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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Q
(Mark One)
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2006
OR
TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number
Registrant, State of Incorporation, Address ofPrincipal Executive Offices, Telephone Number, andIRS Employer Identification No.
1-11299
ENTERGY CORPORATION(a Delaware corporation)639 Loyola AvenueNew Orleans, LA 70113Telephone (504) 576-400072-1229752
1-32718
ENTERGY LOUISIANA, LLC(a Texas limited liability company)446 North BoulevardBaton Rouge, LA 70802Telephone (225) 381-586875-3206126
1-10764
ENTERGY ARKANSAS, INC.(an Arkansas corporation)425 West Capitol Avenue Little Rock, Arkansas 72201Telephone (501) 377-400071-0005900
1-31508
ENTERGY MISSISSIPPI, INC.(a Mississippi corporation)308 East Pearl StreetJackson, Mississippi 39201Telephone (601) 368-500064-0205830
1-27031
ENTERGY GULF STATES, INC.(a Texas corporation)350 Pine StreetBeaumont, Texas 77701Telephone (409) 838-663174-0662730
0-5807
ENTERGY NEW ORLEANS, INC.(a Louisiana corporation)1600 Perdido Street, Building 529New Orleans, Louisiana 70112Telephone (504) 670-362072-0273040
1-8474
ENTERGY LOUISIANA HOLDINGS, INC.
1-9067
SYSTEM ENERGY RESOURCES, INC.(an Arkansas corporation)Echelon One1340 Echelon ParkwayJackson, Mississippi 39213Telephone (601) 368-500072-0752777
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
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Largeaccelerated filer
Accelerated filer
Non-accelerated filer
Entergy Corporation
Ö
Entergy Arkansas, Inc.
Entergy Gulf States, Inc.
Entergy Louisiana Holdings, Inc.
Entergy Louisiana, LLC
Entergy Mississippi, Inc.
Entergy New Orleans, Inc.
System Energy Resources, Inc.
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
Common Stock Outstanding
Outstanding at April 28, 2006
($0.01 par value)
207,940,770
Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana Holdings, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2005, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIESINDEX TO QUARTERLY REPORT ON FORM 10-QMarch 31, 2006
Page Number
Definitions
1
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Hurricane Katrina and Hurricane Rita
4
Results of Operations
5
Liquidity and Capital Resources
7
Significant Factors and Known Trends
10
Critical Accounting Estimates
14
Consolidated Statements of Income
15
Consolidated Statements of Cash Flows
16
Consolidated Balance Sheets
18
Consolidated Statements of Retained Earnings, Comprehensive Income, andPaid-In Capital
20
Selected Operating Results
21
Notes to Consolidated Financial Statements
22
30
31
33
34
Income Statements
35
Statements of Cash Flows
37
Balance Sheets
38
40
Hurricane Rita and Hurricane Katrina
41
43
44
46
47
49
50
Statements of Retained Earnings and Comprehensive Income
52
53
Entergy Louisiana Holdings, Inc. and Entergy Louisiana, LLC
54
56
58
59
Entergy Louisiana Holdings, Inc. and Subsidiaries
60
61
62
64
65
67
68
Statements of Members' Equity
70
Hurricane Katrina
71
72
74
75
76
77
78
80
81
Bankruptcy Proceedings
82
83
85
86
87
88
90
91
92
93
95
96
Notes to Respective Financial Statements
98
Part I, Item 4. Controls and Procedures
107
Part II. Other Information
Item 1. Legal Proceedings
108
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
109
Item 5. Other Information
Item 6. Exhibits
110
Signature
112
FORWARD-LOOKING INFORMATION
In this filing and from time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to the risk factors in the Form 10-K as well as others described elsewhere in this report and in subsequent securities filings) include:
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DEFINITIONS
Certain abbreviations or acronyms used in the text are defined below:
Abbreviation or Acronym
Term
AEEC
Arkansas Electric Energy Consumers
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, a Delaware corporation
Entergy-Koch
Entergy-Koch, LP, a joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc.
