-----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,
PYdxNmejw492LAVm3AA6dZlWSF3TkIvXOXX1z9uV3vQgRpnZFc3hWnBK45kQR0Xr
M3PqmkWoOGQIF/pMhpu1RQ==
__________________________________________________________________________________________ UNITED STATES (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF For the Quarterly Period Ended March 31, 2005 OR TRANSITION REPORT PURSUANT TO SECTION 13 For the transition period from ____________ to ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
THE SECURITIES EXCHANGE ACT OF 1934
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission |
Registrant, State of Incorporation, |
I.R.S. Employer |
|
|
|
1-11299 |
ENTERGY CORPORATION |
72-1229752 |
1-10764 |
ENTERGY ARKANSAS, INC. |
71-0005900 |
1-27031 |
ENTERGY GULF STATES, INC. |
74-0662730 |
1-8474 |
ENTERGY LOUISIANA, INC. |
72-0245590 |
1-31508 |
ENTERGY MISSISSIPPI, INC. |
64-0205830 |
0-5807 |
ENTERGY NEW ORLEANS, INC. |
72-0273040 |
1-9067 |
SYSTEM ENERGY RESOURCES, INC. |
72-0752777 |
__________________________________________________________________________________________
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes |
X |
No |
|
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes |
No |
|
Entergy Corporation |
Ö |
|
Entergy Arkansas, Inc. |
Ö |
|
Entergy Gulf States, Inc. |
Ö |
|
Entergy Louisiana, Inc. |
Ö |
|
Entergy Mississippi, Inc. |
Ö |
|
Entergy New Orleans, Inc. |
Ö |
|
System Energy Resources, Inc. |
Ö |
Common Stock Outstanding |
Outstanding at April 29, 2005 |
|
Entergy Corporation |
($0.01 par value) |
211,998,084 |
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, 2004, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2005
Page Number |
|||
Definitions |
1 |
||
Entergy Corporation and Subsidiaries |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
4 |
||
Liquidity and Capital Resources |
6 |
||
Significant Factors and Known Trends |
8 |
||
Critical Accounting Estimates |
12 |
||
Consolidated Statements of Income |
13 |
||
Consolidated Statements of Cash Flows |
14 |
||
Consolidated Balance Sheets |
16 |
||
Consolidated Statements of Retained Earnings, Comprehensive Income, and |
18 |
||
Selected Operating Results |
19 |
||
Notes to Consolidated Financial Statements |
20 |
||
Entergy Arkansas, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
29 |
||
Liquidity and Capital Resources |
30 |
||
Significant Factors and Known Trends |
31 |
||
Critical Accounting Estimates |
33 |
||
Income Statements |
34 |
||
Statements of Cash Flows |
35 |
||
Balance Sheets |
36 |
||
Selected Operating Results |
38 |
||
Entergy Gulf States, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
39 |
||
Liquidity and Capital Resources |
40 |
||
Significant Factors and Known Trends |
41 |
||
Critical Accounting Estimates |
44 |
||
Income Statements |
45 |
||
Statements of Cash Flows |
47 |
||
Balance Sheets |
48 |
||
Statements of Retained Earnings and Comprehensive Income |
50 |
||
Selected Operating Results |
51 |
||
Entergy Louisiana, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
52 |
||
Liquidity and Capital Resources |
53 |
||
Significant Factors and Known Trends |
54 |
||
Critical Accounting Estimates |
56 |
||
Income Statements |
58 |
||
Statements of Cash Flows |
59 |
||
Balance Sheets |
60 |
||
Selected Operating Results |
62 |
||
Entergy Mississippi, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
63 |
||
Liquidity and Capital Resources |
64 |
||
Significant Factors and Known Trends |
65 |
||
Critical Accounting Estimates |
66 |
||
Income Statements |
68 |
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2005
Page Number |
|||
Statements of Cash Flows |
69 |
||
Balance Sheets |
70 |
||
Selected Operating Results |
72 |
||
Entergy New Orleans, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
73 |
||
Liquidity and Capital Resources |
74 |
||
Significant Factors and Known Trends |
74 |
||
Critical Accounting Estimates |
76 |
||
Income Statements |
77 |
||
Statements of Cash Flows |
79 |
||
Balance Sheets |
80 |
||
Selected Operating Results |
82 |
||
System Energy Resources, Inc. |
|||
Management's Financial Discussion and Analysis |
|||
Results of Operations |
83 |
||
Liquidity and Capital Resources |
83 |
||
Significant Factors and Known Trends |
84 |
||
Critical Accounting Estimates |
84 |
||
Income Statements |
85 |
||
Statements of Cash Flows |
87 |
||
Balance Sheets |
88 |
||
Notes to Respective Financial Statements |
90 |
||
Item 4. Controls and Procedures |
98 |
||
Part II. Other Information |
|||
Item 1. Legal Proceedings |
99 |
||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
99 |
||
Item 5. Other Information |
99 |
||
Item 6. Exhibits |
101 |
||
Signature |
103 |
FORWARD-LOOKING INFORMATION
In this filing and from time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to others described elsewhere in this report and in subsequent securities filings) include:
(Page left blank intentionally)
DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym |
Term |
AFUDC |
Allowance for Funds Used During Construction |
ALJ |
Administrative Law Judge |
ANO 1 and 2 |
Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas |
APSC |
Arkansas Public Service Commission |
Board |
Board of Directors of Entergy Corporation |
Cajun |
Cajun Electric Power Cooperative, Inc. |
capacity factor |
Actual plant output divided by maximum potential plant output for the period |
City Council or Council |
Council of the City of New Orleans, Louisiana |
CPI-U |
Consumer Price Index - Urban |
DOE |
United States Department of Energy |
domestic utility companies |
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, collectively |
EITF |
FASB's Emerging Issues Task Force |
Energy Commodity Services |
Entergy's business segment that includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business |
Entergy |
Entergy Corporation and its direct and indirect subsidiaries |
Entergy Corporation |
Entergy Corporation, a Delaware corporation |
Entergy-Koch |
Entergy-Koch, LP, a joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc. |
EPA |
United States Environmental Protection Agency |
EPDC |
Entergy Power Development Corporation, a wholly-owned subsidiary of Entergy Corporation |
FASB |
Financial Accounting Standards Board |
FEMA |
Federal Emergency Management Agency |
FERC |
Federal Energy Regulatory Commission |
firm liquidated damages |
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset); if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract |
FSP |
FASB Staff Position |
Grand Gulf |
Unit No. 1 of Grand Gulf Steam Electric Generating Station (nuclear), 90% owned or leased by System Energy |
GWh |
Gigawatt-hour(s), which equals one million kilowatt-hours |
Independence |
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power |
IRS |
Internal Revenue Service |
ISO |
Independent System Operator |
kV |
Kilovolt |
kW |
Kilowatt |
kWh |
Kilowatt-hour(s) |
LDEQ |
Louisiana Department of Environmental Quality |
LPSC |
Louisiana Public Service Commission |
Mcf |
1,000 cubic feet of gas |
MMBtu |
One million British Thermal Units |
MPSC |
Mississippi Public Service Commission |
DEFINITIONS (Continued)
Abbreviation or Acronym |
Term |
MW |
Megawatt(s), which equals one thousand kilowatt(s) |
MWh |
Megawatt-hour(s) |
Nelson Unit 6 |
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, owned 70% by Entergy Gulf States |
Net debt ratio |
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
Net MW in operation |
Installed capacity owned or operated |
Net revenue |
Operating revenue net of fuel, fuel-related, and purchased power expenses; and other regulatory credits |
Non-Utility Nuclear |
Entergy's business segment that owns and operates five nuclear power plants and sells electric power produced by those plants to wholesale customers |
NRC |
Nuclear Regulatory Commission |
NYPA |
New York Power Authority |
PPA |
Purchased power agreement |
production cost |
Cost in $/MMBtu associated with delivering gas, excluding the cost of the gas |
PRP |
Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination) |
PUCT |
Public Utility Commission of Texas |
PUHCA |
Public Utility Holding Company Act of 1935, as amended |
PURPA |
Public Utility Regulatory Policies Act of 1978 |
Ritchie Unit 2 |
Unit 2 of the R.E. Ritchie Steam Electric Generating Station (gas/oil) |
River Bend |
River Bend Steam Electric Generating Station (nuclear), owned by Entergy Gulf States |
SEC |
Securities and Exchange Commission |
SFAS |
Statement of Financial Accounting Standards as promulgated by the FASB |
SMEPA |
South Mississippi Electric Power Agency, which owns a 10% interest in Grand Gulf |
spark spread |
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 |
System Agreement |
Agreement, effective January 1, 1983, as modified, among the domestic utility companies relating to the sharing of generating capacity and other power resources |
System Energy |
System Energy Resources, Inc. |
System Fuels |
System Fuels, Inc. |
TWh |
Terawatt-hour(s), which equals one billion kilowatt-hours |
unit-contingent |
Transaction under which power is supplied from a specific generation asset; if the specified generation asset is unavailable as a result of forced outage or unanticipated event or circumstance, the seller is not liable to the buyer for any damages resulting from the seller's failure to deliver power |
unit-contingent with |
Transaction under which power is supplied from a specific generation asset; if the specified generation asset is unavailable as a result of forced outage or unanticipated event or circumstance, the seller is not liable to the buyer for any damages resulting from the seller's failure to deliver power unless the actual availability over a specified period of time is below an availability threshold specified in the contract |
DEFINITIONS (Concluded)
Abbreviation or Acronym |
Term |
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 |
UK |
The United Kingdom of Great Britain and Northern Ireland |
U.S. Utility |
Entergy's business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Waterford 3 |
Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana |
weather-adjusted usage |
Electric usage excluding the effects of deviations from normal weather |
White Bluff |
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Entergy's consolidated earnings applicable to common stock for the first quarter 2005 and 2004 were as follows:
Operating Segment |
|
2005 |
|
2004 |
|
|
(In Thousands) |
||
|
|
|
|
|
U.S. Utility |
|
$90,499 |
|
$115,658 |
Non-Utility Nuclear |
|
77,965 |
|
68,833 |
Parent & Other |
|
3,532 |
|
22,670 |
Total |
|
$171,996 |
|
$207,161 |
Entergy's income before taxes is discussed below according to the operating segments listed above. See Note 7 to the consolidated financial statements for more information concerning Entergy's operating segments and their financial results for the first quarter of 2005 and 2004.
Refer to SELECTED OPERATING RESULTS OF ENTERGY CORPORATION AND SUBSIDIARIES for further information with respect to operating statistics.
U.S. Utility
The decrease in earnings for the U.S. Utility for the first quarter of 2005 compared to the first quarter of 2004 from $115.7 million to $90.5 million was primarily due to lower net revenue and higher other operation and maintenance expenses.
Net Revenue
Net revenue, which is Entergy's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2004 net revenue |
|
$924.7 |
Volume/weather |
|
(24.3) |
Price applied to unbilled sales |
|
(16.1) |
Deferred fuel cost revisions |
|
15.5 |
Rate refund provisions |
4.1 |
|
Other |
|
5.8 |
2005 net revenue |
|
$909.7 |
The volume/weather variance resulted from decreased usage by residential customers primarily during the unbilled sales period.
The price applied to unbilled sales variance resulted from a decrease in the fuel price applied to unbilled sales. See Note 1 to the consolidated financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.
The deferred fuel cost revisions variance is due to a revised estimate of fuel costs filed for recovery at Entergy Arkansas in the March 2004 energy cost recovery rider, which reduced net revenue in the first quarter of 2004 by $11.5 million. The remainder of the variance is due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4.0 million.
The rate refund provisions variance is due primarily to accruals recorded in the first quarter of 2004 for potential rate action at Entergy New Orleans and Entergy Gulf States. Included in the current period variance is a provision recorded at Entergy Louisiana in the first quarter of 2005 as a result of a settlement approved by the LPSC in March 2005. The settlement is discussed in Note 2 to the consolidated financial statements.
Other Income Statement Variances
Other operation and maintenance expenses increased from $331.4 million for the first quarter 2004 to $365.4 million for the first quarter 2005 primarily due to:
Depreciation and amortization expenses increased from $190.4 million for the first quarter 2004 to $204.2 million for the first quarter 2005 due primarily to an increase in plant in service.
Other income increased from $15 million for the first quarter 2004 to $25.3 million for the first quarter 2005 primarily due to:
Interest on long-term debt decreased from $101.6 million for the first quarter 2004 to $93.0 million for the first quarter 2005 primarily due to the net retirement of $319 million of long-term debt at the domestic utility companies in 2004. Refer to Note 5 to the consolidated financial statements in the Form 10-K and Note 4 to the consolidated financial statements herein for details of long-term debt.
Non-Utility Nuclear
|
|
2005 |
|
2004 |
|
|
|
|
|
Net MW in operation at March 31 |
|
4,058 |
|
4,001 |
Average realized price per MWh |
|
$41.56 |
|
$39.70 |
Generation in GWh for the quarter |
|
8,267 |
|
8,687 |
Capacity factor for the quarter |
|
93.2% |
|
98.9% |
The increase in earnings for Non-Utility Nuclear for the first quarter of 2005 compared to the first quarter of 2004 from $68.8 million to $78.0 million was primarily due to miscellaneous income of $15.8 million net-of-tax resulting from a reduction in the decommissioning liability for a plant, as discussed in Note 1 to the consolidated financial statements. Also contributing to the increase in earnings was higher contract pricing. The increase in earnings was partially offset by the effects of lower generation associated with a planned refueling outage at a plant.
Parent & Other
The decrease in earnings for Parent & Other from $22.7 million for the first quarter of 2004 to $3.5 million for the first quarter of 2005 was primarily due to the absence of earnings from Entergy's investment in Entergy-Koch due to the sale of Entergy-Koch's energy trading and pipeline businesses in the fourth quarter of 2004, as discussed in the Form 10-K. Also contributing to the decrease in earnings was the favorable settlement of a tax audit issue, which increased earnings in the first quarter of 2004.
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 34.7% and 33.2%, respectively. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to a downward revision in the estimate of federal income tax expense for prior tax periods and investment tax credit amortization partially offset by state income taxes and regulatory plant differences on utility plant items. The difference in the effective income tax rate for the first quarter of 2004 versus the federal statutory rate of 35.0% is primarily due to the favorable settlement of a tax audit issue and investment tax credit amortization partially offset by state income taxes and regulatory plant differences on utility plant items.
Liquidity and Capital Resources
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.
The Form 10-K reported that Entergy expected to contribute $185.9 million in 2005 to its pension plans. Entergy has elected to make additional contributions, and now expects to contribute $253.3 million to its pension plans in 2005. Entergy made $6.2 million of this contribution in the first quarter 2005.
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage as of March 31, 2005 is primarily the result of increased debt outstanding due to additional borrowings on Entergy Corporation's credit facilities along with a decrease in shareholders' equity, primarily due to repurchases of common stock, both of which are discussed below.
|
|
March 31, |
December 31, |
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
|
||
Net debt to net capital |
|
48.1% |
45.3% |
|
44.8% |
|
45.9% |
|
Effect of subtracting cash from debt |
|
1.5% |
2.1% |
|
2.5% |
|
1.6% |
|
Debt to capital |
|
49.6% |
47.4% |
|
47.3% |
|
47.5% |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.
As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in December 2009, has a borrowing capacity of $500 million, of which $75 million was outstanding at March 31, 2005. The three-year credit facility, which expires in May 2007, has a borrowing capacity of $965 million, of which $383 million was outstanding at March 31, 2005. Entergy also has the ability to issue letters of credit against the total borrowing capacity of both credit facilities, and $62.5 million had been issued against the three-year facility at March 31, 2005. The total unused capacity for these facilities as of March 31, 2005 was $944.5 million.
In April 2005, Entergy Arkansas renewed its 364-day credit facility through April 2006 and Entergy Mississippi renewed its 364-day credit facility through May 2006. Also, Entergy Louisiana and Entergy New Orleans extended their 364-day credit facilities through July 2005. Prior to expiration, it is expected that Entergy Louisiana and Entergy New Orleans will renew their 364-day credit facilities through May 2006. As of March 31, 2005, no borrowings were outstanding on these credit facilities.
See Note 4 to the consolidated financial statements for additional discussion of Entergy's short-term credit facilities.
Capital Expenditure Plans and Other Uses of Capital
See the table in the Form 10-K under "Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of Entergy's planned construction and other capital investments by operating segment for 2005 through 2007.
In March 2005, Entergy Mississippi signed an agreement to purchase for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company (CMGC). Entergy Mississippi plans to invest approximately $20 million in facility upgrades at the Attala plant plus $3 million in transaction costs, bringing the total capital cost of the project to approximately $111 million. The Attala plant will be 100 percent owned by Entergy Mississippi, and the acquisition is expected to close in late 2005 or early 2006. The purchase of the plant is contingent upon obtaining necessary approvals from various federal agencies, state permitting agencies, and the MPSC, including MPSC approval of investment cost recovery. Entergy Mississippi and CMGC had previously executed a purchased power agreement in July 2004 for 100 percent of the plant's output, and this agreement will expire upon the close of the acquisition or in March 2008, whichever occurs earlier. The planned construction and other capital investments table in the Form 10-K includes the estimated cost of the Attala acquisition as a 2006 capital commitment.
Cash Flow Activity
As shown in Entergy's Statements of Cash Flows, cash flows for the three months ended March 31, 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Millions) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$619 |
|
$507 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
502 |
|
399 |
|
Investing activities |
|
(568) |
|
(137) |
|
Financing activities |
|
(74) |
|
41 |
Effect of exchange rates on cash and cash equivalents |
|
- |
|
(2) |
|
Net increase (decrease) in cash and cash equivalents |
|
(140) |
|
301 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$479 |
|
$808 |
Operating Cash Flow Activity
Entergy's cash flow provided by operating activities increased by $103 million in the first quarter of 2005 compared to the first quarter of 2004 primarily due to an increase in cash flow provided by the U.S. Utility segment. The U. S. Utility provided $390 million in operating cash flow in 2005, compared to providing $301 million in the first quarter of 2004. The increase resulted primarily from the timing of receivable collections and payments to vendors.
Investing Activities
Net cash used in investing activities increased by $431 million in the first quarter of 2005 compared to the first quarter of 2004 primarily due to the following activity:
Financing Activities
Financing activities used $74 million in the first quarter of 2005 compared to providing $41 million in the first quarter of 2004 primarily due to the following activity:
Significant Factors and Known Trends
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for discussions of rate regulation, federal regulation, market and credit risks, utility restructuring, and nuclear matters. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
See the Form 10-K for the chart summarizing material rate proceedings. Following are updates to that chart.
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement will result in credits totaling $76 million for retail electricity customers in Entergy Gulf States' Louisiana service territory and credits totaling $14 million for retail electricity customers of Entergy Louisiana. The settlement dismisses Entergy Gulf States' fourth, fifth, sixth, seventh, and eighth annual earnings reviews, Entergy Gulf States' ninth post-merger earnings review and revenue requirement analysis, the continuation of a fuel review for Entergy Gulf States, dockets established to consider issues concerning power purchases for Entergy Gulf States and Entergy Louisiana for the summers of 2001, 2002, 2003, and 2004, all pending and future nuclear uprate cases through May 2005, and an LPSC docket concerning retail issues arising under the System Agreement. The settlement does not include the System Agre ement case pending at FERC. In addition, Entergy Gulf States agreed not to seek recovery from customers of $2.0 million of excess refund amounts associated with the fourth through the eighth annual earnings reviews and Entergy Louisiana agreed to forego recovery of $3.5 million of deferred 2003 capacity costs associated with certain power purchase agreements. The credits have been issued in connection with April 2005 billings. Entergy Gulf States and Entergy Louisiana have reserved for the approximate refund amounts.
The settlement includes the establishment of a three-year formula rate plan for Entergy Gulf States that, among other provisions, establishes a ROE mid-point of 10.65% and permits Entergy Gulf States to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside a 75 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Gulf States. Under the settlement, there is no change to Entergy Gulf States' retail rates at this time. Current rates will remain in place until the first formula rate plan filing in May 2005 and will be reset, if necessary, effective September 1, 2005. If, as a result of the formula rate plan filing in May 2005, Entergy Gulf States is found to have earned an ROE in excess of 10.65% for the 2004 test year, rates will be reset and a refund will be given in an amount sufficient to reduce its ROE to 10.65% effective January 2004.
Regarding Entergy Louisiana's January 2004 rate filing, in March 2005, the LPSC staff and Entergy Louisiana filed a proposed settlement that includes an annual base rate increase of approximately $18.3 million that was implemented, subject to refund, effective with May 2005 billings. The proposed settlement also includes the adoption of a three-year formula rate plan, the terms of which include a ROE mid-point of 10.25% and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an 80 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Louisiana. A decision from the LPSC on the proposed settlement is expected in May 2005.
In April 2005, Entergy New Orleans made its annual scheduled formula rate plan filings with the City Council. The filings show that a decrease of $0.2 million in electric revenues is warranted and an increase of $3.9 million in gas revenues is warranted. The prescribed period for review by the Council's Advisors and other parties has now commenced, and rate adjustments, if any, could be implemented as soon as September 2005.
In February 2005, bills were submitted in the Texas Legislature that would clarify that Entergy Gulf States is no longer subject to a rate freeze and specify that retail open access will not commence in Entergy Gulf States' Texas service territory until the PUCT certifies a power region. A substitute bill was passed by the Texas House of Representatives in April 2005, and is now being considered by the Texas Senate. The substitute bill changed several provisions of the original bills to address concerns raised in the legislative process. The substitute bill provides that:
Federal Regulation
System Agreement Litigation
See the Form 10-K for discussion of the proceeding that the LPSC commenced before itself regarding the System Agreement. As noted above in State and Local Rate Regulation, the settlement of various issues involving Entergy Gulf States and Entergy Louisiana that was approved by the LPSC has resolved the System Agreement proceeding before the LPSC, which has been dismissed without prejudice.
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Interconnection Orders
See the Form 10-K for a discussion of the ALJ Initial Decision and FERC order directing Entergy Louisiana to refund, in the form of transmission credits, approximately $15 million in expenses and tax obligations previously paid by a generator. Entergy's request for rehearing was denied by the FERC.
Available Flowgate Capacity Proceedings
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Utility Restructuring
Retail-Texas
Previous developments and information related to electric industry restructuring are presented in Note 2 to the consolidated financial statements in the Form 10-K. Refer to "Significant Factors and Known Trends - State and Local Rate Regulation" above for discussion of recent activity at the Texas Legislature.
Federal Legislation
See the Form 10-K for discussion of the comprehensive energy legislation activity in the United States Congress in 2004. In April 2005, the U.S. House of Representatives passed energy legislation containing electricity provisions similar to those discussed in the Form 10-K that were contained in the 2004 legislation, except the 2005 bill passed by the U.S. House does not contain a provision on participant funding. The bill is now pending consideration in the U.S. Senate.
Market and Credit Risks
Commodity Price Risk
As discussed in the Form 10-K, some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary may be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where the Non-Utility Nuclear business sells its power. The primary form of the collateral to satisfy these requirements would be an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At March 31, 2005, based on power prices at that time, Entergy had in place as collateral $698.7 million of Entergy Corporation guarantees, $60.0 million of which support letters of credit. In the event of a decrease in Entergy Corporation's credit rating to specified levels below investment grade, Entergy may be required to replace En tergy Corporation guarantees with cash or letters of credit under some of the agreements.
Critical Accounting Estimates
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, pension and other postretirement benefits, and other contingencies. The following is an update to the information provided in the Form 10-K.
Nuclear Decommissioning Costs
In the first quarter of 2005, Entergy's Non-Utility Nuclear business recorded a reduction of $26.0 million in its decommissioning cost liability in conjunction with a new decommissioning cost study as a result of revised decommissioning costs and changes in assumptions regarding the timing of when the decommissioning of a plant will begin. The revised estimate resulted in miscellaneous income of $26.0 million ($15.8 million net-of-tax), reflecting the excess of the reduction in the liability over the amount of undepreciated asset retirement cost.
Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 4 7 will be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF INCOME | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands, Except Share Data) | ||||
OPERATING REVENUES | ||||
Domestic electric | $1,744,383 | $1,701,327 | ||
Natural gas | 86,950 | 83,816 | ||
Competitive businesses | 492,081 | 466,406 | ||
TOTAL | 2,323,414 | 2,251,549 | ||
OPERATING EXPENSES | ||||
Operating and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 580,082 | 550,127 | ||
Purchased power | 499,778 | 449,520 | ||
Nuclear refueling outage expenses | 39,810 | 41,607 | ||
Other operation and maintenance | 534,666 | 501,252 | ||
Decommissioning | 36,998 | 38,347 | ||
Taxes other than income taxes | 102,989 | 97,303 | ||
Depreciation and amortization | 224,177 | 210,648 | ||
Other regulatory credits - net | (16,765) | (16,089) | ||
TOTAL | 2,001,735 | 1,872,715 | ||
OPERATING INCOME | 321,679 | 378,834 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 12,884 | 7,463 | ||
Interest and dividend income | 30,890 | 28,251 | ||
Equity in earnings (loss) of unconsolidated equity affiliates | (2,193) | 19,819 | ||
Miscellaneous - net | 25,802 | 5,167 | ||
TOTAL | 67,383 | 60,700 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 110,752 | 119,460 | ||
Other interest - net | 12,164 | 6,215 | ||
Allowance for borrowed funds used during construction | (7,509) | (5,154) | ||
TOTAL | 115,407 | 120,521 | ||
INCOME BEFORE INCOME TAXES | 273,655 | 319,013 | ||
Income taxes | 95,035 | 105,997 | ||
CONSOLIDATED NET INCOME | 178,620 | 213,016 | ||
Preferred dividend requirements and other | 6,624 | 5,855 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $171,996 | $207,161 | ||
Earnings per average common share: | ||||
Basic | $0.80 | $0.90 | ||
Diluted | $0.79 | $0.88 | ||
Dividends declared per common share | $0.54 | $0.45 | ||
Average number of common shares outstanding: | ||||
Basic | 214,128,023 | 230,264,638 | ||
Diluted | 218,633,202 | 234,978,625 | ||
See Notes to Consolidated Financial Statements. |
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Consolidated net income | $178,620 | $213,016 | ||
Adjustments to reconcile consolidated net income to net cash flow | ||||
provided by operating activities: | ||||
Reserve for regulatory adjustments | 16,561 | (2,293) | ||
Other regulatory credits - net | (16,765) | (16,089) | ||
Depreciation, amortization, and decommissioning | 261,175 | 248,996 | ||
Deferred income taxes and investment tax credits | 22,182 | 31,683 | ||
Equity in earnings (loss) of unconsolidated equity affiliates - net of dividends | 2,193 | (19,819) | ||
Changes in working capital: | ||||
Receivables | 145,581 | 12,757 | ||
Fuel inventory | 1,011 | (11,098) | ||
Accounts payable | (178,410) | (174,659) | ||
Taxes accrued | 27,849 | 51,268 | ||
Interest accrued | (12,303) | 2,570 | ||
Deferred fuel | 64,580 | 59,799 | ||
Other working capital accounts | (104,789) | 15,747 | ||
Provision for estimated losses and reserves | 10,551 | 11,570 | ||
Changes in other regulatory assets | 14,487 | 20,013 | ||
Other | 69,021 | (44,688) | ||
Net cash flow provided by operating activities | 501,544 | 398,773 | ||
INVESTING ACTIVITIES | ||||
Construction/capital expenditures | (282,070) | (253,075) | ||
Allowance for equity funds used during construction | 12,884 | 7,463 | ||
Nuclear fuel purchases | (103,606) | (68,083) | ||
Proceeds from sale/leaseback of nuclear fuel | 82,658 | 51,076 | ||
Proceeds from sale of assets and businesses | - | 21,978 | ||
Investment in non-utility properties | (1,476) | (2,791) | ||
Decrease (increase) in other investments | 37,280 | (15,312) | ||
Purchases of other temporary investments | (1,437,725) | (146,500) | ||
Liquidation of other temporary investments | 1,148,725 | 314,500 | ||
Decommissioning trust contributions and realized change in trust assets | (25,081) | (20,895) | ||
Other regulatory investments | - | (25,595) | ||
Net cash flow used in investing activities | (568,411) | (137,234) | ||
See Notes to Consolidated Financial Statements. | ||||
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of: | ||||
Long-term debt | 257,545 | 99,250 | ||
Common stock and treasury stock | 64,280 | 95,082 | ||
Retirement of long-term debt | (296,314) | (21,232) | ||
Repurchase of common stock | (382,593) | (27,969) | ||
Redemption of preferred stock | (2,250) | (2,250) | ||
Changes in credit line borrowings - net | 407,925 | 4,102 | ||
Dividends paid: | ||||
Common stock | (115,504) | (100,229) | ||
Preferred stock | (6,650) | (5,855) | ||
Net cash flow provided by (used in) financing activities | (73,561) | 40,899 | ||
Effect of exchange rates on cash and cash equivalents | 44 | (1,708) | ||
Net increase (decrease) in cash and cash equivalents | (140,384) | 300,730 | ||
Cash and cash equivalents at beginning of period | 619,786 | 507,433 | ||
Cash and cash equivalents at end of period | $479,402 | $808,163 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid (received) during the period for: | ||||
Interest - net of amount capitalized | $128,429 | $117,721 | ||
Income taxes | $10,011 | ($9,549) | ||
Noncash financing activities: | ||||
Proceeds from long-term debt issued for the purpose | ||||
of refunding other long-term debt | $45,000 | - | ||
See Notes to Consolidated Financial Statements. |
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $73,455 | $79,136 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 405,947 | 540,650 | ||
Total cash and cash equivalents | 479,402 | 619,786 | ||
Other temporary investments | 476,950 | 187,950 | ||
Notes receivable | 2,064 | 3,092 | ||
Accounts receivable: | ||||
Customer | 365,366 | 435,191 | ||
Allowance for doubtful accounts | (21,941) | (23,758) | ||
Other | 346,686 | 342,289 | ||
Accrued unbilled revenues | 378,070 | 460,039 | ||
Total receivables | 1,068,181 | 1,213,761 | ||
Deferred fuel costs | 21,331 | 85,911 | ||
Accumulated deferred income taxes | 83,752 | 76,899 | ||
Fuel inventory - at average cost | 126,240 | 127,251 | ||
Materials and supplies - at average cost | 575,671 | 569,407 | ||
Deferred nuclear refueling outage costs | 116,575 | 107,782 | ||
Prepayments and other | 207,100 | 116,279 | ||
TOTAL | 3,157,266 | 3,108,118 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 192,333 | 231,779 | ||
Decommissioning trust funds | 2,476,143 | 2,453,406 | ||
Non-utility property - at cost (less accumulated depreciation) | 223,765 | 219,717 | ||
Other | 90,455 | 90,992 | ||
TOTAL | 2,982,696 | 2,995,894 | ||
PROPERTY, PLANT AND EQUIPMENT | ||||
Electric | 29,192,580 | 29,053,340 | ||
Property under capital lease | 737,638 | 738,554 | ||
Natural gas | 266,867 | 262,787 | ||
Construction work in progress | 1,290,830 | 1,197,551 | ||
Nuclear fuel under capital lease | 292,392 | 262,469 | ||
Nuclear fuel | 327,965 | 320,813 | ||
TOTAL PROPERTY, PLANT AND EQUIPMENT | 32,108,272 | 31,835,514 | ||
Less - accumulated depreciation and amortization | 13,330,130 | 13,139,883 | ||
PROPERTY, PLANT AND EQUIPMENT - NET | 18,778,142 | 18,695,631 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 739,575 | 746,413 | ||
Other regulatory assets | 1,436,946 | 1,429,261 | ||
Long-term receivables | 38,259 | 39,417 | ||
Goodwill | 377,172 | 377,172 | ||
Other | 916,845 | 918,871 | ||
TOTAL | 3,508,797 | 3,511,134 | ||
TOTAL ASSETS | $28,426,901 | $28,310,777 | ||
See Notes to Consolidated Financial Statements. | ||||
ENTERGY CORPORATION AND SUBSIDIARIES | ||||
CONSOLIDATED BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $490,286 | $492,564 | ||
Notes payable | 118 | 193 | ||
Accounts payable | 718,118 | 896,528 | ||
Customer deposits | 227,568 | 222,320 | ||
Taxes accrued | 255,506 | 224,011 | ||
Interest accrued | 132,175 | 144,478 | ||
Obligations under capital leases | 133,899 | 133,847 | ||
Other | 311,829 | 218,442 | ||
TOTAL | 2,269,499 | 2,332,383 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 5,069,208 | 5,067,381 | ||
Accumulated deferred investment tax credits | 394,142 | 399,228 | ||
Obligations under capital leases | 175,174 | 146,060 | ||
Other regulatory liabilities | 395,945 | 329,767 | ||
Decommissioning and retirement cost liabilities | 2,077,101 | 2,066,277 | ||
Transition to competition | 79,101 | 79,101 | ||
Regulatory reserves | 29,543 | 103,061 | ||
Accumulated provisions | 563,161 | 549,914 | ||
Long-term debt | 7,444,901 | 7,016,831 | ||
Preferred stock with sinking fund | 15,150 | 17,400 | ||
Other | 1,533,952 | 1,541,331 | ||
TOTAL | 17,777,378 | 17,316,351 | ||
Commitments and Contingencies | ||||
Preferred stock without sinking fund | 365,337 | 365,356 | ||
SHAREHOLDERS' EQUITY | ||||
Common stock, $.01 par value, authorized 500,000,000 | ||||
shares; issued 248,174,087 shares in 2005 and in 2004 | 2,482 | 2,482 | ||
Paid-in capital | 4,826,797 | 4,835,375 | ||
Retained earnings | 5,040,655 | 4,984,302 | ||
Accumulated other comprehensive loss | (116,797) | (93,453) | ||
Less - treasury stock, at cost (35,335,147 shares in 2005 and | ||||
31,345,028 shares in 2004) | 1,738,450 | 1,432,019 | ||
TOTAL | 8,014,687 | 8,296,687 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $28,426,901 | $28,310,777 | ||
See Notes to Consolidated Financial Statements. |
ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL | ||||||||
For the Three Months Ended March 31, 2005 and 2004 | ||||||||
(Unaudited) | ||||||||
2005 | 2004 | |||||||
(In Thousands) | ||||||||
RETAINED EARNINGS | ||||||||
Retained Earnings - Beginning of period | $4,984,302 | $4,502,508 | ||||||
Add - Earnings applicable to common stock | 171,996 | $171,996 | 207,161 | $207,161 | ||||
Deduct: | ||||||||
Dividends declared on common stock | 115,629 | 103,762 | ||||||
Other | 14 | - | ||||||
Total |
115,643
|
103,762
|
||||||
Retained Earnings - End of period |
$5,040,655
|
$4,605,907
|
||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||
INCOME (LOSS) (Net of taxes): | ||||||||
Balance at beginning of period | ||||||||
Accumulated derivative instrument fair value changes | ($141,411) | ($25,811) | ||||||
Other accumulated comprehensive income items | 47,958 | 18,016 | ||||||
Total |
(93,453)
|
(7,795)
|
||||||
Net derivative instrument fair value changes | ||||||||
arising during the period | (20,035) | (20,035) | (16,186) | (16,186) | ||||
Foreign currency translation adjustments | (44) | (44) | 1,708 | 1,708 | ||||
Minimum pension liability | (2,053) | (2,053) | - | - | ||||
Net unrealized investment gains (losses) |
(1,212)
|
(1,212)
|
28,766
|
28,766
|
||||
Balance at end of period: | ||||||||
Accumulated derivative instrument fair value changes | (161,446) | (41,997) | ||||||
Other accumulated comprehensive income items | 44,649 | 48,490 | ||||||
Total |
($116,797)
|
$6,493
|
||||||
Comprehensive Income |
$148,652
|
$221,449
|
||||||
PAID-IN CAPITAL | ||||||||
Paid-in Capital - Beginning of period | $4,835,375 | $4,767,615 | ||||||
Add: Common stock issuances related to stock plans |
(8,578)
|
24,556
|
||||||
Paid-in Capital - End of period |
$4,826,797
|
$4,792,171
|
||||||
See Notes to Consolidated Financial Statements. |
ENTERGY CORPORATION AND SUBSIDIARIES For the Three Months Ended March 31, 2005 and 2004 (Unaudited) |
||||||||
Increase/ | ||||||||
Description | 2005 | 2004 | (Decrease) | % | ||||
(Dollars in Millions) |
||||||||
|
||||||||
U. S. Utility Electric Operating Revenues: |
|
|||||||
Residential | $622 | $609 | $13 | 2 | ||||
Commercial | 462 | 435 | 27 | 6 | ||||
Industrial | 556 | 514 | 42 | 8 | ||||
Governmental | 45 | 44 | 1 | 2 | ||||
Total retail | 1,685 | 1,602 | 83 | 5 | ||||
Sales for resale | 95 | 99 | (4) | (4) | ||||
Other | (36) | - | (36) | - - | ||||
Total | $1,744 | $1,701 | $43 | 3 | ||||
U. S. Utility Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 7,570 | 7,726 | (156) | (2) | ||||
Commercial | 5,990 | 5,887 | 103 | 2 | ||||
Industrial | 9,596 | 9,490 | 106 | 1 | ||||
Governmental | 609 | 600 | 9 | 2 | ||||
Total retail | 23,765 | 23,703 | 62 | - - | ||||
Sales for resale | 1,732 | 2,418 | (686) | (28) | ||||
Total | 25,497 | 26,121 | (624) | (2) | ||||
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Nuclear Insurance
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear liability and property and replacement power insurance associated with Entergy's nuclear power plants.
