-----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, Ly2hrAMiwGWrMh14yLq3VvupL4mnBvocMpDNGTJMivnE2OgVB+snb9m5ez2bl/kP rHTGUh1HrmdR+bWGXw6SLw== 0000065984-02-000234.txt : 20021112 0000065984-02-000234.hdr.sgml : 20021111 20021112120024 ACCESSION NUMBER: 0000065984-02-000234 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 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: 02816134 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: 721229752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11299 FILM NUMBER: 02816128 BUSINESS ADDRESS: STREET 1: 639 LOYOLA AVE CITY: NEW ORLEANS STATE: LA ZIP: 70113 BUSINESS PHONE: 5045764000 MAIL ADDRESS: STREET 1: PO BOX 61000 CITY: NEW ORLEANS STATE: LA ZIP: 70161 FORMER COMPANY: FORMER CONFORMED NAME: MIDDLE SOUTH UTILITIES INC DATE OF NAME CHANGE: 19890521 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY GSU HOLDINGS INC /DE/ DATE OF NAME CHANGE: 19940329 FORMER COMPANY: FORMER CONFORMED NAME: ENTERGY CORP /FL/ DATE OF NAME CHANGE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 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: 02816129 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: 001-31508 FILM NUMBER: 02816130 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: 02816131 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: 02816132 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: 02816133 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 a20802.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, 2002 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address of Principal Executive Identification No. Offices and Telephone Number 1-11299 ENTERGY CORPORATION 72-1229752 (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 1-10764 ENTERGY ARKANSAS, INC. 71-0005900 (an Arkansas corporation) 425 West Capitol Avenue, 40th Floor Little Rock, Arkansas 72201 Telephone (501) 377-4000 1-27031 ENTERGY GULF STATES, INC. 74-0662730 (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 838-6631 1-8474 ENTERGY LOUISIANA, INC. 72-0245590 (a Louisiana corporation) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 840-2734 0-320 ENTERGY MISSISSIPPI, INC. 64-0205830 (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 0-5807 ENTERGY NEW ORLEANS, INC. 72-0273040 (a Louisiana corporation) 1600 Perdido Street, Building 505 New Orleans, Louisiana 70112 Telephone (504) 670-3674 1-9067 SYSTEM ENERGY RESOURCES, INC. 72-0752777 (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 _____________________________________________________________________ Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No Common Stock Outstanding Outstanding at October 31, 2002 Entergy Corporation ($0.01 par value) 222,013,494 Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2001, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002, filed by the individual registrants with the SEC, and should be read in conjunction therewith. Forward-Looking Information The following constitutes a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that forward-looking statements contained herein with respect to the revenues, earnings, performance, strategies, prospects and other aspects of the business of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. and their affiliated companies may involve risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, risks and uncertainties relating to: the effects of weather, the performance of generating units and transmission systems, the possession of nuclear materials, fuel and purchased power prices and availability, the effects of regulatory decisions and changes in law, litigation, capital spending requirements and the availability of capital, the onset of competition, the ability to recover net regulatory assets and other potential stranded costs, the effects of the California electricity market on the utility industry nationally, advances in technology, changes in accounting standards, corporate restructuring and changes in capital structure, the success of new business ventures, changes in the markets for electricity and other energy-related commodities, including the use of financial and derivative instruments and volatility of changes in market prices, changes in the number of participants and the risk profile of such participants in the energy marketing and trading business, changes in interest rates and in financial and foreign currency markets generally, the economic climate and growth in Entergy's service territories, changes in corporate strategies, and other factors. ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 2002 Definitions Management's Financial Discussion and Analysis - Significant Factors and Known Trends Management's Financial Discussion and Analysis - Liquidity and Capital Resources Results of Operations and Financial Statements: Entergy Corporation and Subsidiaries: Results of Operations Consolidated Statements of Income Consolidated Statements of Cash Flows Consolidated Balance Sheets Consolidated Statements of Retained Earnings, Comprehensive Income, and Paid-In Capital Selected Operating Results Entergy Arkansas, Inc.: Results of Operations Income Statements Statements of Cash Flows Balance Sheets Selected Operating Results Entergy Gulf States, Inc.: Results of Operations Income Statements Statements of Cash Flows Balance Sheets Statements of Retained Earnings and Comprehensive Income Selected Operating Results Entergy Louisiana, Inc.: Results of Operations Income Statements Statements of Cash Flows Balance Sheets Statements of Retained Earnings and Comprehensive Income Selected Operating Results Entergy Mississippi, Inc.: Results of Operations Income Statements Statements of Cash Flows Balance Sheets Selected Operating Results Entergy New Orleans, Inc.: Results of Operations Statements of Operations Statements of Cash Flows Balance Sheets Statements of Retained Earnings and Comprehensive Income (Loss) Selected Operating Results System Energy Resources, Inc.: Results of Operations Income Statements Statements of Cash Flows Balance Sheets ENTERGY CORPORATION AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q September 30, 2002 Notes to Financial Statements for Entergy Corporation and Subsidiaries Item 4. Controls and Procedures Part II: Item 1. Legal Proceedings Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signature Certifications DEFINITIONS Certain abbreviations or acronyms used in the text are defined below: Abbreviation or Acronym Term ADEQ Arkansas Department of Environmental Quality AFUDC Allowance for Funds Used During Construction ALJ Administrative Law Judge ANO 1 and 2 Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear) APSC Arkansas Public Service Commission BCF/D One billion cubic feet of natural gas per day Board Board of Directors of Entergy Corporation Cajun Cajun Electric Power Cooperative, Inc. capacity factor Actual plant output divided by maximum potential plant output for the period CitiPower CitiPower Pty., an electric distribution company serving Melbourne, Australia and surrounding suburbs, which was sold by Entergy effective December 31, 1998 City Council Council of the City of New Orleans, Louisiana Damhead Creek 800 MW (gas) combined cycle electric generating facility that entered commercial operations in the first quarter of 2001, located in the United Kingdom, and wholly- owned by an indirect subsidiary of EPDC DOE United States Department of Energy domestic utility companies Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively EITF Emerging Issues Task Force electricity marketed Total physical GWH volumes marketed in the U.S. during the period electricity volatility Measure of price fluctuation over time using standard deviation of daily price differences for into-Entergy and into- Cinergy power prices for the upcoming month EPA United States Environmental Protection Agency EPDC Entergy Power Development Corporation, a wholly-owned subsidiary of Entergy Corporation EWO Entergy Wholesale Operations, which consists primarily of Entergy's power development business Entergy Entergy Corporation and its direct and indirect subsidiaries Entergy Arkansas Entergy Arkansas, Inc. Entergy Gulf States Entergy Gulf States, Inc., including its wholly owned subsidiaries - Varibus Corporation, GSG&T, Inc., Prudential Oil & Gas, Inc., and Southern Gulf Railway Company Entergy-Koch Entergy-Koch, L.P., a joint venture equally owned by Entergy and Koch Industries, Inc. Entergy London Entergy London Investments plc, formerly Entergy Power UK plc (including its wholly owned subsidiary, London Electricity plc), which was sold by Entergy effective December 4, 1998 Entergy Louisiana Entergy Louisiana, Inc. Entergy Mississippi Entergy Mississippi, Inc. Entergy New Orleans Entergy New Orleans, Inc. Entergy Power Entergy Power, Inc. FERC Federal Energy Regulatory Commission Fitzpatrick James A. Fitzpatrick nuclear power plant, 825 MW facility located near Oswego, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business DEFINITIONS (Continued) Abbreviation or Acronym Term Form 10-K The combined Annual Report on Form 10-K for the year ended December 31, 2001 of Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy gain/loss days Ratio of the number of days when Entergy- Koch recognized a net gain from commodity trading activities to the number of days when Entergy-Koch recognized a net loss from commodity trading activities gas marketed Total volume of physical gas purchased plus volume of physical gas sold by Entergy-Koch in the U.S. denominated in billions of cubic feet per day gas volatility Measure of price fluctuation over time using standard deviation of daily price differences for Henry Hub natural gas prices for the upcoming month Grand Gulf 1 Unit No. 1 of the Grand Gulf Nuclear Generating Station GGART Grand Gulf Accelerated Recovery Tariff GWH Gigawatt hour(s), which equals one million kilowatt-hours Indian Point 2 Indian Point Energy Center Unit 2 - nuclear power plant, 970 MW facility located in Westchester County, New York, purchased in September 2001 from Consolidated Edison by Entergy's domestic non-utility nuclear business Indian Point 3 Indian Point Energy Center Unit 3 - nuclear power plant, 980 MW facility located in Westchester County, New York, purchased in November 2000 from NYPA by Entergy's domestic non-utility nuclear business KWH kilowatt-hour(s) LDEQ Louisiana Department of Environmental Quality LPSC Louisiana Public Service Commission miles of pipeline Total miles of transmission and gathering pipeline MMBTU One million British Thermal Units MPSC Mississippi Public Service Commission MW Megawatt(s), which equals one thousand kilowatt(s) Net MW in operation Installed capacity owned or operated Net revenue Operating revenue net of fuel, fuel-related, and purchased power expenses; other regulatory credits; and amortization of rate deferrals NRC Nuclear Regulatory Commission NYPA New York Power Authority production cost Cost in $/MMBTU associated with delivering gas, excluding the cost of the gas PUCT Public Utility Commission of Texas PUHCA Public Utility Holding Company Act of 1935, as amended RTO Regional transmission organization River Bend River Bend Steam Electric Generating Station (nuclear) SEC Securities and Exchange Commission SFAS Statement of Financial Accounting Standards as promulgated by the Financial Accounting Standards Board spark spread The dollar difference between electricity prices per unit and natural gas prices after assuming a conversion ratio for the number of natural gas units necessary to generate one unit of electricity storage capacity Working gas storage capacity DEFINITIONS (Concluded) Abbreviation or Acronym Term System Agreement Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources System Energy System Energy Resources, Inc. System Fuels System Fuels, Inc. throughput Gas in BCF/D transported through a pipeline during the period Unit Power Sales Agreement Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf 1 Vermont Yankee Vermont Yankee nuclear power plant, 510 MW facility located in Vernon, Vermont, purchased in July 2002 from Vermont Yankee Nuclear Power Corporation by Entergy's domestic non-utility nuclear business Waterford 3 Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS" in the Form 10-K for discussions of Entergy's three business segments -- the domestic utility, domestic non-utility nuclear, and energy commodity services; its critical accounting policies; the status of the transition to retail competition in the domestic utility segment and the continued application of SFAS 71 to that business; state, local, and federal regulatory proceedings that could affect the domestic utility segment; the market risks that each of Entergy's business segments are exposed to; and other significant issues affecting Entergy. Set forth below are updates to the significant factors and known trends discussed in the Form 10-K. Entergy Wholesale Operations In the first nine months of 2002, Entergy recorded net charges of $391.6 million to operating expenses ($254.2 million net of tax) in the energy commodity services segment, including income of $28.0 million ($17.3 million net of tax) in the third quarter, to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in principally the United States and the United Kingdom. The net charges consist of the following: o as discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. $178.0 million of the charges is a provision for the net costs resulting from cancellation or sale of the turbines subject to purchase commitments with the special-purpose entity; o $167.5 million of the charges results from the write-off of EPDC's equity investment in the Damhead Creek project and the impairment of the values of its Warren Power power plant and its Crete and RS Cogen projects. This portion of the charges reflects Entergy's estimate of the effects of reduced spark spreads in the United States and the United Kingdom; o $39.1 million of the charges relates to the restructuring of EWO, which is comprised of $22.5 million of impairments of EWO administrative fixed assets, $10.7 million of estimated sublease losses, and $5.9 million of employee-related costs. Management expects the restructuring of EWO to be substantially complete by the end of 2002; o $32.7 million of the charges results from the write-off of capitalized project development costs for projects that will not be completed; and o a gain of $25.7 million ($15.9 million net of tax) realized on the sale in August 2002 of EWO's interest in projects under development in Spain. Entergy does not expect further adjustments to these charges in the future, other than those that could result from changes in asset values due to dispositions or changes in market conditions, and benefits from the potential sale of three turbines currently under option to a third party. Also, in the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru for net proceeds of $135.5 million. After impairment provisions recorded for these Latin American interests in 2001, the net loss realized on the sale in 2002 is insignificant. The proceeds included notes receivable totaling $86 million, which were recorded on a discounted basis due to collectibility concerns. The notes were collected in full later in 2002 and the $6 million discount was reversed in the third quarter 2002. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS After the decision to discontinue additional greenfield power plant development and the sale of the Latin American investments, EWO continues to operate or construct the following power plants:
Investment Capacity (MW) Percent Ownership Status United Kingdom - Damhead Creek 800 100% Operational (see Note*) U.S. (AR)- Ritchie Unit 2 544 100% operational U.S. (AR)- Independence Unit 2 842 14% operational U.S. (MS)- Warren Power 300 100% operational U.S. (IA)- Top of Iowa Wind Farm 80 99% operational U.S. (IL)- Crete 320 50% operational U.S. (LA)- RS Cogen 425 50% under construction U.S. (TX)- Harrison County 550 70% under construction
Note*- As discussed above, EPDC has written off its equity investment in Damhead Creek. The credit facility financing Damhead Creek is non- recourse to Entergy, and there is no requirement for Entergy or EPDC to make additional capital contributions or provide credit support to Damhead Creek. After the effect of the equity write-off, Entergy does not expect Damhead Creek's operations to materially effect Entergy's earnings in the future, although Damhead Creek's revenues and expenses continue to be included in the accompanying results of operations. Entergy also continues to perform periodic impairment tests to determine whether additional asset write-downs are required prior to disposition of Damhead Creek. Commodity price risk disclosures in this section have been revised to eliminate Damhead Creek amounts on a forward-looking basis because management expects some form of disposition of Damhead Creek by the end of 2002. Domestic Utility Transition to Competition Texas As discussed in the Form 10-K, a PUCT-approved settlement delayed the implementation of retail open access in Entergy Gulf States' Texas service territory. Given the various approvals required, management now estimates that it is unlikely that the SeTrans RTO can become operational prior to the first quarter of 2004. Therefore, retail open access in Entergy Gulf States' Texas service territory within the context of a functional FERC-approved RTO is not likely to begin before the first quarter of 2004. Given the extended regulatory delay in retail open access in its Texas service territory, Entergy Gulf States is unable to predict what, if any, additional changes to previously approved plans may be required by the PUCT or the LPSC. Federal legislation Federal legislation mandating or facilitating competition in the electric power industry has been seriously considered by the last two United States Congresses, in both the House of Representatives and the Senate. As electricity markets have evolved, the focus of this legislation has shifted from creating retail markets to facilitating wholesale competition. In 2001, the House passed their version of comprehensive energy legislation, but it did not include electricity- restructuring provisions. The Senate legislation, passed earlier in 2002, does contain electricity provisions that would repeal PUHCA and PURPA, enact a mechanism for establishing enforceable reliability standards, provide FERC with new authority over utility mergers and acquisitions, and codify FERC's authority over market based rates. The legislation is now before a conference committee for resolution. As the House and Senate conferees have held discussions, several critical issues are still the subject of controversy, including the extent of Federal jurisdiction over transmission facilities, the extent of FERC authority over utility mergers and asset transfers, and whether there should be a federally imposed "renewable portfolio standard." ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS State and Local Rate Regulation Entergy New Orleans In May 2002, Entergy New Orleans filed a cost of service study and revenue requirement filing with the City Council. Using 2001 as the test year, the filing indicated that a revenue deficiency exists and that a $28.9 million electric rate increase and a $15.3 million gas rate increase are appropriate. Additionally, Entergy New Orleans has proposed a $6.0 million public benefit fund. The City Council has adopted a procedural schedule and hearings are scheduled to begin in April 2003. As discussed in the Form 10-K, and as shown in Item 5 of this Form 10-Q, Entergy New Orleans' earnings for the twelve months ended December 31, 2001 and September 30, 2002 were not adequate to cover its fixed charges and preferred dividends. Under its mortgage covenants, Entergy New Orleans does not currently have the capacity to issue new incremental mortgage-backed debt. Since the settlement of Entergy New Orleans' last rate proceeding, which was approved by the City Council in 1998, its fixed charge coverage has declined and its debt ratio has increased. While Entergy New Orleans has made investments (some of which were required by agreement with the City Council) and incurred expenses necessary to improve customer service since the last rate proceeding, its base revenues have not increased. In an October 2002 report, Moody's Investors Service states that its rating outlook for Entergy New Orleans is negative due to the declining credit measures and the uncertainty of the pending rate case. Moody's currently rates Entergy New Orleans senior secured debt at Baa2. Absent constructive rate-making in the pending proceeding, it is likely that the cost of and access to the capital necessary to finance Entergy New Orleans' current level of service will be adversely affected. Entergy Arkansas In May 2002, the APSC approved the March 2002 settlement agreement that was discussed in Note 2 to the financial statements in the Form 10-K. The APSC also approved in June 2002 a contribution by Entergy Arkansas of $5.9 million to the transition cost account (TCA) as a result of the 2001 earnings evaluation report filing. The settlement agreement allowed Entergy Arkansas to offset ice storm recovery costs with the balance in the TCA on a rate class basis. Entergy Arkansas recorded a regulatory asset, which will be amortized over a 30-year period, of $15.8 million for a portion of the amount of ice storm costs that exceeded the available TCA funds. Entergy Gulf States In May 2001, Entergy Gulf States filed its eighth required post- merger earnings review with the LPSC. This filing is subject to review by the LPSC and may result in a change in rates. In April 2002, the LPSC staff filed testimony recommending a $16.5 million rate refund relating to a prior period and a $40.1 million prospective rate reduction. The prospective reduction includes a recommended reduction in the rate of return on common equity (ROE) to 10.1% that would not take effect until the later of June 2003 or the date of an LPSC order changing the ROE from the current 11.1%. Hearings were held in April 2002 and in August 2002. Entergy Gulf States is awaiting an ALJ recommendation. In May 2002, Entergy Gulf States filed its ninth and last required post-merger earnings analysis with the LPSC. The filing included an earnings review filing for the 2001 test year that resulted in a rate decrease of $11.5 million, which was implemented effective June 2002. The filing also contained a prospective revenue requirement study based on the 2001 test year seeking a prospective rate increase of approximately $21.7 million. Both components of the filing are subject to review by the LPSC and may result in changes in rates other than those sought in the filing. A procedural schedule has been adopted and hearings are scheduled for June 2003. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Negotiations with the LPSC staff and advisors for a statewide formula rate plan in Louisiana are ongoing. Entergy Louisiana In July 2002, the LPSC approved a settlement between Entergy Louisiana and the LPSC Staff that resolves all remaining issues in the 2000 and 2001 formula rate plan proceedings. Entergy Louisiana agreed to a $5 million rate reduction effective August 2001. The prospective rate reduction was implemented beginning in August 2002 and the refund for the retroactive period occurred in September 2002. As part of the settlement, Entergy Louisiana's rates, including its previously authorized ROE of 10.5%, will remain in effect until changed pursuant to a new formula rate plan or a revenue requirement analysis to be filed by June 30, 2003. Negotiations with the LPSC staff and advisors for a statewide formula rate plan in Louisiana are ongoing. Entergy Mississippi In August 2002, Entergy Mississippi filed a rate case with the MPSC requesting a $68.8 million rate increase effective January 2003. Entergy Mississippi requested this increase as a result of capital investments and operation and maintenance expenditures necessary to replace and maintain aging electric facilities and to improve reliability and customer service. In October 2002, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation which would result in a $48.2 million rate increase and an ROE of 11.75%. The stipulation endorsed the new power management rider schedule designed to more efficiently collect capacity portions of purchased power costs. Also, the stipulation provides for improvements in the return on equity formula and more robust performance measures for Entergy Mississippi's formula rate plan. Entergy Mississippi will make its next formula rate plan filing during March 2004. A hearing before the MPSC is scheduled for December 2002. Under the Mississippi Public Utilities Act, the MPSC is required to issue its final order in this general rate proceeding by December 16, 2002. Environmental Matters As discussed in the Form 10-K, the United States Congress is currently considering several bills that take a multi-pollutant approach to reauthorization of the Clean Air Act, primarily addressing sulfur dioxide, nitrogen oxides, and hazardous air pollutant emissions (primarily mercury). In addition to stringent reductions proposed for these three types of emissions, two bills, one filed by Senator James Jeffords and one filed by Senator Thomas Carper, would also require control and reduction of carbon dioxide emissions. While these two bills will lapse at the conclusion of the 107th Congress, management expects that they will be re-introduced upon the convening of the 108th Congress in 2003. Entergy's high percentage of nuclear and natural gas capacity with its below-average emission rates positions Entergy well compared to the costs other utilities without a comparable generation mix could face from potential environmental requirements. Nuclear Matters As discussed more fully in the Form 10-K, concerns have been expressed in public forums about safety issues associated with nuclear generation units and nuclear fuel. In September 2002, the Westchester County Board of Legislators passed a resolution asking for an orderly closure and decommissioning of the Indian Point nuclear plants to begin at the earliest possible time, after certain conditions outlined in the resolution are satisfied. The Westchester County Board of Legislators does not have legal authority to close the plants. The NRC has not taken action in response to the resolution. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Market Risks Disclosure Following are sections from the "Market Risks Disclosure" in the Form 10-K that have significant updates as of September 30, 2002. Commodity Price Risk Power Generation As discussed in the Form 10-K, energy commodity services enters into forward power sale agreements to hedge its exposure to market price fluctuations. The following represents the percentage of planned electricity output sold forward under physical or financial contracts for energy commodity services' generation facilities updated as of September 30, 2002 (as noted above, Damhead Creek generation has been excluded from this table): 2002 2003 % sold % sold Planned GWH forward Planned GWH forward 562 38% 3,124 25% Marketing and Trading As discussed in the Form 10-K, Entergy-Koch Trading (EKT) and Entergy use value-at-risk (VAR) models as one measure of a potential loss in fair value for EKT's natural gas and power trading portfolio and energy commodity services' mark-to-market portfolio. EKT's measures, which it calls Daily Earnings at Risk (DEAR), for its trading portfolio were as follows (using a test with a 97.5% confidence interval): September 30, June 30, March 30, 2002 2002 2002 DEAR at end of quarter $10.7 million $13.6 million $9.5 million Average DEAR for the quarter $11.4 million $10.0 million $7.7 million Approximately 81% of EKT's counterparty credit exposure is associated with companies that have investment grade credit ratings. The VAR for energy commodity services' mark-to-market derivative instruments not held by Entergy-Koch was as follows (using a test with a 97.5% confidence interval): September 30, June 30, March 30, 2002 2002 2002 Daily VAR at end of quarter $0.6 million $0.8 million $4.5 million ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Mark-to-market Accounting As discussed in the Form 10-K, Entergy and Entergy-Koch mark-to- market commodity instruments held by them for trading and risk management purposes that are considered derivatives under SFAS 133 or energy trading contracts under EITF 98-10. Following are the net mark-to-market assets (liabilities) and the period within which the instruments would be realized or (paid) in cash if they are held to maturity and market prices do not change:
Net mark-to- market asset (liability) at September 30, Cumulative cash realization (paid) period 2002 2002 2003 2004-2005 Entergy consolidated subsidiaries ($6) million 26% 55% 100% Entergy-Koch $119 million (8)% 81% 100%
Entergy's net income that has come from businesses that apply mark-to- market accounting is $65.5 million for the nine months ended September 30, 2002 and $25 million for the three months ended September 30, 2002. EITF Issue 02-3 - new consensus reached affecting EITF Issue No. 98- 10 At its October 25, 2002 meeting, the EITF reached a consensus to rescind Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities." Rescinding Issue 98-10 will result in some energy-related contracts being accounted for on an accrual basis that were previously accounted for on a mark-to-market basis. Contracts that meet the provisions of SFAS 133 to qualify as derivatives will be accounted for in accordance with the guidance in SFAS 133 for derivative contracts. Contracts such as capacity, transportation, storage, tolling and full requirements contracts that are based on physical assets and do not meet the provisions of SFAS 133 to qualify as derivatives will be accounted for using accrual accounting. Adoption of this consensus is required by January 1, 2003, although Entergy is currently considering early adoption. Adoption will require the reporting of a cumulative effect of a change in accounting principle. Entergy-Koch is currently evaluating its EITF Issue 98-10 contracts to determine the cumulative effect. Management expects that the cumulative effect resulting from adoption will not have a material effect on Entergy-Koch's total capitalization or partner equity accounts in relation to Entergy-Koch's creditworthiness. Management expects that adoption will not materially affect future earnings due to the short-term nature of Entergy-Koch's contracts. Entergy-Koch's adoption of this consensus will affect Entergy through its share of Entergy-Koch's earnings. Other than the potential effect from Entergy-Koch, the adoption of the consensus will have minimal effect on Entergy because the remainder of Entergy's businesses hold few energy-trading contracts that are currently marked-to-market. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS SIGNIFICANT FACTORS AND KNOWN TRENDS Foreign Currency Exchange Rate Risk As discussed in the Form 10-K, Entergy Gulf States, System Fuels, and Entergy's domestic non-utility nuclear business enter into foreign currency forward contracts to hedge the Euro-denominated payments due under certain purchase contracts. As of September 30, 2002, the total notional amount of the foreign currency forward contracts is 249.5 million Euro and the forward currency rates range from .8624 to .9664 (the weighted average of the rates is .8809). The maturities of these forward contracts depend on the purchase contract payment dates and range in time from January 2003 to January 2007. The mark-to-market valuation of the forward contracts at September 30, 2002 was a net asset of $22.9 million. The counterparty banks obligated on 233.0 million Euro of the notional amount of these agreements are rated by Standard and Poor's Rating Services at AA on their senior debt obligations as of September 30, 2002. The counterparty bank obligated on 16.5 million Euro of the notional amount of these agreements, which are Entergy Gulf States contracts, is rated by Standard and Poor's Rating Services at A+ on its senior debt obligations as of September 30, 2002. For the Entergy Gulf States contracts, the total notional amount of the foreign currency forward contracts are 33.7 million Euro and the forward currency rates range from .8742 to .8802 (the weighted average of the rates is .8771). The maturities of the Entergy Gulf States forward contracts depend on the purchase contract payment dates and range in time from January 2003 to July 2004. The mark-to- market valuation of the forward contracts at September 30, 2002 was a net asset of $3.3 million. SFAS 143 - Accounting for Retirement of Long-lived Assets SFAS 143, which Entergy will implement effective 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 will be recorded at their fair values (which are likely to be the present values of the estimated future cash outflows) in the period in which they are incurred, with accompanying asset retirement costs recorded as costs of the applicable long-lived assets. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as either an increase or decrease in the liabilities and the related asset retirement costs that were capitalized. The asset retirement obligations will be accreted each year through charges to expense, to reflect the time value of money for these present value obligations. The recorded costs of the long-lived 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 statement of income. Although Entergy has not yet completed its implementation of this standard, implementation is currently expected to have the following effects on Entergy's financial statements: o The net effects of implementing this standard for the rate- regulated business of the domestic utility companies and System Energy will be recorded as regulatory assets or liabilities, with no resulting impact on Entergy's net income. Entergy expects that assets and liabilities will increase for the domestic utility companies and System Energy as a result of recording the asset retirement obligations at their fair values as determined under SFAS 143 and recording the related regulatory assets and liabilities. o For Entergy's competitive businesses and for the deregulated portion of Entergy Gulf States, the implementation of SFAS 143 is expected to result in a decrease in liabilities as a result of the discounting methodology required by SFAS 143. Management's study of the effects of implementation of the standard continues and Entergy currently does not have an estimate of the amount of the effect on earnings. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Cash Flow Operations Net cash flow provided by (used in) operating activities for Entergy, the domestic utility companies, and System Energy for the nine months ended September 30, 2002 and 2001 was as follows: Company 2002 2001 (In Millions) Entergy $1,670.3 $1,228.8 Entergy Arkansas $318.4 $186.5 Entergy Gulf States $425.7 $248.9 Entergy Louisiana $395.0 $312.3 Entergy Mississippi $137.3 $63.1 Entergy New Orleans ($1.9) $17.2 System Energy $194.3 $322.1 Entergy's consolidated net cash flow provided by operating activities increased for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 primarily due to: o a $206 million increase in operating cash flow provided by domestic utility primarily resulting from a decrease in payments on fuel-related accounts payable in 2002, partially offset by lower collections of deferred fuel and receivables in 2002; and o a $162 million increase in operating cash flow provided by domestic non-utility nuclear, primarily due to nuclear refueling outages at Pilgrim and Indian Point 3 in 2001 combined with increased net income in 2002 primarily resulting from the operation of Indian Point 2. Money pool activity also affected the operating cash flows of the domestic utility companies and System Energy. The money pool is an inter-company funding arrangement designed to reduce the domestic utility companies' and System Energy's dependence on external short- term borrowings. The money pool provides a means by which, on a daily basis, the excess funds of Entergy Corporation, the domestic utility companies, and System Energy may be used by the domestic utility companies or System Energy to fulfill short-term cash requirements. The following table shows the domestic utility companies and System Energy's receivables from and (payables) to the money pool as of the indicated date. An increase in a company's (payable) to the money pool increases the operating cash flow of that company. An increase in a company's receivable from the money pool decreases the operating cash flow of that company. September 30, December 31, September 30, December 31, Company 2002 2001 2001 2000 (In Millions) Entergy Arkansas $34.1 $23.8 ($78.9) ($30.7) Entergy Gulf States $24.2 $27.7 $72.7 $23.4 Entergy Louisiana ($139.7) $3.8 $8.8 $22.9 Entergy Mississippi ($27.3) $11.5 ($46.8) ($33.3) Entergy New Orleans ($2.7) $9.2 ($19.0) ($5.7) System Energy $92.1 $13.9 $147.0 $155.3 ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources - Sources of Capital" in the Form 10-K for a discussion of the limitations on these borrowings. Entergy Louisiana Tax Accounting Election See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K for discussion of a change in a method of accounting for tax purposes made by Entergy Louisiana in 2001 related to the contract to purchase power from the Vidalia project (the contract is discussed in Note 9 to the financial statements in the Form 10-K). The new tax accounting method is now expected to provide a cumulative cash flow benefit of approximately $700 million - $800 million through 2004, which is expected to reverse in the years 2005 through 2031. The timing of the reversal of this benefit depends on several variables, including the price of power. Approximately half of the consolidated cash flow benefit for Entergy Corporation occurred in 2001 and most of the remainder will occur in 2002. In accordance with Entergy's intercompany tax allocation agreement, most of the cash flow benefit for Entergy Louisiana will occur in the fourth quarter of 2002. While Entergy Louisiana (supported by outside tax counsel's opinion) believes the change in its method of accounting for tax purposes is appropriate, Entergy recognizes that the issue is new and may be subject to extended Internal Revenue Service review. In a September 2002 settlement of an LPSC proceeding that concerned the Vidalia contract, the LPSC approved Entergy Louisiana's proposed treatment of the regulatory impact of the tax accounting election. In general, the settlement permits Entergy Louisiana to keep a portion of the tax benefit in exchange for bearing the risk associated with sustaining the tax treatment. The LPSC settlement divided the term of the Vidalia contract into two segments: 2002-12 and 2013-31. During the first eight years of the 2002-12 segment, Entergy Louisiana agreed to credit rates by flowing through its fuel adjustment calculation $11 million each year, beginning monthly in October 2002. Entergy Louisiana must credit rates in this way and by this amount even if Entergy Louisiana is unable to sustain the tax deduction. Entergy Louisiana also must credit rates by $11 million each year for an additional two years unless either the tax accounting method elected is retroactively repealed or the Internal Revenue Service denies the entire deduction related to the tax accounting method. Entergy Louisiana agreed to credit ratepayers additional amounts if the tax accounting election is sustained. During 2013-2031, Entergy Louisiana and its ratepayers would share the remaining benefits of this tax accounting election. Management expects that the reduction in Entergy Louisiana's revenue caused by the ratepayer credits will be offset by the reduction in interest expense or the increase in interest income, or both, made possible by the cash flow benefit of the election. Management expects to reduce Entergy Louisiana's indebtedness and preferred stock with a portion of the cash. In accordance with the terms of the settlement, Entergy Louisiana has requested SEC approval to return up to $350 million of common equity capital to Entergy Corporation in order to maintain Entergy Louisiana's current capital structure. Investing Activities Net cash used in investing activities decreased for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 primarily due to: o approximately $600 million paid to acquire Indian Point 2 in September 2001; o cash contributions of approximately $414 million made in 2001 in the formation of Entergy-Koch; o cash of $272 million invested in 2001 to provide collateral for the NYPA line of credit in conjunction with the acquisition of the FitzPatrick and Indian Point 3 nuclear power plants; and o the maturity in 2002 of $150 million of other temporary investments combined with additional temporary investments of $250 million made in 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Partially offsetting the decrease in net cash used in investing activities were the following: o receipt of approximately $810 million in proceeds from the sale of the Saltend plant in August 2001; o approximately $180 million paid to acquire Vermont Yankee in July 2002; and o an increase of $113 million in construction expenditures for the nine months ended September 30, 2002 compared to the same period in 2001 primarily related to turbine purchases for EWO's Harrison County project, as discussed below. Financing Activities Financing activities used cash for the nine months ended September 30, 2002 compared to providing a small amount of cash in 2001 primarily due to: o net retirements of long-term debt by the domestic utility segment of $461 million in 2002, compared to net issuances of long- term debt of $189 million in 2001; o the retirement of $268 million of long-term debt by EWO in April 2002 related to the purchase of the rights to the turbines discussed below; and o decreased borrowings under short-term credit facilities by Entergy Corporation in 2002. Tropical Storm Isidore and Hurricane Lili In late September and early October 2002, Tropical Storm Isidore and Hurricane Lili hit the Gulf Coast and left a total of approximately 340,000 of Entergy's domestic utility customers in Louisiana and Mississippi without electric power. The strong winds and heavy rains caused widespread damage to transmission and distribution lines, equipment, poles, and facilities. Storm-related costs are estimated to be approximately $54 million for Entergy Gulf States, $44 million for Entergy Louisiana, $14 million for Entergy Mississippi, and $4 million for Entergy New Orleans. Historically, Entergy has been allowed to recover the costs associated with the restoration of service from storms and other natural disasters. Capital Resources See "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES - Capital Resources" in the Form 10-K for a discussion of Entergy's uses and sources of capital. The following are updates to the Form 10-K. Uses of Capital Capital Expenditures See "ANO Matters" in Part I of the Form 10-K for discussion of the ANO 1 steam generator and reactor vessel closure head. On July 25, 2002, the Board authorized Entergy Arkansas and Entergy Operations to replace the ANO 1 steam generator and reactor vessel closure head. Entergy management estimates the cost of the fabrication and replacement to be approximately $235 million, of which approximately $135 million will be incurred through 2004. Management expects a contractor for the installation of the replacement steam generator and reactor vessel closure head to be selected by December 2002. Management expects that the replacement will occur during a planned refueling outage in 2005. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Entergy's current capital investment plan for 2002 through 2004 includes $2.8 billion in spending by the domestic utility for maintenance capital; $0.4 billion in spending by energy commodity services for previous investment commitments; and $0.7 billion in spending by the domestic non-utility nuclear business comprised of $0.4 billion for maintenance capital, $0.2 billion for the purchase of Vermont Yankee (discussed below), and $0.1 billion for power uprate projects. These amounts reflect the approval by the Board of the ANO 1 steam generator replacement project and the decision announced during 2002 to end new greenfield development by EWO. In addition to these amounts, Entergy estimates that an additional $2.9 billion will be available for other investments that have not yet been identified. This amount is based upon Entergy's current estimate of operating cash flows and dividends over the period from 2002 through 2004, and includes approximately $1.4 billion of additional debt which Entergy believes it can issue and still maintain its targeted 50% net debt to net capital ratio. Entergy Wholesale Operations As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, EWO's power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric Company. The rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. In conjunction with Entergy's obligations related to this sale, Entergy retained certain rights to reacquire turbines or to cancel the construction of the turbines. In April 2002, Entergy paid a total of $351 million to reacquire the rights to the turbines. $83 million of the payments were for the turbines to be placed in the Harrison County project, which is in construction and scheduled to be completed in 2003. Entergy subsequently received a reimbursement from General Electric of $28 million of prior payments. With the reacquisition of the rights to the turbines, EWO's obligations to the special-purpose entity and Entergy Corporation's guarantee of up to $309 million in support of those obligations were terminated. EWO placed 17 of the original 36 turbines at sites that are either operating, under construction, or sold. Of the remaining 19 turbines, four were sold to a third party, three are currently subject to an option to purchase held by a third party, and 12 were cancelled. As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS," Entergy recorded a $178.0 million provision in the first nine months of 2002 for the net costs resulting from cancellation or sale of the turbines that were subject to purchase commitments with the special-purpose entity. Share Repurchases In accordance with its stock option plans, Entergy periodically grants stock options to its employees, which may be exercised to obtain shares of Entergy common stock. In order to reduce the increase in outstanding common shares caused by option exercises, Entergy plans to purchase up to 10 million shares of its common stock through mid-2004 on a discretionary basis through open market purchases or privately negotiated transactions. As of October 31, 2002, Entergy has repurchased 2,885,000 shares of common stock pursuant to this plan for a total purchase price of $118.5 million. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Vermont Yankee In July 2002, Entergy's domestic non-utility nuclear business purchased the 510 MW Vermont Yankee nuclear power plant located in Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation for $180 million. Entergy received the plant, nuclear fuel, inventories, and related real estate. The liability to decommission the plant, as well as related decommissioning trust funds of approximately $310 million, were also transferred to Entergy. The acquisition included a 10-year power purchase agreement (PPA) under which the former owners will buy the power produced by the plant, which is through the expiration of the current operating license for the plant. 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. Damhead Creek Credit Facility As discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" in the Form 10-K, the Damhead Creek credit facility requires that the annual debt service coverage ratio be at least 1.05 to 1 for the previous 12 months at semi-annual dates commencing with June 30, 2002. Given the low electricity prices affecting the UK market, Damhead Creek would not have met the annual debt service coverage ratio test in respect of the 12 months ended June 30, 2002, but the lenders amended the facility so that the coverage ratio calculations would not commence until December 31, 2002. In addition, some of the Damhead Creek affiliates are technically insolvent since October 31, 2002, which has caused a default under the credit agreement. Damhead Creek has requested a waiver of this default from the lenders. Damhead Creek is currently in negotiations with the lenders to develop a debt restructuring for the project. If a debt restructuring agreement cannot be reached prior to December 31, 2002, EPDC may (1) sell its shares in the project to a third party, (2) transfer ownership of the project to the Damhead Creek bank syndicate or (3) ask the bank syndicate to appoint a receiver to the project. There is no requirement for Entergy or EPDC to make additional capital contributions or provide credit support to Damhead Creek, even if there is an occurrence of an event of default. Neither Entergy nor EDPC will make additional capital contributions or provide additional credit support to Damhead Creek. Sources of Capital Entergy Corporation renewed its 364-day credit facility on May 16, 2002 and increased the available capacity from $1.325 billion to $1.425 billion. On July 15, 2002, the available capacity was increased to $1.450 billion. Although the credit line expires in May 2003, Entergy Corporation has the option to extend the period to repay the amount then outstanding for an additional 364-day term. Because of this option, the debt outstanding under the credit line is reflected in long-term debt. The credit line is reflected as notes payable at December 31, 2001. Entergy Arkansas and Entergy Mississippi each renewed their respective 364-day credit facilities on May 31, 2002. Amounts drawn on short-term credit facilities are as follows: Expiration Amount of Amount Drawn as of Company Date Facility September 30, 2002 Entergy Corporation May 2003 $1.450 billion $715 million Entergy Arkansas May 2003 $63 million - Entergy Louisiana January 2003 $15 million $15 million Entergy Mississippi May 2003 $25 million - Entergy Corporation has used borrowings from its credit facility for general corporate purposes and to make additional investments in competitive businesses. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS LIQUIDITY AND CAPITAL RESOURCES Long-term debt maturities as of September 30, 2002 for the domestic utility companies and System Energy for the remainder of 2002 through 2004 are as follows: Company 2002-2003 2004 Entergy Arkansas $255 million - Entergy Gulf States $339 million $654 million Entergy Louisiana $198 million $15 million Energy Mississippi $255 million $150 million Entergy New Orleans $25 million $30 million System Energy $11 million $6 million It is expected that the majority of these amounts will be refinanced prior to or at maturity, with the exception of Entergy Louisiana, which expects to have sufficient cash on hand to retire its maturities. Entergy Gulf States, Entergy Mississippi, and Entergy New Orleans each issued First Mortgage Bonds subsequent to September 30, 2002, the proceeds of which will be used to retire a portion of the maturities listed above. See Note 4 to the financial statements for further discussion of these issuances. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Entergy's consolidated earnings applicable to common stock were $360.9 million and $523.6 million for the three and nine months ended September 30, 2002, respectively, compared to $312.5 million and $705.5 million for the three and nine months ended September 30, 2001, respectively. The changes in earnings (loss) applicable to common stock by operating segments for the three and nine months ended September 30, 2002 compared to the three and nine months ended September 30, 2001 were as follows: Three Months Ended Nine Months Ended Operating Segments Increase/(Decrease) Increase/(Decrease) (In Thousands) Domestic Utility $20,148 $35,102 Domestic Non-Utility Nuclear 38,461 67,727 Energy Commodity Services (18,958) (284,848) Other, including parent company 8,741 80 ------- --------- Total $48,392 ($181,939) ======= ========= Entergy's income before taxes is discussed below according to the operating segments listed above. See Note 6 to the financial statements for further discussion of Entergy's operating segments and their financial results for the three and nine months ended September 30, 2002 and 2001. Refer to "SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES, INC., ENTERGY LOUISIANA, INC., ENTERGY MISSISSIPPI, INC., AND ENTERGY NEW ORLEANS, INC." which follow each company's financial statements in this report for further information with respect to operating statistics. Domestic Utility The increase in earnings for domestic utility for the three months ended September 30, 2002 compared with the same period in 2001 was primarily due to increased electricity usage in the service territories, an increase in the price applied to unbilled revenue, decreased operation and maintenance expenses, and decreased interest expense. The increase in earnings was partially offset by increased depreciation and amortization expenses, increased decommissioning expenses, and decreased other income. The increase in earnings for domestic utility for the nine months ended September 30, 2002 compared with the same period in 2001 was primarily due to increased electricity usage in the service territories, an increase in the price applied to unbilled revenue, and decreased interest expense. The increase in earnings was partially offset by increased other operation and maintenance expenses, increased depreciation and amortization expenses, increased decommissioning expenses, and decreased other income. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Electric operating revenues The changes in electric operating revenues for domestic utility for the three and nine months ended September 30, 2002 compared to 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 differences ($14.8) ($22.8) Rate riders (3.5) (30.1) Fuel cost recovery (101.5) (916.2) Sales volume/weather 30.9 32.5 Unbilled revenue 37.1 141.1 Other revenue 105.0 135.3 Sales for resale (1.6) (63.8) ----- ------- Total $51.6 ($724.0) ===== ======= Base rate differences Base rate differences decreased revenues for the three and nine months ended September 30, 2002 primarily due to an $11.5 million base rate decrease at Entergy Gulf States effective June 2002 and additional formula rate plan reductions at Entergy Louisiana which became effective in both August 2001 and August 2002. Also contributing to the decreased revenues were decreased rates for special-rate industrial customers at Entergy Gulf States for the three months ended September 30, 2002 and at Entergy Louisiana for the three and nine months ended September 30, 2002 as a result of increased KWH usage. Rate riders Rate rider revenues have no material effect on net income because specific incurred expenses offset them. Rate rider revenues decreased for the nine months ended September 30, 2002 primarily due to a decrease in the Grand Gulf rate rider at Entergy Arkansas effective January 2002 as compared to the average rate rider in effect for the nine months ended September 30, 2001 and a decrease in the Grand Gulf rate rider at Entergy Mississippi effective October 2001. Fuel cost recovery The domestic utility companies are allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and nine months ended September 30, 2002 due to lower fuel factors resulting from decreases in the market prices of natural gas and purchased power. Also contributing to the decreases was a lower fuel recovery surcharge in 2002 in the Texas jurisdiction of Entergy Gulf States. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Corresponding to the decreases in fuel cost recovery revenues, fuel and purchased power expenses related to electric sales decreased by $90.1 million and $911.6 million for the three and nine months ended September 30, 2002, respectively, primarily due to decreases in the market prices of natural gas and purchased power in 2002. Sales volume/weather Higher electric sales volume increased revenues for the three and nine months ended September 30, 2002 due to increased usage of 437 GWH and 947 GWH, respectively, in the residential and commercial sectors, after adjusting for the weather effect. Partially offsetting this increase for the nine months ended September 30, 2002 was a decrease in usage of 708 GWH in the industrial sector primarily from contractual modifications that reclassified the sales associated with certain Entergy Gulf States customers from retail to wholesale. The number of retail customers in the domestic utility companies' service territories increased only slightly during these periods. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended September 30, 2002 and 2001 includes the reversal of the estimates for June 2002 and June 2001, respectively. The increase in unbilled revenue for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in June 2001 caused by higher fuel rates as well as increased volume in September 2002 compared to September 2001. Unbilled revenue for the nine months ended September 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 is due to increased volume in September 2002 compared to September 2001 and the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in December 2000 caused by higher fuel rates and volume/weather. Other revenue Other revenue increased for the three and nine months ended September 30, 2002 primarily due to the provisions for rate refunds recorded in 2001 related to System Energy's 1995 rate proceeding. See further discussion of the final resolution of the rate proceeding in Note 2 to the financial statements in the Form 10-K. Sales for resale Sales for resale decreased for the nine months ended September 30, 2002 primarily due to a decrease in the average price of energy sold to wholesale customers coupled with a decrease in sales volume to municipal and co-operative customers. The decrease is partially offset by the contractual modifications that resulted in the reclassified Entergy Gulf States sales noted above in sales volume/weather. Gas operating revenues Natural gas revenues decreased $68.8 million for the nine months ended September 30, 2002 primarily due to a decrease in the market price of natural gas. Corresponding to the decrease in natural gas revenues, fuel and purchased power expenses related to gas sales decreased by $61.9 million for the nine months ended September 30, 2002. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other effects on results of operations Results for the three months ended September 30, 2002 for domestic utility were also affected by the following: o a decrease in other operation and maintenance expenses of $23.5 million, which is explained below; o an increase in decommissioning expenses of $30.8 million primarily due to the effects in 2001 of the final FERC order addressing System Energy's rate proceeding; o an increase in depreciation and amortization expenses of $82.7 million primarily due to the effects in 2001 of the final FERC order addressing System Energy's rate proceeding; o an increase in other regulatory charges of $38.3 million primarily due to the deferral in 2001 of capacity charges associated with power purchases for the summers of 2000 and 2001 and the amortization of these capacity charges in 2002 at Entergy Gulf States and Entergy Louisiana. Refer to Note 2 to the financial statements for further discussion of deferred capacity charges; o a decrease in interest and dividend income of $24.5 million, which is explained below; o an increase in "miscellaneous - net" in other income of $11.8 million due to settlement of liability insurance coverage at Entergy Gulf States and the cessation of amortization of goodwill in January 2002 upon implementation of SFAS 142. Refer to Note 7 to the financial statements for further discussion of the implementation of SFAS 142; and o a decrease in interest expense of $53.4 million primarily due to interest recorded on System Energy's reserve for rate refund in 2001. The refund was made in December 2001. The decrease in other operation and maintenance expenses for the three months ended September 30, 2002 is primarily due to the following: o a decrease in other operation and maintenance expenses at Entergy Arkansas primarily due to $16 million of turbine refurbishment costs expensed in 2001 at a plant after its lease expired; and o a decrease of $13.9 million due to decreased incentive compensation accruals. This decrease was partially offset by an increase in expense of $10.9 million to reflect the current estimate of the liability for the future disposal of low-level radioactive waste materials. The decrease in interest and dividend income for the three months ended September 30, 2002 is primarily due to the following: o a decrease of $12.7 million in interest and dividend income at System Energy primarily due to interest recognized in 2001 on decommissioning funds resulting from the final FERC order addressing System Energy's rate proceeding; and o a decrease of $6.5 million in interest and dividend income at Entergy Mississippi due to interest recorded in 2001 on the deferred System Energy costs that were not being recovered through rates. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Results for the nine months ended September 30, 2002 for domestic utility were also affected by the following: o an increase in other operation and maintenance expenses of $216.0 million primarily due to increased expenses at Entergy Arkansas. Entergy Arkansas had increased expenses of $159.9 million for the nine months ended due to the March 2002 Settlement Agreement and 2001 earnings review that became final in the second quarter of 2002, allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through previously-collected TCA amounts. Entergy Arkansas also had increased expenses of $24.5 million due to the reversal in 2001 of ice storm costs previously charged to expense in December 2000, partially offset by the $16 million of turbine refurbishment costs mentioned above. These increases are partially offset by the increased other regulatory credits discussed below; o an increase in other regulatory credits of $143.4 million primarily due to the March 2002 Settlement Agreement allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts; o an increase in depreciation and amortization expenses of $100.9 million primarily due to the effects in 2001 of the final FERC order addressing System Energy's rate proceeding; and o a decrease in interest income of $48.4 million primarily due to lower interest earned on declining deferred fuel balances; and o an increase in "miscellaneous - net" in other income of $18.2 million due to settlement of liability insurance coverage at Entergy Gulf States and the cessation of amortization of goodwill in January 2002 upon implementation of SFAS 142; and o a decrease in interest expense of $101.5 million, which is explained below. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. The decrease in interest expense for the nine months ended September 30, 2002 is primarily due to the following: o a decrease of $31.4 million in interest on long-term debt primarily due to the retirement of long-term debt in late 2001 and early 2002; and o a decrease of $67.3 million in other interest expense primarily due to interest recorded on System Energy's reserve for rate refund in 2001. The refund was made in December 2001. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Domestic Non-Utility Nuclear The increases in earnings for the three and nine months ended September 30, 2002 compared to the same periods in 2001 for domestic non-utility nuclear were primarily due to the operation of Indian Point 2 and Vermont Yankee, which were purchased in September 2001 and July 2002, respectively. Following are key performance measures for domestic non-utility nuclear during the three and nine months ended September 30, 2002 and 2001: Three Months Nine Months Ended Ended 2002 2001 2002 2001 Net MW in operation at September 30 3,955 3,445 3,955 3,445 Generation in GWH for the period 8,152 5,887 23,110 15,354 Capacity factor for the period 96.8% 97.5% 98.5% 91.5% The following fluctuations in the results of operations for domestic non-utility nuclear for the three months ended September 30, 2002 were primarily caused by the acquisitions of Indian Point 2 and Vermont Yankee: o operating revenues increased $143.4 million to $347.2 million; o fuel expenses increased $9.2 million to $29.3 million; o nuclear refueling outage expenses increased $1.0 million to $9.9 million; o other operation and maintenance expenses increased $54.5 million to $152.4 million; and o depreciation and amortization expenses increased $8.0 million to $12.1 million. The following fluctuations in the results of operations for domestic non-utility nuclear for the nine months ended September 30, 2002 were primarily caused by the acquisitions of Indian Point 2 and Vermont Yankee: o operating revenues increased $390.0 million to $923.2 million; o fuel expenses increased $32.7 million to $82.9 million; o nuclear refueling outage expenses increased $15.4 million to $29.4 million; o other operation and maintenance expenses increased $184.7 million to $436.5 million; o taxes other than income taxes increased $9.1 million to $33.0 million; and o depreciation and amortization expenses increased $20.0 million to $29.1 million. Energy Commodity Services The decrease in earnings for energy commodity services for the three months ended September 30, 2002 compared to the same period in 2001 was primarily due to the gain on the sale of the Saltend plant in August 2001 combined with slightly lower earnings from Entergy's interest in Entergy-Koch. This decrease was partially offset by the gain on the sale of projects under development in Spain discussed below. ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The decrease in earnings for energy commodity services for the nine months ended September 30, 2002 compared to the same period in 2001 was primarily due to the charges, discussed in "MANAGEMENT'S DISCUSSION AND ANALYSIS - SIGNIFICANT FACTORS AND KNOWN TRENDS - Entergy Wholesale Operations," to reflect the impairment of certain assets, including impairments related to EWO's turbine acquisition plans, and to reflect the change in EWO's development plans. $419.5 million ($271.5 million net of tax) was recorded in the first and second quarters of 2002, including an offsetting net of tax benefit of $18.5 million related to the sale of four turbines to a third party. The pre-tax charges are reflected in operation and maintenance expenses in the Consolidated Statements of Income. In the third quarter of 2002, EWO realized a gain of $28.0 million ($17.3 million net of tax) primarily resulting from the sale of projects under development in Spain. Revenues decreased for energy commodity services by $306.8 million and $909.2 million for the three and nine months ended September 30, 2002, respectively, primarily due to decreases of $127.4 million and $495.3 million for the three and nine months ended September 30, 2002, respectively, resulting from the sale of EWO's interest in Highland Energy in the fourth quarter of 2001 combined with decreases of $23.4 million and $161.7 million for the three and nine months ended September 30, 2002, respectively, resulting from the sale of EWO's interest in the Saltend plant in August 2001. Also contributing to the decreases in revenues for energy commodity services was the contribution of substantially all of Entergy's power marketing and trading business to Entergy-Koch in February 2001. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. As a result, for the nine months ended September 30, 2002, revenues from this activity were lower by $135.2 million compared to the same period in 2001 and purchased power expenses were lower by $131.2 million. The net income effect of the lower revenue for the nine months ended September 30, 2002 was offset by the equity in earnings from Entergy's interest in Entergy-Koch. The equity in earnings from Entergy's interest in Entergy-Koch was $9.7 million and $16.8 million lower for the three and nine months ended September 30, 2002 compared to the three and nine months ended September 30, 2001 primarily due to lower earnings from the pipeline business. Gulf South Pipeline had lower trading earnings due to lower throughput and higher production costs. Following are key performance measures for Entergy-Koch's operations for the quarter and year-to-date periods ended September 30, 2002 and 2001: Third Quarter Year-To-Date 2002 2001 2002 2001 Entergy-Koch Trading Gas volatility 58% 69% 64% 69% Electricity volatility 57% 75% 50% 88% Gas marketed (BCF/D) 1.6 1.3 1.8 1.5 Electricity marketed (GWH) 29,982 24,873 96,643 82,268 Gain/loss days 2.0 3.3 1.9 3.0 Gulf South Pipeline Throughput (BCF/D) 2.27 2.56 2.40 2.43 Production cost ($/MMBTU) $0.096 $0.088 $0.088 $0.091 ENTERGY CORPORATION AND SUBSIDIARIES MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS As discussed in the Form 10-K, the partnership agreement currently allocates profits on a disproportionate basis. Substantially all of Entergy-Koch's profits were allocated to Entergy for the three and nine months ended September 30, 2002. Also partially offsetting the decrease in earnings for energy commodity services for the nine months ended September 30, 2002 was a net increase in earnings of $7.3 million ($5.0 million net of tax) related to the mark-to-market of the Damhead Creek power and gas contracts in the first quarter of 2002. Other, including parent company Earnings for Other, including the parent company, increased for the three months ended September 30, 2002 compared to the same period in 2001 primarily due to an increase of $5.0 million in interest income combined with a decrease of $2.6 million in interest expense. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 38.4% and 36.9%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 39.4% and 38.8%, respectively.