Entergy Louisiana
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
One thousand cubic feet of gas
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatt(s)
MWh
Megawatt-hour(s)
Nelson Unit 6
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, owned 70% by Entergy Gulf States
Net debt ratio
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation
Installed capacity owned or operated
Net revenue
Operating revenue net of fuel, fuel-related, and purchased power expenses; and other regulatory credits
Non-Utility Nuclear
Entergy's business segment that owns and operates five nuclear power plants and sells electric power produced by those plants primarily to wholesale customers
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
OASIS
Open Access Same Time Information Systems
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 1935
Public Utility Holding Company Act of 1935, as amended
PUHCA 2005
Public Utility Holding Company Act of 2005, which repealed PUHCA 1935, among other things
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 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 or planned 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 availability guarantees
Transaction under which power is supplied from a specific generation asset; if the specified generation asset is unavailable as a result of forced or planned 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
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy's share of Grand Gulf
Utility
Entergy's business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the estimated effects of deviations from normal weather
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.
In addition to its two primary, reportable, operating segments, Entergy also operates the Energy Commodity Services segment and the Competitive Retail Services business. Energy Commodity Services includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business. Entergy-Koch sold its businesses in the fourth quarter of 2004 and is no longer an operating entity. In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as part of All Other in its segment disclosures.
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. Following are updates to the discussion in the Form 10-K.
As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy is currently preparing applications to seek CDBG funding. In March 2006, Entergy New Orleans, Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials. The statements, which will be reviewed by the Louisiana Recovery Authority, include the estimated costs of Hurricanes Katrina and Rita damage, as well as for Entergy New Orleans a lost customer base component intended to help offset the need for storm-related rate increases. The statements include justification for requests for CDBG funding of $718 million by Entergy New Orleans, $472 million by Entergy Louisiana, and $164 million by Entergy Gulf States-Louisiana.
As discussed more fully in the Form 10-K, Entergy estimates that its net insurance recoveries for the losses caused by Hurricanes Katrina and Rita will be approximately $382 million. Entergy has received $15 million thus far on its insurance claim, as it continues working towards payment of its covered losses.
See State and Local Rate Regulation below for an update on activity at Entergy Mississippi directed towards recovery of its storm restoration costs.
Entergy New Orleans Bankruptcy
See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following is an update to the discussion in the Form 10-K. In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006. In addition, the bankruptcy judge had set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.
Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding. If dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors. If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group. If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.
As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans retroactive to January 1, 2005. Because Entergy owns all of the common stock of Entergy New Orleans, this change will not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' net income or loss being presented as "Equity in earnings (loss) of unconsolidated equity affiliates" rather than its results being included in each individual income statement line item, as is the case for periods prior to 2005.
Non-UtilityNuclear
Parent & Other
2005 Consolidated Net Income
$96,027
$77,966
$4,386
$178,379
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory credits)
65,472
37,190
10,253
112,915
Other operation and maintenance expenses
13,106
7,799
4,887
25,792
Taxes other than income taxes
6,807
4,819
1,096
12,722
Depreciation
(9,888)
219
(464)
(10,133)
Other income
12,754
(19,719)
(8,819)
(15,784)
Interest charges
4,895
(492)
12,819
17,222
Other expenses and discontinued operations
950
(186)
889
1,653
Income taxes
31,448
1,748
(6,608)
26,588
2006 Consolidated Net Income
$126,935
$81,530
($6,799)
$201,666
Refer to "ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS" for further information with respect to operating statistics.
Net Revenue
Amount
(In Millions)
2005 net revenue
$858.8
Base revenues/Attala cost deferral
21.9
Net wholesale revenue
13.0
Fuel recovery
11.9
Rate refund provisions
4.3
Volume/weather
(8.8)
Other
23.1
2006 net revenue
$924.2
The base revenues and Attala cost deferral variance resulted primarily from increases at Entergy Gulf States due to formula rate plan increases and the inclusion of Perryville-related revenues in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider that began in December 2005 in the Texas jurisdiction and the transition to competition rider that began in March 2006 in the Texas jurisdiction. In addition, Entergy Mississippi deferred under-recovered Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
The net wholesale revenue variance resulted from higher volume and higher margins on wholesale contracts.
The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction, partially offset by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.
