Entergy Corporation, the domestic utility companies, and System Energy may be used by the domestic utility companies or System Energy to fulfill short-term cash requirements. See "Capital Resources - Sources of Capital" below for a discussion of the limitations on these borrowings. Investing Activities Net cash used in investing activities increased for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 primarily due to: o approximately $600 million paid to acquire the Indian Point 2 nuclear plant in September 2001; o capital contributions made in the formation of Entergy-Koch, discussed below in "Uses of Capital - Energy Commodity Services;" o investments used as collateral for letters of credit by the domestic non-utility nuclear business, discussed below in "Uses of Capital - Domestic Non-Utility Nuclear;" o the maturity of other temporary investments in 2000 and additional temporary investments made in 2001; and o proceeds from the sale of the Freestone power project in 2000. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES The following factors partially offset the overall increase in cash used in investing activities for the same period: o receipt of approximately $810 million in proceeds from the sale of the Saltend plant to Calpine Corporation in August 2001; o decreased construction expenditures due to completion of construction of the Saltend and Damhead Creek plants; o decreased payments by EWO for turbines in 2001, discussed below in "Uses of Capital - Energy Commodity Services;" and o decreased under-recovery of deferred fuel costs incurred at certain of the domestic utility companies. Entergy Arkansas, the Texas portion of Entergy Gulf States, and Entergy Mississippi for 2000 only, have treated these costs as regulatory investments because these companies are allowed by their regulatory jurisdictions to recover the accumulated fuel cost regulatory asset over longer than a twelve month period. Entergy Mississippi's fuel recovery mechanism changed effective January 2001, and Entergy Mississippi's fuel cost under-recoveries incurred after that date will be recoverable over less than a twelve-month period. The companies will earn a return on the under-recovered balances. Financing Activities Financing activities provided cash during the nine months ended September 30, 2001 compared with using cash during the nine months ended September 30, 2000 primarily due to: o borrowings made during 2001 under the Entergy Corporation credit facility, including approximately $600 million used in the Indian Point 2 acquisition; o decreased repurchases of Entergy Corporation common stock in 2001. Entergy anticipates limited repurchase activity for the remainder of 2001; o redemption of Entergy Gulf States' preference stock in 2000; and o increased common stock issuances, primarily associated with the exercise of stock options. Partially offsetting the increase in cash provided by financing activities were the following for the same period: o the approximately $550 million retirement of the Saltend credit facility in August 2001 when the plant was sold; o a higher amount of debt issued by the domestic utility companies in 2000 than in 2001; and o no additional borrowings in 2001 under the Saltend and Damhead Creek credit facilities due to the completion of construction of the plants in 2000. System Energy Proposed Rate Increase Refund In the third quarter of 2001, FERC's order in System Energy's 1995 rate proceeding became final. As a result, management expects System Energy to pay a refund of approximately $520 million to four of the domestic utility companies when FERC accepts System Energy's compliance filing. System Energy's cash on hand, other temporary investments, money pool receivables, and its ability to borrow from the money pool are believed to be sufficient to fund the refund. Management expects System Energy to pay approximately $187 million to Entergy Arkansas, approximately $73 million to Entergy Louisiana, approximately $172 million to Entergy Mississippi, and approximately $88 million to Entergy New Orleans. Up to approximately half of these amounts will in turn be refunded to customers of these domestic utility companies. In the third quarter 2001, System Energy recorded an associate company payable for the refund, and each of the operating companies recorded an associate company receivable for the refund from System Energy and a liability for the amount payable to their customers. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Capital Resources See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources" in the Form 10-K for a discussion of Entergy's sources of funds and capital requirements. The following are updates to the Form 10-K. Sources of Capital Each of the domestic utility companies issued debt in 2001, with the exception of Entergy Louisiana. See Note 4 to the financial statements herein for details regarding long-term debt issued and retired in 2001. As shown in the earnings ratios in Item 5 of this Form 10-Q, Entergy New Orleans' earnings for the twelve months ended September 30, 2001 were not adequate to cover its fixed charges. Under its mortgage covenants, Entergy New Orleans does not have the capacity to issue new secured debt. Management did not have plans to issue new secured debt at Entergy New Orleans through at least 2002, however, and believes that its short-term and unsecured borrowing capacity will be sufficient for its foreseeable capital needs. Under restrictions contained in its articles of incorporation, Entergy New Orleans could issue approximately $20 million of new unsecured debt as of September 30, 2001. Short-term borrowings by the domestic utility companies and System Energy, including borrowings under the money pool, are limited to amounts authorized by the SEC. See Note 4 to the financial statements in the Form 10-K for further discussion of Entergy's short-term borrowing limits. In 2001, Entergy received SEC approval to increase the authorized limits for the following companies, as follows: Company Current Limit Entergy Mississippi $160 million Entergy New Orleans $100 million Other Entergy non-SEC $420 million registrant subsidiaries The approval increased the current SEC authorized short-term borrowing limits for Entergy subsidiaries from $1.343 billion to $1.620 billion. The SEC authorized limits are effective through November 30, 2001. In June 2001, Entergy filed with the SEC to extend the authorization period for the current short-term borrowing limits and the money pool borrowing arrangement. The following companies had borrowings outstanding from the money pool at September 30, 2001: Outstanding Company Borrowings Entergy Arkansas $78.9 million Entergy Mississippi $46.8 million Entergy New Orleans $19.0 million Other Entergy non-SEC $95.7 million registrant subsidiaries ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy Arkansas, Entergy Louisiana, and Entergy Mississippi each obtained 364-day credit facilities in 2001 as follows: Amount of Amount Drawn Company Date Obtained Facility as of Sept. 30, 2001 Entergy Arkansas January 31, 2001 $63 million - Entergy Louisiana January 31, 2001 $15 million - Entergy Mississippi February 2, 2001 $25 million - Entergy Louisiana's credit facility originally was $30 million, and it was reduced to its current level in May 2001. The facilities have variable interest rates and the average commitment fee is 0.13%. In May 2001, Entergy Corporation amended its 364-day bank credit facility, increasing the capacity from $500 million to $1.25 billion. In July 2001, the borrowing capacity on the facility was increased to $1.325 billion, of which $1.05 billion was drawn as of September 30, 2001. Entergy Corporation has used borrowings from the facility for general corporate purposes and to make additional investments in competitive businesses, including the approximately $600 million paid to purchase Indian Point 2 from Consolidated Edison in September 2001. Uses of Capital PUHCA Restrictions on Uses of Capital Entergy's ability to invest in domestic and foreign generation businesses is subject to the SEC's regulations under PUHCA. As authorized by the SEC, Entergy is allowed to invest an amount equal to 100% of its average consolidated retained earnings in domestic and foreign generation businesses. As of September 30, 2001, Entergy's investments subject to this rule totaled $1.36 billion constituting 40.2% of its average consolidated retained earnings. See "PUHCA Restrictions on Uses of Capital" in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10- K for a discussion of other PUHCA restrictions affecting Entergy, such as its capacity to invest in "energy-related" businesses and its ability to guarantee obligations of its non-utility subsidiaries. Other Uses of Capital by Entergy Corporation For the nine months ended September 30, 2001, Entergy Corporation paid $202 million in cash dividends on its common stock and received dividend payments and returns of capital totaling $307 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 Entergy common stock dividends based upon Entergy's earnings, financial strength, and capital requirements. Restrictions on the ability of Entergy's subsidiaries to pay dividends are discussed in Note 8 to the financial statements in the Form 10-K. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Domestic Non-Utility Nuclear In connection with the acquisition of FitzPatrick and Indian Point 3, the installment payments due by Entergy to NYPA must be secured by a letter of credit from an eligible financial institution. On November 21, 2000, upon closing the acquisition of the NYPA plants, Entergy delivered a $577 million letter of credit, with NYPA as beneficiary. The letter of credit was backed by cash collateral, and this cash is reflected in the consolidated balance sheet at December 31, 2000, as "Special deposits." In January 2001, Entergy replaced $440 million of the cash collateral with an Entergy Corporation guarantee. Most of the cash released by this guarantee was used to fund Entergy's contributions to Entergy-Koch as discussed below. In June 2001, Entergy Corporation obtained new letters of credit totaling $577 million, which replaced the letter of credit initially provided to NYPA. The letters of credit are partially backed by an Entergy Corporation guarantee and partially backed by $272 million of cash collateral. The cash collateral is included in "Other" in the Other Property and Investments section of the consolidated balance sheet at September 30, 2001. In August 2001 Entergy's domestic non-utility nuclear business agreed to purchase the 510 MW Vermont Yankee Nuclear Power Plant in Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation (VYNPC) for $180 million, to be paid in cash upon closing. Entergy will receive the plant, nuclear fuel, inventories, and related real estate. The liability to decommission the plant, as well as related decommissioning trust funds of approximately $280 million, will also be transferred to Entergy. Under a 10-year power purchase agreement (PPA) executed in conjunction with the transaction, Entergy will sell 100% of the plant's output up to 510 MW to VYNPC's current owner-utilities. The PPA includes an adjustment clause where the prices specified in the PPA will be adjusted downward annually, beginning in 2006, if power market prices drop below the PPA prices. Management expects to close the transaction by the spring of 2002, pending the approvals of the NRC, the Public Service Board of Vermont, and other regulatory agencies. Energy Commodity Services Entergy Wholesale Operations As discussed in the Form 10-K, Entergy had plans to spend $3.6 billion in the years 2001 through 2003 in its capital investment plan for EWO's global development business. Investment through September 30, 2001, however, is behind the amounts included in the plan. Primarily this is because in many regions of the United States the spark spread, the difference between the price of electricity and the price of natural gas at certain conversion efficiencies, has declined significantly since earlier this year. The decline is adversely impacting the profitability of power projects selling into power markets on a spot or short-term basis. EWO is attempting to address this spark spread uncertainty through long-term power sales and tolling agreements in its project development efforts. Nevertheless, management can provide no assurance that EWO will be able to obtain long-term agreements for these projects. An inability to structure projects to mitigate these risks could result in a reduction in the capital spending plans. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Also as discussed in the Form 10-K, the global power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric. As noted below, the rights and obligations under the contracts for 22 of the turbines were sold to a third party in May 2001. In conjunction with Entergy's obligations related to this sale, Entergy retained certain rights to reacquire turbines or to cancel the construction of turbines. Thus far, EWO has placed 17 of the originally planned 36 turbines at sites that are either operating, under construction, or sold. In addition, cancellation of four turbines subject to the May 2001 sale agreement is pending. If EWO were to decide to cancel the remaining turbines subject to the May 2001 sale agreement, its exposure at September 30, 2001 would be approximately $250 million. This exposure, however, does not take into account Entergy's ability to sell the turbines (subject to certain consent rights of General Electric), and EWO's ongoing efforts to develop sites for the turbines. EWO will continue to actively manage its assets as an investment portfolio, and attempt to maximize flexibility to respond to different market environments. Active management of the portfolio by EWO will continue to result in: the sale of projects at various stages in their planning, development, or operation; the abandonment of projects; or the commercial operation of projects by EWO. As part of its turbine acquisition program, an EWO subsidiary (EPDC) sold its rights and obligations under certain of the turbine acquisition contracts with General Electric Company to a third party in May 2001. The rights to 22 turbines were included in the sale. As discussed in the preceding paragraph, cancellation of four of these turbines is pending, and three others have been committed to a site under construction. The sale price was approximately $150 million, which corresponded to the amount EPDC had invested in the turbines under construction. The purchaser obtained a revolving financing facility of up to $450 million for the fabrication and acquisition of turbines. EPDC has certain rights to reacquire the turbines from the purchaser, whether pursuant to an interim lease commencing when a turbine is ready for shipment or pursuant to certain purchase rights. The lease payments and purchase price for each turbine have been established pursuant to various agreements between EPDC, the purchaser, and its lenders. If EPDC does not take title to the turbines prior to certain specified dates, the purchaser has certain rights to sell the turbines and EPDC may be held liable for specific defined shortfalls, if any. Certain EPDC obligations under these agreements will be backed by an Entergy Corporation guarantee. Entergy-Koch, L.P. In January 2001, subsidiaries of Entergy and Koch Industries, Inc. formed a new limited partnership called Entergy-Koch, L.P. Entergy contributed substantially all of its power marketing and trading business in the United States and the United Kingdom and made other contributions, including equity and loans, totaling $414 million. Koch contributed to the venture its 9,000-mile Koch Gateway Pipeline (which has been renamed the Gulf South 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. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's consolidated earnings applicable to common stock were $312.5 million and $705.5 million for the three and nine months ended September 30, 2001, respectively. The changes in earnings applicable to common stock by operating segments for the three and nine months ended September 30, 2001, compared to the same periods in 2000, are as follows:
Three Months Ended Nine Months Ended Operating Segments Increase/(Decrease) Increase/(Decrease) (In Thousands) Domestic Utility and System Energy ($60,386) ($34,339) Domestic Non-Utility Nuclear 28,089 68,888 Energy Commodity Services (primarily EWO and Entergy-Koch) 60,414 67,066 Other, including parent company (15,567) (32,057) ------- ------- Total $12,550 $69,558 ======= ======= Increases in earnings per average common share for Entergy: Basic 4% 15% Diluted 4% 13%
See Note 6 to the financial statements for additional business segment information. The decreased earnings for the domestic utility and System Energy segment for the three and nine months ended September 30, 2001 were primarily due to a decrease in net revenues and an increase in interest expense. The decrease in earnings was partially offset by decreases in decommissioning expense, other operation and maintenance expenses, and depreciation and amortization expense, each of which resulted from entries made after receipt of a final FERC order addressing the 1995 System Energy rate increase filing, as well as net increases in regulatory credits. See Note 2 to the financial statements herein for further discussion of the System Energy rate proceeding. The increased earnings for domestic non-utility nuclear in 2001 were primarily due to the operation of FitzPatrick and Indian Point 3, each of which Entergy purchased in November 2000. The increased earnings in 2001 for energy commodity services were primarily due to: o a $69.9 million ($45.4 million net of tax) gain reported in third quarter revenues due to the sale of EWO's Saltend plant in August 2001; and o favorable results from Entergy-Koch. Prior to 2001, revenues and expenses from the operation of Entergy's power marketing and trading business were consolidated in Entergy's financial statements. On January 31, 2001, Entergy contributed substantially all of its power marketing and trading business to Entergy-Koch. Entergy accounts for its 50% share in the investment under the equity method of accounting. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The increased earnings for energy commodity services for the three and nine months ended September 30, 2001 was partially offset by the following events, which are discussed in more detail below, that occurred at EWO: o a loss reserve recorded in connection with the pending cancellation of four gas turbines previously expected to be operational in 2005; o more liquidated damages received as compensation for lost operating margin due to plant construction delays from the Saltend contractor in 2000 than from the Damhead Creek contractor in 2001; o a gain on the sale of the Freestone project located in Fairfield, Texas, in June 2000; o an increase in depreciation expense due to commercial operation of the Saltend and Damhead Creek plants; and o an increase in interest expense. The increased expenses from the commercial operation of Saltend and Damhead Creek more than offset the operating margin generated by those plants in 2001. Entergy's share repurchase program also contributed to the increases in earnings per share by decreasing the weighted average number of shares outstanding. Entergy's income before taxes is discussed according to the operating segments listed above. "Competitive businesses" operating revenues in the statements of income include primarily revenues generated by domestic non- utility nuclear, EWO, and, for 2000 only, power marketing and trading. Domestic Utility and System Energy The changes in electric operating revenues for Entergy's domestic utility companies for the three and nine months ended September 30, 2001 compared to the same periods in 2000 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $2.2 ($21.7) Rate riders (22.2) (20.9) Fuel cost recovery (78.9) 763.5 Sales volume/weather (69.4) (26.6) Other revenue (including unbilled) (224.0) (281.5) Sales for resale (6.5) 34.3 ------- ------ Total ($398.8) $447.1 ======= ====== Fuel cost recovery The domestic utility companies are allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy's financial statements such that these costs do not have a material net effect on earnings. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The decrease in fuel cost recovery revenue for the three months ended September 30, 2001 was primarily due to decreased fuel and purchased power costs recovered through fuel mechanisms at Entergy Louisiana and in the Louisiana jurisdiction of Entergy Gulf States. The decrease was partially offset by increased fuel recovery factors at Entergy Arkansas, Entergy Mississippi, and in the Texas jurisdiction of Entergy Gulf States. The increase in fuel cost recovery revenue for the nine months ended September 30, 2001 was primarily due to: o increased fuel recovery factors at Entergy Arkansas, Entergy Gulf States in the Texas jurisdiction, and Entergy Mississippi; and o higher fuel and purchased power costs recovered through fuel mechanisms at Entergy Gulf States in the Louisiana jurisdiction, Entergy Louisiana, and Entergy New Orleans due to the increased market prices of natural gas and purchased power early in 2001. Corresponding to the decrease in fuel cost recovery revenue for the three months ended September 30, 2001, fuel and purchased power expenses related to electric sales decreased approximately $86.0 million primarily due to: o a decrease in the market price of natural gas; and o the receipt in September 2001 of a final FERC order requiring System Energy to refund a portion of its December 1995 rate increase. The effect of the order reduced purchased power expenses by $27.9 million for the portion of the refund related to the Entergy Arkansas and Entergy Louisiana retained shares of Grand Gulf 1. An increase of $752.5 million in fuel and purchased power expenses related to electric sales corresponded to the increase in fuel cost recovery revenue for the nine months ended September 30, 2001. The increase was primarily due to an increase in the market prices of natural gas and purchased power early in 2001. Other effects on electric operating revenue Lower electric sales volume reduced revenues for the three and nine months ended September 30, 2001 due to decreased weather-adjusted usage of 861 GWH and 1,159 GWH, respectively. Each domestic utility company experienced decreases in weather-adjusted usage. However, the primary decreases in weather-adjusted usage were from industrial customers at Entergy Louisiana and Entergy Gulf States. Electric sales vary seasonally in response to weather and usually peak in the summer. The effect of milder-than-normal summer weather conditions also caused a decrease in electric sales in 2001. For the three and nine months ended September 30, 2001, electric sales volume in the domestic utility companies' service territories decreased 1,250 GWH and 324 GWH, respectively, due to the impact of weather conditions. The decrease for the nine months ended was partially offset by an increase in electric sales volume in residential and commercial sectors at Entergy Arkansas. The number of customers in the domestic utility companies' service territories increased only slightly during these periods. Other revenue decreased for the three and nine months ended September 30, 2001, primarily reflecting the receipt of a final FERC order requiring System Energy to refund a portion of its December 1995 rate increase, which increased provisions for rate refunds $93 million at System Energy. Unbilled revenues decreased for the three and nine months ended September 30, 2001 as a result of decreased fuel prices and less favorable sales volume in the period included in the unbilled revenue calculation compared to the calculation in the prior year. Sales for resale increased for the nine months ended September 30, 2001 due to higher prices of resale electricity early in 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Gas operating revenues Natural gas revenues increased $63.0 million for the nine months ended September 30, 2001, primarily due to increased market prices for natural gas early in 2001 and additional sales volume due to the colder- than-normal winter. The increase in gas revenues was partially offset by an increase of approximately $54.4 million in gas purchased for resale for the same period. Other effects on results Results for the three and nine months ended September 30, 2001 for the domestic utility companies and System Energy were also affected by the following: o decreases in other operation and maintenance expenses of $15.7 million for the three months ended and $62.7 million for the nine months ended, which are explained below; o a decrease in decommissioning expense at System Energy of $31.5 million for both the three and nine months ended resulting from the final resolution of the FERC order addressing the 1995 rate increase filing; o decreases in depreciation and amortization expense at System Energy of $79.6 million for the three months ended and $78.8 million for the nine months ended primarily resulting from the final resolution of the FERC order addressing the 1995 rate increase filing; o net increases in regulatory credits of $72.4 million for the three months ended and $48.4 million for the nine months ended, which are explained below; o increases in interest expense of $42.8 million for the three months ended and $66.1 million for the nine months ended, which are explained below; and o increases in other income of $9.1 million for the three months ended and $21.9 million for the nine months ended, primarily from carrying charges on deferred fuel costs. The decreases in other operation and maintenance expenses for the three and nine months ended September 30, 2001 compared to the same periods in 2000 were primarily due to: o a decrease in property insurance expense for the three months ended due to a $5.0 million true-up in September 2000 to modify storm damage expense included in the annual update of the excess earnings review to a level negotiated with the APSC; o a decrease in property insurance expense for the nine months ended primarily due to a reversal in June 2001, upon recommendation from the APSC, of $24.5 million of ice storm costs previously charged to expense in December 2000 (these costs are now reflected as regulatory assets); o the disposal of low-level radioactive waste in 2000 at Entergy Gulf States resulting in a $4.0 million decrease for the three months ended; o decreases in legal expenses of $1.9 million for the three months ended at Entergy Gulf States and $1.3 million for the three months ended and $10.5 million for the nine months ended at Entergy Arkansas; and o decreases in injury and damages claims, plant maintenance expenses, and vegetation maintenance spending. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The net increases in regulatory credits were primarily due to: o the amount of capacity charges included in purchased power costs for the summers of 2000 and 2001 that Entergy Gulf States and Entergy Louisiana deferred and expects to recover in the future; and o a greater under-recovery of Grand Gulf costs in 2001 at Entergy Mississippi. The increases in interest expense were primarily due to: o the final FERC order addressing the 1995 System Energy rate increase filing; o debt issued at Entergy Gulf States in June 2000 and August 2001, at Entergy Mississippi in February 2000 and January 2001, and at Entergy New Orleans in July 2000 and February 2001; and o borrowings under credit facilities during 2001, primarily at Entergy Arkansas. Domestic Non-Utility Nuclear Increases in earnings for the domestic non-utility nuclear business were primarily due to revenue increases of $146.8 million and $353.3 million for the three and nine months ended September 30, 2001, respectively, primarily due to the operation of FitzPatrick and Indian Point 3, each purchased in November 2000. The following also affected earnings for domestic non-utility nuclear for the three and nine months ended September 30, 2001, all of which were primarily caused by the acquisition of FitzPatrick and Indian Point 3: o other operation and maintenance expenses increased $58.1 million and $142.5 million, respectively; o interest expense, primarily related to debt incurred to purchase FitzPatrick and Indian Point 3, increased $11.8 million and $46.9 million, respectively; o fuel expenses increased $15.7 million and $35.6 million, respectively; o interest income increased $5.3 million and $22.3 million, respectively; and o taxes other than income taxes increased $8.3 million and $20.1 million, respectively. Energy Commodity Services Revenues decreased for energy commodity services by $609.7 million for the three months ended and by $553.3 million for the nine months ended September 30, 2001, primarily due to the contribution of substantially all of Entergy's power marketing and trading business to Entergy-Koch in 2001. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. The decreases in revenues for the three and nine months ended September 30, 2001 were partially offset by: o increased operating revenues for EWO from its investments in Highland Energy and the Saltend and Damhead Creek plants; and o a gain reported in third quarter revenues due to the sale of EWO's Saltend plant in August 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Operating revenues for EWO increased for the three and nine months ended September 30, 2001 primarily due to increases of $127.3 million and $495.3 million, respectively, from EWO's interest in Highland Energy and increases of $182.1 million and $403.7 million, respectively, from the Saltend and Damhead Creek plants. Highland Energy was acquired in June 2000 and the Saltend and Damhead Creek plants began commercial operation in late November 2000 and early 2001, respectively. For the three and nine months ended September 30, 2001, the increase in revenues for EWO is largely offset by increases in fuel and purchased power expenses of $207.2 million and $721.0 million, respectively, and increases in other operation and maintenance expenses of $7.1 million and $47.5 million, respectively. EWO sold the Saltend plant in August 2001, and revenues in the third quarter include the $69.9 million ($45.4 million net of tax) gain on the sale. EWO actively manages its assets as an investment portfolio, and attempts to maximize flexibility to respond to different market environments. Active management of the portfolio by EWO will continue to result in: the sale of projects at various stages in their planning, development, or operation; the abandonment of projects; or the commercial operation of projects by EWO. As previously discussed, substantially all of Entergy's power marketing and trading business was contributed to Entergy-Koch in 2001, and earnings from this joint venture are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. As a result, for the three and nine months ended September 30, 2001, revenues reported for Entergy-Koch/Power Marketing and Trading were lower by $914.5 million and $1,588.9 million, respectively, and purchased power expenses were lower by $903.5 million and $1,422.5 million, respectively. The net income effect of the lower revenues in these periods, however, was more than offset by the equity in earnings from Entergy's interest in Entergy-Koch. Earnings increased in 2001 as a result of increased electricity and gas trading volumes as well as a broader range of commodity sources and options provided to customers by the joint venture in 2001. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001. The increase in earnings for energy commodity services for the three months ended September 30, 2001 was primarily due to the sale of EWO's Saltend plant and favorable results from Entergy-Koch as mentioned above. The increase in earnings was partially offset by increased interest expense of $14.2 million and increased depreciation expense of $8.3 million, respectively, primarily due to interest and depreciation related to commencement of commercial operation of EWO's Saltend and Damhead Creek plants. The increase in earnings for energy commodity services for the nine months ended September 30, 2001 was primarily due to: o the gain on the sale of EWO's Saltend plant as mentioned above; o the favorable results from Entergy-Koch mentioned above; o liquidated damages of $13.9 million ($9.7 million net of tax) received in 2001 from the Damhead Creek construction contractor as compensation for lost operating margin from the plant due to construction delays; and o an $11.0 million ($7.2 million net of tax) gain on the sale of a permitted site in Desoto County, Florida, in May 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Partially offsetting the increase in earnings for energy commodity services for the nine months September 30, 2001 were the following: o an $18.0 million ($11.7 million net of tax) loss reserve recorded primarily because of the pending cancellation of four gas turbines scheduled for delivery in 2005; o liquidated damages of $55.1 million ($38.6 million net of tax) received in 2000 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 of the Freestone project located in Fairfield, Texas, in June 2000; o increased depreciation expense of $25.2 million in 2001 primarily due to the commencement of the commercial operation of the Saltend and Damhead Creek plants; and o increased interest expense of $53.5 million in 2001 primarily because the interest related to the Saltend and Damhead Creek plants was capitalized until those plants commenced commercial operation. Other Earnings from Other decreased primarily due to $21.8 million ($13.4 million net of tax) of merger-related expenses incurred by Entergy Corporation in the first quarter of 2001 and decreased interest income of $10.8 million and $22.1 million for the three and nine months ended September 30, 2001, respectively. Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 36.9% and 40.4%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 38.8% and 40.0%, respectively. The decrease in the effective tax rates for the three and nine months ended was primarily because of the effects of the final FERC order addressing System Energy's 1995 rate proceeding.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands, Except Share Data) OPERATING REVENUES Domestic electric $1,986,338 $2,385,087 $5,849,720 $5,402,657 Natural gas 18,212 21,815 159,144 96,107 Competitive businesses 571,186 1,024,653 1,714,574 1,882,071 ---------- ---------- ---------- ---------- TOTAL 2,575,736 3,431,555 7,723,438 7,380,835 ---------- ---------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 925,452 794,782 3,076,932 1,756,972 Purchased power 279,060 1,158,145 888,835 2,030,210 Nuclear refueling outage expenses 24,284 18,439 64,567 53,625 Other operation and maintenance 550,339 504,379 1,469,408 1,332,012 Decommissioning (22,553) 11,505 (4,749) 28,611 Taxes other than income taxes 103,593 103,188 295,717 266,346 Depreciation and amortization 127,650 188,967 514,099 545,991 Other regulatory charges (credits) - net (24,621) 47,816 (21,075) 27,311 Amortization of rate deferrals 6,029 10,497 15,181 25,776 ---------- ---------- ---------- ---------- TOTAL 1,969,233 2,837,718 6,298,915 6,066,854 ---------- ---------- ---------- ---------- OPERATING INCOME 606,503 593,837 1,424,523 1,313,981 ---------- ---------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 7,672 9,163 19,259 24,898 Gain (loss) on sale of assets - net 2,066 (284) 14,414 21,291 Equity in earnings of unconsolidated equity affiliates 58,414 - 153,957 - Miscellaneous - net 37,643 53,873 139,862 156,505 ---------- ---------- ---------- ---------- TOTAL 105,795 62,752 327,492 202,694 ---------- ---------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 126,670 121,464 386,373 353,585 Other interest - net 84,452 22,576 183,752 66,227 Distributions on preferred securities of subsidiary 4,709 4,709 14,128 14,128 Allowance for borrowed funds used during construction (6,287) (6,776) (15,718) (18,753) ---------- ---------- ---------- ---------- TOTAL 209,544 141,973 568,535 415,187 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 502,754 514,616 1,183,480 1,101,488 Income taxes 185,300 207,927 459,573 440,616 ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME 317,454 306,689 723,907 660,872 Preferred dividend requirements and other 4,970 6,755 18,363 24,886 ---------- ---------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $312,484 $299,934 $705,544 $635,986 ========== ========== ========== ========== Earnings per average common share: Basic $1.41 $1.35 $3.19 $2.78 Diluted $1.39 $1.34 $3.14 $2.77 Dividends declared per common share $0.32 $0.30 $0.95 $0.90 Average number of common shares outstanding: Basic 221,675,578 222,159,091 220,908,546 228,930,171 Diluted 224,830,056 224,352,165 224,780,449 230,034,859 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Consolidated net income $723,907 $660,872 Noncash items included in net income: Amortization of rate deferrals 15,181 25,776 Reserve for regulatory adjustments (357,880) (36,756) Other regulatory charges (credits) - net (21,075) 27,311 Depreciation, amortization, and decommissioning 509,350 574,602 Deferred income taxes and investment tax credits (53,037) (8,074) Allowance for equity funds used during construction (19,259) (24,898) Gain on sale of assets - net (14,414) (21,291) Equity in earnings of unconsolidated equity affiliates (153,957) - Changes in working capital: Receivables 33,355 (538,840) Fuel inventory (24,898) (26,660) Accounts payable (467,749) 270,152 Taxes accrued 457,995 331,509 Interest accrued 10,289 24,319 Deferred fuel 367,105 (33,619) Other working capital accounts (11,291) 85,145 Provision for estimated losses and reserves (10,706) (8,844) Changes in other regulatory assets 61,583 (131) Other 184,257 138,580 ---------- ---------- Net cash flow provided by operating activities 1,228,756 1,439,153 ---------- ---------- INVESTING ACTIVITIES Construction/capital expenditures (939,662) (1,112,075) Allowance for equity funds used during construction 19,259 24,898 Nuclear fuel purchases (119,277) (100,367) Proceeds from sale/leaseback of nuclear fuel 60,679 96,412 Proceeds from sale of businesses 805,945 61,519 Changes in other nonregulated/nonutility properties - net (565,333) (184,339) Increase in other investments (632,548) - Changes in other temporary investments - net (250,600) 299,455 Decommissioning trust contributions and realized change in trust assets (79,047) (44,799) Other regulatory investments (36,461) (264,721) Other (12,200) 5,149 ---------- ---------- Net cash flow used in investing activities (1,749,245) (1,218,868) ---------- ---------- Statement continued on following page.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt $489,295 $934,479 Common stock 62,335 14,810 Retirement of long-term debt (877,088) (145,011) Repurchase of common stock (36,895) (500,644) Redemption of preferred and preference stock (39,574) (156,260) Changes in short-term borrowings - net 662,997 (120,000) Dividends paid: Common stock (202,112) (204,660) Preferred stock (20,281) (23,487) ---------- ---------- Net cash flow provided by (used in) financing activities 38,677 (200,773) ---------- ---------- Effect of exchange rates on cash and cash equivalents 664 (142) ---------- ---------- Net increase (decrease) in cash and cash equivalents (481,148) 19,370 Cash and cash equivalents at beginning of period 1,382,424 1,213,719 ---------- ---------- Cash and cash equivalents at end of period $901,276 $1,233,089 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $570,846 $382,313 Income taxes $6,872 $146,664 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($38,718) $38,837 Net assets contributed to Entergy-Koch $80,145 - Decommissioning trust fund acquired in Indian Point 2 acquisition $430,000 - See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $224,293 $157,550 Temporary cash investments - at cost, which approximates market 675,790 640,038 Special deposits 1,193 584,836 ----------- ----------- Total cash and cash equivalents 901,276 1,382,424 ----------- ----------- Other temporary investments 250,600 - Notes receivable 3,000 3,608 Accounts receivable: Customer 572,807 497,821 Allowance for doubtful accounts (9,947) (9,947) Other 189,988 395,518 Accrued unbilled revenues 368,903 415,409 ----------- ----------- Total receivables 1,121,751 1,298,801 ----------- ----------- Deferred fuel costs 310,880 568,331 Fuel inventory - at average cost 118,976 93,679 Materials and supplies - at average cost 457,539 425,357 Rate deferrals 1,402 16,581 Deferred nuclear refueling outage costs 101,227 46,544 Prepayments and other 90,060 122,690 ----------- ----------- TOTAL 3,356,711 3,958,015 ----------- ----------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 641,466 214 Decommissioning trust funds 1,781,661 1,315,857 Non-utility property - at cost (less accumulated depreciation) 292,857 262,952 Non-regulated investments 139,198 189,154 Other - at cost (less accumulated depreciation) 354,063 27,036 ----------- ----------- TOTAL 3,209,245 1,795,213 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric 26,012,486 25,137,562 Plant acquisition adjustment 378,465 390,664 Property under capital lease 758,458 831,822 Natural gas 199,928 190,989 Construction work in progress 897,709 936,785 Nuclear fuel under capital lease 235,199 277,673 Nuclear fuel 243,671 157,603 ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT 28,725,916 27,923,098 Less - accumulated depreciation and amortization 11,787,620 11,477,352 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT - NET 16,938,296 16,445,746 ----------- ----------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 1,001,884 980,266 Unamortized loss on reacquired debt 170,799 183,627 Deferred fuel costs 22,468 95,661 Other regulatory assets 709,312 792,515 Long-term receivables 28,870 29,575 Other 744,049 1,171,278 ----------- ----------- TOTAL 2,677,382 3,252,922 ----------- ----------- TOTAL ASSETS $26,181,634 $25,451,896 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $601,937 $464,215 Notes payable 1,051,018 388,023 Accounts payable 594,320 1,204,227 Customer deposits 183,808 172,169 Taxes accrued 924,621 451,811 Accumulated deferred income taxes 68,248 225,649 Nuclear refueling outage costs 16,163 10,209 Interest accrued 185,440 172,033 Obligations under capital leases 154,713 156,907 Other 325,092 192,908 ----------- ----------- TOTAL 4,105,360 3,438,151 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,398,899 3,249,083 Accumulated deferred investment tax credits 476,895 494,315 Obligations under capital leases 150,681 201,873 FERC settlement - refund obligation 25,234 30,745 Other regulatory liabilities 139,095 104,841 Decommissioning 1,170,657 749,708 Transition to competition 222,021 191,934 Regulatory reserves 38,909 396,789 Accumulated provisions 372,537 390,116 Other 760,975 853,137 ----------- ----------- TOTAL 6,755,903 6,662,541 ----------- ----------- Long-term debt 7,237,613 7,732,093 Preferred stock with sinking fund 26,185 65,758 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 334,687 334,688 Common stock, $.01 par value, authorized 500,000,000 shares; issued 248,174,087 shares in 2001 and 248,094,614 shares in 2000 2,482 2,481 Paid-in capital 4,662,762 4,660,483 Retained earnings 3,688,624 3,190,639 Accumulated other comprehensive loss (96,913) (75,033) Less - treasury stock, at cost (27,161,334 shares in 2001 and 28,490,031 shares in 2000) 750,069 774,905 ----------- ----------- TOTAL 7,841,573 7,338,353 ----------- ----------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,181,634 $25,451,896 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended 2001 2000 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,445,141 $2,982,495 Add - Earnings applicable to common stock 312,484 $312,484 299,934 $299,934 Deduct: Dividends declared on common stock 69,841 66,835 Capital stock and other expenses (840) (801) ---------- ---------- Total 69,001 66,034 ---------- ---------- Retained Earnings - End of period $3,688,624 $3,216,395 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($100,433) ($76,086) Net derivative instrument fair value changes arising during the period (1,475) (1,475) - - Foreign currency translation adjustments 7,848 7,848 (1,270) (1,270) Net unrealized investment gains (losses) (2,853) (2,853) 12,863 12,863 ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (23,343) - Other accumulated comprehensive income (loss) items (73,570) (64,493) ---------- ---------- Total ($96,913) ($64,493) ========== -------- ========== -------- Comprehensive Income $316,004 $311,527 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,661,334 $4,636,407 Add: Common stock issuances related to stock plans 1,428 404 ---------- ---------- Paid-in Capital - End of period $4,662,762 $4,636,811 ========== ========== Nine Months Ended 2001 2000 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,190,639 $2,786,467 Add - Earnings applicable to common stock 705,544 $705,544 635,986 $635,986 Deduct: Dividends declared on common stock 208,766 206,886 Capital stock and other expenses (1,207) (828) ---------- ---------- Total 207,559 206,058 ---------- ---------- Retained Earnings - End of period $3,688,624 $3,216,395 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): Balance at beginning of period ($75,033) ($73,805) Cumulative effect to January 1, 2001 of accounting change regarding fair value of derivative instruments (29,067) - - - Net derivative instrument fair value changes arising during the period 5,724 5,724 - - Foreign currency translation adjustments 4,213 4,213 (2,299) (2,299) Net unrealized investment gains (losses) (2,750) (2,750) 11,611 11,611 ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (23,343) - Other accumulated comprehensive income (loss) items (73,570) (64,493) ---------- ---------- Total ($96,913) ($64,493) ========== -------- ========== -------- Comprehensive Income $712,731 $645,298 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,660,483 $4,636,163 Add: Common stock issuances related to stock plans 2,279 648 ---------- ---------- Paid-in Capital - End of period $4,662,762 $4,636,811 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $874.8 $940.6 ($65.8) (7) Commercial 529.9 518.0 11.9 2 Industrial 532.2 598.9 (66.7) (11) Governmental 55.5 54.4 1.1 2 -------- -------- ------- Total retail 1,992.4 2,111.9 (119.5) (6) Sales for resale 108.9 115.4 (6.5) (6) Other (115.0) 157.8 (272.8) (173) -------- -------- ------- Total $1,986.3 $2,385.1 ($398.8) (17) ======== ======== ======= Billed Electric Energy Sales (GWH): Residential 10,502 11,573 (1,071) (9) Commercial 7,351 7,578 (227) (3) Industrial 10,457 11,248 (791) (7) Governmental 722 744 (22) (3) -------- -------- ------- Total retail 29,032 31,143 (2,111) (7) Sales for resale 2,373 2,290 83 4 -------- -------- ------- Total 31,405 33,433 (2,028) (6) ======== ======== ======= Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $2,127.0 $1,933.7 $193.3 10 Commercial 1,462.8 1,252.5 210.3 17 Industrial 1,838.7 1,549.4 289.3 19 Governmental 162.7 134.5 28.2 21 -------- -------- ------- Total retail 5,591.2 4,870.1 721.1 15 Sales for resale 325.8 291.5 34.3 12 Other (67.3) 241.0 (308.3) (128) -------- -------- ------- Total $5,849.7 $5,402.6 $447.1 8 ======== ======== ======= Billed Electric Energy Sales (GWH): Residential 24,771 24,943 (172) (1) Commercial 18,834 18,738 96 1 Industrial 31,478 32,886 (1,408) (4) Governmental 1,967 1,966 1 - -------- -------- ------- Total retail 77,050 78,533 (1,483) (2) Sales for resale 7,004 6,880 124 2 -------- -------- ------- Total 84,054 85,413 (1,359) (2) ======== ======== =======
ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 2001 compared to the three months ended September 30, 2000 primarily due to receipt of a final FERC order that will result in a refund from System Energy. The accounting entries necessary to record the effects of the order reduced purchased power expenses. Decreased other regulatory charges and decreased other operation and maintenance expenses also increased net income. The increase was partially offset by increased interest expense. See Note 2 to the financial statements for further discussion of System Energy's rate proceeding. Net income increased for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 primarily due to the effect of the final FERC order in the System Energy rate proceeding and decreased other operation and maintenance expenses, which includes the reversal of Arkansas ice storm costs discussed below. The increase was partially offset by increased depreciation and amortization expenses, increased other regulatory charges, and increased interest expense. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2001 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $4.4 ($6.1) Rate riders (12.6) (8.4) Fuel cost recovery 22.9 65.3 Sales volume/weather (9.1) 17.1 Other revenue (including unbilled) (7.8) (15.9) Sales for resale (4.4) (6.4) ----- ----- Total ($6.6) $45.6 ===== ===== Base rate changes Base rate changes increased revenues for the three months ended September 30, 2001 primarily due to higher prices for industrial and commercial customers. The increase in rates is offset by lower revenues from decreased usage from those customers as discussed below. Base rate changes decreased revenues for the nine months ended September 30, 2001 primarily due to the effect of block rates for residential customers. The decrease in rates is offset by increased revenues from favorable volume and weather from those customers as discussed below. The decrease in base rate changes is partially offset by higher prices for industrial customers due to decreased usage. Rate riders Rate rider revenues have no material effect on net income because specific incurred expenses offset them. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Rate rider revenues decreased for the three months ended September 30, 2001 as a result of a decrease in the Grand Gulf rate rider effective July 2001. The Grand Gulf rate rider allows Entergy Arkansas to recover its recoverable share of operating costs for Grand Gulf 1. Rate rider revenues decreased for the nine months ended September 30, 2001 primarily as a result of the cessation of the ANO Decommissioning rate rider for the calendar year 2001. In October 2000, the APSC concluded that funds previously collected, together with future earnings on those funds, will be sufficient to decommission ANO 1 and 2. Further details of this decision can be found in Note 2 to the financial statements in the Form 10-K. Fuel cost recovery Entergy Arkansas is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Arkansas' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenue increased for the three months ended September 30, 2001 primarily due to an increase in the energy cost rate, which became effective in April 2001. The increase in the energy cost rate allows Entergy Arkansas to recover previously under-recovered fuel expenses. Fuel cost recovery revenue increased for the nine months ended September 30, 2001 primarily due to increases in the energy cost rate that became effective in April 2000 and April 2001. Sales volume/weather Lower electric sales volume reduced revenues for the three months ended September 30, 2001 due to decreased usage of 97 GWH in the industrial sector, partially offset by increased weather-adjusted usage of 47 GWH in the residential and commercial sectors. Electric sales vary seasonally in response to weather and usually peak in the summer. Unfavorable weather also decreased electric sales for the three months ended September 30, 2001. The effect of milder-than-normal summer weather offset the weather-adjusted usage increase in the residential and commercial sectors with a decrease in electric sales volume of 146 GWH. Higher electric sales volume increased revenues for the nine months ended September 30, 2001 due to increased weather-adjusted usage of 235 GWH in the residential and commercial sectors. Electric sales vary seasonally in response to weather and usually peak in the summer. Favorable weather also increased electric sales. The effect of colder- than-normal winter weather in the first quarter of 2001 contributed 177 GWH to the increase in electric sales volume in the residential and commercial sectors. Other revenue (including unbilled) Unbilled revenue decreased for the three months ended September 30, 2001 primarily due to the effect of less favorable weather on the period included in the September 2001 unbilled revenue calculation compared to the calculation in September 2000. Unbilled revenue decreased for the nine months ended September 30, 2001 primarily due to the effect of less favorable weather on the period included in the September 2001 unbilled revenue calculation compared to the calculation in the prior year. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales for resale Sales for resale decreased for the three months ended September 30, 2001 primarily due to a decrease in sales volume to adjoining utility systems as a result of decreased generation, coupled with a decrease in the average market price of energy. The decrease was partially offset by an increase in sales volume to affiliated companies. Sales for resale decreased for the nine months ended September 30, 2001 primarily due to a decrease in sales volume to affiliated companies and adjoining utility systems as a result of decreased generation. The decrease was partially offset by an increase in sales volume to municipal and co-operative customers coupled with an increase in the average market price of energy early in 2001. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2001 primarily due to receipt of a final FERC order requiring System Energy to refund a portion of its requested December 1995 rate increase. The effect of the order reduced purchased power expenses at Entergy Arkansas by $61.5 million. A decrease in the market price of natural gas also contributed to the decrease in fuel and purchased power expenses. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended September 30, 2001 primarily due to: o a decrease in property insurance expense due to a $5 million true-up in September 2000 to modify storm damage expense included in the annual update of the excess earnings review to a level negotiated with the APSC; and o a decrease in outside service expense of $1.3 million due to lower legal expenses. Other operation and maintenance expenses decreased for the nine months ended September 30, 2001 primarily due to: o a decrease in property insurance expense of $24.5 million due to a reversal in June 2001, upon recommendation from the APSC, of ice storm costs previously charged to expense in December 2000 (these costs are now reflected as regulatory assets on Entergy Arkansas' balance sheet); o a decrease in outside service expense of $10.5 million due to decreased transition to competition support costs, lower legal expenses, and decreased information technology maintenance costs; and o a decrease in overhead line maintenance expense of $9.6 million primarily due to decreased vegetation maintenance spending. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Depreciation and amortization Depreciation and amortization expenses increased for the three and nine months ended September 30, 2001 primarily due to net capital additions, most notably the ANO 2 replacement steam generators placed in service in late 2000. Other regulatory charges (credits) Other regulatory charges decreased for the three months ended September 30, 2001 primarily due to a lower adjustment to the transition cost account made in 2001 as a result of the 2000 excess earnings review, compared to the adjustment made in September 2000. The transition cost account is further discussed in Note 2 to the financial statements. Other regulatory charges increased for the nine months ended September 30, 2001 primarily due to an increase in the Grand Gulf 1 rider, which allows for increased recovery of Grand Gulf 1 costs effective January 2001. Other Other income Other income decreased for the three and nine months ended September 30, 2001 primarily due to a decrease in the allowance for equity funds used during construction due to a lower construction work in progress balance during 2001 compared to the same period in 2000. The construction balance was lower because the ANO 2 replacement steam generators were placed in service in late 2000. The decrease for the nine months ended was partially offset by increased interest income recorded on the deferred fuel balance. Interest and other charges Interest and other charges increased for the three and nine months ended September 30, 2001 due to: o interest expense on intercompany money pool borrowings; o interest expense on a $63 million credit facility obtained in January 2001; and o a decrease in the allowance for borrowed funds used during construction because of the lower construction work in progress balance during 2001. Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 40.9% and 43.2%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 41.1% and 41.0%, respectively. The decrease in the effective tax rate for the three months ended was primarily due to a decrease in flow-through items and permanent tax differences.
ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $541,556 $548,156 $1,388,463 $1,342,856 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 120,003 74,804 298,165 224,660 Purchased power 76,528 179,587 321,038 398,547 Nuclear refueling outage expenses 7,079 6,439 21,616 19,317 Other operation and maintenance 113,089 119,822 249,913 295,330 Decommissioning 18 2,595 15 1,882 Taxes other than income taxes 8,259 10,664 25,687 28,359 Depreciation and amortization 45,245 42,539 131,268 125,535 Other regulatory charges (credits) - net 7,797 17,789 1,458 (4,381) -------- -------- ---------- ---------- TOTAL 378,018 454,239 1,049,160 1,089,249 -------- -------- ---------- ---------- OPERATING INCOME 163,538 93,917 339,303 253,607 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 1,858 4,416 4,497 11,836 Miscellaneous - net 457 963 5,240 3,201 -------- -------- ---------- ---------- TOTAL 2,315 5,379 9,737 15,037 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 23,171 21,611 67,475 65,745 Other interest - net 3,239 1,915 11,744 6,323 Distributions on preferred securities of subsidiary 1,275 1,275 3,825 3,825 Allowance for borrowed funds used during construction (1,187) (2,888) (2,902) (7,704) -------- -------- ---------- ---------- TOTAL 26,498 21,913 80,142 68,189 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 139,355 77,383 268,898 200,455 Income taxes 56,954 33,461 110,481 82,242 -------- -------- ---------- ---------- NET INCOME 82,401 43,922 158,417 118,213 Preferred dividend requirements and other 1,912 1,944 5,800 5,832 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $80,489 $41,978 $152,617 $112,381 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $158,417 $118,213 Noncash items included in net income: Other regulatory charges (credits) - net 1,458 (4,381) Depreciation, amortization, and decommissioning 131,283 127,417 Deferred income taxes and investment tax credits (50,323) (3,908) Allowance for equity funds used during construction (4,497) (11,836) Changes in working capital: Receivables (218,974) (61,827) Fuel inventory (8,605) (5,752) Accounts payable (111,262) (25,791) Taxes accrued 151,757 32,794 Interest accrued (11,228) 3,592 Deferred fuel costs 66,973 27,682 Other working capital accounts 62,753 24,602 Provision for estimated losses and reserves (4,536) (396) Changes in other regulatory assets (57,723) (4,760) Other 80,979 46,049 -------- -------- Net cash flow provided by operating activities 186,472 261,698 -------- -------- INVESTING ACTIVITIES Construction expenditures (189,883) (250,643) Allowance for equity funds used during construction 4,497 11,836 Nuclear fuel purchases (19,103) (32,938) Proceeds from sale/leaseback of nuclear fuel 19,103 32,938 Decommissioning trust contributions and realized change in trust assets (6,569) (10,367) Other regulatory investments (13,834) (59,354) -------- -------- Net cash flow used in investing activities (205,789) (308,528) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 98,919 99,389 Dividends paid: Common stock (59,100) (44,600) Preferred stock (5,832) (3,803) -------- -------- Net cash flow provided by financing activities 33,987 50,986 -------- -------- Net increase in cash and cash equivalents 14,670 4,156 Cash and cash equivalents at beginning of period 7,838 6,862 -------- -------- Cash and cash equivalents at end of period $22,508 $11,018 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $90,297 $63,290 Income taxes ($3) $46,455 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($17,087) $13,953 See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents $22,508 $7,838 Accounts receivable: Customer 131,333 98,550 Allowance for doubtful accounts (1,667) (1,667) Associated companies 222,991 22,286 Other 13,498 26,221 Accrued unbilled revenues 64,096 65,887 ---------- ---------- Total accounts receivable 430,251 211,277 ---------- ---------- Deferred fuel costs 49,831 102,970 Accumulated deferred income taxes 3,292 - Fuel inventory - at average cost 18,414 9,809 Materials and supplies - at average cost 74,796 80,682 Deferred nuclear refueling outage costs 21,587 23,541 Prepayments and other 8,461 5,540 ---------- ---------- TOTAL 629,140 441,657 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 11,217 11,217 Decommissioning trust funds 345,334 355,852 Non-utility property - at cost (less accumulated depreciation) 1,466 1,469 Other - at cost (less accumulated depreciation) 2,976 3,032 ---------- ---------- TOTAL 360,993 371,570 ---------- ---------- UTILITY PLANT Electric 5,345,434 5,274,066 Property under capital lease 38,609 40,289 Construction work in progress 170,606 87,389 Nuclear fuel under capital lease 78,282 107,023 Nuclear fuel 9,138 6,720 ---------- ---------- TOTAL UTILITY PLANT 5,642,069 5,515,487 Less - accumulated depreciation and amortization 2,616,432 2,534,463 ---------- ---------- UTILITY PLANT - NET 3,025,637 2,981,024 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 174,853 162,952 Unamortized loss on reacquired debt 41,703 44,428 Other regulatory assets 267,627 221,805 Other 8,686 4,775 ---------- ---------- TOTAL 492,869 433,960 ---------- ---------- TOTAL ASSETS $4,508,639 $4,228,211 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $85,000 $100 Notes payable 667 667 Accounts payable: Associated companies 108,768 94,776 Other 106,059 231,313 Customer deposits 31,856 29,775 Taxes accrued 192,020 40,263 Accumulated deferred income taxes - 55,127 Interest accrued 16,396 27,624 Obligations under capital leases 46,158 45,962 Other 71,938 14,942 ---------- ---------- TOTAL 658,862 540,549 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 742,847 715,891 Accumulated deferred investment tax credits 84,495 88,264 Obligations under capital leases 70,734 101,350 Transition to competition 142,923 119,553 Accumulated provisions 37,857 42,393 Other 101,204 64,267 ---------- ---------- TOTAL 1,180,060 1,131,718 ---------- ---------- Long-term debt 1,259,967 1,239,712 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2001 and 2000 470 470 Paid-in capital 591,127 591,127 Retained earnings 641,803 548,285 ---------- ---------- TOTAL 1,349,750 1,256,232 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,508,639 $4,228,211 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 207.4 $ 209.6 ($2.2) (1) Commercial 103.8 99.1 4.7 5 Industrial 109.2 106.4 2.8 3 Governmental 4.7 4.4 0.3 7 -------- -------- ------- Total retail 425.1 419.5 5.6 1 Sales for resale Associated companies 63.3 59.1 4.2 7 Non-associated companies 57.1 65.7 (8.6) (13) Other (3.9) 3.9 (7.8) (200) -------- -------- ------- Total $ 541.6 $ 548.2 ($6.6) (1) ======== ======== ======= Billed Electric Energy Sales (GWH): Residential 2,332 2,424 (92) (4) Commercial 1,608 1,615 (7) - Industrial 1,923 2,020 (97) (5) Governmental 71 70 1 1 -------- -------- ------- Total retail 5,934 6,129 (195) (3) Sales for resale Associated companies 1,673 1,216 457 38 Non-associated companies 1,320 1,341 (21) (2) -------- -------- ------- Total 8,927 8,686 241 3 ======== ======== ======= Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 471.7 $ 439.7 $ 32.0 7 Commercial 253.2 233.5 19.7 8 Industrial 279.2 264.0 15.2 6 Governmental 12.4 11.4 1.0 9 -------- -------- ------- Total retail 1,016.5 948.6 67.9 7 Sales for resale Associated companies 183.1 197.6 (14.5) (7) Non-associated companies 164.7 156.6 8.1 5 Other 24.2 40.1 (15.9) (40) -------- -------- ------- Total $ 1,388.5 $ 1,342.9 $ 45.6 3 ======== ======== ======= Billed Electric Energy Sales (GWH): Residential 5,568 5,276 292 6 Commercial 3,971 3,851 120 3 Industrial 5,270 5,386 (116) (2) Governmental 188 182 6 3 -------- -------- ------- Total retail 14,997 14,695 302 2 Sales for resale Associated companies 4,753 5,481 (728) (13) Non-associated companies 3,947 3,832 115 3 -------- -------- ------- Total 23,697 24,008 (311) (1) ======== ======== ======= ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 2001 compared to the three months ended September 30, 2000 primarily due to decreased net revenue and increased interest expense, partially offset by decreased other operation and maintenance expenses. Net income decreased slightly for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 as a result of decreased net revenue and increased interest expense, largely offset by increased interest income and decreased other operation and maintenance expenses. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and nine months ended September 30, 2001 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes ($2.1) ($3.0) Fuel cost recovery (3.6) 317.0 Sales volume/weather (17.1) (5.5) Other revenue (including unbilled) (60.6) (73.1) Sales for resale (18.9) 31.8 ------- ------ Total ($102.3) $267.2 ======= ====== Fuel cost recovery Entergy Gulf States is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Gulf States' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased $39.8 million for the three months ended September 30, 2001 in the Louisiana jurisdiction of Entergy Gulf States due to lower fuel and purchased power costs. Fuel cost recovery revenues increased $36.2 million for the three months ended September 30, 2001 in the Texas jurisdiction of Entergy Gulf States due to a higher fixed fuel factor and due to a fuel recovery surcharge which became effective in February 2001. Fuel cost recovery revenues increased for the nine months ended September 30, 2001 in both operational jurisdictions of Entergy Gulf States. In the Louisiana jurisdiction, fuel recovery revenues increased $204 million for the nine months ended September 30, 2001 due to the recovery through the fuel adjustment clause of higher fuel and purchased power costs from early 2001. In the Louisiana jurisdiction, these fuel costs are recovered on a two-month lag. In the Texas jurisdiction, fuel cost recovery revenues increased $113 million for the nine months ended September 30, 2001 due to increases in the fixed fuel factor in August 2000 and March 2001 and due to a fuel recovery surcharge which became effective in February 2001. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Sales volume/weather Electric sales vary seasonally in response to weather and usually peak in the summer. Lower electric sales volume reduced revenues for the three months ended September 30, 2001 primarily due to less favorable weather. The effect of milder-than-normal summer weather in the third quarter of 2001 decreased electric sales volume by 338 GWH in the residential and commercial sectors. Lower usage in the industrial sector of 533 GWH and 612 GWH for the three and nine months ended, respectively, contributed to the decrease in electric sales. Other revenue (including unbilled) Unbilled revenue decreased $61 million for the three months ended September 30, 2001 due to the effect of fuel prices in the Louisiana jurisdiction in the period included in the September 2001 unbilled revenue calculation compared to the calculation in the prior period. Unbilled revenue decreased $69 million for the nine months ended September 30, 2001 due to the effect of fuel prices for the Louisiana jurisdiction and decreased volume for retail customers in the Louisiana and Texas jurisdictions and wholesale customers in the Texas jurisdiction. Sales for resale Sales for resale decreased for the three months ended September 30, 2001 primarily due to decreased sales volume to affiliated customers and to adjoining utility systems and due to decreased prices for resale electricity. Sales for resale increased for the nine months ended September 30, 2001 primarily due to increased sales volume to municipal and co-op customers and due to increased prices for resale electricity. Included in the sales for resale is the sale to adjoining utility systems of power from the 30% share of River Bend acquired from Cajun, which is not subject to state rate regulation. Gas operating revenues Gas operating revenues increased for the nine months ended September 30, 2001 due to a 76% average increase in the market price of natural gas, particularly during the first and second quarters of 2001, and due to increased sales volume, primarily during the first quarter of 2001. The increase in gas revenues was largely offset by increased expense for gas purchased for resale. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the nine months ended September 30, 2001 due to: o higher market prices for purchased power; and o higher market prices for natural gas, which increased 23% over the same period of 2000. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended September 30, 2001 primarily due to: o the disposal of low-level radioactive waste in 2000 of $4.0 million; o a decrease in legal expenses of $1.9 million related to the unbundling of services for transition to competition; o a decrease in maintenance of overhead lines of $1.6 million; and o a decrease in expenses for injuries and damages of $1.1 million. Other regulatory credits Other regulatory credits increased for the three and nine months ended September 30, 2001 primarily due to the amount of capacity charges included in purchased power costs for the summers of 2000 and 2001 that Entergy Gulf States deferred and expects to recover in the future. Other Other income Other income increased $9.6 million for the nine months ended September 30, 2001 primarily due to increased interest income recorded on the deferred fuel balance. Interest and other charges Interest expense increased for the three months ended September 30, 2001 primarily due to an adjustment to the liability for deferred compensation for certain former Entergy Gulf States employees in accord with an actuarial study. Interest expense increased for the nine months ended September 30, 2001 primarily due to: o the issuance of $300 million of long-term debt in June 2000 and the net issuance of an additional $177 million of long-term debt in August 2001; o increased interest expense on refund provisions; and o an adjustment to the liability for deferred compensation for certain former Entergy Gulf States employees in accord with an actuarial study. Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 36.2% and 38.2%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 36.1% and 37.0%, respectively.
ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $708,951 $811,265 $2,129,424 $1,862,171 Natural gas 5,537 5,887 50,434 24,584 -------- -------- ---------- ---------- TOTAL 714,488 817,152 2,179,858 1,886,755 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 281,276 279,411 881,440 639,950 Purchased power 136,703 141,226 404,558 328,506 Nuclear refueling outage expenses 2,680 4,990 8,792 13,573 Other operation and maintenance 107,991 116,480 309,404 313,720 Decommissioning 1,562 1,568 4,685 4,705 Taxes other than income taxes 32,028 35,295 90,587 90,053 Depreciation and amortization 48,683 47,599 143,634 140,977 Other regulatory credits - net (16,038) (955) (23,393) (12,746) Amortization of rate deferrals 1,402 1,402 4,205 4,205 -------- -------- ---------- ---------- TOTAL 596,287 627,016 1,823,912 1,522,943 -------- -------- ---------- ---------- OPERATING INCOME 118,201 190,136 355,946 363,812 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 2,650 2,189 6,817 5,675 Gain on sale of assets 623 549 1,811 1,595 Miscellaneous - net 4,957 4,910 16,609 8,320 -------- -------- ---------- ---------- TOTAL 8,230 7,648 25,237 15,590 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 37,359 39,036 115,511 106,225 Other interest - net 7,844 1,415 12,038 4,524 Distributions on preferred securities of subsidiary 1,859 1,859 5,578 5,578 Allowance for borrowed funds used during construction (2,704) (1,973) (6,858) (5,185) -------- -------- ---------- ---------- TOTAL 44,358 40,337 126,269 111,142 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 82,073 157,447 254,914 268,260 Income taxes 29,720 60,122 92,133 99,363 -------- -------- ---------- ---------- NET INCOME 52,353 97,325 162,781 168,897 Preferred dividend requirements and other 1,201 1,349 3,782 8,668 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $51,152 $95,976 $158,999 $160,229 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $162,781 $168,897 Noncash items included in net income: Amortization of rate deferrals 4,205 4,205 Reserve for regulatory adjustments (22,880) (82,637) Other regulatory credits - net (23,393) (12,746) Depreciation, amortization, and decommissioning 148,319 145,682 Deferred income taxes and investment tax credits (17,478) 19,866 Allowance for equity funds used during construction (6,817) (5,675) Gain on sale of assets (1,811) (1,595) Changes in working capital: Receivables (69,940) (129,735) Fuel inventory (17,057) (2,515) Accounts payable (163,428) 4,179 Taxes accrued 120,593 95,878 Interest accrued 5,776 20,172 Deferred fuel costs 118,427 (1,240) Other working capital accounts 15,914 12,769 Provision for estimated losses and reserves (4,539) (3,195) Changes in other regulatory assets (31,610) (27,392) Other 31,876 37,427 -------- -------- Net cash flow provided by operating activities 248,938 242,345 -------- -------- INVESTING ACTIVITIES Construction expenditures (224,101) (195,304) Allowance for equity funds used during construction 6,817 5,675 Nuclear fuel purchases (3,937) (34,707) Proceeds from sale/leaseback of nuclear fuel 3,937 34,150 Decommissioning trust contributions and realized change in trust assets (9,245) (8,364) Changes in other temporary investments - net (75,777) - Other regulatory investments (22,628) (80,516) -------- -------- Net cash flow used in investing activities (324,934) (279,066) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 300,000 298,855 Retirement of: Long-term debt (122,750) - Redemption of preferred stock (4,574) (156,260) Dividends paid: Common stock (78,500) (73,400) Preferred stock (3,830) (9,540) -------- -------- Net cash flow provided by financing activities 90,346 59,655 -------- -------- Net increase in cash and cash equivalents 14,350 22,934 Cash and cash equivalents at beginning of period 68,279 32,312 -------- -------- Cash and cash equivalents at end of period $82,629 $55,246 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $117,903 $91,865 Income taxes $920 $7,659 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($10,172) $15,500 See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $23,419 $10,726 Temporary cash investments - at cost, which approximates market 59,210 57,553 ---------- ---------- Total cash and cash equivalents 82,629 68,279 ---------- ---------- Other temporary investments 75,777 - Accounts receivable: Customer 143,924 125,412 Allowance for doubtful accounts (2,131) (2,131) Associated companies 83,714 27,660 Other 34,610 22,837 Accrued unbilled revenues 119,985 136,384 ---------- ---------- Total accounts receivable 380,102 310,162 ---------- ---------- Deferred fuel costs 192,327 288,126 Fuel inventory - at average cost 54,315 37,258 Materials and supplies - at average cost 96,687 100,018 Rate deferrals 1,402 5,606 Prepayments and other 24,562 22,332 ---------- ---------- TOTAL 907,801 831,781 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 242,628 243,555 Non-utility property - at cost (less accumulated depreciation) 194,425 194,422 Other - at cost (less accumulated depreciation) 16,100 14,826 ---------- ---------- TOTAL 453,153 452,803 ---------- ---------- UTILITY PLANT Electric 7,612,205 7,574,905 Property under capital lease 30,355 38,564 Natural gas 58,865 56,163 Construction work in progress 261,008 144,814 Nuclear fuel under capital lease 48,990 57,472 ---------- ---------- TOTAL UTILITY PLANT 8,011,423 7,871,918 Less - accumulated depreciation and amortization 3,753,230 3,680,662 ---------- ---------- UTILITY PLANT - NET 4,258,193 4,191,256 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 413,360 403,934 Unamortized loss on reacquired debt 35,216 37,903 Other regulatory assets 191,589 169,405 Long-term receivables 27,360 29,586 Other 23,504 17,349 ---------- ---------- TOTAL 691,029 658,177 ---------- ---------- TOTAL ASSETS $6,310,176 $6,134,017 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $150,000 $122,750 Accounts payable: Associated companies 40,691 66,312 Other 120,722 258,529 Customer deposits 43,468 37,489 Taxes accrued 252,961 132,368 Accumulated deferred income taxes 47,905 94,032 Nuclear refueling outage costs 16,163 10,209 Interest accrued 49,315 43,539 Obligations under capital leases 41,130 42,524 Other 24,109 19,418 ---------- ---------- TOTAL 786,464 827,170 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,162,627 1,115,119 Accumulated deferred investment tax credits 165,575 171,000 Obligations under capital leases 38,214 53,512 Other regulatory liabilities - 669 Decommissioning 145,076 142,604 Transition to competition 79,098 72,381 Regulatory reserves 38,085 60,965 Accumulated provisions 62,865 67,404 Other 81,380 98,501 ---------- ---------- TOTAL 1,772,920 1,782,155 ---------- ---------- Long-term debt 1,959,054 1,808,879 Preferred stock with sinking fund 26,185 30,758 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 85,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 47,677 47,677 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2001 and 2000 114,055 114,055 Paid-in capital 1,153,253 1,153,195 Retained earnings 365,568 285,128 ---------- ---------- TOTAL 1,680,553 1,600,055 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,310,176 $6,134,017 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 256.8 $ 237.8 $ 19.0 8 Commercial 159.9 133.2 26.7 20 Industrial 208.6 221.8 (13.2) (6) Governmental 9.6 7.7 1.9 25 ------- ------- ------ Total retail 634.9 600.5 34.4 6 Sales for resale Associated companies 40.0 63.5 (23.5) (37) Non-associated companies 36.2 31.6 4.6 15 Other (2.1) 115.7 (117.8) (102) ------- ------- ------- Total $ 709.0 $ 811.3 ($102.3) (13) ======= ======= ======= Billed Electric Energy Sales (GWH): Residential 3,045 3,340 (295) (9) Commercial 2,238 2,290 (52) (2) Industrial 3,948 4,481 (533) (12) Governmental 121 122 (1) (1) ------- ------- ------- Total retail 9,352 10,233 (881) (9) Sales for resale Associated companies 557 769 (212) (28) Non-associated companies 801 698 103 15 ------- ------- ------- Total 10,710 11,700 (990) (8) ======= ======= ======= Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 639.6 $ 534.7 $ 104.9 20 Commercial 461.9 362.3 99.6 27 Industrial 774.4 614.5 159.9 26 Governmental 29.9 23.5 6.4 27 ------- ------- ------- Total retail 1,905.8 1,535.0 370.8 24 Sales for resale Associated companies 69.3 81.9 (12.6) (15) Non-associated companies 120.8 76.4 44.4 58 Other 33.5 168.9 (135.4) (80) ------- ------- ------- Total $ 2,129.4 $ 1,862.2 $ 267.2 14 ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 7,188 7,274 (86) (1) Commercial 5,819 5,795 24 - Industrial 12,784 13,396 (612) (5) Governmental 342 336 6 2 ------- ------- ------- Total retail 26,133 26,801 (668) (2) Sales for resale Associated companies 1,005 1,205 (200) (17) Non-associated companies 2,496 2,266 230 10 ------- ------- ------- Total 29,634 30,272 (638) (2) ======= ======= ======= ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 2001 compared to the three months ended September 30, 2000 primarily due to receipt of a final FERC order that will result in a refund from System Energy. The accounting entries necessary to record the effects of the order reduced purchased power expenses. See Note 2 to the financial statements for further discussion of System Energy's rate proceeding. Increased regulatory credits also increased net income, and the increase was partially offset by decreased net revenue. Net income decreased for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 primarily due to decreased net revenue and increased interest expense, partially offset by the effect of the final FERC order in the System Energy rate proceeding, increased regulatory credits, and decreased other operation and maintenance expenses. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2001 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $0.3 ($7.6) Fuel cost recovery (169.1) 166.2 Sales volume/weather (27.0) (27.1) Other revenue (including unbilled) (45.7) (72.6) Sales for resale (7.3) (5.9) ------- ----- Total ($248.8) $53.0 ======= ===== Base rate changes Base rate changes decreased for the nine months ended September 30, 2001 primarily due to additional formula rate plan reductions effective August 2000, partially offset by higher prices for special-use industrial customers as a result of decreased usage which is reflected in sales volume/weather. Fuel cost recovery Entergy Louisiana is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Louisiana's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three months ended September 30, 2001 primarily due to decreased fuel and purchased power expenses as a result of decreased market prices of natural gas and purchased power in addition to fuel-related refunds that occurred in July through September 2001. See Note 2 to the financial statements herein for a discussion of the fuel-related refunds. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues increased for the nine months ended September 30, 2001 due to the recovery through the fuel adjustment clause of higher fuel and purchased power expenses. The increase in fuel and purchased power expenses was primarily due to the increased market prices of natural gas and purchased power early in 2001. Sales volume/weather Lower electric sales volume reduced revenues for the three and nine months ended September 30, 2001 because of decreased usage of 114 GWH and 599 GWH, respectively, in the industrial sector. The decreased usage in the industrial sector resulted in higher rates for that sector, which is reflected in base rate changes. Electric sales vary seasonally in response to weather and usually peak in the summer. The effect of milder- than-normal summer weather also decreased usage by 404 GWH and 230 GWH for the three and nine months ended, respectively, in the residential and commercial sectors. Other revenue (including unbilled) Unbilled revenue decreased $51.2 million and $78.6 million for the three and nine months ended September 30, 2001, respectively, primarily due to the effect of lower fuel prices for the period included in the September 2001 unbilled revenue calculation compared to the calculation in the prior year. Sales for resale Sales for resale decreased for the three and nine months ended September 30, 2001 primarily due to a decrease in sales volume as a result of decreased generation, coupled with a decrease in the average market price of energy. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2001 primarily due to: o decreased market prices of natural gas and purchased power; o decreased generation requirements; and o the reduction of $67.5 million in purchased power expenses as a result of the FERC-ordered refund from System Entergy. Fuel and purchased power expenses increased for the nine months ended September 30, 2001 primarily due to higher market prices of natural gas and purchased power early in 2001, partially offset by the FERC- ordered refund from System Energy and decreased generation requirements. Other operation and maintenance Other operation and maintenance expenses decreased for the nine months ended September 30, 2001 primarily due to a decrease of $7.0 million in plant maintenance expenses as a result of prior year maintenance outages at Waterford 3 and certain fossil plants. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other regulatory charges (credits) Other regulatory credits increased for the three and nine months ended September 30, 2001 primarily due to the amount of capacity charges included in purchased power costs for the summers of 2000 and 2001 that Entergy Louisiana deferred and expects to recover in the future. Other Other income Other income decreased for the three months ended September 30, 2001 primarily due to a decrease in interest recorded on deferred fuel balances. Interest and other charges Other interest increased for the three and nine months ended September 30, 2001 primarily due to interest accrued on reserves provided for fuel-related refunds that were refunded in July through September 2001. Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 39.3% and 39.5%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 40.1% and 40.2%, respectively.
ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $473,342 $722,175 $1,570,040 $1,517,063 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 93,989 235,362 518,458 367,301 Purchased power 69,841 160,360 337,831 394,479 Nuclear refueling outage expenses 3,050 3,410 9,574 10,230 Other operation and maintenance 76,131 77,435 217,214 225,608 Decommissioning 2,606 2,606 7,818 7,817 Taxes other than income taxes 20,314 21,173 57,031 55,889 Depreciation and amortization 44,016 42,700 129,460 127,029 Other regulatory charges (credits) - net (29,133) 240 (28,053) 720 -------- -------- ---------- ---------- TOTAL 280,814 543,286 1,249,333 1,189,073 -------- -------- ---------- ---------- OPERATING INCOME 192,528 178,889 320,707 327,990 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 1,301 1,373 3,462 3,252 Gain on sale of assets - - 152 - Miscellaneous - net 664 2,641 3,344 3,184 -------- -------- ---------- ---------- TOTAL 1,965 4,014 6,958 6,436 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 24,176 25,418 73,366 73,360 Other interest - net 2,368 1,212 9,455 5,158 Distributions on preferred securities of subsidiary 1,575 1,575 4,725 4,725 Allowance for borrowed funds used during construction (987) (1,046) (2,619) (2,914) -------- -------- ---------- ---------- TOTAL 27,132 27,159 84,927 80,329 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 167,361 155,744 242,738 254,097 Income taxes 65,846 61,577 97,329 102,051 -------- -------- ---------- ---------- NET INCOME 101,515 94,167 145,409 152,046 Preferred dividend requirements and other 1,061 2,378 5,818 7,135 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $100,454 $91,789 $139,591 $144,911 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $145,409 $152,046 Noncash items included in net income: Reserve for regulatory adjustments (11,456) - Other regulatory charges (credits) - net (28,053) 720 Depreciation, amortization, and decommissioning 137,278 134,846 Deferred income taxes and investment tax credits (55,380) (1,395) Allowance for equity funds used during construction (3,462) (3,252) Gain on sale of assets (152) - Changes in working capital: Receivables (21,389) (141,381) Accounts payable (97,696) (65,280) Taxes accrued 180,533 130,070 Interest accrued (8,139) 9,015 Deferred fuel costs 127,247 (69,348) Other working capital accounts (68,284) 45,542 Provision for estimated losses and reserves 1,499 3,378 Changes in other regulatory assets (31,841) 16,732 Other 46,173 2,834 -------- -------- Net cash flow provided by operating activities 312,287 214,527 -------- -------- INVESTING ACTIVITIES Construction expenditures (146,418) (135,442) Allowance for equity funds used during construction 3,462 3,252 Nuclear fuel purchases - (29,317) Proceeds from sale/leaseback of nuclear fuel - 29,317 Decommissioning trust contributions and realized change in trust assets (12,638) (8,700) Changes in other temporary investments - net (9,214) - -------- -------- Net cash flow used in investing activities (164,808) (140,890) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 148,754 Retirement of: Long-term debt (35,088) (100,000) Redemption of preferred stock (35,000) - Dividends paid: Common stock (85,500) (57,800) Preferred stock (7,369) (7,135) -------- -------- Net cash flow used in financing activities (162,957) (16,181) -------- -------- Net increase (decrease) in cash and cash equivalents (15,478) 57,456 Cash and cash equivalents at beginning of period 43,959 7,734 -------- -------- Cash and cash equivalents at end of period $28,481 $65,190 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $91,077 $68,913 Income taxes $550 $9,156 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($4,792) $4,396 See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $21,844 $14,138 Temporary cash investments - at cost, which approximates market 6,637 29,821 ---------- ---------- Total cash and cash equivalents 28,481 43,959 ---------- ---------- Other temporary investments 9,214 - Notes receivable 8 1,510 Accounts receivable: Customer 101,075 111,292 Allowance for doubtful accounts (1,771) (1,771) Associated companies 93,853 30,518 Other 10,717 13,698 Accrued unbilled revenues 123,952 152,700 ---------- ---------- Total accounts receivable 327,826 306,437 ---------- ---------- Deferred fuel costs - 84,051 Accumulated deferred income taxes 28,030 - Materials and supplies - at average cost 76,730 77,389 Deferred nuclear refueling outage costs 7,115 16,425 Prepayments and other 11,098 9,996 ---------- ---------- TOTAL 488,502 539,767 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 14,230 14,230 Decommissioning trust funds 118,109 110,263 Non-utility property - at cost (less accumulated depreciation) 21,716 21,700 ---------- ---------- TOTAL 154,055 146,193 ---------- ---------- UTILITY PLANT Electric 5,416,378 5,357,920 Property under capital lease 238,427 238,427 Construction work in progress 133,640 85,299 Nuclear fuel under capital lease 39,019 63,923 ---------- ---------- TOTAL UTILITY PLANT 5,827,464 5,745,569 Less - accumulated depreciation and amortization 2,533,080 2,441,937 ---------- ---------- UTILITY PLANT - NET 3,294,384 3,303,632 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 209,176 204,810 Unamortized loss on reacquired debt 29,566 33,244 Other regulatory assets 78,356 50,881 Long-term receivables 1,510 - Other 16,713 10,882 ---------- ---------- TOTAL 335,321 299,817 ---------- ---------- TOTAL ASSETS $4,272,262 $4,289,409 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $170,368 $35,088 Accounts payable: Associated companies 33,272 71,948 Other 85,821 144,841 Customer deposits 61,108 60,227 Taxes accrued 203,840 23,307 Accumulated deferred income taxes - 20,545 Interest accrued 27,397 35,536 Deferred fuel cost 43,196 - Obligations under capital leases 34,274 34,274 Other 23,105 102,614 ---------- ---------- TOTAL 682,381 528,380 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 762,049 757,362 Accumulated deferred investment tax credits 113,305 117,393 Obligations under capital leases 4,745 29,649 Regulatory reserves - 11,456 Accumulated provisions 65,700 64,201 Other 75,920 61,724 ---------- ---------- TOTAL 1,021,719 1,041,785 ---------- ---------- Long-term debt 1,106,523 1,276,696 Preferred stock with sinking fund - 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 2001 and 2000 1,088,900 1,088,900 Capital stock expense and other (2,171) (2,171) Retained earnings 204,410 150,319 ---------- ---------- TOTAL 1,391,639 1,337,548 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,272,262 $4,289,409 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 192.8 $ 284.1 ($91.3) (32) Commercial 106.0 145.9 (39.9) (27) Industrial 149.7 219.7 (70.0) (32) Governmental 8.7 11.6 (2.9) (25) ------- ------- ------ Total retail 457.2 661.3 (204.1) (31) Sales for resale Associated companies 9.2 15.0 (5.8) (39) Non-associated companies 7.8 9.3 (1.5) (16) Other (0.8) 36.6 (37.4) (102) ------- ------- ------ Total $ 473.4 $ 722.2 ($248.8) (34) ======= ======= ======= Billed Electric Energy Sales (GWH): Residential 2,749 3,103 (354) (11) Commercial 1,572 1,650 (78) (5) Industrial 3,675 3,789 (114) (3) Governmental 132 131 1 1 ------- ------- ------ Total retail 8,128 8,673 (545) (6) Sales for resale Associated companies 108 152 (44) (29) Non-associated companies 114 122 (8) (7) ------- ------- ------ Total 8,350 8,947 (597) (7) ======= ======= ====== Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 541.1 $ 546.4 ($5.3) (1) Commercial 342.0 324.1 17.9 6 Industrial 613.1 533.2 79.9 15 Governmental 31.5 27.9 3.6 13 --------- --------- ------ Total retail 1,527.7 1,431.6 96.1 7 Sales for resale Associated companies 20.6 15.7 4.9 31 Non-associated companies 20.0 30.8 (10.8) (35) Other 1.7 38.9 (37.2) (96) --------- --------- ------ Total $ 1,570.0 $ 1,517.0 $ 53.0 3 ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 6,532 6,775 (243) (4) Commercial 4,080 4,094 (14) - Industrial 10,832 11,431 (599) (5) Governmental 380 362 18 5 --------- --------- ------ Total retail 21,824 22,662 (838) (4) Sales for resale Associated companies 269 168 101 60 Non-associated companies 289 435 (146) (34) --------- --------- ------ Total 22,382 23,265 (883) (4) ========= ========= ======
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 primarily due to decreased other operation and maintenance expenses and increased interest income, partially offset by decreased unbilled revenues and increased interest expense. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2001 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes $4.2 $3.2 Grand Gulf rate rider (9.6) (12.5) Fuel cost recovery 68.6 136.0 Sales volume/weather (8.1) (1.0) Other revenue (including unbilled) 1.8 (2.5) Sales for resale (0.3) 65.3 ----- ------ Total $56.6 $188.5 ===== ====== Base rate changes Base rate changes increased for the three and nine months ended September 30, 2001 primarily due to an annual rate increase of $5.6 million under the formula rate plan, which became effective May 2001. Grand Gulf rate rider Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Grand Gulf rate rider revenue decreased for the three and nine months ended September 30, 2001 as a result of a lower rider which became effective October 2000. Fuel cost recovery Entergy Mississippi is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy Mississippi's financial statements such that these costs generally have no net effect on earnings. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues increased for the three and nine months ended September 30, 2001 primarily due to an increase in the energy cost recovery rider to collect the under-recovered fuel and purchased power costs incurred as of September 30, 2000. The recovery of $136.7 million, plus carrying charges, will occur over a 24-month period, which began in January 2001. The increase was also due to an additional increase in the energy cost recovery rider effective April 2001. Sales volume/weather Electric sales vary seasonally in response to weather and usually peak in the summer. Lower electric sales volume reduced revenues for the three months ended September 30, 2001 due to decreased usage of 310 GWH in the residential and commercial sectors as a result of milder-than-normal summer weather. The decrease was also due to decreased usage of 61 GWH in the industrial sector. Sales for resale Sales for resale increased for the nine months ended September 30, 2001 primarily due to increased net generation resulting in more energy available for sale. The increase came from sales to affiliates, which are generally made at a low margin. The increase was partially offset by a decrease in the average market price of energy. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three months ended September 30, 2001 primarily due to an over-recovery of fuel costs. The three months ended increase was partially offset by the decreased market price of natural gas. Fuel and purchased power increased for the nine months ended September 30, 2001 primarily due to the increased market prices of natural gas, oil, and purchased power. Other operation and maintenance Other operation and maintenance expenses decreased for the three and nine months ended September 30, 2001 primarily due to a decrease of $2.6 million and $11.5 million, respectively, in plant maintenance expenses due to outage costs at certain fossil plants in 2000. The nine months ended decrease was partially offset by the following: o increased charitable donations of $1.9 million; and o return to service costs of $1.0 million for the Natchez steam plant. Other regulatory charges (credits) Other regulatory charges decreased for the three months ended September 30, 2001 primarily due to a smaller over-recovery of Grand Gulf costs. Other regulatory credits increased for the nine months ended September 30, 2001 primarily due to a greater under-recovery of Grand Gulf costs in 2001. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other Other income Interest income increased for the three and nine months ended September 30, 2001 primarily due to interest recorded on the deferred fuel balance as a result of an MPSC order providing for a 24-month recovery of the September 2000 under-recovered deferred fuel balance of $136.7 million. Interest and other charges Interest on long-term debt increased for the nine months ended September 30, 2001 primarily due to the issuance of $120 million of long- term debt in February 2000 and the issuance of $70 million of long-term debt in January 2001. Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 36.7% and 37.2%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 35.3% and 35.6%, respectively.
ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $354,518 $297,966 $884,824 $696,346 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 145,168 65,656 350,720 140,986 Purchased power 104,352 111,677 282,190 283,544 Other operation and maintenance 40,230 42,390 112,951 121,093 Taxes other than income taxes 12,962 12,906 36,027 34,174 Depreciation and amortization 12,751 12,292 36,966 35,994 Other regulatory charges (credits) - net 4,753 16,750 (14,502) 2,262 -------- -------- -------- -------- TOTAL 320,216 261,671 804,352 618,053 -------- -------- -------- -------- OPERATING INCOME 34,302 36,295 80,472 78,293 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 784 662 1,799 1,912 Miscellaneous - net 6,625 2,246 14,772 6,656 -------- -------- -------- -------- TOTAL 7,409 2,908 16,571 8,568 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 11,745 11,012 35,048 31,026 Other interest - net 1,039 673 3,351 2,370 Allowance for borrowed funds used during construction (685) (518) (1,548) (1,502) -------- -------- -------- -------- TOTAL 12,099 11,167 36,851 31,894 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 29,612 28,036 60,192 54,967 Income taxes 10,864 10,425 21,236 19,556 -------- -------- -------- -------- NET INCOME 18,748 17,611 38,956 35,411 Preferred dividend requirements and other 555 842 2,240 2,527 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $18,193 $16,769 $36,716 $32,884 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $38,956 $35,411 Noncash items included in net income: Other regulatory charges (credits) - net (14,502) 2,262 Depreciation and amortization 36,966 35,994 Deferred income taxes and investment tax credits (66,707) 23,697 Allowance for equity funds used during construction (1,799) (1,912) (Gain)/loss on sale of assets (3) 2 Changes in working capital: Receivables (201,114) (30,932) Fuel inventory (2,042) 705 Accounts payable (14,127) (9,520) Taxes accrued 81,226 18,406 Interest accrued 3,370 3,609 Deferred fuel costs 23,844 36,679 Other working capital accounts 16,765 4,021 Provision for estimated losses and reserves (4,100) (699) Changes in other regulatory assets 135,154 (17,643) Other 31,242 20,612 -------- -------- Net cash flow provided by operating activities 63,129 120,692 -------- -------- INVESTING ACTIVITIES Construction expenditures (106,273) (91,895) Allowance for equity funds used during construction 1,799 1,912 Other regulatory investments - (124,851) -------- -------- Net cash flow used in investing activities (104,474) (214,834) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 69,620 119,057 Dividends paid: Common stock (17,300) (18,000) Preferred stock (2,527) (2,527) -------- -------- Net cash flow provided by financing activities 49,793 98,530 -------- -------- Net increase in cash and cash equivalents 8,448 4,388 Cash and cash equivalents at beginning of period 5,113 4,787 -------- -------- Cash and cash equivalents at end of period $13,561 $9,175 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $33,114 $28,060 Income taxes - ($28,748) See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents $13,561 $5,113 Accounts receivable: Customer 86,174 44,517 Allowance for doubtful accounts (1,044) (1,044) Associated companies 179,083 10,741 Other 2,579 9,964 Accrued unbilled revenues 32,100 33,600 ---------- ---------- Total accounts receivable 298,892 97,778 ---------- ---------- Deferred fuel costs 114,299 64,950 Fuel inventory - at average cost 5,478 3,436 Materials and supplies - at average cost 17,459 18,485 Prepayments and other 7,119 3,004 ---------- ---------- TOTAL 456,808 192,766 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,755 6,851 ---------- ---------- TOTAL 12,286 12,382 ---------- ---------- UTILITY PLANT Electric 1,914,826 1,885,501 Property under capital lease 219 290 Construction work in progress 101,566 44,085 ---------- ---------- TOTAL UTILITY PLANT 2,016,611 1,929,876 Less - accumulated depreciation and amortization 750,507 733,977 ---------- ---------- UTILITY PLANT - NET 1,266,104 1,195,899 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 30,869 25,544 Unamortized loss on reacquired debt 14,224 15,122 Deferred fuel costs 22,468 95,661 Other regulatory assets 200 140,679 Other 7,715 5,886 ---------- ---------- TOTAL 75,476 282,892 ---------- ---------- TOTAL ASSETS $1,810,674 $1,683,939 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $65,000 $- Accounts payable: Associated companies 76,764 92,980 Other 29,022 26,933 Customer deposits 28,668 26,368 Taxes accrued 113,088 31,862 Accumulated deferred income taxes 33,552 47,734 Interest accrued 16,469 13,099 Obligations under capital leases 35 79 Other 19,807 2,540 ---------- ---------- TOTAL 382,405 241,595 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 261,581 306,295 Accumulated deferred investment tax credits 18,283 19,408 Obligations under capital leases 184 211 Accumulated provisions 2,706 6,806 Other 42,606 31,339 ---------- ---------- TOTAL 325,360 364,059 ---------- ---------- Long-term debt 589,675 584,467 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 in 2001 and 2000 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 263,586 244,170 ---------- ---------- TOTAL 513,234 493,818 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,810,674 $1,683,939 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 147.6 $ 128.8 $ 18.8 15 Commercial 106.5 84.4 22.1 26 Industrial 55.8 43.4 12.4 29 Governmental 9.1 7.3 1.8 25 --------- --------- ------ Total retail 319.0 263.9 55.1 21 Sales for resale Associated companies 26.9 27.9 (1.0) (4) Non-associated companies 7.8 7.1 0.7 10 Other 0.8 (1.0) 1.8 180 --------- --------- ------ Total $ 354.5 $ 297.9 $ 56.6 19 ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 1,655 1,855 (200) (11) Commercial 1,300 1,349 (49) (4) Industrial 794 855 (61) (7) Governmental 106 112 (6) (5) --------- --------- ------ Total retail 3,855 4,171 (316) (8) Sales for resale Associated companies 423 355 68 19 Non-associated companies 117 105 12 11 --------- --------- ------ Total 4,395 4,631 (236) (5) ========= ========= ====== Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 317.6 $ 268.4 $ 49.2 18 Commercial 255.0 209.1 45.9 22 Industrial 146.3 120.0 26.3 22 Governmental 23.7 19.4 4.3 22 --------- --------- ------ Total retail 742.6 616.9 125.7 20 Sales for resale Associated companies 109.6 40.9 68.7 168 Non-associated companies 17.4 20.8 (3.4) (16) Other 15.2 17.7 (2.5) (14) --------- --------- ------ Total $ 884.8 $ 696.3 $ 188.5 27 ========= ========= ======= Billed Electric Energy Sales (GWH): Residential 3,907 3,890 17 - Commercial 3,299 3,275 24 1 Industrial 2,279 2,384 (105) (4) Governmental 289 281 8 3 --------- --------- ------ Total retail 9,774 9,830 (56) (1) Sales for resale Associated companies 1,755 561 1,194 213 Non-associated companies 225 244 (19) (8) --------- --------- ------ Total 11,754 10,635 1,119 11 ========= ========= ====== ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income (Loss) Entergy New Orleans experienced a net loss for the three months ended September 30, 2001, and experienced significantly lower net income for the nine months ended September 30, 2001, primarily because of significantly lower net revenue and increased other operation and maintenance and interest expenses. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and nine months ended September 30, 2001 are as follows: Three Months Ended Nine Months Ended Description Increase/(Decrease) Increase/(Decrease) (In Millions) Base rate changes ($4.6) ($8.3) Fuel cost recovery 2.3 79.0 Sales volume/weather (8.1) (10.1) Other revenue (including unbilled) (16.5) (12.3) Sales for resale (3.6) (11.3) ------ ----- Total ($30.5) $37.0 ====== ===== Base rate changes Base rate changes decreased revenues for the three and nine months ended September 30, 2001 primarily due to rate reductions that became effective in October 2000. Fuel cost recovery Entergy New Orleans is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is reflected as deferred fuel costs on Entergy New Orleans' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues increased for the nine months ended September 30, 2001 primarily due to recovery through the fuel adjustment clause of higher fuel and purchased power expenses. The increase in fuel and purchased power expenses was a result of increased market prices of natural gas and purchased power early in 2001. Sales volume/weather Lower electric sales volume reduced revenues for the three and nine months ended September 30, 2001 due to decreased weather-adjusted usage of 83 GWH and 138 GWH, respectively, in the residential, commercial, and governmental sectors. Electric sales vary seasonally in response to weather and usually peak in the summer. Less favorable weather decreased electric sales by 105 GWH and 108 GWH for the three and nine months ended September 30, 2001, respectively, in the residential, commercial, and governmental sectors. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other revenue (including unbilled) Unbilled revenues decreased $13 million and $10 million for the three and nine months ended September 30, 2001, respectively, primarily due to the effects of lower fuel prices and less favorable weather for the period included in the September 2001 unbilled revenue calculation compared to the calculation in the prior year. Sales for resale Sales for resale decreased for the three and nine months ended September 30, 2001 primarily due to a decrease in net generation resulting in less energy available for sale. The decrease for the nine months ended was partially offset by increased prices for resale electricity. Gas operating revenues Gas operating revenues increased for the nine months ended September 30, 2001 primarily due to the increased market price of natural gas and increased sales due to a colder-than-normal winter. The increase in gas revenues was largely offset by increased expenses for gas purchased for resale. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the nine months ended September 30, 2001 primarily due to the increased market prices of natural gas and purchased power early in 2001. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended September 30, 2001 primarily due to increases in: o plant maintenance of $1.7 million; o vegetation maintenance spending of $1.4 million; and o uncollectible receivable write-offs of $1.1 million. Other operation and maintenance expenses increased for the nine months ended September 30, 2001 primarily due to increases in: o plant maintenance of $2.5 million; o uncollectible receivable write-offs of $2.1 million; and o increased customer service support costs of $1.4 million. Taxes other than income taxes Taxes other than income taxes increased for the nine months ended September 30, 2001 primarily due to an increase in local franchise taxes as a result of higher retail revenue. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Amortization of rate deferrals Amortization of rate deferrals decreased for the three and nine months ended September 30, 2001 primarily due to a scheduled rate change in the amortization of Grand Gulf 1 phase-in expenses. The Grand Gulf 1 phase-in plan was completed in September 2001. Other Interest and other charges Interest on long-term debt increased for the nine months ended September 30, 2001 primarily due to the issuance of $30 million of long- term debt in July 2000 and the issuance of $30 million of long-term debt in February 2001. Income taxes There was no effective income tax rate for the three months ended September 30, 2001 as a result of the net loss generated. For the three months ended September 30, 2000, the effective income tax rate was 40.7%. For the nine months ended September 30, 2001 and 2000, the effective income tax rates were 46.5% and 42.2%, respectively. The increase for the nine months ended September 30, 2001 in the effective tax rate was primarily due to the decrease in pre-tax income, which increased the impact of flow-through items.