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands, Except Share Data) OPERATING REVENUES Domestic electric $2,037,957 $1,986,338 $5,125,722 $5,849,720 Natural gas 18,953 18,212 90,313 159,144 Competitive businesses 411,965 572,339 1,210,254 1,726,727 ---------- ---------- ---------- ---------- TOTAL 2,468,875 2,576,889 6,426,289 7,735,591 ---------- ---------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 672,217 925,452 1,612,490 3,076,932 Purchased power 222,472 279,060 625,476 888,835 Nuclear refueling outage expenses 24,183 24,284 74,057 64,567 Provision for turbine commitments, asset impairments and restructuring charges (27,985) - 391,557 - Other operation and maintenance 564,762 550,339 1,816,131 1,456,908 Decommissioning 8,198 (22,553) 24,589 (4,749) Taxes other than income taxes 107,189 103,593 291,753 295,717 Depreciation and amortization 214,408 127,650 625,407 514,099 Other regulatory charges (credits) - net 19,742 (18,592) (149,340) (5,894) ---------- ---------- ---------- ---------- TOTAL 1,805,186 1,969,233 5,312,120 6,286,415 ---------- ---------- ---------- ---------- OPERATING INCOME 663,689 607,656 1,114,169 1,449,176 ---------- ---------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 8,726 7,672 23,730 19,259 Gain on sale of assets - net 705 913 2,379 2,261 Interest and dividend income 20,688 43,223 71,924 124,294 Equity in earnings of unconsolidated equity affiliates 50,159 58,414 142,964 153,957 Miscellaneous - net 7,837 (5,580) (3,346) 3,068 ---------- ---------- ---------- ---------- TOTAL 88,115 104,642 237,651 302,839 ---------- ---------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 131,905 126,670 376,825 386,373 Other interest - net 26,260 84,452 86,630 183,752 Distributions on preferred securities of subsidiary 4,709 4,709 14,128 14,128 Allowance for borrowed funds used during construction (6,548) (6,287) (18,478) (15,718) ---------- ---------- ---------- ---------- TOTAL 156,326 209,544 459,105 568,535 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 595,478 502,754 892,715 1,183,480 Income taxes 228,678 185,300 351,314 459,573 ---------- ---------- ---------- ---------- CONSOLIDATED NET INCOME 366,800 317,454 541,401 723,907 Preferred dividend requirements and other 5,924 4,970 17,796 18,363 ---------- ---------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $360,876 $312,484 $523,605 $705,544 ========== ========== ========== ========== Earnings per average common share: Basic $1.61 $1.41 $2.34 $3.19 Diluted $1.59 $1.39 $2.30 $3.14 Dividends declared per common share $0.33 $0.32 $0.99 $0.95 Average number of common shares outstanding: Basic 223,714,449 221,675,578 223,336,005 220,908,546 Diluted 227,054,321 224,830,056 227,402,737 224,780,449 See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Consolidated net income $541,401 $723,907 Noncash items included in net income: Reserve for regulatory adjustments 10,767 (357,880) Other regulatory credits - net (149,340) (5,894) Depreciation, amortization, and decommissioning 649,996 509,350 Deferred income taxes and investment tax credits (169,905) (53,037) Allowance for equity funds used during construction (23,730) (19,259) Gain on sale of assets - net (2,379) (2,261) Equity in undistributed earnings of unconsolidated equity affiliates (140,964) (145,312) Provision for turbine commitments, asset impairments and restructuring charges 391,557 - Changes in working capital: Receivables (233,194) 33,355 Fuel inventory (193) (24,898) Accounts payable 68,004 (467,749) Taxes accrued 496,789 457,995 Interest accrued 5,158 10,289 Deferred fuel 85,998 367,105 Other working capital accounts (83,990) (11,291) Provision for estimated losses and reserves 198 (10,706) Changes in other regulatory assets 206,504 61,583 Other 17,600 163,459 ---------- ---------- Net cash flow provided by operating activities 1,670,277 1,228,756 ---------- ---------- INVESTING ACTIVITIES Construction/capital expenditures (1,053,000) (939,662) Allowance for equity funds used during construction 23,730 19,259 Nuclear fuel purchases (217,398) (119,277) Proceeds from sale/leaseback of nuclear fuel 160,062 60,679 Proceeds from sale of businesses 244,578 805,945 Investment in other non-regulated/non-utility properties (200,119) (565,333) Decrease (increase) in other investments 38,964 (632,548) Changes in other temporary investments - net 150,000 (250,600) Decommissioning trust contributions and realized change in trust assets (49,458) (79,047) Other regulatory investments (45,262) (36,461) Other 116,654 (12,200) ---------- ---------- Net cash flow used in investing activities (831,249) (1,749,245) ---------- ---------- See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 368,589 489,295 Common stock 115,569 62,335 Retirement of long-term debt (1,166,412) (877,088) Repurchase of common stock (103,579) (36,895) Redemption of preferred stock (1,858) (39,574) Changes in credit line borrowings - net 379,333 662,997 Dividends paid: Common stock (221,215) (202,112) Preferred stock (17,796) (20,281) ---------- ---------- Net cash flow provided by (used in) financing activities (647,369) 38,677 ---------- ---------- Effect of exchange rates on cash and cash equivalents 5,614 664 ---------- ---------- Net increase (decrease) in cash and cash equivalents 197,273 (481,148) Cash and cash equivalents at beginning of period 751,573 1,382,424 ---------- ---------- Cash and cash equivalents at end of period $948,846 $901,276 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $454,489 $570,846 Income taxes $37,770 $6,872 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($78,156) ($38,718) Net assets contributed to Entergy-Koch - $80,145 Decommissioning trust funds acquired in nuclear plant acquisitions $310,000 $430,000 Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $205,184 $129,866 Temporary cash investments - at cost, which approximates market 743,344 618,327 Special deposits 318 3,380 ----------- ----------- Total cash and cash equivalents 948,846 751,573 ----------- ----------- Other temporary investments - 150,000 Notes receivable 2,077 2,137 Accounts receivable: Customer 439,856 294,799 Allowance for doubtful accounts (22,036) (19,255) Other 286,052 286,671 Accrued unbilled revenues 365,157 268,680 ----------- ----------- Total receivables 1,069,029 830,895 ----------- ----------- Deferred fuel costs 131,708 172,444 Accumulated deferred income taxes 22,936 6,488 Fuel inventory - at average cost 97,690 97,497 Materials and supplies - at average cost 514,688 460,644 Deferred nuclear refueling outage costs 68,732 79,755 Prepayments and other 94,724 129,251 ----------- ----------- TOTAL 2,950,430 2,680,684 ----------- ----------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 756,682 766,103 Decommissioning trust funds 2,032,368 1,775,950 Non-utility property - at cost (less accumulated depreciation) 293,773 295,616 Other 295,765 495,542 ----------- ----------- TOTAL 3,378,588 3,333,211 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT Electric 26,951,520 26,359,376 Property under capital lease 745,063 753,310 Natural gas 209,808 201,841 Construction work in progress 1,275,323 882,829 Nuclear fuel under capital lease 291,720 265,464 Nuclear fuel 258,224 232,387 ----------- ----------- TOTAL PROPERTY, PLANT AND EQUIPMENT 29,731,658 28,695,207 Less - accumulated depreciation and amortization 12,275,323 11,805,578 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT - NET 17,456,335 16,889,629 ----------- ----------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 920,352 946,126 Unamortized loss on reacquired debt 157,578 166,546 Other regulatory assets 526,709 707,439 Long-term receivables 25,588 28,083 Goodwill 377,172 377,472 Other 984,241 781,121 ----------- ----------- TOTAL 2,991,640 3,006,787 ----------- ----------- TOTAL ASSETS $26,776,993 $25,910,311 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $966,744 $682,771 Notes payable 15,351 351,018 Accounts payable 662,261 592,529 Customer deposits 196,583 188,230 Taxes accrued 797,321 550,133 Nuclear refueling outage costs 11,199 2,080 Interest accrued 197,690 192,420 Obligations under capital leases 150,731 149,352 Other 183,974 345,387 ----------- ----------- TOTAL 3,181,854 3,053,920 ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 3,410,943 3,574,664 Accumulated deferred investment tax credits 453,712 471,090 Taxes accrued 650,000 400,000 Obligations under capital leases 196,572 181,085 Other regulatory liabilities 172,203 135,878 Decommissioning 1,544,090 1,194,333 Transition to competition 79,098 231,512 Regulatory reserves 48,357 37,591 Accumulated provisions 418,959 425,399 Other 988,403 852,269 ----------- ----------- TOTAL 7,962,337 7,503,821 ----------- ----------- Long-term debt 7,239,139 7,321,028 Preferred stock with sinking fund 24,327 26,185 Preferred stock without sinking fund 334,337 334,337 Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated deferrable debentures 215,000 215,000 SHAREHOLDERS' EQUITY Common stock, $.01 par value, authorized 500,000,000 shares; issued 248,174,087 shares in 2002 and in 2001 2,482 2,482 Paid-in capital 4,666,953 4,662,704 Retained earnings 3,941,240 3,638,448 Accumulated other comprehensive loss (45,156) (88,794) Less - treasury stock, at cost (25,910,490 shares in 2002 and 27,441,384 shares in 2001) 745,520 758,820 ----------- ----------- TOTAL 7,819,999 7,456,020 ----------- ----------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $26,776,993 $25,910,311 =========== =========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,653,841 $3,445,141 Add - Earnings applicable to common stock 360,876 $360,876 312,484 $312,484 Deduct: Dividends declared on common stock 73,933 69,841 Capital stock and other expenses (456) (840) ---------- ---------- Total 73,477 69,001 ---------- ---------- Retained Earnings - End of period $3,941,240 $3,688,624 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes ($3,628) ($21,868) Other accumulated comprehensive (loss) items (13,613) (78,565) ---------- ---------- Total (17,241) (100,433) ---------- ---------- Net derivative instrument fair value changes arising during the period (17,108) (17,108) (1,475) (1,475) Foreign currency translation adjustments 255 255 7,848 7,848 Net unrealized investment (losses) (11,062) (11,062) (2,853) (2,853) ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (20,736) (23,343) Other accumulated comprehensive (loss) items (24,420) (73,570) ---------- ---------- Total ($45,156) ($96,913) ========== -------- ========== -------- Comprehensive Income $332,961 $316,004 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,666,754 $4,661,334 Add: Common stock issuances related to stock plans 199 1,428 ---------- ---------- Paid-in Capital - End of period $4,666,953 $4,662,762 ========== ========== Nine Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $3,638,448 $3,190,639 Add - Earnings applicable to common stock 523,605 $523,605 705,544 $705,544 Deduct: Dividends declared on common stock 221,288 208,766 Capital stock and other expenses (475) (1,207) ---------- ---------- Total 220,813 207,559 ---------- ---------- Retained Earnings - End of period $3,941,240 $3,688,624 ========== ========== ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes ($17,973) - Other accumulated comprehensive (loss) items (70,821) ($75,033) ---------- ---------- Total (88,794) (75,033) ---------- ---------- Cumulative effect to January 1, 2001 of accounting change regarding fair value of derivative instruments - - (18,021) - Net derivative instrument fair value changes arising during the period (2,763) (2,763) (5,322) (5,322) Foreign currency translation adjustments 68,312 1,978 4,213 4,213 Net unrealized investment (losses) (21,911) (21,911) (2,750) (2,750) ---------- -------- ---------- -------- Balance at end of period: Accumulated derivative instrument fair value changes (20,736) (23,343) Other accumulated comprehensive (loss) items (24,420) (73,570) ---------- ---------- Total ($45,156) ($96,913) ========== -------- ========== -------- Comprehensive Income $500,909 $701,685 ======== ======== PAID-IN CAPITAL Paid-in Capital - Beginning of period $4,662,704 $4,660,483 Add: Common stock issuances related to stock plans 4,249 2,279 ---------- ---------- Paid-in Capital - End of period $4,666,953 $4,662,762 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 847.6 $ 874.8 ($27.2) (3) Commercial 501.8 529.9 (28.1) (5) Industrial 523.3 532.2 (8.9) (2) Governmental 50.5 55.5 (5.0) (9) --------- --------- ------ Total retail 1,923.2 1,992.4 (69.2) (3) Sales for resale 107.3 108.9 (1.6) (1) Other 7.4 (115.0) 122.4 106 --------- --------- ------ Total $ 2,037.9 $ 1,986.3 $ 51.6 3 ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 10,827 10,502 325 3 Commercial 7,509 7,351 158 2 Industrial 10,839 10,457 382 4 Governmental 731 722 9 1 --------- --------- ------ Total retail 29,906 29,032 874 3 Sales for resale 2,823 2,373 450 19 --------- --------- ------ Total 32,729 31,405 1,324 4 ========= ========= ====== Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Domestic Electric Operating Revenues: Residential $ 1,898.8 $ 2,127.0 ($228.2) (11) Commercial 1,264.3 1,462.8 (198.5) (14) Industrial 1,385.0 1,838.7 (453.7) (25) Governmental 132.3 162.7 (30.4) (19) --------- --------- ------ Total retail 4,680.4 5,591.2 (910.8) (16) Sales for resale 262.0 325.8 (63.8) (20) Other 183.3 (67.3) 250.6 372 --------- --------- ------ Total $ 5,125.7 $ 5,849.7 ($724.0) (12) ========= ========= ====== Billed Electric Energy Sales (GWH): Residential 25,303 24,771 532 2 Commercial 19,219 18,834 385 2 Industrial 30,770 31,478 (708) (2) Governmental 2,002 1,967 35 2 --------- --------- ------ Total retail 77,294 77,050 244 - Sales for resale 7,480 7,004 476 7 --------- --------- ------ Total 84,774 84,054 720 1 ========= ========= ====== ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 primarily due to the refund from System Energy ordered by FERC that became final in July 2001. The accounting entries necessary to record the effects of the FERC order reduced purchased power expenses by $61.5 million in 2001, which resulted in a $37.4 million increase in net income in 2001. The refund is discussed further in Note 2 to the financial statements in the Form 10-K. Absent the effect of the refund entry on 2001 results, net income would have increased in 2002 due to a decrease in other operation and maintenance expenses and other regulatory charges and an increase in the sales volume of unbilled revenue, partially offset by decreased sales for resale. Net income decreased for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 primarily due to the aforementioned System Energy refund and the effect of the March 2002 Settlement Agreement and the 2001 earnings review that were approved by the APSC in the second quarter of 2002. The settlement agreement allowed Entergy Arkansas to recover 2000 and 2001 ice storm repair expenses through previously-collected TCA amounts. The effect of this settlement agreement increased other operation and maintenance expenses, other regulatory credits, and provisions for rate refunds. The net impact of the settlement agreement and the 2001 earnings review is a $2.2 million decrease in net income. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. The overall decrease was partially offset by an increase in the sales volume of unbilled revenue. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2002 compared with 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 differences ($0.2) $4.4 Rate riders 1.7 (13.4) Fuel cost recovery (39.6) (52.9) Sales volume/weather 1.8 (6.8) Unbilled revenue 7.8 14.3 Provisions for rate refunds - (18.1) Other revenue (0.3) 0.9 Sales for resale (37.9) (96.3) ------ ------- Total ($66.7) ($167.9) ====== ======= 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 nine months ended September 30, 2002 primarily due to a decrease in the Grand Gulf rate rider effective January 2002 compared to the average rate rider in effect during the nine months ended September 30, 2001. The Grand Gulf rate rider allows Entergy Arkansas to recover its retail share of operating costs for Grand Gulf 1. Fuel cost recovery Entergy Arkansas is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Arkansas' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and nine months ended September 30, 2002 primarily due to a decrease in the energy cost recovery rider that became effective in April 2002. The rider utilizes prior year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. In September 2002, Entergy Arkansas filed and the APSC approved an interim revision to the energy cost rate effective October 2002 through March 2003. The rider is discussed further in Note 2 to the financial statements in the Form 10-K. Sales volume/weather Electric sales volume decreased revenues for the nine months ended September 30, 2002 due to decreased usage of 53 GWH in the industrial sector. The effect of less favorable weather through September 30, 2002 compared to the same period in 2001 also decreased electric sales volume by 173 GWH in the residential and commercial sectors. The decreased usage resulted in higher effective rates in each sector, which is reflected in base rate differences. Unbilled revenue The increase for the three and nine months ended September 30, 2002 compared to the three and nine months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2002 period of higher unbilled revenue in September 2002 caused by volume/weather. Provisions for rate refunds Revenues decreased for the nine months ended September 30, 2002 due to the provisions for rate refunds to large general service customers pursuant to the March 2002 Settlement Agreement. The refunds were distributed in August 2002. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Sales for resale Sales for resale decreased for the three and nine months ended September 30, 2002 due to a decrease in the average price of energy sold to wholesale customers coupled with a decrease in sales volume to municipalities and co-operatives, partially due to the expiration of a municipal wholesale customer contract on June 30, 2002. Entergy Arkansas is aggressively pursuing other wholesale power sales opportunities to offset the revenue loss resulting from the loss of this contract. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2002 primarily due to: o decreased coal transportation costs due to new contracts; o decreased coal commodity costs due to increased purchases in the spot market; and o decreased average market price of purchased power. The decrease was partially offset by the reduction of $61.5 million in purchased power expenses in September 2001 as a result of the FERC- ordered refund from System Energy. Fuel and purchased power expenses decreased for the nine months ended September 30, 2002 primarily due to decreased market prices of natural gas and purchased power as well as decreased expenses for coal as mentioned above. The decrease was partially offset by the FERC-ordered refund from System Energy mentioned above. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended September 30, 2002 primarily due to $16 million of turbine refurbishment costs expensed in 2001 at a plant, the lease of which expired after the summer of 1999. Other operation and maintenance expenses increased for the nine months ended September 30, 2002 primarily due to: o increased expenses consisting of $159.9 million due primarily to the March 2002 Settlement Agreement (discussed further in Note 2 to the financial statements) and 2001 earnings review allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts and $24.5 million due to the reversal in 2001 of ice storm costs previously charged to expense in December 2000; o an increase in expense of $6.6 million to reflect the current estimate of the liability for the future disposal of low-level radioactive waste materials; and o lower nuclear insurance refunds of $3.1 million. These were partially offset by the $16 million of turbine refurbishment costs discussed above. Depreciation, amortization, and decommissioning Depreciation and amortization expenses increased for the nine months ended September 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives, which lowered expense in 2001 in accordance with regulatory treatment. ENTERGY ARKANSAS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other regulatory charges (credits) - net Other regulatory charges decreased for the three months ended September 30, 2002 primarily due to an adjustment to the transition cost account made in the third quarter of 2001 as a result of the 2000 excess earnings review. The March 2002 Settlement Agreement provided that the process for contributing excess earnings to the transition cost account end with the 2001 earnings review. Other regulatory credits increased for the nine months ended September 30, 2002 primarily due to the March 2002 Settlement Agreement allowing Entergy Arkansas to recover 2000 and 2001 ice storm repair expenses through the previously-collected TCA amounts. The increase in other regulatory credits is offset by an increase in other operation and maintenance expenses discussed above. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Other Other income Other income decreased for the nine months ended September 30, 2002 primarily due to: o a decrease in interest income recorded on the deferred fuel balance because the balance has been lower during 2002; and o reversal of the first quarter 2002 recording of 2000 ice storm expenses in other operation and maintenance of $2.7 million, as originally recommended by the APSC staff, in accordance with the March 2002 Settlement Agreement. The March 2002 Settlement Agreement is discussed further in Note 2 to the financial statements. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 36.6% and 40.9%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 38.7% and 41.1%, respectively. The decrease in the effective tax rate for the three months ended September 30, 2002 was primarily due to the effect of a flow-through book and tax timing difference. The decrease in the effective tax rate for the nine months ended September 30, 2002 was primarily due to a research and experimental tax deduction.
ENTERGY ARKANSAS, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $474,873 $541,556 $1,220,622 $1,388,463 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 76,005 120,003 249,468 298,165 Purchased power 102,485 76,528 262,440 321,038 Nuclear refueling outage expenses 5,877 7,079 18,935 21,616 Other operation and maintenance 94,501 113,089 430,616 249,913 Taxes other than income taxes 9,481 8,259 30,054 25,687 Depreciation, amortization, and decommissioning 47,229 45,263 140,410 131,283 Other regulatory charges (credits) - net 408 7,797 (175,314) 1,458 -------- -------- ---------- ---------- TOTAL 335,986 378,018 956,609 1,049,160 -------- -------- ---------- ---------- OPERATING INCOME 138,887 163,538 264,013 339,303 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 2,243 1,858 5,543 4,497 Interest and dividend income 498 1,324 2,063 8,036 Miscellaneous - net (593) (867) (5,121) (2,796) -------- -------- ---------- ---------- TOTAL 2,148 2,315 2,485 9,737 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 22,189 23,171 63,574 67,475 Other interest - net 1,174 3,239 12,222 11,744 Distributions on preferred securities of subsidiary 1,275 1,275 3,825 3,825 Allowance for borrowed funds used during construction (1,413) (1,187) (3,598) (2,902) -------- -------- ---------- ---------- TOTAL 23,225 26,498 76,023 80,142 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 117,810 139,355 190,475 268,898 Income taxes 43,146 56,954 73,725 110,481 -------- -------- ---------- ---------- NET INCOME 74,664 82,401 116,750 158,417 Preferred dividend requirements and other 1,944 1,912 5,832 5,800 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $72,720 $80,489 $110,918 $152,617 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $116,750 $158,417 Noncash items included in net income: Other regulatory charges (credits) - net (175,314) 1,458 Depreciation, amortization, and decommissioning 140,410 131,283 Deferred income taxes and investment tax credits (46,672) (50,323) Allowance for equity funds used during construction (5,543) (4,497) Changes in working capital: Receivables (16,899) (218,974) Fuel inventory (6,146) (8,605) Accounts payable 15,750 (111,262) Taxes accrued 101,761 151,757 Interest accrued (4,001) (11,228) Deferred fuel costs 66,838 66,973 Other working capital accounts (3,079) 62,753 Provision for estimated losses and reserves (4,300) (4,536) Changes in other regulatory assets 150,309 (57,723) Changes in other deferred credits (22,192) 36,937 Other 10,697 44,042 -------- -------- Net cash flow provided by operating activities 318,369 186,472 -------- -------- INVESTING ACTIVITIES Construction expenditures (194,349) (189,883) Allowance for equity funds used during construction 5,543 4,497 Nuclear fuel purchases (60,075) (19,103) Proceeds from sale/leaseback of nuclear fuel 60,075 19,103 Decommissioning trust contributions and realized change in trust assets (16,255) (6,569) Changes in other temporary investments - net 38,397 - Other regulatory investments - (13,834) -------- -------- Net cash flow used in investing activities (166,664) (205,789) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 94,405 98,919 Retirement of long-term debt (170,000) - Changes in short-term borrowings (667) - Dividends paid: Common stock (94,800) (59,100) Preferred stock (5,832) (5,832) -------- -------- Net cash flow provided by (used in) financing activities (176,894) 33,987 -------- -------- Net increase (decrease) in cash and cash equivalents (25,189) 14,670 Cash and cash equivalents at beginning of period 103,466 7,838 -------- -------- Cash and cash equivalents at end of period $78,277 $22,508 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $79,856 $90,297 Income taxes $9,356 ($3) Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($37,298) ($17,087) Long-term debt refunded with proceeds from long-term debt issued in prior period ($47,000) - See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $32,889 $18,331 Temporary cash investments - at cost, which approximates market 45,388 85,135 ---------- ---------- Total cash and cash equivalents 78,277 103,466 ---------- ---------- Other temporary investments - 38,397 Accounts receivable: Customer 108,435 80,719 Allowance for doubtful accounts (1,667) (1,667) Associated companies 43,355 65,102 Other 19,311 20,889 Accrued unbilled revenues 74,815 62,307 ---------- ---------- Total accounts receivable 244,249 227,350 ---------- ---------- Deferred fuel costs - 17,246 Accumulated deferred income taxes 39,443 22,698 Fuel inventory - at average cost 10,518 4,372 Materials and supplies - at average cost 80,943 75,499 Deferred nuclear refueling outage costs 12,541 14,508 Prepayments and other 7,205 53,386 ---------- ---------- TOTAL 473,176 556,922 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 11,217 11,217 Decommissioning trust funds 330,071 351,114 Non-utility property - at cost (less accumulated depreciation) 1,462 1,465 Other 2,976 2,976 ---------- ---------- TOTAL 345,726 366,772 ---------- ---------- UTILITY PLANT Electric 5,493,816 5,399,294 Property under capital lease 33,729 35,604 Construction work in progress 222,254 157,994 Nuclear fuel under capital lease 98,040 65,556 Nuclear fuel 9,394 8,156 ---------- ---------- TOTAL UTILITY PLANT 5,857,233 5,666,604 Less - accumulated depreciation and amortization 2,695,234 2,615,013 ---------- ---------- UTILITY PLANT - NET 3,161,999 3,051,591 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 181,928 164,146 Unamortized loss on reacquired debt 39,902 40,817 Other regulatory assets 92,444 260,535 Other 18,919 10,797 ---------- ---------- TOTAL 333,193 476,295 ---------- ---------- TOTAL ASSETS $4,314,094 $4,451,580 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $100,000 $85,000 Notes payable - 667 Accounts payable: Associated companies 36,499 32,868 Other 99,155 87,036 Customer deposits 34,467 32,589 Taxes accrued 206,042 104,281 Interest accrued 26,543 30,544 Deferred fuel costs 49,592 - Obligations under capital leases 52,312 51,973 System Energy refund 3,958 53,732 Other 19,334 17,221 ---------- ---------- TOTAL 627,902 495,911 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 805,447 809,742 Accumulated deferred investment tax credits 79,483 83,239 Obligations under capital leases 79,457 49,187 Transition to competition - 152,414 Accumulated provisions 37,115 41,415 Other 85,232 107,424 ---------- ---------- TOTAL 1,086,734 1,243,421 ---------- ---------- Long-term debt 1,179,207 1,308,075 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 60,000 60,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 116,350 116,350 Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2002 and 2001 470 470 Paid-in capital 591,127 591,127 Retained earnings 652,304 636,226 ---------- ---------- TOTAL 1,360,251 1,344,173 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,314,094 $4,451,580 ========== ========== See Notes to Financial Statements.
ENTERGY ARKANSAS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 193.3 $ 207.4 ($14.1) (7) Commercial 93.7 103.8 (10.1) (10) Industrial 97.6 109.2 (11.6) (11) Governmental 4.1 4.7 (0.6) (13) --------------------------------- Total retail 388.7 425.1 (36.4) (9) Sales for resale Associated companies 33.0 63.3 (30.3) (48) Non-associated companies 49.5 57.1 (7.6) (13) Other 3.7 (3.9) 7.6 195 --------------------------------- Total $ 474.9 $ 541.6 ($66.7) (12) ================================= Billed Electric Energy Sales (GWH): Residential 2,354 2,332 22 1 Commercial 1,617 1,608 9 1 Industrial 1,937 1,923 14 1 Governmental 70 71 (1) (1) --------------------------------- Total retail 5,978 5,934 44 1 Sales for resale Associated companies 1,436 1,673 (237) (14) Non-associated companies 1,521 1,320 201 15 --------------------------------- Total 8,935 8,927 8 - ================================= Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 442.8 $ 471.7 ($28.9) (6) Commercial 237.0 253.2 (16.2) (6) Industrial 256.1 279.2 (23.1) (8) Governmental 11.9 12.4 (0.5) (4) ----------------------------------- Total retail 947.8 1,016.5 (68.7) (7) Sales for resale Associated companies 126.1 183.1 (57.0) (31) Non-associated companies 125.4 164.7 (39.3) (24) Other 21.3 24.2 (2.9) (12) ----------------------------------- Total $ 1,220.6 $ 1,388.5 ($167.9) (12) =================================== Billed Electric Energy Sales (GWH): Residential 5,476 5,568 (92) (2) Commercial 3,967 3,971 (4) - Industrial 5,217 5,270 (53) (1) Governmental 194 188 6 3 ----------------------------------- Total retail 14,854 14,997 (143) (1) Sales for resale Associated companies 5,322 4,753 569 12 Non-associated companies 3,757 3,947 (190) (5) ----------------------------------- Total 23,933 23,697 236 1 =================================== ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 primarily due to increases in the sales volume and price applied to unbilled revenue, increased other income, decreased interest expense, and decreased operation and maintenance expenses, partially offset by decreased other regulatory credits. Net income decreased for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 primarily due to decreased sales for resale, increased depreciation and amortization expenses, and decreased other regulatory credits, significantly offset by increases in the sales volume and price applied to unbilled revenue and decreased interest expense. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2002 compared with 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 differences ($5.2) ($7.6) Fuel cost recovery (77.6) (456.6) Sales volume/weather 6.6 (0.9) Unbilled revenue 25.4 42.4 Other revenue 1.9 5.0 Sales for resale (17.1) (62.0) ------ ------- Total ($66.0) ($479.7) ====== ======= Base rate differences Base rate differences decreased revenues for the three and nine months ended September 30, 2002 due to an $11.5 million base rate decrease effective June 2002. The decrease for the three months ended September 30, 2002 was also due to decreased rates for special- rate industrial customers as a result of increased KWH usage. Fuel cost recovery Entergy Gulf States is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Gulf States' financial statements such that these costs generally have no net effect on earnings. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues decreased for the three and nine months ended September 30, 2002 in both operational jurisdictions of Entergy Gulf States. In the Louisiana jurisdiction, fuel cost recovery revenues decreased $22.6 million and $286.7 million for the three and nine months ended September 30, 2002, respectively, due to lower fuel factors resulting from decreases in fuel and purchased power expenses. In the Louisiana jurisdiction, these fuel costs are recovered on a two-month lag. In the Texas jurisdiction, fuel cost recovery revenues decreased $55.0 million and $169.9 million for the three and nine months ended September 30, 2002, respectively, due to a decrease in the fixed fuel factor in March 2002 and a lower fuel recovery surcharge in 2002. Sales volume/weather Higher electric sales volume increased revenues for the three months ended September 30, 2002 due to increased usage of 92 GWH in the residential and commercial sectors, after adjusting for the weather effect, and increased usage of 209 GWH in the industrial sector. The increased usage resulted in lower effective rates for the industrial sector, which is reflected in base rate differences. Lower electric sales volume reduced revenues for the nine months ended September 30, 2002 primarily due to decreased usage in the industrial sector as a result of contractual modifications that reclassified the sales associated with certain customers from retail to wholesale. Under the terms of the former contract with these customers, Entergy Gulf States was also required to purchase the electricity produced by the customers' generating units. As a result of the cessation of the purchased power obligation, the reclassification of these sales will not have a negative impact on Entergy Gulf States' earnings. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended September 30, 2002 and 2001 includes the reversal of the estimates for June 2002 and June 2001, respectively. The increase for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in June 2001 caused by volume/weather and higher fuel rates. Unbilled revenue for the nine months ended September 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in December 2000 caused by volume/weather and higher fuel rates. Sales for resale Sales for resale decreased for the three and nine months ended September 30, 2002 primarily due to decreased sales volume to affiliated customers coupled with a decrease in the average price of energy supplied for affiliated sales. The decrease is partially offset by contractual modifications that reclassified the sales associated with certain customers from retail to wholesale. Gas operating revenues Gas operating revenues decreased for the nine months ended September 30, 2002 primarily due to the decreased market price of natural gas. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2002 primarily due to a decrease in the market price of purchased power. Fuel and purchased power expenses decreased for the nine months ended September 30, 2002 primarily due to decreases in the market prices of natural gas and purchased power. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended September 30, 2002 due to decreases in: o general and administrative salaries expense of $3.9 million; o uncollectible receivable write-offs of $2.5 million; o nuclear operation and maintenance expenses of $2.2 million; and o transmission expenses of $1.0 million. The decrease in other operation and maintenance expenses was somewhat offset by increases in: o employee pension and benefits expense of $2.6 million; and o expenses of $2.5 million to reflect the current estimate of the liability for the future disposal of low-level radioactive waste materials. Taxes other than income taxes Taxes other than income taxes increased for the nine months ended September 30, 2002 primarily due to lower sales and use tax audit assessments in 2001. Depreciation and amortization Depreciation and amortization expenses increased for the nine months ended September 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives, which lowered expense in 2001 in accordance with regulatory treatment. The increase was also due to net capital additions to plant in service. Other regulatory charges (credits) - net Other regulatory credits decreased for the three and nine months ended September 30, 2002 primarily due to the deferral in 2001 of capacity charges included in power purchases for the summers of 2000 and 2001 and the amortization of these capacity charges in 2002. The amortization of the summer 2000 capacity charges ended in May 2002. The amortization of the capacity charges for the summer 2001 began in June 2002 and will occur through May 2003. Refer to Note 2 to the financial statements for further discussion of deferred capacity charges. The decrease for the nine months ended September 30, 2002 was somewhat offset by the recognition in income of the Louisiana portion of the unamortized deferred gain on the 1988 sale of Nelson Units 1 and 2. The deferred gain was recognized in income because the LPSC no longer requires that amortization of the gain reduce Entergy Gulf States' recoverable fuel. ENTERGY GULF STATES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other income Other income increased for the three months ended September 30, 2002 as a result of settlement of liability insurance coverage, somewhat offset by decreased interest income recorded on the deferred fuel balance due to partial recovery of the balance. Other income decreased for the nine months ended September 30, 2002 primarily due to decreased interest income recorded on the deferred fuel balance due to partial recovery of the balance. The decrease was somewhat offset by settlement of liability insurance coverage. Interest and other charges Interest on long-term debt decreased for the three and nine months ended September 30, 2002 primarily due to lower interest expense on variable-rate First Mortgage Bonds and the retirement of $148 million of First Mortgage Bonds in January 2002. Other interest expense decreased for the three and nine months ended September 30, 2002 primarily due to a 2001 adjustment to the liability for deferred compensation for certain former Entergy Gulf States employees in accordance with an actuarial study. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 38.0% and 36.2%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 38.4% and 36.1%, respectively. The increase in the effective tax rate for the three and nine months ended was primarily due to the effect of flow-through book and tax timing differences.
ENTERGY GULF STATES, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $642,940 $708,951 $1,649,729 $2,129,424 Natural gas 5,909 5,537 30,587 50,434 -------- -------- ---------- ---------- TOTAL 648,849 714,488 1,680,316 2,179,858 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 233,976 281,276 518,875 881,440 Purchased power 96,037 136,703 270,215 404,558 Nuclear refueling outage expenses 3,056 2,680 9,135 8,792 Other operation and maintenance 103,454 107,991 308,405 309,404 Decommissioning 1,579 1,562 4,731 4,685 Taxes other than income taxes 32,823 32,028 94,134 90,587 Depreciation and amortization 51,154 48,683 151,847 143,634 Other regulatory charges (credits) - net 1,227 (14,636) (10,796) (19,188) -------- -------- ---------- ---------- TOTAL 523,306 596,287 1,346,546 1,823,912 -------- -------- ---------- ---------- OPERATING INCOME 125,543 118,201 333,770 355,946 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 2,988 2,650 7,971 6,817 Gain on sale of assets 707 623 2,379 1,811 Interest and dividend income 2,756 5,666 7,687 19,893 Miscellaneous - net 6,215 (709) 4,768 (3,284) -------- -------- ---------- ---------- TOTAL 12,666 8,230 22,805 25,237 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 32,694 37,359 97,191 115,511 Other interest - net 2,260 7,844 5,002 12,038 Distributions on preferred securities of subsidiary 1,859 1,859 5,578 5,578 Allowance for borrowed funds used during construction (2,540) (2,704) (7,153) (6,858) -------- -------- ---------- ---------- TOTAL 34,273 44,358 100,618 126,269 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 103,936 82,073 255,957 254,914 Income taxes 39,447 29,720 98,194 92,133 -------- -------- ---------- ---------- NET INCOME 64,489 52,353 157,763 162,781 Preferred dividend requirements and other 1,218 1,201 3,678 3,782 -------- -------- ---------- ---------- EARNINGS APPLICABLE TO COMMON STOCK $63,271 $51,152 $154,085 $158,999 ======= ======== ========== ========== See Notes to Financial Statements.