The rate refund provisions variance resulted primarily from a provision recorded at Entergy Louisiana in the first quarter of 2005 as a result of a settlement with the LPSC staff.
The volume/weather variance resulted primarily from milder weather in the first quarter of 2006 compared to the first quarter of 2005. Billed usage decreased by 208 GWh in the residential sector. The decrease was partially offset by increased usage during the unbilled period.
Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to fewer refueling outages in 2006 and power uprates at certain plants completed in 2005 and 2006. Following are key performance measures for Non-Utility Nuclear for the first quarters of 2006 and 2005:
2006
2005
Net MW in operation at March 31
4,135
4,058
Average realized price per MWh
$44.39
$41.56
Generation in GWh for the quarter
8,742
8,267
Capacity factor for the quarter
97.1%
93.2%
Other Operation and Maintenance Expenses
Other operation and maintenance expenses increased from $346 million for the first quarter of 2005 to $359 million for the first quarter of 2006 primarily due to:
Other operation and maintenance expenses increased from $142 million for the first quarter of 2005 to $150 million for the first quarter of 2006 primarily due to the absence of refueling outages in the current period. As discussed in Note 1 to the consolidated financial statements in the Form 10-K, nuclear refueling outage costs are deferred during the outage and amortized over the period to the next outage.
Other Income
Other income increased from $31 million for the first quarter of 2005 to $43 million for the first quarter of 2006 primarily due to an increase in interest and dividend income due to both increased interest income recorded on the deferred fuel balance and additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K.
Other income decreased primarily due to miscellaneous income of $26 million in 2005 resulting from a reduction in the decommissioning liability for a plant in conjunction with a new decommissioning cost study. The decrease was partially offset by an increase of $3.6 million in interest income.
Interest Charges
Interest charges increased for Parent & Other Business Segments primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricane Katrina and Hurricane Rita.
Income Taxes
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.
Debtor-in-Possession Credit Agreement
See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Following is an update to that discussion.
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, primarily using its portion of the income tax refund that resulted from application of the Gulf Opportunity Zone Act, which is discussed below in "Operating Activities." As of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility.
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table.
March 31,2006
December 31,2005
Net debt to net capital
50.0%
51.5%
Effect of subtracting cash from debt
2.1%
1.6%
Debt to capital
52.1%
53.1%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.
As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expires in May 2010 and the three-year facility expires in December 2008. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of March 31, 2006:
Facility
Capacity
Borrowings
Lettersof Credit
CapacityAvailable
5-Year Facility
$2,000
$805
$111
$1,084
3-Year Facility
$1,500
$-
Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, each have credit facilities available as of March 31, 2006 as follows:
Company
Expiration Date
Amount of Facility
Amount Drawn as of March 31, 2006
Entergy Arkansas
April 2006
$85 million (a)
-
Entergy Gulf States
February 2011
$25 million (b)
Entergy Mississippi
May 2006
$25 million (c)
(a)
The combined amount borrowed by Entergy Arkansas and Entergy Louisiana under these facilities at any one time cannot exceed $85 million. Entergy Louisiana granted a security interest in its receivables to secure its $85 million facility.
(b)
The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of March 31, 2006, $1.4 million in letters of credit had been issued.
(c)
Borrowings under the Entergy Mississippi facility may be secured by a security interest in its receivables.
In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' renewed facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.
In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.
See Note 4 to the consolidated financial statements for additional discussion of Entergy's credit facilities.
Capital Expenditure Plans and Other Uses of Capital
See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of planned construction and other capital investments by operating segment for 2006 through 2008.
Cash Flow Activity
As shown in Entergy's Statements of Cash Flows, cash flows for the three months ended March 31, 2006 and 2005 were as follows:
Cash and cash equivalents at beginning of period
$583
$620
Effect of deconsolidating Entergy New Orleans in 2005
(8)
Cash flow provided by (used in):
Operating activities
1,012
497
Investing activities
(859)
(559)
Financing activities
(73)
Net increase (decrease) in cash and cash equivalents
169
(135)
Cash and cash equivalents at end of period
$752
$477
Operating Activities
Entergy's cash flow provided by operating activities increased by $515 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to receipt of a $344 million income tax refund, increased collection of deferred fuel costs, and increased net revenue at Non-Utility Nuclear, partially offset by storm restoration spending. Following are cash flows from operating activities by segment:
The income tax refund was received by Entergy Corporation (including $71 million attributable to Entergy New Orleans) as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, $273 million of the refund was distributed to the Utility in April 2006, with most of the remainder distributed to Non-Utility Nuclear.