ENTERGY NEW ORLEANS, INC. INCOME (LOSS) STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $154,462 $184,933 $422,751 $385,730 Natural gas 12,675 15,928 108,710 71,523 -------- -------- -------- -------- TOTAL 167,137 200,861 531,461 457,253 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 46,139 60,389 206,826 142,421 Purchased power 74,067 61,197 181,393 135,091 Other operation and maintenance 24,575 20,277 67,151 59,934 Taxes other than income taxes 12,424 14,133 37,418 32,829 Depreciation and amortization 6,372 5,796 18,879 17,306 Other regulatory credits - net (3,721) (2,163) (7,427) (5,497) Amortization of rate deferrals 4,628 9,096 10,977 21,573 -------- -------- -------- -------- TOTAL 164,484 168,725 515,217 403,657 -------- -------- -------- -------- OPERATING INCOME 2,653 32,136 16,244 53,596 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 535 312 1,386 907 Miscellaneous - net 1,561 1,145 2,575 2,562 -------- -------- -------- -------- TOTAL 2,096 1,457 3,961 3,469 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 4,661 3,840 13,229 10,479 Other interest - net 734 349 1,545 1,175 Allowance for borrowed funds used during construction (473) (239) (1,179) (684) -------- -------- -------- -------- TOTAL 4,922 3,950 13,595 10,970 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (173) 29,643 6,610 46,095 Income taxes 135 12,050 3,073 19,468 -------- -------- -------- -------- NET INCOME (LOSS) (308) 17,593 3,537 26,627 Preferred dividend requirements and other 241 241 724 724 -------- -------- -------- -------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK ($549) $17,352 $2,813 $25,903 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $3,537 $26,627 Noncash items included in net income: Amortization of rate deferrals 10,977 21,573 Reserve for regulatory adjustments (1,176) - Other regulatory credits - net (7,427) (5,497) Depreciation and amortization 18,879 17,306 Deferred income taxes and investment tax credits (43,474) 4,390 Allowance for equity funds used during construction (1,386) (907) Changes in working capital: Receivables (90,495) (56,406) Fuel inventory 1,148 1,895 Accounts payable (21,707) 13,473 Taxes accrued 44,901 19,588 Interest accrued (3,145) (2,377) Deferred fuel costs 30,616 (27,391) Other working capital accounts 37,000 104 Provision for estimated losses and reserves (2,234) (900) Changes in other regulatory assets 33,334 (7,777) Other 7,806 6,544 -------- -------- Net cash flow provided by operating activities 17,154 10,245 -------- -------- INVESTING ACTIVITIES Construction expenditures (44,286) (29,602) Allowance for equity funds used during construction 1,386 907 Changes in other temporary investments - net (100) - -------- -------- Net cash flow used in investing activities (43,000) (28,695) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 29,763 29,607 Dividends paid: Common stock (800) (9,500) Preferred stock (724) (482) -------- -------- Net cash flow provided by financing activities 28,239 19,625 -------- -------- Net increase in cash and cash equivalents 2,393 1,175 Cash and cash equivalents at beginning of period 6,302 4,454 -------- -------- Cash and cash equivalents at end of period $8,695 $5,629 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $17,536 $13,747 Income taxes - ($2,368) See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents $8,695 $6,302 Other temporary investments 100 - Accounts receivable: Customer 66,363 67,264 Allowance for doubtful accounts (770) (770) Associated companies 90,686 2,800 Other 5,418 3,709 Accrued unbilled revenues 28,639 26,838 -------- -------- Total accounts receivable 190,336 99,841 -------- -------- Deferred fuel costs - 28,234 Accumulated deferred income taxes 9,888 - Fuel inventory - at average cost 3,056 4,204 Materials and supplies - at average cost 7,861 9,630 Rate deferrals - 10,974 Prepayments and other 5,185 1,416 -------- -------- TOTAL 225,121 160,601 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 579,576 572,061 Natural gas 141,062 134,826 Construction work in progress 57,881 36,489 -------- -------- TOTAL UTILITY PLANT 778,519 743,376 Less - accumulated depreciation and amortization 402,811 394,271 -------- -------- UTILITY PLANT - NET 375,708 349,105 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Unamortized loss on reacquired debt 814 974 Other regulatory assets 11,342 44,676 Other 2,149 616 -------- -------- TOTAL 14,305 46,266 -------- -------- TOTAL ASSETS $618,393 $559,231 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Accounts payable: Associated companies $37,600 $24,637 Other 22,896 57,566 Customer deposits 18,709 18,311 Taxes accrued 50,724 5,823 Accumulated deferred income taxes - 6,543 Interest accrued 2,974 6,119 Deferred fuel cost 2,382 - Other 41,813 3,211 -------- -------- TOTAL 177,098 122,210 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 14,776 43,754 Accumulated deferred investment tax credits 5,487 5,868 SFAS 109 regulatory liability - net 15,847 12,607 Other regulatory liabilities - 537 Accumulated provisions 6,237 8,471 Other 13,466 12,356 -------- -------- TOTAL 55,813 83,593 -------- -------- Long-term debt 229,072 199,031 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 19,780 19,780 Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2001 and 2000 33,744 33,744 Paid-in capital 36,294 36,294 Retained earnings 66,592 64,579 -------- -------- TOTAL 156,410 154,397 -------- -------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $618,393 $559,231 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 70.2 $ 80.4 ($10.2) (13) Commercial 53.8 55.4 (1.6) (3) Industrial 8.9 7.6 1.3 17 Governmental 23.5 23.4 0.1 - ------ ------ ----- Total retail 156.4 166.8 (10.4) (6) Sales for resale Associated companies 0.7 3.9 (3.2) (82) Non-associated companies 1.3 1.7 (0.4) (24) Other (4.0) 12.5 (16.5) (132) ------ ------ ----- Total $ 154.4 $ 184.9 ($30.5) (16) ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 721 851 (130) (15) Commercial 633 676 (43) (6) Industrial 117 103 14 14 Governmental 293 308 (15) (5) ------ ------ ----- Total retail 1,764 1,938 (174) (9) Sales for resale Associated companies 9 50 (41) (82) Non-associated companies 21 25 (4) (16) ------ ------ ----- Total 1,794 2,013 (219) (11) ====== ====== ===== Nine Months Ended Increase/ Description 2001 2000 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 157.0 $ 144.6 $ 12.4 9 Commercial 150.7 123.5 27.2 22 Industrial 25.7 17.7 8.0 45 Governmental 65.3 52.3 13.0 25 ------ ------ ----- Total retail 398.7 338.1 60.6 18 Sales for resale Associated companies 9.3 17.5 (8.2) (47) Non-associated companies 3.0 6.1 (3.1) (51) Other 11.7 24.0 (12.3) (51) ------ ------ ----- Total $ 422.7 $ 385.7 $ 37.0 10 ======= ======= ====== Billed Electric Energy Sales (GWH): Residential 1,576 1,727 (151) (9) Commercial 1,665 1,723 (58) (3) Industrial 313 289 24 8 Governmental 768 805 (37) (5) ------ ------ ----- Total retail 4,322 4,544 (222) (5) Sales for resale Associated companies 99 351 (252) (72) Non-associated companies 48 104 (56) (54) ------ ------ ----- Total 4,469 4,999 (530) (11) ====== ====== ===== SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three and nine months ended September 30, 2001 compared to the three and nine months ended September 30, 2000 because of the final resolution of System Energy's 1995 rate proceeding and the resulting reductions in decommissioning, depreciation, and income tax expenses, partially offset by a decrease in revenue and an increase in interest expense. See Note 2 to the financial statements for further discussion of System Energy's rate proceeding. Revenues Operating revenues recover operating expenses, depreciation, and capital costs attributable to Grand Gulf 1. Capital costs are computed by allowing a return on System Energy's common equity funds allocable to its net investment in Grand Gulf 1 and adding to such amount System Energy's effective interest cost for its debt. Operating revenues decreased for the three and nine months ended September 30, 2001 primarily due to an increase in the provision for rate refund resulting from the final resolution of System Energy's 1995 rate proceeding. Expenses Decommissioning Decommissioning expenses decreased for the three and nine months ended September 30, 2001 primarily due to the effects of the final FERC order addressing System Energy's rate proceeding. Depreciation and amortization Depreciation and amortization expenses decreased for the three and nine months ended September 30, 2001 primarily due to the effects of the final FERC order addressing System Energy's rate proceeding. Other regulatory charges Other regulatory charges decreased for the three months ended September 30, 2001 primarily due to the suspension of GGART recovery at Entergy Arkansas in July 2001. The GGART is discussed in Note 2 to the financial statements. Other Interest income Interest income increased for the three and nine months ended September 30, 2001 to recognize interest on decommissioning funds resulting from the final FERC order addressing System Energy's rate proceeding. Interest expense Interest on long-term debt decreased for the three and nine months ended September 30, 2001 primarily due to a decrease in interest expense associated with the sale-leaseback of Grand Gulf 1, decreased interest expense on the sale-leaseback line of credit, and a decrease in interest expense due to the retirement of $77.9 million in long-term debt in 2000 and 2001. Other interest expense increased for the three and nine months ended September 30, 2001 primarily due to the effects of the final FERC order addressing System Energy's rate proceeding. SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Income taxes The effective income tax rates for the three months ended September 30, 2001 and 2000 were 0% and 47.3%, respectively. The effective income tax rates for the nine months ended September 30, 2001 and 2000 were 30.6% and 47.7%, respectively. The decreases in 2001 in the effective tax rates were due to the effects of the final resolution of System Energy's 1995 rate proceeding.
SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) Three Months Ended Nine Months Ended 2001 2000 2001 2000 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $66,276 $169,114 $370,343 $485,592 ------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 9,092 9,941 26,985 31,482 Nuclear refueling outage expenses 2,627 3,600 10,648 10,504 Other operation and maintenance 23,927 24,892 61,735 63,222 Decommissioning (26,738) 4,736 (17,266) 14,208 Taxes other than income taxes 6,177 7,094 19,345 19,262 Depreciation and amortization (44,435) 35,115 12,273 91,046 Other regulatory charges - net 11,720 16,156 50,842 46,952 ------- -------- -------- -------- TOTAL (17,630) 101,534 164,562 276,676 ------- -------- -------- -------- OPERATING INCOME 83,906 67,580 205,781 208,916 ------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 544 211 1,298 1,317 Miscellaneous - net 13,595 5,590 23,390 14,781 ------- -------- -------- -------- TOTAL 14,139 5,801 24,688 16,098 ------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 16,032 20,420 53,799 67,183 Other interest - net 44,728 8,098 62,364 22,238 Allowance for borrowed funds used during construction (251) (113) (612) (766) ------- -------- -------- -------- TOTAL 60,509 28,405 115,551 88,655 ------- -------- -------- -------- INCOME BEFORE INCOME TAXES 37,536 44,976 114,918 136,359 Income taxes (257) 21,267 35,125 65,078 ------- -------- -------- -------- NET INCOME $37,793 $23,709 $79,793 $71,281 ======= ======= ======= ======== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2001 and 2000 (Unaudited) 2001 2000 (In Thousands) OPERATING ACTIVITIES Net income $79,793 $71,281 Noncash items included in net income: Reserve for regulatory adjustments (322,368) 45,881 Other regulatory charges - net 50,842 46,952 Depreciation, amortization, and decommissioning (4,993) 105,254 Deferred income taxes and investment tax credits 115,981 (56,861) Allowance for equity funds used during construction (1,298) (1,317) Changes in working capital: Receivables 10,421 154,032 Accounts payable 516,329 (12,045) Taxes accrued (68,530) 11,721 Interest accrued (15,704) (9,899) Other working capital accounts (30,088) 16,486 Provision for estimated losses and reserves (665) (203) Changes in other regulatory assets 10,929 37,386 Other (18,502) (36,423) -------- -------- Net cash flow provided by operating activities 322,147 372,245 -------- -------- INVESTING ACTIVITIES Construction expenditures (29,840) (28,148) Allowance for equity funds used during construction 1,298 1,317 Nuclear fuel purchases (37,639) (7) Proceeds from sale/leaseback of nuclear fuel 37,639 7 Decommissioning trust contributions and realized change in trust assets (14,639) (17,368) Changes in other temporary investments - net (153,157) - -------- -------- Net cash flow used in investing activities (196,338) (44,199) -------- -------- FINANCING ACTIVITIES Retirement of long-term debt (151,800) (47,947) Dividends paid: Common stock (65,800) (71,700) -------- -------- Net cash flow used in financing activities (217,600) (119,647) -------- -------- Net increase (decrease) in cash and cash equivalents (91,791) 208,399 Cash and cash equivalents at beginning of period 202,218 35,152 -------- -------- Cash and cash equivalents at end of period $110,427 $243,551 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $128,588 $72,049 Income taxes $3,463 $104,042 Noncash investing and financing activities: Change in unrealized appreciation/(depreciation) of decommissioning trust assets ($6,667) $4,988 See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $98 $44 Temporary cash investments - at cost, which approximates market 110,329 202,174 ---------- ---------- Total cash and cash equivalents 110,427 202,218 ---------- ---------- Other temporary investments 153,157 - Accounts receivable: Associated companies 202,632 212,551 Other 1,692 2,194 ---------- ---------- Total accounts receivable 204,324 214,745 ---------- ---------- Materials and supplies - at average cost 51,944 52,235 Deferred nuclear refueling outage costs 11,356 6,577 Prepayments and other 28,243 2,639 ---------- ---------- TOTAL 559,451 478,414 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 165,544 157,572 ---------- ---------- UTILITY PLANT Electric 3,100,564 3,093,033 Property under capital lease 449,851 449,851 Construction work in progress 39,167 24,029 Nuclear fuel under capital lease 68,907 49,256 ---------- ---------- TOTAL UTILITY PLANT 3,658,489 3,616,169 Less - accumulated depreciation and amortization 1,404,296 1,407,885 ---------- ---------- UTILITY PLANT - NET 2,254,193 2,208,284 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 189,475 195,634 Unamortized loss on reacquired debt 49,275 51,957 Other regulatory assets 169,747 174,517 Other 8,584 8,172 ---------- ---------- TOTAL 417,081 430,280 ---------- ---------- TOTAL ASSETS $3,396,269 $3,274,550 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY September 30, 2001 and December 31, 2000 (Unaudited) 2001 2000 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $47,691 $151,800 Accounts payable: Associated companies 521,993 2,722 Other 20,643 23,585 Taxes accrued - 68,530 Accumulated deferred income taxes 3,505 1,648 Interest accrued 28,303 44,007 Obligations under capital leases 32,119 32,119 Other 1,679 1,674 ---------- ---------- TOTAL 655,933 326,085 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 518,407 391,505 Accumulated deferred investment tax credits 86,909 89,516 Obligations under capital leases 36,788 17,137 FERC settlement - refund obligation 25,234 30,745 Other regulatory liabilities 139,095 103,634 Decommissioning 126,607 153,197 Regulatory reserves - 322,368 Accumulated provisions 24 689 Other 16,634 15,394 ---------- ---------- TOTAL 949,698 1,124,185 ---------- ---------- Long-term debt 883,219 930,854 SHAREHOLDER'S EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2001 and 2000 789,350 789,350 Retained earnings 118,069 104,076 ---------- ---------- TOTAL 907,419 893,426 ---------- ---------- Commitments and Contingencies (Notes 1 and 2) TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,396,269 $3,274,550 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (including nuclear fuel but excluding AFUDC), long-term debt and preferred stock maturities, and cash sinking fund requirements. Sales Warranties and Indemnities (Entergy Corporation) In the Entergy London and CitiPower sales transactions, Entergy or its subsidiaries made certain warranties to the purchasers. These warranties include representations regarding litigation, accuracy of financial accounts, and the adequacy of existing tax provisions. Notice of a claim on the CitiPower warranties had to be given by December 2000, and Entergy's potential liability is limited to A$100 million ($49 million). Notice of a claim on the Entergy London warranties had to be given for certain items by December 1999, and for the tax warranties, had to be given by June 30, 2001. Entergy's liability is limited to BPS1.4 billion ($2.0 billion) on certain tax warranties and BPS140 million ($200 million) on the remaining warranties relating to the Entergy London sale. Entergy also agreed to maintain the net asset value of the subsidiary that sold Entergy London at $700 million through June 30, 2001. For both of the sales, the notice period is extended if a taxing authority has begun a review before expiration of the notice period. Entergy received notice in June 2001 from both purchasers regarding issues that have not been resolved by the respective taxing authorities concerning reviews that commenced before the notice deadlines. Entergy responded to both purchasers and denies that valid claims by the purchasers have been made under the warranties. Management periodically reviews reserve levels for these warranties and as of September 30, 2001 believes it has adequately provided for the ultimate resolution of these matters. 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, Pilgrim, Indian Point 3, and FitzPatrick. Regarding the property damage and replacement power insurance programs, a proposed revision is currently pending approval by the members that provides for sharing among the members of limits up to $3.24 billion for all terrorist loss among the members that might be incurred within one year. If the proposal is approved, it could become effective as early as November 15, 2001. Entergy purchased the Indian Point 1 and Indian Point 2 nuclear power plants in September 2001 from Consolidated Edison. Indian Point 1 has been shut down and in safe storage since the early 1970s. Entergy's domestic non-utility nuclear business has accepted assignment of the Indian Point 2 spent fuel disposal contract with the DOE previously held by Consolidated Edison. Consolidated Edison has paid or retained liability for the DOE fees for all generation prior to the purchase date of Indian Point 2. Indian Point 2 currently has sufficient spent fuel storage capacity until approximately 2004. As part of the Indian Point 1 and 2 purchase, Consolidated Edison transferred a $430 million decommissioning trust fund, along with the liability to decommission Indian Point 2 and Indian Point 1, to Entergy's domestic non-utility nuclear business. Entergy also funded an additional $25 million resulting in a total fund of $455 million at September 30, 2001. Entergy believes that Indian Point 1 and 2's decommissioning fund will be adequate to cover future decommissioning costs for these plants without any additional deposits to the trust. Environmental Issues (Entergy Arkansas) In previous years, Entergy Arkansas has received notices from the EPA and the Arkansas Department of Environmental Quality (ADEQ) alleging that Entergy Arkansas, along with others, may be a potentially responsible party (PRP) for clean-up costs associated with a site in Arkansas. As of September 30, 2001, a remaining recorded liability of approximately $5.0 million existed related to the cleanup of that site. (Entergy Gulf States) Entergy Gulf States has been designated as a PRP for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the cleanup of these sites. As of September 30, 2001, a remaining recorded liability of approximately $15.4 million existed related to the cleanup of the remaining sites at which the EPA has designated Entergy Gulf States as a PRP. (Entergy Louisiana and Entergy New Orleans) During 1993, the LDEQ issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana and Entergy New Orleans have determined that certain of their power plant wastewater impoundments were affected by these regulations and have chosen to upgrade or close them. Recorded liabilities in the amounts of $5.8 million for Entergy Louisiana and $0.5 million for Entergy New Orleans existed at September 30, 2001 for wastewater upgrades and closures. Completion of this work is awaiting LDEQ approval. City Franchise Ordinances (Entergy New Orleans) Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3, which were refinanced in 1997. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the Owner Participants to withdraw from these lease transactions and may be required to assume the outstanding bonds issued to finance, in part, the lessors' acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10-K for further information. Employment Litigation (Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi) Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi 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 September 30, 2001. 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, the target date for retail open access has been delayed until no sooner than October 1, 2003 and no later than October 1, 2005. In October 2000, in compliance with the currently enacted deregulation law, Entergy Arkansas filed a market power study in accordance with the guidelines adopted by the APSC. In December 2000, Entergy Arkansas filed an application for approval to transfer Entergy Arkansas' transmission assets to the Transco. In February 2001, Entergy Arkansas filed supplemental testimony to address the effects of the proposed Transco on Entergy Arkansas' market power. In July 2001, Entergy Arkansas filed a request, which the APSC approved, to suspend proceedings regarding Transco pending further action in the FERC-mandated mediation proceedings. In September 2001, the APSC staff issued a report recommending the following: o the APSC use its statutory authority to delay retail open access until October 1, 2004; o the APSC recommend to the Arkansas General Assembly that legislation be enacted to further delay or repeal retail open access, with repeal as the better approach; and o further suspension of all rulemaking activity to implement retail open access. Entergy Arkansas agreed in reply testimony to the proposed further delay of retail open access but opposed repeal of deregulation legislation as premature at this time. A hearing is currently scheduled for November 2001. Texas (Entergy Corporation and Entergy Gulf States) As discussed in Note 2 to the financial statements in the Form 10-K, the Texas legislature enacted a law providing for retail open access by most investor-owned electric utilities, including Entergy Gulf States, on January 1, 2002, unless delayed by the PUCT. On August 3, 2001, the PUCT staff filed a petition requesting that the PUCT determine whether the market is ready for retail open access in the portion of Texas within the Southeastern Electric Reliability Council (SERC), which includes Entergy Gulf States' service territory. In its petition, the PUCT staff states that the retail electric power pilot project in SERC has not been successful to date in creating competition. The petition also states that, in light of information received by the PUCT staff indicating a lack of interest in SERC by the retail electric provider community at this time and the uncertainty surrounding the status of an RTO in SERC, it is unlikely that the competitive situation in SERC will improve to any significant degree before the current date for full customer choice to begin in SERC. Certain cities served by Entergy Gulf States also filed a petition asking the PUCT to delay competition for Entergy Gulf States. Several parties, including Entergy Gulf States and the PUCT staff, agreed to a non-unanimous settlement that was filed with the PUCT on October 22, 2001. A hearing was held before the PUCT on October 31, 2001 at which time the PUCT voted to approve the settlement. The settlement agreement contains several points, including: o a delay in the commencement of retail open access until at least September 15, 2002, subject to certain provisions of the settlement agreement; o suspension of additional capacity auctions until at least sixty days before retail open access commences (the capacity auctions are discussed below); o continuation of Entergy Gulf States' current pilot project; o initiation by the PUCT of a project to develop market protocols to support retail open access; o efforts to develop an interim solution to implement retail open access no sooner than September 15, 2002 in the event that a functional, FERC-approved RTO is not likely to be achieved in the 2002 time frame (the RTO and related power region certification issue are discussed below); o going forward with the currently pending proceedings (discussed below) to determine the fuel and base rate components of the price-to-beat rates with implementation of these rates when retail open access begins, without escalation of the fuel component during the delay period; o continuation of Entergy Gulf States' current bundled rates and fuel factor methodology until the commencement of retail open access unless addressed in the interim solution; and o continuation of efforts by Entergy Gulf States to obtain the appropriate approvals with respect to its business separation plan (discussed below) with the actual business separation not occurring until the eve of retail open access. Business Separation Plan Entergy Gulf States' business separation plan provides for the separation of its generation, transmission, distribution and retail electric functions. It has been amended during the course of various PUCT and LPSC proceedings and is subject to further change and regulatory proceedings as described below. The amended plan currently provides that Entergy Gulf States will be separated into the following principal companies: o a Texas distribution company, which will own and operate Entergy Gulf States' electric distribution system in Texas; o a Texas generation company (which may be more than one legal entity), which initially will purchase capacity and energy from the generating assets allocated to Texas load (Texas generating assets), and eventually will own those assets; o Texas retail electric providers, which will provide competitive retail electric service in Texas; and o Entergy Gulf States-Louisiana. Entergy Gulf States-Louisiana will: o own and operate Entergy Gulf States' electric distribution system in Louisiana, the Texas generating assets (until they are transferred to the Texas generation company), the remainder of Entergy Gulf States' generating assets, and Entergy Gulf States' other businesses that are not separated, and own Entergy Gulf States' transmission assets allocated to Louisiana (until they are transferred to the intermediate transmission company described in the next bullet); and o indirectly own a portion of an intermediate transmission company, which will own Entergy Gulf States' electric transmission assets allocated to Texas, and later Entergy Gulf States' transmission assets allocated to Louisiana. Entergy Gulf States' assets and liabilities (other than its long-term debt and liabilities) will be allocated among these companies generally based upon categorizing them by function. Entergy Gulf States will allocate assets and liabilities not associated with a single function based upon specified factors. In an April 2001 filing with the LPSC discussing its separation methodology, Entergy Gulf States included a balance sheet separated by jurisdiction and function. The balance sheet was based on September 30, 1999 balances. In this balance sheet, Entergy Gulf States allocated approximately 27% of the net utility plant balance to Texas generation, approximately 12% to Texas distribution, approximately 6% to Texas transmission, approximately 7% to Louisiana transmission, and less than 1% to Texas retail. Applying these percentages to Entergy Gulf States' September 30, 2001 net utility plant book value of $4.3 billion, for illustrative purposes only, results in net book values of approximately $1.2 billion for Texas generation, approximately $580 million for Texas distribution, approximately $180 million for Texas transmission, approximately $210 million for Louisiana transmission, approximately $20 million for Texas retail, and approximately $2.1 billion for the remainder of Entergy Gulf States- Louisiana. The actual allocations could materially differ from these figures because of a number of factors, including changes to the plan and the allocation methodology. In addition, the actual allocations will be based on allocation factors and account balances as of a different date. The business separation plan provides that Entergy Gulf States- Louisiana will retain liability for all of its long-term debt and liabilities and that the property transferred to the Texas companies will be released from the lien of Entergy Gulf States' mortgage on the basis of property additions. Pursuant to separate agreements, the Texas distribution company and the intermediate transmission company will each assume a portion of Entergy Gulf States' long-term debt and liabilities, which assumptions will not act to release Entergy Gulf States-Louisiana's liability. The Texas distribution company and the intermediate transmission company will undertake to pay the outstanding assumed long- term debt and liabilities within 1 year and 3 years, respectively, of the assumption. Entergy must provide a contingent indemnity with respect to the intermediate transmission company's assumed portion of Entergy Gulf States' long-term debt and liabilities in the event that the obligations under the debt assumption agreement have not been extinguished within one year of the assumption. The Texas generation company will be required to pay an allocated portion of the outstanding principal amount of Entergy Gulf States' long-term debt and liabilities each time that Texas generating