Nuclear Decommissioning and Other Retirement Costs
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear decommissioning costs. In the first quarter of 2005, Entergy's Non-Utility Nuclear business recorded a reduction of $26.0 million in its decommissioning cost liability in conjunction with a new decommissioning cost study as a result of revised decommissioning costs and changes in assumptions regarding the timing of when the decommissioning of a plant will begin. The revised estimate resulted in miscellaneous income of $26.0 million ($15.8 million net-of-tax), reflecting the excess of the reduction in the liability over the amount of undepreciated asset retirement cost.
Income Taxes
See Note 8 to the consolidated financial statements in the Form 10-K for information regarding certain material income tax audit matters involving Entergy.
CashPoint Bankruptcy
See Note 8 to the consolidated financial statements in the Form 10-K for information regarding the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.
Employment Litigation
Entergy Corporation and certain subsidiaries are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies deny any liability to the plaintiffs.
NOTE 2. RATE AND REGULATORY MATTERS
Retail Rate Proceedings
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Filings with the LPSC
Global Settlement (Entergy Gulf States and Entergy Louisiana)
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement will result in credits totaling $76 million for retail electricity customers in Entergy Gulf States' Louisiana service territory and credits totaling $14 million for retail electricity customers of Entergy Louisiana. The settlement dismisses Entergy Gulf States' fourth, fifth, sixth, seventh, and eighth annual earnings reviews, Entergy Gulf States' ninth post-merger earnings review and revenue requirement
analysis, the continuation of a fuel review for Entergy Gulf States, dockets established to consider issues concerning power purchases for Entergy Gulf States and Entergy Louisiana for the summers of 2001, 2002, 2003, and 2004, all pending and future nuclear uprate cases through May 2005, and an LPSC docket concerning retail issues arising under the System Agreement. The settlement does not include the System Agreement case pending at FERC. In addition, Entergy Gulf States agreed not to seek recovery from customers of $2.0 million of excess refund amounts associated with the fourth through the eighth annual earnings reviews and Entergy Louisiana agreed to forego recovery of $3.5 million of deferred 2003 capacity costs associated with certain power purchase agreements. The credits have been issued in connection with April 2005 billings. Entergy Gulf States and Entergy Louisiana have reserved for the approximate refund amounts.
The settlement includes the establishment of a three-year formula rate plan for Entergy Gulf States that, among other provisions, establishes a ROE mid-point of 10.65% and permits Entergy Gulf States to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside a 75 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Gulf States. Under the settlement, there is no change to Entergy Gulf States' retail rates at this time. Current rates will remain in place until the first formula rate plan filing in May 2005 and will be reset, if necessary, effective September 1, 2005. If, as a result of the formula rate plan filing in May 2005, Entergy Gulf States is found to have earned an ROE in excess of 10.65% for the 2004 test year, rates will be reset and a refund will be given in an amount sufficient to reduce its ROE to 10.65% effective January 2004.
Retail Rates (Entergy Louisiana)
See Note 2 to consolidated financial statements in the Form 10-K for discussion of Entergy Louisiana's rate filing with the LPSC requesting a base rate increase. In March 2005, the LPSC staff and Entergy Louisiana filed a proposed settlement that includes an annual base rate increase of approximately $18.3 million which was implemented, subject to refund, effective with May 2005 billings. The proposed settlement also includes the adoption of a three-year formula rate plan, the terms of which include a ROE mid-point of 10.25% and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an 80 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Louisiana. A decision from the LPSC on the proposed settlement is expected in May 2005.
Filings with the City Council (Entergy New Orleans)
In April 2005, Entergy New Orleans made its annual scheduled formula rate plan filings with the City Council. The filings show that a decrease of $0.2 million in electric revenues is warranted and an increase of $3.9 million in gas revenues is warranted. The prescribed period for review by the Council's Advisors and other parties has now commenced, and rate adjustments, if any, could be implemented as soon as September 2005.
Deferred Fuel Costs
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
In March 2005, Entergy Arkansas filed with the APSC its energy cost recovery rider for the period April 2005 through March 2006. The filed energy cost rate, which accounts for 15 percent of a typical residential customer's bill using 1,000 kWh per month, increased 31 percent primarily attributable to a true-up adjustment for an under-recovery balance of $11.2 million and a nuclear refueling adjustment resulting from outages scheduled in 2005 at ANO 1 and 2.
In March 2004, Entergy Gulf States filed with the PUCT a fuel reconciliation case covering the period September 2000 through August 2003. Entergy Gulf States is reconciling $1.43 billion of fuel and purchased power costs on a Texas retail basis. This amount includes $8.6 million of under-recovered costs that Entergy Gulf States is asking to reconcile and roll into its fuel over/under-recovery balance to be addressed in the next appropriate fuel proceeding. This case involves imputed capacity and River Bend payment issues similar to those decided adversely in a January 2001 proceeding that is now on appeal. On January 31, 2005, the ALJ issued a Proposal for Decision that recommended disallowing $10.7 million (excluding interest) related to these two issues. In April 2005, the PUCT issued an order reversing in part, the ALJ's Proposal for Decision and allowing Entergy Gulf States to recover a part of its request related to the imputed capacity and River Bend payment issues. The PUCT's order reduced the disallowance in the case to $8.3 million. Both Entergy Gulf States and certain cities served by Entergy Gulf States filed motions for rehearing on these issues. Judicial review may follow PUCT action on the motions. Any disallowance will be netted against Entergy Gulf States' under-recovered costs and will be included in its deferred fuel costs balance.
As discussed in Note 2 to the consolidated financial statements in the Form 10-K, in August 2000, the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Louisiana pursuant to a November 1997 LPSC general order. The time period that is the subject of the audit is January 1, 2000 through December 31, 2001. In September 2003, the LPSC staff issued its audit report and recommended a disallowance with regard to one item. The issue relates to the alleged failure to uprate Waterford 3 in a timely manner, a claim that also has been raised in the summer 2001, 2002, and 2003 purchased power proceedings. The settlement approved by the LPSC in March 2005, discussed above, resolves the uprate imprudence disallowance and is no longer at issue in this proceeding.
In January 2005, the MPSC approved a change in Entergy Mississippi's energy cost recovery rider. Entergy Mississippi's fuel over-recoveries for the third quarter of 2004 of $21.3 million will be deferred from the first quarter 2005 energy cost recovery rider adjustment calculation. The deferred amount of $21.3 million plus carrying charges will be refunded through the energy cost recovery rider in the second and third quarters of 2005 at a rate of 45% and 55%, respectively.
As discussed in Note 2 to the consolidated financial statements in the Form 10-K, the City Council passed resolutions implementing a package of measures developed by Entergy New Orleans and the Council Advisors to protect customers from potential gas price spikes during the 2004 - 2005 winter heating season including the deferral of collection of up to $6.2 million of gas costs associated with a cap on the purchased gas adjustment in November and December 2004 and in the event that the average residential customer's gas bill were to exceed a threshold level. The deferrals of $1.7 million resulting from these caps will receive accelerated recovery over a seven-month period beginning in April 2005.
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 consolidated financial statements in the Form 10-K.
Texas
See Note 2 to the consolidated financial statements in the Form 10-K for a discussion of the status of retail open access in Entergy Gulf States' Texas service territory and Entergy Gulf States' independent organization request.
In February 2005, bills were submitted in the Texas Legislature that would clarify that Entergy Gulf States is no longer subject to a rate freeze and specify that retail open access will not commence in Entergy Gulf States' Texas service territory until the PUCT certifies a power region. A substitute bill was passed by the Texas House of Representatives in April 2005, and is now being considered by the Texas Senate. The substitute bill changed several provisions of the original bills to address concerns raised in the legislative process. The substitute bill provides that:
NOTE 3. COMMON EQUITY
Common Stock
Earnings per Share
The following tables present Entergy's basic and diluted earnings per share (EPS) calculations included on the consolidated income statement:
|
|
For the Three Months Ended March 31, |
|||||||
|
|
2005 |
|
2004 |
|||||
|
|
(In Millions, Except Per Share Data) |
|||||||
|
|
|
|
$/share |
|
|
|
$/share |
|
Earnings applicable to common stock |
|
$172.0 |
|
|
|
$207.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding - basic |
|
|
|
|
|
|
|
|
|
Average dilutive effect of: |
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
4.3 |
|
(0.016) |
|
4.5 |
|
(0.017) |
|
Deferred Units |
|
0.2 |
|
(0.001) |
|
0.2 |
|
(0.001) |
Average number of common shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy's stock option and other equity compensation plans are discussed in Note 7 to the consolidated financial statements in the Form 10-K.
During the first quarter of 2005, Entergy Corporation issued 1,603,481 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. During the first quarter of 2005, Entergy Corporation repurchased 5,593,600 shares of common stock for a total purchase price of $382.6 million.
Retained Earnings
On April 12, 2005, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54 per share, payable on June 1, 2005, to holders of record as of May 12, 2005.
NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in December 2009, has a borrowing capacity of $500 million, of which $75 million was outstanding at March 31, 2005. The three-year credit facility, which expires in May 2007, has a borrowing capacity of $965 million, of which $383 million was outstanding at March 31, 2005. Entergy also has the ability to issue letters of credit against the total borrowing capacity of both credit facilities, and $62.5 million had been issued against the three-year facility at March 31, 2005. The total unused capacity for these facilities as of March 31, 2005 was $944.5 million. The commitment fee for these facilities is currently 0.13% of the line amount. Commitment fees and interest rates on loans under the credit facilities can fluctuate depending on the senior debt ratings of the domestic utility companies.
The short-term borrowings of Entergy's subsidiaries are limited to amounts authorized by the SEC. The current limits authorized are effective through November 30, 2007. In addition to borrowing from commercial banks, Entergy's subsidiaries are authorized to borrow from Entergy's money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the SEC authorized limits. As of March 31, 2005, Entergy's subsidiaries' aggregate authorized limit was $1.6 billion and the outstanding borrowings from the money pool were $117.1 million.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans each have 364-day credit facilities available as follows:
|
|
|
|
Amount of |
|
Amount Drawn as of |
|
|
|
|
|
|
|
Entergy Arkansas |
|
April 2006 |
|
$85 million |
|
- |
Entergy Louisiana |
|
July 2005 |
|
$15 million (a) |
|
- |
Entergy Mississippi |
|
May 2006 |
|
$25 million |
|
- |
Entergy New Orleans |
July 2005 |
$14 million (a) |
- |
(a) |
The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities at any one time cannot exceed $15 million. |
In April 2005, Entergy Arkansas renewed its 364-day credit facility through April 2006 and Entergy Mississippi renewed its 364-day credit facility through May 2006. Also, Entergy Louisiana and Entergy New Orleans extended their 364-day credit facilities through July 2005. Prior to expiration, it is expected that Entergy Louisiana and Entergy New Orleans will renew their 364-day credit facilities through May 2006.
The 364-day credit facilities have variable interest rates and the average commitment fee is 0.13%. The Entergy Arkansas facility requires it to maintain total shareholders' equity of at least 25% of its total assets.
The following long-term debt has been issued by Entergy in 2005:
|
Issue Date |
|
Amount |
|
|
|
(In Thousands) |
U.S. Utility |
|
|
|
Mortgage Bonds: |
|
|
|
5.66% Series due February 2025 - Entergy Arkansas |
January 2005 |
|
$175,000 |
6.18% Series due March 2035 - Entergy Gulf States |
February 2005 |
|
$85,000 |
Governmental Bonds: |
|
|
|
5.00% Series due January 2021, Independence County - Arkansas (Entergy Arkansas) |
March 2005 |
|
$45,000 |
The following long-term debt was retired by Entergy in 2005:
|
Retirement Date |
|
Amount |
|
|
|
(In Thousands) |
U.S. Utility |
|
|
|
Mortgage Bonds: |
|
|
|
7.00% Series due October 2023 - Entergy Arkansas |
February 2005 |
|
$175,000 |
Other Long-term Debt: |
|
|
|
Grand Gulf Lease Obligation payment |
N/A |
|
$28,790 |
8.75% Junior Subordinated Deferrable Interest Debentures |
March 2005 |
|
$87,629 |
Retirements after the balance sheet date: |
|
|
|
9.0% Series due May 2015, West Feliciana Parish - Louisiana (Entergy Gulf States) |
May 2005 |
|
$45,000 |
7.5% Series due May 2015, West Feliciana Parish - Louisiana (Entergy Gulf States) |
May 2005 |
|
$41,600 |
Entergy Arkansas used the proceeds from the March 2005 issuance to redeem, prior to maturity, $45 million of 6.25% Series of Independence County bonds in April 2005. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
NOTE 5. STOCK-BASED COMPENSATION PLANS
Entergy grants stock options, which are described more fully in Note 7 to the consolidated financial statements in the Form 10-K. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation." Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans vest over three years. Therefore, the cost related to stock-based employee compensation included in the determination of net income for 2004 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS 123. There is no pro forma effect for the first quarter 2005 because all non-vested awards are accounted for at fair value. Stock-based compensation expense in cluded in earnings applicable to common stock, net of related tax effects, for the first quarter 2005 is $1.8 million. The following table illustrates the effect on net income and earnings per share for 2004 if Entergy would have historically applied the fair value based method of accounting to stock-based employee compensation.
First Quarter |
|||
(In Thousands, Except Per Share Data) |
|||
Earnings applicable to common stock |
$207,161 |
||
Add: Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects |
|
||
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects |
|
||
Pro forma earnings applicable to common stock |
$204,279 |
||
Earnings per average common share: |
|||
Basic |
$0.90 |
||
Basic - pro forma |
$0.89 |
||
Diluted |
$0.88 |
||
Diluted - pro forma |
$0.87 |
||
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
Entergy's pension cost, including amounts capitalized, for the first quarters of 2005 and 2004, included the following components:
|
|
2005 |
|
2004 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$21,447 |
|
$18,735 |
Interest cost on projected benefit obligation |
|
38,632 |
|
36,015 |
Expected return on assets |
|
(39,513) |
|
(38,725) |
Amortization of transition asset |
|
(165) |
|
(191) |
Amortization of prior service cost |
|
1,362 |
|
1,413 |
Amortization of loss |
|
7,457 |
|
4,401 |
Net pension costs |
|
$29,220 |
|
$21,648 |
Components of Net Other Postretirement Benefit Cost
Entergy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2005 and 2004, included the following components:
|
|
2005 |
|
2004 |
|
|
(In Thousands) |
||
|
|
|
|
|
Service cost - benefits earned during the period |
|
$9,400 |
|
$9,708 |
Interest cost on APBO |
|
14,290 |
|
14,297 |
Expected return on assets |
|
(4,942) |
|
(4,702) |
Amortization of transition obligation |
|
175 |
|
1,242 |
Amortization of prior service cost |
|
(1,979) |
|
(889) |
Amortization of loss |
|
7,083 |
|
5,954 |
Net other postretirement benefit cost |
|
$24,027 |
|
$25,610 |
Employer Contributions
Entergy previously disclosed in the Form 10-K that it expected to contribute $185.9 million to its pension plans in 2005. Entergy has elected to make additional contributions of $67.4 million to the plan for a total of $253.3 million in 2005. As of March 31, 2005, Entergy contributed $6.2 million to its pension plans. The April 2005 contribution was $111.5 million. Therefore, Entergy presently anticipates contributing an additional $135.6 million to fund its pension plans in 2005.
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2004 Accumulated Postretirement Benefit Obligation by $161 million, and reduced the first quarter 2005 and 2004 other postretirement benefit cost by $6.8 million and $2.5 million, respectively. Refer to Note 10 to the consolidated financial statements in the Form 10-K for further discussion.
NOTE 7. BUSINESS SEGMENT INFORMATION
Entergy's reportable segments as of March 31, 2005 are U.S. Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the Energy Commodity Services segment, the Competitive Retail Services business, and earnings on the proceeds of sales of previously-owned businesses. The Energy Commodity Services segment was presented as a reportable segment prior to 2005, but it did not meet the quantitative thresholds for a reportable segment in 2004 and, with the sale of Entergy-Koch's businesses in 2004, management does not expect the Energy Commodity Services segment to meet the quantitative thresholds in the foreseeable future. The 2004 information in the table below has been restated to include the Energy Commodity Services segment in the All Other column.
Entergy's segment financial information for the first quarters of 2005 and 2004 is as follows:
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|||||||||
2005 |
|
|
|
|
|
|
|
|
|
Operating Revenues |
$1,831,800 |
|
$343,575 |
|
$165,099 |
|
($17,060) |
|
$2,323,414 |
Equity in earnings of |
|
|
|
|
|
|
|
|
|
unconsolidated equity affiliates |
- |
|
- |
|
(2,193) |
|
- |
|
(2,193) |
Income Taxes (Benefit) |
49,049 |
|
51,168 |
|
(5,182) |
|
- |
|
95,035 |
Net Income |
96,268 |
|
77,965 |
|
4,460 |
|
(73) |
|
178,620 |
Total Assets |
22,986,894 |
|
4,631,292 |
|
3,288,980 |
|
(2,480,265) |
|
28,426,901 |
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
Operating Revenues |
$1,785,518 |
|
$344,848 |
|
$136,553 |
|
($15,370) |
|
$2,251,549 |
Equity in earnings of |
|
|
|
|
|
|
|
|
|
unconsolidated equity affiliates |
- |
|
- |
|
19,819 |
|
- |
|
19,819 |
Income Taxes (Benefit) |
72,678 |
|
43,695 |
|
(10,376) |
|
- |
|
105,997 |
Net Income |
121,513 |
|
68,833 |
|
22,670 |
|
- |
|
213,016 |
Total Assets |
22,497,775 |
|
4,440,348 |
|
3,411,517 |
|
(1,484,892) |
|
28,864,748 |
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.
NOTE 8. OTHER TEMPORARY INVESTMENTS
The consolidated balance sheet as of December 31, 2004 reflects a reclassification from cash and cash equivalents to other temporary investments of $188 million of instruments used in Entergy's cash management program. This reclassification is to present certain highly-liquid auction rate securities as short-term investments rather than as cash equivalents due to the stated tenor of the maturities of these investments. Entergy actively invests its available cash balance in financial instruments, including auction rate securities that have stated maturities of 20 years or more. The auction rate securities provide a high degree of liquidity through features such as 7 and 28 day auctions that allow for the redemption of the securities at their face amount plus earned interest. Because Entergy intends to sell these instruments within one year or less, typically within 28 days of the balance sheet date, they are classified as current assets. A corresponding change was made to the consolidated statement of cash flows for the three months ended March 31, 2004 resulting in reductions of $67 million and $185 million in the amounts presented as cash and cash equivalents as of March 31, 2004 and December 31, 2003.
__________________________________
In the opinion of the management of Entergy Corporation, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the U.S. Utility segment, however, is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
ENTERGY ARKANSAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased $12.7 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to higher net revenue.
Net Revenue
Net revenue, which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2004 net revenue |
|
$206.8 |
Deferred fuel cost revisions |
|
15.5 |
Other |
|
1.4 |
2005 net revenue |
|
$223.7 |
The deferred fuel cost revisions variance is primarily due to a revised estimate of fuel costs filed for recovery at Entergy Arkansas in the March 2004 energy cost recovery rider, which reduced net revenue in the first quarter of 2004 by $11.5 million. The remainder of the variance is due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4.0 million.
Fuel and purchased power expenses
Fuel and purchased power expenses decreased primarily due to decreased deferred fuel costs resulting primarily from the true-ups to the 2004 and 2003 energy cost recovery rider filings.
Other Income Statement Variances
Other income increased primarily due to:
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 35.2% and 40.5%, respectively. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items in addition to state income taxes net of federal, offset by a downward revision in the estimate of federal income tax expense for prior tax periods. The difference in the effective income tax rate for the first quarter of 2004 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items in addition to state income taxes net of federal.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$89,744 |
|
$8,834 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
143,480 |
|
69,392 |
|
Investing activities |
|
(52,606) |
|
(49,922) |
|
Financing activities |
|
(18,575) |
|
(10,244) |
Net increase in cash and cash equivalents |
|
72,299 |
|
9,226 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$162,043 |
|
$18,060 |
Operating Activities
Cash flow from operations increased $74.1 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to money pool activity, the timing of the collection of receivables from customers, and an increase in net income.
Entergy Arkansas' receivables from or (payables to) the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$28,252 |
|
$23,561 |
|
($42,926) |
|
($69,153) |
Money pool activity used $4.7 million of Entergy Arkansas' operating cash flows in the first quarter of 2005 and used $26.2 million in the first quarter of 2004. See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Investing Activities
Net cash flow used in investing activities increased $2.7 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to increased construction expenditures resulting from the steam generator and reactor vessel head replacement at ANO 1.
Financing Activities
Net cash flow used in financing activities increased $8.3 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to a $4.4 million call premium paid on the early redemption of the 7.0% Series of First Mortgage Bonds in February 2005 and the payment of $1.9 million more in common stock dividends. See Note 3 to the domestic utility companies and System Energy financial statements for details of Entergy Arkansas' long-term debt activity in 2005.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
In April 2005, Entergy Arkansas renewed its 364-day credit facility through April 30, 2006. The amount available under the credit facility is $85 million, of which none was drawn at March 31, 2005.
Entergy Arkansas issued long-term debt in 2005 as follows:
Issue Date |
Description |
Maturity |
Amount |
|||
(In Thousands) |
||||||
January 2005 |
5.66% Series |
February 2025 |
$175,000 |
|||
March 2005 |
5.00% Series |
January 2021 |
$45,000 |
The proceeds from the January 2005 issuance were used to redeem First Mortgage Bonds as follows:
Retirement Date |
|
|
|
|||
(In Thousands) |
||||||
February 2005 |
7.00% Series |
October 2023 |
$175,000 |
Entergy Arkansas used the proceeds from the March 2005 issuance to redeem, prior to maturity, $45 million of 6.25% Series of Independence County bonds in April 2005. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of utility restructuring, federal regulation and proceedings, market and credit risks, state and local rate regulatory risks, nuclear matters, and environmental risks. Following are updates to the information presented in the Form 10-K.