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ENTERGY GULF STATES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $157,763 $162,781 Noncash items included in net income: Reserve for regulatory adjustments 7,566 (22,880) Other regulatory credits - net (10,796) (19,188) Depreciation, amortization, and decommissioning 156,578 148,319 Deferred income taxes and investment tax credits (38,938) (17,478) Allowance for equity funds used during construction (7,971) (6,817) Gain on sale of assets (2,379) (1,811) Changes in working capital: Receivables (37,577) (69,940) Fuel inventory 1,687 (17,057) Accounts payable (12,319) (163,428) Taxes accrued 131,065 120,593 Interest accrued 1,675 5,776 Deferred fuel costs 43,035 118,427 Other working capital accounts 3,967 15,914 Provision for estimated losses and reserves (822) (4,539) Changes in other regulatory assets 10,029 (31,610) Other 23,175 31,876 -------- -------- Net cash flow provided by operating activities 425,738 248,938 -------- -------- INVESTING ACTIVITIES Construction expenditures (228,050) (224,101) Allowance for equity funds used during construction 7,971 6,817 Nuclear fuel purchases (21,820) (3,937) Proceeds from sale/leaseback of nuclear fuel 21,923 3,937 Decommissioning trust contributions and realized change in trust assets (9,213) (9,245) Changes in other temporary investments - net 44,643 (75,777) Other regulatory investments (45,262) (22,628) -------- -------- Net cash flow used in investing activities (229,808) (324,934) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 300,000 Retirement of long-term debt (148,000) (122,750) Redemption of preferred stock (1,858) (4,574) Dividends paid: Common stock (75,200) (78,500) Preferred stock (3,678) (3,830) -------- -------- Net cash flow provided by (used in) financing activities (228,736) 90,346 -------- -------- Net increase (decrease) in cash and cash equivalents (32,806) 14,350 Cash and cash equivalents at beginning of period 123,728 68,279 -------- -------- Cash and cash equivalents at end of period $90,922 $82,629 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $102,066 $117,903 Income taxes $18,900 $920 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($17,780) ($10,172) See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $52,002 $19,503 Temporary cash investments - at cost, which approximates market 38,920 104,225 ---------- ---------- Total cash and cash equivalents 90,922 123,728 ---------- ---------- Other temporary investments - 44,643 Accounts receivable: Customer 108,672 81,136 Allowance for doubtful accounts (2,131) (2,131) Associated companies 34,414 34,032 Other 36,232 53,249 Accrued unbilled revenues 111,420 84,744 ---------- ---------- Total accounts receivable 288,607 251,030 ---------- ---------- Deferred fuel costs 128,957 126,730 Fuel inventory - at average cost 52,324 54,011 Materials and supplies - at average cost 97,337 95,674 Prepayments and other 22,285 22,373 ---------- ---------- TOTAL 680,432 718,189 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 236,815 245,382 Non-utility property - at cost (less accumulated depreciation) 192,357 194,830 Other 17,711 15,970 ---------- ---------- TOTAL 446,883 456,182 ---------- ---------- UTILITY PLANT Electric 7,798,874 7,694,226 Property under capital lease 21,741 28,087 Natural gas 62,168 59,100 Construction work in progress 303,369 221,730 Nuclear fuel under capital lease 48,260 67,688 ---------- ---------- TOTAL UTILITY PLANT 8,234,412 8,070,831 Less - accumulated depreciation and amortization 3,859,398 3,750,770 ---------- ---------- UTILITY PLANT - NET 4,375,014 4,320,061 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 424,164 426,623 Unamortized loss on reacquired debt 31,898 34,321 Other regulatory assets 193,759 201,329 Long-term receivables 24,077 26,576 Other 25,695 26,460 ---------- ---------- TOTAL 699,593 715,309 ---------- ---------- TOTAL ASSETS $6,201,922 $6,209,741 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $339,000 $147,921 Accounts payable: Associated companies 29,356 38,728 Other 132,076 135,023 Customer deposits 47,403 45,876 Taxes accrued 221,669 90,604 Accumulated deferred income taxes 11,371 21,412 Nuclear refueling outage costs 11,199 2,080 Interest accrued 45,089 43,414 Obligations under capital leases 37,707 36,668 Other 15,891 20,995 ---------- ---------- TOTAL 890,761 582,721 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 1,209,748 1,227,084 Accumulated deferred investment tax credits 158,242 163,766 Obligations under capital leases 32,207 60,163 Decommissioning 147,757 144,926 Transition to competition 79,098 79,098 Regulatory reserves 41,157 33,591 Accumulated provisions 62,989 63,811 Other 76,867 93,719 ---------- ---------- TOTAL 1,808,065 1,866,158 ---------- ---------- Long-term debt 1,620,072 1,958,897 Preferred stock with sinking fund 24,327 26,185 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 85,000 85,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 47,327 47,327 Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 100 shares in 2002 and 2001 114,055 114,055 Paid-in capital 1,157,459 1,157,459 Retained earnings 450,824 371,939 Accumulated other comprehensive income: 4,032 - ---------- ---------- TOTAL 1,773,697 1,690,780 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,201,922 $6,209,741 ========== ========== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $431,295 $358,916 Add - Earnings applicable to common stock 63,271 $63,271 51,152 $51,152 Deduct: Dividends declared on common stock 43,800 44,500 Capital stock and other expenses (58) - -------- -------- Total 43,742 44,500 -------- -------- Retained Earnings - End of period $450,824 $365,568 ======== ======== ACCUMULATED OTHER COMPREHENSIVE INCOME (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $2,078 $ - Net derivative instrument fair value changes arising during the period 1,954 1,954 - - -------- ------- -------- ------- Balance at end of period: Accumulated derivative instrument fair value changes $4,032 $ - ======== ------- ======== ------- Comprehensive Income $65,225 $51,152 ======= ======= Nine Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $371,939 $285,128 Add - Earnings applicable to common stock 154,085 $154,085 158,999 $158,999 Deduct: Dividends declared on common stock 75,200 78,500 Capital stock and other expenses - 59 -------- -------- Total 75,200 78,559 -------- -------- Retained Earnings - End of period $450,824 $365,568 ======== ======== ACCUMULATED OTHER COMPREHENSIVE INCOME (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $ - $ - Net derivative instrument fair value changes arising during the period 4,032 4,032 - - -------- -------- -------- -------- Balance at end of period: Accumulated derivative instrument fair value changes $4,032 $ - ======== -------- ======== -------- Comprehensive Income $158,117 $158,999 ======== ======== See Notes to Financial Statements.
ENTERGY GULF STATES, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 234.4 $ 256.8 ($22.4) (9) Commercial 146.5 159.9 (13.4) (8) Industrial 193.6 208.6 (15.0) (7) Governmental 9.1 9.6 (0.5) (5) ---------------------------------- Total retail 583.6 634.9 (51.3) (8) Sales for resale Associated companies 11.1 40.0 (28.9) (72) Non-associated companies 48.0 36.2 11.8 33 Other 0.3 (2.1) 2.4 114 ---------------------------------- Total $ 643.0 $ 709.0 ($66.0) (9) ================================== Billed Electric Energy Sales (GWH): Residential 3,095 3,045 50 2 Commercial 2,260 2,238 22 1 Industrial 4,157 3,948 209 5 Governmental 127 121 6 5 ---------------------------------- Total retail 9,639 9,352 287 3 Sales for resale Associated companies 357 557 (200) (36) Non-associated companies 1,214 801 413 52 ---------------------------------- Total 11,210 10,710 500 5 ================================== Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 543.3 $ 639.6 ($96.3) (15) Commercial 378.6 461.9 (83.3) (18) Industrial 519.7 774.4 (254.7) (33) Governmental 25.1 29.9 (4.8) (16) ---------------------------------- Total retail 1,466.7 1,905.8 (439.1) (23) Sales for resale Associated companies 16.6 69.3 (52.7) (76) Non-associated companies 111.5 120.8 (9.3) (8) Other 54.9 33.5 21.4 64 ---------------------------------- Total $1,649.7 $ 2,129.4 ($479.7) (23) ================================== Billed Electric Energy Sales (GWH): Residential 7,387 7,188 199 3 Commercial 5,978 5,819 159 3 Industrial 11,877 12,784 (907) (7) Governmental 355 342 13 4 ---------------------------------- Total retail 25,597 26,133 (536) (2) Sales for resale Associated companies 486 1,005 (519) (52) Non-associated companies 3,426 2,496 930 37 ---------------------------------- Total 29,509 29,634 (125) - ==================================
ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three months ended September 30, 2002 compared with the three months ended September 30, 2001 primarily due to the receipt of the final FERC order in July 2001 in the System Energy rate proceeding. The accounting entries necessary to record the effects of the order reduced purchased power expenses by $67.5 million in 2001, which resulted in a $41.5 million increase in net income in 2001. The decrease was also due to increased regulatory charges, and was partially offset by increased electricity usage in the service territory. Net income increased for the nine months ended September 30, 2002 compared with the nine months ended September 30, 2001 primarily due to an increase in the price applied to unbilled revenue, increased electricity usage in the service territory, and decreases in taxes other than income taxes and interest charges. The increase was partially offset by the effect of the final FERC order in the System Energy rate proceeding in 2001, and increases in other regulatory charges, other operation and maintenance expenses, and depreciation and amortization expenses. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2002 compared with 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 differences ($6.9) ($17.3) Fuel cost recovery 69.0 (253.9) Sales volume/weather 15.8 31.5 Unbilled revenue (2.4) 75.8 Other revenue (0.4) 3.5 Sales for resale (20.4) (28.2) ----- ------- Total $54.7 ($188.6) ===== ======= Base rate differences Base rate differences decreased revenues for the three and nine months ended September 30, 2002 primarily due to decreased rates for special-rate industrial customers as a result of increased KWH usage and additional formula rate plan reductions that became effective in both August 2001 and August 2002. Fuel cost recovery Entergy Louisiana is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Louisiana's financial statements such that these costs generally have no net effect on earnings. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery revenues increased for the three months ended September 30, 2002 due to higher fuel factors resulting from recent increases in fuel and purchased power expenses. Entergy Louisiana recovers fuel costs on a two-month lag. Fuel cost recovery revenues decreased for the nine months ended September 30, 2002 due to lower fuel factors resulting from decreases in the market price of natural gas and purchased power. Sales volume/weather Higher electric sales volume increased revenues for the three and nine months ended September 30, 2002 due to increased usage of 177 GWH and 413 GWH, respectively, in the residential and commercial sectors, after adjusting for the weather effect, and increased usage of 178 GWH and 391 GWH for the three and nine months ended, respectively, in the industrial sector. The increased usage resulted in lower effective rates for the industrial sector, which is reflected in base rate differences. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the nine months ended September 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in December 2000 caused by higher fuel rates and volume/weather. Sales for resale Sales for resale decreased for the three and nine months ended September 30, 2002 primarily due to a decrease in volume to adjoining utility systems and affiliated customers. Expenses Fuel and purchased power Fuel and purchased power expenses increased for the three months ended September 30, 2002 primarily due to: o the reduction of $67.5 million in purchased power expenses in September 2001 as a result of the FERC-ordered refund from System Energy; o an increase in demand; and o a slight increase in the market price of natural gas. Fuel and purchased power expenses decreased for the nine months ended September 30, 2002 primarily due to a decrease in the market prices of natural gas and purchased power, partially offset by the effects of the FERC-ordered refund from System Energy in September 2001. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other operation and maintenance Other operation and maintenance expenses increased for the nine months ended September 30, 2002 primarily due to: o an increase in maintenance expense at certain fossil plants of $5.9 million; o an increase in employee pension and benefits expense of $5.3 million; o an increase in outside contract services of $1.6 million; o an increase in corrective maintenance of overhead lines of $1.5 million; o an increase in transmission expenses of $1.4 million; and o lower nuclear insurance refunds of $1.3 million. Taxes other than income taxes Taxes other than income taxes decreased for the nine months ended September 30, 2002 primarily due to franchise tax adjustments. As a result of a favorable court decision, Entergy Louisiana expects to receive a refund for certain franchise taxes previously expensed and paid under protest. Depreciation and amortization Depreciation and amortization expenses increased for the three and nine months ended September 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives, which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory charges (credits) - net Other regulatory charges increased for the three and nine months ended September 30, 2002 primarily due to the deferral in 2001 of capacity charges associated with power purchases for the summers of 2000 and 2001 and the amortization of these capacity charges in 2002. The amortization of the summer 2000 capacity charges ended in July 2002. The amortization of the capacity charges for the summer 2001 began in August 2002 and will occur through July 2003. Refer to Note 2 to the financial statements for further discussion of deferred capacity charges. Other Other income Interest income increased for the nine months ended September 30, 2002 primarily due to the interest component of the expected franchise tax refund discussed above. Interest and other charges Interest on long-term debt decreased for the nine months ended September 30, 2002 due to the refinancing and net redemption of First Mortgage Bonds in the amounts of $18.7 million in 2001 and $119.4 million in 2002. ENTERGY LOUISIANA, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other interest decreased for the three and nine months ended September 30, 2002 primarily due to: o interest accrued in 2001 on reserves provided for fuel-related refunds that were made in the summer of 2001; o adjustments to interest expense previously recorded on franchise tax accruals; and o interest accrued in 2001 on the deferred fuel balance. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 40.5% and 39.3%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 39.0% and 40.1%, respectively.
ENTERGY LOUISIANA, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $528,052 $473,342 $1,381,404 $1,570,040 -------- -------- ---------- ---------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 125,878 93,989 274,568 518,458 Purchased power 138,548 69,841 340,210 337,831 Nuclear refueling outage expenses 2,745 3,050 8,757 9,574 Other operation and maintenance 77,651 76,131 237,309 217,214 Decommissioning 2,606 2,606 7,817 7,818 Taxes other than income taxes 20,650 20,314 44,629 57,031 Depreciation and amortization 46,268 44,016 137,410 129,460 Other regulatory charges (credits) - net 4,869 (29,133) 11,499 (28,053) -------- -------- ---------- ---------- TOTAL 419,215 280,814 1,062,199 1,249,333 -------- -------- ---------- ---------- OPERATING INCOME 108,837 192,528 319,205 320,707 -------- -------- ---------- ---------- OTHER INCOME Allowance for equity funds used during construction 1,327 1,301 3,760 3,462 Gain on sale of assets - - - 152 Interest and dividend income 308 1,277 7,126 5,411 Miscellaneous - net (491) (613) (2,111) (2,067) -------- -------- ---------- ---------- TOTAL 1,144 1,965 8,775 6,958 -------- -------- ---------- ---------- INTEREST AND OTHER CHARGES Interest on long-term debt 24,948 24,176 70,203 73,366 Other interest - net 338 2,368 1,017 9,455 Distributions on preferred securities of subsidiary 1,575 1,575 4,725 4,725 Allowance for borrowed funds used during construction (967) (987) (2,834) (2,619) -------- -------- ---------- ---------- TOTAL 25,894 27,132 73,111 84,927 -------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES 84,087 167,361 254,869 242,738 Income taxes 34,024 65,846 99,466 97,329 -------- -------- ---------- ---------- NET INCOME 50,063 101,515 155,403 145,409 Preferred dividend requirements and other 1,678 1,061 5,035 5,818 -------- -------- ---------- ---------- EARNINGS APPLICAPLE TO COMMON STOCK $48,385 $100,454 $150,368 $139,591 ======== ======== ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $155,403 $145,409 Noncash items included in net income: Reserve for regulatory adjustments - (11,456) Other regulatory charges (credits) - net 11,499 (28,053) Depreciation, amortization, and decommissioning 145,227 137,278 Deferred income taxes and investment tax credits 36,097 (55,380) Allowance for equity funds used during construction (3,760) (3,462) Gain on sale of assets - (152) Changes in working capital: Receivables (74,583) (21,389) Accounts payable 148,727 (97,696) Taxes accrued 100,529 180,533 Interest accrued (6,175) (8,139) Deferred fuel costs (88,819) 127,247 Other working capital accounts (20,319) (68,284) Provision for estimated losses and reserves 1,203 1,499 Changes in other regulatory assets 12,078 (31,841) Other (22,061) 46,173 -------- -------- Net cash flow provided by operating activities 395,046 312,287 -------- -------- INVESTING ACTIVITIES Construction expenditures (142,060) (146,418) Allowance for equity funds used during construction 3,760 3,462 Nuclear fuel purchases (50,473) - Proceeds from sale/leaseback of nuclear fuel 50,473 - Decommissioning trust contributions and realized change in trust assets (12,545) (12,638) Changes in other temporary investments - net 6,152 (9,214) -------- -------- Net cash flow used in investing activities (144,693) (164,808) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 144,679 - Retirement of long-term debt (285,358) (35,088) Redemption of preferred stock - (35,000) Changes in short-term borrowings 15,000 - Dividends paid: Common stock (129,300) (85,500) Preferred stock (5,035) (7,369) -------- -------- Net cash flow used in financing activities (260,014) (162,957) -------- -------- Net decrease in cash and cash equivalents (9,661) (15,478) Cash and cash equivalents at beginning of period 42,408 43,959 -------- -------- Cash and cash equivalents at end of period $32,747 $28,481 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid/(received) during the period for: Interest - net of amount capitalized $78,238 $91,077 Income taxes ($9,983) $550 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($9,270) ($4,792) See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $32,747 $28,768 Temporary cash investments - at cost, which approximates market - 13,640 ---------- ---------- Total cash and cash equivalents 32,747 42,408 ---------- ---------- Other temporary investments - 6,152 Accounts receivable: Customer 106,234 48,640 Allowance for doubtful accounts (1,771) (1,771) Associated companies 15,251 9,090 Other 11,693 47,965 Accrued unbilled revenues 118,300 71,200 ---------- ---------- Total accounts receivable 249,707 175,124 ---------- ---------- Deferred fuel costs 21,326 - Accumulated deferred income taxes - 42,566 Materials and supplies - at average cost 75,888 77,523 Deferred nuclear refueling outage costs 12,379 4,096 Prepayments and other 19,190 9,008 ---------- ---------- TOTAL 411,237 356,877 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 14,230 14,230 Decommissioning trust funds 122,938 119,663 Non-utility property - at cost (less accumulated depreciation) 21,534 21,671 ---------- ---------- TOTAL 158,702 155,564 ---------- ---------- UTILITY PLANT Electric 5,535,866 5,456,093 Property under capital lease 239,395 239,395 Construction work in progress 147,843 110,792 Nuclear fuel under capital lease 59,415 70,316 ---------- ---------- TOTAL UTILITY PLANT 5,982,519 5,876,596 Less - accumulated depreciation and amortization 2,647,095 2,538,964 ---------- ---------- UTILITY PLANT - NET 3,335,424 3,337,632 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 169,367 179,368 Unamortized loss on reacquired debt 26,323 28,341 Other regulatory assets 71,677 73,754 Long-term receivables 1,511 1,515 Other 19,315 16,650 ---------- ---------- TOTAL 288,193 299,628 ---------- ---------- TOTAL ASSETS $4,193,556 $4,149,701 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $198,475 $185,627 Notes payable 15,000 - Accounts payable: Associated companies 213,475 73,208 Other 101,920 93,460 Customer deposits 62,942 61,359 Taxes accrued 120,939 20,410 Accumulated deferred income taxes 1,691 - Interest accrued 28,349 34,524 Deferred fuel costs - 67,493 Obligations under capital leases 34,171 34,171 Other 9,047 14,119 ---------- ---------- TOTAL 786,009 584,371 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 768,240 776,610 Accumulated deferred investment tax credits 107,890 111,942 Obligations under capital leases 25,243 36,144 Accumulated provisions 69,725 68,522 Other 71,771 82,780 ---------- ---------- TOTAL 1,042,869 1,075,998 ---------- ---------- Long-term debt 943,297 1,091,329 Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable debentures 70,000 70,000 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 100,500 100,500 Common stock, no par value, authorized 250,000,000 shares; issued and outstanding 165,173,180 shares in 2002 and 2001 1,088,900 1,088,900 Capital stock expense and other (1,718) (1,718) Retained earnings 161,389 140,321 Accumulated other comprehensive income 2,310 - ---------- ---------- TOTAL 1,351,381 1,328,003 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,193,556 $4,149,701 ========== ========== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $193,655 $176,156 Add - Earnings applicable to common stock 48,385 $48,385 100,454 $100,454 Deduct: Dividends declared on common stock 80,700 72,200 Capital stock and other expenses (49) - -------- -------- Total 80,651 72,200 -------- -------- Retained Earnings - End of period $161,389 $204,410 ======== ======== ACCUMULATED OTHER COMPREHENSIVE INCOME (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $ - $ - Net derivative instrument fair value changes arising during the period 2,310 2,310 - - -------- ------- -------- -------- Balance at end of period: Accumulated derivative instrument fair value changes $2,310 $ - ======== ------- ======== -------- Comprehensive Income $50,695 $100,454 ======= ======== Nine Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $140,321 $150,319 Add - Earnings applicable to common stock 150,368 $150,368 139,591 $139,591 Deduct - Dividends declared on common stock 129,300 85,500 -------- -------- Retained Earnings - End of period $161,389 $204,410 ======== ======== ACCUMULATED OTHER COMPREHENSIVE INCOME (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $ - $ - Net derivative instrument fair value changes arising during the period 2,310 2,310 - - -------- -------- -------- -------- Balance at end of period: Accumulated derivative instrument fair value changes $2,310 $ - ======== -------- ======== -------- Comprehensive Income $152,678 $139,591 ======== ======== See Notes to Financial Statements.
ENTERGY LOUISIANA, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 220.9 $ 192.8 $ 28.1 15 Commercial 119.7 106.0 13.7 13 Industrial 179.7 149.7 30.0 20 Governmental 9.6 8.7 0.9 10 --------------------------------- Total retail 529.9 457.2 72.7 16 Sales for resale Associated companies (7.2) 9.2 (16.4) (179) Non-associated companies 3.8 7.8 (4.0) (51) Other 1.6 (0.8) 2.4 300 --------------------------------- Total $ 528.1 $ 473.4 $ 54.7 12 ================================= Billed Electric Energy Sales (GWH): Residential 2,868 2,749 119 4 Commercial 1,622 1,572 50 3 Industrial 3,853 3,675 178 5 Governmental 130 132 (2) (2) --------------------------------- Total retail 8,473 8,128 345 4 Sales for resale Associated companies (125) 108 (233) (216) Non-associated companies 16 114 (98) (86) --------------------------------- Total 8,364 8,350 14 - ================================= Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 490.9 $ 541.1 ($50.2) (9) Commercial 301.1 342.0 (40.9) (12) Industrial 469.4 613.1 (143.7) (23) Governmental 26.4 31.5 (5.1) (16) --------------------------------- Total retail 1,287.8 1,527.7 (239.9) (16) Sales for resale Associated companies 1.9 20.6 (18.7) (91) Non-associated companies 10.5 20.0 (9.5) (48) Other 81.2 1.7 79.5 4,676 --------------------------------- Total $1,381.4 $ 1,570.0 ($188.6) (12) ================================= Billed Electric Energy Sales (GWH): Residential 6,810 6,532 278 4 Commercial 4,195 4,080 115 3 Industrial 11,223 10,832 391 4 Governmental 380 380 - - --------------------------------- Total retail 22,608 21,824 784 4 Sales for resale Associated companies 29 269 (240) (89) Non-associated companies 108 289 (181) (63) --------------------------------- Total 22,745 22,382 363 2 =================================
ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 primarily due to increased electricity usage in the service territory, increased other revenue, decreased other operation and maintenance expenses, and decreased interest expense, partially offset by decreased interest income. Net income increased for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 primarily due to an increase in the sales volume of unbilled revenue, increased other revenue, formula rate plan increases, increased other regulatory credits, and decreased interest expense. The increase was partially offset by increased other operation and maintenance expenses, increased depreciation and amortization expenses, and decreased interest income. Revenues and Sales The changes in electric operating revenues for the three and nine months ended September 30, 2002 compared with 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 differences ($1.2) $2.5 Grand Gulf rate rider (5.4) (16.9) Fuel cost recovery (35.7) (59.7) Sales volume/weather 3.9 2.2 Unbilled revenue 1.7 5.1 Other revenue 2.6 8.4 Sales for resale (3.7) (56.2) ------ ------- Total ($37.8) ($114.6) ====== ======= Base rate differences Base rate differences increased revenues for the nine months ended September 30, 2002 primarily due to formula rate plan increases that became effective in May 2001 and May 2002. The increase was partially offset by the effect of block rates on residential and commercial customers as a result of increased KWH usage. 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, 2002 as a result of a lower rate that became effective in October 2001. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel cost recovery Entergy Mississippi is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy Mississippi's financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and nine months ended September 30, 2002 primarily due to lower fuel factors resulting from the decrease in the market price of purchased power. The decrease for the nine months ended was also due to the decrease in the market price of natural gas. Sales volume/weather Higher electric sales volume increased revenues for the three months ended September 30, 2002 due to increased usage of 136 GWH in the residential and commercial sectors, after adjusting for the weather effect. Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and reversed the following month. Unbilled revenue for the nine months ended September 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 is due to the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in December 2000 caused by volume/weather. Other revenue Other revenue increased for the three and nine months ended September 30, 2002 primarily due to Entergy Mississippi beginning in October 2001 to charge late fees to its customers. Sales for resale Sales for resale decreased for the nine months ended September 30, 2002 primarily due to a decrease in sales volume to affiliated customers, coupled with a decrease in the average price of energy. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2002 primarily due to: o a decrease in the average market price of purchased power; o a decrease in demand; and o a smaller over-recovery of fuel costs. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Fuel and purchased power expenses decreased for the nine months ended September 30, 2002 primarily due to: o the displacement of oil generation by lower priced gas generation. Oil generation was used in 2001 due to significant increases in the market price of natural gas; o a decrease in demand; and o a decrease in the average market price of purchased power. The decrease was partially offset by a larger over-recovery of fuel costs, including the effect of increased recoveries approved by the MPSC in 2000 to recover previous under-recoveries. Other operation and maintenance Other operation and maintenance expenses decreased for the three months ended September 30, 2002 primarily due to a decrease in property damage expense of $2.1 million. Other operation and maintenance expenses increased for the nine months ended September 30, 2002 primarily due to: o an increase of $4.8 million in plant maintenance expense due to an unscheduled outage at a fossil plant in 2002; o an increase in outside contract services of $1.1 million; o an increase in employee pension and benefits expense of $1.7 million; o an insurance reimbursement of $1.4 million received in 2001 in connection with a turbine generator failure; and o an increase in injuries and damages expense of $1.3 million. The increase in other operation and maintenance expenses was partially offset by a decrease in property damage expense of $5.6 million. Depreciation and amortization Depreciation and amortization expenses increased for the nine months ended September 30, 2002 primarily due to revisions made to the useful lives of certain intangible plant assets to more appropriately reflect their actual lives, which lowered expense in 2001 in accordance with regulatory treatment. Other regulatory charges (credits) - net Other regulatory charges decreased for the three months ended September 30, 2002 primarily due to a smaller over-recovery of Grand Gulf 1-related costs in 2002 compared to the same period in 2001. The decrease was partially offset by the settlement of the System Energy rate proceeding in 2001 that ceased the deferral of costs associated with purchases from System Energy. See Note 2 to the financial statements in the Form 10K for further discussion of the System Energy rate proceeding and FERC order. Other regulatory credits increased for the nine months ended September 30, 2002 primarily due to an under-recovery of Grand Gulf 1- related costs in 2002 versus an over-recovery in 2001. The increase was substantially offset by the settlement of the System Energy rate proceeding in 2001 that ceased the deferral of costs associated with purchases from System Energy. ENTERGY MISSISSIPPI, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Other Other income Interest income decreased for the three and nine months ended September 30, 2002 primarily due to interest recorded in 2001 on the deferred System Energy costs that Entergy Mississippi was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of the final FERC order. Interest and other charges Interest on long-term debt decreased for the three months ended September 30, 2002 primarily due to the retirement of $65 million of 6.875% Series First Mortgage Bonds in June 2002. Interest and other charges decreased for the nine months ended September 30, 2002 primarily due to lower interest expense due to the retirement of $65 million of 6.875% Series First Mortgage Bonds in June 2002. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 37.9% and 36.7%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 36.9% and 35.3%, respectively.
ENTERGY MISSISSIPPI, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $316,745 $354,518 $770,178 $884,824 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 127,647 145,168 271,345 350,720 Purchased power 72,699 104,352 222,181 282,190 Other operation and maintenance 36,900 40,230 118,564 112,951 Taxes other than income taxes 13,430 12,962 36,937 36,027 Depreciation and amortization 14,101 12,751 41,352 36,966 Other regulatory charges (credits) - net 1,517 4,753 (16,832) (14,502) -------- -------- -------- -------- TOTAL 266,294 320,216 673,547 804,352 -------- -------- -------- -------- OPERATING INCOME 50,451 34,302 96,631 80,472 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 899 784 3,044 1,799 Interest and dividend income 777 7,264 3,004 16,516 Miscellaneous - net (363) (639) (1,466) (1,744) -------- -------- -------- -------- TOTAL 1,313 7,409 4,582 16,571 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 9,545 11,745 30,757 35,048 Other interest - net 859 1,039 2,215 3,351 Allowance for borrowed funds used during construction (828) (685) (2,748) (1,548) -------- -------- -------- -------- TOTAL 9,576 12,099 30,224 36,851 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 42,188 29,612 70,989 60,192 Income taxes 15,975 10,864 26,195 21,236 -------- -------- -------- -------- NET INCOME 26,213 18,748 44,794 38,956 Preferred dividend requirements and other 842 555 2,527 2,240 -------- -------- -------- -------- EARNINGS APPLICABLE TO COMMON STOCK $25,371 $18,193 $42,267 $36,716 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $44,794 $38,956 Noncash items included in net income: Other regulatory credits - net (16,832) (14,502) Depreciation and amortization 41,352 36,966 Deferred income taxes and investment tax credits (25,149) (66,707) Allowance for equity funds used during construction (3,044) (1,799) Changes in working capital: Receivables (31,595) (201,114) Fuel inventory (261) (2,042) Accounts payable 13,488 (14,127) Taxes accrued 43,330 81,226 Interest accrued (1,351) 3,370 Deferred fuel costs 63,091 23,844 Other working capital accounts (8,446) 16,765 Provision for estimated losses and reserves 924 (4,100) Changes in other regulatory assets (3,492) 135,154 Other 20,487 31,239 -------- -------- Net cash flow provided by operating activities 137,296 63,129 -------- -------- INVESTING ACTIVITIES Construction expenditures (110,707) (106,273) Allowance for equity funds used during construction 3,044 1,799 Changes in other temporary investments - net 18,566 - -------- -------- Net cash flow used in investing activities (89,097) (104,474) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 69,620 Retirement of long-term debt (65,000) - Dividends paid: Common stock (19,300) (17,300) Preferred stock (2,527) (2,527) -------- -------- Net cash flow provided by (used in) financing activities (86,827) 49,793 -------- -------- Net increase (decrease) in cash and cash equivalents (38,628) 8,448 Cash and cash equivalents at beginning of period 54,048 5,113 -------- -------- Cash and cash equivalents at end of period $15,420 $13,561 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $32,344 $33,114 See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $15,420 $12,883 Temporary cash investments - at cost, which approximates market - 41,165 ---------- ---------- Total cash and cash equivalents 15,420 54,048 ---------- ---------- Other temporary investments - 18,566 Accounts receivable: Customer 72,905 50,370 Allowance for doubtful accounts (1,044) (1,044) Associated companies 17,272 14,201 Other 5,281 2,892 Accrued unbilled revenues 33,900 30,300 ---------- ---------- Total accounts receivable 128,314 96,719 ---------- ---------- Deferred fuel costs 43,067 106,158 Accumulated deferred income taxes 5,696 - Fuel inventory - at average cost 5,085 4,824 Materials and supplies - at average cost 18,742 16,896 Prepayments and other 3,160 8,521 ---------- ---------- TOTAL 219,484 305,732 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 5,531 5,531 Non-utility property - at cost (less accumulated depreciation) 6,626 6,723 ---------- ---------- TOTAL 12,157 12,254 ---------- ---------- UTILITY PLANT Electric 2,031,545 1,939,182 Property under capital lease 184 211 Construction work in progress 114,698 110,450 ---------- ---------- TOTAL UTILITY PLANT 2,146,427 2,049,843 Less - accumulated depreciation and amortization 768,413 741,892 ---------- ---------- UTILITY PLANT - NET 1,378,014 1,307,951 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 23,688 22,387 Unamortized loss on reacquired debt 13,044 13,925 Other regulatory assets 15,694 13,503 Other 5,991 7,274 ---------- ---------- TOTAL 58,417 57,089 ---------- ---------- TOTAL ASSETS $1,668,072 $1,683,026 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $190,000 $65,000 Accounts payable: Associated companies 53,534 45,554 Other 32,891 27,383 Customer deposits 32,309 29,421 Taxes accrued 74,814 31,484 Accumulated deferred income taxes - 19,277 Interest accrued 16,316 17,667 Obligations under capital leases 38 36 System Energy refund - 14,836 Other 1,951 1,964 ---------- ---------- TOTAL 401,853 252,622 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 270,779 266,498 Accumulated deferred investment tax credits 16,850 17,908 Obligations under capital leases 146 175 Accumulated provisions 8,551 7,627 Other 36,150 37,678 ---------- ---------- TOTAL 332,476 329,886 ---------- ---------- Long-term debt 400,020 589,762 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 50,381 50,381 Common stock, no par value, authorized 15,000,000 shares; issued and outstanding 8,666,357 shares in 2002 and 2001 199,326 199,326 Capital stock expense and other (59) (59) Retained earnings 284,075 261,108 ---------- ---------- TOTAL 533,723 510,756 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,668,072 $1,683,026 ========== ========== See Notes to Financial Statements.