Investing Activities
Net cash used in investing activities increased by $300 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to the following activity:
The increase was partially offset because Entergy's investment in other temporary investments increased by $289 million during the first quarter 2005. Entergy had no activity in other temporary investments during the first quarter 2006.
Financing Activities
Financing activities provided $16 million of cash for the three months ended March 31, 2006 compared to using $73 million of cash for the three months ended March 31, 2005 primarily due to the following activity:
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
On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.
Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.
Entergy Gulf States-Louisiana
In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.
In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC. The filing was amended by an April 2006 filing. The amended filing shows that an increase of $3.1 million in electric revenues is warranted. The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing. Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006. A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as secur itization). Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization. A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.
Entergy New Orleans
In April 2006, the City Council agreed to delay Entergy New Orleans' 2005 formula rate plan filing to July 2006 from the originally scheduled May 1, 2006 deadline.
Federal Regulation
System Agreement Litigation
See the Form 10-K for a discussion of the System Agreement litigation proceedings at the FERC. In April 2006, Entergy filed with the FERC its compliance filing to implement the provisions of the FERC's decision. The filing amends the System Agreement to provide for the calculation of production costs, average production costs, and payments among the domestic utility companies to the extent required to maintain rough production cost equalization pursuant to the FERC's decision, and makes clear that all payments/receipts will be classified as energy costs. The payments would be based on calendar year 2006 production costs, with any payments between the domestic utility companies to be made in twelve equal monthly installments, commencing in June 2007.
Independent Coordinator of Transmission (ICT)
The proposed modifications include, among other things: (1) Entergy must file with the FERC the criteria used to grant and deny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to four years; and Entergy is precluded from terminating the ICT prior to the end of the four year period; (3) the establishment of a transmission users group that will provide input directly to the ICT on the effectiveness of the ICT Proposal and also will propose to the FERC an appropriate means by which they could be given access to inputs in the process and models under the direction of the ICT; (4) With regard to any dispute between the ICT and Entergy concerning transmission service requests, transmission planning, and interconnection requests, the ICT's position will prevail during the pendency of the dispute resolution; (5) The WPP must be operational within approximately 14 months of the FERC order or the FERC may r eevaluate all approvals to proceed with the ICT.
Market and Credit Risks
Commodity Price Risk
Power Generation
As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business and Energy Commodity Services business, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward as of March 31, 2006 under physical or financial contracts (2006 represents the remaining three quarters of the year):
2007
2008
2009
2010
Non-Utility Nuclear:
Percent of planned generation sold forward:
Unit-contingent
34%
32%
27%
21%
12%
Unit-contingent with guarantee of availability
53%
47%
13%
5%
Firm liquidated damages
4%
2%
0%
Total
91%
81%
59%
17%
Planned generation (TWh)
26
Average contracted price per MWh
$41
$45
$50
$56
$46
A sale of power on a unit contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy's outstanding guarantees of availability provide for dollar limits on Entergy's maximum liability under such guarantees. The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy the power produced by the plant through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly if power market prices drop below PPA prices.
See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants.
Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary will be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary form of collateral to satisfy these requirements would be an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At March 31, 2006, based on power prices at that time, Entergy had in place as collateral $1,527 million of Entergy Corporation guarantees for wholesale transactions, $108 million of which support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount up to $400 million if gas prices increase $1 per MMBtu in both the short- and long - -term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.
In addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward as of March 31, 2006 (2006 represents the remaining three quarters of the year):
Percent of capacity sold forward:
Bundled capacity and energy contracts
Capacity contracts
77%
48%
36%
24%
3%
89%
60%
15%
Planned net MW in operation
4,200
Average capacity contract price per kW per month
$1.1
$1.0
$0.9
Blended Capacity and Energy (based on revenues)
% of planned generation and capacity sold forward
85%
72%
50%
29%
Average contract revenue per MWh
$42
$51
$57
Following is a summary of the amount of Energy Commodity Services' output and installed capacity that is sold forward under physical or financial contracts at fixed prices as of March 31, 2006 (2006 represents the remaining three quarters of the year):
Energy Commodity Services:
Planned MW in operation
1,578
% of capacity sold forward
30%
19%
Energy
3
% of planned generation sold forward
40%
38%
33%
35%
% of planned energy and capacity sold forward
23%
16%
$25
$28
$21
$20
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies. Following is an update to that discussion.
Unbilled Revenue
Effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES
See Note 9 to the consolidated financial statements for information on the Entergy New Orleans bankruptcy proceeding.
Nuclear Insurance
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy's nuclear power plants
Non-Nuclear Property Insurance
See Note 8 to the consolidated financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited for any one occurrence will be reduced to $500 million.
Nuclear Decommissioning and Other Asset Retirement Costs
See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.
Employment Litigation
Entergy Corporation and certain subsidiaries are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companies deny any liability to the plaintiffs.
NOTE 2. RATE AND REGULATORY MATTERS
Regulatory Assets
Other Regulatory Assets
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding regulatory assets reflected on the balance sheets of the domestic utility companies and System Energy. The following are updates to the Form 10-K.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as secur itization).
Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization. A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.
Deferred Fuel Costs
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utility companies.
In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh would replace the interim rate of $0.01900 per kWh that has been in place since October 2005. The interim energy cost rate is discussed in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to coal delivery problems.
On March 1, 2006, Entergy Gulf States filed with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97 million including interest of eligible fuel costs for the period August 2005 through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States has entered into a unanimous settlement that would reduce the requested surcharge for actual over-collections from the months of February and March 2006, resulting in a surcharge of $78.8 million to be implemented over a twelve-month period beginning in June 2006. Amounts collected through the interim fuel surcharges are subject to final reconciliation in a future fuel reconciliation proceeding.
Entergy Gulf States and Entergy Louisiana
Unbilled Revenue and Deferred Fuel Costs
Retail Rate Proceedings
See Note 2 to the consolidated financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Filings with the PUCT and Texas Cities
As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement in principle on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million p er year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The settlement agreement has been filed and is expected to be considered by the PUCT in May 2006.
Filings with the LPSC
Retail Rates - Electric
Retail Rates - Gas (Entergy Gulf States)
In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff. The rates are implemented subject to refund pending approval by the LPSC. An LPSC decision is expected during the second quarter of 2006.
Filings with the MPSC
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,
(In Millions, Except Per Share Data)
$/share
Earnings applicable to common stock
$193.6
$172.0
Average number of common shares outstanding - basic
207.7
$0.93
214.1
$0.80
Average dilutive effect of:
Stock Options
3.5
(0.015)
(0.016)
Deferred Units
0.2
(0.001)
Average number of common shares outstanding - diluted
211.4
$0.92
218.6
$0.79
Entergy's stock option and other equity compensation plans are discussed in Note 7 to the consolidated financial statements in the Form 10-K.
Treasury Stock
During the first quarter of 2006, Entergy Corporation issued 392,991 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards.
Retained Earnings
On April 11, 2006, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54 per share, payable on June 1, 2006 to holders of record as of May 11, 2006.
Accumulated Other Comprehensive Income
Cash flow hedges with net unrealized losses of approximately $206 million at March 31, 2006 are scheduled to mature during the next twelve months.
NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion, of which $805 million was outstanding as of March 31, 2006. The three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion, none of which was outstanding as of March 31, 2006. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities, and letters of credit totaling $111 million had been issued against the five-year facility at March 31, 2006. The total unused capacity for these facilities as of March 31, 2006 was approximately $2.6 billion. The commitment fee for this facility is currently 0.13% per annum of the unused amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior debt ratings of the domestic utility comp anies.
In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.
The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.