Federal Regulation
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Available Flowgate Capacity Proceeding
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Critical Accounting Estimates
See
"Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and pension and other postretirement benefits.Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 4 7 will be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY ARKANSAS, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $367,360 | $363,461 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 36,803 | 59,787 | ||
Purchased power | 107,632 | 102,328 | ||
Nuclear refueling outage expenses | 6,317 | 6,337 | ||
Other operation and maintenance | 85,829 | 84,441 | ||
Decommissioning | 8,113 | 9,344 | ||
Taxes other than income taxes | 9,837 | 8,396 | ||
Depreciation and amortization | 51,777 | 49,668 | ||
Other regulatory credits - net | (795) | (5,406) | ||
TOTAL | 305,513 | 314,895 | ||
OPERATING INCOME | 61,847 | 48,566 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 3,959 | 2,193 | ||
Interest and dividend income | 4,292 | 2,022 | ||
Miscellaneous - net | (632) | (1,050) | ||
TOTAL | 7,619 | 3,165 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 20,782 | 19,748 | ||
Other interest - net | 1,426 | 883 | ||
Allowance for borrowed funds used during construction | (2,011) | (1,301) | ||
TOTAL | 20,197 | 19,330 | ||
INCOME BEFORE INCOME TAXES | 49,269 | 32,401 | ||
Income taxes | 17,338 | 13,125 | ||
NET INCOME | 31,931 | 19,276 | ||
Preferred dividend requirements and other | 1,944 | 1,944 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $29,987 | $17,332 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY ARKANSAS, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $31,931 | $19,276 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | (791) | 175 | ||
Other regulatory credits - net | (795) | (5,406) | ||
Depreciation, amortization, and decommissioning | 59,890 | 59,012 | ||
Deferred income taxes and investment tax credits | 11,865 | 37,822 | ||
Changes in working capital: | ||||
Receivables | 53,154 | 4,917 | ||
Fuel inventory | (10,013) | (12,628) | ||
Accounts payable | 14,503 | (47,474) | ||
Taxes accrued | 12,447 | (12,647) | ||
Interest accrued | 1,621 | 4,508 | ||
Deferred fuel costs | (9,431) | 13,222 | ||
Other working capital accounts | (59,926) | (13,069) | ||
Provision for estimated losses and reserves | (378) | (3,921) | ||
Changes in other regulatory assets | 15,917 | 7,445 | ||
Other | 23,486 | 18,160 | ||
Net cash flow provided by operating activities | 143,480 | 69,392 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (54,718) | (50,251) | ||
Allowance for equity funds used during construction | 3,959 | 2,193 | ||
Nuclear fuel purchases | (39,615) | - - | ||
Proceeds from sale/leaseback of nuclear fuel | 39,615 | - - | ||
Decommissioning trust contributions and realized | ||||
change in trust assets | (1,847) | (1,864) | ||
Net cash flow used in investing activities | (52,606) | (49,922) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | 173,464 | - - | ||
Retirement of long-term debt | (179,895) | - - | ||
Dividends paid: | ||||
Common stock | (10,200) | (8,300) | ||
Preferred stock | (1,944) | (1,944) | ||
Net cash flow used in financing activities | (18,575) | (10,244) | ||
Net increase in cash and cash equivalents | 72,299 | 9,226 | ||
Cash and cash equivalents at beginning of period | 89,744 | 8,834 | ||
Cash and cash equivalents at end of period | $162,043 | $18,060 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $18,522 | $13,357 | ||
Income taxes | - - | ($5,400) | ||
Noncash financing activities: | ||||
Proceeds from long-term debt issued for the purpose | ||||
of refunding other long-term debt | $45,000 | - - | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $3,220 | $7,133 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 158,823 | 82,611 | ||
Total cash and cash equivalents | 162,043 | 89,744 | ||
Accounts receivable: | ||||
Customer | 69,358 | 87,131 | ||
Allowance for doubtful accounts | (10,994) | (11,039) | ||
Associated companies | 64,895 | 72,472 | ||
Other | 59,528 | 72,425 | ||
Accrued unbilled revenues | 56,691 | 71,643 | ||
Total accounts receivable | 239,478 | 292,632 | ||
Deferred fuel costs | 16,799 | 7,368 | ||
Accumulated deferred income taxes | 16,552 | 27,306 | ||
Fuel inventory - at average cost | 14,311 | 4,298 | ||
Materials and supplies - at average cost | 85,252 | 85,076 | ||
Deferred nuclear refueling outage costs | 29,446 | 16,485 | ||
Prepayments and other | 53,571 | 6,154 | ||
TOTAL | 617,452 | 529,063 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 11,208 | 11,208 | ||
Decommissioning trust funds | 384,541 | 383,784 | ||
Non-utility property - at cost (less accumulated depreciation) | 1,452 | 1,453 | ||
Other | 2,976 | 2,976 | ||
TOTAL | 400,177 | 399,421 | ||
UTILITY PLANT | ||||
Electric | 6,142,908 | 6,124,359 | ||
Property under capital lease | 16,598 | 17,500 | ||
Construction work in progress | 254,219 | 226,172 | ||
Nuclear fuel under capital lease | 92,576 | 93,855 | ||
Nuclear fuel | 10,960 | 12,201 | ||
TOTAL UTILITY PLANT | 6,517,261 | 6,474,087 | ||
Less - accumulated depreciation and amortization | 2,795,780 | 2,753,525 | ||
UTILITY PLANT - NET | 3,721,481 | 3,720,562 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 92,201 | 101,658 | ||
Other regulatory assets | 406,066 | 400,174 | ||
Other | 45,982 | 42,514 | ||
TOTAL | 544,249 | 544,346 | ||
TOTAL ASSETS | $5,283,359 | $5,193,392 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY ARKANSAS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $147,000 | $147,000 | ||
Accounts payable: | ||||
Associated companies | 76,335 | 68,829 | ||
Other | 96,893 | 89,896 | ||
Customer deposits | 42,962 | 41,639 | ||
Taxes accrued | 63,613 | 35,874 | ||
Interest accrued | 22,997 | 21,376 | ||
Obligations under capital leases | 49,871 | 49,816 | ||
Other | 18,953 | 19,648 | ||
TOTAL | 518,624 | 474,078 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,099,883 | 1,121,623 | ||
Accumulated deferred investment tax credits | 67,339 | 68,452 | ||
Obligations under capital leases | 59,303 | 61,538 | ||
Other regulatory liabilities | 66,271 | 67,362 | ||
Decommissioning | 500,857 | 492,745 | ||
Accumulated provisions | 34,599 | 34,977 | ||
Long-term debt | 1,239,717 | 1,191,763 | ||
Other | 233,572 | 237,447 | ||
TOTAL | 3,301,541 | 3,275,907 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 116,350 | 116,350 | ||
Common stock, $0.01 par value, authorized 325,000,000 | ||||
shares; issued and outstanding 46,980,196 shares in 2005 | ||||
and 2004 | 470 | 470 | ||
Paid-in capital | 591,127 | 591,127 | ||
Retained earnings | 755,247 | 735,460 | ||
TOTAL | 1,463,194 | 1,443,407 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $5,283,359 | $5,193,392 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY ARKANSAS, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2005 and 2004 | ||||||||
(Unaudited) |
||||||||
Increase/ | ||||||||
Description |
2005 |
2004 |
(Decrease) |
% |
||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 135 | $ 131 | $ 4 | 3 | ||||
Commercial | 69 | 65 | 4 | 6 | ||||
Industrial | 72 | 68 | 4 | 6 | ||||
Governmental | 4 | 4 | - | - - | ||||
Total retail | 280 | 268 | 12 | 4 | ||||
Sales for resale | ||||||||
Associated companies | 41 | 54 | (13) | (24) | ||||
Non-associated companies | 51 | 45 | 6 | 13 | ||||
Other | (5) | (4) | (1) | (25) | ||||
Total | $ 367 | $ 363 | $ 4 | 1 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,890 | 1,889 | 1 | - - | ||||
Commercial | 1,249 | 1,213 | 36 | 3 | ||||
Industrial | 1,664 | 1,647 | 17 | 1 | ||||
Governmental | 68 | 64 | 4 | 6 | ||||
Total retail | 4,871 | 4,813 | 58 | 1 | ||||
Sales for resale | ||||||||
Associated companies | 1,355 | 1,672 | (317) | (19) | ||||
Non-associated companies | 1,107 | 1,273 | (166) | (13) | ||||
Total | 7,333 | 7,758 | (425) | (5) | ||||
ENTERGY GULF STATES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $18.4 million for the first quarter of 2005 primarily due to lower net revenue and higher other operation and maintenance expenses, partially offset by lower interest expense and a lower effective income tax rate.
Net Revenue
Net revenue, which is Entergy Gulf States' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2004 net revenue |
|
$262.7 |
Volume/weather |
|
(12.5) |
Price applied to unbilled sales |
|
(11.3) |
Rate refund provisions |
|
4.2 |
Other |
|
(1.4) |
2005 net revenue |
|
$241.7 |
The volume/weather variance is primarily due to decreased usage primarily during the unbilled sales period and milder weather.
The price applied to unbilled sales variance results primarily from a decrease in the fuel price applied to unbilled sales.
The rate refund provisions variance is due to provisions recorded in the first quarter of 2004 for potential rate actions and refunds.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to an increase of $57.1 million in fuel cost recovery revenues due to higher fuel rates, partially offset by the volume/weather variance and unbilled pricing variance discussed above.
Fuel and purchased power expenses increased primarily due to increased recovery from customers of deferred fuel costs and an increase in the market price of purchased power, partially offset by a decrease in demand.
Other Income Statement Variances
Other operation and maintenance expenses increased $16.9 million primarily due to increases of:
Other regulatory credits decreased $2.9 million primarily due to the deferral in 2004 of a gas facility charge related to lower throughput and 2004 credits related to asset retirement obligations.
Interest and other charges decreased $8.1 million primarily due to the retirement of $292 million of First Mortgage Bonds in 2004.
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 19.6% and 31.9%, respectively. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to a downward revision in the estimate of federal income tax expense for prior tax periods, book and tax differences related to utility plant items, and flow-through book and tax timing differences. The difference in the effective income tax rate for the first quarter of 2004 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and the amortization of investment tax credits.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$6,974 |
|
$206,030 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
72,275 |
|
57,133 |
|
Investing activities |
|
(62,556) |
|
(59,351) |
|
Financing activities |
|
(11,220) |
|
(10,300) |
Net decrease in cash and cash equivalents |
|
(1,501) |
|
(12,518) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$5,473 |
|
$193,512 |
Operating Activities
Cash flow from operations increased $15.1 million in the first quarter of 2005 compared to the first quarter of 2004 primarily due to an increase in the collection of customer receivables. The increase was partially offset by money pool activity, which used $40.1 million of Entergy Gulf States' operating cash flows in the first quarter of 2005 compared to using $20.9 million in the first quarter of 2004. Entergy Gulf States' receivables from or (payables to) the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
($19,630) |
|
($59,720) |
|
$90,270 |
|
$69,354 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Investing Activities
Net cash used in investing activities increased $3.2 million for the first quarter of 2005 compared to the same period of 2004 primarily due to the maturity in 2004 of $23.6 million of other investments that provided cash in 2004 as well as an increase in construction expenditures of $9.9 million in 2005 primarily related to transmission reliability and fossil projects. The increase was partially offset by $25.6 million for other regulatory investments in 2004 as a result of fuel cost under-recovery. See Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for fuel costs.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Gulf States' uses and sources of capital. Following is an update to the information provided in the Form 10-K.
In February 2005, Entergy Gulf States issued $85 million of 6.18% Series of First Mortgage Bonds due March 2035. Entergy Gulf States used the proceeds to redeem, in March 2005, $87.6 million of 8.75% Series Junior Subordinated Deferrable Interest Debentures due March 2046.
In May 2005, Entergy Gulf States redeemed, prior to maturity, $45 million of 9.0% Series of West Feliciana Parish bonds and $41.6 million of 7.5% Series of West Feliciana Parish bonds.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of transition to retail competition, federal regulation and proceedings, state and local rate regulatory risk, industrial, commercial, and wholesale customers, market and credit risks, nuclear matters, environmental risks, and litigation risks. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement will result in credits of $76 million to retail electricity customers in Entergy Gulf States' Louisiana service territory. The settlement dismisses Entergy Gulf States' fourth, fifth, sixth, seventh, and eighth annual earnings reviews, Entergy Gulf States' ninth post-merger earnings review and revenue requirement analysis, the continuation of a fuel review for Entergy Gulf States, dockets established to consider issues concerning power purchases for the summers of 2001, 2002, 2003, and 2004, all pending and future nuclear uprate cases through May 2005, and an LPSC docket concerning retail issues arising under the System Agreement. The settlement does not include the System Agreement case pending at FERC. In addition, Entergy Gulf States agreed not to seek recovery from customers of $2.0 million of excess refun d amounts associated with the fourth through the eighth annual earnings reviews. The credits will be issued in connection with April 2005 billings. Entergy Gulf States has previously reserved for the approximate refund amounts.
The settlement includes the establishment of a three-year formula rate plan for Entergy Gulf States that, among other provisions, establishes an ROE mid-point of 10.65% and permits Entergy Gulf States to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside a 75 basis point bandwidth will be allocated 60% to the customers and 40% to Entergy Gulf States. Under the settlement, there is no change to Entergy Gulf States' retail rates at this time. Current rates will remain in place until the first formula rate plan filing in May 2005 and will be reset, if necessary, effective September 1, 2005. If, as a result of the formula rate plan filing in May 2005, Entergy Gulf States is found to have earned an ROE in excess of 10.65% for the 2004 test year, rates will be reset and a refund will be given in an amount sufficient to reduce its ROE to 10.65% effective January 2004.
Federal Regulation
System Agreement Litigation
See the Form 10-K for discussion of the proceeding that the LPSC commenced before itself regarding the System Agreement. As noted above in State and Local Rate Regulation, the settlement of various issues involving Entergy Gulf States and Entergy Louisiana that was approved by the LPSC has resolved the System Agreement proceeding before the LPSC, which has been dismissed without prejudice.
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Available Flowgate Capacity Proceedings
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Transition to Retail Competition
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of the status of retail open access in Entergy Gulf States' Texas service territory and Entergy Gulf States' independent organization request.
In February 2005, bills were submitted in the Texas Legislature that would clarify that Entergy Gulf States is no longer subject to a rate freeze and specify that retail open access will not commence in Entergy Gulf States' Texas service territory until the PUCT certifies a power region. A substitute bill was passed by the Texas House of Representatives in April 2005, and is now being considered by the Texas Senate. The substitute bill changed several provisions of the original bills to address concerns raised in the legislative process. The substitute bill provides that:
Critical Accounting Estimates
See "Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States' accounting for nuclear decommissioning costs, SFAS 143, the application of SFAS 71, unbilled revenue, and pension and other postretirement benefits.
Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 4 7 will be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY GULF STATES, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $652,395 | $612,371 | ||
Natural gas | 26,855 | 26,625 | ||
TOTAL | 679,250 | 638,996 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 219,956 | 177,713 | ||
Purchased power | 217,736 | 201,654 | ||
Nuclear refueling outage expenses | 4,071 | 3,193 | ||
Other operation and maintenance | 108,693 | 91,829 | ||
Decommissioning | 2,298 | 3,730 | ||
Taxes other than income taxes | 30,538 | 29,722 | ||
Depreciation and amortization | 48,736 | 45,868 | ||
Other regulatory credits - net | (121) | (3,025) | ||
TOTAL | 631,907 | 550,684 | ||
OPERATING INCOME | 47,343 | 88,312 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 4,799 | 2,520 | ||
Interest and dividend income | 3,435 | 3,849 | ||
Miscellaneous - net | 651 | 1,884 | ||
TOTAL | 8,885 | 8,253 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 28,225 | 35,388 | ||
Other interest - net | 1,985 | 1,814 | ||
Allowance for borrowed funds used during construction | (3,006) | (1,914) | ||
TOTAL | 27,204 | 35,288 | ||
INCOME BEFORE INCOME TAXES | 29,024 | 61,277 | ||
Income taxes | 5,675 | 19,549 | ||
NET INCOME | 23,349 | 41,728 | ||
Preferred dividend requirements and other | 1,063 | 1,150 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $22,286 | $40,578 | ||
See Notes to Respective Financial Statements. |
ENTERGY GULF STATES, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $23,349 | $41,728 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: |
||||
Reserve for regulatory adjustments | 11,848 | 4,407 | ||
Other regulatory credits - net | (121) | (3,025) | ||
Depreciation, amortization, and decommissioning | 51,034 | 49,598 | ||
Deferred income taxes and investment tax credits | 4,346 | 3,885 | ||
Changes in working capital: | ||||
Receivables | 21,439 | (22,442) | ||
Fuel inventory | 5,864 | (1,298) | ||
Accounts payable | (79,017) | (69,718) | ||
Taxes accrued | (6,108) | 13,369 | ||
Interest accrued | 1,917 | 7,262 | ||
Deferred fuel costs | 33,983 | 32,206 | ||
Other working capital accounts | (10,142) | 27,274 | ||
Provision for estimated losses and reserves | 623 | 403 | ||
Changes in other regulatory assets | 5,879 | 875 | ||
Other | 7,381 | (27,391) | ||
Net cash flow provided by operating activities | 72,275 | 57,133 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (66,813) | (56,889) | ||
Allowance for equity funds used during construction | 4,799 | 2,520 | ||
Nuclear fuel purchases | (2) | (5,616) | ||
Proceeds from sale/leaseback of nuclear fuel | 54 | 5,616 | ||
Investment in subsidiaries | - | |||
Decommissioning trust contributions and realized | ||||
change in trust assets | (3,223) | (2,966) | ||
Changes in other investments - net | 2,629 | 23,579 | ||
Other regulatory investments | - | (25,595) | ||
Net cash flow used in investing activities | (62,556) | (59,351) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | 84,148 | - | ||
Retirement of long-term debt | (87,629) | - | ||
Redemption of preferred stock | (2,250) | (2,250) | ||
Dividends paid: | ||||
Common stock | (4,400) | (6,900) | ||
Preferred stock | (1,089) | (1,150) | ||
Net cash flow used in financing activities | (11,220) | (10,300) | ||
Net decrease in cash and cash equivalents | (1,501) | (12,518) | ||
Cash and cash equivalents at beginning of period | 6,974 | 206,030 | ||
Cash and cash equivalents at end of period | $5,473 | $193,512 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $26,465 | $33,346 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY GULF STATES, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $3,749 | $5,627 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 1,724 | 1,347 | ||
Total cash and cash equivalents | 5,473 | 6,974 | ||
Accounts receivable: | ||||
Customer | 100,722 | 124,801 | ||
Allowance for doubtful accounts | (1,968) | (2,687) | ||
Associated companies | 42,841 | 13,980 | ||
Other | 41,005 | 40,697 | ||
Accrued unbilled revenues | 110,471 | 137,719 | ||
Total accounts receivable | 293,071 | 314,510 | ||
Deferred fuel costs | 56,141 | 90,124 | ||
Accumulated deferred income taxes | 27,425 | 14,339 | ||
Fuel inventory - at average cost | 43,794 | 49,658 | ||
Materials and supplies - at average cost | 103,104 | 101,922 | ||
Prepayments and other | 25,957 | 20,556 | ||
TOTAL | 554,965 | 598,083 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Decommissioning trust funds | 293,909 | 290,952 | ||
Non-utility property - at cost (less accumulated depreciation) | 93,722 | 94,052 | ||
Other | 20,088 | 22,012 | ||
TOTAL | 407,719 | 407,016 | ||
UTILITY PLANT | ||||
Electric | 8,449,863 | 8,418,119 | ||
Natural gas | 80,191 | 78,627 | ||
Construction work in progress | 356,073 | 331,703 | ||
Nuclear fuel under capital lease | 66,532 | 71,279 | ||
TOTAL UTILITY PLANT | 8,952,659 | 8,899,728 | ||
Less - accumulated depreciation and amortization | 4,086,881 | 4,047,182 | ||
UTILITY PLANT - NET | 4,865,778 | 4,852,546 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 444,421 | 444,799 | ||
Other regulatory assets | 281,213 | 285,017 | ||
Long-term receivables | 22,069 | 23,228 | ||
Other | 41,365 | 44,713 | ||
TOTAL | 789,068 | 797,757 | ||
TOTAL ASSETS | $6,617,530 | $6,655,402 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY GULF STATES, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $98,000 | $98,000 | ||
Accounts payable: | ||||
Associated companies | 115,386 | 153,069 | ||
Other | 106,003 | 147,337 | ||
Customer deposits | 54,910 | 53,229 | ||
Taxes accrued | 33,416 | 22,882 | ||
Accumulated deferred income taxes | - - | |||
Interest accrued | 34,659 | 32,742 | ||
Deferred fuel costs | - - | - - | ||
Obligations under capital leases | 33,516 | 33,518 | ||
Global Settlement refund | 76,079 | - - | ||
Other | 14,647 | 19,912 | ||
TOTAL | 566,616 | 560,689 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,536,567 | 1,533,804 | ||
Accumulated deferred investment tax credits | 137,189 | 138,616 | ||
Obligations under capital leases | 33,016 | 37,711 | ||
Other regulatory liabilities | 44,849 | 34,009 | ||
Decommissioning and retirement cost liabilities | 155,442 | 152,095 | ||
Transition to competition | 79,098 | 79,098 | ||
Regulatory reserves | 17,224 | 81,455 | ||
Accumulated provisions | 68,710 | 66,875 | ||
Long-term debt | 1,888,820 | 1,891,478 | ||
Preferred stock with sinking fund | 15,150 | 17,400 | ||
Other | 224,191 | 229,408 | ||
TOTAL | 4,200,256 | 4,261,949 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 47,327 | 47,327 | ||
Common stock, no par value, authorized 200,000,000 | ||||
shares; issued and outstanding 100 shares in 2005 and 2004 | 114,055 | 114,055 | ||
Paid-in capital | 1,157,486 | 1,157,486 | ||
Retained earnings | 531,068 | 513,182 | ||
Accumulated other comprehensive income | 722 | 714 | ||
TOTAL | 1,850,658 | 1,832,764 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $6,617,530 | $6,655,402 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY GULF STATES, INC. | ||||||||
STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME | ||||||||
For the Three Months Ended March 31, 2005 and 2004 | ||||||||
(Unaudited) | ||||||||
2005 | 2004 | |||||||
(In Thousands) | ||||||||
RETAINED EARNINGS | ||||||||
Retained Earnings - Beginning of period | $513,182 | $419,690 | ||||||
Add: Net Income | 23,349 | $23,349 | 41,728 | $41,728 | ||||
Deduct: | ||||||||
Dividends declared on common stock | 4,400 | 6,900 | ||||||
Preferred dividend requirements and other | 1,063 | 1,063 | 1,150 | 1,150 | ||||
5,463 | 8,050 | |||||||
Retained Earnings - End of period |
$531,068
|
$453,368
|
||||||
ACCUMULATED OTHER COMPREHENSIVE | ||||||||
INCOME (Net of Taxes): | ||||||||
Balance at beginning of period: | ||||||||
Accumulated derivative instrument fair value changes | $714 | $3,912 | ||||||
Net derivative instrument fair value changes | ||||||||
arising during the period | 8 | 8 | (543) | (543) | ||||
Balance at end of period: | ||||||||
Accumulated derivative instrument fair value changes |
$722
|
$3,369
|
||||||
Comprehensive Income |
$22,294
|
$40,035
|
||||||
See Notes to Respective Financial Statements. | ||||||||
ENTERGY GULF STATES, INC. | ||||||||
SELECTED OPERATING RESULTS | ||||||||
For the Three Months Ended March 31, 2005 and 2004 | ||||||||
(Unaudited) | ||||||||
Increase/ | ||||||||
Description | 2005 | 2004 | (Decrease) | % | ||||
(Dollars In Millions) |
||||||||
Electric Operating Revenues: | ||||||||
Residential | $196 | $184 | $12 | 7 | ||||
Commercial | 159 | 142 | 17 | 12 | ||||
Industrial | 244 | 212 | 32 | 15 | ||||
Governmental | 10 | 9 | 1 | 11 | ||||
Total retail | 609 | 547 | 62 | 11 | ||||
Sales for resale | ||||||||
Associated companies | 26 | 13 | 13 | 100 | ||||
Non-associated companies | 32 | 45 | (13) | (29) | ||||
Other | (15) | 7 | (22) | (314) | ||||
Total | $652 | $612 | $40 | 7 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 2,155 | 2,188 | (33) | (2) | ||||
Commercial | 1,914 | 1,862 | 52 | 3 | ||||
Industrial | 3,981 | 3,923 | 58 | 1 | ||||
Governmental | 105 | 111 | (6) | (5) | ||||
Total retail | 8,155 | 8,084 | 71 | 1 | ||||
Sales for resale | ||||||||
Associated companies | 565 | 311 | 254 | 82 | ||||
Non-associated companies | 539 | 1,022 | (483) | (47) | ||||
Total | 9,259 | 9,417 | (158) | (2) | ||||
ENTERGY LOUISIANA, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Entergy Louisiana's net income for first quarter 2005 was $1.8 million, which is a decrease of $19.4 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to lower net revenue, higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest charges, partially offset by higher interest income.
Net Revenue
Net revenue, which is Entergy Louisiana's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
|
|
Amount |
|
|
(In Millions) |
|
|
|
2004 net revenue |
|
$197.2 |
Volume/weather |
|
(9.6) |
Rate refund provisions |
|
(5.1) |
Other |
|
2.2 |
2005 net revenue |
|
$184.7 |
The volume/weather variance is due to a total decrease of 131 GWh in weather-adjusted usage, primarily in the residential sector, and decreased usage during the unbilled sales period, partially offset by the effect of milder weather in the first quarter of 2004.
The rate refund provisions variance is primarily due to provisions recorded in the first quarter of 2005 as a result of a settlement approved by the LPSC in March 2005. The settlement is discussed in Note 2 to the domestic utility companies and System Energy financial statements.
Fuel and purchased power expenses and other regulatory credits
Fuel and purchased power expenses increased primarily due to:
The increase was partially offset by decreased demand.
Other regulatory credits increased primarily due to the deferral in the first quarter of 2005 of capacity charges related to generation resource planning as allowed by the LPSC.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income increased primarily due to:
Interest charges increased primarily due to:
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 32.1% and 37.2%, respectively. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to the amortization of investment tax credits and book and tax differences related to the allowance for funds used during construction, partially offset by state income taxes and book and tax differences related to utility plant items. The difference in the effective income tax rate for the first quarter of 2004 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by the amortization of investment tax credits.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$146,049 |
|
$8,787 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
82,815 |
|
8,562 |
|
Investing activities |
|
(56,705) |
|
(44,571) |
|
Financing activities |
|
(3,478) |
|
82,763 |
Net increase in cash and cash equivalents |
|
22,632 |
|
46,754 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$168,681 |
|
$55,541 |
Operating Activities
Cash flow from operations increased $74.3 million in the first quarter of 2005 compared to the first quarter of 2004 primarily due to money pool activity which provided $11.2 million of Entergy Louisiana's operating cash flows in the first quarter of 2005 and used $66.9 million in the first quarter of 2004. Entergy Louisiana's receivables from or (payables to) the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$29,378 |
|
$40,549 |
|
$25,626 |
|
($41,317) |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Investing Activities
The increase of $12.1 million in net cash used by investing activities for the first quarter of 2005 compared to the first quarter of 2004 is primarily due to increased spending on transmission and nuclear projects.
Financing Activities
Entergy Louisiana used $3.5 million of cash for financing activities in the first quarter of 2005 compared to providing $82.8 million in the first quarter of 2004 primarily due to the issuance of $100 million of 5.5% Series First Mortgage Bonds in March 2004, partially offset by a principal payment of $14.8 million in 2004 for the Waterford Lease Obligation.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Louisiana's uses and sources of capital. Following are updates to the information provided in the Form 10-K.
As discussed in the Form 10-K, Entergy Louisiana has a 364-day credit facility in the amount of $15 million. The credit facility's expiration has been extended to July 2005, and it is expected that this facility will be renewed prior to expiration.
Regarding the planned Perryville plant acquisition by Entergy Louisiana, the FERC has denied rehearing of its October 2004 order disclaiming jurisdiction over the acquisition. Also, the LPSC hearing on the acquisition scheduled for March 2005 was held and in April 2005 the LPSC approved the acquisition and the long-term cost-of-service purchased power agreement under which Entergy Gulf States will purchase 75 percent of the plant's output. Entergy Louisiana expects the Perryville acquisition to close in mid-2005.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of utility restructuring, state rate regulation, federal regulation and proceedings, industrial and commercial customers, market and credit risks, nuclear matters, environmental risks, and litigation risks. Following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement will result in credits of $14 million to retail electricity customers of Entergy Louisiana. The settlement dismisses, among other dockets, dockets established to consider issues concerning power purchases for Entergy Louisiana for the summers of 2001, 2002, 2003, and 2004, all pending and future nuclear uprate cases through May 2005, and an LPSC docket concerning retail issues arising under the System Agreement. The settlement does not include the System Agreement case pending at FERC. In addition, Entergy Louisiana agreed to forego recovery of $3.5 million of deferred 2003 capacity costs associated with certain power purchase agreements. The credits will be issued in connection with April 2005 billings. Entergy Louisiana has reserved for the approximate refund amounts.
Refer to "Management's Financial Discussion and Analysis - State Rate Regulation" in the Form 10-K for discussion of Entergy Louisiana's rate filing with the LPSC requesting a base rate increase. In March 2005, the LPSC staff and Entergy Louisiana filed a proposed settlement that includes an annual base rate increase of approximately $18.3 million which was implemented, subject to refund, effective with May 2005 billings. The proposed settlement also includes the adoption of a three-year formula rate plan, the terms of which include a ROE mid-point of 10.25% and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an 80 basis point bandwidth will be allocated 60% to the customers and 40% to Entergy Louisiana. A decision from the LPSC is expected in May 2005.
Federal Regulation
System Agreement Litigation
See the Form 10-K for discussion of the proceeding that the LPSC commenced before itself regarding the System Agreement. As noted above in State and Local Rate Regulation, the settlement of various issues involving Entergy Gulf States and Entergy Louisiana that was approved by the LPSC has resolved the System Agreement proceeding before the LPSC, which has been dismissed without prejudice.
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Interconnection Orders
See the Form 10-K for a discussion of the ALJ Initial Decision and FERC order directing Entergy Louisiana to refund, in the form of transmission credits, approximately $15 million in expenses and tax obligations previously paid by a generator. Entergy's request for rehearing was denied by the FERC.
Available Flowgate Capacity Proceedings
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Critical Accounting Estimates
See "Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and pension and other postretirement costs.
Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 47 wi ll be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY LOUISIANA, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $480,673 | $488,046 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 137,777 | 137,779 | ||
Purchased power | 171,306 | 157,730 | ||
Nuclear refueling outage expenses | 3,424 | 3,177 | ||
Other operation and maintenance | 88,638 | 77,698 | ||
Decommissioning | 5,717 | 5,356 | ||
Taxes other than income taxes | 18,357 | 16,074 | ||
Depreciation and amortization | 51,808 | 46,586 | ||
Other regulatory credits - net | (13,084) | (4,672) | ||
TOTAL | 463,943 | 439,728 | ||
OPERATING INCOME | 16,730 | 48,318 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 2,537 | 1,350 | ||
Interest and dividend income | 3,066 | 1,727 | ||
Miscellaneous - net | (367) | (1,138) | ||
TOTAL | 5,236 | 1,939 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 17,839 | 16,458 | ||
Other interest - net | 3,019 | 985 | ||
Allowance for borrowed funds used during construction | (1,499) | (976) | ||
TOTAL | 19,359 | 16,467 | ||
INCOME BEFORE INCOME TAXES | 2,607 | 33,790 | ||
Income taxes | 836 | 12,579 | ||
NET INCOME | 1,771 | 21,211 | ||
Preferred dividend requirements and other | 1,678 | 1,678 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $93 | $19,533 | ||
See Notes to Respective Financial Statements. |
(Page left blank intentionally)
ENTERGY LOUISIANA, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $1,771 | $21,211 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Reserve for regulatory adjustments | 5,287 | - - | ||
Other regulatory credits - net | (13,084) | (4,672) | ||
Depreciation, amortization, and decommissioning | 57,525 | 51,942 | ||
Deferred income taxes and investment tax credits | (8,913) | 19,728 | ||
Changes in working capital: | ||||
Receivables | 10,893 | (4,509) | ||
Accounts payable | (24,415) | (94,210) | ||
Taxes accrued | 21,343 | 6,646 | ||
Interest accrued | 1,783 | (5,205) | ||
Deferred fuel costs | 27,559 | 13,773 | ||
Other working capital accounts | (18,853) | 21,040 | ||
Provision for estimated losses and reserves | 1,926 | 1,778 | ||
Changes in other regulatory assets | (8,651) | 519 | ||
Other | 28,644 | (19,479) | ||
Net cash flow provided by operating activities | 82,815 | 8,562 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (55,368) | (44,758) | ||
Allowance for equity funds used during construction | 2,537 | 1,350 | ||
Nuclear fuel purchases | (40,291) | - - | ||
Proceeds from the sale/leaseback of nuclear fuel | 40,291 | - - | ||
Decommissioning trust contributions and realized | ||||
change in trust assets | (3,874) | (1,163) | ||
Net cash flow used in investing activities | (56,705) | (44,571) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - - | 99,250 | ||
Retirement of long-term debt | - - | (14,809) | ||
Dividends paid: | ||||
Common stock | (1,800) | - - | ||
Preferred stock | (1,678) | (1,678) | ||
Net cash flow provided by (used in) financing activities | (3,478) | 82,763 | ||
Net increase in cash and cash equivalents | 22,632 | 46,754 | ||
Cash and cash equivalents at beginning of period | 146,049 | 8,787 | ||
Cash and cash equivalents at end of period | $168,681 | $55,541 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $18,285 | $20,345 | ||
See Notes to Respective Financial Statements. |
ENTERGY LOUISIANA, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $3,531 | $3,875 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 165,150 | 142,174 | ||
Total cash and cash equivalents | 168,681 | 146,049 | ||
Accounts receivable: | ||||
Customer | 79,304 | 88,154 | ||
Allowance for doubtful accounts | (2,467) | (3,135) | ||
Associated companies | 50,856 | 43,121 | ||
Other | 24,776 | 13,070 | ||
Accrued unbilled revenues | 121,301 | 143,453 | ||
Total accounts receivable | 273,770 | 284,663 | ||
Deferred fuel costs | - - | 8,654 | ||
Accumulated deferred income taxes | 16,043 | 12,712 | ||
Materials and supplies - at average cost | 77,827 | 77,665 | ||
Deferred nuclear refueling outage costs | 3,988 | 5,605 | ||
Prepayments and other | 22,293 | 6,861 | ||
TOTAL | 562,602 | 542,209 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 14,230 | 14,230 | ||
Decommissioning trust funds | 175,771 | 172,083 | ||
Non-utility property - at cost (less accumulated depreciation) | 21,143 | 21,176 | ||
Other | 4 | 4 | ||
TOTAL | 211,148 | 207,493 | ||
UTILITY PLANT | ||||
Electric | 6,010,315 | 5,985,889 | ||
Property under capital lease | 250,964 | 250,964 | ||
Construction work in progress | 210,363 | 188,848 | ||
Nuclear fuel under capital lease | 74,681 | 31,655 | ||
TOTAL UTILITY PLANT | 6,546,323 | 6,457,356 | ||
Less - accumulated depreciation and amortization | 2,839,284 | 2,799,936 | ||
UTILITY PLANT - NET | 3,707,039 | 3,657,420 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 134,880 | 132,686 | ||
Other regulatory assets | 310,717 | 302,456 | ||
Long-term receivables | 10,736 | 10,736 | ||
Other | 27,486 | 25,994 | ||
TOTAL | 483,819 | 471,872 | ||
TOTAL ASSETS | $4,964,608 | $4,878,994 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY LOUISIANA, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $55,000 | $55,000 | ||
Accounts payable: | ||||
Associated companies | 59,000 | 57,681 | ||
Other | 102,789 | 128,523 | ||
Customer deposits | 66,652 | 66,963 | ||
Taxes accrued | 37,431 | 7,268 | ||
Interest accrued | 20,221 | 18,438 | ||
Deferred fuel cost | 18,905 | - - | ||
Obligations under capital leases | 22,753 | 22,753 | ||
Other | 19,863 | 10,428 | ||
TOTAL | 402,614 | 367,054 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 1,795,274 | 1,805,410 | ||
Accumulated deferred investment tax credits | 94,902 | 96,130 | ||
Obligations under capital leases | 51,929 | 8,903 | ||
Other regulatory liabilities | 67,318 | 51,260 | ||
Decommissioning | 352,972 | 347,255 | ||
Accumulated provisions | 94,579 | 92,653 | ||
Long-term debt | 930,711 | 930,695 | ||
Other | 103,197 | 106,815 | ||
TOTAL | 3,490,882 | 3,439,121 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 100,500 | 100,500 | ||
Common stock, no par value, authorized 250,000,000 | ||||
shares; issued 165,173,180 shares in 2005 | ||||
and 2004 | 1,088,900 | 1,088,900 | ||
Capital stock expense and other | (1,718) | (1,718) | ||
Retained earnings | 3,430 | 5,137 | ||
Less - treasury stock, at cost (18,202,573 shares in 2005 and 2004) | 120,000 | 120,000 | ||
TOTAL | 1,071,112 | 1,072,819 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $4,964,608 | $4,878,994 | ||
See Notes to Respective Financial Statements. |
ENTERGY LOUISIANA, INC. |
||||||||
Increase/ | ||||||||
Description | 2005 | 2004 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $165 | $170 | ($5) | (3) | ||||
Commercial | 115 | 114 | 1 | 1 | ||||
Industrial | 189 | 186 | 3 | 2 | ||||
Governmental | 10 | 9 | 1 | 11 | ||||
Total retail | 479 | 479 | - | - - | ||||
Sales for resale | ||||||||
Associated companies | 16 | 10 | 6 | 60 | ||||
Non-associated companies | 2 | 4 | (2) | (50) | ||||
Other | (16) | (5) | (11) | (220) | ||||
Total | $481 | $488 | ($7) | (1) | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,929 | 2,007 | (78) | (4) | ||||
Commercial | 1,287 | 1,283 | 4 | - - | ||||
Industrial | 3,115 | 3,132 | (17) | (1) | ||||
Governmental | 118 | 109 | 9 | 8 | ||||
Total retail | 6,449 | 6,531 | (82) | (1) | ||||
Sales for resale | ||||||||
Associated companies | 145 | 106 | 39 | 37 | ||||
Non-associated companies | 15 | 48 | (33) | (69) | ||||
Total | 6,609 | 6,685 | (76) | (1) |
ENTERGY MISSISSIPPI, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $1.4 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expense, substantially offset by higher net revenue.
Net Revenue
Net revenue, which is Entergy Mississippi's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
Amount |
||
(In Millions) |
||
2004 net revenue |
$87.5 |
|
Net wholesale revenue |
4.0 |
|
2005 net revenue |
$91.5 |
The net wholesale revenue variance resulted from the receipt from a third party of prior period transmission revenue that was not previously billed.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
Depreciation and amortization expense increased primarily due to increased plant in service.
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 29.6% and 32.8%, respectively. The difference in the effective tax rate for the first quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to the amortization of investment tax credits and book and tax differences related to the allowance of equity funds used during construction, partially offset by state income taxes. The difference in the effective tax rate for the first quarter of 2004 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and the amortization of investment tax credits, partially offset by state income taxes.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$80,396 |
|
$63,838 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
32,573 |
|
15,182 |
|
Investing activities |
|
(30,545) |
|
(30,119) |
|
Financing activities |
|
(6,342) |
|
(3,742) |
Net decrease in cash and cash equivalents |
|
(4,314) |
|
(18,679) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$76,082 |
|
$45,159 |
Operating Activities
Cash flow from operations increased $17.4 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to increased recovery of deferred fuel and purchased power costs and money pool activity.
Entergy Mississippi's receivables from the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$13,111 |
|
$21,584 |
|
$17,289 |
|
$22,076 |
Money pool activity provided $8.5 million of Entergy Mississippi's operating cash flow for the first quarter of 2005 and provided $4.8 million of Entergy Mississippi's operating cash flow for the first quarter of 2004. See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Investing Activities
Net cash used in investing activities was relatively unchanged for the first quarter of 2005 compared to the first quarter of 2004. Decreased capital expenditures as a result of decreased spending on transmission projects was offset by the maturity in 2004 of $7.5 million of other temporary investments that had been made in 2003, which provided cash in 2004.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Mississippi's uses and sources of capital. Following are updates to the information presented in the Form 10-K.
See the table in the Form 10-K under "Uses of Capital" which sets forth the amounts of Entergy Mississippi's planned construction and other capital investments for 2005 through 2007. In March 2005, Entergy Mississippi signed an agreement to purchase for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company (CMGC). Entergy Mississippi plans to invest approximately $20 million in facility upgrades at the Attala plant plus $3 million in transaction costs, bringing the total capital cost of the project to approximately $111 million. The Attala plant will be 100 percent owned by Entergy Mississippi, and the acquisition is expected to close in late 2005 or early 2006. The purchase of the plant is contingent upon obtaining necessary approvals from various federal agencies, state permitting agencies, and the MPSC, including MPSC approval of investment cost recovery. Entergy Mississippi and CMGC had previously executed a purchased power agreement in July 2004 for 100 percent of the plant's output, and this agreement will expire upon the close of the acquisition or in March 2008, whichever occurs earlier. The planned construction and other capital investments line in the table in the Form 10-K includes the estimated cost of the Attala acquisition as a 2006 capital commitment.
In April 2005, Entergy Mississippi renewed its 364-day credit facility through May 31, 2006. The amount available under the credit facility is $25 million, of which none was drawn at March 31, 2005.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of utility restructuring, state and local rate regulation, federal regulation and proceedings, market and credit risks, state and local regulatory risks, and litigation risks. The following are updates to the information provided in the Form 10-K.
State and Local Rate Regulation
In April 2005, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation regarding Entergy Mississippi's annual formula rate plan filing that provides for no change in rates based on an adjusted return on common equity midpoint of 10.5%, establishing an allowed regulatory earnings range of 9.1% to 11.9%.
Federal Regulation
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Available Flowgate Capacity Proceedings
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Critical Accounting Estimates
See "Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi's accounting for pension and other retirement costs.
Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 47 wi ll be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY MISSISSIPPI, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $251,246 | $236,829 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 43,367 | 59,175 | ||
Purchased power | 116,058 | 92,702 | ||
Other operation and maintenance | 40,981 | 37,048 | ||
Taxes other than income taxes | 13,766 | 12,798 | ||
Depreciation and amortization | 17,937 | 14,909 | ||
Other regulatory charges (credits) - net | 365 | (2,527) | ||
TOTAL | 232,474 | 214,105 | ||
OPERATING INCOME | 18,772 | 22,724 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 1,001 | 767 | ||
Interest and dividend income | 638 | 716 | ||
Miscellaneous - net | (369) | (640) | ||
TOTAL | 1,270 | 843 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 9,834 | 10,929 | ||
Other interest - net | 617 | 400 | ||
Allowance for borrowed funds used during construction | (663) | (607) | ||
TOTAL | 9,788 | 10,722 | ||
INCOME BEFORE INCOME TAXES | 10,254 | 12,845 | ||
Income taxes | 3,032 | 4,208 | ||
NET INCOME | 7,222 | 8,637 | ||
Preferred dividend requirements and other | 842 | 842 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $6,380 | $7,795 | ||
See Notes to Respective Financial Statements. |
(Page left blank intentionally)
ENTERGY MISSISSIPPI, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $7,222 | $8,637 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory charges (credits) - net | 365 | (2,527) | ||
Depreciation and amortization | 17,937 | 14,909 | ||
Deferred income taxes and investment tax credits | (695) | 56,647 | ||
Changes in working capital: | ||||
Receivables | 20,843 | 12,328 | ||
Fuel inventory | 1,696 | 726 | ||
Accounts payable | (15,008) | (10,296) | ||
Taxes accrued | (22,845) | (74,888) | ||
Interest accrued | 3,940 | 2,837 | ||
Deferred fuel costs | 17,714 | 8,244 | ||
Other working capital accounts | (13,617) | (4,103) | ||
Provision for estimated losses and reserves | 19 | 20 | ||
Changes in other regulatory assets | 2,181 | 1,200 | ||
Other | 12,821 | 1,448 | ||
Net cash flow provided by operating activities | 32,573 | 15,182 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (31,546) | (38,392) | ||
Allowance for equity funds used during construction | 1,001 | 767 | ||
Changes in other temporary investments - net | - | 7,506 | ||
Net cash flow used in investing activities | (30,545) | (30,119) | ||
FINANCING ACTIVITIES | ||||
Dividends paid: | ||||
Common stock | (5,500) | (2,900) | ||
Preferred stock | (842) | (842) | ||
Net cash flow used in financing activities | (6,342) | (3,742) | ||
Net decrease in cash and cash equivalents | (4,314) | (18,679) | ||
Cash and cash equivalents at beginning of period | 80,396 | 63,838 | ||
Cash and cash equivalents at end of period | $76,082 | $45,159 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $5,990 | $7,996 | ||
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $2,377 | $4,716 | ||
Temporary cash investment - at cost, | ||||
which approximates market | 73,705 | 75,680 | ||
Total cash and cash equivalents | 76,082 | 80,396 | ||
Accounts receivable: | ||||
Customer | 55,863 | 68,821 | ||
Allowance for doubtful accounts | (797) | (1,126) | ||
Associated companies | 19,389 | 22,616 | ||
Other | 13,184 | 12,133 | ||
Accrued unbilled revenues | 28,310 | 34,348 | ||
Total accounts receivable | 115,949 | 136,792 | ||
Accumulated deferred income taxes | 27,853 | 27,924 | ||
Fuel inventory - at average cost | 2,441 | 4,137 | ||
Materials and supplies - at average cost | 19,004 | 18,414 | ||
Prepayments and other | 25,357 | 15,413 | ||
TOTAL | 266,686 | 283,076 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 5,531 | 5,531 | ||
Non-utility property - at cost (less accumulated depreciation) | 6,294 | 6,465 | ||
TOTAL | 11,825 | 11,996 | ||
UTILITY PLANT | ||||
Electric | 2,408,731 | 2,385,465 | ||
Property under capital lease | 84 | 95 | ||
Construction work in progress | 93,546 | 89,921 | ||
TOTAL UTILITY PLANT | 2,502,361 | 2,475,481 | ||
Less - accumulated depreciation and amortization | 885,866 | 870,188 | ||
UTILITY PLANT - NET | 1,616,495 | 1,605,293 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 17,641 | 17,628 | ||
Other regulatory assets | 82,925 | 82,674 | ||
Long-term receivable | 4,510 | 4,510 | ||
Other | 30,798 | 31,009 | ||
TOTAL | 135,874 | 135,821 | ||
TOTAL ASSETS | $2,030,880 | $2,036,186 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY MISSISSIPPI, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Accounts payable: | ||||
Associated companies | $ 59,333 | $ 65,806 | ||
Other | 17,008 | 25,543 | ||
Customer deposits | 38,840 | 37,333 | ||
Taxes accrued | 21,556 | 40,106 | ||
Interest accrued | 16,427 | 12,487 | ||
Deferred fuel costs | 40,507 | 22,793 | ||
Obligations under capital leases | 43 | 43 | ||
Other | 3,751 | 8,341 | ||
TOTAL | 197,465 | 212,452 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 433,881 | 438,321 | ||
Accumulated deferred investment tax credits | 13,355 | 13,687 | ||
Obligations under capital leases | 41 | 52 | ||
Accumulated provisions | 12,737 | 12,718 | ||
Long-term debt | 695,091 | 695,073 | ||
Other | 89,618 | 76,071 | ||
TOTAL | 1,244,723 | 1,235,922 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 50,381 | 50,381 | ||
Common stock, no par value, authorized 15,000,000 shares; | ||||
issued and outstanding 8,666,357 shares in 2005 and 2004 | 199,326 | 199,326 | ||
Capital stock expense and other | (59) | (59) | ||
Retained earnings | 339,044 | 338,164 | ||
TOTAL | 588,692 | 587,812 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,030,880 | $2,036,186 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY MISSISSIPPI, INC. |
||||||||
Increase/ | ||||||||
Description | 2005 | 2004 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $ 96 | $ 95 | $ 1 | 1 | ||||
Commercial | 85 | 80 | 5 | 6 | ||||
Industrial | 44 | 42 | 2 | 5 | ||||
Governmental | 8 | 8 | - - | - - | ||||
Total retail | 233 | 225 | 8 | 4 | ||||
Sales for resale | ||||||||
Associated companies | 6 | 4 | 2 | 50 | ||||
Non-associated companies | 10 | 5 | 5 | 100 | ||||
Other | 2 | 3 | (1) | (33) | ||||
Total | $ 251 | $ 237 | $14 | 6 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 1,196 | 1,225 | (29) | (2) | ||||
Commercial | 1,021 | 1,004 | 17 | 2 | ||||
Industrial | 692 | 676 | 16 | 2 | ||||
Governmental | 92 | 91 | 1 | 1 | ||||
Total retail | 3,001 | 2,996 | 5 | - - | ||||
Sales for resale | ||||||||
Associated companies | 17 | 13 | 4 | 31 | ||||
Non-associated companies | 68 | 66 | 2 | 3 | ||||
Total | 3,086 | 3,075 | 11 | - - | ||||
ENTERGY NEW ORLEANS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $1.4 million for the first quarter 2005 compared to the first quarter 2004 primarily due to lower net revenue and higher depreciation expense.
Net Revenue
Net revenue, which is Entergy New Orleans' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory charges. Following is an analysis of the change in net revenue comparing the first quarter of 2005 to the first quarter of 2004.
Amount |
||
(In Millions) |
||
2004 net revenue |
$53.6 |
|
Price applied to unbilled electric sales |
(2.2) |
|
Weather/volume |
(2.2) |
|
Rate refund provisions |
4.1 |
|
Other |
(1.2) |
|
2005 net revenue |
$52.1 |
The price applied to unbilled electric sales variance is due to a decrease in fuel price applied to unbilled sales.
The weather/volume variance is due to a decrease in electricity usage in the service territory primarily during the unbilled sales period.
The rate refund provisions variance is due to provisions recorded in the first quarter of 2004 primarily as a result of a resolution adopted by the City Council in February 2004.
Gross operating revenues and fuel expenses
Gross operating revenues increased primarily due to an increase of $19.2 million in gross wholesale revenue as a result of increased sales to affiliates.
Fuel expenses increased primarily due to increased generation to meet system requirements.
Other Income Statement Variances
Depreciation and amortization expense increased primarily due to an increase in plant in service.
Income Taxes
The effective income tax rates for the first quarters of 2005 and 2004 were 38.1% and 38.25%, respectively. The difference for the first quarters of 2005 and 2004 in the effective income tax rate versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$7,954 |
|
$4,669 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
5,373 |
|
12,973 |
|
Investing activities |
|
(9,959) |
|
(9,191) |
|
Financing activities |
|
(841) |
|
(841) |
Net increase (decrease) in cash and cash equivalents |
|
(5,427) |
|
2,941 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$2,527 |
|
$7,610 |
Operating Activities
Cash flow from operations decreased $7.6 million primarily due to an income tax refund of $5.0 million in the first quarter of 2004. Cash flow from operations also decreased due to money pool activity, which provided $5.3 million of Entergy New Orleans operating cash flow of the first quarter of 2005 compared to providing $9.8 million in the first quarter of 2004.
Entergy New Orleans' receivables from or (payables to) the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
($3,897) |
|
$1,413 |
|
($8,023) |
|
$1,783 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy New Orleans' uses and sources of capital.
As discussed in the Form 10-K, Entergy New Orleans has a 364-day credit facility in the amount of $14 million. The credit facility's expiration has been extended to July 2005, and it is expected that this facility will be renewed prior to expiration.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, market and credit risks, environmental risks, and litigation risks. Following are updates to the information presented in the Form 10-K.
State and Local Rate Regulation
In April 2005, Entergy New Orleans made its annual scheduled formula rate plan filings with the City Council. The filings show that a decrease of $0.2 million in electric revenues is warranted and an increase of $3.9 million in gas revenues is warranted. The prescribed period for review by the Council's Advisors and other parties has now commenced, and rate adjustments, if any, could be implemented as soon as September 2005.
Federal Regulation
System Agreement Litigation
See the Form 10-K for discussion of the City Council resolution directing Entergy New Orleans and Entergy Louisiana to notify the City Council and obtain prior approval for any action that would materially modify, amend, or terminate the System Agreement for one or more of the domestic utility companies, and the state court decision dismissing the City Council's claims for lack of subject matter jurisdiction. The City Council has appealed that decision to the Louisiana Court of Appeal for the Fourth Circuit.
Transmission
See the Form 10-K for a discussion of the petition for declaratory order that Entergy filed with the FERC in January 2005 regarding Entergy's Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reportin g conditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service.
Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal. Entergy contemplates submitting the necessary filings by the end of May 2005. On April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy. The intervenors requested that the FERC act on their Request for Clarification by May 4, 2005. The intervenors filed a separate request f or rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.
On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the Base Plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy seeks rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing to im plement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the New Orleans City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT.
In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is now scheduled for August 2005.
Available Flowgate Capacity Proceedings
See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP. On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT. Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs. Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel with the establishment of the ICT.
Critical Accounting Estimates
See
"Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans' accounting for unbilled revenue and pension and other retirement costs.Recently Issued Accounting Pronouncements
In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 47 wi ll be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.
ENTERGY NEW ORLEANS, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $131,172 | $112,576 | ||
Natural gas | 60,095 | 57,191 | ||
TOTAL | 191,267 | 169,767 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 81,096 | 56,511 | ||
Purchased power | 56,782 | 58,919 | ||
Other operation and maintenance | 20,847 | 21,316 | ||
Taxes other than income taxes | 10,680 | 9,995 | ||
Depreciation and amortization | 8,086 | 6,831 | ||
Other regulatory charges - net | 1,255 | 708 | ||
TOTAL | 178,746 | 154,280 | ||
OPERATING INCOME | 12,521 | 15,487 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 282 | 218 | ||
Interest and dividend income | 218 | 170 | ||
Miscellaneous - net | (123) | (294) | ||
TOTAL | 377 | 94 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 3,486 | 3,866 | ||
Other interest - net | 384 | 416 | ||
Allowance for borrowed funds used during construction | (232) | (222) | ||
TOTAL | 3,638 | 4,060 | ||
INCOME BEFORE INCOME TAXES | 9,260 | 11,521 | ||
Income taxes | 3,524 | 4,407 | ||
NET INCOME | 5,736 | 7,114 | ||
Preferred dividend requirements and other | 241 | 241 | ||
EARNINGS APPLICABLE TO | ||||
COMMON STOCK | $5,495 | $6,873 | ||
See Notes to Respective Financial Statements. |
(Page left blank intentionally)
ENTERGY NEW ORLEANS, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $5,736 | $7,114 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory charges - net | 1,255 | 708 | ||
Depreciation and amortization | 8,086 | 6,831 | ||
Deferred income taxes and investment tax credits | (1,695) | 17,125 | ||
Changes in working capital: | ||||
Receivables | 3,410 | 14,858 | ||
Fuel inventory | 4,181 | 4,561 | ||
Accounts payable | (5,909) | (19,295) | ||
Taxes accrued | 4,779 | (4,744) | ||
Interest accrued | (2,499) | (3,929) | ||
Deferred fuel costs | (5,244) | (7,646) | ||
Other working capital accounts | (8,539) | 14,571 | ||
Provision for estimated losses and reserves | (556) | (33) | ||
Changes in other regulatory assets | 2,492 | 708 | ||
Other | (124) | (17,856) | ||
Net cash flow provided by operating activities | 5,373 | 12,973 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (10,241) | (10,015) | ||
Allowance for equity funds used during construction | 282 | 218 | ||
Changes in other temporary investments - net | - - | 606 | ||
Net cash flow used in investing activities | (9,959) | (9,191) | ||
FINANCING ACTIVITIES | ||||
Proceeds from the issuance of long-term debt | - - | - - | ||
Retirement of long-term debt | - - | - - | ||
Dividends paid: | ||||
Common stock | (600) | (600) | ||
Preferred stock | (241) | (241) | ||
Net cash flow used in financing activities | (841) | (841) | ||
Net increase (decrease) in cash and cash equivalents | (5,427) | 2,941 | ||
Cash and cash equivalents at beginning of period | 7,954 | 4,669 | ||
Cash and cash equivalents at end of period | $2,527 | $7,610 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid/(received) during the period for: | ||||
Interest - net of amount capitalized | $6,171 | $8,052 | ||
Income taxes | - - | ($5,010) | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY NEW ORLEANS, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $2,527 | $2,998 | ||
Temporary cash investments - at cost, | ||||
which approximates market | - - | 4,956 | ||
Total cash and cash equivalents | 2,527 | 7,954 | ||
Accounts receivable: | ||||
Customer | 43,814 | 47,356 | ||
Allowance for doubtful accounts | (3,436) | (3,492) | ||
Associated companies | 14,874 | 12,223 | ||
Other | 7,577 | 7,329 | ||
Accrued unbilled revenues | 22,025 | 24,848 | ||
Total accounts receivable | 84,854 | 88,264 | ||
Deferred fuel | 7,803 | 2,559 | ||
Fuel inventory - at average cost | - - | 4,181 | ||
Materials and supplies - at average cost | 9,207 | 9,150 | ||
Prepayments and other | 11,296 | 3,467 | ||
TOTAL | 115,687 | 115,575 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Investment in affiliates - at equity | 3,259 | 3,259 | ||
UTILITY PLANT | ||||
Electric | 705,519 | 699,072 | ||
Natural gas | 186,244 | 183,728 | ||
Construction work in progress | 34,087 | 33,273 | ||
TOTAL UTILITY PLANT | 925,850 | 916,073 | ||
Less - accumulated depreciation and amortization | 443,140 | 435,519 | ||
UTILITY PLANT - NET | 482,710 | 480,554 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
Other regulatory assets | 37,769 | 40,354 | ||
Long term receivables | 2,492 | 2,492 | ||
Other | 20,580 | 20,540 | ||
TOTAL | 60,841 | 63,386 | ||
TOTAL ASSETS | $662,497 | $662,774 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY NEW ORLEANS, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $30,000 | $30,000 | ||
Accounts payable: | ||||
Associated companies | 35,144 | 30,563 | ||
Other | 33,659 | 44,149 | ||
Customer deposits | 17,651 | 17,187 | ||
Taxes accrued | 2,103 | 2,592 | ||
Accumulated deferred income taxes | 1,761 | 1,906 | ||
Interest accrued | 2,258 | 4,757 | ||
Energy Efficiency Program provision | 6,690 | 6,611 | ||
Other | 2,281 | 3,477 | ||
TOTAL | 131,547 | 141,242 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 52,434 | 47,062 | ||
Accumulated deferred investment tax credits | 3,888 | 3,997 | ||
SFAS 109 regulatory liability - net | 45,038 | 46,406 | ||
Accumulated provisions | 8,767 | 9,323 | ||
Pension liability | 38,653 | 36,845 | ||
Long-term debt | 199,912 | 199,902 | ||
Other | 3,121 | 3,755 | ||
TOTAL | 351,813 | 347,290 | ||
Commitments and Contingencies | ||||
SHAREHOLDERS' EQUITY | ||||
Preferred stock without sinking fund | 19,780 | 19,780 | ||
Common stock, $4 par value, authorized 10,000,000 | ||||
shares; issued and outstanding 8,435,900 shares in 2005 | ||||
and 2004 | 33,744 | 33,744 | ||
Paid-in capital | 36,294 | 36,294 | ||
Retained earnings | 89,319 | 84,424 | ||
TOTAL | 179,137 | 174,242 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $662,497 | $662,774 | ||
See Notes to Respective Financial Statements. | ||||
ENTERGY NEW ORLEANS, INC. SELECTED OPERATING RESULTS For the Three Months Ended March 31, 2005 and 2004 (Unaudited) |
||||||||
Increase/ | ||||||||
Description | 2005 | 2004 | (Decrease) | % | ||||
(Dollars In Millions) | ||||||||
Electric Operating Revenues: | ||||||||
Residential | $29 | $30 | ($1) | (3) | ||||
Commercial | 34 | 34 | - | - - | ||||
Industrial | 7 | 6 | 1 | 17 | ||||
Governmental | 13 | 13 | - | - - | ||||
Total retail | 83 | 83 | - | - - | ||||
Sales for resale | ||||||||
Associated companies | 46 | 27 | 19 | 70 | ||||
Non-associated companies | - | 1 | (1) | (100) | ||||
Other | 2 | 2 | - | - - | ||||
Total | $131 | $113 | $18 | 16 | ||||
Billed Electric Energy | ||||||||
Sales (GWh): | ||||||||
Residential | 400 | 417 | (17) | (4) | ||||
Commercial | 519 | 525 | (6) | (1) | ||||
Industrial | 144 | 112 | 32 | 29 | ||||
Governmental | 226 | 225 | 1 | - | ||||
Total retail | 1,289 | 1,279 | 10 | 1 | ||||
Sales for resale | ||||||||
Associated companies | 606 | 360 | 246 | 68 | ||||
Non-associated companies | 4 | 9 | (5) | (56) | ||||
Total | 1,899 | 1,648 | 251 | 15 | ||||
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy's principal asset consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy's only source of operating revenues. Net income increased $1.6 million for the first quarter of 2005 compared to the first quarter of 2004 primarily due to higher interest income earned on temporary cash investments.
Liquidity and Capital Resources
Cash Flow
Cash flows for the first quarters of 2005 and 2004 were as follows:
|
|
2005 |
|
2004 |
|
|
|
(In Thousands) |
|||
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
$216,355 |
|
$52,536 |
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
Operating activities |
|
77,763 |
|
37,268 |
|
Investing activities |
|
(8,156) |
|
(2,648) |
|
Financing activities |
|
(55,613) |
|
(30,348) |
Net increase in cash and cash equivalents |
|
13,994 |
|
4,272 |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$230,349 |
|
$56,808 |
Operating Activities
Cash flow from operations increased $40.5 million for the first quarter 2005 compared to the first quarter 2004 primarily due to money pool activity. Money pool activity provided $20.6 million of System Energy's operating cash flows for the first quarter of 2005 and used $10.7 million for the first quarter of 2004. System Energy's receivables from the money pool were as follows:
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
(In Thousands) |
||||||
|
|
|
|
|
|
|
$40,965 |
|
$61,592 |
|
$29,728 |
|
$19,064 |
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
Investing Activities
The increase of $5.5 million in net cash used in investing activities for the first quarter of 2005 compared to the first quarter of 2004 was primarily due to the maturity of $6.5 million of other temporary investments, which provided cash in 2004.
Financing Activities
The increase of $25.3 million in net cash used in financing activities for the first quarter of 2005 compared to the first quarter of 2004 was primarily due to an increase of $22.4 million in the January 2005 principal payment made on the Grand Gulf sale-leaseback compared to the January 2004 principal payment.
Uses and Sources of Capital
See "Management's Financial Discussion and Analysis - Liquidity and Capital Resources" in the Form 10-K for a discussion of System Energy's uses and sources of capital.
Significant Factors and Known Trends
See "Management's Financial Discussion and Analysis - Significant Factors and Known Trends" in the Form 10-K for a discussion of market risks, nuclear matters, litigation risks, and environmental risks.