ENTERGY MISSISSIPPI, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 133.7 $ 147.6 ($13.9) (9) Commercial 94.4 106.5 (12.1) (11) Industrial 44.7 55.8 (11.1) (20) Governmental 7.8 9.1 (1.3) (14) ------------------------------- Total retail 280.6 319.0 (38.4) (12) Sales for resale Associated companies 25.9 26.9 (1.0) (4) Non-associated companies 5.1 7.8 (2.7) (35) Other 5.1 0.8 4.3 538 ------------------------------- Total $ 316.7 $ 354.5 ($37.8) (11) =============================== Billed Electric Energy Sales (GWH): Residential 1,748 1,655 93 6 Commercial 1,358 1,300 58 4 Industrial 774 794 (20) (3) Governmental 106 106 - - ------------------------------- Total retail 3,986 3,855 131 3 Sales for resale Associated companies 483 423 60 14 Non-associated companies 66 117 (51) (44) ------------------------------- Total 4,535 4,395 140 3 =============================== Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 292.3 $ 317.6 ($25.3) (8) Commercial 234.6 255.0 (20.4) (8) Industrial 122.3 146.3 (24.0) (16) Governmental 21.5 23.7 (2.2) (9) ------------------------------- Total retail 670.7 742.6 (71.9) (10) Sales for resale Associated companies 58.2 109.6 (51.4) (47) Non-associated companies 12.6 17.4 (4.8) (28) Other 28.7 15.2 13.5 89 ------------------------------- Total $ 770.2 $ 884.8 ($114.6) (13) =============================== Billed Electric Energy Sales (GWH): Residential 3,960 3,907 53 1 Commercial 3,368 3,299 69 2 Industrial 2,151 2,279 (128) (6) Governmental 285 289 (4) (1) ------------------------------- Total retail 9,764 9,774 (10) - Sales for resale Associated companies 1,091 1,755 (664) (38) Non-associated companies 163 225 (62) (28) ------------------------------- Total 11,018 11,754 (736) (6) =============================== ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income increased for the three months ended September 30, 2002 primarily due to an increase in the price applied to unbilled revenue, increased electricity usage in the service territory, decreased other operation and maintenance expenses, and decreased other regulatory charges, slightly offset by decreased interest income. Net income increased for the nine months ended September 30, 2002 primarily due to increased electricity usage in the service territory and an increase in the price applied to unbilled revenue. The increase was partially offset by accruals for potential rate actions and refunds, decreased interest income, and decreased net gas revenue. Revenues and Sales Electric operating revenues The changes in electric operating revenues for the three and nine months ended September 30, 2002 compared with 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 differences ($1.1) ($4.6) Fuel cost recovery (17.6) (93.1) Sales volume/weather 2.8 6.5 Unbilled revenue 4.6 3.5 Other revenue 0.3 (5.8) Sales for resale 0.9 (7.2) ------ ------- Total ($10.1) ($100.7) ====== ======= Fuel cost recovery Entergy New Orleans is allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric rates, recorded as fuel cost recovery revenues. The difference between revenues collected and current fuel and purchased power costs is recorded as deferred fuel costs on Entergy New Orleans' financial statements such that these costs generally have no net effect on earnings. Fuel cost recovery revenues decreased for the three and nine months ended September 30, 2002 primarily due to lower fuel factors resulting from decreases in the market prices of natural gas and purchased power. Sales volume/weather Higher electric sales volume increased revenues for the three and nine months ended September 30, 2002 primarily due to increased usage of 63 GWH and 136 GWH, respectively, in the residential and commercial sectors after adjusting for the weather effect. ENTERGY NEW ORLEANS, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Unbilled revenue As discussed in Note 1 to the financial statements in the Form 10-K, unbilled revenues are estimated monthly and are reversed the following month. Unbilled revenue for the three months ended September 30, 2002 and 2001 includes the reversal of the estimates for June 2002 and June 2001, respectively. The increase for the three months ended September 30, 2002 compared to the three months ended September 30, 2001 is due to more favorable volume in September 2002 and the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in June 2001 caused by higher fuel rates. Unbilled revenue for the nine months ended September 30, 2002 and 2001 includes the reversal of the estimates for December 2001 and December 2000, respectively. The increase in unbilled revenue for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001 is due to more favorable volume in September 2002 and the effect on the unbilled calculation for the 2001 period of higher unbilled revenue in December 2000 caused by higher fuel rates. Other revenue Other revenue decreased for the nine months ended September 30, 2002 primarily due to accruals for potential rate actions and refunds. Sales for resale Sales for resale decreased for the nine months ended September 30, 2002 primarily due to a decrease in the average price of resale energy coupled with a decrease in net generation resulting in less energy available for resale. Gas operating revenues Gas operating revenues decreased for the nine months ended September 30, 2002 primarily due to the decreased market price of natural gas coupled with decreased sales volume. Expenses Fuel and purchased power Fuel and purchased power expenses decreased for the three months ended September 30, 2002 primarily due to the decreased market price of purchased power, partially offset by a slight increase in the price of natural gas. Fuel and purchased power expenses decreased for the nine months ended September 30, 2002 primarily due to the decreased market prices of natural gas and purchased power. ENTERGY NEW ORLEANS, 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, 2002 primarily due to decreases in: o plant maintenance expense of $1.7 million; o maintenance overhead line expense of $0.9 million due to decreased vegetation work; and o uncollectible accounts expense for miscellaneous accounts receivable of $1.0 million. The decreases were partially offset by an increase in rate proceedings costs of $1.0 million. Taxes other than income taxes Taxes other than income taxes decreased for the nine months ended September 30, 2002 primarily due to a decrease in local franchise taxes as a result of lower retail revenue. Other regulatory charges - net Other regulatory charges decreased for the three months ended September 30, 2002 primarily due to the completion of the Grand Gulf 1 Rate Deferral Plan in September 2001. Other Other income Other income decreased for the three and nine months ended September 30, 2002 primarily due to interest recorded in the first half of 2001 on deferred System Energy costs that Entergy New Orleans was not recovering through rates. The deferral of these costs ceased in the third quarter of 2001 as a result of a final FERC order. See Note 2 to the financial statements in the Form 10-K for further discussion of the System Energy rate proceeding and FERC order. Interest and other charges Other interest expense increased for the nine months ended September 30, 2002 primarily due to interest recorded for potential rate actions and refunds. Income taxes The effective income tax rate for the three months ended September 30, 2002 was 41.0%. There was no meaningful effective income tax rate for the three months ended September 30, 2001 as a result of the net loss generated, while book and tax timing differences caused income tax expense for the period. The effective income tax rate for the nine months ended September 30, 2002 and 2001 were 45.1% and 46.5%, respectively.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF OPERATIONS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $144,373 $154,462 $322,061 $422,751 Natural gas 13,044 12,675 59,725 108,710 -------- -------- -------- -------- TOTAL 157,417 167,137 381,786 531,461 -------- -------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 61,002 46,139 111,470 206,826 Purchased power 37,811 74,067 118,632 181,393 Other operation and maintenance 22,224 24,575 67,336 67,151 Taxes other than income taxes 11,902 12,424 30,329 37,418 Depreciation and amortization 7,088 6,372 20,822 18,879 Other regulatory charges (credits) - net (1,893) 907 2,438 3,550 -------- -------- -------- -------- TOTAL 138,134 164,484 351,027 515,217 -------- -------- -------- -------- OPERATING INCOME 19,283 2,653 30,759 16,244 -------- -------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 529 535 1,421 1,386 Interest and dividend income 58 1,875 421 4,036 Miscellaneous - net (195) (314) (1,031) (1,461) -------- -------- -------- -------- TOTAL 392 2,096 811 3,961 -------- -------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 4,469 4,661 13,405 13,229 Other interest - net (26) 734 3,974 1,545 Allowance for borrowed funds used during construction (539) (473) (1,406) (1,179) -------- -------- -------- -------- TOTAL 3,904 4,922 15,973 13,595 -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 15,771 (173) 15,597 6,610 Income taxes 6,464 135 7,031 3,073 -------- -------- -------- -------- NET INCOME (LOSS) 9,307 (308) 8,566 3,537 Preferred dividend requirements and other 241 241 724 724 -------- -------- -------- -------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $9,066 ($549) $7,842 $2,813 ======== ======== ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $8,566 $3,537 Noncash items included in net income: Other regulatory charges - net 2,438 3,550 Depreciation and amortization 20,822 18,879 Deferred income taxes and investment tax credits (2,295) (43,474) Allowance for equity funds used during construction (1,421) (1,386) Changes in working capital: Receivables (5,998) (90,495) Fuel inventory (265) 1,148 Accounts payable (585) (21,707) Taxes accrued - 44,901 Interest accrued (4,004) (3,145) Deferred fuel costs 1,854 30,616 Other working capital accounts (24,275) 37,000 Provision for estimated losses and reserves (1,268) (2,234) Changes in other regulatory assets 12 33,334 Other 4,488 6,630 ------- ------- Net cash flow provided by (used in) operating activities (1,931) 17,154 ------- ------- INVESTING ACTIVITIES Construction expenditures (42,863) (44,286) Allowance for equity funds used during construction 1,421 1,386 Changes in other temporary investments - net 14,859 (100) ------- ------- Net cash flow used in investing activities (26,583) (43,000) ------- ------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt - 29,763 Dividends paid: Common stock (700) (800) Preferred stock (724) (724) ------- ------- Net cash flow provided by (used in) financing activities (1,424) 28,239 ------- ------- Net increase (decrease) in cash and cash equivalents (29,938) 2,393 Cash and cash equivalents at beginning of period 38,184 6,302 ------- ------- Cash and cash equivalents at end of period $8,246 $8,695 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $20,987 $17,536 See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $8,246 $5,237 Temporary cash investments - at cost, which approximates market - 32,947 -------- -------- Total cash and cash equivalents 8,246 38,184 -------- -------- Other temporary investments - 14,859 Accounts receivable: Customer 42,147 33,827 Allowance for doubtful accounts (2,234) (2,234) Associated companies 480 10,527 Other 5,698 4,511 Accrued unbilled revenues 26,565 20,027 -------- -------- Total accounts receivable 72,656 66,658 -------- -------- Accumulated deferred income taxes 5,736 4,882 Fuel inventory - at average cost 3,346 3,081 Materials and supplies - at average cost 7,816 8,273 Prepayments and other 25,964 26,239 -------- -------- TOTAL 123,764 162,176 -------- -------- OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity 3,259 3,259 -------- -------- UTILITY PLANT Electric 619,200 597,575 Natural gas 147,628 142,741 Construction work in progress 52,579 43,166 -------- -------- TOTAL UTILITY PLANT 819,407 783,482 Less - accumulated depreciation and amortization 408,991 396,535 -------- -------- UTILITY PLANT - NET 410,416 386,947 -------- -------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Unamortized loss on reacquired debt 602 761 Other regulatory assets 10,831 10,843 Other 1,944 2,051 -------- -------- TOTAL 13,377 13,655 -------- -------- TOTAL ASSETS $550,816 $566,037 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $25,000 $ - Accounts payable: Associated companies 14,762 18,199 Other 26,492 23,640 Customer deposits 19,226 18,931 Interest accrued 3,028 7,032 Deferred fuel costs 12,050 10,196 System Energy Refund - 33,614 Other 10,111 1,799 -------- -------- TOTAL 110,669 113,411 -------- -------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 18,094 25,326 Accumulated deferred investment tax credits 5,006 5,361 SFAS 109 regulatory liability - net 27,745 19,868 Accumulated provisions 4,534 5,802 Other 22,415 16,735 -------- -------- TOTAL 77,794 73,092 -------- -------- Long-term debt 204,165 229,097 SHAREHOLDERS' EQUITY Preferred stock without sinking fund 19,780 19,780 Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2002 and 2001 33,744 33,744 Paid-in capital 36,294 36,294 Retained earnings 67,762 60,619 Accumulated other comprehensive income 608 - -------- -------- TOTAL 158,188 150,437 -------- -------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $550,816 $566,037 ======== ======== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME (LOSS) For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $59,396 $67,940 Add - Earnings (Loss) applicable to common stock 9,066 $9,066 (549) ($549) Deduct: Dividends declared on common stock 700 800 Capital stock and other expenses - (1) ------- ------- Total 700 799 ------- ------- Retained Earnings - End of period $67,762 $66,592 ======= ======= ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $ - $ - Net derivative instrument fair value changes arising during the period 608 608 - - ------- ------ ------- ------ Balance at end of period: Accumulated derivative instrument fair value changes $608 $ - ======= ------ ======= ------ Comprehensive Income (Loss) $9,674 ($549) ====== ====== Nine Months Ended 2002 2001 (In Thousands) RETAINED EARNINGS Retained Earnings - Beginning of period $60,619 $64,579 Add - Earnings applicable to common stock 7,842 $7,842 2,813 $2,813 Deduct: Dividends declared on common stock 700 800 Capital stock and other expenses (1) - ------- ------- Total 699 800 ------- ------- Retained Earnings - End of period $67,762 $66,592 ======= ======= ACCUMULATED OTHER COMPREHENSIVE INCOME (Net of Taxes): Balance at beginning of period: Accumulated derivative instrument fair value changes $ - $ - Net derivative instrument fair value changes arising during the period 608 608 - - ------- ------ ------- ------ Balance at end of period: Accumulated derivative instrument fair value changes $608 $ - ======= ------ ======= ------ Comprehensive Income $8,450 $2,813 ====== ====== See Notes to Financial Statements.
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 65.3 $ 70.2 ($4.9) (7) Commercial 47.5 53.8 (6.3) (12) Industrial 7.7 8.9 (1.2) (13) Governmental 20.0 23.5 (3.5) (15) -------------------------------- Total retail 140.5 156.4 (15.9) (10) Sales for resale Associated companies 2.0 0.7 1.3 186 Non-associated companies 0.9 1.3 (0.4) (31) -------------------------------- Other 1.0 (3.9) 4.9 126 Total $ 144.4 $ 154.5 ($10.1) (7) ================================ Billed Electric Energy Sales (GWH): Residential 762 721 41 6 Commercial 651 633 18 3 Industrial 118 117 1 1 Governmental 298 293 5 2 -------------------------------- Total retail 1,829 1,764 65 4 Sales for resale Associated companies 46 9 37 411 Non-associated companies 7 21 (14) (67) -------------------------------- Total 1,882 1,794 88 5 ================================ Nine Months Ended Increase/ Description 2002 2001 (Decrease) % (In Millions) Electric Operating Revenues: Residential $ 129.5 $ 157.0 ($27.5) (18) Commercial 113.0 150.7 (37.7) (25) Industrial 17.6 25.7 (8.1) (32) Governmental 47.4 65.3 (17.9) (27) -------------------------------- Total retail 307.5 398.7 (91.2) (23) Sales for resale Associated companies 3.2 9.3 (6.1) (66) Non-associated companies 1.9 3.0 (1.1) (37) Other 9.5 11.8 (2.3) (19) -------------------------------- Total $ 322.1 $ 422.8 ($100.7) (24) ================================ Billed Electric Energy Sales (GWH): Residential 1,669 1,576 93 6 Commercial 1,710 1,665 45 3 Industrial 303 313 (10) (3) Governmental 788 768 20 3 -------------------------------- Total retail 4,470 4,322 148 3 Sales for resale Associated companies 77 99 (22) (22) Non-associated companies 27 48 (21) (44) -------------------------------- Total 4,574 4,469 105 2 ================================
SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net Income Net income decreased for the three and nine months ended September 30, 2002 compared with the three and nine months ended September 30, 2001 primarily due to the effects in 2001 of the final resolution of System Energy's 1995 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 increased for the three and nine months ended September 30, 2002 primarily due to the absence of the provision for rate refund in 2002 due to the final resolution of System Energy's 1995 rate proceeding in 2001. For the nine months ended September 30, 2002, the increase was partially offset by a decrease in operating revenues as a result of the suspension of the GGART for Entergy Arkansas in July 2001. The net income impact of the suspended tariff is substantially offset in other regulatory charges. See further discussion of the System Energy rate proceeding and the GGART in Note 2 to the financial statements in the Form 10-K. Expenses Nuclear refueling outage expenses Nuclear refueling outage expenses decreased for the nine months ended September 30, 2002 due to lower monthly amortization of outage expenses resulting from lower expenses incurred during the April/May 2001 refueling and maintenance outage compared to the previous outage. Other operation and maintenance Other operation and maintenance expenses increased for the three months ended September 30, 2002 primarily due to: o an increase in payroll accruals of $1.2 million; o an increase in expense of $0.8 million to reflect the current estimate of the liability for the future disposal of low-level radioactive waste materials; and o an increase in employee pension and benefits expense of $0.7 million. Other operation and maintenance expenses increased for the nine months ended September 30, 2002 primarily due to: o lower nuclear insurance refunds of $1.7 million; o an increase in outside services employed of $1.5 million; o an increase in payroll accruals of $1.3 million; and o an increase in employee pension and benefits expense of $1.3 million. SYSTEM ENERGY RESOURCES, INC. MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Decommissioning Decommissioning expenses increased for the three and nine months ended September 30, 2002 primarily due to the effects in 2001 of the final FERC order addressing System Energy's rate proceeding. Depreciation and amortization Depreciation and amortization expenses increased for the three and nine months ended September 30, 2002 primarily due to the effects in 2001 of the final FERC order addressing System Energy's rate proceeding. Other regulatory charges - net Other regulatory charges decreased for the nine months ended September 30, 2002 primarily due to the suspension of the GGART for Entergy Arkansas in July 2001. Other Other income Interest income decreased for the three and nine months ended September 30, 2002 due to interest recognized in 2001 on decommissioning funds resulting from the final FERC order addressing System Energy's rate proceeding combined with a decrease in interest earned on System Energy's investments in the money pool due to lower advances to the money pool in 2002 compared to the same period in 2001. Interest and other charges Interest on long-term debt increased for the three months ended September 30, 2002 primarily due to an increase in interest expense related to the sale-leaseback of Grand Gulf 1. Interest on long-term debt decreased for the nine months ended September 30, 2002 primarily due to the retirement of $135 million of long-term debt in August 2001, partially offset by an increase in interest expense related to the sale-leaseback of Grand Gulf 1. Other interest expense decreased for the three and nine months ended September 30, 2002 due to interest recorded in 2001 on System Energy's reserve for rate refund. The refund was made in December 2001. Income taxes The effective income tax rates for the three months ended September 30, 2002 and 2001 were 43.0% and 0%, respectively. The effective income tax rates for the nine months ended September 30, 2002 and 2001 were 42.2% and 30.6%, respectively. The increases in the effective tax rates in 2002 were due to the effects of the final resolution of System Energy's 1995 rate proceeding on the 2001 effective tax rates.
SYSTEM ENERGY RESOURCES, INC. INCOME STATEMENTS For the Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands) (In Thousands) OPERATING REVENUES Domestic electric $156,930 $66,276 $442,152 $370,343 -------- ------- -------- -------- OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 7,839 9,092 26,805 26,985 Nuclear refueling outage expenses 2,617 2,627 7,855 10,648 Other operation and maintenance 27,253 23,927 69,508 61,735 Decommissioning 4,013 (26,738) 12,041 (17,266) Taxes other than income taxes 7,082 6,177 20,659 19,345 Depreciation and amortization 29,502 (44,435) 81,544 12,273 Other regulatory charges - net 13,610 11,720 39,664 50,842 -------- ------- -------- -------- TOTAL 91,916 (17,630) 258,076 164,562 -------- ------- -------- -------- OPERATING INCOME 65,014 83,906 184,076 205,781 -------- ------- -------- -------- OTHER INCOME Allowance for equity funds used during construction 741 544 1,991 1,298 Interest and dividend income 889 13,612 1,978 23,455 Miscellaneous - net (45) (17) (435) (65) -------- ------- -------- -------- TOTAL 1,585 14,139 3,534 24,688 -------- ------- -------- -------- INTEREST AND OTHER CHARGES Interest on long-term debt 21,223 16,032 51,874 53,799 Other interest - net 662 44,728 2,165 62,364 Allowance for borrowed funds used during construction (261) (251) (740) (612) -------- ------- -------- -------- TOTAL 21,624 60,509 53,299 115,551 -------- ------- -------- -------- INCOME BEFORE INCOME TAXES 44,975 37,536 134,311 114,918 Income taxes 19,335 (257) 56,694 35,125 -------- ------- -------- -------- NET INCOME $25,640 $37,793 $77,617 $79,793 ======== ======= ======== ======== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (Unaudited) 2002 2001 (In Thousands) OPERATING ACTIVITIES Net income $77,617 $79,793 Noncash items included in net income: Reserve for regulatory adjustments - (322,368) Other regulatory charges - net 39,664 50,842 Depreciation, amortization, and decommissioning 93,585 (4,993) Deferred income taxes and investment tax credits (30,746) 115,981 Allowance for equity funds used during construction (1,991) (1,298) Changes in working capital: Receivables (89,802) 10,421 Accounts payable 20,718 516,329 Taxes accrued 82,240 (68,530) Interest accrued (20,640) (15,704) Other working capital accounts 4,645 (30,088) Provision for estimated losses and reserves (55) (665) Changes in other regulatory assets 28,961 10,929 Other (9,856) (18,502) -------- -------- Net cash flow provided by operating activities 194,340 322,147 -------- -------- INVESTING ACTIVITIES Construction expenditures (31,262) (29,840) Allowance for equity funds used during construction 1,991 1,298 Nuclear fuel purchases (27,590) (37,639) Proceeds from sale/leaseback of nuclear fuel 27,590 37,639 Decommissioning trust contributions and realized change in trust assets (7,867) (14,639) Changes in other temporary investments - net 22,354 (153,157) -------- -------- Net cash flow used in investing activities (14,784) (196,338) -------- -------- FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 69,505 - Retirement of long-term debt (100,891) (151,800) Dividends paid: Common stock (75,000) (65,800) -------- -------- Net cash flow used in financing activities (106,386) (217,600) -------- -------- Net increase (decrease) in cash and cash equivalents 73,170 (91,791) Cash and cash equivalents at beginning of period 49,579 202,218 -------- -------- Cash and cash equivalents at end of period $122,749 $110,427 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest - net of amount capitalized $71,626 $128,588 Income taxes - $3,463 Noncash investing and financing activities: Change in unrealized depreciation of decommissioning trust assets ($13,808) ($6,667) See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS ASSETS September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $57 $15 Temporary cash investments - at cost, which approximates market 122,692 49,564 ---------- ---------- Total cash and cash equivalents 122,749 49,579 ---------- ---------- Other temporary investments - 22,354 Accounts receivable: Associated companies 145,077 70,755 Other 16,673 1,193 ---------- ---------- Total accounts receivable 161,750 71,948 ---------- ---------- Materials and supplies - at average cost 50,273 51,665 Deferred nuclear refueling outage costs 4,491 8,728 Prepayments and other 2,706 1,631 ---------- ---------- TOTAL 341,969 205,905 ---------- ---------- OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 132,605 138,546 ---------- ---------- UTILITY PLANT Electric 3,116,424 3,098,446 Property under capital lease 450,014 450,014 Construction work in progress 45,969 36,868 Nuclear fuel under capital lease 86,005 61,905 ---------- ---------- TOTAL UTILITY PLANT 3,698,412 3,647,233 Less - accumulated depreciation and amortization 1,491,260 1,416,337 ---------- ---------- UTILITY PLANT - NET 2,207,152 2,230,896 ---------- ---------- DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: SFAS 109 regulatory asset - net 148,950 173,470 Unamortized loss on reacquired debt 45,809 48,381 Other regulatory assets 153,508 157,949 Other 8,778 8,894 ---------- ---------- TOTAL 357,045 388,694 ---------- ---------- TOTAL ASSETS $3,038,771 $2,964,041 ========== ========== See Notes to Financial Statements.
SYSTEM ENERGY RESOURCES, INC. BALANCE SHEETS LIABILITIES AND SHAREHOLDER'S EQUITY September 30, 2002 and December 31, 2001 (Unaudited) 2002 2001 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $11,375 $100,891 Accounts payable: Associated companies 6,731 2,404 Other 30,707 14,316 Taxes accrued 194,762 112,522 Accumulated deferred income taxes 729 2,360 Interest accrued 26,455 47,095 Obligations under capital leases 26,503 26,503 Other 1,674 1,583 ---------- ---------- TOTAL 298,936 307,674 ---------- ---------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes 459,706 498,404 Accumulated deferred investment tax credits 83,433 86,040 Obligations under capital leases 59,502 35,401 Other regulatory liabilities 172,203 135,878 Decommissioning 147,970 140,103 Accumulated provisions 650 705 Other 34,429 39,117 ---------- ---------- TOTAL 957,893 935,648 ---------- ---------- Long-term debt 888,644 830,038 SHAREHOLDER'S EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2002 and 2001 789,350 789,350 Retained earnings 103,948 101,331 ---------- ---------- TOTAL 893,298 890,681 ---------- ---------- Commitments and Contingencies TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,038,771 $2,964,041 ========== ========== See Notes to Financial Statements.