The FERC has issued an order ("FERC Short-Term Order") approving the short-term borrowing limits of the domestic utility companies (except Entergy New Orleans) and System Energy through March 31, 2008. Entergy New Orleans may rely on existing SEC PUHCA 1935 orders for its financing authority, subject to bankruptcy court approval. In addition to borrowings from commercial banks, the FERC Short-Term Order authorized the domestic utility companies (except Entergy New Orleans which is authorized by an SEC PUHCA 1935 order) and System Energy to continue as participants in the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the authorized limits. As of March 31, 2006, Entergy's subsidiaries' aggregate authorized limit was $2.0 billion and the aggregate outstanding borrowing f rom the money pool was $201.8 million.
In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.
NOTE 5. PREFERRED STOCK
In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which are outstanding as of March 31, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share.
The proceeds from this issuance were used in the second quarter of 2006 to redeem all $10 million of Entergy Arkansas' $100 par value 7.32% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.80% Series Preferred Stock, all $20 million of Entergy Arkansas' $100 par value 7.40% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.88% Series Preferred Stock, and all $15 million of Entergy Arkansas' $25 par value $1.96 Series Preferred Stock.
NOTE 6. STOCK-BASED COMPENSATION PLANS
Entergy grants stock options, which are described more fully in Note 7 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The impact of adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the first quarters of 2006 and 2005 is $1.7 million and $1.8 million, respectively.
NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
Components of Net Pension Cost
Entergy's qualified pension cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:
(In Thousands)
Service cost - benefits earned during the period
$23,176
$21,010
Interest cost on projected benefit obligation
41,814
37,484
Expected return on assets
(44,482)
(38,781)
Amortization of transition asset
(166)
Amortization of prior service cost
1,365
1,306
Amortization of loss
10,931
7,305
Net pension costs
$32,804
$28,158
Entergy recognized $3.9 million and $4.1 million in pension cost for its non-qualified pension plans in the first quarters of 2006 and 2005, respectively.
Components of Net Other Postretirement Benefit Cost
Entergy's other postretirement benefit cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:
$10,370
$9,208
Interest cost on APBO
14,316
13,501
(4,756)
(4,363)
Amortization of transition obligation
542
1,340
(3,688)
(1,989)
5,698
5,271
Net other postretirement benefit cost
$22,482
$22,968
Employer Contributions
Entergy expects to contribute $349 million to its qualified pension plans in 2006 (including $107 million delayed from 2005 as a result of the Katrina Emergency Tax Relief Act). As of the end of April 2006, Entergy contributed $157 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $192 million to fund its pension plans in 2006.
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation by $176 million, and reduced the first quarter 2006 and 2005 other postretirement benefit cost by $6.9 million and $6.4 million, respectively. Refer to Note 10 to the consolidated financial statements in the Form 10-K for further discussion.
NOTE 8. BUSINESS SEGMENT INFORMATION
Entergy's reportable segments as of March 31, 2006 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the Energy Commodity Services segment, the Competitive Retail Services business, and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy has discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005, and is reporting Entergy New Orleans results under the equity method of accounting in the Utility segment.
Entergy's segment financial information for the first quarters of 2006 and 2005 is as follows:
Non-UtilityNuclear*
All Other*
Eliminations
Consolidated
Operating Revenues
$2,131,020
$388,010
$66,688
($17,687)
$2,568,031
Equity in earnings (loss) of
unconsolidated equity affiliates
5,643
(2,057)
3,586
Income Taxes (Benefit)
76,973
52,916
(11,059)
118,830
Net Income (Loss)
126,935
81,530
(6,767)
(32)
201,666
Total Assets
24,736,486
5,037,167
3,451,763
(2,709,370)
30,516,046
$1,729,340
$343,575
$54,327
($17,060)
$2,110,182
5,495
(2,193)
3,302
45,525
51,168
(4,451)
92,242
96,027
77,965
4,460
178,379
22,585,904
4,631,292
3,288,980
(2,480,265)
28,025,911
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 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING
See Note 16 to the consolidated financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding, and a discussion of Entergy's decision to deconsolidate its investment in Entergy New Orleans and report it under the equity method of accounting. Entergy's income statement for the three months ended March 31, 2006 includes $61 million in operating revenues and $7 million in purchased power from transactions with Entergy New Orleans. Entergy's income statement for the three months ended March 31, 2005 includes $43 million in operating revenues and $46 million in purchased power from transactions with Entergy New Orleans. Entergy's balance sheet as of March 31, 2006 includes $55.7 million of pre-petition accounts that are payable to Entergy affiliates by Entergy New Orleans. As discussed in the Form 10-K, because Entergy owns all of the common stock of Entergy New Orleans, Entergy's deconsolidation of Entergy New Orleans does not affe ct the amount of net income Entergy records resulting from Entergy New Orleans' operations.