assets are transferred to it, and the transfers must be completed within 3 years of the commencement of retail open access. After the transfer of the Texas distribution and transmission assets contemplated by the current business separation plan, the distribution and transmission businesses conducted by the Texas distribution company and the intermediate transmission company, respectively, will continue to be regulated as to rates by the PUCT and the FERC, respectively. Accordingly, management believes that the Texas distribution company and the intermediate transmission company will be able to fund the payment of the assumed debt within the required period from a combination of cash flow from operations and third party financing. Entergy Gulf States filed the business separation plan with the PUCT in January 2000 and amended that plan in November 2000 and January 2001. In May 2001, the PUCT approved the amended business separation plan in an interim order. The outcome of the LPSC proceedings described below, which have resulted in amendments to the plan beyond what was approved by the PUCT, will be reported to the PUCT and the Office of Public Utility Counsel and may require additional PUCT action before the business separation plan is final. In addition, the proceeding described above that has delayed the commencement of retail open access may affect the approval. The LPSC opened a docket to identify the changes in corporate structure and operations of Entergy Gulf States, and their potential impact on Louisiana retail ratepayers, resulting from restructuring in Texas and Arkansas. In those proceedings, Entergy Gulf States and the LPSC staff reached a settlement on certain Texas business separation plan issues described above, and after a May 2001 hearing, the LPSC issued an interim order in July 2001 approving the settlement. In July 2001, Entergy Gulf States and the LPSC staff completed an additional settlement on business separation plan issues relating to the separation of Texas distribution and transmission. A hearing on the distribution and transmission settlement has been held and the LPSC approved the settlement in September 2001. With respect to issues related to the separation of generation, the LPSC scheduled a hearing in November 2001 to address settled issues. In light of the delay in the commencement of retail open access, the procedural schedule in the LPSC docket has been temporarily suspended to assess the impact of the PUCT decision. Generation-related Issues Regarding the generation-related issues referred to in the preceding paragraph, Entergy Gulf States has not yet reached agreement with the LPSC staff on certain matters related to the separation of the Texas generating assets. Entergy Gulf States has proposed that Texas generating assets be a jurisdictional portion (approximately 45 - 50%) of each generating plant and that Entergy Gulf States-Louisiana continue to operate the plants. Entergy Gulf States has also suggested that certain generating assets be allocated by specific plant such that the Texas generating assets have approximately the Texas jurisdictional portion of the capacity and value of all of Entergy Gulf States' generating assets. Until the Texas generating assets are transferred to the Texas generation company, which, as currently proposed, will occur by the end of 2004, Entergy Gulf States-Louisiana expects to sell most of the Texas jurisdictional capacity and energy from these assets to the Texas generation company under a power sale agreement. The power sale agreement is expected to require the Texas generation company to pay all costs, including a reasonable return on equity, for the capacity and energy of the Texas generating assets. The Texas generation company is expected to sell most of this capacity and energy to Entergy's affiliated Texas retail electric providers at a negotiated rate and sell any remainder to the market. Entergy's affiliated Texas retail electric providers will use the capacity and energy to provide retail electric service to retail customers in Texas, including Entergy's "price-to-beat" obligation, which requires it to sell electricity to residential and small commercial customers in the service territory of the Texas distribution company at a rate equal to the existing base rates plus a fuel component. Up to 20% of capacity and energy from the Texas generating assets must be sold to third parties under PUCT rules, or to Entergy's domestic utility companies that elect to purchase it, as described below: o Under the Texas restructuring legislation and a stipulation, Entergy Gulf States offered to sell at auction entitlements to approximately 425 megawatts of its installed generation capacity in Texas. Auctions occurred in September 2001, and not all of the entitlements offered at auction sold. The settlement that delayed retail open access provides for suspension of additional capacity auctions until at least 60 days prior to the introduction of retail open access. The obligation to auction capacity entitlements continues for up to 60 months after retail open access occurs, or until 40% of current customers have chosen an alternative supplier, whichever comes first. o Under the settlement of System Agreement proceedings, which are described in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS", Entergy's domestic utility companies have the option to purchase up to 5% of the megawatt capacity of the Texas generating assets. Each company has until December 2001 to elect to purchase its pro rata share of this capacity. If the capacity purchase is elected, it will be for the period from the inception of retail open access in Texas for Entergy Gulf States through June 2008. Beginning on the date retail open access begins, the market power measures in the Texas restructuring law will prohibit the Texas generation company and its affiliates from owning and controlling more than 20% of the installed generation capacity located in, or capable of delivering electricity to, a power region. The implications of this limit are uncertain. It is possible that the Texas generation company (or its affiliates) could be required to auction additional capacity entitlements, divest some of the Texas generating assets, or seek other means of mitigation if it is found to have ownership in excess of this limit. Other PUCT Proceedings In March 2001, Entergy Gulf States filed with the PUCT a non- unanimous settlement agreement in its unbundled cost of service proceeding that establishes the Texas distribution company's revenue requirement. The settlement agreement is among Entergy Gulf States, the PUCT staff, and other parties. Pursuant to a generic rule prescribed by the PUCT, the Texas distribution company's allowed return on equity will be 11.25%. The capital structure prescribed by the PUCT is 60% debt and 40% equity. A rider to recover nuclear decommissioning costs will be implemented. Also in the settlement agreement, the parties agree that Entergy Gulf States' Texas jurisdictional stranded costs and benefits are $0, and no charge to recover stranded costs or credit to refund excess mitigation will be implemented. Nevertheless, if new legislation passes in Texas that requires or expressly authorizes the PUCT to require Entergy Gulf States to pass-through or share stranded benefits with its customers, that legislation will control this issue. Entergy Gulf States agreed in the settlement to refund any excess earnings resulting from the restructuring law's annual report process for 2000 and 2001. After a hearing in April 2001, the PUCT voted to approve a rate order consistent with the terms of the settlement. A written interim order was signed in May 2001. In October 2001, the PUCT indicated its intent to defer a final ruling on this proceeding until a date closer to opening the market to retail open access. In June 2001, Entergy filed an application with the PUCT seeking certification of the Southwest Power Pool (SPP) as a power region under the Texas restructuring law. The proceeding has been abated, however, due to FERC's order on the establishment of regional transmission organizations (RTOs), discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS". In addition, the settlement that has delayed the commencement of retail open access requires a new power region certification proceeding. If Entergy Gulf States' power region in Texas is not certified by the PUCT before retail open access is introduced, Entergy's affiliated Texas retail electric provider could be required to maintain rates at the price-to-beat levels for residential and small commercial customers in Entergy Gulf States' service territory beyond January 1, 2007. Entergy's affiliated Texas retail electric provider could also be required to offer rates to industrial and large commercial customers in Entergy Gulf States' service territory that are no higher than the rates that, on a bundled basis, were in effect on January 1, 1999, subject to fuel factor adjustments. Entergy's affiliated Texas retail electric provider might also face requests for restrictions in its ability to compete for retail customers in parts of its power region in Texas outside of its current service area. In July 2001, Entergy Gulf States filed an application for approval of the fuel factor portion of Entergy's affiliated Texas retail electric provider's price-to-beat rates, and the gas price was updated in October 2001. After the gas price update, Entergy Gulf States is recommending that the PUCT approve an average fuel factor of approximately $29/MWH adjusted, if necessary, to maintain an adequate competitive margin. The request proceeded to hearing in early October 2001, and an ALJ made a recommendation in November 2001 that would result in a lower factor. A PUCT decision is expected by December 2001. In June 2001, Entergy Gulf States filed tariffs for the non-fuel component of the price-to-beat rates. The tariffs are based on Entergy Gulf States' current base rates. In September 2001, Entergy Gulf States entered into a unanimous settlement. A final decision from the PUCT is expected in November 2001. The PUCT had designated an Entergy-affiliated Texas retail electric provider to serve as the provider of last resort (POLR) for residential and small non-residential customers in the service territory of Southwestern Electric Power Company (SWEPCO), and for industrial and large commercial customers in Entergy Gulf States' Texas service territory. Retail open access has been delayed in SWEPCO's service territory, and Entergy's contract to provide POLR services will expire before retail open access begins there. Another designation of a POLR in that territory will be necessary if retail open access is implemented there. The PUCT has designated SWEPCO's affiliated retail electric provider as the POLR for the residential and small non-residential customers in Entergy Gulf States' Texas service territory. Retail competition in Entergy Gulf States' Texas service territory has been delayed until at least September 15, 2002, and it will not be necessary for SWEPCO's retail electric provider to provide POLR service in the service territory under the contract that has been negotiated until retail open access begins. If retail open access does not begin in the Entergy Gulf States service territory in 2002, SWEPCO's contract to provide POLR service will likely expire, and another retail electric provider will have to be designated to serve as the POLR when retail open access does begin. At that time, it is also possible that an Entergy-affiliated Texas retail electric provider will be designated to serve as the POLR for residential and small non- residential customers at the price-to-beat rate in the service territory. Neither the timing nor the outcome of these proceedings can be predicted at this time. Other Regulatory Proceedings and Uncertainties In addition to the PUCT and LPSC proceedings relating to the business separation plan described above, certain aspects of the business separation plan will also have to be approved by the SEC under PUHCA. Entergy Gulf States filed an application for SEC approval in August 2001. In addition, as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS", FERC has approved a settlement providing for certain amendments to the System Agreement required by the Texas restructuring. Certain aspects of the Texas restructuring will require additional FERC approvals. Entergy Gulf States will also have to obtain the approval of the NRC if it transfers ownership of any interest in River Bend. The regulatory proceedings described above have affected, and are likely to continue to affect, the final form and timing of implementation of the business separation plan. It is possible that these approvals or related regulatory orders o may not be received in time to implement the plan on the date retail open access is scheduled to begin; o may be obtained with requirements or conditions that differ from the business separation plan described above or that conflict with each other; or o may be obtained with conditions that are unacceptable to Entergy or that do not permit timely implementation. Entergy Gulf States' business separation plan has already been amended during the course of the PUCT and LPSC proceedings described above and is subject to further change as a result of the regulatory approval process or otherwise. As a result, no assurance can be given that the business separation plan will be implemented as described above or that it will not change significantly before implementation. Louisiana (Entergy Corporation and Entergy Louisiana) As discussed in Note 2 to the financial statements in the Form 10-K, the LPSC directed the LPSC staff, outside consultants, and counsel to work together to analyze and resolve issues related to competition and to recommend a plan for consideration by the LPSC. In July 2001, the LPSC staff submitted a final response to the LPSC. In its report the LPSC staff concluded that retail competition is not in the public interest at this time for any customer class. Nevertheless, the LPSC staff recommended that retail open access be made available for certain large industrial customers as early as January 2003. An eligible customer choosing to go to competition would be required to provide its utility with a minimum of six months notice prior to the date of retail open access. The LPSC staff report also recommended that all customers who do not currently co- or self-generate, or have co- or self-generation under construction as of a date to be specified by the LPSC, remain liable for their share of stranded costs. During its October 2001 meeting, the LPSC adopted dates by which a total of 800 MW of co- or self-generation could be developed in Louisiana without being affected by stranded costs. During its November 2001 meeting, the LPSC decided not to adopt a plan for retail open access at this time, but to have collaborative group meetings concerning open access from time to time, and to have the LPSC staff monitor developments in neighboring states and to report to the LPSC regarding the progress of retail access developments in those states. At this time, no further moves toward retail access in Louisiana appear likely until sometime during or after 2004. 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 2001, Entergy Arkansas filed its annually redetermined energy cost rate with the APSC in accordance with the energy cost rate formula, including a new energy allocation factor. The filing reflected that an increase was warranted due to the increase in fuel and purchased power costs in 2000 and the accumulated under-recovery of 2000 energy costs. The increased energy cost rate is effective April 2001 through March 2002. 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 that allows the collection of excess earnings in a transition cost account. Upon recommendation from the APSC, Entergy Arkansas recorded an adjustment for 2000 excess earnings in the transition cost account of $10.9 million ($6.7 million after tax) in June 2001 and $7.9 million ($4.8 million after tax) in September 2001. Interest of $4.6 million ($2.8 million after tax) was also recorded in the transition cost account for the first nine months of 2001. December 2000 Ice Storms In mid- and late December 2000, two separate ice storms left 226,000 and 212,500 Entergy Arkansas customers, respectively, without electric power in its service area. The storms were the most severe natural disasters ever to affect Entergy Arkansas, causing damage to transmission and distribution lines, equipment, poles, and facilities. In April 2001, Entergy Arkansas filed with the APSC a proposal to recover, over approximately a five and one-half year period, costs plus carrying charges associated with power restoration caused by the December 2000 ice storms. In an order issued in June 2001, the APSC decided not to give final approval to Entergy's proposed storm cost recovery rider outside of a fully developed cost-of-service study in a general rate proceeding. The APSC action resulted in the deferral in 2001 of previously expensed storm damage costs as reflected in Entergy Arkansas' financial statements. In a subsequent decision, the APSC ordered Entergy Arkansas to commence such a proceeding by January 2002. In the subsequent order, the APSC also established a procedural schedule to consider putting an interim rider in place to recover the ice storm costs, subject to refund. The schedule calls for a January 2002 hearing date and the issuance of a decision by February 2002. In accord with the schedule, Entergy Arkansas filed its final storm damage cost determination, which reflects costs of approximately $195 million. The filing asks for recovery of approximately $170 million through the rider over approximately a six and one-half year period. The remainder of the costs is primarily capital expenditures that will be included in rate base in the general rate proceeding that is currently scheduled to be filed in January 2002. No assurance can be give as to the timing or outcome of these proceedings before the APSC. Filings with the PUCT and Texas Cities Recovery of River Bend Costs (Entergy Corporation and Entergy Gulf States) In March 1998, the PUCT disallowed recovery of $1.4 billion of company-wide abeyed River Bend plant costs, which have been held in abeyance since 1988. Entergy Gulf States appealed the PUCT's decision on this matter to the Travis County District Court in Texas. Subsequent to the June 1999 settlement agreement discussed in Note 2 to the financial statements in the Form 10-K, Entergy Gulf States removed the reserve for River Bend plant costs held in abeyance and reduced the net book value of the plant asset. The June 1999 settlement agreement limits potential recovery of the remaining plant asset, less depreciation, to $115 million as of January 1, 2002. In the unbundled cost of service settlement discussed above, and consistent with the June 1999 settlement, Entergy Gulf States agrees not to prosecute its appeal until January 1, 2002. Entergy Gulf States also agrees that it will not seek recovery of the abeyed plant costs through any additional charge to Texas ratepayers. The financial statement impact of the settlement agreement on the abeyed plant costs will ultimately depend on several factors, including the possible discontinuance of SFAS 71 accounting treatment to the Texas generation business, the determination of the market value of generation assets, and any future legislation in Texas addressing the pass-through or sharing of any stranded benefits with Texas ratepayers. No assurance can be given that additional reserves or write-offs will not be required in the future. PUCT Fuel Cost Review (Entergy Corporation and Entergy Gulf States) As determined in the June 1999 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. The settlement that delayed implementation of retail open access in Texas for Entergy Gulf States provides that Entergy Gulf States will continue the use of this methodology until retail open access begins. The amounts collected under Entergy Gulf States' fixed fuel factor through the date retail open access commences are subject to fuel reconciliation proceedings before the PUCT. In January 2001, Entergy Gulf States filed a fuel reconciliation case covering the period from March 1, 1999 to August 31, 2000. Entergy Gulf States is reconciling approximately $583 million of fuel and purchased power costs. As part of this filing, Entergy Gulf States requested a surcharge to collect $28 million, plus interest, of under-recovered fuel and purchased power costs. A hearing on the merits concluded in August 2001 and issuance of a final order is pending. No assurance can be given as to the outcome of this proceeding. In November 2001, Entergy Gulf States filed an application with the PUCT requesting an interim surcharge to collect $71 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through September 2001. Entergy Gulf States made the application pursuant to one of the terms of the settlement agreement that delayed implementation of retail open access in Texas for Entergy Gulf States. Entergy Gulf States requests that the surcharge begin January 1, 2002 and end September 30, 2002. No assurance can be given as to the outcome of this request. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In June 2001, the LPSC approved a settlement between Entergy Gulf States and the LPSC staff to refund $25.9 million, including interest, resolving issues in Entergy Gulf States' third, sixth, and seventh post- merger earnings reviews filed with the LPSC in May 1996, 1999, and 2000, respectively. The refund was made over a three-month period beginning July 2001. The settlement resolved the prospective return on common equity issue on remand from the Louisiana Supreme Court in the third earnings review. Refund issues from the sixth and seventh earnings reviews were also resolved; however, certain prospective issues remain in dispute. The LPSC approved an 11.1% return on common equity through June 2003, which Entergy Gulf States was allowed to include in its eighth post- merger earnings analysis discussed below. In May 2001, Entergy Gulf States filed its eighth 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. A procedural schedule has been established by the LPSC and a hearing is scheduled for April 2002. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In May 2000, Entergy Louisiana submitted its fifth annual performance- based formula rate plan filing. The filing used a 1999 test year. As a result of this filing, Entergy Louisiana implemented a $24.8 million base rate reduction in August 2000. In September 2001, the LPSC approved a settlement in which Entergy Louisiana agreed to increase to $28.2 million the total base rate reduction, effective August 2000. The settlement resolves all issues in the proceeding except for Entergy Louisiana's claim for an increase in its allowed return on common equity from 10.5% to 11.6%. A procedural schedule to address the return on common equity issue has been established and a hearing is scheduled for February 2002. In April 2001, Entergy Louisiana submitted its sixth annual performance-based formula rate plan filing, which used a 2000 test year. The filing indicated that an immaterial base rate reduction might be appropriate. This filing will be subject to review by the LPSC. A procedural schedule has been established and a hearing is scheduled for March 2002. 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. 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. A few parties intervened in the LPSC proceeding. In direct testimony, plaintiffs purport to quantify many of their claims for the period 1989 through 1998 in an amount totaling $544 million, plus interest. Entergy Louisiana agreed to settle both of these proceedings. The LPSC approved the settlement agreement following a fairness hearing before an ALJ in November 2000. The state court certified the plaintiff class and approved the settlement after a fairness hearing in April 2001. Under the terms of the settlement agreement, Entergy Louisiana agreed 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. Entergy Louisiana previously recorded reserves for the refund, which Entergy Louisiana made through the fuel adjustment clause over a three-month period beginning in July 2001. Also under the terms of the settlement, Entergy Louisiana consents 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 for the remainder of the contract's 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. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) In March 2001, Entergy Mississippi submitted its annual performance- based formula rate plan filing for the 2000 test year. The submittal indicated that a $6.7 million rate increase was appropriate under the formula rate plan. In April 2001, the MPSC staff and Entergy Mississippi entered into a stipulation that provides for an increase of $5.6 million, which was approved by the MPSC and was effective May 2001. Filings with the Council (Entergy Corporation and Entergy New Orleans) Rate Proceedings In June 2001, Entergy New Orleans filed with the Council for changes in gas and electric rates based on a test year ending December 31, 2000. The filing indicated that an increase of $12.7 million in gas rates and an increase of $12.5 million in electric rates might be appropriate. Proceedings on Entergy New Orleans' filing have been deferred until June 2002. Entergy New Orleans' rate decrease that would have occurred in October 2001 upon completion of its Grand Gulf 1 phase-in plan has also been deferred. As a result of the deferral of the proceedings, Entergy New Orleans' rates will remain at their current level at this time. Fuel Adjustment Clause Litigation In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. 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 the plaintiffs' 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. Testimony was filed on behalf of the plaintiffs in this proceeding in April 2000 and has been supplemented. The testimony, as supplemented, asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices and included costs in Entergy New Orleans' fuel adjustment that could have resulted in New Orleans customers being overcharged by more than $100 million over a period of years. In June 2001, the Council's Advisors filed testimony on these issues in which they allege that Entergy New Orleans ratepayers may have been overcharged by more than $32 million, the vast majority of which is reflected in the plaintiffs' claim. However, it is not clear precisely what periods and damages are being alleged in the proceeding. Entergy intends to defend this matter vigorously, both in court and before the Council. Hearings are scheduled to begin in February 2002. The ultimate outcome of the lawsuit and the Council proceeding cannot be predicted at this time. Natural Gas Purchases In a resolution adopted August 2, 2001, the Council ordered Entergy New Orleans to account for $30.1 million of certain natural gas costs charged to its gas distribution customers from July 1997 through May 2001. The resolution suggests that refunds may be due to the gas distribution customers if Entergy New Orleans cannot account satisfactorily for these costs. Entergy New Orleans filed a response to the Council in September 2001. Entergy New Orleans has documented a full reconciliation for the natural gas costs during that period. The ultimate outcome of the proceeding cannot be predicted at this time. Proposed System Energy 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. System Energy implemented the rate increase in December 1995. After a hearing, FERC issued an order in the proceeding in July 2000. 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. In July 2001, FERC denied requests for rehearing and the July 2000 order became final. FERC also ordered System Energy to file a compliance tariff to the July 2000 order and to make refunds in compliance with the order within 30 days after acceptance of the tariff. FERC has not acted on the compliance tariff filing, which System Energy made on August 29, 2001. In accord with regulatory accounting principles, during the pendency of the case System Energy recorded reserves for potential refunds against its revenues. Upon the order becoming final, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy recorded entries to spread the impacts of FERC's order to the various revenue, expense, asset, and liability accounts affected, as if the order had been in place since commencement of the case in 1995. System Energy also recorded an additional reserve amount against its revenue, to adjust its estimate of the impact of the order, and recorded additional interest expense on that reserve. System Energy also recorded reductions in its depreciation and its decommissioning expenses to reflect the lower levels in FERC's order, and reduced tax expense affected by the order. In August 2001, Entergy Arkansas filed an application with the APSC for approval of a plan to refund to ratepayers approximately $62.5 million in early 2002 as a result of the final FERC order in System Energy's rate increase proceeding. In October 2001, the APSC approved the issuance of refund checks to Entergy Arkansas' ratepayers. Entergy Mississippi's allocation of the proposed System Energy wholesale rate increase is $21.6 million annually. In July 1995, Entergy Mississippi filed a schedule with the MPSC that deferred the retail recovery of the System Energy rate increase. The deferral plan, which was approved by the MPSC, began in December 1995, the effective date of the System Energy rate increase, and was effective until the issuance of the final order by FERC. Under this plan, the deferral period was anticipated to have ended by September 1998, and the deferred amount would have been amortized over 48 months beginning in October 1998. Entergy Mississippi filed a revised deferral plan with the MPSC in August 1998 that provided for recovery, effective with October 1998 billings, of $11.8 million of the System Energy rate increase that was approved by the FERC ALJ's initial decision in July 1996. The $11.8 million was being amortized over the original 48-month period, which began in October 1998. In August 2000, as a result of the July 2000 FERC Order and Entergy's request for rehearing, Entergy Mississippi filed a second revised deferral plan with the MPSC that provides for a one year suspension of the recovery of the ALJ amount deferred prior to October 1998. The amount of System Energy's proposed increase in excess of the $11.8 million was also deferred until the issuance of a final order by FERC, or October 2002, whichever occurred first. As a result of the final resolution of the FERC order and in accordance with Entergy Mississippi's second revised deferral plan, refunds to Entergy Mississippi from System Energy, including interest, will be credited against deferral balances and any refund amounts in excess of the deferral balances will be included as a credit to the amounts billed in October 2001 through September 2002 to Entergy Mississippi's customers under its Grand Gulf Riders. Grand Gulf Accelerated Recovery Tariff (Entergy Arkansas) In April 1998, FERC approved the GGART that Entergy Arkansas filed as part of the settlement agreement that the APSC approved in December 1997. The GGART was designed to allow Entergy Arkansas to pay down a portion of its Grand Gulf purchased power obligation in advance of the implementation of retail access in Arkansas. The GGART provides for the acceleration of $165.3 million of its obligation over the period January 1, 1999 through June 30, 2004. In April 2001, FERC approved Entergy Arkansas' filing that requested cessation of the GGART effective July 1, 2001. Entergy Arkansas made the filing pursuant to the terms of a December 2000 settlement agreement with the APSC, which is discussed in Note 2 to the financial statements in the Form 10-K. NOTE 3. COMMON STOCK (Entergy Corporation) During the nine months ended September 30, 2001, Entergy Corporation repurchased 989,100 shares of common stock in the open market for an aggregate purchase price of approximately $36.9 million. During the nine months ended September 30, 2001, Entergy Corporation issued 2,317,797 shares of its previously repurchased common stock to satisfy stock options exercised and employee stock purchases. In addition, Entergy Corporation received proceeds of approximately $2.1 million from the issuance of 79,473 shares of common stock to satisfy stock options exercised. NOTE 4. LONG-TERM DEBT (Entergy Corporation) On August 24, 2001, Entergy Corporation paid off the outstanding Saltend Project credit facilities of approximately $550 million using proceeds from the sale of the plant. (Entergy Arkansas) On July 17, 2001, Entergy Arkansas issued $100 million of 6.125% Series First Mortgage Bonds due July 1, 2005. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness associated with ice storm expenses. (Entergy Gulf States) On August 1, 2001, Entergy Gulf States retired, at maturity, $122.8 million of 6.41% Series First Mortgage Bonds with internally generated funds, primarily from the Entergy inter-company money pool funding arrangement. On August 22, 2001, Entergy Gulf States issued $300 million of Floating Rate Series First Mortgage Bonds due September 1, 2004, with an initial interest rate of 4.829% per annum. The proceeds were used to reduce the short-term debt that was incurred to repay, at maturity, $122.8 million of 6.41% Series First Mortgage Bonds due August 1, 2001 and for general corporate purposes. The proceeds will also be used to repay, at maturity, $150 million of 8.21% Series First Mortgage Bonds due January 1, 2002. (Entergy Louisiana) On April 1, 2001, Entergy Louisiana retired, at maturity, $18.7 million of 7.875% Series First Mortgage Bonds with internally generated funds. (Entergy Mississippi) On January 31, 2001, Entergy Mississippi issued $70 million of 6.25% Series First Mortgage Bonds due February 1, 2003. The proceeds are being used for general corporate purposes, including the retirement of short- term indebtedness incurred from money pool borrowings for capital expenditures and working capital needs. (Entergy New Orleans) On February 23, 2001, Entergy New Orleans issued $30 million of 6.65% Series First Mortgage Bonds due March 1, 2004. The proceeds are being used for general corporate purposes, including the retirement of short-term indebtedness incurred from money pool borrowings for capital expenditures and working capital needs. (System Energy) On August 1, 2001, System Energy retired, at maturity, $135 million of 7.71% Series First Mortgage Bonds with internally generated funds. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On October 26, 2001, Entergy Corporation's Board of Directors declared a common stock dividend of $0.33 per share, payable on December 1, 2001, to holders of record on November 13, 2001. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) Entergy's reportable segments as of September 30, 2001, are domestic utility and System Energy, energy commodity services, and domestic non- utility nuclear. During the third quarter of 2001, Entergy began integration of Entergy-Koch and Entergy Wholesale Operations into the energy commodity services segment. Prior to the third quarter of 2001, Entergy-Koch and Entergy Wholesale Operations were reported as separate segments. Prior to the first quarter of 2001, Entergy reported its power marketing and trading segment that engaged in the marketing of wholesale electricity, gas, other generating fuels, electric capacity, and financial instruments. On January 31, 2001, Entergy contributed substantially all of its power marketing and trading business to Entergy-Koch, which is now a part of the energy commodity services segment. Results from Entergy- Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. See Note 9 to the financial statements for further discussion of the investment in Entergy-Koch, L.P. Entergy Wholesale Operations, which includes Entergy's global power development business and is now part of the energy commodity services segment, and domestic non-utility nuclear were reported in "all other" prior to 2001. "All Other" now includes the parent company, Entergy Corporation, and other business activity, which is principally gains or losses on the sales of businesses and the earnings on the proceeds of those sales. Entergy's segment financial information for the three months ended September 30, 2001 and 2000 is as follows (in thousands):
Domestic Energy Domestic Non-All Other* Eliminations Consolidated Utility Commodity Utility and System Services* Nuclear * Energy 2001 Operating Revenues $2,005,043 $361,760 $203,783 $5,970 ($820) $2,575,736 Equity in Earnings of Unconsolidated Equity Affiliates - 58,414 - - - 58,414 Income Taxes (Benefit) 125,218 44,138 23,399 (7,455) - 185,300 Net Income (Loss) 228,523 67,241 34,636 (12,946) - 317,454 2000 Operating Revenues $2,412,482 $971,428 $56,962 $8,240 ($17,557) $3,431,555 Income Taxes (Benefit) 199,142 5,404 4,799 (1,418) - 207,927 Net Income 290,694 6,827 6,547 2,621 - 306,689
Entergy's segment financial information for the nine months ended September 30, 2001 and 2000 is as follows (in thousands):
Domestic Energy Domestic Non-All Other* Eliminations Consolidated Utility Commodity Utility and System Services* Nuclear * Energy 2001 Operating Revenues $6,011,105 $1,155,738 $533,199 $26,450 ($3,054) $7,723,438 Equity in Earnings of Unconsolidated Equity Affiliates - 153,957 - - - 153,957 Income Taxes (Benefit) 325,951 78,706 65,642 (10,726) - 459,573 Net Income (Loss) 524,116 115,765 98,966 (14,940) - 723,907 Total Assets 20,597,897 2,210,727 3,367,953 878,371 (873,314) 26,181,634 2000 Operating Revenues $5,511,403 $1,709,003 $179,911 $22,515 ($41,997) $7,380,835 Income Taxes 390,640 22,549 21,843 5,584 - 440,616 Net Income 564,978 48,699 30,078 17,117 - 660,872 Total Assets 20,560,181 2,280,131 645,698 1,070,935 (529,842) 24,027,103
Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily inter-segment activity. NOTE 7. ENTERGY-FPL GROUP MERGER (Entergy Corporation) On July 30, 2000, Entergy Corporation and FPL Group, Inc. entered into a Merger Agreement providing for a business combination that would have resulted in the creation of a new company. On April 1, 2001, Entergy Corporation and FPL Group, Inc. terminated the Merger Agreement by mutual decision. Both companies agreed that no termination fee is payable under the terms of the Merger Agreement, unless within nine months of the termination one party agrees to a substantially similar transaction with another party. Each company will bear its own merger-related expenses. Entergy has withdrawn its merger-related filings submitted to the FERC, the SEC, and state and local regulatory agencies. NOTE 8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which was implemented effective January 1, 2001. This statement requires that all derivatives be recognized in the balance sheet, either as assets or liabilities, at fair value. The changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which Entergy is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions in which Entergy is hedging the variability of cash flows related to a variable- rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current-period earnings. Entergy utilizes derivative financial instruments primarily for the following purposes: o to ensure adequate power supplies and to mitigate certain risks in the domestic utility business; and o to hedge cash flows for certain risks in its competitive businesses, including certain interest rate, currency, and commodity price risks. The implementation of SFAS 133 did not materially impact the power marketing and trading business, as its derivative portfolio was already marked-to-market under the provisions of EITF 98-10, "Measuring the Value of Energy-Related Contracts". Effective January 1, 2001, Entergy recorded a net-of-tax cumulative-effect-type adjustment of approximately $18.0 million reducing accumulated other comprehensive income to recognize at fair value all derivative instruments that are designated as cash-flow hedging instruments, primarily interest rate swaps and foreign currency forward contracts related to Entergy's competitive businesses. FASB recently adopted certain interpretations of SFAS 133, and is considering other interpretations of that standard, that will affect Entergy's future financial statements. Entergy expects to implement these interpretations by no later than the second quarter of 2002. Entergy has not completed its assessment of the impact of these interpretations. NOTE 9. ACQUISITIONS, DISPOSITIONS, AND EQUITY METHOD INVESTMENTS (Entergy Corporation) Acquisition of Indian Point 2 In September 2001, Entergy's domestic non-utility nuclear business acquired the 951 MW Indian Point 2 nuclear power plant located in Westchester County, New York from Consolidated Edison. Entergy paid approximately $600 million in cash at the closing of the purchase and received the plant, nuclear fuel, materials and supplies, a purchase power agreement (PPA), and assumed certain liabilities. On the second anniversary of the Indian Point 2 acquisition, Entergy's nuclear business will also begin to pay NYPA $10 million per year for up to 10 years in accordance with the Indian Point 3 purchase agreement. Under the PPA, Consolidated Edison will purchase 100% of Indian Point 2's output for an average price of $39/MWh through 2004. Consolidated Edison transferred a $430 million decommissioning trust fund, along with the liability to decommission Indian Point 2 and Indian Point 1, to Entergy. Entergy acquired Indian Point 1 in the transaction, a plant that has been shut down and in safe storage since the 1970s. The acquisition was accounted for using the purchase method. The results of operations of Indian Point 2 subsequent to the purchase date have been included in Entergy's consolidated results of operations. The Indian Point 2 purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values on the purchase date. The allocation was based on preliminary information and ultimate amounts are likely to change. Asset Disposition In August 2001, Entergy's EWO business sold the Saltend plant to Calpine Corporation for a cash payment of approximately $800 million. Entergy's gain on the sale was approximately $69.9 million ($45.4 million after tax). The results of operations of the Saltend plant are included in Entergy's consolidated statements of income through the date of sale. The gain arising from the sale is included in operating revenues in that statement. EWO actively manages its assets as an investment portfolio, and attempts to maximize flexibility to respond to different market environments. Active management of the portfolio will continue to result in: the sale of projects at various stages in their planning, development, or operation; the abandonment of projects; or, the commercial operation of projects by EWO. In the sales transaction, Entergy or its subsidiaries made certain warranties to the purchasers. Entergy believes that it has provided adequate reserves for these warranties as of September 30, 2001. Equity Method Investments On January 31, 2001, subsidiaries of Entergy and Koch Industries, Inc. formed Entergy-Koch, L.P., a limited partnership equally owned by Entergy and Koch Industries, Inc. An eight-member board of directors, equally appointed by Entergy and Koch Industries, Inc., governs Entergy- Koch, L.P. As part of the joint venture agreement, Entergy contributed substantially all of its power marketing and trading business in the United States and the United Kingdom and made other contributions, including equity and loans, totaling $414 million. Koch contributed to the venture its 9,000-mile Koch Gateway Pipeline (which has been renamed the Gulf South Pipeline), gas storage facilities, including the Bistineau storage facility near Shreveport, Louisiana, and Koch Energy Trading, which marketed and traded electricity, gas, weather derivatives, and other energy-related commodities and services. Entergy's investment in Entergy- Koch, L.P. is accounted for under the equity method of accounting. Certain terms of the partnership arrangement allocate income from various sources, and the taxes on that income, on a disproportionate basis. These disproportionate allocations have been favorable to Entergy in the aggregate in 2001. Entergy also owns investments in the following companies that it accounts for under the equity method of accounting: Generandes Peru S.A., in which it owns 34% of the voting power; Compania Electrica San Isidro S.A., in which it owns 25% of the voting power; RS Cogen LLC, in which it holds a 50% member interest; and EntergyShaw LLC, in which it holds a 50% member interest. Following is a summary of combined financial information reported by Entergy's equity method investees (in thousands): September 30, 2001 Three Months Nine Months Ended Ended Income Statement Items Operating revenues $2,909,807 $7,727,012 Operating income 92,925 232,988 Net income 67,483 183,251 Balance Sheet Items Current assets $2,831,424 Noncurrent assets 2,961,457 Current liabilities 2,534,427 Noncurrent liabilities 1,345,572 Prior to the formation of Entergy-Koch in January 2001 and its results during 2001, Entergy's equity method investees were immaterial to its results of operations and financial position. Therefore, summarized financial information for 2000 is not presented. NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In mid-2001, the FASB issued the following pronouncements: o SFAS 141, "Business Combinations"; o SFAS 142, "Goodwill and Other Intangible Assets"; o SFAS 143, "Accounting for Asset Retirement Obligations"; and o SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS 141, which Entergy will implement for all business combinations initiated after June 30, 2001, eliminates the pooling-of-interests method of accounting for business combinations and requires that all business combinations be accounted for using the purchase accounting method. SFAS 141 also requires the recording of all acquired intangible assets that either arise from contractual or legal rights, or that are separable from the acquired entity. The implementation of SFAS 141 on July 1, 2001 had no impact on Entergy's financial statements. SFAS 142, which Entergy will implement effective January 1, 2002, eliminates the amortization of goodwill arising from business combinations. Instead, goodwill will be subject to a periodic impairment test at the "reporting unit" level. SFAS 142 also eliminates the arbitrary 40-year cap on useful lives of intangible assets, and acknowledges that some intangible assets may have indefinite useful lives. The implementation of SFAS 142 will require Entergy to cease the amortization of the remaining acquisition adjustment recorded in conjunction with its acquisition of Entergy Gulf States. Entergy will also be required to perform an impairment test on the remaining acquisition adjustment. Entergy has not completed its assessment of the impact of the implementation of this standard. SFAS 143, which is required to be implemented by January 1, 2003, requires the recording of liabilities for all legal obligations associated with the retirement of long-lived assets that result from the normal operation of those assets. These liabilities are required to be recorded at their fair values (which are likely to be the present values of the estimated future cash flows) in the period in which they are incurred. SFAS 143 requires the associated asset retirement costs to be capitalized as part of the carrying amount of the long-lived asset. The asset retirement obligation will be accreted each year through a charge to expense. The amounts added to the carrying amounts of the assets will be depreciated over the useful lives of the assets. Upon adoption, the net effects of implementing this standard, to the extent that they are not recorded as regulatory assets or liabilities, will be recognized as cumulative effects of an accounting change in Entergy's income statement. Entergy has not yet completed its assessment of the likely overall impact of this standard on its financial statements. SFAS 144, which Entergy will implement effective January 1, 2002, promulgates standards for measuring and recording impairments of long- lived assets. Additionally, this standard establishes requirements for classifying an asset as held for sale, and changes existing accounting and reporting standards for discontinued operations and exchanges of long- lived assets. Entergy does not expect the implementation of this standard to have a significant effect on Entergy's financial position or results of operations. __________________________________ 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. Ratepayer Lawsuits (Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) See "Ratepayer Lawsuits, Entergy Louisiana Fuel Clause Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the complaints filed by ratepayers with the LPSC and in Louisiana state court in Orleans Parish. See "Filings with the LPSC, Fuel Adjustment Clause Litigation" and "Filings with the Council, 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. See "Ratepayer Lawsuits, Vidalia Project Sub-Docket" in Item 1 of Part I of the Form 10-K and in Item 1 of Part II of the 2001 first quarter Form 10-Q for a discussion of the sub-docket established in the Entergy Louisiana Fuel Clause Lawsuit at the LPSC. Franchise Service Area Litigation (Entergy Gulf States) See "Franchise Service Area Litigation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation with Beaumont Power & Light (BP&L). In May 2000, the PUCT voted to remand the proceeding back to the ALJ to allow BP&L to provide further evidence. A hearing on the merits of the case has been scheduled for November 2001. Hindusthan Development Corporation, Ltd. (Entergy Corporation) See "Hindusthan Development Corporation, Ltd." in Item 1 of Part I of the Form 10-K for a discussion of the arbitration proceeding in India against Entergy Power Asia Ltd. (EPAL), a wholly-owned subsidiary of Entergy Corporation. In the second quarter of 2001, EPAL and HDC settled the arbitration for an immaterial amount, and the claim has been dismissed. Item 4. Submission of Matters to a Vote of Security Holders (System Energy) A consent in lieu of the annual meeting of common stockholders was executed on July 31, 2001. The consent was signed on behalf of Entergy Corporation, the holder of all issued and outstanding shares of common stock. The common stockholder, by such consent, elected the following individuals to serve as directors constituting the Board of Directors of System Energy: Jerry W. Yelverton, Donald C. Hintz, and C. John Wilder. Item 5. Other Information Environmental Regulation (Entergy Gulf States) The State of Louisiana is considering future emission control strategies to address continued ozone non-attainment status of areas in and around Baton Rouge, Louisiana. In August 2001 the LDEQ published a notice of intent to issue a rule for control of NOx as part of the State Implementation Plan (SIP) to bring this area into attainment with the National Ambient Air Quality standards for ozone by May 2005. The notice contains certain provisions that would lead to installation of new NOx control equipment at Entergy Gulf States generating units. Preliminary analyses indicate compliance costs may be as much as $47 million overall. Most of the related expenditures would take place in 2003 and 2004. The final rule is expected to be in place by December 2001. Cost estimates will be refined as engineering studies progress before and after promulgation of the final NOx rule. Entergy Gulf States will be required to obtain revised operating permits from LDEQ and meet new, lower emission limits for NOx. Entergy expects to file before October 2002 revised permit applications containing its detailed compliance strategy. In late August 2001, however, a federal magistrate issued a report recommending that the EPA be ordered to make a determination regarding the ozone non- attainment status and any reclassification of the area required as a result of the determination. The recommendation might result in an upgrade from the current status of "serious" to "severe" non-attainment classification for the Baton Rouge area. If this occurs, LDEQ ozone SIP rulemakings could be affected, especially in terms of scheduling. The specific impact of the magistrate's recommendation on Entergy Gulf States will remain unclear until the EPA responds to the magistrate's report. 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, September 30, 1996 1997 1998 1999 2000 2001 Entergy Arkansas 2.93 2.54 2.63 2.08 3.01 3.48 Entergy Gulf States 1.47 1.42 1.40 2.18 2.60 2.39 Entergy Louisiana 3.16 2.74 3.18 3.48 3.33 3.13 Entergy Mississippi 3.40 2.98 3.12 2.44 2.33 2.30 Entergy New Orleans 3.51 2.70 2.65 3.00 2.66 (b) System Energy 2.21 2.31 2.52 1.90 2.41 2.02 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, September 30, 1996 1997 1998 1999 2000 2001 Entergy Arkansas 2.44 2.24 2.28 1.80 2.70 3.13 Entergy Gulf States (a) 1.19 1.23 1.20 1.86 2.39 2.29 Entergy Louisiana 2.64 2.36 2.75 3.09 2.93 2.82 Entergy Mississippi 2.95 2.69 2.80 2.18 2.09 2.10 Entergy New Orleans 3.22 2.44 2.41 2.74 2.43 (b) (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock. (b) Earnings for the twelve months ended September 30, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $11.4 million and $13.1 million, respectively. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* 4(a) - Fifty-sixth Supplemental Indenture, dated as of July 1, 2001, to Entergy Arkansas' Mortgage and Deed of Trust, dated as of October 1, 1944. ** 4(b) - Assumption Agreement, dated July 12, 2001, among First Union National Bank, as Additional Lender, Entergy and Citibank N.A., as Agent (filed as Exhibit 5(a) to Rule 24 Certificate dated November 6, 2001 in File No. 70-9749). ** 4(b) - Sixtieth Supplemental Indenture, dated as of August 1, 2001, 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 September 10, 2001 in File No. 70-9751). 99(a) - Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(b) - Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(c) - Entergy Louisiana's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(d) - Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(e) - Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. 99(f) - System Energy's Computation of Ratios of Earnings to Fixed Charges, as defined. ___________________________ Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of Entergy Corporation and its subsidiaries on a consolidated basis. * Reference is made to a duplicate list of exhibits being filed as a part of this report on Form 10-Q for the quarter ended September 30, 2001, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended September 30, 2001. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation A Current Report on Form 8-K, dated July 3, 2001, was filed with the SEC on July 5, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 5, 2001, was filed with the SEC on July 5, 2001, 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 5, 2001, was filed with the SEC on July 5, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy A Current Report on Form 8-K, dated July 6, 2001, was filed with the SEC on July 13, 2001, reporting information under Item 5. "Other Events". Entergy Corporation A Current Report on Form 8-K, dated July 31, 2001, was filed with the SEC on July 31, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy A Current Report on Form 8-K, dated August 13, 2001, was filed with the SEC on August 13, 2001, reporting information under Item 4. "Changes in Registrant's Certifying Accountant" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated August 15, 2001, was filed with the SEC on August 15, 2001, reporting information under Item 5. "Other Events", Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated September 26, 2001, was filed with the SEC on September 26, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Gulf States A Current Report on Form 8-K, dated October 5, 2001, was filed with the SEC on October 15, 2001, 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 October 22, 2001, was filed with the SEC on October 22, 2001, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries. ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY GULF STATES, INC. ENTERGY LOUISIANA, INC. ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. SYSTEM ENERGY RESOURCES, INC. /s/ Nathan E. Langston Nathan E. Langston Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: November 9, 2001 EX-4 3 a133014a.txt Exhibit 4(a) ENTERGY ARKANSAS, INC. TO BANKERS TRUST COMPANY (successor to Morgan Guaranty Trust Company of New York) AND STANLEY BURG (successor to Henry A. Theis, Herbert E. Twyeffort, Grainger S. Greene and John W. Flaherty) AND (as to property, real or personal, situated or being in Missouri) BNY TRUST COMPANY OF MISSOURI (successor to Peter D. Van Cleve, The Boatmen's National Bank of St. Louis and Marvin A. Mueller) As Trustees under Entergy Arkansas, Inc.'s Mortgage and Deed of Trust, Dated as of October 1, 1944 ___________________________ FIFTY-SIXTH SUPPLEMENTAL INDENTURE Providing among other things for First Mortgage Bonds, 6 1/8% Series due July 1, 2005 (Sixty-third Series) __________________________ Dated as of July 1, 2001 FIFTY-SIXTH SUPPLEMENTAL INDENTURE INDENTURE, dated as of July 1, 2001, between ENTERGY ARKANSAS, INC., a corporation of the State of Arkansas, whose post office address is 425 West Capitol, Little Rock, Arkansas 72201 (hereinafter sometimes called the "Company"), and BANKERS TRUST COMPANY (successor to Morgan Guaranty Trust Company of New York), a corporation of the State of New York, whose post office address is 4 Albany Street, New York, New York 10006 (hereinafter sometimes called the "Corporate Trustee"), and STANLEY BURG (successor to John W. Flaherty, Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene), and (as to property, real or personal, situated or being in Missouri) BNY TRUST COMPANY OF MISSOURI (successor to Peter D. Van Cleve, The Boatmen's National Bank of St. Louis and Marvin A. Mueller), whose mailing address is_911 Washington Avenue, St. Louis, Missouri 63101 (said Stanley Burg being hereinafter sometimes called the "Co-Trustee", and said BNY Trust Company of Missouri being hereinafter sometimes called the "Missouri Co-Trustee", and the Corporate Trustee, the Co-Trustee and the Missouri Co-Trustee being hereinafter together sometimes called the "Trustees"), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the "Mortgage"), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the "Fifty-sixth Supplemental Indenture") being supplemental thereto. WHEREAS, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and WHEREAS, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co- Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and WHEREAS, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co- Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and WHEREAS, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and WHEREAS, by the Thirty-third Supplemental Indenture mentioned below, the Company, among other things, appointed Marvin A. Mueller as Missouri Co-Trustee under the Mortgage, and Marvin A. Mueller accepted said appointment; and WHEREAS, by the Thirty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed The Boatmen's National Bank of St. Louis as Missouri Co-Trustee in succession to Marvin A. Mueller (resigned) under the Mortgage, and The Boatmen's National Bank of St. Louis accepted said appointment; and WHEREAS, an instrument, dated as of September 1, 1994, was executed by the Company appointing Bankers Trust Company as Trustee, and Stanley Burg as Co-Trustee, in succession to Morgan Guaranty Trust Company of New York (resigned) and John W. Flaherty (resigned), respectively, under the Mortgage and Bankers Trust Company and Stanley Burg accepted said appointments, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and WHEREAS, by the Fifty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed Peter D. Van Cleve as Missouri Co-Trustee in succession to The Boatmen's National Bank of St. Louis (resigned) under the Mortgage, and Peter D. Van Cleve accepted said appointment; and WHEREAS, by an instrument, dated as of May 31, 2000, the Company appointed BNY Trust Company of Missouri as Missouri Co- Trustee in succession to Peter D. Van Cleve (resigned) under the Mortgage, and BNY Trust Company of Missouri accepted said appointment, and said instrument was appropriately filed or recorded in various official records in the State of Missouri; and WHEREAS, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and WHEREAS, the Company executed and delivered to the Trustees the following supplemental indentures: Designation Dated as of First Supplemental Indenture July 1, 1947 Second Supplemental Indenture August 1, 1948 Designation Dated as of Third Supplemental Indenture October 1, 1949 Fourth Supplemental Indenture June 1, 1950 Fifth Supplemental Indenture October 1, 1951 Sixth Supplemental Indenture September 1, 1952 Seventh Supplemental Indenture June 1, 1953 Eighth Supplemental Indenture August 1, 1954 Ninth Supplemental Indenture April 1, 1955 Tenth Supplemental Indenture December 1, 1959 Eleventh Supplemental Indenture May 1, 1961 Twelfth Supplemental Indenture February 1, 1963 Thirteenth Supplemental Indenture April 1, 1965 Fourteenth Supplemental Indenture March 1, 1966 Fifteenth Supplemental Indenture March 1, 1967 Sixteenth Supplemental Indenture April 1, 1968 Seventeenth Supplemental Indenture June 1, 1968 Eighteenth Supplemental Indenture December 1, 1969 Nineteenth Supplemental Indenture August 1, 1970 Twentieth Supplemental Indenture March 1, 1971 Twenty-first Supplemental Indenture August 1, 1971 Twenty-second Supplemental Indenture April 1, 1972 Twenty-third Supplemental Indenture December 1, 1972 Twenty-fourth Supplemental Indenture June 1, 1973 Twenty-fifth Supplemental Indenture December 1, 1973 Twenty-sixth Supplemental Indenture June 1, 1974 Twenty-seventh Supplemental Indenture November 1, 1974 Twenty-eighth Supplemental Indenture July 1, 1975 Twenty-ninth Supplemental Indenture December 1, 1977 Thirtieth Supplemental Indenture July 1, 1978 Thirty-first Supplemental Indenture February 1, 1979 Thirty-second Supplemental Indenture December 1, 1980 Thirty-third Supplemental Indenture January 1, 1981 Thirty-fourth Supplemental Indenture August 1, 1981 Thirty-fifth Supplemental Indenture February 1, 1982 Thirty-sixth Supplemental Indenture December 1, 1982 Thirty-seventh Supplemental Indenture February 1, 1983 Thirty-eighth Supplemental Indenture December 1, 1984 Designation Dated as of Thirty-ninth Supplemental Indenture December 1, 1985 Fortieth Supplemental Indenture July 1, 1986 Forty-first Supplemental Indenture July 1, 1989 Forty-second Supplemental Indenture February 1, 1990 Forty-third Supplemental Indenture October 1, 1990 Forty-fourth Supplemental Indenture November 1, 1990 Forty-fifth Supplemental Indenture January 1, 1991 Forty-sixth Supplemental Indenture August 1, 1992 Forty-seventh Supplemental Indenture November 1, 1992 Forty-eighth Supplemental Indenture June 15, 1993 Forty-ninth Supplemental Indenture August 1, 1993 Fiftieth Supplemental Indenture October 1, 1993 Fifty-first Supplemental Indenture October 1, 1993 Fifty-second Supplemental Indenture June 15, 1994 Fifty-third Supplemental Indenture March 1, 1996 Fifty-fourth Supplemental Indenture March 1, 1997 Fifty-fifth Supplemental Indenture March 1, 2000 which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri, Tennessee and Wyoming; and WHEREAS, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds: Principal Principal Amount Amount Series Issued Outstanding 3 1/8% Series due 1974 $ 30,000,000 None 2 7/8% Series due 1977 11,000,000 None 3 1/8% Series due 1978 7,500,000 None 2 7/8% Series due 1979 8,700,000 None 2 7/8% Series due 1980 6,000,000 None 3 5/8% Series due 1981 8,000,000 None Principal Principal Amount Amount Series Issued Outstanding 3 1/2% Series due 1982 15,000,000 None 4 1/4% Series due 1983 18,000,000 None 3 1/4% Series due 1984 7,500,000 None 3 3/8% Series due 1985 18,000,000 None 5 5/8% Series due 1989 15,000,000 None 4 7/8% Series due 1991 12,000,000 None 4 3/8% Series due 1993 15,000,000 None 4 5/8% Series due 1995 25,000,000 None 5 3/4% Series due 1996 25,000,000 None 5 7/8% Series due 1997 30,000,000 None 7 3/8% Series due 1998 15,000,000 None 9 1/4% Series due 1999 25,000,000 None 9 5/8% Series due 2000 25,000,000 None 7 5/8% Series due 2001 30,000,000 None 8 % Series due August 1, 2001 30,000,000 None 7 3/4% Series due 2002 35,000,000 None 7 1/2% Series due December 1, 2002 15,000,000 None 8 0/0% Series due 2003 40,000,000 None 8 1/8% Series due December 1, 2003 40,000,000 None 10 1/2% Series due 2004 40,000,000 None 9 1/4% Series due November 1, 1981 60,000,000 None 10 1/8% Series due July 1, 2005 40,000,000 None 9 1/8% Series due December 1, 2007 75,000,000 None 9 7/8% Series due July 1, 2008 75,000,000 None 10 1/4% Series due February 1, 2009 60,000,000 None 16 1/8% Series due December 1, 1986 70,000,000 None 4 1/2% Series due September 1, 1983 1,202,000 None 5 1/2% Series due January 1, 1988 598,310 None 5 5/8% Series due May 1, 1990 1,400,000 None 6 1/4% Series due December 1, 1996 3,560,000 None Principal Principal Amount Amount Series Issued Outstanding 9 3/4% Series due September 1, 2000 4,600,000 None 8 3/4% Series due March 1, 1998 9,800,000 None 17 3/8% Series due August 1, 1988 75,000,000 None 16 1/2% Series due February 1, 1991 80,000,000 None 13 3/8% Series due December 1, 2012 75,000,000 None 13 1/4% Series due February 1, 2013 25,000,000 None 14 1/8% Series due December 1, 2014 100,000,000 None Pollution Control Series A 128,800,000 None 10 1/4% Series due July 1, 2016 50,000,000 None 09 3/4% Series due July 1, 2019 75,000,000 None 10 0/0% Series due February 1, 2020 150,000,000 None 10 3/8% Series due October 1, 2020 175,000,000 None Solid Waste Disposal Series A 21,066,667 21,066,667 Solid Waste Disposal Series B 28,440,000 28,440,000 7 1/2% Series due August 1, 2007 100,000,000 100,000,000 7.90% Series due November 1, 2002 25,000,000 None 8.70% Series due November 1, 2022 25,000,000 None Pollution Control Series B 46,875,000 46,875,000 6.65% Series due August 1, 2005 115,000,000 115,000,000 6 0/0% Series due October 1, 2003 155,000,000 155,000,000 7 0/0% Series due October 1, 2023 175,000,000 175,000,000 Pollution Control Series C 20,319,000 20,319,000 Pollution Control Series D 9,586,400 9,586,400 8 3/4% Series due March 1, 2026 85,000,000 85,000,000 7 % Series due March 1, 2002 85,000,000 85,000,000 7.72% Series due March 1, 2003 100,000,000 100,000,000 which bonds are also hereinafter sometimes called bonds of the First through Sixty-second Series, respectively; and WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and WHEREAS, the Company now desires to create a new series of bonds and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and WHEREAS, the execution and delivery by the Company of this Fifty-sixth Supplemental Indenture, and the terms of the bonds of the Sixty-third Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors; NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto BNY Trust Company of Missouri (as to property, real or personal, situated or being in Missouri) and Stanley Burg (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) to Bankers Trust Company, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Fifty-sixth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof, all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described. TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof. IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby. PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Fifty-sixth Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company's contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company's franchise to be a corporation; (7) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas, in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (8) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Fifty-sixth Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that any or all of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof. TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto BNY Trust Company of Missouri (as to property, real or personal, situated or being in Missouri), and unto Stanley Burg (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) unto Bankers Trust Company, as Trustees, and their successors and assigns forever. IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Fifty-sixth Supplemental Indenture being supplemental to the Mortgage. AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed. The Company further covenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows: ARTICLE I Sixty-THIRD Series of Bonds SECTION 1. There shall be a series of bonds designated "6 1/8% Series due July 1, 2005" (herein sometimes called the "Sixty- third Series"), each of which shall also bear the descriptive title "First Mortgage Bond", and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Sixty-third Series (which shall be initially issued in the aggregate principal amount of $100,000,000) shall mature on July 1, 2005, shall be issued as fully registered bonds in the denomination of One Thousand Dollars and, at the option of the Company, in any multiple or multiples of One Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof), shall bear interest at the rate of 6 1/8 % per annum, the first interest payment to be made on January 1, 2002, for the period from July 17, 2001 to January 1, 2002 with subsequent interest payments payable semi-annually on January 1 and July 1 of each year, shall be dated as in Section 10 of the Mortgage provided, and the principal of and interest on each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. So long as all of the bonds of the Sixty-third Series are held by The Depository Trust Company or its nominee, or a successor thereof, the record date for the payment of interest on the bonds of the Sixty-third Series shall be the Business Day immediately preceding the date on which interest is due; provided, however, that the record date for the payment of interest which is paid after the date such interest is due, shall be the Business Day immediately preceding the date on which such interest is paid. Interest on the bonds of the Sixty-third Series shall be paid to the Person in whose name such bonds of the Sixty-third Series are registered at the close of business on the record date for the payment of such interest. (I) Bonds of the Sixty-third Series shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed not less than 30 days nor more than 60 days prior to the date fixed for redemption, at a redemption price equal to the greater of (i) 100% of the principal amount of the bonds of the Sixty-third Series to be redeemed and (ii) as determined by the Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal of and interest on the bonds of the Sixty-third Series being redeemed (excluding the portion of any such interest accrued to the redemption date) discounted (for purposes of determining such present values) to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 0.20%, plus, in each case, accrued interest thereon to the redemption date. "Adjusted Treasury Rate" means, with respect to any redemption date, (1) the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," for the maturity corresponding to the Comparable Treasury Issue (if no maturity is within three months before or after the remaining term of the bonds of the Sixty-third Series, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month); or (2) if such release (or any successor release) is not published during the week preceding the calculation date for the Adjusted Treasury Rate or does not contain such yields, the rate per annum equal to the semi- annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date. The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the redemption date. "Business Day" means any day other than a Saturday or a Sunday or a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Corporate Trustee is closed for business. "Comparable Treasury Issue" means the United States Treasury security selected by the Independent Investment Banker as having a maturity comparable to the remaining term of the bonds of the Sixty-third Series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such bonds of the Sixty-third Series. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of five Reference Treasury Dealer Quotations for such redemption date after excluding the highest and lowest such Reference Treasury Dealer Quotations or (ii) if the Independent Investment Banker obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations. "Independent Investment Banker" means BNY Capital Markets, Inc. or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Company. "Reference Treasury Dealer" means (1) BNY Capital Markets, Inc. and ABN AMRO Incorporated and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer, and (2) any other Primary Treasury Dealer selected by the Independent Investment Banker after consultation with the Company. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. (II) Bonds of the Sixty-third Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash delivered to or deposited with the Corporate Trustee pursuant to the provisions of Section 37 or Section 64 of the Mortgage at the special redemption price of 100% of the principal amount of the bonds of the Sixty-third Series to be redeemed plus accrued interest thereon to the redemption date. (III) At the option of the registered owner, any bonds of the Sixty-third Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations. Bonds of the Sixty-third Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York. Upon any exchange or transfer of bonds of the Sixty-third Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series. Upon the delivery of this Fifty-sixth Supplemental Indenture and upon compliance with the applicable provisions of the Mortgage, as heretofore supplemented, there shall be an initial issue of bonds of the Sixty-third Series for the aggregate principal amount of $100,000,000. ARTICLE II DIVIDEND COVENANT SECTION 2. The Company covenants that, so long as any of the bonds of the Sixty-third Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to June 30, 2001 (other than any dividend declared by the Company on or before June 30, 2001) exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from retained earnings to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to June 30, 2001 to retained earnings, (b) $350,000,000 and (c) such additional amount as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935. For the purposes of this Section 2 the aggregate amount credited subsequent to June 30, 2001 to retained earnings shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to retained earnings applicable to the period prior to June 30, 2001, including, but not limited to, charges to retained earnings for write-offs or write-downs of book values of assets owned by the Company on June 30, 2001. ARTICLE III MISCELLANEOUS PROVISIONS SECTION 3. The holders of the bonds of the Sixty-third Series shall be deemed to have consented and agreed that the Company may, but shall not be obligated to, fix a record date for the purpose of determining the holders of the bonds of the Sixty- third Series entitled to consent to any amendment or supplement to the Mortgage or the waiver of any provision thereof or any act to be performed thereunder. If a record date is fixed, those persons who were holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. SECTION 4. Subject to the amendments provided for in this Fifty-sixth Supplemental Indenture, the terms defined in the Mortgage and the First through Fifty-fifth Supplemental Indentures shall, for all purposes of this Fifty-sixth Supplemental Indenture, have the meanings specified in the Mortgage and the First through -Fifty-fifth Supplemental Indentures. SECTION 5. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage and in the First through Fifty-fifth Supplemental Indentures set forth and upon the following terms and conditions: The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Fifty-sixth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Fifty-sixth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Fifty-sixth Supplemental Indenture. SECTION 6. Whenever in this Fifty-sixth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Fifty-sixth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or any of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not. SECTION 7. Nothing in this Fifty-sixth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Fifty-sixth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises or agreements in this Fifty-sixth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding under the Mortgage. SECTION 8. This Fifty-sixth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9. This Fifty-sixth Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York. IN WITNESS WHEREOF, ENTERGY ARKANSAS, INC. has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and BANKERS TRUST COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Assistant Vice Presidents, and its corporate seal to be attested by one of its Associates for and in its behalf, and STANLEY BURG has hereunto set his hand and affixed his seal, and BNY TRUST COMPANY OF MISSOURI has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or one of its Assistant Vice Presidents, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Treasurers or one of its Assistant Vice Presidents for and in its behalf, as of the day and year first above written. ENTERGY ARKANSAS, INC. By: __________________________. Nathan E. Langston Vice President and Chief Accounting Officer Attest: __________________________ Christopher T. Screen Assistant Secretary Executed, sealed and delivered by Entergy Arkansas, Inc. in the presence of: ____________________________ ____________________________ BANKERS TRUST COMPANY, As Corporate Trustee By: __________________________ Vice President Attest: ____________________ STANLEY BURG, Associate As Co-Trustee ___________________________[L.S.] Executed, sealed and delivered by Bankers Trust Company and Stanley Burg in the presence of: ______________________ ____________________________ BNY TRUST COMPANY OF MISSOURI, As Co-Trustee as to property, real or personal, situated or being in Missouri By: ____________________ Vice President Attest: ___________________________ Assistant Vice President Executed, sealed and delivered by BNY TRUST COMPANY OF MISSOURI in the presence of: ............................................................. ............................................................. STATE OF LOUISIANA ) ) SS.: PARISH OF ORLEANS ) On this 13th day of July, 2001, before me, Sylvia R. Bonin, a Notary Public duly commissioned, qualified and acting within and for said Parish and State, appeared in person the within named Nathan E. Langston and Christopher T. Screen, to me personally well known, who stated that they were the Vice President and Chief Accounting Officer and Assistant Secretary, respectively, of ENTERGY ARKANSAS, INC., a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. On the 13th day of July, 2001, before me personally came Nathan E. Langston, to me known, who, being by me duly sworn, did depose and say that he resides at 125 Ayshire Court, Slidell, Louisiana 70461; that he is the Vice President and Chief Accounting Officer of ENTERGY ARKANSAS, INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. On the 13th day of July, 2001, before me appeared Christopher T. Screen, to me personally known, who, being by me duly sworn, did say that he is the Assistant Secretary of ENTERGY ARKANSAS, INC., and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said Parish and State the day and year last above written. _________________________ Notary Public Parish of Orleans, State of Louisiana My Commission is Issued For Life STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this __ day of July, 2001, before me, ______________, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared Carol Ng and Rodney Gaughan, to me personally well known, who stated that they were a Vice President and Associate, respectively, of BANKERS TRUST COMPANY, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth. On the __ day of July, 2001, before me personally came Carol Ng, to me known, who, being by me duly sworn, did depose and say that she resides at 246-23 Van Zandt Avenue, Douglaston, NY 11362; that she is a Vice President of BANKERS TRUST COMPANY, one of the corporations described in and which executed the above instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority. On the __ day of July, 2001, before me appeared Rodney Gaughan, to me personally known, who, being by me duly sworn, did say that he is an Associate of BANKERS TRUST COMPANY, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written. _______________________________ Notary Public, State of New York Qualified in New York County Commission Expires _________________ STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this ____ day of July, 2001, before me, ________________, the undersigned, personally appeared, STANLEY BURG, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained. On the ____ day of July, 2001, before me personally appeared STANLEY BURG, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed. IN WITNESS WHEREOF, I hereunto set my hand and official seal. __________________________ Notary Public, State of New York Qualified in New York County Commission Expires _________________ STATE OF MISSOURI ) ) SS.: CITY OF ST. LOUIS ) On this ___ day of July, 2001, before me, __________________, a Notary Public duly commissioned, qualified and acting within and for said county and state, appeared __________ and _____________, to me personally known, who stated that they were a _______ and __________, respectively, _________________ of BNY TRUST COMPANY OF MISSOURI, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and on behalf of said Corporation; and further stated that they had so signed, executed and delivered the same for the consideration, uses and purposes therein mentioned and set forth. On the___ day of July, 2001, before me personally appeared _______________, to me personally known, who, being by me duly sworn, did depose and say that he resided at _________________________; that he is a ________________ of BNY TRUST COMPANY OF MISSOURI, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. On the ___ day of July, 2001, before me appeared _____________, to me personally known, who, being by me duly sworn, did say that he is a ____________of BNY TRUST COMPANY OF MISSOURI, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said City and State the day and year last above written. Notary Public, State of Missouri Qualified in ___________ County Commission Expires ____________ EX-99 4 a1330199a.txt
Exhibit 99(a) Entergy Arkansas, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest Charges $106,716 $104,165 $96,685 $97,023 $101,600 $108,751 Interest applicable to rentals 19,121 17,529 15,511 17,289 16,449 14,881 ---------------------------------------------------------- Total fixed charges, as defined 125,837 121,694 112,196 114,312 118,049 $123,632 Preferred dividends, as defined (a) 24,731 16,073 16,763 17,836 13,479 13,435 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $150,568 $137,767 $128,959 $132,148 $131,528 $137,067 ========================================================== Earnings as defined: Net Income $157,798 $127,977 $110,951 $69,313 $137,047 $177,251 Add: Provision for income taxes: Total 84,445 59,220 71,374 54,012 100,512 128,751 Fixed charges as above 125,837 121,694 112,196 114,312 118,049 123,632 ---------------------------------------------------------- Total earnings, as defined $368,080 $308,891 $294,521 $237,637 $355,608 $429,634 ========================================================== Ratio of earnings to fixed charges, as defined 2.93 2.54 2.63 2.08 3.01 3.48 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.44 2.24 2.28 1.80 2.70 3.13 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 5 a1330199b.txt
Exhibit 99(b) Entergy Gulf States, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest charges $193,890 $180,073 $178,220 $153,034 $158,949 $175,749 Interest applicable to rentals 14,887 15,747 16,927 16,451 18,307 19,258 ------------------------------------------------------ Total fixed charges, as defined 208,777 195,820 195,147 169,485 177,256 $195,007 Preferred dividends, as defined (a) 48,690 30,028 32,031 29,355 15,742 7,897 ------------------------------------------------------ Combined fixed charges and preferred dividends, as defined $257,467 $225,848 $227,178 $198,840 $192,998 $202,904 ====================================================== Earnings as defined: Income (loss) from continuing operations before extraordinary items and the cumulative effect of accounting changes ($3,887) $59,976 $46,393 $125,000 $180,343 $174,227 Add: Income Taxes 102,091 22,402 31,773 75,165 103,603 96,373 Fixed charges as above 208,777 195,820 195,147 169,485 177,256 195,007 ------------------------------------------------------ Total earnings, as defined (b) $306,981 $278,198 $273,313 $369,650 $461,202 $465,607 ====================================================== Ratio of earnings to fixed charges, as defined 1.47 1.42 1.40 2.18 2.60 2.39 ====================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.19 1.23 1.20 1.86 2.39 2.29 ====================================================== (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) Earnings for the year ended December 31, 1994, for GSU were not adequate to cover fixed charges combined fixed charges and preferred dividends by $144.8 million and $197.1 million, respectively.
EX-99 6 a1330199c.txt
Exhibit 99(c) Entergy Louisiana, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest $132,412 $128,900 $122,890 $117,247 $111,743 $116,046 Interest applicable to rentals 10,601 9,203 9,564 9,221 6,458 7,673 ----------------------------------------------------- Total fixed charges, as defined 143,013 138,103 132,454 126,468 118,201 $123,719 Preferred dividends, as defined (a) 28,234 22,103 20,925 16,006 16,102 13,890 ----------------------------------------------------- Combined fixed charges and preferred dividends, as defined $171,247 $160,206 $153,379 $142,474 $134,303 $137,609 ===================================================== Earnings as defined: Net Income $190,762 $141,757 $179,487 $191,770 $162,679 $156,042 Add: Provision for income taxes: Total Taxes 118,559 98,965 109,104 122,368 112,645 107,923 Fixed charges as above 143,013 138,103 132,454 126,468 118,201 123,719 ----------------------------------------------------- Total earnings, as defined $452,334 $378,825 $421,045 $440,606 $393,525 $387,684 ===================================================== Ratio of earnings to fixed charges, as defined 3.16 2.74 3.18 3.48 3.33 3.13 ===================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.64 2.36 2.75 3.09 2.93 2.82 ===================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 7 a1330199d.txt
Exhibit 99(d) Entergy Mississippi, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest $48,007 $45,274 $40,927 $38,840 $44,877 $49,880 Interest applicable to rentals 2,165 1,947 1,864 2,261 1,596 1,729 -------------------------------------------------------------- Total fixed charges, as defined 50,172 47,221 42,791 41,101 46,473 $51,609 Preferred dividends, as defined (a) 7,610 5,123 4,878 4,878 5,347 4,886 -------------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $57,782 $52,344 $47,669 $45,979 $51,820 $56,495 ============================================================= Earnings as defined: Net Income $79,210 $66,661 $62,638 $41,588 $38,973 $42,518 Add: Provision for income taxes: Total income taxes 41,107 26,744 28,031 17,537 22,868 24,548 Fixed charges as above 50,172 47,221 42,791 41,101 46,473 51,609 -------------------------------------------------------------- Total earnings, as defined $170,489 $140,626 $133,460 $100,226 $108,314 $118,675 ============================================================== Ratio of earnings to fixed charges, as defined 3.40 2.98 3.12 2.44 2.33 2.30 ============================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.95 2.69 2.80 2.18 2.09 2.10 ============================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 8 a1330199e.txt
Exhibit 99(e) Entergy New Orleans, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest $16,304 $15,287 $14,792 $14,680 $15,891 $19,011 Interest applicable to rentals 831 911 1,045 1,281 1,008 963 ------------------------------------------------------------ Total fixed charges, as defined 17,135 16,198 15,837 15,961 16,899 $19,974 Preferred dividends, as defined (a) 1,549 1,723 1,566 1,566 1,643 1,743 ------------------------------------------------------------ Combined fixed charges and preferred dividends, as defined $18,684 $17,921 $17,403 $17,527 $18,542 $21,717 ============================================================ Earnings as defined: Net Income $26,776 $15,451 $16,137 $18,961 $16,518 ($6,572) Add: Provision for income taxes: Total 16,216 12,142 10,042 13,030 11,597 (4,798) Fixed charges as above 17,135 16,198 15,837 15,961 16,899 19,974 ------------------------------------------------------------ Total earnings, as defined $60,127 $43,791 $42,016 $47,952 $45,014 $8,604 ============================================================ Ratio of earnings to fixed charges, as defined 3.51 2.70 2.65 3.00 2.66 0.43 ============================================================ Ratio of earnings to combined fixed charges and preferred dividends, as defined 3.22 2.44 2.41 2.74 2.43 0.40 ============================================================ - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) Earnings for the twelve months ended December 31, 1991 include the $90 million effect of the 1991 NOPSI Settlement.
EX-99 9 a1330199f.txt
Exhibit 99(f) System Energy Resources, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges September 30, 1996 1997 1998 1999 2000 2001 Fixed charges, as defined: Total Interest $143,720 $128,653 $116,060 $147,982 $118,519 $145,261 Interest applicable to rentals 6,223 6,065 5,189 3,871 5,753 5,057 ---------------------------------------------------------- Total fixed charges, as defined $149,943 $134,718 $121,249 $151,853 $124,272 $150,318 ========================================================== Earnings as defined: Net Income $98,668 $102,295 $106,476 $82,375 $93,745 $102,257 Add: Provision for income taxes: Total 82,121 74,654 77,263 53,851 81,263 51,310 Fixed charges as above 149,943 134,718 121,249 151,853 124,272 150,318 ---------------------------------------------------------- Total earnings, as defined $330,732 $311,667 $304,988 $288,079 $299,280 $303,885 ========================================================== Ratio of earnings to fixed charges, as defined 2.21 2.31 2.52 1.90 2.41 2.02 ==========================================================
-----END PRIVACY-ENHANCED MESSAGE-----