ENTERGY CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. COMMITMENTS AND CONTINGENCIES Capital Requirements and Financing (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on Entergy's estimated construction expenditures (including nuclear fuel but excluding AFUDC), which is updated by the following paragraph, long-term debt and preferred stock maturities, and cash sinking fund requirements. ANO 1 Steam Generator and Reactor Vessel Closure Head Replacement (Entergy Corporation and Entergy Arkansas) See "ANO Matters" in Part I of the Form 10-K for discussion of the ANO 1 steam generator and reactor vessel closure head. On July 25, 2002, the Board authorized Entergy Arkansas and Entergy Operations to replace the ANO 1 steam generator and reactor vessel closure head. Entergy management estimates the cost of the fabrication and replacement to be approximately $235 million, of which approximately $135 million will be incurred through 2004. Management expects a contractor for the installation of the replacement steam generator and reactor vessel closure head to be selected by December 2002. Management expects that the replacement will occur during a planned refueling outage in 2005. Entergy Arkansas plans to file in January 2003 a request for a declaratory order by the APSC that the investment in the replacement is in the public interest analogous to the order received in 1998 prior to the replacement of the steam generator for ANO 2. Receipt of an order relating to the replacement at ANO 1 would support the inclusion of these costs in a future general rate case; however, management cannot predict the outcome of either the request for a declaratory order or a general rate proceeding. During a planned refueling outage that began October 4, 2002, visual inspection of the reactor vessel head at ANO 1 revealed one nozzle leak. Further ultrasonic testing showed the presence of seven additional minor indications that could potentially develop into leaks. Entergy Arkansas will make a total of eight repairs during this outage, extending the outage from the original schedule of 30 days to approximately 40 days. Entergy Arkansas has notified the NRC of the inspection findings and reported to the NRC the intended plan to use certain industry-standard procedures for these repairs. The NRC has agreed with the plans. Entergy Arkansas currently expects to incur approximately $8 to $10 million of costs for repairs and management is analyzing the methods available for recovery of these costs. The extended outage will also result in the need to acquire replacement power, which will be obtained either from other Entergy System operating companies or from the wholesale energy market. The purchased power costs will be included in Entergy Arkansas' April 2003 update of its Energy Cost Recovery Rider. Sales Warranties and Indemnities (Entergy Corporation) See Note 9 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Entergy London and CitiPower sales transactions. Regarding the Entergy London sale, Inland Revenue (the United Kingdom's taxing authority) has notified Entergy that no tax liability exists with respect to the sale. Therefore, the notice of claim Entergy received from the Entergy London purchaser has no basis. Regarding the CitiPower sale, in November 2002 the Australian taxing authority assessed CitiPower for taxes for the years 1997 through 1999. Management believes it has adequately provided for the ultimate resolution of this matter. See Note 14 to the financial statements in the Form 10-K for information on certain warranties made by Entergy or its subsidiaries in the Saltend sale transaction. Nuclear Insurance, Spent Nuclear Fuel, and Decommissioning Costs (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) See Note 9 to the financial statements in the Form 10-K for information on nuclear liability, property and replacement power insurance, related NRC regulations, the disposal of spent nuclear fuel, other high-level radioactive waste, and decommissioning costs associated with Entergy's nuclear power plants. Regarding nuclear insurance, the Price-Anderson Act expired on August 1, 2002, and the U.S. Congress is currently considering a number of proposals for its renewal. Entergy's current nuclear operating licenses will not be affected by the expiration, because operating licenses issued prior to August 2002 are not affected by the expiration. In July 2002, Entergy's domestic non-utility nuclear business purchased the Vermont Yankee nuclear power plant from Vermont Yankee Nuclear Power Corporation (VYNPC). Entergy's domestic non-utility nuclear business has accepted assignment of the Vermont Yankee spent fuel disposal contract with the DOE previously held by VYNPC. VYNPC has paid or retained liability for the DOE fees for all generation prior to the purchase date of Vermont Yankee. Vermont Yankee currently has sufficient spent fuel storage capacity until approximately 2007. As part of the Vermont Yankee purchase, VYNPC transferred a $310 million decommissioning trust fund, along with the liability to decommission Vermont Yankee, to Entergy's domestic non-utility nuclear business. Entergy believes that Vermont Yankee's decommissioning trust fund will be adequate to cover future decommissioning costs for the plant without any additional deposits to the trust. Environmental Issues (Entergy Arkansas) In previous years, Entergy Arkansas has received notices from the EPA and the ADEQ alleging that Entergy Arkansas, along with others, may be a potentially responsible party (PRP) for clean-up costs associated with a site in Arkansas. As of September 30, 2002, a remaining recorded liability of approximately $5.0 million existed related to the cleanup of that site. (Entergy Gulf States) Entergy Gulf States has been designated as a PRP for the cleanup of certain hazardous waste disposal sites. Entergy Gulf States is currently negotiating with the EPA and state authorities regarding the cleanup of these sites. As of September 30, 2002, a remaining recorded liability of approximately $13.6 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, 2002 for wastewater upgrades and closures. Completion of this work is awaiting LDEQ approval. City Franchise Ordinances (Entergy New Orleans) Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans' electric and gas utility properties. Waterford 3 Lease Obligations (Entergy Louisiana) On September 28, 1989, Entergy Louisiana entered into three separate but substantially identical transactions for the sale and leaseback of undivided interests (aggregating approximately 9.3%) in Waterford 3, which were refinanced in 1997. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the termination of the lease transactions and may be required to assume the outstanding bonds issued to finance, in part, the lessors' acquisition of the undivided interests in Waterford 3. See Note 10 to the financial statements in the Form 10- K for further information. Off Balance Sheet Turbine Financing Arrangement (Entergy Corporation) As discussed in Note 9 to the financial statements in the Form 10-K, EWO obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special- purpose entity in May 2001. Entergy reacquired from the special- purpose entity the rights to the turbines in April 2002. For the nine months ended September 30, 2002, Entergy recorded a $180.2 million ($117.1 million net of tax) provision for Entergy's estimate of the impairments resulting from cancellation or sale of the turbines subject to purchase commitments with the special-purpose entity. The Consolidated Statements of Income reflects the pre-tax effect of this liability in operation and maintenance expenses. Employment Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies are vigorously defending these suits and deny any liability to the plaintiffs. Nevertheless, no assurance can be given as to the outcome of these cases. Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans) Numerous lawsuits have been filed in federal and state courts in Texas and Louisiana primarily by contractor employees in the 1950- 1980 timeframe against Entergy Gulf States, Entergy Louisiana, and Entergy New Orleans, as premises owners of power plants, for damages caused by alleged exposure to asbestos or other hazardous material. See Note 9 to the financial statements in the Form 10-K for further information. Litigation (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) In addition to those proceedings discussed elsewhere herein and in the Form 10-K, Entergy and the domestic utility companies are involved in a number of other legal proceedings and claims in the ordinary course of their businesses. While management is unable to predict the outcome of these other legal proceedings and claims, it is not reasonably expected that their ultimate resolution individually or collectively will have a material adverse effect on the results of operations, cash flows, or financial condition of these entities. NOTE 2. RATE AND REGULATORY MATTERS Electric Industry Restructuring and the Continued Application of SFAS 71 Previous developments and information related to electric industry restructuring are presented in Note 2 to the financial statements in the Form 10-K. Texas (Entergy Corporation and Entergy Gulf States) Retail open access legislation is in place in Texas, but the implementation of retail open access in Entergy Gulf States' service territory has been delayed. Management does not expect that retail open access in Entergy Gulf States' Texas service territory within the context of a functional FERC-approved RTO is likely to begin before the first quarter of 2004. Several proceedings necessary to implement retail open access are still pending, including the proceeding to set the price-to-beat fuel rate that will be charged by Entergy's retail electric provider. In September 2002, the PUCT granted a motion extending by several months certain filing deadlines established in the December 2001 settlement delaying retail open access. In addition, the LPSC has not approved for the Louisiana jurisdictional operations the transfer of generation assets to, or a power purchase agreement with, Entergy's Texas generation company. Given the delay in implementing retail open access, Entergy Gulf States cannot predict what, if any, additional changes to previously approved plans may be required by the PUCT or the LPSC. Therefore, neither the necessary regulatory actions nor the opportunity for a reasonable determination of the effect of deregulation has occurred that are prerequisites for Entergy Gulf States to discontinue the application of regulatory accounting principles to its Texas generation operations. Retail Rate Proceedings Filings with the APSC (Entergy Corporation and Entergy Arkansas) March 2002 Settlement Agreement As discussed in the Form 10-K, in March 2002, Entergy Arkansas, the APSC staff, and the Arkansas Attorney General submitted a settlement agreement to the APSC for approval. The settlement agreement proposed a resolution of issues discussed in the Form 10-K under "Retail Rates," "Transition Cost Account," and "December 2000 Ice Storm Cost Recovery." In May 2002, the APSC approved the March 2002 settlement agreement without revision. Transition Cost Account In May 2002, Entergy Arkansas filed its 2001 earnings evaluation report with the APSC. In June 2002, the APSC approved a contribution of $5.9 million to the TCA. The balance in the TCA after this contribution was $155.5 million, including interest, through June 2002. A principal provision in the March 2002 settlement agreement was to offset $137.4 million of ice storm recovery costs with the TCA on a rate class basis. In accordance with the settlement agreement and following the APSC's approval of Entergy Arkansas' 2001 earnings review, Entergy Arkansas filed to return $18.1 million of the TCA to certain large general service class customers that paid more into the TCA than their allocation of storm costs. In August 2002, the APSC approved the return of funds to the large general service customer class in the form of refund checks. December 2000 Ice Storm Cost Recovery The March 2002 settlement agreement provisions allowed Entergy Arkansas to offset incremental ice storm expenses with the funds accumulated in the TCA on a rate class basis, and any excess of ice storm costs over the amount available in the TCA would be deferred for recovery. The allocated ice storm expenses exceeded the available TCA funds by $15.8 million. This excess amount was recorded as a regulatory asset in June 2002 and is being amortized over a 30-year period. Fuel Cost Recovery In March 2002, Entergy Arkansas filed its annually redetermined energy cost rate with the APSC, including a new energy allocation factor. The filing reflected a decrease due to reduced fuel and purchased power costs in 2001 and the accumulated over-recovery of 2001 energy costs. The decreased energy cost rate is effective April 2002 through March 2003. In September 2002, Entergy Arkansas filed and the APSC approved an interim revision to the energy cost rate effective October 2002 through March 2003. Entergy Arkansas will reduce the energy cost rate to offset the current and projected over- recovery of fuel and purchased power costs for 2002. The revised energy cost rate will be effective October 2002 through March 2003, when the annual energy cost rate redetermination will be filed for the period from April 2003 through March 2004. Filings with the PUCT and Texas Cities (Entergy Corporation and Entergy Gulf States) Rate Proceedings As discussed in the Form 10-K, in June 1999, the PUCT approved a settlement agreement that Entergy Gulf States entered into in February 1999. This settlement agreement resolved Entergy Gulf States' 1996 and 1998 rate proceedings and all of the settling parties' pending appeals in other matters, except for the appeal in the River Bend abeyed cost recovery proceeding discussed below. The Office of Public Utility Counsel, an intervenor in the proceeding, appealed certain aspects of this settlement to the Travis County District Court in Texas. In August 2002, this appeal was dismissed. Recovery of River Bend Costs In March 1998, the PUCT disallowed recovery of $1.4 billion of company-wide abeyed River Bend plant costs, which have been held in abeyance since 1988. Entergy Gulf States appealed the PUCT's decision on this matter to the Travis County District Court in Texas. In June 1999, subsequent to the settlement agreement discussed in the Form 10-K, Entergy Gulf States removed the reserve for River Bend plant costs held in abeyance and reduced the value of the plant asset. The settlement agreement limits potential recovery of the remaining plant asset to $115 million as of January 1, 2002, less depreciation after that date. In a settlement in its transition to competition proceedings, and consistent with the June 1999 settlement, Entergy Gulf States agreed not to prosecute its appeal until January 1, 2002. Entergy Gulf States also agreed that it will not seek recovery of the abeyed plant costs through any additional charge to Texas ratepayers. In its interim order approving this settlement, however, the PUCT recognized that any additional River Bend investment found prudent, subject to the $115 million cap, could be used as an offset against stranded benefits, should legislation be passed requiring Entergy Gulf States to return stranded benefits to retail customers. In April 2002, the Travis County District Court issued an order affirming the PUCT's order on remand disallowing recovery of the abeyed plant costs. Entergy Gulf States has appealed this ruling to the Third District Court of Appeals. Oral argument is scheduled for November 2002. The financial statement impact of the retail rate settlement agreement on the remaining abeyed plant costs will ultimately depend on several factors, including the possible discontinuance of SFAS 71 accounting treatment for the Texas generation business, the determination of the market value of generation assets, and any future legislation in Texas addressing the pass-through or sharing of any stranded benefits with Texas ratepayers. While Entergy Gulf States expects to prevail in its lawsuit, no assurance can be given that additional reserves or write- offs will not be required in the future. PUCT Fuel Cost Review As determined in the June 1999 retail rate settlement agreement, Entergy Gulf States adopted a methodology for calculating its fixed fuel factor based on the market price of natural gas. This calculation and any necessary adjustments occur semi-annually. The settlement that delayed implementation of retail open access in Texas for Entergy Gulf States provides that Entergy Gulf States will continue the use of this methodology until retail open access begins. The amounts collected under Entergy Gulf States' fixed fuel factor until the date retail open access commences are subject to fuel reconciliation proceedings before the PUCT. The interim surcharges discussed below will also be subject to the fuel reconciliation proceeding. In January 2001, Entergy Gulf States filed a fuel reconciliation case covering the period from March 1999 through August 2000. Entergy Gulf States is reconciling approximately $583.0 million of fuel and purchased power costs. As part of this filing, Entergy Gulf States requested authority to collect $28.0 million, plus interest, of under-recovered fuel and purchased power costs. A hearing on the merits concluded in August 2001, and the ALJ recommended that Entergy Gulf States' request be reduced to $7.0 million. The PUCT considered the ALJ's recommendation in February 2002, but did not reach a final decision at that time. The PUCT remanded certain issues related to the eligibility of costs for Entergy Gulf States' 30% non-regulated share of River Bend for further consideration by the ALJ. After considering the remanded issues, the PUCT decided in August 2002 to reduce Entergy Gulf States' request to approximately $6.3 million, including interest through July 31, 2002. Approximately $4.7 million of the total reduction to the requested surcharge relates to nuclear fuel costs that the PUCT deferred ruling on at this time. The PUCT issued a written order supporting its decisions and has rejected Entergy Gulf States' motion for rehearing challenging that order. In October 2002, Entergy Gulf States appealed the PUCT's final order in Texas District Court. In its appeal, Entergy Gulf States is challenging the PUCT's disallowance of approximately $4.2 million related to imputed capacity costs and its disallowance related to costs for energy delivered from the 30% non-regulated share of River Bend. No assurance can be given as to the final outcome of this proceeding. In November 2001, Entergy Gulf States filed an application with the PUCT requesting an interim surcharge to collect $71 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through September 2001. Entergy Gulf States made the application pursuant to one of the terms of the settlement agreement that delayed implementation of retail open access in Texas for Entergy Gulf States. In March 2002, Entergy Gulf States revised its request to collect $30.3 million, plus interest, of under-recovered fuel and purchased power expenses incurred from September 2000 through February 2002. Entergy Gulf States requested that the surcharge begin in April 2002 and extend through August 2002, or until the fuel cost is fully recovered, whichever is sooner. In March 2002, the PUCT issued an order approving the surcharge. The surcharge was implemented in the first billing cycle of April 2002 and was completed with the last billing cycle of August 2002. In September 2002, Entergy Gulf States filed an application with the PUCT for an interim surcharge to collect $53.9 million, including interest, of under-recovered fuel and purchased power expenses incurred from March 2001 through August 2002. Entergy Gulf States' application contains a request to implement the surcharge over a six- month period beginning January 2003. Certain parties have contested the request. The PUCT staff has recommended that the surcharge period occur over a twelve-month period instead of the six-month period requested. Hearings were held in October 2002. The schedule for the hearing still allows for the implementation to occur by the requested date. No assurance can be given as to the PUCT's decision with respect to the timing or amount of this request. Filings with the LPSC Annual Earnings Reviews (Entergy Corporation and Entergy Gulf States) In May 2001, Entergy Gulf States filed its eighth required post- merger earnings review with the LPSC. This filing is subject to review by the LPSC and may result in a change in rates. In April 2002, the LPSC staff filed testimony recommending a $16.5 million rate refund relating to a prior period and a $40.1 million prospective rate reduction. The prospective reduction includes a recommended reduction in the rate of return on common equity (ROE) to 10.1% that would not take effect until the later of June 2003 or the date of an LPSC order changing the ROE from the current 11.1%. Hearings were held in April 2002 and in August 2002. Entergy Gulf States is awaiting an ALJ recommendation. In May 2002, Entergy Gulf States filed its ninth and last required post-merger earnings analysis with the LPSC. The filing included an earnings review filing for the 2001 test year that resulted in a rate decrease of $11.5 million, which was implemented effective June 2002. The filing also contained a prospective revenue requirement study based on the 2001 test year seeking a prospective rate increase of approximately $21.7 million. Both components of the filing are subject to review by the LPSC and may result in changes in rates other than those sought in the filing. A procedural schedule has been adopted and hearings are scheduled for June 2003. In June 2002, an ALJ issued a proposed prospective recommendation to the LPSC with regard to issues raised in Entergy Gulf States' fifth annual post-merger earnings review. The ALJ recommended adoption of the LPSC Staff's position on most issues, including the recommendation that Entergy Gulf States' authorized ROE be set at 10.0%. However, due to a settlement agreement currently in effect, Entergy Gulf States' currently authorized ROE of 11.1% will remain in effect until the later of June 2003 or the date of an LPSC order changing the current ROE. Entergy Gulf States cannot predict the timing or outcome of this proceeding. A decision has not yet been rendered by the LPSC in the fifth earnings review. Formula Rate Plan Filings (Entergy Corporation and Entergy Louisiana) In May 1997, Entergy Louisiana made its second annual performance-based formula rate plan filing with the LPSC for the 1996 test year. This filing resulted in a rate reduction of approximately $54.5 million, which was implemented in July 1997. At the same time, rates were reduced by an additional $0.7 million and by an additional $2.9 million effective March 1998. Upon completion of the hearing process in December 1998, the LPSC issued an order requiring an additional rate reduction and refund. The resulting amounts were not quantified, although they are expected to be immaterial. Entergy Louisiana appealed this order and obtained a preliminary injunction pending a final decision on appeal. The Louisiana Supreme Court rendered a non-unanimous decision in April 2002 affirming the LPSC's order. Entergy Louisiana has filed with the U.S. Supreme Court an application for writ of certiorari. In May 2000, Entergy Louisiana submitted its fifth annual performance-based formula rate plan filing for the 1999 test year. As a result of this filing, Entergy Louisiana implemented a $24.8 million base rate reduction in August 2000. In September 2001, the LPSC approved a settlement in which Entergy Louisiana agreed to increase to $28.2 million the total base rate reduction, effective August 2000. The additional rate reduction and the associated credit were implemented in September 2001. The settlement resolved all issues in the proceeding except for Entergy Louisiana's claim for an increase in its allowed ROE from 10.5% to 11.6%. A hearing to address the ROE issue was held in March 2002. This issue was resolved in the June 2002 settlement between Entergy Louisiana and the LPSC discussed below. In April 2001, Entergy Louisiana submitted its sixth annual performance-based formula rate plan filing, which used a 2000 test year. The filing indicated that an immaterial base rate reduction might be appropriate. Subsequently, Entergy Louisiana agreed to implement a $3.4 million rate reduction effective August 2001. This stipulation resolved all issues relating to the 2000 test year, except issues relating to its return on common equity and the treatment of certain capacity costs in the formula rate plan process. These issues were addressed in a hearing in June 2002 and were resolved in the settlement discussed below. In June 2002, Entergy Louisiana and the LPSC Staff reached a settlement that resolved all remaining issues in the 2000 and 2001 formula rate plan proceedings. The LPSC approved the settlement in July 2002. Entergy Louisiana agreed to a $5 million rate reduction effective August 2001. The prospective rate reduction was implemented beginning in August 2002 and the refund for the retroactive period occurred in September 2002. As part of the settlement, Entergy Louisiana's current rates, including its previously authorized ROE of 10.5%, remain in effect until changed pursuant to a new formula rate plan filing or a revenue requirement analysis to be filed by June 30, 2003. Filings with the MPSC (Entergy Corporation and Entergy Mississippi) Formula Rate Plan Filings In March 2002, Entergy Mississippi submitted its annual performance-based formula rate plan filing for the 2001 test year. The submittal indicated that a $2.8 million rate increase was appropriate under the formula rate plan. In April 2002, the MPSC Staff and Entergy Mississippi entered into a stipulation, which the MPSC approved, that provided for an increase of $1.95 million effective in May 2002. In August 2002, Entergy Mississippi filed a rate case with the MPSC requesting a $68.8 million rate increase effective January 2003. Entergy Mississippi requested this increase as a result of capital investments and operation and maintenance expenditures necessary to replace and maintain aging electric facilities and to improve reliability and customer service. In October 2002, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation which would result in a $48.2 million rate increase and an ROE of 11.75%. The stipulation endorsed a new power management rider schedule designed to more efficiently collect capacity portions of purchased power costs. Also, the stipulation provides for improvements in the return on equity formula and more robust performance measures for Entergy Mississippi's formula rate plan. Entergy Mississippi will make its next formula rate plan filing during March 2004. A hearing before the MPSC is scheduled for December 2002. Under the Mississippi Public Utilities Act, the MPSC is required to issue its final order in this general rate proceeding by December 16, 2002. Filings with the City Council (Entergy Corporation and Entergy New Orleans) Retail Rate Filings In May 2002, Entergy New Orleans filed a cost of service study and revenue requirement filing with the City Council for the 2001 test year. The filing indicated that a revenue deficiency exists and that a $28.9 million electric rate increase and a $15.3 million gas rate increase are appropriate. Additionally, Entergy New Orleans has proposed a $6.0 million public benefit fund. The City Council has established a procedural schedule for consideration of the filing and hearings are scheduled to begin in April 2003. The procedural schedule provides for the City Council's decision with respect to Entergy New Orleans' filing by June 15, 2003. Natural Gas In a resolution adopted in August 2001, the City Council ordered Entergy New Orleans to account for $36 million of certain natural gas costs charged to its gas distribution customers from July 1997 through May 2001. The resolution suggests that refunds may be due to the gas distribution customers if Entergy New Orleans cannot account satisfactorily for these costs. Entergy New Orleans filed a response to the City Council in September 2001, which is still being evaluated by the City Council. Entergy New Orleans has documented a full reconciliation for the natural gas costs during that period. The ultimate outcome of the proceeding cannot be predicted at this time. Fuel Adjustment Clause Litigation In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the City Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. Entergy filed exceptions to the plaintiffs' allegations, asserting, among other things, that jurisdiction over these issues rests with the City 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 City Council in order to initiate a review by the City Council of the plaintiffs' allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Testimony was filed on behalf of the plaintiffs in this proceeding in April 2000 and has been supplemented. The testimony, as supplemented, asserts, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices and included costs in Entergy New Orleans' fuel adjustment that could have resulted in New Orleans customers being overcharged by more than $100 million over a period of years. In June 2001, the City 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 City Council. Hearings were held in February and March 2002. The parties have submitted post-hearing briefs and the matter has been submitted to the City Council for a decision. In October 2002, the plaintiffs filed a motion to re-open the evidentiary record, or in the alternative, a motion for a new trial seeking to re-open the record to accept certain testimony filed by the City Council advisors in a separate proceeding at the FERC. The ultimate outcome of the lawsuit and the City Council proceeding cannot be predicted at this time. Purchased Power for Summer 2000, 2001, and 2002 (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) The domestic utility companies requested that the APSC, the LPSC, the MPSC, and the City Council approve the sale of power by Entergy Gulf States from its unregulated, undivided 30% interest in River Bend formerly owned by Cajun to the other domestic utility companies during the summer of 2000. These applications were approved subject to subsequent prudence reviews. In addition, Entergy Gulf States and Entergy Louisiana filed an application with the LPSC for authorization to purchase capacity and electric power from third parties for the summer of 2000, and filed a similar application for the summer of 2001. The LPSC approved these applications, with reservation of its rights to review the prudence of the purchases and the appropriate categorization of the costs as either capacity or energy charges for purposes of recovery. The LPSC reviewed the 2000 purchases and found that Entergy Louisiana's and Entergy Gulf States' costs were prudently incurred, but decided that approximately 34% of the costs should be categorized as capacity charges, and therefore should be recovered through base rates and not through the fuel adjustment clause. In November 2000, the LPSC ordered refunds of $11.1 million for Entergy Louisiana and $3.6 million for Entergy Gulf States, for which adequate provisions were made. In May 2001, the LPSC determined that 24% of Entergy Louisiana's and Entergy Gulf States' costs relating to summer 2001 purchases should be categorized as capacity charges, and has reviewed certain prudence issues related to the 2001 purchases. The prudence issues involve approximately $6 million of Entergy Louisiana costs and approximately $5 million of Entergy Gulf States costs. The LPSC has questioned in the prudence review the Entergy system's contract mix and raised issues relating to potential uprates at nuclear facilities. Hearings on those issues were conducted in May 2002 and briefs have been filed by the parties. Those costs that are categorized as capacity charges will be included in the costs of service used to determine the base rates of Entergy Louisiana and Entergy Gulf States. In 2001, these companies recorded a regulatory asset for the capacity charges incurred in both 2000 and 2001. The capacity charges for 2000 were amortized through May 2002 for Entergy Gulf States and through July 2002 for Entergy Louisiana. The capacity charges for 2001 are being amortized over a twelve-month period, which began in June 2002 for Entergy Gulf States and in August 2002 for Entergy Louisiana. In March 2002, Entergy Louisiana and Entergy Gulf States filed an application with the LPSC for the approval of capacity and energy purchases for the summer of 2002 similar to the applications filed for the summers of 2000 and 2001. Entergy Louisiana, Entergy Gulf States, and the LPSC Staff reached a settlement in which those parties agreed that 14% of Entergy Louisiana's and Entergy Gulf States' costs relating to summer 2002 purchases should be categorized as capacity charges. The LPSC approved the settlement at its July 2002 public meeting. Prudence issues relating to summer 2002 purchases were resolved in a settlement approved by the LPSC at its September 2002 open session. The settlement reserves the LPSC's right to reflect for the summer of 2002 the effect of any finding that may be made in the summer 2001 case, discussed above, regarding the prudence of decisions relating to potential uprates at nuclear facilities. No refunds were ordered and all other purchases were found to be prudent. Issues relating to the reasonableness of the long-term planning process were moved into a separate sub-docket. Issues relating to the need for and potential scope of that proceeding are currently under review. System Energy's 1995 Rate Proceeding (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in the Form 10-K, FERC denied requests for rehearing in the System Energy rate increase proceeding and the July 2000 order became final. System Energy made a compliance tariff filing in August 2001 and it was accepted by FERC in November 2001. System Energy made refunds to the domestic utility companies in December 2001. Entergy Arkansas refunded $54.3 million, including interest, through the issuance of refund checks in March 2002 as approved by the APSC. Entergy Mississippi refunded $14.8 million to its customers through credits to the Grand Gulf Riders. The credits began in October 2001 and occurred through September 2002. Entergy New Orleans refunded $27.0 million to its customers through the issuance of refund checks in the first quarter of 2002. Entergy Louisiana refunded $4.9 million, including interest, to its customers through a credit on the September 2002 bills as approved by the LPSC. NOTE 3. COMMON STOCK (Entergy Corporation) The average number of common shares outstanding for the presentation of diluted earnings per share was greater by 3,339,872 and 3,154,478 shares for the three months ended September 30, 2002 and 2001, respectively, and 4,066,732 and 3,871,903 shares for the nine months ended September 30, 2002 and 2001, respectively, than the number of such shares for the presentation of basic earnings per share due to Entergy's stock option and other stock compensation plans discussed more thoroughly in Note 5 to the financial statements in the Form 10-K. The dilutive effect of the stock options on earnings per share for the three months ended September 30, 2002 and 2001 was $.02 for both periods. The dilutive effect of the stock options on earnings per share for the nine months ended September 30, 2002 and 2001 was $.04 and $.05, respectively. During the nine months ended September 30, 2002, Entergy Corporation repurchased 2,516,000 shares of common stock in the open market for an aggregate purchase price of approximately $103.6 million. During the nine months ended September 30, 2002, Entergy Corporation issued 4,046,894 shares of its previously repurchased common stock to satisfy stock option exercises. NOTE 4. LONG-TERM DEBT (Entergy Corporation) As discussed in Note 7 to the financial statements in the Form 10-K, the Damhead Creek credit facility requires that the annual debt service coverage ratio be at least 1.05 to 1 for the previous 12 months at semi-annual dates commencing with June 30, 2002. Given the low electricity prices currently affecting the UK market, Damhead Creek would not have met the annual debt service coverage ratio test in respect of the 12 months ended June 30, 2002, but the lenders amended the facility so that the coverage ratio calculations would not commence until December 31, 2002. In addition, some of the Damhead Creek affiliates are technically insolvent since October 31, 2002, which has caused a default under the credit agreement. Damhead Creek has requested a waiver of this default from the lenders. Damhead Creek is currently in negotiations with the lenders to develop and implement a debt restructuring for the project prior to December 2002. If a debt restructuring agreement cannot be reached prior to December 31, 2002, EPDC may (1) sell its shares in the project to a third party, (2) transfer ownership of the project to the Damhead Creek bank syndicate or (3) ask the bank syndicate to appoint an administrative receiver to the project. There is no requirement for Entergy or EPDC to make additional capital contributions or provide credit support to Damhead Creek, even if there is an occurrence of an event of default. Neither Entergy nor EDPC will make additional capital contributions or provide credit support to Damhead Creek. (Entergy Arkansas) On March 1, 2002, Entergy Arkansas retired, at maturity, $85 million of 7% Series First Mortgage Bonds with internally generated funds. On March 28, 2002, Entergy Arkansas issued $100 million of 6.70% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $85 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds were used to replace a portion of the cash that was used to meet the maturity of the $85 million 7% Series First Mortgage Bonds retired on March 1, 2002 discussed above. (Entergy Gulf States) On January 1, 2002, Entergy Gulf States retired, at maturity, $148 million of 8.21% Series First Mortgage Bonds with proceeds from $300 million of Floating Rate Series First Mortgage Bonds issued on August 22, 2001. On November 7, 2002, Entergy Gulf States issued $200 million of 5.2% Series First Mortgage Bonds due December 3, 2007. The proceeds will be used to retire, at maturity, or to redeem or repurchase prior to maturity, a portion of the $300 million Floating Rate Series First Mortgage Bonds due June 2, 2003. (Entergy Louisiana) On January 1, 2002, Entergy Louisiana retired, at maturity, $23 million of 7.5% Series First Mortgage Bonds. On March 1, 2002, Entergy Louisiana retired, at maturity, $75 million of 5.80% Series First Mortgage Bonds. On March 27, 2002, Entergy Louisiana issued $150 million of 7.60% Series First Mortgage Bonds due April 1, 2032. A portion of the net proceeds was used to satisfy the annual replacement fund requirement under the mortgage relating to the bonds by redeeming $115 million of 8.75% Series First Mortgage Bonds due March 1, 2026. The remaining net proceeds will be used to reduce short-term debt that, among other things, was incurred to meet the maturities of the First Mortgage Bonds discussed above. On June 1, 2002, Entergy Louisiana remarketed $55 million St. Charles Parish Pollution Control Revenue Refunding Bonds due 2030, resetting the interest rate to 4.9% through May 31, 2005. On July 1, 2002, Entergy Louisiana retired, at maturity, $56.4 million of 7.74% Series First Mortgage Bonds with internally generated funds. (Entergy Mississippi) On June 1, 2002, Entergy Mississippi retired, at maturity, $65 million of 6.875% Series First Mortgage Bonds with internally generated funds. On October 22, 2002, Entergy Mississippi issued $75 million of 6% Series First Mortgage Bonds due November 1, 2032. The net proceeds will be used to retire, at maturity, $70 million of 6.25% Series First Mortgage Bonds due February 1, 2003, and a portion of $120 million 7.75% Series First Mortgage Bonds due February 15, 2003. (Entergy New Orleans) On October 18, 2002, Entergy New Orleans issued $25 million of 6.75% Series First Mortgage Bonds due October 15, 2017. The net proceeds will be used to redeem, prior to maturity, $25 million of 7% Series First Mortgage Bonds due March 1, 2003. (System Energy) On September 24, 2002, System Energy issued $70 million of 4.875% Series First Mortgage Bonds due 2007. The net proceeds were used to redeem, on September 30, 2002, $70 million in principal amount of 8.25% Series First Mortgage Bonds that were scheduled to mature on October 1, 2002. NOTE 5. RETAINED EARNINGS (Entergy Corporation) On October 25, 2002, Entergy Corporation's Board of Directors declared a common stock dividend of $0.35 per share, payable on December 1, 2002, to holders of record as of November 12, 2002. NOTE 6. BUSINESS SEGMENT INFORMATION (Entergy Corporation) Entergy's reportable segments as of September 30, 2002 are domestic utility, domestic non-utility nuclear, and energy commodity services. "All Other" includes the parent company, Entergy Corporation, and other business activity, which is principally gains or losses on the sales of businesses and the earnings on the proceeds of those sales. Entergy's segment financial information for the three months ended September 30, 2002 and 2001 is as follows (in thousands):
Domestic Domestic Non- Energy All Eliminations Consolidated Utility Utility Commodity Other* Nuclear* Services* 2002 Operating Revenues $2,057,317 $347,220 $56,078 $8,780 ($520) $2,468,875 Equity in earnings of unconsolidated equity affiliates - - 50,159 - - 50,159 Income Taxes (Benefit) 157,886 49,210 26,163 (4,581) - 228,678 Net Income (Loss) 249,625 73,097 48,283 (4,205) - 366,800 2001 Operating Revenues $2,005,043 $203,783 $362,913 $5,970 ($820) $2,576,889 Equity in earnings of unconsolidated equity affiliates - - 58,414 - - 58,414 Income Taxes (Benefit) 125,218 23,399 44,138 (7,455) - 185,300 Net Income (Loss) 228,523 34,636 67,241 (12,946) - 317,454
Entergy's segment financial information for the nine months ended September 30, 2002 and 2001 is as follows (in thousands): Domestic Domestic Non- Energy All Other* Eliminations Consolidated Utility Utility Commodity Nuclear* Services* 2002 Operating Revenues $5,217,365 $923,187 $258,683 $30,593 ($3,539) $6,426,289 Equity in earnings of unconsolidated equity affiliates - - 142,964 - - 142,964 Income Taxes (Benefit) 359,798 111,120 (107,345) (12,259) - 351,314 Net Income (Loss) 558,651 166,693 (169,083) (14,860) - 541,401 Total Assets 20,174,890 4,405,919 2,388,982 1,057,669 (1,250,467) 26,776,993 2001 Operating Revenues $6,011,105 $533,199 $1,034,451 $26,450 ($3,054) $7,602,151 Equity in earnings of unconsolidated equity affiliates - - 153,957 - - 153,957 Income Taxes (Benefit) 325,951 65,642 78,706 (10,726) - 459,573 Net Income (Loss) 524,116 98,966 115,765 (14,940) - 723,907 Total Assets 20,597,897 3,367,953 2,210,727 878,371 (873,314) 26,181,634
Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Energy commodity services' net loss for the nine months ended September 30, 2002 includes net charges of $391.6 million to operating expenses ($254.2 million net of tax) to reflect the effect of Entergy's decision to discontinue additional EWO greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets in the United States and the United Kingdom. The charges consist of the following: o as discussed in Note 1, $178.0 million of the charges is a provision for the net costs resulting from cancellation or sale of the turbines subject to purchase commitments with a special-purpose entity; o $167.5 million of the charges result from the write-off of EPDC's equity investment in the Damhead Creek project ($55.0 million) and the impairment of the values of the Warren Power power plant, the Crete project, and the RS Cogen project ($112.5 million combined). This portion of the charges reflects Entergy's estimate of the effects of reduced spark spreads in the United States and the United Kingdom. These estimates are based on various sources of information, including discounted cash flow projections and current market prices; o $39.1 million of the charges relate to the restructuring of EWO, including impairments of EWO administrative fixed assets, estimated sublease losses, and employee-related costs for approximately 135 affected employees. These restructuring costs, which are included in the "Provision for turbine commitments, asset impairments and restructuring charges" in the accompanying consolidated statement of income as of September 30, 2002, were comprised of the following (in millions): Restructuring Paid in Non-Cash Remaining Costs Cash Portion Accrual Fixed asset impairments $22.5 - $22.5 - Sublease losses 10.7 $0.4 - $10.3 Severance and related costs 5.9 2.5 - 3.4 ----- ---- ----- ----- Total $39.1 $2.9 $22.5 $13.7 ===== ==== ===== ===== Management expects the restructuring of EWO to be substantially complete by the end of 2002; and o $32.7 million of the charges result from the write-off of capitalized project development costs for projects that will not be completed. The net charges include a gain of $25.7 million ($15.9 million net of tax) on the sale of EWO's interest in projects under development in Spain in August 2002. NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS (Entergy Corporation) As discussed in the Form 10-K, Entergy implemented SFAS 142, "Goodwill and Other Intangible Assets" and SFAS 144, "Accounting for the Impairment or Disposal of Long-lived Assets" effective January 1, 2002. The implementation of SFAS 142 resulted in the cessation of Entergy's amortization of the remaining plant acquisition adjustment recorded in conjunction with its acquisition of Entergy Gulf States; this will increase Entergy's annual net income by approximately $16.3 million. The following table is a reconciliation of reported earnings applicable to common stock to earnings applicable to common stock without goodwill amortization for the three and nine months ended September 30, 2002 and 2001.