Critical Accounting Estimates
See
"Management's Financial Discussion and Analysis - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy's accounting for nuclear decommissioning costs and pension and other retirement benefits.SYSTEM ENERGY RESOURCES, INC. | ||||
INCOME STATEMENTS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING REVENUES | ||||
Domestic electric | $124,790 | $127,168 | ||
OPERATING EXPENSES | ||||
Operation and Maintenance: | ||||
Fuel, fuel-related expenses, and | ||||
gas purchased for resale | 9,719 | 7,246 | ||
Nuclear refueling outage expenses | 2,993 | 3,627 | ||
Other operation and maintenance | 23,136 | 21,509 | ||
Decommissioning | 6,128 | 5,701 | ||
Taxes other than income taxes | 6,049 | 5,945 | ||
Depreciation and amortization | 26,544 | 26,541 | ||
Other regulatory credits - net | (4,385) | (1,168) | ||
TOTAL | 70,184 | 69,401 | ||
OPERATING INCOME | 54,606 | 57,767 | ||
OTHER INCOME | ||||
Allowance for equity funds used during construction | 306 | 414 | ||
Interest and dividend income | 2,845 | 1,355 | ||
Miscellaneous - net | (113) | (221) | ||
TOTAL | 3,038 | 1,548 | ||
INTEREST AND OTHER CHARGES | ||||
Interest on long-term debt | 12,856 | 15,240 | ||
Other interest - net | 2 | 211 | ||
Allowance for borrowed funds used during construction | (97) | (134) | ||
TOTAL | 12,761 | 15,317 | ||
INCOME BEFORE INCOME TAXES | 44,883 | 43,998 | ||
Income taxes | 18,651 | 19,334 | ||
NET INCOME | $26,232 | $24,664 | ||
See Notes to Respective Financial Statements. | ||||
(Page left blank intentionally)
SYSTEM ENERGY RESOURCES, INC. | ||||
STATEMENTS OF CASH FLOWS | ||||
For the Three Months Ended March 31, 2005 and 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
OPERATING ACTIVITIES | ||||
Net income | $26,232 | $24,664 | ||
Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||
Other regulatory credits - net | (4,385) | (1,168) | ||
Depreciation, amortization, and decommissioning | 32,672 | 32,242 | ||
Deferred income taxes and investment tax credits | (6,619) | (163,415) | ||
Changes in working capital: | ||||
Receivables | 30,664 | 5,006 | ||
Accounts payable | (7,782) | (725) | ||
Taxes accrued | 10,213 | 166,874 | ||
Interest accrued | (27,541) | (11,947) | ||
Other working capital accounts | (4,514) | (94,842) | ||
Provision for estimated losses and reserves | 51 | (1,096) | ||
Changes in other regulatory assets | (3,330) | 8,782 | ||
Other | 32,102 | 72,893 | ||
Net cash flow provided by operating activities | 77,763 | 37,268 | ||
INVESTING ACTIVITIES | ||||
Construction expenditures | (3,307) | (5,737) | ||
Allowance for equity funds used during construction | 306 | 414 | ||
Nuclear fuel purchases | - - | (45,460) | ||
Proceeds from sale/leaseback of nuclear fuel | - - | 45,460 | ||
Decommissioning trust contributions and realized | ||||
change in trust assets | (5,155) | (3,807) | ||
Changes in other temporary investments - net | - - | 6,482 | ||
Net cash flow used in investing activities | (8,156) | (2,648) | ||
FINANCING ACTIVITIES | ||||
Retirement of long-term debt | (28,813) | (6,348) | ||
Dividends paid: | ||||
Common stock | (26,800) | (24,000) | ||
Net cash flow used in financing activities | (55,613) | (30,348) | ||
Net increase in cash and cash equivalents | 13,994 | 4,272 | ||
Cash and cash equivalents at beginning of period | 216,355 | 52,536 | ||
Cash and cash equivalents at end of period | $230,349 | $56,808 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash paid during the period for: | ||||
Interest - net of amount capitalized | $38,948 | $26,322 | ||
See Notes to Respective Financial Statements. |
SYSTEM ENERGY RESOURCES, INC. | ||||
BALANCE SHEETS | ||||
ASSETS | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT ASSETS | ||||
Cash and cash equivalents: | ||||
Cash | $59 | $399 | ||
Temporary cash investments - at cost, | ||||
which approximates market | 230,290 | 215,956 | ||
Total cash and cash equivalents | 230,349 | 216,355 | ||
Accounts receivable: | ||||
Associated companies | 82,670 | 111,588 | ||
Other | 1,987 | 3,733 | ||
Total accounts receivable | 84,657 | 115,321 | ||
Materials and supplies - at average cost | 54,323 | 53,427 | ||
Deferred nuclear refueling outage costs | 6,620 | 9,510 | ||
Prepayments and other | 7,549 | 1,007 | ||
TOTAL | 383,498 | 395,620 | ||
OTHER PROPERTY AND INVESTMENTS | ||||
Decommissioning trust funds | 211,474 | 205,083 | ||
UTILITY PLANT | ||||
Electric | 3,236,616 | 3,232,314 | ||
Property under capital lease | 469,993 | 469,993 | ||
Construction work in progress | 26,637 | 28,743 | ||
Nuclear fuel under capital lease | 58,602 | 65,572 | ||
TOTAL UTILITY PLANT | 3,791,848 | 3,796,622 | ||
Less - accumulated depreciation and amortization | 1,807,117 | 1,780,450 | ||
UTILITY PLANT - NET | 1,984,731 | 2,016,172 | ||
DEFERRED DEBITS AND OTHER ASSETS | ||||
Regulatory assets: | ||||
SFAS 109 regulatory asset - net | 95,471 | 96,047 | ||
Other regulatory assets | 300,850 | 296,305 | ||
Other | 19,658 | 19,578 | ||
TOTAL | 415,979 | 411,930 | ||
TOTAL ASSETS | $2,995,682 | $3,028,805 | ||
See Notes to Respective Financial Statements. | ||||
SYSTEM ENERGY RESOURCES, INC. | ||||
BALANCE SHEETS | ||||
LIABILITIES AND SHAREHOLDER'S EQUITY | ||||
March 31, 2005 and December 31, 2004 | ||||
(Unaudited) | ||||
2005 | 2004 | |||
(In Thousands) | ||||
CURRENT LIABILITIES | ||||
Currently maturing long-term debt | $22,989 | $25,266 | ||
Accounts payable: | ||||
Associated companies | - | 3,880 | ||
Other | 17,149 | 21,051 | ||
Taxes accrued | 73,034 | 46,468 | ||
Accumulated deferred income taxes | 2,360 | 3,477 | ||
Interest accrued | 15,457 | 42,998 | ||
Obligations under capital leases | 27,716 | 27,716 | ||
Other | 1,655 | 1,621 | ||
TOTAL | 160,360 | 172,477 | ||
NON-CURRENT LIABILITIES | ||||
Accumulated deferred income taxes and taxes accrued | 397,941 | 421,466 | ||
Accumulated deferred investment tax credits | 74,743 | 75,612 | ||
Obligations under capital leases | 30,886 | 37,855 | ||
Other regulatory liabilities | 240,879 | 210,863 | ||
Decommissioning | 342,021 | 335,893 | ||
Accumulated provisions | 2,429 | 2,378 | ||
Long-term debt | 823,102 | 849,593 | ||
Other | 29,305 | 28,084 | ||
TOTAL | 1,941,306 | 1,961,744 | ||
Commitments and Contingencies | ||||
SHAREHOLDER'S EQUITY | ||||
Common stock, no par value, authorized 1,000,000 shares; | ||||
issued and outstanding 789,350 shares in 2005 and 2004 | 789,350 | 789,350 | ||
Retained earnings | 104,666 | 105,234 | ||
TOTAL | 894,016 | 894,584 | ||
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | $2,995,682 | $3,028,805 | ||
See Notes to Respective Financial Statements. |
ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, AND SYSTEM ENERGY
NOTES TO RESPECTIVE FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
Nuclear Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear liability and property and replacement power insurance associated with Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's, and System Energy's nuclear power plants.
Income Taxes (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
CashPoint Bankruptcy
(Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.
City Franchise Ordinances (Entergy New Orleans)
Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to franchise ordinances. These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans' electric and gas utility properties.
Employment Litigation (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies deny any liability to the plaintiffs.
Asbestos and Hazardous Material Litigation (Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
Numerous lawsuits have been filed in federal and state courts in Texas, Louisiana, and Mississippi primarily by contractor employees in the 1950-1980 timeframe against Entergy Gulf States, Entergy Louisiana, Entergy New Orleans, and Entergy Mississippi as premises owners of power plants, for damages caused by alleged exposure to asbestos or other hazardous material. Many other defendants are named in these lawsuits as well. Presently, there are approximately 480 lawsuits involving approximately 10,000 claims. Management believes that adequate provisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recover more reimbursement, while new coverage is being secured to minimize anticipated future potential exposures. Management believes that loss exposure has been and will continue to be handled successfully so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial po sition or results of operation of the domestic utility companies involved in these lawsuits.
NOTE 2. RATE AND REGULATORY MATTERS
Retail Rate Proceedings
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Global Settlement (Entergy Gulf States and Entergy Louisiana)
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement will result in credits totaling $76 million for retail electricity customers in Entergy Gulf States' Louisiana service territory and credits totaling $14 million for retail electricity customers of Entergy Louisiana. The settlement dismisses Entergy Gulf States' fourth, fifth, sixth, seventh, and eighth annual earnings reviews, Entergy Gulf States' ninth post-merger earnings review and revenue requirement analysis, the continuation of a fuel review for Entergy Gulf States, dockets established to consider issues concerning power purchases for Entergy Gulf States and Entergy Louisiana for the summers of 2001, 2002, 2003, and 2004, all pending and future nuclear uprate cases through May 2005, and an LPSC docket concerning retail issues arising under the System Agreement. The settlement does not include the System Agre ement case pending at FERC. In addition, Entergy Gulf States agreed not to seek recovery from customers of $2.0 million of excess refund amounts associated with the fourth through the eighth annual earnings reviews and Entergy Louisiana agreed to forego recovery of $3.5 million of deferred 2003 capacity costs associated with certain power purchase agreements. The credits have been issued in connection with April 2005 billings. Entergy Gulf States and Entergy Louisiana have reserved for the approximate refund amounts.
The settlement includes the establishment of a three-year formula rate plan for Entergy Gulf States that, among other provisions, establishes a ROE mid-point of 10.65% and permits Entergy Gulf States to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside a 75 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Gulf States. Under the settlement, there is no change to Entergy Gulf States' retail rates at this time. Current rates will remain in place until the first formula rate plan filing in May 2005 and will be reset, if necessary, effective September 1, 2005. If, as a result of the formula rate plan filing in May 2005, Entergy Gulf States is found to have earned an ROE in excess of 10.65% for the 2004 test year, rates will be reset and a refund will be given in an amount sufficient to reduce its ROE to 10.65% effective January 2004.
Retail Rates
(Entergy Louisiana)See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for discussion of Entergy Louisiana's rate filing with the LPSC requesting a base rate increase. In March 2005, the LPSC staff and Entergy Louisiana filed a proposed settlement that includes an annual base rate increase of approximately $18.3 million which was implemented, subject to refund, effective with May 2005 billings. The proposed settlement also includes the adoption of a three-year formula rate plan, the terms of which include a ROE mid-point of 10.25% and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an 80 basis point bandwidth will be allocated 60% to customers and 40% to Entergy Louisiana. A decision from the LPSC on the proposed settlement is expected in May 2005.
Filings with the City Council (Entergy New Orleans)
Deferred Fuel Costs
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
(Entergy Arkansas)
In March 2005, Entergy Arkansas filed with the APSC its energy cost recovery rider for the period April 2005 through March 2006. The filed energy cost rate, which accounts for 15 percent of a typical residential customer's bill using 1,000 kWh per month, increased 31 percent primarily attributable to a true-up adjustment for an under-recovery balance of $11.2 million and a nuclear refueling adjustment resulting from outages scheduled in 2005 at Arkansas Nuclear One Unit 1 and Unit 2.
(Entergy Gulf States)
(Entergy Louisiana)
As discussed in Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K, in August 2000, the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Louisiana pursuant to a November 1997 LPSC general order. The time period that is the subject of the audit is January 1, 2000 through December 31, 2001. In September 2003, the LPSC staff issued its audit report and recommended a disallowance with regard to one item. The issue relates to the alleged failure to uprate Waterford 3 in a timely manner, a claim that also has been raised in the summer 2001, 2002, and 2003 purchased power proceedings. The settlement approved by the LPSC in March 2005, discussed above, resolves the uprate imprudence disallowance and is no longer at issue in this proceeding.
(Entergy Mississippi)
In January 2005, the MPSC approved a change in Entergy Mississippi's energy cost recovery rider. Entergy Mississippi's fuel over-recoveries for the third quarter of 2004 of $21.3 million will be deferred from the first quarter 2005 energy cost recovery rider adjustment calculation. The deferred amount of $21.3 million plus carrying charges will be refunded through the energy cost recovery rider in the second and third quarters of 2005 at a rate of 45% and 55%, respectively.
(Entergy New Orleans)
As discussed in Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K, the City Council passed resolutions implementing a package of measures developed by Entergy New Orleans and the Council Advisors to protect customers from potential gas price spikes during the 2004 - 2005 winter heating season including the deferral of collection of up to $6.2 million of gas costs associated with a cap on the purchased gas adjustment in November and December 2004 and in the event that the average residential customer's gas bill were to exceed a threshold level. The deferrals of $1.7 million resulting from these caps will receive accelerated recovery over a seven-month period beginning in April 2005.
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 domestic utility companies and System Energy financial statements in the Form 10-K.
Texas (Entergy Gulf States)
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the status of retail open access in Entergy Gulf States' Texas service territory and Entergy Gulf States' independent organization request.
In February 2005, bills were submitted in the Texas Legislature that would clarify that Entergy Gulf States is no longer subject to a rate freeze and specify that retail open access will not commence in Entergy Gulf States' Texas service territory until the PUCT certifies a power region. A substitute bill was passed by the Texas House of Representatives in April 2005, and is now being considered by the Texas Senate. The substitute bill changed several provisions of the original bills to address concerns raised in the legislative process. The substitute bill provides that:
NOTE 3. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
The short-term borrowings of the domestic utility companies and System Energy are limited to amounts authorized by the SEC. The current limits authorized are effective through November 30, 2007. In addition to borrowing from commercial banks, the domestic utility companies and System Energy are authorized to borrow from Entergy's money pool. The money pool is an inter-company borrowing arrangement designed to reduce the domestic utility companies' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the SEC authorized limits. The following are the short-term borrowings from the money pool and the SEC-authorized limits for short-term borrowings for the domestic utility companies and System Energy as of March 31, 2005:
|
|
Authorized |
|
Borrowings |
|
|
(In Millions) |
||
|
|
|
|
|
Entergy Arkansas |
|
$235 |
|
- |
Entergy Gulf States |
|
$340 |
|
$19.6 |
Entergy Louisiana |
|
$225 |
|
- |
Entergy Mississippi |
|
$160 |
|
- |
Entergy New Orleans |
|
$100 |
|
$3.9 |
System Energy |
|
$140 |
|
- |
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans each have 364-day credit facilities available as follows:
|
|
Amount of |
Amount Drawn as of |
|||
Entergy Arkansas |
|
April 2006 |
|
$85 million |
|
- |
Entergy Louisiana |
|
July 2005 |
|
$15 million (a) |
|
- |
Entergy Mississippi |
|
May 2006 |
|
$25 million |
|
- |
Entergy New Orleans |
|
July 2005 |
$14 million (a) |
- |
(a) |
The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities at any one time cannot exceed $15 million. |
In April 2005, Entergy Arkansas renewed its 364-day credit facility through April 2006 and Entergy Mississippi renewed its 364-day facility through May 2006. Also, Entergy Louisiana and Entergy New Orleans extended their 364-day credit facilities through July 2005. Prior to the expiration, it is expected that Entergy Louisiana and Entergy New Orleans will renew their 364-day credit facilities through May 2006.
The 364-day credit facilities have variable interest rates and the average commitment fee is 0.13%. The Entergy Arkansas facility requires it to maintain total shareholders' equity of at least 25% of its total assets.
The following long-term debt has been issued by the domestic utility companies and System Energy in 2005:
|
Issue Date |
|
Amount |
|
|
|
(In Thousands) |
Mortgage Bonds: |
|
|
|
5.66% Series due February 2025 - Entergy Arkansas |
January 2005 |
|
$175,000 |
6.18% Series due March 2035 - Entergy Gulf States |
February 2005 |
|
$85,000 |
|
|
|
|
Governmental Bonds: |
|
|
|
5.00% Series due January 2021, Independence County - Arkansas (Entergy Arkansas) |
|
|
|
The following long-term debt was retired by the domestic utility companies and System Energy in 2005:
|
Retirement Date |
|
Amount |
|
|
|
(In Thousands) |
Mortgage Bonds: |
|
|
|
7.00% Series due October 2023 - Entergy Arkansas |
February 2005 |
|
$175,000 |
Other Long-Term Debt: |
|
|
|
Grand Gulf Lease Obligation payment, System Energy |
N/A |
|
$28,790 |
8.75% Junior Subordinated Deferrable Interest Debentures |
|
|
|
Retirements after the balance sheet date: | |||
9.0% Series due May 2015, West Feliciana Parish - Louisiana (Entergy Gulf States) |
|
$45,000 | |
7.5% Series due May 2015, West Feliciana Parish - Louisiana (Entergy Gulf States) |
|
$41,600 |
Entergy Arkansas used the proceeds from the March 2005 issuance to redeem, prior to maturity, $45 million of 6.25% Series of Independence County bonds in April 2005. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.
Tax Exempt Bond Audit (Entergy Louisiana)
The Internal Revenue Service (IRS) is auditing certain Tax Exempt Bonds (Bonds) issued by St. Charles Parish, State of Louisiana (the Issuer). The Bonds were issued to finance previously unfinanced acquisition costs expended by Entergy Louisiana to acquire certain radioactive solid waste disposal facilities (the Facilities) at the Waterford Steam Electric Generating Station. In March and April 2005, the IRS issued proposed adverse determinations that the Issuer's 7.0% Series bonds due 2022, 7.5% Series bonds due 2021, and 7.05% Series bonds due 2022 are not tax exempt. The stated basis for these determinations was that radioactive waste did not constitute "solid waste" within the provisions of the Internal Revenue Code and therefore the Facilities did not qualify as solid waste disposal facilities. The Issuer and Entergy Louisiana intend to continue to vigorously contest this matter.
NOTE 4. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
The domestic utility companies' and System Energy's pension cost, including amounts capitalized, for the first quarters of 2005 and 2004, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$3,329 |
|
$2,704 |
|
$1,957 |
|
$1,005 |
|
$436 |
|
$944 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
9,115 |
|
7,235 |
|
5,525 |
|
2,998 |
|
1,148 |
|
1,413 |
Expected return on assets |
|
(9,009) |
|
(9,709) |
|
(6,666) |
|
(3,566) |
|
(731) |
|
(1,324) |
Amortization of transition asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(69) |
Amortization of prior service cost |
|
415 |
|
378 |
|
163 |
|
128 |
|
57 |
|
17 |
Amortization of loss |
|
1,613 |
|
1,213 |
|
730 |
|
527 |
|
151 |
|
229 |
Net pension cost |
|
$5,463 |
|
$1,821 |
|
$1,709 |
|
$1,092 |
|
$1,061 |
|
$1,210 |
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2004 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$3,003 |
|
$2,454 |
|
$1,724 |
|
$954 |
|
$425 |
|
$845 |
Interest cost on projected |
|
|
|
|
|
|
|
|
|
|
|
|
benefit obligation |
|
8,617 |
|
7,111 |
|
5,183 |
|
2,891 |
|
1,042 |
|
1,232 |
Expected return on assets |
|
(9,245) |
|
(9,892) |
|
(6,796) |
|
(3,691) |
|
(928) |
|
(1,034) |
Amortization of transition asset |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(80) |
Amortization of prior service cost |
|
417 |
|
465 |
|
189 |
|
141 |
|
57 |
|
18 |
Amortization of loss |
|
868 |
|
641 |
|
297 |
|
285 |
|
59 |
|
113 |
Net pension cost |
|
$3,660 |
|
$779 |
|
$597 |
|
$580 |
|
$655 |
|
$1,094 |
Components of Net Other Postretirement Benefit Cost
The domestic utility companies' and System Energy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2005 and 2004, included the following components:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2005 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$1,157 |
|
$1,634 |
|
$689 |
|
$363 |
|
$192 |
|
$415 |
Interest cost on APBO |
|
2,589 |
|
2,924 |
|
1,673 |
|
833 |
|
789 |
|
394 |
Expected return on assets |
|
(1,637) |
|
(1,366) |
|
- |
|
(669) |
|
(579) |
|
(387) |
Amortization of transition obligation |
|
205 |
|
947 |
|
95 |
|
88 |
|
435 |
|
4 |
Amortization of prior service cost |
|
(173) |
|
- |
|
18 |
|
(46) |
|
10 |
|
(139) |
Amortization of loss |
|
1,276 |
|
770 |
|
691 |
|
471 |
|
211 |
|
146 |
Net other postretirement benefit cost |
|
$3,417 |
|
$4,909 |
|
$3,166 |
|
$1,040 |
|
$1,058 |
|
$433 |
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
2004 |
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Service cost - benefits earned |
|
|
|
|
|
|
|
|
|
|
|
|
during the period |
|
$1,632 |
|
$1,529 |
|
$720 |
|
$477 |
|
$205 |
|
$388 |
Interest cost on APBO |
|
2,833 |
|
2,941 |
|
1,701 |
|
878 |
|
827 |
|
388 |
Expected return on assets |
|
(1,603) |
|
(1,236) |
|
- |
|
(653) |
|
(566) |
|
(310) |
Amortization of transition obligation |
|
609 |
|
1,147 |
|
300 |
|
254 |
|
529 |
|
4 |
Amortization of prior service cost |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(91) |
Amortization of loss |
|
1,074 |
|
651 |
|
562 |
|
348 |
|
156 |
|
131 |
Net other postretirement benefit cost |
|
$4,545 |
|
$5,032 |
|
$3,283 |
|
$1,304 |
|
$1,151 |
|
$510 |
Employer Contributions
The domestic utility companies and System Energy expect to contribute the following to pension plans in 2005:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
Expected 2005 pension contributions |
|
|
|
|
|
|
|
|
|
|
|
|
disclosed in Form 10-K |
|
$20,560 |
|
$18,948 |
|
$2,622 |
|
$3,416 |
|
$15,667 |
|
$9,266 |
Revised expected 2005 pension contributions |
|
$13,802 |
$21,893 |
|
- |
|
$3,416 |
|
$21,281 |
|
$12,305 |
|
Pension contributions made through April 2005 |
|
$2,002 |
$12,425 |
|
- |
|
$512 |
|
$12,078 |
|
$6,358 |
|
Remaining estimated pension contributions to be made in 2005 |
|
$11,800 |
$9,468 |
|
- |
|
$2,904 |
|
$9,203 |
|
$5,947 |
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2004 Accumulated Postretirement Benefit Obligation (APBO) and first quarter 2005 and 2004 other postretirement benefit cost for the domestic utility companies and System Energy as follows:
|
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
Entergy |
|
System |
|
|
Arkansas |
|
Gulf States |
|
Louisiana |
|
Mississippi |
|
New Orleans |
|
Energy |
|
|
(In Thousands) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in 12/31/2004 APBO |
|
($35,928) |
|
($31,846) |
|
($20,085) |
|
($12,227) |
|
($9,742) |
|
($4,982) |
Reduction in first quarter 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
other postretirement benefit cost |
|
($1,446) |
|
($1,269) |
|
($790) |
|
($476) |
|
($350) |
|
($245) |
Reduction in first quarter 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
other postretirement benefit cost |
|
($498) |
|
($554) |
|
($232) |
|
($156) |
|
($144) |
|
($53) |
For further information on the Medicare Act refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.
__________________________________
In the opinion of the management of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the domestic utility companies and System Energy is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of March 31, 2005, 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.
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See "PART I, Item 1, Litigation" in the Form 10-K for a discussion of legal proceedings affecting Entergy. Following is an update to that discussion.
Entergy Louisiana Formula Ratemaking Plan Lawsuit
See Part I, Item 1, "Entergy Louisiana Formula Ratemaking Plan Lawsuit" in the Form 10-K for a discussion of the complaint filed against Entergy Louisiana and the LPSC in state court in East Baton Rouge Parish purportedly on behalf of all Entergy Louisiana ratepayers. This case has been abandoned by operation of law.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
Period |
|
Total Number of |
|
Average Price Paid |
|
Total Number of |
|
Maximum $ Amount |
|
|
|
|
|
|
|
|
|
1/01/2005-1/31/2005 |
|
2,820,000 |
|
$66.47 |
|
2,820,000 |
|
$836,304,437 |
2/01/2005-2/28/2005 |
|
2,078,500 |
|
$70.50 |
|
2,078,500 |
|
$750,138,283 |
3/01/2005-3/31/2005 |
|
695,100 |
|
$69.79 |
|
695,100 |
|
$728,763,293 |
Total |
|
5,593,600 |
|
$68.38 |
|
5,593,600 |
|
|
(1) |
In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to its employees, which may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. See Note 7 to the consolidated financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. Entergy's management has been authorized to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans, and this authorization does not have an expiration date. In August 2004, Entergy announced a program under which Entergy Corporation will repurchase up to $1.5 billion of its common stock. The program extends through the end of 2006. This repurchase program is incremental to the existing authority to repurchase shares to fund the exercise of employee stock options. The amount of rep urchases under the program may vary as a result of material changes in business results or capital spending, or as a result of material new investment opportunities. |
(2) |
Maximum amount of shares that may yet be repurchased relates only to the $1.5 billion plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans. |
Item 5. Other Information
Federal Regulation
FERC Audits
The FERC is currently reviewing certain wholesale sales and purchases involving EPMC that occurred during the 1998-2001 time period and similar transactions that Entergy-Koch Trading may have undertaken. EPMC was an Entergy subsidiary engaged in non-regulated wholesale marketing and trading activities prior to the formation of Entergy-Koch. Entergy is working with the FERC investigation staff to provide information regarding these transactions.
Other Customer-initiated Proceedings at the FERC
See the Form 10-K for a discussion of the complaint filed with the FERC in February 2005 by ExxonMobil Chemical Company and ExxonMobil Refining & Supply Company (ExxonMobil) against Entergy Services and the domestic utility companies. On April 18, 2005, the FERC (1) rejected as unfounded ExxonMobil's allegation concerning the netting of its station power needs; and (2) set for hearing the question of whether the facility upgrades and related charges are subject to FERC jurisdiction and, if so, when they became subject to FERC jurisdiction, whether the monthly facility charge violated FERC pricing policy, and whether any refunds are appropriate. The FERC then held the hearing in abeyance in order to provide the parties an opportunity to settle their dispute before hearing procedures commence. The FERC further directed that a settlement judge be appointed.
On January 24, 2005 Cottonwood Energy Company, L.P., an independent generator, filed with the FERC a rate schedule for reactive power that proposes to impose on Entergy Gulf States a rate for reactive supply service allegedly supplied by Cottonwood's electric generating facility. Cottonwood has proposed a fixed monthly charge of $0.3 million, which according to Cottonwood represents its revenue requirement for reactive power service. Entergy believes that independent generators should only be compensated for reactive power to the extent that they have an affirmative and continual obligation to provide reactive power support beyond their power factor range when directed to do so by the transmission provider, and is opposing Cottonwood's rate schedule. On March 23, 2005, the FERC accepted Cottonwood's proposed reactive power rate schedule for filing effective on February 1, 2005, subject to refund, and established hearing and settlement judge procedures. Cottonwood and Entergy Gulf States are currently engaged in settlement discussions pursuant to the FERC order. A procedural schedule for a hearing has not yet been established.
Environmental Regulation
See "PART I, Item 1, Clean Air Act and Subsequent Amendments, Hazardous Air Pollutants" in the Form 10-K for information related to the hazardous air pollutant emissions reduction programs. In March 2005, the EPA issued a rule to permanently cap and reduce mercury emissions from coal-fired power plants. The Clean Air Mercury Rule establishes "standards of performance" limiting mercury emissions from new and existing coal-fired power plants and creates a market-based cap-and-trade program that will reduce nationwide utility emissions of mercury in two distinct phases. The first phase cap is 38 tons beginning in 2010. Entergy owns units that will be subject to the mercury regulations and is studying compliance options in order to determine the best control alternative. Entergy expects that any necessary capital expenditures will occur between 2006 and 2009, and ongoing operating costs will begin in 2010.
See "PART I, Item 1, Clean Air Act and Subsequent Amendments, Interstate Air Transport" in the Form 10-K for information related to SO2 and NOX emissions reduction programs. In March 2005, the EPA finalized the Clean Air Interstate Rule (CAIR), which will reduce SO2 and NOX emissions from electric generation plants in order to improve air quality in 28 eastern states. The rule will require a combination of capital investment to install pollution control equipment and increased operating costs. Entergy's capital investment and annual operation and maintenance allowance purchase costs will depend on the economic assessment of NOX and SO2 allowance markets, the cost of control technologies, and unit usage. The capital financial impact could be offset by emission markets which allow for purchases or use of allocated credits; however, the allocation of the emission allowances and the set up of the market wil l determine the ultimate cost to Entergy. Entergy is concerned that the allocation may be unfairly skewed towards states with relatively higher emissions. Entergy will continue to study the final rule's impact to its generation fleet and will work to ensure that all states are treated fairly in the allocation of emission credits.
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, |
March 31, |
||||||||||
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
||||||
Entergy Arkansas |
3.01 |
3.29 |
2.79 |
3.17 |
3.37 |
3.55 |
|||||
Entergy Gulf States |
2.60 |
2.36 |
2.49 |
1.51 |
3.04 |
2.92 |
|||||
Entergy Louisiana |
3.33 |
2.76 |
3.14 |
3.93 |
3.60 |
3.13 |
|||||
Entergy Mississippi |
2.33 |
2.14 |
2.48 |
3.06 |
3.41 |
3.40 |
|||||
Entergy New Orleans |
2.66 |
(a) |
(b) |
1.73 |
3.60 |
3.52 |
|||||
System Energy |
2.41 |
2.12 |
3.25 |
3.66 |
3.95 |
4.08 |
Ratios of Earnings to Combined Fixed Charges |
|||||||||||
Twelve Months Ended |
|||||||||||
December 31, |
March 31, |
||||||||||
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
||||||
Entergy Arkansas |
2.70 |
2.99 |
2.53 |
2.79 |
2.98 |
3.15 |
|||||
Entergy Gulf States |
2.39 |
2.21 |
2.40 |
1.45 |
2.90 |
2.79 |
|||||
Entergy Louisiana |
2.93 |
2.51 |
2.86 |
3.46 |
3.16 |
2.77 |
|||||
Entergy Mississippi |
2.09 |
1.96 |
2.27 |
2.77 |
3.07 |
3.06 |
|||||
Entergy New Orleans |
2.43 |
(a) |
(b) |
1.59 |
3.31 |
3.23 |
(a) |
Earnings for the twelve months ended December 31, 2001, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $6.6 million and $9.5 million, respectively. |
(b) |
Earnings for the twelve months ended December 31, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively. |
Item 6. Exhibits
(a) Exhibits*
10(a) - |
Second Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective April 15, 2005. |
|
10(b) - |
Purchase and Sale Agreement by and between Central Mississippi Generating Company, LLC and Entergy Mississippi, Inc., dated as of March 16, 2005. |
|
31(a) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
|
31(b) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
|
31(c) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
|
31(d) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States. |
|
31(e) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States and Entergy Louisiana. |
|
31(f) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
|
31(g) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
|
31(h) - |
Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
|
31(i) - |
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans. |
|
31(j) - |
Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
|
32(a) - |
Section 1350 Certification for Entergy Corporation. |
|
32(b) - |
Section 1350 Certification for Entergy Corporation. |
|
32(c) - |
Section 1350 Certification for Entergy Arkansas. |
|
32(d) - |
Section 1350 Certification for Entergy Gulf States. |
|
32(e) - |
Section 1350 Certification for Entergy Gulf States and Entergy Louisiana. |
|
32(f) - |
Section 1350 Certification for Entergy Mississippi. |
|
32(g) - |
Section 1350 Certification for Entergy New Orleans. |
|
32(h) - |
Section 1350 Certification for System Energy. |
|
32(i) - |
Section 1350 Certification for Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans. |
|
32(j) - |
Section 1350 Certification for System Energy. |
|
99(a) - |
Entergy Arkansas' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
|
99(b) - |
Entergy Gulf States' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
|
99(c) - |
Entergy Louisiana'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 the total assets 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 March 31, 2005, 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 March 31, 2005. |
** |
Incorporated herein by reference as indicated. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION |
/s/ Nathan E. Langston Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) |
Date: May 4, 2005
Exhibit 10(a)
SYSTEM EXECUTIVE CONTINUITY PLAN OF
ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective March 8, 2004)
Certificate of Amendment
Amendment No. 2
THIS INSTRUMENT, executed this 15th day of April, 2005, but made effective as of March 8, 2004 ("Effective Date"), constitutes the Second Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, as amended and restated effective March 8, 2004 (the "Plan"). All capitalized terms used in this document shall have the meanings assigned to them in the Plan unless otherwise defined in this document.
Pursuant to Section 8.01 of the Plan and resolutions adopted by the Board of Directors of Entergy Corporation at its meeting held on March 8, 2004, this clarifying amendment limits the severance benefits paid to Plan Participants, except as otherwise provided herein, to the maximum amount allowed under the Severance Policy without shareholder approval.