Three Months Ended Nine Months Ended 2002 2001 2002 2001 (In Thousands, Except Share Data) Reported earnings applicable to common stock $360,876 $312,484 $523,605 $705,544 Add back: Goodwill amortization - 4,066 - 12,199 -------- -------- -------- -------- Adjusted earnings applicable to common stock without goodwill amortization $360,876 $316,550 $523,605 $717,743 ======== ======== ======== ======== Basic earnings per average common share: Reported earnings applicable to common stock $1.61 $1.41 $2.34 $3.19 Goodwill amortization - 0.02 - 0.06 -------- -------- -------- -------- Adjusted earnings applicable to common stock without goodwill amortization $1.61 $1.43 $2.34 $3.25 ======== ======== ======== ======== Diluted earnings per average common share: Reported earnings applicable to common stock $1.59 $1.39 $2.30 $3.14 Goodwill amortization - 0.02 - 0.05 -------- -------- -------- -------- Adjusted earnings applicable to common stock without goodwill amortization $1.59 $1.41 $2.30 $3.19 ======== ======== ======== ========
NOTE 8. ACQUISITIONS (Entergy Corporation) In July 2002, Entergy's domestic non-utility nuclear business acquired the 510 MW Vermont Yankee nuclear power plant located in Vernon, Vermont, from Vermont Yankee Nuclear Power Corporation (VYNPC). Entergy paid approximately $180 million in cash at the closing of the purchase and received the plant, nuclear fuel, inventories, and related real estate. As part of the Vermont Yankee purchase, VYNPC transferred a $310 million decommissioning trust fund, along with the liability to decommission Vermont Yankee, to Entergy. The acquisition included a 10-year power purchase agreement (PPA) under which the former owners will buy the power produced by the plant. 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. The acquisition was accounted for using the purchase method. The results of operations of Vermont Yankee subsequent to the purchase date have been included in Entergy's consolidated results of operations. The Vermont Yankee 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 the final allocation may differ, although management does not expect the difference to be material. NOTE 9. EQUITY METHOD INVESTMENTS (Entergy Corporation) See Note 13 to the financial statements in the Form 10-K for a discussion of Entergy's equity method investments. In the first quarter of 2002, EWO sold its interests in projects in Argentina, Chile, and Peru, including Generandes Peru S.A. and Compania Electrica San Isidro S.A. EWO had $100.8 million reflected in "Investments in affiliates - at equity" for these investments as of December 31, 2001, and reported $11.6 million of "Equity in earnings of unconsolidated equity affiliates" from these investments for the year ended December 31, 2001. After impairment provisions recorded for these interests in 2001, the net loss realized on the sale in the first quarter of 2002 is insignificant. Approximately $66 million of cumulative translation adjustments were realized in the sale. As discussed in Note 6 to the financial statements, in the first and second quarters of 2002, Entergy recorded a total impairment of $78.3 million against the book value of its investments in Crete Energy Ventures, LLC and RS Cogen LLC. __________________________________ In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. However, the business of the domestic utility companies and System Energy is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year. Item 4. Controls and Procedures Within the 90-day period prior to the filing of this report, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (individually "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of the evaluations, there were no significant changes in the Registrants' internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. ENTERGY CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 1. Legal Proceedings See "PART I, Item 1, Other Regulation and Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Murphy Oil Lawsuit (Entergy Corporation and Entergy Louisiana) Residents located near the Murphy Oil Refinery in Meraux, Louisiana filed several lawsuits in state court in St. Bernard Parish, Louisiana against Murphy Oil, Entergy Louisiana, and others for injuries they allegedly suffered as a result of an explosion at the refinery in June 1995. The lawsuits were consolidated and a class of plaintiffs was certified. Plaintiffs alleged, among other things, that an electrical fault at an Entergy Louisiana substation contributed to causing the explosion. Murphy Oil filed a cross-claim against Entergy Louisiana based on the same allegation, in which Murphy Oil seeks recovery of any damages it has paid to the plaintiffs. Claiborne P. Deming, who became a director of Entergy Corporation in 2002, is the President and Chief Executive Officer of Murphy Oil. Murphy Oil and other defendants settled with the plaintiffs for $8.8 million, but Entergy Louisiana did not participate in the settlement. Entergy Louisiana believes the claims against it are without merit and is vigorously defending itself. Entergy Louisiana also has insurance in place for claims of this type. A trial date for the remaining parties in the proceeding has been set for September 2003. Franchise Fee Litigation (Entergy Gulf States) See "Franchise Fee Litigation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation with the City of Nederland. By agreement of the parties, an order abating the case has been entered. Fiber Optic Cable Litigation (Entergy Corporation, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi) See "Fiber Optic Cable Litigation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation pertaining to the alleged installment by defendants of fiber optic cable across plaintiffs' property without obtaining appropriate easements. In June 2002, a class action lawsuit was filed by two defendants in the United States District Court of the Northern District of Mississippi against Entergy Mississippi, purportedly on behalf of others similarly situated, alleging that Entergy Mississippi installed fiber optic cable across their property without obtaining the appropriate easement. The plaintiffs seek declaratory relief and an unspecified amount of damages, including punitive damages. Entergy Mississippi filed a motion to dismiss in September 2002, contending that it has no fiber optic cables attached to its facilities and has not authorized any party to place fiber optic facilities on or under its right of way on the property in question. Entergy Mississippi intends to vigorously defend the lawsuit. At this time, management cannot determine the specific amount of damages being sought. Franchise Service Area Litigation (Entergy Gulf States) See "Franchise Service Area Legislation" in Item 1 of Part I of the Form 10-K for a discussion of the litigation with Beaumont Power & Light (BP&L). In September 2002, the PUCT denied BP&L's application. BP&L did not file a timely motion for rehearing, and the proceeding has ended. Ratepayer Lawsuits (Entergy Corporation and Entergy Gulf States) See "Entergy Gulf States Merger Savings Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the litigation filed by ratepayers against Entergy Gulf States and Entergy Corporation. The district court has denied Entergy Gulf States' and Entergy Corporation's motions to transfer venue and to dismiss or abate on the basis of the PUCT's jurisdiction over this matter. In September 2002, Entergy Gulf States and Entergy Corporation sought mandamus relief at the Ninth District Court of Appeals. Proceedings have been stayed in the district court pending the decision in the mandamus application. (Entergy Louisiana) See "Vidalia Project Sub-Docket" in Item 1 of Part I of the Form 10-K for a discussion of the proceeding in which the LPSC was reviewing several issues related to the contract entered into by Entergy Louisiana to purchase energy generated by the Vidalia project. The LPSC has approved a settlement of the proceeding and has concluded the Vidalia project subdocket. The settlement is based on Entergy Louisiana sharing with Entergy Louisiana customers a portion of the benefits of a tax deduction that became available when Entergy Louisiana elected to mark the Vidalia contract to market for tax accounting purposes. The tax benefit sharing is described in more detail in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - LIQUIDITY AND CAPITAL RESOURCES" under the heading "Entergy Louisiana Tax Accounting Election." Three of the issues listed in the Form 10- K disclosure as part of the proceeding are not addressed by the settlement, but there is no proceeding pending before the LPSC at this time to consider them. Those issues are: (i) the LPSC's jurisdiction over the Vidalia project; (ii) the appropriateness of Entergy Louisiana's recovery of 100% of the Vidalia contract costs from customers; and (iii) the appropriate regulatory treatment of the Vidalia contract in the event the LPSC approves implementation of retail competition. (Entergy New Orleans) See "Entergy New Orleans Rate of Return Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the litigation filed by ratepayers against Entergy New Orleans. The hearing scheduled for June 2002 was postponed and the proceeding has been continued without a proposed trial date. Street Lighting Lawsuit (Entergy New Orleans) See "Street Lighting Lawsuit" in Item 1 of Part I of the Form 10-K for a discussion of the lawsuit filed by the City of New Orleans alleging that Entergy New Orleans breached its obligations to the City related to the provision of street lighting maintenance services. After mediation, the City dismissed its lawsuit with prejudice on October 28, 2002, and any amounts that might be owed by Entergy New Orleans will be determined by an independent third party audit. Management believes that Entergy New Orleans does not owe the City any net amount under the street lighting contract, and therefore does not expect to pay a significant amount to the City after the audit. Item 5. Other Information Environmental Regulation (Entergy Gulf States) The State of Louisiana is implementing emission control strategies to address continued ozone non-attainment status of areas in and around Baton Rouge, Louisiana. In March 2002, the LDEQ issued a final rule for control of NOx as part of the State Implementation Plan (SIP) to bring this area into attainment with the National Ambient Air Quality standards for ozone by 2005. In August 2002, the LDEQ issued a revision to this rule that is expected to lead to installation of new NOx control equipment at Entergy Gulf States generating units. The latest analyses indicate compliance costs at these units may be as much as $12 million in new capital spending. Most of the related expenditures would take place in 2003 and 2004. Cost estimates will be refined as engineering studies progress. Entergy Gulf States will be required to obtain revised operating permits from the LDEQ and meet new, lower emission limits for NOx. In September 2002, the EPA approved revisions to the SIP that address NOx control. On October 2, 2002, the EPA then approved the entire ozone attainment demonstration SIP for the Baton Rouge area. In conjunction with this approval, the EPA also approved Louisiana's transport demonstration and extended the ozone attainment date to November 15, 2005, while retaining the area's current classification as a serious ozone non-attainment area. The EPA withdrew its previous rulemaking that determined non-attainment and reclassification of the Baton Rouge area. Additionally, the EPA found that the Baton Rouge ozone non-attainment area meets the reasonably available control measures requirements of the Clean Air Act; approved the State's enforceable commitment to submit revised emission budgets for the transportation sector; and approved an enforceable transportation control measure. Wholesale Rate Matters (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) As discussed in Part I, Item 1 of the Form 10-K, Entergy is involved in litigation before the FERC and the LPSC regarding production cost equalization under the System Agreement. Negotiations among the parties have not resolved the proceeding before the FERC, and that proceeding is now set for hearing commencing in June 2003. The case had been set for hearing in February 2003, and the extension of the trial date has also extended the refund effective date reported in the Form 10-K by 120 days. In the ex-parte proceeding commenced by the LPSC, the procedural schedule has now been suspended through at least the June 2003 expected hearing date in the FERC proceeding. The LPSC staff has filed testimony suggesting that the remedy for the alleged imprudence of Entergy Louisiana and Entergy Gulf States should be a reduction in allowed rate of return on common equity of 100 basis points. Regional Transmission Organizations (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans) On June 27, 2002, a number of utilities in the southeastern United States, including the domestic utility companies, filed a petition for declaratory order with the FERC, seeking guidance on whether certain aspects of the proposed SeTrans RTO satisfied the FERC's RTO requirements. On October 11, 2002, FERC issued an order granting conditional approval of the central aspects of the SeTrans proposal, including the governance structure, the transmission pricing policy, the business model, and the selection process for the Independent System Administrator. The FERC order states that the FERC will not revisit findings made in the SeTrans docket if inconsistencies exist between those findings and the final rules issued in the standardized market design proceeding discussed immediately below. At the state level, cost-benefit studies of RTO participation have been ordered by the APSC and the LPSC, and the Southeast Association of Regulatory Utility Commissions (SEARUC) requested a cost-benefit study for the entire southeastern United States, including the SeTrans region. The SEARUC study was released on November 7, 2002 and is currently being analyzed by Entergy management. Both the FERC order and the SEARUC cost-benefit study will be discussed at the SeTrans Stakeholder Advisory Committee meeting scheduled for November 14, 2002. FERC Notice of Proposed Rulemaking (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) On July 31, 2002, FERC issued a notice of proposed rulemaking to establish a standardized transmission service and wholesale electric market design. The proposed rules would o establish a network access transmission service applicable to all transmission users; o require utilities to take the transmission component of bundled transmission service under an open access transmission tariff; o require transmission facilities to be operated by an independent transmission provider; o require that the independent transmission provider administer the day-ahead and real-time energy and ancillary services markets; o establish an access charge for embedded transmission costs; o use location marginal pricing for transmission congestion management and provide tradable congestion revenue rights; o establish open imbalance energy markets; o establish procedures to mitigate market power in the day-ahead and real-time markets o require under certain conditions that generation owners submit offers to supply energy at prices that do not exceed specified price ceilings; and o establish procedures to assure adequate transmission, generation and demand-side resources. Comments on certain aspects of the proposed rule are due by mid- November 2002, with comments due on the remaining issues in January 2003. Reply comments on all issues are due in February 2003. Several technical conferences are scheduled for November and December 2002. Some of the retail regulators in Entergy's service territory have publicly expressed opposition to the proposed rulemaking. Management is in the process of evaluating this complex and lengthy proposal. Generating Capacity (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans) As discussed in Part I of the Form 10-K, the domestic utility companies have met summer capacity needs by contracting for up to 3,000 MW of short-term purchased power. In September 2002, Entergy Louisiana and Entergy Gulf States made an informational filing with the LPSC containing a draft request for proposal for supply-side resources. The final request for proposal was issued on November 1, 2002 by Entergy Services on behalf of the domestic utility companies. The request for proposal seeks to meet both Entergy's summer 2003 and longer term reliability needs through a broad range of wholesale power products, including short and long-term contractual products and possibly asset acquisitions. The request for proposals contains a timeline for both short and long-term proposals that would enable Entergy to enter into definitive agreements with winning bidders for a portion of the summer capacity by the end of the first quarter 2003. Additional procurements will be made in early 2003 enabling Entergy to sign definitive agreements in time to cover summer capacity requirements. Sarbanes-Oxley Act and Other Corporate Governance Standards (Entergy, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) In response to recent corporate collapses resulting from accounting irregularities and perceived failures of ethics and controls, the U.S. Congress passed the Sarbanes-Oxley Act on July 25, 2002. President Bush signed the Act on July 30, 2002. The stated purpose of the Act is to increase the reliability and accuracy of corporate reporting and accounting and audit practices and to ensure the independence of securities analyst advice and recommendations. The Act purports to strengthen accounting oversight and corporate accountability by enhancing disclosure requirements, increasing accounting and auditor regulation, creating new federal crimes and increasing penalties for existing federal crimes. In addition, on August 1, 2002, the New York Stock Exchange adopted, subject to approval by the Securities and Exchange Commission, new standards and changes in corporate governance and practices for companies whose securities are listed on that exchange. Management and the Board are reviewing the new law and regulations as they are issued, and Entergy is adopting new policies or procedures necessary to comply with the new law and regulations as their various provisions become effective. Entergy Corporation and Entergy Gulf States Merger See "Entergy Corporation and Entergy Gulf States Merger" in Part I, Item 1 of the Form 10-K for a discussion of the appeal to the D.C. Circuit by the APSC, Arkansas Cities and Cooperatives, Arkansas Electric Energy Consumers, the MPSC, and the State of Mississippi of the FERC's approval of the merger of Entergy Corporation and Gulf States Utilities. In May 2002 the D.C. Circuit denied the petitions for review, thereby upholding the FERC's decision approving the merger. Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy) The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends pursuant to Item 503 of Regulation S-K of the SEC as follows: Ratios of Earnings to Fixed Charges Twelve Months Ended December 31, September 30, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.54 2.63 2.08 3.01 3.29 2.75 Entergy Gulf States 1.42 1.40 2.18 2.60 2.36 2.57 Entergy Louisiana 2.74 3.18 3.48 3.33 2.76 3.08 Entergy Mississippi 2.98 3.12 2.44 2.33 2.14 2.50 Entergy New Orleans 2.70 2.65 3.00 2.66 (b) 1.10 System Energy 2.31 2.52 1.90 2.41 2.12 3.26 Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended December 31, September 30, 1997 1998 1999 2000 2001 2002 Entergy Arkansas 2.24 2.28 1.80 2.70 2.99 2.49 Entergy Gulf States (a) 1.23 1.20 1.86 2.39 2.21 2.39 Entergy Louisiana 2.36 2.75 3.09 2.93 2.51 2.81 Entergy Mississippi 2.69 2.80 2.18 2.09 1.96 2.25 Entergy New Orleans 2.44 2.41 2.74 2.43 (b) (c) (a) "Preferred Dividends" in the case of Entergy Gulf States also include dividends on preference stock for the twelve months ended December 31, 1997, 1998, and 1999. (b) Earnings for the twelve months ended December 31, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. (c) Earnings for the twelve months ended September 30, 2002, for Entergy New Orleans were not adequate to cover combined fixed charges and preferred dividends by $.5 million. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits* ** 4(a) - Twenty-second Supplemental Indenture, dated as of September 1, 2002, to System Energy's Mortgage and Deed of Trust, dated as of June 15, 1977 (filed as Exhibit A- 2(a) to Rule 24 Certificate dated October 4, 2002 in File No. 70-9753). 4(b) - Tenth Supplemental Indenture, dated as of October 1, 2002, to Entergy New Orleans' Mortgage and Deed of Trust, dated as of May 1, 1987. ** 4(c) - Seventeenth Supplemental Indenture, dated as of October 1, 2002, to Entergy Mississippi's Mortgage and Deed of Trust, dated as of February 1, 1988 (filed as Exhibit A- 2(b) to Rule 24 Certificate dated October 31, 2002 in File No. 70-9757). 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, 2002, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended September 30, 2002. ** Incorporated herein by reference as indicated. (b) Reports on Form 8-K Entergy Corporation A Current Report on Form 8-K, dated July 8, 2002, was filed with the SEC on July 8, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated July 30, 2002, was filed with the SEC on July 30, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". 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 12, 2002, was filed with the SEC on August 12, 2002, reporting information under Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated August 13, 2002, was filed with the SEC on August 13, 2002, reporting information under Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated September 4, 2002, was filed with the SEC on September 4, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated September 18, 2002, was filed with the SEC on September 18, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated October 7, 2002, was filed with the SEC on October 7, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Mississippi A Current Report on Form 8-K, dated October 16, 2002, was filed with the SEC on October 18, 2002, reporting information under Item 5. "Other Events and Regulation FD Disclosure" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Corporation A Current Report on Form 8-K, dated October 18, 2002, was filed with the SEC on October 18, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated October 22, 2002, was filed with the SEC on October 22, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Corporation A Current Report on Form 8-K, dated October 30, 2002, was filed with the SEC on October 30, 2002, reporting information under Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits" and Item 9. "Regulation FD Disclosure". Entergy Arkansas A Current Report on Form 8-K, dated November 1, 2002, was filed with the SEC on November 4, 2002, reporting information under Item 5. "Other Events and Regulation FD Disclosure" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". Entergy Arkansas A Current Report on Form 8-K, dated November 6, 2002, was filed with the SEC on November 8, 2002, reporting information under Item 5. "Other Events and Regulation FD Disclosure" and Item 7. "Financial Statements, Pro Forma Financial Statements and Exhibits". SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries. ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY GULF STATES, INC. ENTERGY LOUISIANA, INC. ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. SYSTEM ENERGY RESOURCES, INC. /s/ Nathan E. Langston Nathan E. Langston Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) Date: November 11, 2002 CERTIFICATIONS I, J. Wayne Leonard, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Entergy Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ J. Wayne Leonard J. Wayne Leonard Chief Executive Officer, Entergy Corporation Date: November 11, 2002 CERTIFICATIONS I, C. John Wilder, certify that: 1. I have reviewed these quarterly reports on Form 10-Q of Entergy Corporation and System Energy Resources, Inc.; 2. Based on my knowledge, these quarterly reports do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by these quarterly reports; 3. Based on my knowledge, the financial statements, and other financial information included in these quarterly reports, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in these quarterly reports; 4. The registrants' other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrants' disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrants' other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants' auditors and the audit committee of registrants' board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants' ability to record, process, summarize and report financial data and have identified for the registrants' auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal controls; and 6. The registrants' other certifying officers and I have indicated in these quarterly reports whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ C. John Wilder C. John Wilder Executive Vice President and Chief Financial Officer, Entergy Corporation, System Energy Resources, Inc. Date: November 11, 2002 CERTIFICATIONS I, Hugh T. McDonald, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Hugh T. McDonald Hugh T. McDonald Chairman, President, and Chief Executive Officer, Entergy Arkansas, Inc. Date: November 11, 2002 CERTIFICATIONS I, Joseph F. Domino, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Joseph F. Domino Joseph F. Domino Chairman, President and Chief Executive Officer, Texas of Entergy Gulf States, Inc. Date: November 11, 2002 CERTIFICATIONS I, E. Renae Conley, certify that: 1. I have reviewed these quarterly reports on Form 10-Q of Entergy Gulf States, Inc. and Entergy Louisiana, Inc.; 2. Based on my knowledge, these quarterly reports do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by these quarterly reports; 3. Based on my knowledge, the financial statements, and other financial information included in these quarterly reports, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in these quarterly reports; 4. The registrants' other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrants' disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrants' other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants' auditors and the audit committee of registrants' board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants' ability to record, process, summarize and report financial data and have identified for the registrants' auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal controls; and 6. The registrants' other certifying officers and I have indicated in these quarterly reports whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ E. Renae Conley E. Renae Conley Chairman, President, and Chief Executive Officer of Entergy Louisiana, Inc.; President and Chief Executive Officer- Louisiana of Entergy Gulf States, Inc. Date: November 11, 2002 CERTIFICATIONS I, Carolyn C. Shanks, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Carolyn C. Shanks Carolyn C. Shanks Chairman, President, and Chief Executive Officer, Entergy Mississippi, Inc. Date: November 11, 2002 CERTIFICATIONS I, Daniel F. Packer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Daniel F. Packer Daniel F. Packer Chairman, President, and Chief Executive Officer, Entergy New Orleans, Inc. Date: November 11, 2002 CERTIFICATIONS I, Jerry W. Yelverton, certify that: 1. I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Jerry W. Yelverton Jerry W. Yelverton Chairman, President, and Chief Executive Officer, System Energy Resources, Inc. Date: November 11, 2002 CERTIFICATIONS I, Theodore H. Bunting, Jr., certify that: 1. I have reviewed these quarterly reports on Form 10-Q of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc.; 2. Based on my knowledge, these quarterly reports do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by these quarterly reports; 3. Based on my knowledge, the financial statements, and other financial information included in these quarterly reports, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in these quarterly reports; 4. The registrants' other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrants' disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrants' other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants' auditors and the audit committee of registrants' board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants' ability to record, process, summarize and report financial data and have identified for the registrants' auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal controls; and 6. The registrants' other certifying officers and I have indicated in these quarterly reports whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Vice President and Chief Financial Officer, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc. Date: November 11, 2002 EX-4 3 a208024b.txt Exhibit 4(b) ENTERGY NEW ORLEANS, INC. to THE BANK OF NEW YORK (successor to Harris Trust Company of New York and Bank of Montreal Trust Company) And STEPHEN J. GIURLANDO (successor to Mark F. McLaughlin and Z. George Klodnicki) As Trustees under the Mortgage and Deed of Trust, dated as of May 1, 1987 of Entergy New Orleans, Inc. TENTH SUPPLEMENTAL INDENTURE Providing among other things for First Mortgage Bonds, 6.75% Series due October 15, 2017 (Thirteenth Series) Dated as of October 1, 2002 TENTH SUPPLEMENTAL INDENTURE, dated as of October 1, 2002, between ENTERGY NEW ORLEANS, INC., a corporation of the State of Louisiana, whose post office address is 1600 Perdido Street, Building 505, New Orleans, Louisiana 70112 (the "Company") and THE BANK OF NEW YORK (successor to Harris Trust Company of New York and Bank of Montreal Trust Company), a New York banking corporation, whose principal corporate trust office is located at 101 Barclay Street, Floor 21 West, New York, New York 10286 and STEPHEN J. GIURLANDO (successor to Mark F. McLaughlin and Z. George Klodnicki), whose address is 63 Euclid Avenue, Massapequa, New York 11758, as trustees under the Mortgage and Deed of Trust, dated as of May 1, 1987, executed and delivered by the Company (herein called the "Original Indenture"; the Original Indenture and any and all indentures and instruments supplemental thereto being herein called the "Indenture"); WHEREAS, the Original Indenture has been duly recorded and filed as required in the State of Louisiana simultaneously with the recording and filing of the First Supplemental Indenture thereto, dated as of May 1, 1987, between the Company and BANK OF MONTREAL TRUST COMPANY (The Bank of New York, successor) and Z. GEORGE KLODNICKI (Stephen J. Giurlando, successor), as trustees (herein called the "First Supplemental Indenture"); and WHEREAS, the Original Indenture was recorded in various Parishes in the State of Louisiana; and WHEREAS, the Company executed and delivered to the Trustees (such term and all other defined terms used herein and not defined herein having the respective definitions to which reference is made in Article I below) its Second Supplemental Indenture, dated as of January 1, 1988, its Third Supplemental Indenture, dated as of March 1, 1993, its Fourth Supplemental Indenture, dated as of September 1, 1993, its Fifth Supplemental Indenture, dated as of April 1, 1995, its Sixth Supplemental Indenture, dated as of March 1, 1996, its Seventh Supplemental Indenture, dated as of July 1, 1998, its Eighth Supplemental Indenture, dated as of July 1, 2000 (the "Eight Supplemental Indenture"), and its Ninth Supplemental Indenture, dated as of February 1, 2001 (the "Ninth Supplemental Indenture"), each as a supplement to the Original Indenture, which Supplemental Indentures have been duly recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Tenth Supplemental Indenture is to be recorded; and WHEREAS, pursuant to an Agreement and Plan of Merger dated as of March 18, 1999, Harris Trust Company of New York merged into Bank of Montreal Trust Company, Trustee under the Indenture, and effective July 1, 1999, the combined entity changed its name to Harris Trust Company of New York, and, by virtue of Section 9.03 of the Original Indenture, Harris Trust Company of New York became successor Trustee under the Indenture, without execution of any paper or the performance of any further act on the part of any other parties to the Indenture; and WHEREAS, effective July 15, 2000, Harris Trust Company of New York and Mark F. McLaughlin resigned as Trustee and Co- Trustee, respectively, under the Indenture, and by the Eighth Supplemental Indenture, the Company appointed The Bank of New York and Stephen J. Giurlando as successor Trustee and successor Co- Trustee, respectively, effective July 15, 2000, and The Bank of New York and Stephen J. Giurlando accepted said respective appointments; and WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Indenture, the following series of bonds: Series Principal Principal Amount Amount Issued Outstanding 10.95% Series due May 1, 1997 $75,000,000 None 13.20% Series due February 1, 1991 1,400,000 None 13.60% Series due February 1, 1993 29,400,000 None 13.90% Series due February 1, 1995 9,200,000 None 7% Series due March 1, 2003 25,000,000 $25,000,000 8% Series due March 1, 2023 45,000,000 45,000,000 7.55% Series due September 1, 2023 30,000,000 30,000,000 8.67% Series due April 1, 2005 30,000,000 None 8% Series due March 1, 2006 40,000,000 40,000,000 7% Series due July 15, 2008 30,000,000 30,000,000 8.125% Series due July 15, 2005 30,000,000 30,000,000 6.65% Series due March 1, 2004 30,000,000 30,000,000 ; and WHEREAS, Section 19.04 of the Original Indenture 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 Indenture, 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, restrictions or provisions for the benefit of any one or more series of bonds issued thereunder, or the Company may establish the terms and provisions of any series of bonds 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 be recorded in all of the states in which any property at the time subject to the Lien of the Indenture shall be situated; and WHEREAS, the Company desires to create a new series of bonds under the Indenture and to add to its covenants and agreements contained in the Indenture certain other covenants and agreements to be observed by it; and WHEREAS, all things necessary to make this Tenth Supplemental Indenture a valid, binding and legal instrument have been performed, and the issue of said series of bonds, subject to the terms of the Indenture, has been in all respects duly authorized; NOW, THEREFORE, THIS TENTH SUPPLEMENTAL INDENTURE WITNESSETH: That ENTERGY NEW ORLEANS, INC., in consideration of the premises and of Ten Dollars ($10) to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order 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 Indenture, according to their tenor and effect and the performance of all provisions of the Indenture (including any modification made as in the Indenture provided) and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over and confirmed and granted a security interest in, and by these presents doth grant, bargain, sell, release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set over and confirm and grant a security interest in (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto STEPHEN J. GIURLANDO and (to the extent of its legal capacity to hold the same for the purpose hereof) to THE BANK OF NEW YORK, as Trustees under the Indenture, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever (1) all rights, legal and equitable, of the Company (whether in accordance with Paragraph 32 of that certain Resolution No. R-86-112, adopted by the Council of the City of New Orleans on March 20, 1986 and accepted by the Company on March 25, 1986, as superseded by Resolution No. R-91-157, effective October 4, 1991, or pursuant to other regulatory authorization or by operation of law or otherwise), in the event of the purchase and acquisition by the City of New Orleans (or any other governmental authority or instrumentality or designee thereof) of properties and assets of the Company, to recover and receive payment and compensation from the City (or from such other governmental authority or instrumentality or designee thereof or any other person) of an amount equal to the aggregate uncollected balance of (A) the deferrals of Grand Gulf 1 Costs (as defined in the Original Indenture) and the deferred carrying charges accrued thereon that have accumulated prior to the City or such other entity providing official notice to the Company of the City's or such other entity's intent to effect such purchase and acquisition and (B) if and to the extent that the City or such other entity and the Company agree that the City or such other entity is liable for all or a portion of the aggregate uncollected balance of such deferrals accumulating thereafter or a court of final resort so holds, such deferrals that have accumulated subsequent to such notice (said rights of the Company, together with the proceeds and products thereof, being defined in the Original Indenture as the "Municipalization Interest"); and (2) all properties of the Company, real, personal and mixed, of the kind or nature described or mentioned in the Original Indenture; and (3) all properties of the Company specifically described in Article VI hereof and all other properties of the Company, real, personal and mixed, of the kind or nature specifically mentioned in the Original Indenture or of any other kind or nature acquired by the Company on or after the date of the execution and delivery of the Original Indenture (except any herein or in the Original Indenture, as heretofore supplemented, expressly excepted), now owned or, subject to the provisions of Section 15.03 of the Original Indenture, 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 herein or in the Original Indenture, as heretofore supplemented), 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; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, 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 telephone, radio and television systems, air-conditioning systems, and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, electric, gas and water lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generators and turbogenerator units), 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, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment, and all other fixtures and presently; 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 and (except as herein or in the Original Indenture, as heretofore supplemented, expressly excepted) all the rights, 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 herein or in the Original Indenture, 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 11.01 of the Original Indenture) 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, rights and franchises and every part and parcel thereof. IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 15.03 of the Original Indenture, 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 Original Indenture, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and as fully embraced within the Lien of the Original Indenture and the Lien hereof as if such property, rights and franchises were now owned by the Company and were specifically described herein and granted and conveyed hereby. PROVIDED that, except as provided herein and in the Original Indenture with respect to the Municipalization Interest, 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, nor is a security interest therein hereby or by the Original Indenture, as heretofore supplemented, granted or intended to be granted, and the same are hereby expressly excepted from the Lien of the Indenture and the operation of this Tenth Supplemental Indenture, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not heretofore or hereafter specifically pledged, paid, deposited, delivered or held hereunder or covenanted so to be; (2) merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or part) any rolling stock, buses, motor coaches, automobiles and other vehicles or aircraft or boats, ships, or other vessels and any fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; boats, ships and other vessels; all timber, minerals, mineral rights and royalties; (3) bills, notes and other instruments and accounts receivable, judgments, demands, general intangibles and chooses in action, and all contracts, leases and operating agreements not specifically pledged hereunder or under the Original Indenture or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the Lien of the Indenture; (5) electric energy, gas, water, steam, 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; (6) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system; and (7) the Company's franchise to be a corporation; provided, however, that the property and rights expressly excepted from the Lien and operation of the 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 either or both 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 XII of the Original Indenture by reason of the occurrence of a Default. 