If there should occur a Change in Control and if, within the Change in Control Period, a Participant has a Qualifying Event, then such Participant shall be entitled to receive, subject to the limitation provisions of Section 4.09 and the forfeiture provisions of Section 6.01, the Plan benefits set forth in Sections 4.02 and 4.03 with respect to Participants at his System Management Level. A Participant's benefits shall be determined by reference to his System Management Level on the date immediately preceding the commencement of the Change in Control Period.
A Participant satisfying all of the terms and conditions of this Plan shall be entitled to receive, in lieu of any further salary payments to the Participant for periods subsequent to the Date of Termination, but subject to the limitation provisions of Section 4.09 and the forfeiture provisions of Section 6.01, a single-sum cash payment calculated and payable in accordance with the following:
4.09 Benefit Limitation. Notwithstanding any provision of this Plan to the contrary and except for those named Participants in the immediately following sentence to whom this Section 4.09 does not apply, the value of the benefits payable to a Participant under the terms of Section 4.02 shall not in the aggregate exceed 2.99 times the sum of: (a) Participant's annual base salary as in effect at any time within one year prior to commencement of a Change in Control Period or, if higher, immediately prior to a circumstance constituting Good Reason plus (b) the higher of: (i) the annual incentive award actually awarded to the Participant under the EAIP for the fiscal year of Entergy Corporation immediately preceding the fiscal year in which the Participant's termination of employment occurs; (ii) the Target Award for such Participant for the fiscal year of Entergy Corporation in which the Participant's termination of employment occurs; or (iii) the Target Award for such Participant f or the fiscal year of Entergy Corporation in which the Change in Control Period commences. The benefit limitation set forth in this Section 4.09 shall not apply to the following named Participants for as long as they continuously remain a Participant in the Plan at their current or higher System Management Level: Richard J. Smith, Curtis L. Hebert, Gary J. Taylor, Robert D. Sloan and Mark T. Savoff.
IN WITNESS WHEREOF, the Board of Directors of Entergy Corporation has caused this Second Amendment to the System Executive Continuity Plan of Entergy Corporation and Subsidiaries to be executed by its duly authorized representative on the day, month, and year above set forth.
ENTERGY CORPORATION
through the undersigned duly authorized representative
/s/ WILLIAM E. MADISON
WILLIAM E. MADISON
Senior Vice-President,
Human Resources and Administration
Exhibit 10(b)
PURCHASE AND SALE AGREEMENT
by and between
CENTRAL MISSISSIPPI GENERATING COMPANY, LLC
and
ENTERGY MISSISSIPPI, INC.,
Dated as of March 16, 2005
EXHIBITS AND SCHEDULES
Item |
Description |
Exhibit A-1, A-2 |
Form of Assignment and Assumption Agreement |
Exhibit B |
Form of Bill of Sale |
Exhibit C |
Form of Deed |
Exhibit D |
Form of Letter of Credit |
Exhibit E |
Form of Termination of Pre-Closing Interconnection Letter |
Schedule 1.1A |
Certain Permitted Encumbrances |
Schedule 1.1B |
Purchaser's Required Consents |
Schedule 1.1C |
Purchaser's Required Regulatory Approvals |
Schedule 1.1D |
Preliminary Title Commitment |
Schedule 2.1(a) |
Owned Real Property |
Schedule 2.1(b) |
Leased Real Property |
Schedule 2.1(c) |
Tangible Personal Property |
Schedule 2.1(d) |
Purchased Inventory |
Schedule 2.1(e) |
Purchased Project Contracts |
Schedule 2.1(f) |
Permits |
Schedule 2.1(g) |
Books and Records |
Schedule 2.1(h) |
Warranties |
Schedule 2.1(i) |
Claims and Causes of Action |
Schedule 2.1(j) |
Prepaid Items |
Schedule 2.2(b) |
Specified Excluded Assets |
Schedule 2.2(g) |
Advance Payments |
Schedule 4.4 |
Compliance With Laws |
Schedule 4.7 |
Litigation |
Schedule 4.8 |
Project Contracts and Other Contracts |
Schedule 4.9 |
Purchased Project Contract Matters |
Schedule 4.11 |
Owned Real Property |
Schedule 4.12 |
Leased Real and Personal Property |
Schedule 4.13 |
Condition of Purchased Assets; Defects |
Schedule 4.16 |
Environmental Matters |
Schedule 4.23(b) |
Undisclosed Liabilities |
Schedule 4.24 |
Adverse Material Change to Purchased Assets |
Schedule 4.25 |
Seller's Required Consents and Seller's Required Regulatory Approvals |
Schedule 4.26 |
Certain Changes Since Seller's Acquisition of Project |
Schedule 5.5 |
Purchaser Litigation |
Schedule 6.4 |
Exceptions to Conduct Pending Closing |
Schedule 6.12 |
Designated NAES Employees |
Schedule 8.7 |
Certain Title Insurance Exceptions |
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of March 16, 2005, is made and entered into by and between Central Mississippi Generating Company, LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Seller"), and Entergy Mississippi, Inc., a corporation organized and existing under the laws of the State of Mississippi ("Purchaser").
RECITALS
A. Seller owns the Project (as defined in Article 1).
B. Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase from Seller, all of Seller's right, title and interest in and to the Purchased Assets on the terms and subject to the conditions hereinafter set forth.
C. Seller and Purchaser are entering into this Agreement to evidence their respective duties, obligations and responsibilities in respect of the purchase and sale and related transactions contemplated by this Agreement and the Ancillary Agreements as defined in Article 1 (the "Transactions").
NOW, THEREFORE, in consideration of the foregoing recitals and the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. The following terms when used in this Agreement (or in the Schedules and Exhibits to this Agreement) with initial letters capitalized have the meanings set forth below:
"Adjustment Sections" has the meaning set forth in Section 3.3.
"Affiliate" means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
"Agreement" means this Purchase and Sale Agreement, together with the Schedules and Exhibits hereto.
"Ancillary Agreements" means (i) the Bill of Sale, (ii) the Deed, (iii) the Assignment and Assumption Agreements, (iv) any additional agreements and instruments of sale, transfer, conveyance, assignment and assumption that may be executed and delivered by any Party at the Closing, (v) the Letter of Credit and (vi) the Transmission Purchase Agreements.
"Asserted Purchaser Claims" has the meaning set forth in Section 3.8(a).
"Assignment and Assumption Agreements" means the Assignment and Assumption Agreements, substantially in the form of Exhibits A-1 and A-2, to be executed and delivered by Seller and Purchaser at the Closing.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bankrupt" means, with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due.
"Bill of Sale" means a Bill of Sale, substantially in the form of Exhibit B, to be executed and delivered by Seller at the Closing.
"Business" means the business of operating the Project and generating, selling and delivering electric energy and providing Other Associated Electric Products from the Project.
"Business Day" means any day on which Federal Reserve member banks in New York, New York are open for business; and a Business Day shall commence at 8:00 a.m. and close at 5:00 p.m., local time, at the location of the applicable Party's principal place of business, or at such other location as the context may require.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Inventory Report" means an Inventory Report dated as of the Closing Date.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1986.
"Code" means the Internal Revenue Code of 1986.
"Commercially Reasonable Efforts" means efforts which are reasonably within or should have been reasonably within the contemplation of the Parties on the Effective Date and which do not require the performing Party to expend funds or incur obligations other than expenditures and obligations which are customary and reasonable in transactions of the kind and nature contemplated by this Agreement. With respect to expenditures required to satisfy Seller's obligations to use Commercially Reasonable Efforts under this Agreement:
(a) For Seller's obligations to use Commercially Reasonable Efforts other than those described in paragraphs (b) and (c) below, Seller shall be required to expend up to, but shall not be required to expend more than, $500,000 in aggregate payments to third parties to satisfy any and all such obligations.
(b) For Seller's obligations to use Commercially Reasonable Efforts for those actions described in Section 2.5(a)(ii), Seller shall be required to expend up to, but shall not be required to expend more than, $500,000 in aggregate payments to third parties to satisfy any and all such obligations (such payments being in addition to those payments described in paragraph (a) above).
(c) Seller shall not be required to expend any funds in order to obtain any consent to transfer to Purchaser any of the Other Software Licenses.
(d) The limitations in paragraphs (a)-(c) above shall not apply to Seller's obligations to use Commercially Reasonable Efforts other than with respect to payments to third parties, shall not apply to payments to counsel for Seller, shall not apply to expenditures resulting from the application of provisions other than those expressly requiring Commercially Reasonable Efforts, such as the provisions allocating costs and expenses in Section 6.2, and shall not apply to any obligations to use Commercially Reasonable Efforts under Sections 6.8 or 6.16.
"Confidentiality Agreement" means that certain Confidentiality Agreement, dated as of June 1, 2004, between ESI and Seller.
"Consumables" means any and all of the following items of Inventory intended to be consumed or needing regular periodic replacement at the Project in the ordinary course of the conduct of the Business: lubricants, chemicals, fluids, lubricating oils, filters, seals, gaskets, and other similar expendable materials; maintenance, shop and office supplies; and all other expendable materials, supplies and other items consumed at the Project in the ordinary course of the conduct of the Business.
"Contract" means any contract, agreement, arrangement, license, easement, lease, commitment, sale and purchase order, and other instrument or understanding of any kind, whether written or oral, express or implied.
"Damaged Portion" has the meaning set forth in Section 6.8(b).
"Deed" means one or more Deeds, substantially in the form of Exhibit C, conveying each of the Owned Real Properties included in the Purchased Assets, free and clear of all Encumbrances other than Permitted Encumbrances, with legal descriptions suitable for conveyance of such Owned Real Properties of record, to be executed and delivered by Seller at the Closing.
"Designated NAES Employees" shall have the meaning set forth in Section 6.12(b).
"Dispute" shall have the meaning set forth in Section 11.8(a).
"Easements" means all easements, rights-of-way, privileges, franchises, licenses and other similar agreements existing for the benefit of Real Property, including those specified in Schedule 2.1(a).
"Effective Date" means the date on which this Agreement has been executed and delivered by Seller and Purchaser.
"Electric Interconnection Facilities" means all structures, facilities, equipment, auxiliary equipment, devices and apparatus directly or indirectly required or installed to interconnect and deliver electric energy from the Project to the applicable delivery points and including, electric transmission and/or distribution lines, transformation, switching, electric metering equipment, any other metering equipment, communications equipment, and safety equipment, including, but not limited to, equipment required to protect (i) the electrical system to which the Project is connected and its customers from faults occurring at the Project and (ii) the Project from faults occurring on the electrical system to which the Project is connected or on other electrical systems to which such electrical system is directly or indirectly connected.
"Emission Allowances" means all authorizations to emit specified units of Hazardous Substances from the Project or the Project Site, which units are established by a Governmental Authority with jurisdiction over the Project or the Project Site under Environmental Law, including without limitation under (i) an air pollution control and emission reduction program designed to mitigate global warming or interstate or intrastate transport of air pollutants, (ii) a program designed to mitigate impairment of surface waters, watersheds or groundwater, or (iii) any pollution reduction program with a similar purpose, in each case regardless of whether the Governmental Authority establishing such authorizations designates such authorizations by a name other than "allowances."
"Encumbrances" means any and all mortgages, pledges, claims, liens, security interests, options, warrants, purchase rights, conditional and installment sales agreements, easements, activity and use restrictions and limitations, exceptions, rights-of-way, deed restrictions, defects or imperfections of title, encumbrances and charges of any kind.
"Entergy Operating Companies" means Entergy Arkansas, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy Gulf States, Inc., and Entergy New Orleans, Inc.
"Entergy System" means the transmission system of the Entergy Operating Companies, or of any entity succeeding to the ownership or control thereof, with a substation located near the Project.
"Environment" means the environment, including without limitation, any of the following media and any living organism or systems supported by any such media: (a) land, including surface land, sub-surface strata, sea bed and riverbed under water (as defined in clause (b) hereof) and any natural or man-made structures; (b) water, including coastal and inland waters, navigable waters, surface waters, ground waters, drinking water supplies and waters in drains and sewers, surface and sub-surface strata; and (c) air, including indoor and outdoor air and air within buildings and other man-made or natural structure above or below ground.
"Environmental Assessment" means an environmental site assessment with respect to the Project and the Project Site, prepared by the Environmental Consultant and performed in compliance with standard ASTM E1527-00 or any such other measures as required by EPA regulation to meet the "all appropriate inquiry" standard of CERCLA Section 101 in form and substance satisfactory to Purchaser, in Purchaser's sole discretion. A copy of the initial Environmental Assessment, dated September 22, 2004, prepared by the Environmental Consultant, has been supplied to Seller. If, in its discretion, Purchaser elects to conduct a final Environmental Assessment, the same shall be completed by Purchaser at its sole cost and expense not later than sixty (60) days in advance of the Closing Date.
"Environmental Claim" means, without limitation, any pending or threatened written notice, claim, demand or other communication by any Person alleging or asserting a Party's or any other Person's actual or potential liability for investigation, response, investigation costs, cleanup costs, compliance costs, enforcement costs, response costs, suits (whether in law or in equity), defense costs, capital expenditures (whether incurred to construct, alter, replace or modify any of the Purchased Assets as necessary for a Party to perform its obligations under this Agreement or otherwise) or the funding necessary therefor, actual damages, consequential damages, punitive damages, claims for contribution or indemnity, damages to natural resources or other property, personal injuries (including those arising from or related to toxic torts), fines or penalties, based on or resulting from, in whole or in part: (a) the presence or Release of any Hazardous Substances at any location, whether or n ot on property owned by such Person; (b) circumstances forming the basis of any violation or alleged violation of or legal obligation or liability pursuant to any Environmental Law; or (c) claims for Remediation or costs associated with Remediation.
"Environmental Condition" means the presence or Release of a Hazardous Substance in the Environment with the respect to the Project or the Project Site (wherever migrating) for which there is an obligation under Environmental Law to engage in any monitoring, investigation, assessment, treatment, cleanup, containment, removal, mitigation, reporting, response or restorative work, or concerning which a Governmental Authority with jurisdiction over such matter has required or may require the foregoing activities under Environment Laws.
"Environmental Consultant" means Malcolm Pirnie, Inc., or such other recognized environmental consulting firm as shall be acceptable to Purchaser and retained by Purchaser at its cost.
"Environmental Law" means any federal, state and local statutes, regulations, rules, ordinances, codes, decrees, judgments and judicial or administrative orders or common law relating to pollution or protection of the Environment or natural resources, including, without limitation, laws relating to Releases of Hazardous Substances or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, transport, disposal or handling of Hazardous Substances, including, without limitation: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 through 2629; the Oil Pollution Act, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j; the Surface Mining Control and Reclamation Act of 1977, 30 U.S.C. Section 1201 et seq.; any similar laws of the State of Mississippi or of any other Governmental Authority having jurisdiction over the Project or the Project Site.
"Environmental Liability" means any Environmental Losses which (i) arise under or relate to any Environmental Condition or Environmental Claim, or (ii) are attributable to actions occurring or conditions existing on or prior to the Closing Date in violation of any Environmental Laws.
"Environmental Loss" means, without limitation, all liabilities, losses, claims, debts, assessments, deficiencies, charges, demands, fines, penalties, costs, expenses, damages, natural resource damages, reasonable fees and disbursements of counsel, costs of Remediation, liens or other claims against property or improvements thereon for work, labor or services performed with respect thereto or other obligations of any kind, character or description (whether absolute, contingent, matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect, derivative or otherwise) and expressly including those related to an indemnified Party's own negligence, pertaining or relating directly or indirectly, in whole or in part, to an Environmental Claim or Environmental Condition.
"Environmental Permit" means any federal, state or local Permit under or in connection with any Environmental Law, and includes without limitation any and all orders, consent orders or binding agreements issued or entered into by a Governmental Authority under any applicable Environmental Law relating to the Project or the Project Site.
"Environmental Report" means any environmental audit, environmental risk assessment, environmental site assessment or other investigation of Environmental Conditions at or related to the Project or the Project Site.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ESI" means Entergy Services, Inc., a Delaware corporation.
"ESI as Agent" means ESI as Agent for one or more of the Entergy Operating Companies, pursuant to that certain Amended and Restated Entergy System Agency Agreement, dated as of May 1, 2003, by and among said Entergy Services, Inc. and the Entergy Operating Companies.
"Estimated Closing Adjustment" has the meaning set forth in Section 3.5.
"Estimated Closing Statement" has the meaning set forth in Section 3.5.
"Estimated Cost" shall have the meaning set forth in Sections 6.8(b)(i) and 6.16(a)(i).
"Estimated Limit Date" shall have the meaning set forth in Sections 6.8(c) and 6.16(d).
"EWG" has the meaning set forth in Section 4.20.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Expiration Date" means the date of the three year anniversary of this Agreement, as such date may be extended pursuant to Sections 6.8 or 6.16.
"FERC" means the Federal Energy Regulatory Commission as established by the Department of Energy Organization Act of 1977, 42 U.S.C. Section 7171, or its regulatory successor, as applicable.
"Final Allocation" has the meaning set forth in Section 3.7.
"Final Closing Adjustment" has the meaning set forth in Section 3.5.
"First Meeting Deadline" shall have the meaning set forth in Sections 11.8(b).
"Fuel" means natural gas or fuel oil of sufficient quality to meet all technical specifications of the Project.
"GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a consistent basis.
"Gas Interconnection Facilities" means all structures, pipelines, facilities, equipment, auxiliary equipment, devices and apparatus directly or indirectly required or installed to interconnect and deliver natural gas from the applicable delivery points for natural gas from the TETCO pipeline to the Project's electric generation units.
"GEII" means General Electric International Inc., a Delaware corporation.
"Good Utility Practices" means those practices, methods and acts engaged in or approved by a significant portion of the electric utility and power generation industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment by a prudent electric utility in light of the facts known at the time a decision is made, could have been expected to accomplish a desired result at reasonable cost consistent with good business practices, reliability, safety and expedition and in compliance with Law. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of others, but rather to those practices, methods and acts generally accepted or approved by a significant portion of the electric utility industry in the relevant region, during the relevant time period, as described in the immediately preceding sentence.
"Governmental Authority" means any federal, state, local, foreign or other governmental subdivision, regulatory or administrative agency, commission, body, court or tribunal or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or Tax authority or power over the matters specified or if such matters are not specified over Seller, Purchaser, the Project, the Project Site, the Transactions or any related matter.
"Hazardous Substances" means (a) any chemicals, materials, substances or wastes which are defined or regulated as "hazardous substances," "hazardous materials," "hazardous constituents," "restricted hazardous materials," "extremely hazardous substances," "hazardous wastes," "extremely hazardous wastes" "restricted hazardous wastes," "toxic substances," "toxic pollutants," "toxic air pollutants," "pollutants," "contaminants" or words of similar meaning and regulatory effect, including without limitation as the foregoing may be defined under any Environmental Law and (b) any other chemicals, materials, wastes or substances, the exposure to or treatment, storage, transportation, use, disposal or Release of which is prohibited, limited or regulated by any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Income Tax" means any Tax imposed by any Governmental Authority (i) based upon, measured by or calculated with respect to gross or net income, profits or receipts (including municipal gross receipt Taxes, capital gains Taxes and minimum Taxes) or (ii) based upon, measured by or calculated with respect to multiple bases (including corporate franchise Taxes) if one or more of such bases is described in clause (i), in each case together with any interest, penalties or additions attributable to such Tax.
"Indemnitee" has the meaning set forth in Section 7.3.
"Indemnitor" has the meaning set forth in Section 7.3.
"Independent Accounting Firm" means such nationally recognized, independent accounting firm as is mutually appointed by Seller and Purchaser for purposes of this Agreement.
"Independent Contractor" means any Person (with the exception of attorneys and accountants) working at, or providing services or consulting in any capacity or manner for or related to the Project, and who is considered under applicable law or by Seller as an independent contractor, agent or consultant, including NAES, R.W. Beck and Kelson Attala.
"Initial Purchase Price" has the meaning set forth in Section 3.2.
"Intellectual Property Rights" has the meaning set forth in Section 4.14.
"Intercompany Arrangements" has the meaning set forth in Section 2.2(m).
"Interconnection Agreement" means an Interconnection Agreement in form satisfactory to Purchaser to be executed and delivered by Transmission Purchaser and Purchaser and become effective upon the Closing.
"Interconnection and Service Charge Agreement" means an Interconnection and Service Charge Agreement in form satisfactory to Purchaser to be executed and delivered by Transmission Purchaser and Purchaser and become effective upon the Closing.
"Interconnection Facilities Maintenance Agreement" means an Interconnection Facilities Maintenance Agreement in form satisfactory to Purchaser to be executed and delivered by Transmission Purchaser and Purchaser and become effective upon the Closing.
"Interconnection Facilities" means all Electric Interconnection Facilities and Gas Interconnection Facilities.
"Interim LTSA" means Seller's arrangements with GEII to provide customary maintenance of the combustion and steam turbines of the Project in compliance with GEII's technical requirements and information.
"Inventory" means any and all of the inventory items and equipment intended to be used or consumed at the Project in the ordinary course of the conduct of the Business including Consumables, new, repaired or refurbished equipment, components, assemblies, sub-assemblies and spare, replacement or other parts; tools, special tools, equipment; and all associated materials, supplies, software and other goods and other similar items of moveable property.
"Inventory Accounting Policies" has the meaning set forth in Section 3.3(b).
"Inventory Report" shall mean an inventory report prepared by Seller in the form set forth in Schedule 2.1(d).
"Inventory Threshold" has the meaning set forth in Section 3.3(b).
"Inventory Value" has the meaning set forth in Section 3.3(b).
"Kelson Attala" means Kelson Attala, LLC.
"Knowledge" or similar terms used in this Agreement with respect to a Party means:
(a) in the case of Seller, the extent of the knowledge, as of the Effective Date (or, with respect to (i) the certificate delivered pursuant to Section 8.6, as of the date of delivery of the certificate and (ii) the matters set forth in Sections 6.3(a) and 11.14(c), as of the date that such knowledge is acquired), of David Patton after his due inquiry with Edward Burrell, Tom Corlett, Michael Chapman and Eric Emerson and, with respect to the matters in Sections 4.4, 4.5, 4.7 and 4.18, after his due inquiry with appropriate representatives of Greenberg Traurig, LLP, Kelson Attala and NAES; and
(b) in the case of Purchaser, the extent of the knowledge, as of the Effective Date (or, with respect to (i) the certificate delivered pursuant to Section 9.6, as of the date of delivery of the certificate and (ii) the matters set forth in Sections 6.3(c) and 11.14(c), as of the date that such knowledge is acquired), of the following individuals whether or not employed by Purchaser: William Mohl, Marie Heard, Gary Dickens, Robert Malone, Cory Burton, Phil Carter, Trey Helle, Chuck Barlow, Carol St. Clair and Warren Page.
For purposes of this definition, an individual shall be deemed to have "knowledge" of a particular fact, circumstance or other matter if such individual is or at any time was actually aware of such fact, circumstance or other matter.
"Laws" means all statutes, rules, regulations, ordinances, orders and codes of any and all Governmental Authorities.
"Leased Real Property" has the meaning set forth in Section 2.1(b).
"Letter of Credit" has the meaning set forth in Section 3.8(a).
"Letter of Intent" means that certain Letter of Intent, dated as of August 12, 2004, by and between Seller and ESI.
"Liquidated Damages for Costs and Expenses" means a cash payment in the amount of (i) $2,000,000, if the event giving rise to the termination notice occurs prior to October 15, 2005, (ii) $3,500,000, if the event giving rise to termination notice occurs on or after October 15, 2005, but prior to October 15, 2006, and (iii) $4,500,000, if the event giving rise to termination notice occurs on or after October 15, 2006; provided, however, that the amount of Liquidated Damages for Costs and Expenses payable in respect of an event giving rise to Purchaser's right to terminate this Agreement shall be determined by reference to the earliest date on which a termination notice could have occurred based on such event, regardless of any waiver or delay in the giving of such notice; provided, further, however, that to the extent Purchaser shall at any time have the right to terminate this Agreement and receive Liquidated Damages for Costs and Expenses pursuant to more than one of the provisions of Section 10.1, and different amounts of Liquidated Damages for Costs and Expenses would be payable depending on which provision of Section 10.1 is made the basis of such Party's termination notice, only one of the amounts shall be payable and such amount shall be the greatest of the amounts of Liquidated Damages for Costs and Expenses.
"Limit Date" shall have the meaning set forth in Sections 6.8(c) and 6.16(d).
"Losses" has the meaning set forth in Section 7.1(a).
"Material Adverse Effect" with respect to Seller, means any occurrence set forth in clause (a) or clause (b) of this definition, and with respect to Purchaser, means any occurrence set forth in clause (a) of this definition: (a) any event, circumstance or condition materially impairing such Party's authority, right, or ability to perform its obligations under this Agreement or any Ancillary Agreement or to consummate the Transactions; or (b) any change (or changes taken together) in, or effect on, the Project that is materially adverse to the operations or physical condition of the Project, or the business, assets, properties, financial condition, results of operations or prospects of the Business, including any change (or changes taken together) or effect related to the Project that (i) causes or could reasonably be expected to cause a diminution in value of any of the Purchased Assets of $500,000 or more or (ii) causes, or could reasonably be expected to cause, an increase in the amount or cost of paying, performing or otherwise discharging any of the Assumed Liabilities of $500,000 or more; provided that in no event shall the term Material Adverse Effect include: (1) any changes in national or regional or electric industry economic conditions generally affecting the national or regional electric industry as a whole, (2) any changes in the price of natural gas generally prevailing in the SERC Region, (3) any changes in the price of real estate generally prevailing in the SERC Region, or (4) any changes in the price of electric generating facilities generally prevailing in the SERC region.
"Material Software Licenses" shall mean the Purchased Project Contracts set forth on Schedule 2.1(e) under the caption "Software Licenses" that are described as items # 1, 2, 3, 7, 8, 13, 14, 16 and 17 and any Replacement License Agreements.
"Monthly Operating Report" shall mean a Monthly Management Report for the applicable period substantially in the form of those provided by Seller and delivered to Purchaser prior to the Effective Date, including therein technical discussions of energy management, financial results, operations and maintenance and regulatory compliance, with attached reports covering such matters as have been covered in reports previously provided by Seller or are otherwise reasonably requested by Purchaser.
"NAES" means North American Energy Services Company.
"NEG Contracts" shall have the meaning set forth in Section 2.2(k).
"NEG Tolling Contract" shall have the meaning set forth in Section 2.2(k).
"New LTSA" has the meaning set forth in Section 8.8.
"Nonassignable Asset" has the meaning set forth in Section 2.5(b).
"Notice of Claim" has the meaning set forth in Section 7.3.
"Order" means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Authority.
"Other Associated Electric Products" means all of the services and products associated with capabilities or operational attributes or regulatory treatment of a generating unit, including but not limited to the capability to provide ancillary services, reserves, operational functions (e.g., black start capability), receipt or allocation or emissions allowances and other services and products.
"Other Software Licenses" shall mean the Purchased Project Contracts set forth on Schedule 2.1(e) under the caption "Software Licenses" other than the Material Software Licenses.
"Owned Real Property" has the meaning set forth in Section 2.1(a).
"Participating Entergy Operating Company Transactions" means any and all proposed purchases and sales of capacity, energy and/or Other Associated Electric Products of or from the Project at any time or from time to time after the Closing by any of the Participating Entergy Operating Companies.
"Participating Entergy Operating Company" means Purchaser and any other Entergy Operating Company that becomes (or is expected to become) a permitted assignee of or successor to Purchaser hereunder on or before the Closing Date, or purchases (or is expected to purchase) any portion of the output of the Project from and after the Closing and designated by Purchaser as a "Participating Entergy Operating Company" in a written notice to Seller after the Effective Date.
"Party" means Seller or Purchaser, as the context requires; "Parties" means, collectively, Seller and Purchaser.
"Permits" means permits, registrations, licenses, franchises, certificates and other consents, approvals and authorizations of Governmental Authorities to the extent related to the Project or the Business.
"Permitted Encumbrances" means (i) liens for Property Taxes and other governmental charges and assessments which are not yet due and payable or the validity of which is being contested in good faith by appropriate proceedings and described in Part I of Schedule 1.1A, (ii) all exceptions, restrictions, easements, charges, rights-of-way and monetary and nonmonetary Encumbrances which are set forth in any Purchased Permit listed on a schedule to this Agreement or listed in Part II of Schedule 1.1A, (iii) mechanics', materialmens', laborers', carriers', workers', repairers' and other similar liens arising in the ordinary course of business for sums not yet due and payable, so long as the amount of any such sum in respect of which any such lien shall have arisen does not exceed $50,000, individually, and all such sums do not exceed $250,000 in the aggregate, and (iv) Encumbrances with respect to any of the Purchased Assets and created by or resulti ng from the acts or omissions of Purchaser.
"Person" means any individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization, any Governmental Authority or any other entity.
"Predecessor-in-Interest" means any predecessor-in-interest with respect to the Project, including Attala Generating Company, LLC (formerly known as Duke Energy Attala, LLC), VCC Attala OL LLC and TCC Attala OL LLC, and each of their respective Affiliates and Independent Contractors.
"Preliminary Title Commitment" means the Preliminary Title Commitment of the Title Insurer, Commitment Number 04-3706-11653MS, dated effective as of February 25, 2005, issued in the name of Seller, and attached hereto as Schedule 1.1D.
"Prepaid Items" has the meaning set forth in Section 2.1(j).
"Project" means the natural gas fueled electrical generation plant consisting of two General Electric 7241FA combustion turbine generator sets, two ALSTOM triple-pressure level heat recovery steam generators fitted with selective catalytic reduction, and a condensing General Electric steam turbine generator located in Attala County, Mississippi, together with all related assets and properties, real, personal and mixed, and interests therein (to the extent of Seller's interest), including ancillary equipment, Interconnection Facilities and Protective Apparatus and any additions thereto or replacements thereof.
"Project Contract" means any Contract to which Seller is a party, by which Seller or any of the Purchased Assets is bound or which has the primary purpose of supporting the Project or the Business, including the Interim LTSA.
"Project Employee Plan" has the meaning set forth in Section 2.2(d).
"Project Employees" means any employees, including individuals deemed to be employees by Law, who are employed in positions at or, if employed at another location, who perform substantially all their work in support of, the Project (whether employed by Seller, if any, or any Independent Contractor or any Predecessor-in-Interest). References to "former Employees" or "future Employees" mean former or future employees, including individuals deemed to be employees by Law, who, during the period of their employment (whether employed by Seller, if any, or any Independent Contractor or any Predecessor-in-Interest) related to the Project, were or are employed in positions at or, if employed at another location, who performed or perform substantially all their work in support of, the Project.
"Project Insurance Policies" means all insurance policies carried by or for the benefit of Seller or with respect to the ownership, operation or maintenance of the Project or the Business, including all liability, property damage, self insurance arrangements, retrospective assessments and business interruption policies in respect thereof.
"Project Site" means (a) the Owned Real Property and the Leased Real Property, and (b) the "Transmission Real Property" under and as such term is defined in the Transmission Assets Purchase and Sale Agreement.
"Property Tax" means any Tax resulting from and relating to the assessment of real or personal property by any Governmental Authority.
"Protective Apparatus" means such equipment and apparatus, including but not limited to protective relays, circuit breakers and the like, necessary or appropriate to isolate the Project from the electrical system to which they are connected consistent with Good Utility Practices.
"Purchase Price" has the meaning set forth in Section 3.3.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Purchased Inventory" has the meaning set forth in Section 2.1(d).