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 or in which a security interest has been granted by the Company as aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto STEPHEN J. GIURLANDO and (to the extent of its legal capacity to hold the same for the purposes hereof) to THE BANK OF NEW YORK, 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 Original Indenture, as heretofore supplemented, this Tenth Supplemental Indenture being supplemental thereto. AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Original Indenture, as heretofore supplemented, shall affect and apply to the property hereinbefore and hereinafter described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property 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 Original Indenture and had been specifically and at length described in and conveyed to said Trustees by the Original Indenture as a part of the property therein stated to be conveyed. The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Indenture, as follows: ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION Section 1.01 Terms From the Original Indenture and First through Ninth Supplemental Indentures. Except as set forth in Section 1.02 below, all defined terms used in this Tenth Supplemental Indenture and not otherwise defined herein shall have the respective meanings ascribed to them in the Original Indenture or the First through the Ninth Supplemental Indentures, as the case may be. Section 1.02 Certain Defined Terms. As used in this Tenth Supplemental Indenture, the following defined terms shall have the respective meanings specified unless the context clearly requires otherwise: The term "Business Day" shall mean 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 Trustee is closed for business. The term "Thirteenth Series" shall have the meaning specified in Section 2.01. Section 1.03 References are to Tenth Supplemental Indenture. Unless the context otherwise requires, all references herein to "Articles", "Sections" and other subdivisions refer to the corresponding Articles, Sections and other subdivisions of this Tenth Supplemental Indenture, and the words "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Tenth Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision hereof or to the Original Indenture or any other supplemental indenture thereto. Section 1.04 Number and Gender. Unless the context otherwise requires, defined terms in the singular include the plural, and in the plural include the singular. The use of a word of any gender shall include all genders. ARTICLE II THE THIRTEENTH SERIES Section 2.01 Bonds of the Thirteenth Series. Pursuant to Section 2.01 of the Original Indenture, there shall be a series of bonds designated 6.75% Series due October 15, 2017 (herein sometimes referred to as "Thirteenth Series"), each of which shall also bear the descriptive title "First Mortgage Bond". The form of Bonds of the Thirteenth Series shall be substantially in the form of Exhibit A hereto. Bonds of the Thirteenth Series shall mature on October 15, 2017 and shall be issued only as fully registered bonds in denominations of One Thousand Dollars and, at the option of the Company, in any multiple or multiples thereof (the exercise of such option to be evidenced by the execution and delivery thereof). Bonds of the Thirteenth Series shall bear interest at the rate of six and seventy-five one hundredths percent (6.75%) per annum (except as hereinafter provided), payable monthly on the 15th day of each month and at maturity or earlier redemption, the first interest payment to be made on November 15, 2002 for the period from the date of original issuance of the Bonds of the Thirteenth Series to November 15, 2002; the principal and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, payable 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. Interest on the Bonds of the Thirteenth Series may at the option of the Company be paid by check mailed to the registered owners thereof. Overdue principal and (to the extent permitted by law) overdue interest in respect of the bonds of the Thirteenth Series shall bear interest (before and after judgment) at the rate of seven and seventy-five one hundredths percent (7.75%) per annum. Interest on the Bonds of the Thirteenth Series shall be computed on the basis of a 360- day year consisting of twelve 30-day months. Interest on the Bonds of the Thirteenth Series in respect of a portion of a month shall be calculated based on the actual number of days elapsed. In any case where any interest payment date, redemption date or maturity of any bond of the Thirtheenth Series shall not be a Business Day, then payment of interest or principal need not be made on such date, but may be made on the next succeeding Business Day, with the same force and effect, and in the same amount, as if made on the corresponding interest payment date or redemption date, or at maturity, as the case may be, and, if such payment is made or duly provided for on such Business Day, no interest shall accrue on the amounts so payable for the period from and after such interest payment date, redemption date or maturity, as the case may be, to such Business Day. The Company reserves the right to establish at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Thirteenth Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose. Section 2.02 Redemption of Bonds of the Thirteenth Series. (a) Bonds of the Thirteenth Series shall be redeemable, at the option of the Company, in whole or in part from time to time, on any interest payment date on or after October 15, 2005, upon notice mailed to each registered owner at his last address appearing on the registry books not less than 15 days nor more than 30 days prior to the date fixed for redemption, at a redemption price equal to 100% of the principal amount of such Bonds of the Thirteenth Series to be redeemed plus accrued and unpaid interest thereon to the redemption date; provided, however, that in the event that the taking, sale, transfer or other conveyance described in Section 2.02(d) hereof shall have occurred, during the period commencing on the occurrence of such event and ending on the day following the date that the Bonds of the Thirteenth Series are redeemable pursuant to Section 2.02(d) hereof, the redemption price for the redemption of Bonds of the Thirteenth Series pursuant to this Section 2.02(a) shall be 101% of the principal amount of the Bonds of the Thirteenth Series being redeemed plus accrued and unpaid interest thereon to the redemption date. (b) Bonds of the Thirteenth Series shall also be redeemable, at the option of the Company, in whole or in part, at any time prior to maturity, upon notice mailed to each registered owner at his last address appearing on the registry books not less than 30 days nor more than 60 days prior to the date fixed for redemption, by the application (either at the option of the Company or pursuant to the requirements of the Original Indenture) of proceeds of insurance or cash delivered to or deposited with the Trustee pursuant to the provisions of Section 9.05 and 11.06 of the Original Indenture, at the special redemption price of 100% of the principal amount of the Bonds of the Thirteenth Series being redeemed, plus accrued and unpaid interest thereon to the redemption date; provided, however, that in the event that the taking, sale, transfer or other conveyance described in Section 2.02 (d) hereof shall have occurred, the special redemption price for any redemption pursuant to this Section 2.02(b) from cash delivered to or deposited with the Trustee in respect thereof shall be 101% of the principal amount of the Bonds of the Thirteenth Series being redeemed plus accrued and unpaid interest thereon to the redemption date. (c) Bonds of the Thirteenth Series shall also be redeemable, at the option of the holders thereof, as provided in Section 3.04 of the First Supplemental Indenture, as heretofore and hereby amended. (d) Bonds of the Thirteenth Series shall also be redeemable as follows: Should all or substantially all of the Mortgaged and Pledged Property be taken by the City of New Orleans or any instrumentality or designee thereof by the exercise of the power of eminent domain or taken by the exercise by the City of New Orleans or any instrumentality or designee thereof of the right to purchase or otherwise acquire the same, or should such Mortgaged and Pledged Property be voluntarily sold, transferred or otherwise conveyed to the City of New Orleans or such instrumentality or designee thereof, then, in any such event, the Company shall, upon the consummation of such taking, sale, transfer or other conveyance (in any case whether or not the Lien of the Indenture is released with respect to such Mortgaged and Pledged Property), immediately request the Trustee to take, and upon receipt of such request the Trustee shall take, all requisite action to prepare (in consultation with the Company) and to mail written notice thereof to each registered holder of any Outstanding Bond of the Thirteenth Series, at his last address appearing upon the registry books, such notice (hereinafter referred to in this Section 2.02(d) as the "Trustee's Special Notice"), to state that it is given pursuant to this Section 2.02(d) of this Tenth Supplemental Indenture and that the holder of any Bond or Bonds of the Thirteenth Series then Outstanding shall have the right to require the Company to redeem such Bond or Bonds of the Thirteenth Series, in whole or in part, on the terms and subject to the conditions hereinafter in this Section 2.02(d) set forth. Upon the mailing of the Trustee's Special Notice, the holder of any Bonds of the Thirteenth Series then Outstanding may, within forty-five (45) days from the date of the Trustee's Special Notice, give the Trustee written notice of such holder's intent to have his Bond or Bonds of the Thirteenth Series redeemed by the Company on the sixtieth (60th) day following the date of the Trustee's Special Notice, upon delivery and surrender of such Bond or Bonds of the Thirteenth Series accompanied by such documentation as the Trustee or the Company may require. Unless on or prior to the forty-fifth (45th) day following the date of the Trustee's Special Notice, such holder shall have, by further written notice to the Trustee, withdrawn or revoked such written notice of intent to have his Bond or Bonds of the Thirteenth Series so redeemed, the Company shall, on the sixtieth (60th) day following the date of the Trustee's Special Notice, redeem any such Bond or Bonds of the Thirteenth Series that are properly delivered and surrendered for that purpose at the special redemption price of 101% of the principal amount thereof plus accrued and unpaid interest thereon to the redemption date. Section 2.03 Transfer and Exchange. At the option of the registered owner, any Bonds of the Thirteenth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations. Bonds of the Thirteenth 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, New York. Upon any such exchange or transfer of Bonds of the Thirteenth 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 2.05 of the Original Indenture, but the Company hereby waives any right to make a charge in addition thereto for any such exchange or transfer of Bonds of the Thirteenth Series. Section 2.04 Dating of Bonds and Interest Payments. (a) Each Bond of the Thirteenth Series shall be dated as of the date of authentication and shall bear interest from the last preceding interest payment date to which interest shall have been paid (unless the date of such bond is an interest payment date to which interest is paid, in which case from the date of such bond); provided that each Bond of the Thirteenth Series dated prior to November 15, 2002 shall bear interest from the date of original issuance thereof; and provided, further, that if any Bond of the Thirteenth Series shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any other Bond or Bonds of the Thirteenth Series upon which interest is in default, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such bond shall have been delivered or from its date of original issuance, if no interest shall have been paid on the Bonds of the Thirteenth Series. (b) Notwithstanding the foregoing, Bonds of the Thirteenth Series shall be dated so that the person in whose name any Bond of the Thirteenth Series is registered at the close of business on the Business Day immediately preceding an interest payment date shall be entitled to receive the interest payable on the interest payment date notwithstanding the cancellation of such bond upon any transfer or exchange thereof subsequent to such close of business and prior to such interest payment date, except if, and to the extent that, the Company shall default in the payment of interest due on such interest payment date, in which case such defaulted interest shall be paid to the persons in whose names Outstanding Bonds of the Thirteenth Series are registered at the close of business on the Business Day immediately preceding the date of payment of such defaulted interest. Any Bond of the Thirteenth Series issued upon any transfer or exchange subsequent to such close of business and prior to such interest payment date shall bear interest from such interest payment date. In the event there shall be more than one registered owner of Bonds of the Thirteenth Series, then the Company shall not be required to make transfers or exchanges of bonds of said series for a period of fifteen (15) days next preceding any interest payment date of said series. ARTICLE III OTHER PROVISIONS FOR RETIREMENT OF BONDS Section 3.01 Exchange or Redemption upon Merger or Consolidation. The second sentence of subsection (a) of Section 3.04 of the First Supplemental Indenture, as amended and restated by the Seventh Supplemental Indenture, and as subsequently amended, is hereby further amended to insert the following words immediately after the words "the Ninth Supplemental Indenture": ", shall (as to the New LP&L Bonds being exchanged for the Bonds of the Thirteenth Series) be subject to redemption at the option of the Company on terms similar to those provided in the Tenth Supplemental Indenture," Section 3.02 Redemption Price upon Merger or Consolidation. The redemption price for any Bonds of the Thirteenth Series redeemed pursuant to subsection (b) of Section 3.04 of the First Supplemental Indenture, as amended and restated by the Seventh Supplemental Indenture, and as subsequently amended, shall be equal to the principal amount of the Bonds of the Thirteenth Series to be redeemed, plus accrued and unpaid interest thereon to the redemption date. ARTICLE IV COVENANTS Section 4.01 Maintenance of Paying Agency. So long as any bonds of the Thirteenth Series are Outstanding, the Company covenants that the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, where the principal of or interest on any bonds of the Thirteenth Series shall be payable, shall also be an office or agency where any such bonds may be transferred or exchanged and where notices, presentations or demands to or upon the Company in respect of such bonds or in respect of the Indenture may be given or made. Section 4.02 Further Assurances. From time to time whenever reasonably requested by the Trustee or the holders of a majority in principal amount of bonds of the Thirteenth Series then Outstanding, the Company will make, execute and deliver or cause to be made, executed and delivered any and all such further and other instruments and assurances as may be reasonably necessary or proper to carry out the intention of or to facilitate the performance of the terms of the Indenture or to secure the rights and remedies of the holders of such bonds. Section 4.03 Limitation on Restricted Payments. (a) So long as any bonds of the Thirteenth Series are Outstanding, the Company covenants that it will not declare any dividends on its common stock (other than (1) a dividend payable solely in shares of its common stock or (2) 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) unless after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to September 30, 2002 (other than any dividend declared by the Company on or before September 30, 2002) does not exceed (without giving effect to (1) any such dividends, distributions, purchases or acquisitions or (2) any net transfers from earned surplus to stated capital accounts) the sum of (A) the aggregate amount credited subsequent to September 30, 2002, to earned surplus, (B) $150,000,000 and (C) such additional amounts as shall be authorized or approved, upon application by the Company and, after notice, by the SEC under the Holding Company Act. For the purpose of this Section 4.03, the aggregate amount credited subsequent to September 30, 2002, to earned surplus shall be determined in accordance with applicable generally accepted accounting principles and practices (or, if in the opinion of the Company's independent public accountants (delivered to the Trustee) there is an absence of any such generally accepted accounting principles and practices as to the determination in question, then in accordance with sound accounting practices) and after making provision for dividends upon any preferred stock of the Company accumulated subsequent to such date, and in addition there shall be deducted from earned surplus all amounts (without duplication) of losses, write-offs, write-downs or amortization of property, whether extraordinary or otherwise, recorded in and applicable to a period or periods subsequent to September 30, 2002. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01 Acceptance of Trusts. 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 Original Indenture, as heretofore supplemented, 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 Tenth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are solely made by the Company. In general, each and every term and condition contained in Article XVI of the Original Indenture shall apply to and form part of this Tenth 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 Tenth Supplemental Indenture. Section 5.02 Effect of Tenth Supplemental Indenture under Louisiana Law. It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Tenth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Tenth Supplemental Indenture shall be considered as an act of mortgage and pledge and granting of a security interest under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledge and secured parties in trust for the benefit of themselves and of all present and future holders of bonds issued under the Indenture and any coupons thereto issued hereunder, and are irrevocably appointed special agents and representatives of the holders of such bonds and coupons and vested with full power in their behalf to effect and enforce the mortgage and pledge and a security interest hereby constituted for their benefit, or otherwise to act as herein provided for. Section 5.03 Record Date. The holders of the Bonds of the Thirteenth 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 Thirteenth Series entitled to consent, if any such consent is required, to any amendment or supplement to the Indenture 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 5.04 Titles. The titles of the several Articles and Sections of this Tenth Supplemental Indenture shall not be deemed to be any part hereof. Section 5.05 Counterparts. This Tenth Supplemental Indenture may 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 5.06 Governing Law. The laws of the State of New York shall govern this Tenth Supplemental Indenture and the Bonds of the Thirteenth Series, except to the extent that the validity or perfection of the Lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of New York. ARTICLE VI SPECIFIC DESCRIPTION OF PROPERTY PARAGRAPH ONE The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipelines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company's lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, switchyards, electric lines, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property. PARAGRAPH TWO The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company's lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoyed or capable of being used or enjoyed in conjunction with any of them. PARAGRAPH THREE All and singular the Miscellaneous Lands and Real Estate or Rights and Interests therein of the Company, and buildings and improvements thereon, now owned, or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired during the existence of this trust. PARAGRAPH FOUR The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, insulators, pipes, conduits, electric submarine cables, and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under or upon any public streets or highways or other lands, public or private. PARAGRAPH FIVE The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company's other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company's rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under, or upon any public streets or highways or other lands or property, public or private. PARAGRAPH SIX The Gas Distributing Systems of the Company, whether now owned or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired, including gas regulator stations, gas main crossings, odorizing equipment, gas metering stations, shops, service buildings, office buildings, expansion tanks, conduits, gas mains and pipes, mechanical storage sheds, boilers, service pipes, fittings, city gates, pipelines, booster stations, reducer stations, valves, valve platforms, connections, meters and all appurtenances, appliances, devices and equipment and all the Company's other property, real, personal or mixed forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distributing systems, or any of them, together with all of the Company's rights-of-way, easements, prescriptions, servitudes, privileges, immunities, permits and franchises, licenses, consents and rights for or relating to the construction, maintenance or operation thereof, in, on, through, across or under any public streets or highways or other lands or property, public or private. PARAGRAPH SEVEN All of the franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric and gas systems in, on and under streets, alleys, highways, roads, public grounds and rights-of-way and all rights incident thereto which were granted by the governing and regulatory bodies of the City of New Orleans, State of Louisiana. Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric and gas systems in, on or under the streets, alleys, highways, roads, and public grounds, areas and rights-of-way and/or for the supply and sale of electricity or natural gas and all rights incident thereto, subject, however, to the provisions of Section 15.03 of the Original Indenture. IN WITNESS WHEREOF, ENTERGY NEW ORLEANS, 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 on its behalf, and THE BANK OF NEW YORK has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Vice Presidents, Assistant Vice Presidents, Assistant Treasurers or Assistant Secretaries for and on its behalf, and STEPHEN J. GIURLANDO has hereunto set his hand, all as of the day and year first above written. ENTERGY NEW ORLEANS, INC. By:/s/ Nathan E. Langston Nathan E. Langston Senior Vice President and Chief Accounting Officer Attest: /s/ Christopher T. Screen Christopher T. Screen Assistant Secretary Executed, sealed and delivered by ENTERGY NEW ORLEANS, INC. in the presence of: /s/ Myrna A. Romain /s/ E. Lilian Wise THE BANK OF NEW YORK As Trustee By:/s/ Robert A. Massimillo Attest: /s/ Mary LaGumina Vice President /s/ Stephen J. Giurlando STEPHEN J. GIURLANDO, As Co-Trustee Executed, sealed and delivered by THE BANK OF NEW YORK and STEPHEN J. GIURLANDO in the presence of: /s/ Regina F. Johnson /s/ Ada Li STATE OF LOUISIANA ) ) SS.: PARISH OF ORLEANS ) On this 18th day of October, 2002, before me appeared Nathan E. Langston, to me personally known, who, being duly sworn, did say that he is Senior Vice President and Chief Accounting Officer of ENTERGY NEW ORLEANS, INC., and that the seal affixed to said instrument is the corporate seal of said corporation and that the foregoing instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said Nathan E. Langston acknowledged said instrument to be the free act and deed of said corporation. On the 18th day of October, 2002, 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, Slidell, Louisiana 70461; that he is Senior Vice President and Chief Accounting Officer of ENTERGY NEW ORLEANS, INC., one of the parties 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. /s/ Sylvia R. Bonin Sylvia R. Bonin Notary Public Parish of Orleans, State of Louisiana My Commission is Issued for Life STATE OF NEW YORK } ss.: COUNTY OF ROCKLAND On this 18th day of October, 2002, before me appeared ROBERT A. MASSIMILLO to me personally known, who, being by me duly sworn, did say that he is a Vice President of THE BANK OF NEW YORK, and that the seal affixed to the above 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 said Robert A. Massimillo acknowledged said instrument to be the free act and deed of said corporation. On the 18th day of October, 2002, before me personally came Robert A. Massimillo, to me known, who, being by me duly sworn, did depose and say that he resides at 87 Brandis Avenue Staten Island NY 10312; that he is a Vice President of THE BANK OF NEW YORK, 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. /s/ Robert Hirsch ROBERT HIRSCH Notary Public, State of New York No. 01HI6076679 Qualified in Rockland County Commission Expires July 1, 2006 STATE OF NEW YORK } ss.: COUNTY OF ROCKLAND On this 18th day of October, 2002, before me appeared STEPHEN J. GIURLANDO, 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. On the 18th day of October, 2002, before me personally came STEPHEN J. GIURLANDO, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same. /s/ Robert Hirsch ROBERT HIRSCH Notary Public, State of New York No. 01HI6076679 Qualified in Rockland County Commission Expires July 1, 2006 EXHIBIT A [FORM OF BOND OF THE THIRTEENTH SERIES] [(See legend at the end of this bond for restrictions on transferability and change of form)] FIRST MORTGAGE BOND 6.75% Series due October 15, 2017 CUSIP No. 29364P AD 5 No. R- __ $_________ ENTERGY NEW ORLEANS, INC., a corporation duly organized and existing under the laws of the State of Louisiana (the "Company"), for value received, hereby promises to pay to ____________, or registered assigns, at the office or agency of the Company in The City of New York, New York, the principal sum of $____________ on October 15, 2017, 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, and to pay in like manner to the registered owner hereof interest thereon from the date of original issuance hereof, if the date of this bond is prior to November 15, 2002, or, if the date of this bond is on or after November 15, 2002, from the most recent 15th day of a month next preceding the date of this bond to which interest has been paid (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of six and seventy-five one hundredths percent (6.75%) per annum in like coin or currency on the 15th day of each month, commencing November 15, 2002, and at maturity or earlier redemption until the principal of this bond shall have become due and been duly paid or provided for, and to pay interest (before and after judgment) on any overdue principal, premium, if any, and (to the extent permitted by law) on any overdue interest at the rate of seven and seventy-five one hundredths percent (7.75%) per annum. Interest on this bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on this bond in respect of a portion of a month shall be calculated based on the actual number of days elapsed. The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business on the Business Day immediately preceding such interest payment date. At the option of the Company, interest may be paid by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company. This bond shall not become obligatory until The Bank of New York, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of authentication certificate endorsed hereon. This bond is one of a series of bonds of the Company issuable in series and is one of a duly authorized series of First Mortgage Bonds 6.75% Series due October 15, 2017 (herein called bonds of the Thirteenth Series), all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of May 1, 1987, duly executed by the Company to Bank of Montreal Trust Company (The Bank of New York, successor) and Z. George Klodnicki (Stephen J. Giurlando, successor), as Trustees. Reference is made to the Mortgage for a description of the mortgaged and pledged property, assets and rights, the nature and extent of the lien and security, the respective rights, limitations of rights, covenants, obligations, duties and immunities thereunder of the Company, the holders of bonds and the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms herein used, to all of which, by its acceptance of this bond, the holder of this bond agrees. The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided. The Mortgage provides that in certain circumstances and upon certain conditions, such a declaration and its consequences or certain past defaults and the consequences thereof may be waived by such affirmative vote of holders of bonds as is specified in the Mortgage. The Mortgage contains provisions permitting the Company and the Trustee to execute supplemental indentures amending the Mortgage for certain specified purposes without the consent of holders of bonds. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds of the Thirteenth Series and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage. Any consent or waiver by the holder of this bond (unless effectively revoked as provided in the Mortgage) shall be conclusive and binding upon such holder and upon all future holders of this bond and of any bonds issued in exchange or substitution herefor, irrespective of whether or not any notation of such consent or waiver is made upon this bond or such other bond. No reference herein to the Mortgage and no provision of this bond or of the Mortgage shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this bond in the manner, at the respective times, at the rate and in the currency herein prescribed. The bonds are issuable as registered bonds without coupons in the denominations of $1,000 and integral multiples thereof. At the office or agency to be maintained by the Company in The City of New York, New York, and in the manner and subject to the provisions of the Mortgage, bonds may be exchanged for a like aggregate principal amount of bonds of other authorized denominations, without payment of any charge other than a sum sufficient to reimburse the Company for any tax or other governmental charge incident thereto. This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in The City of New York, New York, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange hereof as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes, and neither the Company nor the Trustees shall be affected by any notice to the contrary. This bond is redeemable at the option of the Company under certain circumstances in the manner and at such redemption prices as are provided in the Mortgage. This bond is also redeemable at the option of the owner upon the events, in the manner and at such redemption prices as are specified in the Mortgage. No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage. As provided in the Mortgage, this bond shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, Entergy New Orleans, Inc. has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his or her signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his or her signature or a facsimile thereof. Dated: ENTERGY NEW ORLEANS, INC. By: Title: Attest: Name: Title: [FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE] TRUSTEE'S AUTHENTICATION CERTIFICATE This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage. THE BANK OF NEW YORK, as Trustee, By: Authorized Signatory [LEGEND Unless and until this bond is exchanged in whole or in part for certificated bonds registered in the names of the various beneficial holders hereof as then certified to the Trustee by The Depository Trust Company or its successor (the "Depositary"), this bond may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of the Depositary to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co., or such other name as requested by an authorized representative of the Depositary, and any amount payable thereunder is made payable to Cede & Co., or such other name, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. This bond may be exchanged for certificated bonds registered in the names of the various beneficial owners hereof if (a) the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days or (b) the Company elects to issue certificated bonds to beneficial owners (as certified to the Company by the Depositary).] EX-99 4 a2080299a.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 Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest Charges $104,165 $96,685 $97,023 $101,600 $109,523 $106,100 Interest applicable to rentals 17,529 15,511 17,289 16,449 14,563 11,488 ---------------------------------------------------------- Total fixed charges, as defined 121,694 112,196 114,312 118,049 124,086 117,588 Preferred dividends, as defined (a) 16,073 16,763 17,836 13,479 12,348 12,018 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $137,767 $128,959 $132,148 $131,528 $136,434 $129,606 ========================================================== Earnings as defined: Net Income $127,977 $110,951 $69,313 $137,047 $178,185 $136,518 Add: Provision for income taxes: Total 59,220 71,374 54,012 100,512 105,933 69,177 Fixed charges as above 121,694 112,196 114,312 118,049 124,086 117,588 ---------------------------------------------------------- Total earnings, as defined $308,891 $294,521 $237,637 $355,608 $408,204 $323,283 ========================================================== Ratio of earnings to fixed charges, as defined 2.54 2.63 2.08 3.01 3.29 2.75 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.24 2.28 1.80 2.70 2.99 2.49 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 5 a2080299b.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 Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest charges $180,073 $178,220 $153,034 $158,949 $174,368 $149,012 Interest applicable to rentals 15,747 16,927 16,451 18,307 18,520 17,918 ---------------------------------------------------------- Total fixed charges, as defined 195,820 195,147 169,485 177,256 192,888 166,930 Preferred dividends, as defined (a) 30,028 32,031 29,355 15,742 13,017 13,062 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $225,848 $227,178 $198,840 $192,998 $205,905 $179,992 ========================================================== Earnings as defined: Income (loss) from continuing operations before extraordinary items and the cumulative effect of accounting changes $59,976 $46,393 $125,000 $180,343 $179,444 $174,426 Add: Income Taxes 22,402 31,773 75,165 103,603 82,038 88,099 Fixed charges as above 195,820 195,147 169,485 177,256 192,888 166,930 ---------------------------------------------------------- Total earnings, as defined (b) $278,198 $273,313 $369,650 $461,202 $454,370 $429,455 ========================================================== Ratio of earnings to fixed charges, as defined 1.42 1.40 2.18 2.60 2.36 2.57 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 1.23 1.20 1.86 2.39 2.21 2.39 ========================================================== (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 6 a2080299c.txt
Exhibit 99(c) Entergy Louisiana, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $128,900 $122,890 $117,247 $111,743 $116,076 $104,475 Interest applicable to rentals 9,203 9,564 9,221 6,458 7,951 6,411 ---------------------------------------------------------- Total fixed charges, as defined 138,103 132,454 126,468 118,201 124,027 $110,886 Preferred dividends, as defined (a) 22,103 20,925 16,006 16,102 12,374 $10,919 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $160,206 $153,379 $142,474 $134,303 $136,401 $121,805 ========================================================== Earnings as defined: Net Income $141,757 $179,487 $191,770 $162,679 $132,550 $142,544 Add: Provision for income taxes: Total Taxes 98,965 109,104 122,368 112,645 86,287 88,424 Fixed charges as above 138,103 132,454 126,468 118,201 124,027 110,886 ---------------------------------------------------------- Total earnings, as defined $378,825 $421,045 $440,606 $393,525 $342,864 $341,854 ========================================================== Ratio of earnings to fixed charges, as defined 2.74 3.18 3.48 3.33 2.76 3.08 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.36 2.75 3.09 2.93 2.51 2.81 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate.
EX-99 7 a2080299d.txt
Exhibit 99(d) Entergy Mississippi, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $45,274 $40,927 $38,840 $44,877 $50,991 $45,564 Interest applicable to rentals 1,947 1,864 2,261 1,596 1,849 1,690 ---------------------------------------------------------- Total fixed charges, as defined 47,221 42,791 41,101 46,473 52,840 $47,254 Preferred dividends, as defined (a) 5,123 4,878 4,878 5,347 4,674 5,218 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $52,344 $47,669 $45,979 $51,820 $57,514 $52,472 ========================================================== Earnings as defined: Net Income $66,661 $62,638 $41,588 $38,973 $39,620 $45,458 Add: Provision for income taxes: Total income taxes 26,744 28,031 17,537 22,868 20,464 25,423 Fixed charges as above 47,221 42,791 41,101 46,473 52,840 47,254 ---------------------------------------------------------- Total earnings, as defined $140,626 $133,460 $100,226 $108,314 $112,924 $118,135 ========================================================== Ratio of earnings to fixed charges, as defined 2.98 3.12 2.44 2.33 2.14 2.50 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.69 2.80 2.18 2.09 1.96 2.25 ========================================================== - ------------------------ (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 a2080299e.txt
Exhibit 99(e) Entergy New Orleans, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Dividends Twelve Months Ended Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $15,287 $14,792 $14,680 $15,891 $19,661 $22,266 Interest applicable to rentals 911 1,045 1,281 1,008 977 933 --------------------------------------------------------- Total fixed charges, as defined 16,198 15,837 15,961 16,899 20,638 23,199 Preferred dividends, as defined (a) 1,723 1,566 1,566 1,643 2,898 2,863 ---------------------------------------------------------- Combined fixed charges and preferred dividends, as defined $17,921 $17,403 $17,527 $18,542 $23,536 $26,062 ========================================================== Earnings as defined: Net Income $15,451 $16,137 $18,961 $16,518 ($2,195) 2,834 Add: Provision for income taxes: Total 12,142 10,042 13,030 11,597 (4,396) (438) Fixed charges as above 16,198 15,837 15,961 16,899 20,638 23,199 ---------------------------------------------------------- Total earnings, as defined $43,791 $42,016 $47,952 $45,014 $14,047 $25,595 ========================================================== Ratio of earnings to fixed charges, as defined 2.70 2.65 3.00 2.66 0.68 1.10 ========================================================== Ratio of earnings to combined fixed charges and preferred dividends, as defined 2.44 2.41 2.74 2.43 0.60 0.98 ========================================================== - ------------------------ (a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. (b) For Entergy New Orleans, earnings for the twelve months ended December 31, 2001 were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. (c) For Entergy New Orleans, earnings for the twelve months ended September 30, 2002 were not adequate to cover combined fixed charges and preferred dividends by $13.6 million and $16.3 million, respectively.
EX-99 9 a2080299f.txt
Exhibit 99(f) System Energy Resources, Inc. Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges Twelve Months Ended Sept 30, 1997 1998 1999 2000 2001 2002 Fixed charges, as defined: Total Interest $128,653 $116,060 $147,982 $118,519 $138,018 $75,894 Interest applicable to rentals 6,065 5,189 3,871 5,753 4,458 3,391 --------------------------------------------------------- Total fixed charges, as defined $134,718 $121,249 $151,853 $124,272 $142,476 $79,285 ========================================================= Earnings as defined: Net Income $102,295 $106,476 $82,375 $93,745 $116,355 114,179 Add: Provision for income taxes: Total 74,654 77,263 53,851 81,263 43,761 65,330 Fixed charges as above 134,718 121,249 151,853 124,272 142,476 79,285 --------------------------------------------------------- Total earnings, as defined $311,667 $304,988 $288,079 $299,280 $302,592 $258,794 ========================================================= Ratio of earnings to fixed charges, as defined 2.31 2.52 1.90 2.41 2.12 3.26 =========================================================
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