"Purchased Permits" has the meaning set forth in Section 2.1(f).
"Purchased Project Contracts" has the meaning set forth in Section 2.1(e).
"Purchaser" has the meaning set forth in the introductory paragraph of this Agreement.
"Purchaser Claims" has the meaning set forth in Section 7.1(a).
"Purchaser Financial Statements" has the meaning set forth in Section 5.6.
"Purchaser Group" has the meaning set forth in Section 7.1(a).
"Purchaser's Additional Regulatory Approvals" means from each of the Governmental Authorities having jurisdiction over Purchaser's or any of the Participating Entergy Operating Companies' retail operations, and specified in Part II of Schedule 1.1C, either: (i) approval of the Purchaser Transactions and the Participating Entergy Operating Company Transactions, including approval of the consummation thereof and of the full recovery of all costs associated with the Purchaser Transactions and the Participating Entergy Operating Company Transactions (through base rates, fuel adjustment charges, and/or such other rates or charges as may be applied pursuant to a rider or otherwise, provided that the provisions for full recovery of all costs are acceptable to Purchaser and/or the Participating Entergy Operating Companies, in their sole discretion) pursuant to a finding that the consummation of the Purchaser Transactions by Purchaser, and the consummation of the Participating E ntergy Operating Transactions by Purchaser and the Participating Entergy Operating Companies, is prudent and in the public interest, or (ii) such other regulatory treatment as is deemed acceptable to Purchaser and the Participating Entergy Operating Companies in the exercise of their sole and absolute discretion.
"Purchaser's Required Consents" means the notices to or the consents, waivers or releases of any Person other than a Governmental Authority required by Purchaser to be made or obtained by or on behalf of Purchaser or any Participating Entergy Operating Company prior to consummation of the Purchaser Transactions, including the notices, consents, waivers or releases specified in Schedule 1.1B.
"Purchaser's Required Regulatory Approvals" means the notices to, filings with or approvals, statements, waivers, consents or authorizations of or from any Governmental Authority of competent jurisdiction over any of the Parties, any Participating Entergy Operating Company, any other Affiliates of Purchaser or the Project that are required (a) for Purchaser to consummate the Purchaser Transactions, including those specified in Part I of Schedule 1.1C or (b) to be made or obtained by or on behalf of Purchaser or any of the Participating Entergy Operating Companies with respect to the Transactions, the Transmission Arrangement Agreements or the transactions contemplated thereby, including those specified in Part I of Schedule 1.1C.
"Purchaser Transactions" means the Transactions regarding the Purchased Assets to which the Purchaser is a Party.
"Real Estate Curative Documents" has the meaning specified in Section 8.17(h).
"Real Property" means the Owned Real Property and the Leased Real Property.
"Release" shall have the meaning set forth in the Laws referred to in the definition of Environmental Laws herein, but also shall include without limitation any threatened Release, spill, leak, discharge, abandonment, disposal, pumping, pouring, emitting, emptying, injecting, leaching, dumping, depositing, dispersing, allowing to escape or migrate into or through the Environment or the Project Site of any Hazardous Substance. The term "Released" shall have a corresponding meaning.
"Remediation" means any action of any kind to address an Environmental Condition, or the Release or the presence of Hazardous Substances in the Environment at the Project Site or any Purchased Assets, including the following: (i) monitoring, investigation, assessment, treatment, cleanup, containment, remediation, removal, mitigation, response or restoration work; (ii) obtaining any Permits necessary to conduct any such work; (iii) preparing and implementing any plans or studies for such work; (iv) obtaining a written notice from a Governmental Authority with jurisdiction under applicable Environmental Laws that no material additional work is required by such Governmental Authority; (v) any response to, or preparation for, any inquiry, order, hearing or other proceeding by or before any Governmental Authority with respect to any such Environmental Condition, Release or presence of Hazardous Substances; and (vi) any other activities that are appropriate or req uired under Environmental Laws to address an Environmental Condition, or the presence of or Release of Hazardous Substances in the Environment at the Project Site or any other Purchased Assets.
"Replacement License Agreement" has the meaning specified in Section 2.5(a)(ii).
"R.W. Beck" means R.W. Beck Plant Management, Ltd.
"Scheduled Adjustment Date" has the meaning set forth in Section 3.6.
"Seller" has the meaning set forth in the introductory paragraph of this Agreement.
"Seller Claims" has the meaning set forth in Section 7.2(a).
"Seller Group" means Seller, the Seller Trust, each of HSBC Bank USA, National Association, as Trustee, Monumental Life Insurance Company, Transamerica Life Insurance and Annuity Company, Transamerica Life Insurance Company, AIG Life Insurance Company, American General Life & Accident Insurance Company, American General Life Insurance Company, The United States Life Insurance Company in the City of New York (Formerly American General Life Insurance Company of New York), The Maritime Life Assurance Company, John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company, New York Life Insurance Company, SOF Investments, L.P. and Chateau I, LP and each of their respective officers, directors, attorneys, agents and successors and assigns.
"Seller Litigation" has the meaning set forth in Section 4.7.
"Seller's Required Consents" means the notices to or the consents, waivers or releases of any Person other than a Governmental Authority that are required by Seller to be made or obtained by or on behalf of Seller prior to the consummation of the Transactions, including the consents, waivers or releases specified in Schedule 4.25.
"Seller's Required Regulatory Approvals" means the notices to, filings with or approvals, waivers, consents or authorizations of or from any Governmental Authority that are required (i) for Seller to consummate the Transactions, including, those specified in Schedule 4.25 and (ii) by Seller to be made or obtained by or on behalf of Seller prior to the Closing, including those specified in Schedule 4.25.
"Seller Trust" means the Attala 2004 Trust, a New York trust, and owner of 100% of the membership interests in Seller.
"SERC Region" means the North American Electric Reliability Council region served by the members of the Southeastern Electric Reliability Council.
"SO2 Emission Allowance" means (i) an authorization by the USEPA under the Federal Clean Air Act, 42 U.S.C. Section 7401, et seq., to emit up to one ton of sulfur dioxide during or after a specified calendar year, or (ii) an authorization by the Mississippi Department of Environmental Quality authorizing the emission of up to one (1) ton of sulfur dioxide during or after a specified calendar year under an existing or future SO2 Emissions Allowance program.
"Tangible Personal Property" has the meaning set forth in Section 2.1(c).
"Tax" or "Taxes" means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property (including assessments, fees or other charges based on the use or ownership of real property), personal property, transactional, use, transfer, registration, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not, including, without limitation, any item for which liability arises as a transferee or secondary liability in respect any tax (whether imposed by law, contractual agreement or otherwise) and any liability in respect of any tax as a result of being a member of any affiliated, consolidated, combined, unitary or similar group.
"Tax Return" means any return, report, information return, declaration, claim for refund or other document, together with all amendments and supplements thereto (including all related or supporting information), required to be supplied to any Governmental Authority responsible for the administration of Laws governing Taxes including information returns or reports with respect to backup withholding and other payments to third parties.
"Termination Date" has the meaning set forth in Section 10.1.
"Termination of Pre-Closing Interconnection Letter" means the Termination of Pre-Closing Interconnection Letter, substantially in the form of Exhibit E, to be executed and delivered by Seller prior to the Closing.
"Third Party Claim" means a claim by a Person that is not a member of the Seller Group or the Purchaser Group, including any claim for the costs of conducting Remediation, or seeking an order or demanding that a Person undertake Remediation.
"Title Insurer" has the meaning set forth in Section 8.7.
"Title Policy" has the meaning set forth in Section 8.7.
"Tolling Agreement" means that certain Tolling Agreement, dated as of July 1, 2004, by and between Seller and ESI as Agent.
"Transactions" has the meaning set forth in the Recitals.
"Transfer Tax" means any sales Tax, transfer Tax, transaction Tax, conveyance fee, use Tax, stamp Tax, stock transfer Tax or other similar Tax, including any related penalties, interest and additions thereto.
"Transmission Arrangement Agreements" means the Interconnection Agreement, the Interconnection and Service Charge Agreement, the Interconnection Facilities Maintenance Agreement and any other documents and agreements between Purchaser and Transmission Purchaser contemplated therein that are to become effective upon Closing.
"Transmission Assets" means the "Transmission Assets" under, and as such term is defined in, the Transmission Assets Purchase and Sale Agreement.
"Transmission Assets Purchase and Sale Agreement" means the Purchase and Sale Agreement dated as of March 16, 2005, between Seller and Transmission Assets Purchaser.
"Transmission Assets Purchaser" means Attala Transmission LLC, a Louisiana limited liability company.
"Transmission Purchase Agreements" means the Transmission Assets Purchase and Sale Agreement and the Termination of Pre-Closing Interconnection Letter.
"USEPA Allowance Tracking System" means the electronic recordkeeping and notification system called "Allowance Tracking System," "ATS," "NOx Allowance Tracking System" or "NATS" which is maintained by the USEPA in order to record, track and monitor transactions in SO2 Emission Allowances and NOx Emission Allowances, the status of SO2 Emission Allowance and NOx Emission Allowance accounts and related matters.
"USEPA" means the United States Environmental Protection Agency.
"Warranties" has the meaning set forth in Section 2.1(h).
Section 1.2 Certain Interpretive Matters. In this Agreement, unless the context otherwise requires:
ARTICLE 2
Section 2.1 1Purchased Assets. Upon the terms and subject to the conditions contained in this Agreement, at the Closing, Seller shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser will purchase and acquire from Seller, (i) all of the assets, properties and rights of every kind, nature, character and description, whether real, personal or mixed, whether tangible or intangible, whether accrued, contingent or otherwise relating to, used or held for use in the Business or for or at the Project, directly or indirectly, in whole or in part, in existence on the date hereof and any additions thereto on or before the Closing Date, whether or not carried on the books and records of Seller, in each case to the extent now or hereafter located at the Project or owned by Seller on or before the Closing Date, and (ii) without limiting the foregoing, the assets relating to, used or held f or use in the Business or for or at the Project described below, but excluding with respect to clauses (i) and (ii) above all Excluded Assets (collectively, the "Purchased Assets"):
Section 2.2 Excluded Assets. In accordance with the last clause of the first paragraph of Section 2.1, nothing in this Agreement will constitute or be construed as conferring on Purchaser, and Purchaser shall not be entitled or required to purchase or acquire, any right, title or interest in, to or under the following assets, interests, properties, rights, licenses or contracts (the "Excluded Assets"):
No designation by Purchaser of any asset as an Excluded Asset pursuant to subsections (b) or (c) of this Section 2.2 shall serve to reduce the Purchase Price. At any time or from time to time, up to thirty (30) days following the Closing, any and all of the tangible Excluded Assets may be removed from the Project by Seller (at no expense to Purchaser, but without charge by Purchaser for temporary storage), provided that Seller shall do so in a manner that does not unduly or unnecessarily disrupt normal business activities at the Project.
Section 2.3 Assumption of Liabilities. Upon the Closing, Purchaser will assume, and will thereafter pay, perform and discharge as and when due, and Purchaser shall indemnify Seller Group in accordance with Section 7.2(a)(vi) with respect to, the following, and only the following, obligations and liabilities of Seller to the extent, and only to the extent, such obligations and liabilities are allocable to the period after the Closing Date or are prorated to Purchaser under Section 3.4 (collectively, the "Assumed Liabilities"): all liabilities and obligations under the Purchased Project Contracts assigned to Purchaser under this Agreement (other than obligations or liabilities prorated to Seller under Section 3.4), except in each case to the extent such liabilities and obligations are allocable to the period before the Closing Date, including liabilities and obligations thereof, that but for a brea ch or default by Seller or a waiver or extension given to or by Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default by, or waiver or extension given to or by Seller.
Section 2.4 Excluded Liabilities. Except for Assumed Liabilities as provided in Section 2.3, Purchaser shall not assume or be obligated to pay, perform or otherwise discharge or be responsible or liable with respect to, and Seller shall indemnify Purchaser Group in accordance with Section 7.1(a)(iv) with respect to, any liabilities or obligations of Seller or otherwise relating to the Business or the Project or any present or former owner or operator thereof, whether or not of, associated with, or arising from, any of the Purchased Assets, and whether fixed, contingent or otherwise, known or unknown (collectively, the "Excluded Liabilities"), including the following:
Section 2.5 Assignability and Consents.
(ii) Within thirty (30) days after the execution of the Agreement, Seller will provide notice to the counterparty to each of the Material Software Licenses of the pending assignment of such Material Software Licenses to Purchaser (or to any permitted assignee under the Agreement) upon the occurrence of the Closing. Seller shall use Commercially Reasonable Efforts to either (y) obtain any necessary consents to the assignment of such Material Software License and the rights to use such Material Software License to Purchaser (or to any permitted assignee under the Agreement; provided however that, a consent that doesn't include such permitted assignees shall be deemed acceptable to Purchaser) prior to the Closing Date or (z) enter into a new license agreement ( each a "Replacement License Agreement") in replacement of such Material Software License, with rights, terms and conditions that are substantially similar to such Material Software License and with terms that permit the transfer thereof to Purchaser (or to any permitted assignee under the Agreement; provided however that, a Replacement License Agreement that doesn't include such permitted assignees shall be deemed acceptable to Purchaser) without having to obtain the counterparty's consent, and transfer such Replacement License Agreement and the rights to use the license granted thereunder to Purchaser prior to the Closing Date. Each such Replacement License Agreement shall constitute a Purchased Project Contract hereunder.
ARTICLE 3
Section 3.1 Closing. Subject to the terms and conditions hereof the consummation of the Transactions (the "Closing") will take place at the offices of Bracewell & Patterson, L.L.P., at 10:00 a.m. local time, on a mutually acceptable date within ten (10) Business Days following the date on which the conditions set forth in Articles 8 and 9, other than those conditions that by their nature are to be satisfied at the Closing, have been either satisfied or waived by the Party for whose benefit such conditions exist, or at such other time and place as the Parties may mutually agree. The date on which the Closing occurs is referred to herein as the "Closing Date." The Closing shall be effective for all purposes immediately after 11:59 p.m. on the Closing Date. At the Closing, and subject to the terms and conditions hereof, the following will occur:< /A>
Section 3.2 Initial Purchase Price. The initial purchase price for the Purchased Assets being sold shall be (a) $85,312,248, if the Closing occurs prior to October 15, 2005, (b) $88,094,169, if the Closing occurs on or after October 15, 2005, but prior to October 15, 2006, and (c) $92,730,704, if the Closing occurs on or after October 15, 2006 (such price on the Closing Date being, the "Initial Purchase Price").
Section 3.3 Adjustments to Initial Purchase Price. The Initial Purchase Price shall be subject to such adjustments as are specified in this Section 3.3 and as may occur under the provisions of Section 3.5 (this Section and Section 3.5 being referred to as the "Adjustment Sections," and the Initial Purchase Price as so adjusted is herein referred to as the "Purchase Price").
Section 3.5 Procedures for Closing Adjustments. At least twenty (20) calendar days prior to the anticipated Closing Date, Purchaser (with the assistance of Seller, to the extent requested by Purchaser) shall prepare and deliver to Seller an estimated closing statement (the "Estimated Closing Statement") that shall set forth Purchaser's best estimate of all estimated adjustments to the Initial Purchase Price required by this Agreement to be made as of the Closing (the "Estimated Closing Adjustment"). The Estimated Closing Adjustment, insofar as it relates to the adjustment required by Section 3.3(b), will be based on an Inventory survey which shall be conducted by Seller, in consultation with Purchaser, within thirty (30) days prior to the anticipated Closing Date consistent with the Inventory Accounting Policies and the results of which shall be del ivered by Seller to Purchaser promptly upon completion. Seller shall provide at least five (5) Business Days advance written notice to Purchaser of the commencement of such Inventory survey and shall, to the extent Purchaser reasonably requests, permit Purchaser to observe and monitor Seller's conduct of the Inventory survey. Within ten (10) calendar days after the delivery of the Estimated Closing Statement by Purchaser to Seller, Seller may object in good faith to the Estimated Closing Adjustment in writing. If Seller objects to the Estimated Closing Adjustment within such ten (10) calendar day period, the Parties shall attempt to resolve their differences by negotiation and the Closing will not take place until such differences have been resolved in accordance with the provisions of Section 3.6. If Seller does not object to the Estimated Closing Adjustment, the parties will negotiate the final amount of all adjustments to the Initial Purchase Price (the "Final Closing Adjustment") at lea st five (5) Business Days prior to the Closing Date, or, if the Parties cannot resolve any differences with respect to such Final Closing Adjustment, the Closing will not take place until such differences have been resolved in accordance with the provisions of Section 3.6.
Section 3.6 Procedures for Certain Purchase Price Adjustments. If circumstances exist that result in any disagreement in respect of an adjustment to the Purchase Price pursuant to the provisions of the Adjustment Sections, then and in any such event, such negotiations, and the resolution of disagreements, shall be conducted in accordance with the provisions of this Section 3.6. The Parties shall negotiate such adjustment of the Purchase Price in good faith prior to the date such adjustment is otherwise scheduled to become effective (each, a "Scheduled Adjustment Date"). If the Parties are unable to agree upon an adjustment by the fifth (5th) Business Day prior to such date, then for the items in dispute such Scheduled Adjustment Date and any Closing Date (but not any Termination Date) shall be extended to the fifth (5th) Business Day following completion of the procedure described in this Section 3.6 and the determination of the pertinent adjustment, to provide for the opportunity to resolve such disagreement pursuant to the provisions of this Section 3.6. Within seven (7) Business Days following the original Scheduled Adjustment Date, each Party shall submit to the Independent Accounting Firm in writing its proposed adjustments of the Purchase Price which were to occur on such Scheduled Adjustment Date. Such proposals shall be materially in accordance with the last proposals made by such Party to the other Party during the course of the aforementioned good faith negotiations between the Parties. The Parties shall additionally submit such memoranda, arguments, briefs and evidence in support of their respective positions, and in accordance with such procedures, as the Independent Accounting Firm may determine. Within five (5) Business Days following the due date of such submissions, as to each adjustment of the Purchase Price that was to occur on the Scheduled Adjustment Date concerning which there exists disagreement, the Independent Accounting Firm shall select, on an individual basis, a proposed adjustment of the Purchase Price proposed by one of the Parties, it being agreed that the Independent Accounting Firm shall have no authority to alter any such proposal in any way. Such determination by the Independent Accounting Firm shall be final and binding between the Parties as to such adjustments of the Purchase Price and shall not be subject to further challenge by the Parties pursuant to Section 11.8 or otherwise. Upon the determination of the appropriate adjustments, the Parties shall, subject to the terms and conditions of this Agreement, effectuate such adjustments by including them in the payments to occur at the Closing. Subject to the foregoing, the Independent Accounting Firm may determine the issues in dispute following such procedures, consistent with the provisions of this Agreement, as it deems appropriate to the circumstances and with reference to the amounts in issue. The Parties do not intend to impose any particular procedures upon the Independent Accounting Firm, it being the desire of the Parties that any such disagreement shall be resolved as expeditiously and inexpensively as reasonably practicable. The Independent Accounting Firm shall have no liability to the Parties in connection with services, except for acts of bad faith, willful misconduct or gross negligence and the Parties shall provide such indemnities to the Independent Accounting Firm as it may reasonably request consistent with the foregoing. The fees and disbursements of the Independent Accounting Firm shall be paid one-half by Seller and one-half by Purchaser.
Section 3.8 Credit Support.
ARTICLES 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser, as of the Effective Date and as of the Closing Date, as follows:
Section 4.5 Permits. To Seller's Knowledge, Seller holds and is in compliance with all material Permits required by Law (excluding any of the foregoing required under any Environmental Law, in respect of which Seller's sole representations and warranties are set forth in Section 4.16) for the ownership and operation of the Project and the Business, as currently operated by Seller. To Seller's Knowledge, each such Permit is in full force and effect and no event has occurred which permits, or with or without the giving of notice or the passage of time or both would permit, the revocation, suspension, limitation or termination thereof. To Seller's Knowledge, there is no condition, circumstance or issue that represents any material impediment to the assignment of any Purchased Permit or any condition, circumstance or issue related to Seller that would prevent Purchaser from obtaining the prompt provision of any other Perm it, in each case with an associated cost not in excess of standard renewal or application fees, as applicable. Seller has no planned changes to the Project or the Project Site, including any power uprate, which requires modification of any Permit which has not yet been obtained.
Section 4.7 Litigation. Except as set forth in Schedule 4.7, to Seller's Knowledge there is no claim, action, proceeding or investigation pending or threatened in writing against Seller before any court, arbitrator or Governmental Authority, or any judgment, decree, writ, injunction or order of any court, arbitrator or Governmental Authority binding on Seller (collectively, "Seller Litigation"); nor to Seller's Knowledge any claim, action, proceeding or investigation pending or threatened in writing against any of Seller Group (other than Seller) or any Independent Contractor before any court, arbitrator or Governmental Authority, or any judgment, decree, writ, injunction or order of any court, arbitrator or Governmental Authority binding on any of Seller Group (other than Seller) or any Independent Contractor in any way relating to the Project, the Business or the Purchased Assets that could reasonably be expected to have a Material Adverse Effect. Without limiting the foregoing, to Seller's Knowledge, all claims, actions, proceedings or investigations related to the NEG Contracts that could materially affect the Seller are subject to a binding settlement agreement that precludes further claims, actions, proceedings or investigations by NEG or any of its Affiliates against Seller, the Project, the Business or the Purchased Assets.
Section 4.8 Contracts. Except for (i) this Agreement, (ii) as of the Closing Date, any Ancillary Agreement, (iii) any Project Contract listed in Schedules 4.8, 4.11 and 4.12, and (iv) provisions of terminated Project Contracts that expressly survive their termination but are not the subject of any current application, to the Knowledge of Seller, Seller is not bound by or subject to, and none of the Project, the Business or the Purchased Assets is bound by or subject to, any Contract.
Section 4.9 Purchased Project Contracts.
Section 4.10 Conveyance of Title. Except for the Purchased Project Contracts listed under the caption "Software Licenses" on Schedule 2.1(e), (a) Seller has good and marketable title to each item of property included in the Purchased Assets, free and clear of all Encumbrances, except Permitted Encumbrances and (b) Seller will convey to Purchaser at the Closing good and marketable title to each item of property included in the Purchased Assets, free and clear of all Encumbrances, except Permitted Encumbrances.
Section 4.11 Real Property. Schedule 4.11 sets forth a description of the Owned Real Property. Seller has good and marketable fee simple title in all of the Owned Real Property (except in the case of a servitude or easement, in which case Seller shall convey good and marketable title in its rights as grantee and owner of the dominant estate thereunder), free and clear of all Encumbrances, except Permitted Encumbrances. Seller will convey to Purchaser at Closing, good and marketable fee simple title in all of the Owned Real Property (except in the case of a servitude or easement, in which case Seller shall convey good and marketable title in its rights as grantee and owner of the dominant estate thereunder), free and clear of all Encumbrances, except Permitted Encumbrances. Except as set forth in Schedule 4.11, there are no proceedings pending for the reduction or any contemplated increase in, the assessed valuation of the Owned Real and Personal Property.
Section 4.13 Condition of Purchased Assets; All Necessary Purchased Assets.
(a) To Seller's Knowledge Schedule 4.16 sets forth all Environmental Permits applicable to the Project or the Project Site, as well as any pending applications for modification, renewal, issuance or extension of any such Environmental Permits. Assuming that Purchaser meets the requirements to receive such Environmental Permits, to Seller's Knowledge, there are no impediments to the prompt renewal, transfer or extension of any such Environmental Permits as currently issued in final or draft form with an associated cost not in excess of standard modification, renewal or extension fees. To Seller's Knowledge, Seller ha s not generated, transported, released, used, stored, treated, disposed of, handled or managed any Hazardous Substance relating to the Project, except in compliance with all Environmental Laws. Except as set forth in Schedule 4.16, to Seller's Knowledge (i) the Project and the Project Site are in compliance in all material respects with Environmental Laws and Environmental Permits; and (ii) the Project and the Project Site are not the subject of any administrative, regulatory or judicial action, suit, investigation, proceeding, decree or claim relating to any Environmental Law or Environmental Permit. Except as set forth in Schedule 4.16, Seller does not presently own, operate, lease or use any above-ground storage tanks, underground storage tanks or other process tanks relating to the Project or at the Project Site. To Seller's Knowledge, no Environmental Condit ion currently exists at the Project or at the Project Site.
(b) Except as set forth in Schedule 4.16, Seller previously has not sought or obtained, nor to Seller's Knowledge has there been or is there currently environmental-insurance coverage for the Project or the Project Site.
(c) Except as set forth in Schedule 4.16, Seller has obtained or has a right to (or, prior to the Closing Date, will have obtained or have a right to) all Emission Allowances required by Environmental Laws for the current and anticipated future use of the Project or the Project Site during each year until the year in which the Closing occurs, and each of such Emission Allowances are, or are expected to be, in full force and effect, have been allocated or reserved for the Project or the Project Site and are not otherwise subject to sale, loss or diminution.
Section 4.17 Tax Matters.Section 4.19 Project Employee Benefit Plans. Seller has not at any time sponsored, maintained or contributed to (i) an employee pension benefit plan (as defined in ERISA Section 3(2) which was (or is) subject to Title IV of ERISA or (ii) a multiemployer pension plan (as defined in ERISA Section 4001(a)(3)).
Section 4.20 Regulatory Status. Seller was determined by FERC to be an exempt wholesale generator within the meaning of Section 32 of the Public Utility Holding Company Act of 1935 (an "EWG") by order dated December 23, 2003 in Docket No. EG04-16-000. To Seller's Knowledge there has been no challenge to such EWG status. Section 4.22 Warranties. Schedule 2.1(h) identifies (a) to Seller's Knowledge, all of the warranties made or given by any Person in connection with or with respect to any of the Purchased Assets, including any warranties against defects in materials and/or workmanship, any extended warranties given in connection with any repaired or replaced work and any warranties that any Person may have assigned to Seller, (b) the Person who made or gave each such warranty, (c) if any such warranty was made or given to any Person other than Seller, the Person to whom such warranty was made or given, (d) the Purchased Assets to which each such warranty relates and (e) the duration of each such warranty. Seller holds and has the right to enforce all of the warranties identified in Schedule 2.1(h). Seller has furnished to Purchaser true, correct and complete copies of, all of the warranties identified in Schedule 2.1(h) and any agr eement or instrument assigning or transferring any of such warranties.Section 4.23 Financial Statements; Undisclosed Liabilities.
Section 4.28 No Third Party Options. There are no Contracts, options, commitments or rights with, of or to any Person to acquire any assets, properties or rights of Seller or any interest in such assets, properties or rights.
Section 4.29 Insurance Coverage. Seller has furnished to Purchaser a summary of all insurance policies and fidelity bonds covering the Business or any employee or Independent Contractor of Seller. There are no pending claims by Seller under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds.ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller, as of the Effective Date and as of the Closing Date, as follows:
Section 5.1 Organization and Existence. Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the State of Mississippi, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Section 5.3 No Violation. Subject to Purchaser obtaining Purchaser's Required Regulatory Approvals and Purchaser's Required Consents, and except for compliance with the requirements of the HSR Act, neither the execution and delivery by Purchaser of this Agreement or any of the Ancillary Agreements to which it is or becomes a party, nor Purchaser's compliance with any provision hereof or thereof, nor Purchaser's consummation of the transactions contemplated hereby or thereby will:ARTICLE 6
Section 6.1 Efforts to Close. Subject to the terms and conditions herein, each of the Parties hereto shall use its Commercially Reasonable Efforts to consummate and make effective, as soon as reasonably practicable, the Purchaser Transactions, including the satisfaction of all conditions thereto set forth herein. Such actions shall include, in the case of Seller, (a) exercising its Commercially Reasonable Efforts to obtain (i) each of the Real Estate Curative Documents (as defined in Section 8.17(h)) and (ii) each of the consents, waivers, authorizations and approvals of any Governmental Authority or other Person which is reasonably necessary to effectuate the Transactions or which is required to transfer, convey and assign to Purchaser at the Closing any and all rights of Seller, including contractual rights, necessary to operate the Purchased Assets, including Seller's Required Regulatory Approvals, Seller's Required Consents and the Title Policy and effecting all other necessary notifications, registrations and filings, including, without limitation, filings under applicable Laws, including the HSR Act, and all other necessary filings with any Governmental Authority having jurisdiction over Seller or the Project and (b) executing the Termination of Pre-Closing Interconnection Letter promptly after the execution of this Agreement and sending the executed Letter to Purchaser. Such actions shall include, in the case of Purchaser, exercising its Commercially Reasonable Efforts to (a) obtain each of the consents, waivers, authorizations and approvals of any Governmental Authority or other Person which is reasonably necessary to effectuate the Purchaser Transactions, including Purchaser's Required Regulatory Approvals, Purchaser's Additional Regulatory Approvals and Purchaser's Required Consents, and effecting all other necessary notifications, registrations and filings, including, without limitation, filings under applicable Laws, including the HSR Act, and all other necessary filings with any Governmental Authority having jurisdiction over Purchaser or any of the Participating Entergy Operating Companies and (b) within a reasonable period of time after its receipt of the Termination of Pre-Closing Interconnection Letter from Seller, make all necessary filings with the applicable Governmental Authority to effect the termination of the agreement described therein as of the Closing Date. Section 6.2 Expenses. Whether or not the Transactions are consummated, except as otherwise provided in the Adjustment Sections or any other provision of this Agreement, all costs and expenses incurred in connection with this Agreement and the Purchaser Transactions shall be paid by the Party incurring such expenses. Notwithstanding the foregoing, with respect to the Purchaser Transactions (i) costs associated with preliminary title reports or commitments and the Title Policy and any endorsements required by Purchaser shall be borne jointly; (ii) documentary transfer fees, if any, will be borne in accordance with customary practices in Mississippi; (iii) recording costs and charges respecting real property comprising part of the Purchased Assets will be borne by Purchaser, except that Seller shall bear the cost of releasing any Encumbrances (other than Permitted Encumbrances) on the Purchased Assets, such as releasing any mechanic's or materia lmen's liens; (iv) except as otherwise specifically set forth in Section 6.6, all fees, charges and costs of economists and other experts, if any, jointly retained by Purchaser and Seller in connection with submissions made to any Governmental Authority and advice in connection therewith respecting approval of the Purchaser Transactions will be borne jointly; and (v) the filing fee payable in connection the notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the Purchaser Transactions shall be borne by Purchaser. All such charges and expenses shall be promptly settled between the Parties at the Closing or upon termination or expiration of further proceedings under this Agreement, or with respect to such charges and expenses not determined as of such time, as soon thereafter as is reasonably practicable. Section 6.3 Notice of Certain Events.provided, however, that nothing in this Section 6.4 shall (i) obligate Seller to make expenditures other than in the ordinary course of business consistent with past practices, (ii) preclude Seller from paying, prepaying or otherwise satisfying any liability which, if outstanding as of the Closing Date, would be an Assumed Liability or an Excluded Liability, (iii) preclude Seller from incurring any liabilities or obligations to any third party in connection with obtaining such Party's consent to any transaction contemplated by this Agreement or the Ancillary Agreements provided such liabilities and obligations incurred under this clause (iii) shall be Excluded Liabilities or (iv) preclude Seller from instituting, participating in or completing any program designed to promote compliance or comply with applicable Laws or Good Utility Practices with respect to the Project or Purchased Assets or (v) obligate Seller to acquiesce in any reduction in the P urchase Price.
Section 6.5 Regulatory Approvals.
Section 6.8 Risk of Loss.
Section 6.12 Project Employee Matters.
Section 6.13 Emission Allowances Adjustment. Notwithstanding anything to the contrary herein, Purchaser and Seller shall use Commercially Reasonable Efforts, including executing any required forms or providing appropriate notices to Governmental Authorities, in a timely fashion, to ensure that Purchaser will obtain all, or the rights to all, Emission Allowances that are to be transferred to it pursuant to Section 2.1(k) hereof, including the right to receive such Emission Allowances that are to be allocated or issued by a Governmental Authority in the future. Purchaser and Seller further acknowledge and agree that such actions may be required before, on or after the Closing Date.
Section 6.14 Additional Covenants of Seller. Seller hereby agrees with and covenants to Purchaser that Seller shall cooperate with Purchaser in assessing the Purchased Assets and their operating characteristics in the interest of facilitating an orderly transition of the management of the Purchased Assets on the Closing Date.
Section 6.15 No Solicitation. From the date of the Letter of Intent, Seller has not and will not directly or indirectly (a) solicit, initiate, seek, respond to or take any other action to encourage inquiry or submission or proposals of offers, or accept any offers, or enter into a confidentiality agreement, letter of intent or purchase agreement or other similar agreement with any Person other than Purchaser (or Transmission Purchaser, as contemplated by the Transmission Purchase Agreements), with respect to the acquisition of some or all of the Project, including the Purchased Assets and the Transmission Assets, or a merger, consolidation, business combination, sale of all or any material portion of the securities of Seller or any similar extraordinary transaction with respect to Seller (an "Acquisition Proposal") or (b) participate in any discussions or negotiations regarding, or furnish to any Person other than Purchaser (or Transmis sion Purchaser, as contemplated by the Transmission Purchase Agreements) any information with respect to, or otherwise cooperate in any way with or assist, facilitate or encourage any Acquisition Proposal by any Person other than Purchaser (or Transmission Purchaser, as contemplated by the Transmission Purchase Agreements).Section 6.16 Environmental Matters.
(a) As set forth in Section 6.11(b) the initial Environmental Assessment obtained by Purchaser reflects that neither the Project nor the Project Site was, at the time of the Assessment, subject to any Environmental Condition or any violation of Environmental Law. If in its discretion Purchaser elects to conduct a final Environmental Assessment, the same shall be completed not later than sixty (60) days in advance of the Closing Date. If the final Environmental Assessment discloses that the Project or the Project Site is subject to an Environmental Condition, then Purchaser shall notify Seller and Transmission Assets Purchaser promptly in writing not later than forty-five (45) days prior to the Closing Date identifying any such Environmental Condition and furnishing a copy of said final Environmental Assessment. If, before the Closing, an Environmental Condition is discovered in a manner other than through the final Envir onmental Assessment, the discovering party shall notify the other Party and the Transmission Assets Purchaser promptly in writing of such fact. Upon notification of such Environmental Condition through the final Environmental Assessment or otherwise, the following steps shall occur:
(b) With respect to any such Remediation, Seller shall comply with the requirements of the relevant Governmental Authorities to address any such Environmental Condition so identified with the purpose of obtaining a "no further action" determination or a similar finding by such Governmental Authorities. Seller shall identify itself as the sole party responsible for compliance with the terms and conditions of the Remediation. For the purposes of subparagraphs (a)(ii) and (iii) above and paragraph (d) below, completion of the Remediation shall not have occurred until Seller has received such determination or finding.
(c) Seller will provide Purchaser and, if the Transmission Assets are affected by the applicable Environmental Condition, Transmission Assets Purchaser, with a copy of the draft Remediation Plan concerning any remediation to be conducted pursuant to this Section 6.16. Seller will obtain Purchaser's approval and, if the Transmission Assets are affected by the applicable Environmental Condition, Transmission Assets Purchaser's approval, of the Remediation Plan, not to be unreasonably withheld or delayed, prior to beginning remediation activities: (i) if the plan will result in a material modification of the operation of the Purchased Assets or the Transmission Assets or a material modification of the Purchased Assets or the Transmission Assets; (ii) if new and different monitoring of the Purchased Assets or the Transmission Assets is required by the Governmental Authorities; or (iii) if issu ance of an Environmental Permit not reflected on the Schedules to this Agreement or to the Transmission Assets Purchase and Sale Agreement is required. Otherwise, Seller shall provide Purchaser and, if the Transmission Assets are affected by the applicable Environmental Condition, Transmission Assets Purchaser, with an opportunity to review and comment on the Remediation Plan.
(d) In the event Seller is responsible for Remediation in accordance with any of the foregoing, then before commencing such Remediation the following shall be determined: (i) if such Remediation could reasonably be expected to be fully completed on or before the earlier of the Expiration Date or twelve (12) months after the receipt of the Estimated Cost (for the purposes of this Section 6.16, the earlier of such dates being the "Limit Date"), then such Remediation shall be completed on or before the Limit Date and the Closing shall be delayed for such reasonable time as is necessary to accomplish the same, but in no event later than the Limit Date, or (ii) if such Remediation could not reasonably be expected to be fully completed on or before the Limit Date, then at Purchaser's election (A) Purchaser, Transmission Assets Purchaser and Seller shall agree to extend the Limit Date to the extent necessary to complete such Remediation (for the purposes of this Section 6.16, the "Extended Limit Date"), including to the extent necessary by extension of the Expiration Date and the "Expiration Date" and the "Limit Date" under the Transmission Assets Purchase and Sale Agreement (and with respect to Purchaser and Seller, in the event that the Expiration Date is extended, the extension of the expiration date under the Tolling Agreement), in which case the agreed upon extensions shall become effective and such repairs shall be completed on or before the Extended Limit Date and the Closing shall be delayed for such reasonable time as is necessary to accomplish the same, but in no event later than the Extended Limit Date, or (B) subject to the approval of Transmission Assets Purchaser if the Transmission Assets are affected by the applicable Environmental Condition, Purchaser and Transmission Assets Purchaser shall, to the extent the Purchased Assets or Transmission Assets, respectively, are affected severally, accept responsibility for such Remediation, the Purchase Price and the "Purchase Price" under the Transmission Assets Purchase and Sale Agreement, respectively, shall be proportionately reduced by the Estimated Cost of such Remediation to the respective affected assets, Purchaser and Transmission Assets Purchaser shall waive conditions precedent regarding the completion of such Remediation by Seller (and paragraphs (b) and (c) above) and, if Purchaser so requests, Seller shall allow Purchaser and Transmission Assets Purchaser to begin such Remediation prior to Closing subject to appropriate indemnification. In the event that clause (B) above applies and the actual cost of such Remediation is less than or is more than the Estimated Cost, Seller and Purchaser agree that neither party shall have the right to make a claim against the other party for such differential, it being understood that a claim for such differential shall not constitute a Purchaser Claim or a Seller Claim hereunder
(e) In the event that the conditions to Closing contained in Section 8.4(a) and (b) have been fulfilled or waived, Purchaser shall receive a day for day extension for the dates on which there would otherwise be an increase in the Initial Purchase Price equal to the number of days from the date of the notice of the Environmental Condition by Purchaser until the date the Remediation is complete.
ARTICLE 7
Section 7.1 Indemnification by Seller.
Section 7.2 Indemnification by Purchaser.
ARTICLE 8
PURCHASER'S CONDITIONS TO CLOSING
The obligation of Purchaser to consummate the Transactions hereunder shall be subject to fulfillment at or prior to the Closing of the following conditions, except to the extent Purchaser waives such fulfillment in writing:
Section 8.1 Compliance with Provisions. Seller shall have performed or complied in all material respects with all covenants, obligations and agreements contained in this Agreement and the Ancillary Agreements on its part required to be performed or complied with at or prior to the Closing. Section 8.3 No Restraint. There shall be no:Section 8.9 Material Adverse Effect. Since the Effective Date, no Material Adverse Effect shall have occurred.
Section 8.10 Legal Opinion. Purchaser shall have received an opinion or opinions from Greenberg Traurig, LLP, dated the Closing Date covering matters relating to entity existence and qualification to do business, authority, no violation or conflicts with organizational documents, contracts or applicable laws and no required consents or approvals, subject to the conditions and limitations therein and to other customary conditions and limitations.Section 8.11 No Termination. Neither Party shall have exercised any termination right such Party is entitled to exercise pursuant to Section 10.1.
Section 8.12 No Unremediated Environmental Conditions. If Purchaser elects, the Environmental Consultant shall have delivered to Purchaser a reasonably acceptable and complete final Environmental Assessment, and Purchaser shall be satisfied, in its reasonable discretion based upon investigation conducted pursuant to Section 6.11(b) and otherwise, that there is no Environmental Condition at the Project Site requiring any Remediation, or if there is, Seller shall have completed the Remediation in accordance with Section 6.16. Section 8.13 Warranties. The Warranties listed in Schedule 2.1(h) shall be included in the Purchased Assets to be assigned to Purchaser at the Closing and any consent, waiver or approval required to be obtained from the grantor of any of such Warranties in connection with the consummation of the Transactions shall have been obtained. Section 8.15 No Unrepaired Casualty. If all or any portion of the Purchased Assets shall have been damaged or destroyed (whether by fire, theft, vandalism or other casualty) in whole or in part, Seller shall have completed the full repair or restoration of the Damaged Portion in accordance with Section 6.8, including, if required pursuant to Section 6.8, Seller shall have obtained Purchaser's written consent to Seller's final acceptance of such repair and restoration. Section 8.17 Receipt of Other Documents. Purchaser shall have received the following:Section 8.21 Transmission Assets. All conditions in Article 8 of the Transmission Assets Purchase and Sale Agreement to the consummation of the "Closing" under, and as such term is defined in, the Transmission Assets Purchase and Sale Agreement shall have been fulfilled or waived in a manner acceptable to Purchaser, and Seller and Transmission Assets Purchaser shall be ready to and shall effect such Closing contemporaneously with the Closing under this Agreement.
ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
The obligation of Seller to consummate the Transactions hereunder shall be subject to fulfillment at or prior to the Closing of the following conditions, except to the extent Seller waives such fulfillment in writing:
Section 9.2 HSR Act. The waiting period under the HSR Act applicable to the consummation of the sale of the Purchased Assets contemplated hereby shall have expired or been terminated.Section 9.3 No Restraint. There shall be no:
ARTICLE 10
Section 10.1 Rights to Terminate. To the extent set forth in Section 10.2, this Agreement may be terminated (the date of such termination being the "Termination Date"):Section 10.3 Liquidated Damages for Costs and Expenses. If Purchaser terminates this Agreement pursuant to Section 10.1(c) or Section 10.1(g), or if this Agreement is terminated by either Party pursuant to Section 10.1(e) (other than with respect to (i) any unsatisfied or unwaived condition in Article 8 the satisfaction of which was required to have been achieved by Purchaser under the terms of this Agreement, (ii) any unsatisfied or unwaived condition from the Transmission Purchase Agreements or the Transmission Arrangement Agreements incorporated in Section 8.21 the satisfaction of which was required to have been achieved by Transmission Purchaser or Purchaser under the terms thereof, (iii) satisfaction of the conditions set forth in Section 8.17(h) or Section 8.17(i)), or if this Agreement is terminated by either Party in accordance with Section 6.8 or Section 6.16 but only to the extent described in accordance with Section 6.8 or Section 6.16; then the Liquidated Damages for Costs and Expenses shall become immediately due and payable by Seller and Seller shall pay the Liquidated Damages for Costs and Expenses to Purchaser within ten (10) calendar days of Seller's receipt of notice of such termination (or, if later, the date on which such notice is effective), by wire transfer of immediately available funds to an account designated in writing by Purchaser. The payment of the Liquidated Damages for Costs and Expenses constitutes liquidated damages to reimburse Purchaser for the internal management, technical, legal and general and administrative costs and expenses of Purchaser with respect to, or that would not otherwise have been incurred absent, the negotiation, execution, delivery and performance and termination under this Agreement through the date of termination (the "Purchaser General Costs and Expenses"). With respect to the Liquidated Damages for Costs and Expen ses, the Parties acknowledge and agree that (i) the damages of Purchaser associated with the Purchaser General Costs and Expenses are likely to be substantial and unreasonably difficult to quantify, (ii) the Liquidated Damages for Costs and Expenses are a reasonable estimate of Purchaser's actual damages for the Purchaser General Costs and Expenses, (iii) payment of the Liquidated Damages for Costs and Expenses are appropriate as liquidated damages and are not a penalty, and (iv) payment of the Liquidated Damages for Costs and Expenses shall be deemed Purchaser's sole and exclusive remedy of Purchaser under this Agreement for damages associated with Purchaser General Costs and Expenses, but not for any other damages of Purchaser such as direct damages for any difference between the value of the Purchased Assets and the Purchase Price that may be payable to Purchaser in accordance with the provisions of Section 7.1.
ARTICLE 11
Section 11.1 Entire Document; Amendments. This Agreement (including the Exhibits and Schedules to this Agreement), the Ancillary Agreements to which they are a party, and the Confidentiality Agreement contain the entire agreement between the Parties with respect to the Purchaser Transactions, and supersede all negotiations, representations, warranties, commitments, offers, contracts and writings (except for, the Confidentiality Agreement and any such Ancillary Agreements executed prior to the date hereof) prior to the execution date of this Agreement, written or oral. No modification or amendment of any provision of this Agreement shall be effective unless made in writing and duly signed by the Parties referring specifically to this Agreement. Section 11.2 Schedules. Seller may from time to time notify Purchaser of any changes or additions to any of Seller's Schedules to this Agreement and Purchaser may from time to time notify Seller of any changes or additions to any of Purchaser's Schedules to this Agreement by the delivery of amendments or supplements thereto. No such notification, change, addition, amendment or supplement shall become effective or cure any breach of any representation or warranty, covenant or other provision of this Agreement unless and until the same has been approved by the other Party in its sole discretion, except with respect to Schedules 2.1(c)-(j), 2.2(g), 4.8, 4.24, 4.25, and 6.12, where the other Party's approval shall not be unreasonably withheld provided that the same reflects an updated condition occurring as a result of the ordinary course of business in compliance with the terms of this Agreement that could not reasonably be expected to have a material adverse effect upon such Party or with respect to Seller's Schedules a Material Adverse Effect. Section 11.4 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be valid, binding and enforceable under applicable Law, but if any provision of this Agreement is held to be invalid, void (or voidable) or unenforceable under applicable Law, such provision shall be ineffective only to the extent held to be invalid, void (or voidable) or unenforceable, without affecting the remainder of such provision or the remaining provisions of this Agreement. To the extent permitted by Law, the Parties waive any provision of Law that renders any provision hereof prohibited or unenforceable in any respect. Section 11.6 Captions. The captions of the various Articles, Sections, Exhibits and Schedules of this Agreement have been inserted only for convenience of reference and do not modify, explain, enlarge or restrict any of the provisions of this Agreement. Section 11.7 Governing Law. The validity, interpretation and effect of this Agreement are governed by and will be construed in accordance with the laws of the State of New York without regard to conflicts of law doctrines (other than Section 5-1401 of the New York General Obligations Law), except to the extent that (i) certain matters are preempted by federal law or are governed by the law of the respective jurisdiction of incorporation or formation, as applicable of the Parties or (ii) certain matters with respect to real property are governed by the law of the State of Mississippi. Section 11.8 Dispute Resolution.If to Seller to:
Central Mississippi Generating Company, LLC
c/o R.W. Beck Plant Management Ltd.
The Corporate Center, East Wing
550 Cochituate Road
Framingham, MA 01701
Attention: David L. Patton
Fax: (508) 935-1888
with a copy to:
Greenberg Traurig, LLP
200 Park Avenue
New York, NY 10166
Attention: Nathan Limpert
Fax: (212) 801-6400
and
If to Purchaser to:
Entergy Mississippi, Inc.
City Centre
200 South Lamar
Suite 500
Jackson, MS 39201
Attention: Carolyn Shanks
with copies to:
Entergy Services, Inc.
Parkwood 2 Building - Suite 300
10055 Grogan's Mill Road
The Woodlands, TX 77380
Attention: Bill Mohl
Fax: 281-297-3929Entergy Services, Inc.
Parkwood 2 Building - Suite 300
10055 Grogan's Mill Road
The Woodlands, TX 77380
Attention: Carol St. Clair
Fax: 281-297-3945
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, TX 77002
Attention: Robert Stephens
Fax: 713-222-3202
or to such other Person at such other address as a Party shall designate by like notice to the other Party.
Any Party may from time to time change its address for the purpose of notices to that Party by a similar notice specifying a new address, but no such change is effective until it is actually received by the Party sought to be charged with its contents.
Section 11.11 No Joint Venture. Nothing contained in this Agreement creates or is intended to create an association, trust, partnership or joint venture or impose a trust or partnership duty, obligation or liability on or with regard to any Party. Section 11.12 Construction of Agreement. This Agreement and any documents or instruments delivered pursuant hereto shall be construed without regard to the identity of the Person who drafted the various provisions of the same. Each and every provision of this Agreement and such other documents and instruments shall be construed as though the Parties participated equally in the drafting of the same. Consequently, the Parties acknowledge and agree that any rule of construction that a document is to be construed against the drafting party shall not be applicable either to this Agreement or such other documents and instruments. Section 11.13 Waiver of Compliance. To the extent permitted by applicable Law, any failure to comply with any obligation, covenant, agreement or condition set forth herein or in any Ancillary Agreement, or any breach of any representation or warranty set forth herein or in any Ancillary Agreement, may be waived by the Party entitled to the benefit of such obligation, covenant, agreement, condition, representation or warranty only by a written instrument signed by such Party that expressly waives such failure or breach, but any such waiver shall not operate as a waiver of, or estoppel with respect to, any prior or subsequent failure to comply therewith or breach thereof. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, or the waiver of the fulfillment of any such condition, will not affect the right to indemnification or other remedy based on such representation, warranty, covenant or obligation. The failure of a Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. Section 11.14 Survival; Right to Indemnification Not Affected by Knowledge.[signature page follows]
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above.
CENTRAL MISSISSIPPI GENERATING COMPANY, LLC By: R.W. Beck Plant Management, Ltd., its By
|
|
ENTERGY MISSISSIPPI, INC. By
|
Exhibit 31(a)
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 report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ J. Wayne Leonard Chief Executive Officer of Entergy Corporation |
Date: May 4, 2005
Exhibit 31(b)
CERTIFICATIONS
I, Leo P. Denault, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Leo P. Denault Executive Vice President and Chief Financial Officer of Entergy Corporation |
Date: May 4, 2005
Exhibit 31(c)
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 report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Hugh T. McDonald Chairman, President, and Chief Executive Officer of Entergy Arkansas, Inc. |
Date: May 4, 2005
Exhibit 31(d)
CERTIFICATIONS
I, Joseph F. Domino, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Joseph F. Domino Chairman, President and Chief Executive Officer-Texas of Entergy Gulf States, Inc. |
Date: May 4, 2005
Exhibit 31(e)
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 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 reports; |
3. |
Based on my knowledge, the financial statements, and other financial information included in these 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which these reports are being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in these reports our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by these reports based on such evaluation; and |
|
d) Disclosed in these reports any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and |
|
5. |
The registrants' other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. |
/s/ 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: May 4, 2005
Exhibit 31(f)
CERTIFICATIONS
I, Carolyn C. Shanks, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Carolyn C. Shanks Chairman, President, and Chief Executive Officer of Entergy Mississippi, Inc. |
Date: May 4, 2005
Exhibit 31(g)
CERTIFICATIONS
I, Daniel F. Packer, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Daniel F. Packer Chairman, President, and Chief Executive Officer of Entergy New Orleans, Inc. |
Date: May 4, 2005
Exhibit 31(h)
CERTIFICATIONS
I, Gary J. Taylor, certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Gary J. Taylor Chairman, President, and Chief Executive Officer of System Energy Resources, Inc. |
Date: May 4, 2005
Exhibit 31(i)
CERTIFICATIONS
I, Jay A. Lewis, 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 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 reports; |
3. |
Based on my knowledge, the financial statements, and other financial information included in these 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which these reports are being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in these reports our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by these reports based on such evaluation; and |
|
d) Disclosed in these reports any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and |
|
5. |
The registrants' other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of the registrants' board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. |
/s/ Jay A. Lewis Vice President and Chief Financial Officer of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. |
Date: May 4, 2005
Exhibit 31(j)
CERTIFICATIONS
I, Theodore H. Bunting, Jr., certify that: |
|
1. |
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Theodore H. Bunting, Jr. Vice President and Chief Financial Officer of System Energy Resources, Inc. |
Date: May 4, 2005
Exhibit 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, J. Wayne Leonard, Chief Executive Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ J. Wayne Leonard Chief Executive Officer of Entergy Corporation |
Date: May 4, 2005
Exhibit 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Leo P. Denault, Chief Financial Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Leo P. Denault Executive Vice President and Chief Financial Officer of Entergy Corporation |
Date: May 4, 2005
Exhibit 32(c)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Hugh T. McDonald, Chairman, President and Chief Executive Officer of Entergy Arkansas, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Hugh T. McDonald |
Date: May 4, 2005
Exhibit 32(d)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Joseph F. Domino, Chairman, President and Chief Executive Officer-Texas of Entergy Gulf States, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Joseph F. Domino |
Date: May 4, 2005
Exhibit 32(e)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, E. Renae Conley, President and Chief Executive Officer-Louisiana of Entergy Gulf States, Inc. and Chairman, President and Chief Executive Officer of Entergy Louisiana, Inc. (the "Companies"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of each of the Companies for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in each Report fairly presents, in all material respects, the financial condition and results of operations of each respective Company as of the dates and for the periods presented in each Report. |
/s/ E. Renae Conley |
Date: May 4, 2005
Exhibit 32(f)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Carolyn C. Shanks, Chairman, President and Chief Executive Officer of Entergy Mississippi, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Carolyn C. Shanks |
Date: May 4, 2005
Exhibit 32(g)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I,
Daniel F. Packer, Chairman, President and Chief Executive Officer of Entergy New Orleans, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Daniel F. Packer |
Date: May 4, 2005
Exhibit 32(h)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary J. Taylor, Chairman, President and Chief Executive Officer of System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Gary J. Taylor |
Date: May 4, 2005
Exhibit 32(i)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Jay A. Lewis, Vice President and Chief Financial Officer of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. (the "Companies"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of each of the Companies for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in each Report fairly presents, in all material respects, the financial condition and results of operations of each respective Company as of the dates and for the periods presented in each Report. |
/s/ Jay A. Lewis |
Date: May 4, 2005
Exhibit 32(j)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Theodore H. Bunting, Jr., Chief Financial Officer of System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report. |
/s/ Theodore H. Bunting, Jr. |
Date: May 4, 2005
Exhibit 99(a) | ||||||
Entergy Arkansas, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest Charges | $101,600 | $109,523 | $103,210 | $91,221 | $84,430 | $86,007 |
Interest applicable to rentals | 16,449 | 14,563 | 12,762 | 15,425 | 13,171 | 11,297 |
Total fixed charges, as defined | 118,049 | 124,086 | 115,972 | 106,646 | 97,601 | 97,304 |
Preferred dividends, as defined (a) | 13,479 | 12,348 | 11,869 | 14,274 | 12,646 | 12,378 |
Combined fixed charges and preferred dividends, as defined | $131,528 | $136,434 | $127,841 | $120,920 | $110,247 | $109,682 |
Earnings as defined: | ||||||
Net Income | $137,047 | $178,185 | $135,643 | $126,009 | $142,210 | $154,865 |
Add: | ||||||
Provision for income taxes: | ||||||
Total | 100,512 | 105,933 | 71,404 | 105,296 | 89,064 | 93,277 |
Fixed charges as above | 118,049 | 124,086 | 115,972 | 106,646 | 97,601 | 97,304 |
Total earnings, as defined | $355,608 | $408,204 | $323,019 | $337,951 | $328,875 | $345,446 |
Ratio of earnings to fixed charges, as defined | 3.01 | 3.29 | 2.79 | 3.17 | 3.37 | 3.55 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.70 | 2.99 | 2.53 | 2.79 | 2.98 | 3.15 |
- ------------------------ | ||||||
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. | ||||||
Exhibit 99(b) | ||||||
Entergy Gulf States, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest charges | $158,949 | $174,368 | $144,840 | $157,343 | $133,598 | $126,606 |
Interest applicable to rentals | 18,307 | 18,520 | 16,483 | 16,694 | 13,707 | 12,970 |
Total fixed charges, as defined | 177,256 | 192,888 | 161,323 | 174,037 | 147,305 | 139,576 |
Preferred dividends, as defined (a) | 15,742 | 13,017 | 6,190 | 6,845 | 6,991 | 6,623 |
Combined fixed charges and preferred dividends, as defined | $192,998 | $205,905 | $167,513 | $180,882 | $154,296 | $146,199 |
Earnings as defined: | ||||||
Income (loss) from continuing operations before extraordinary items | ||||||
andthe cumulative effect of accounting changes | $180,343 | $179,444 | $174,078 | $63,895 | $192,264 | $173,885 |
Add: | ||||||
Income Taxes | 103,603 | 82,038 | 65,997 | 24,249 | 108,288 | 94,414 |
Fixed charges as above | 177,256 | 192,888 | 161,323 | 174,037 | 147,305 | 139,576 |
Total earnings, as defined (b) | $461,202 | $454,370 | $401,398 | $262,181 | $447,857 | $407,875 |
Ratio of earnings to fixed charges, as defined | 2.60 | 2.36 | 2.49 | 1.51 | 3.04 | 2.92 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.39 | 2.21 | 2.40 | 1.45 | 2.90 | 2.79 |
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. | ||||||
Exhibit 99(c) | ||||||
Entergy Louisiana, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest | $111,743 | $116,076 | $100,667 | $76,756 | $74,141 | $77,556 |
Interest applicable to rentals | 6,458 | 7,951 | 6,496 | 6,359 | 5,595 | 5,019 |
Total fixed charges, as defined | 118,201 | 124,027 | $107,163 | $83,115 | $79,736 | $82,575 |
Preferred dividends, as defined (a) | 16,102 | 12,374 | 10,647 | $11,189 | $10,899 | $10,696 |
Combined fixed charges and preferred dividends, as defined | $134,303 | $136,401 | $117,810 | $94,304 | $90,635 | $93,271 |
Earnings as defined: | ||||||
Net Income | $162,679 | $132,550 | $144,709 | $146,154 | $127,495 | $108,055 |
Add: | ||||||
Provision for income taxes: | ||||||
Total Taxes | 112,645 | 86,287 | 84,765 | 97,408 | 79,475 | 67,732 |
Fixed charges as above | 118,201 | 124,027 | 107,163 | 83,115 | 79,736 | 82,575 |
Total earnings, as defined | $393,525 | $342,864 | $336,637 | $326,677 | $286,706 | $258,362 |
Ratio of earnings to fixed charges, as defined | 3.33 | 2.76 | 3.14 | 3.93 | 3.60 | 3.13 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.93 | 2.51 | 2.86 | 3.46 | 3.16 | 2.77 |
- ------------------------ | ||||||
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. | ||||||
Exhibit 99(d) | ||||||
Entergy Mississippi, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends | ||||||
December 31, | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest | $44,877 | $50,991 | $45,464 | $47,464 | $44,637 | $43,759 |
Interest applicable to rentals | 1,596 | 1,849 | 1,916 | 1,880 | 1,162 | 1,308 |
Total fixed charges, as defined | 46,473 | 52,840 | $47,380 | $49,344 | $45,799 | $45,067 |
Preferred dividends, as defined (a) | 5,347 | 4,674 | 4,490 | 5,099 | 5,067 | 5,010 |
Combined fixed charges and preferred dividends, as defined | $51,820 | $57,514 | $51,870 | $54,443 | $50,866 | $50,077 |
Earnings as defined: | ||||||
Net Income | $38,973 | $39,620 | $52,408 | $67,058 | $73,497 | $72,082 |
Add: | ||||||
Provision for income taxes: | ||||||
Total income taxes | 22,868 | 20,464 | 17,846 | 34,431 | 37,040 | 35,864 |
Fixed charges as above | 46,473 | 52,840 | 47,380 | 49,344 | 45,799 | 45,067 |
Total earnings, as defined | $108,314 | $112,924 | $117,634 | $150,833 | $156,336 | $153,013 |
Ratio of earnings to fixed charges, as defined | 2.33 | 2.14 | 2.48 | 3.06 | 3.41 | 3.40 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.09 | 1.96 | 2.27 | 2.77 | 3.07 | 3.06 |
- ------------------------ | ||||||
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend requirement by one hundred percent (100%) minus the income tax rate. | ||||||
Exhibit 99(e) | ||||||
Entergy New Orleans, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest | $15,891 | $19,661 | $27,950 | $17,786 | $16,610 | $16,198 |
Interest applicable to rentals | 1,008 | 977 | 1,043 | 910 | 644 | 713 |
Total fixed charges, as defined | 16,899 | 20,638 | 28,993 | 18,696 | 17,254 | 16,911 |
Preferred dividends, as defined (a) | 1,643 | 2,898 | 2,736 | 1,686 | 1,545 | 1,544 |
Combined fixed charges and preferred dividends, as defined | $18,542 | $23,536 | $31,729 | $20,382 | $18,799 | $18,455 |
Earnings as defined: | ||||||
Net Income | $16,518 | ($2,195) | ($230) | $7,859 | $28,072 | 26,694 |
Add: | ||||||
Provision for income taxes: | ||||||
Total | 11,597 | (4,396) | (422) | 5,875 | 16,868 | 15,985 |
Fixed charges as above | 16,899 | 20,638 | 28,993 | 18,696 | 17,254 | 16,911 |
Total earnings, as defined | $45,014 | $14,047 | $28,341 | $32,430 | $62,194 | $59,590 |
Ratio of earnings to fixed charges, as defined | 2.66 | 0.68 | 0.98 | 1.73 | 3.60 | 3.52 |
Ratio of earnings to combined fixed charges and | ||||||
preferred dividends, as defined | 2.43 | 0.60 | 0.89 | 1.59 | 3.31 | 3.23 |
- ------------------------ | ||||||
(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 December 31, 2002 were not adequate to cover combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively. |
Exhibit 99(f) | ||||||
System Energy Resources, Inc. | ||||||
Computation of Ratios of Earnings to Fixed Charges and | ||||||
Ratios of Earnings to Fixed Charges | ||||||
Twelve Months Ended | ||||||
December 31, | March 31, | |||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Fixed charges, as defined: | ||||||
Total Interest | $118,519 | $138,018 | $76,639 | $64,620 | $58,928 | $56,335 |
Interest applicable to rentals | 5,753 | 4,458 | 3,250 | 3,793 | 3,426 | 3,733 |
Total fixed charges, as defined | $124,272 | $142,476 | $79,889 | $68,413 | $62,354 | $60,068 |
Earnings as defined: | ||||||
Net Income | $93,745 | $116,355 | $103,352 | $106,003 | $105,948 | 107,516 |
Add: | ||||||
Provision for income taxes: | ||||||
Total | 81,263 | 43,761 | 76,177 | 75,845 | 78,013 | 77,330 |
Fixed charges as above | 124,272 | 142,476 | 79,889 | 68,413 | 62,354 | 60,068 |
Total earnings, as defined | $299,280 | $302,592 | $259,418 | $250,261 | $246,315 | $244,914 |
Ratio of earnings to fixed charges, as defined | 2.41 | 2.12 | 3.25 | 3.66 | 3.95 | 4.08 |