__________________________________
In the opinion of the management of Entergy Corporation, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Utility segment, however, is subject to seasonal fluctuations with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
ENTERGY ARKANSAS, INC.
Net Income
Net revenue, which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.
$223.7
10.0
5.4
Deferred fuel cost revisions
(4.7)
Capacity costs
(4.9)
2.2
$231.7
The net wholesale revenue variance is primarily due to higher wholesale prices and improved results related to co-owner contracts.
The volume/weather variance is primarily due to an increase of a total of 237 GWh in weather-adjusted usage in all sectors, partially offset by the effect of milder weather in the first quarter of 2006 compared to the first quarter of 2005.
The deferred fuel cost revisions variance is primarily due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4 million.
The capacity costs variance is primarily due to higher capacity related costs including the revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
Gross operating revenues, fuel and purchased power expenses, and other regulatory credits
Gross operating revenues increased primarily due to an increase of $44.9 million in fuel cost recovery revenues due to increases in the energy cost recovery rider effective April 2005 and October 2005. The increases in volume/weather and net wholesale revenue, as discussed above, also contributed to the increase.
Fuel and purchased power expenses increased primarily due to increased deferred fuel expense resulting primarily from higher purchased energy costs as a result of higher natural gas prices and increased power purchases.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to $4.1 million applied as a credit against bad debt expense in the first quarter of 2005 in accordance with a settlement agreement with the APSC. Also contributing to the increase was an increase of $2.7 million in payroll and benefits costs.
Other income increased primarily due to:
Partially offsetting the increase was a decrease in allowance for equity funds used during construction primarily due to increased construction expenditures in the first quarter of 2005 resulting from the steam generator and reactor vessel head replacement at ANO 1 completed in the fourth quarter 2005.
The effective income tax rates for the first quarters of 2006 and 2005 were 44.1% and 35.2%, respectively. The difference in the effective income tax rate for the first quarter of 2006 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, partially offset by the amortization of investment tax credits. 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, offset by a downward revision in the estimate of federal income tax expense for prior tax periods.
Cash Flow
$9,393
$89,744
95,463
148,171
(89,049)
(57,297)
28,556
(18,575)
Net increase in cash and cash equivalents
34,970
72,299
$44,363
$162,043
Cash flow from operations decreased $52.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the timing of payments to vendors and the timing of the collection of receivables from customers, partially offset by increased recovery of deferred fuel costs.
In the first quarter 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $12 million of the refund to Entergy Arkansas.
Net cash flow used in investing activities increased $31.8 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to money pool activity. Also contributing to the increase was a difference in the timing of nuclear construction expenditures combined with insurance credits at ANO 1 in 2005.
Financing activities provided $28.6 million for the first quarter of 2006 compared to using $18.6 million for the first quarter of 2005 primarily due to the issuance of $75 million of preferred stock in March 2006, partially offset by money pool activity. See Note 4 to the domestic utility companies and System Energy financial statements for the details of Entergy Arkansas' preferred stock activity in 2006.
Entergy Arkansas' capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital percentage as of March 31, 2006 is primarily the result of an increase in shareholders' equity due to the issuance of $75 million of preferred stock in March 2006. As discussed below, $75 million of preferred stock was redeemed in April 2006 using the proceeds of the March 2006 issuance.
45.2%
47.4%
0.8%
0.1%
46.0%
47.5%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas' financial condition.
Uses and Sources of Capital
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 30, 2007. The facility is no longer subject to a combined borrowing limit with Entergy Louisiana's credit facility. There were no outstanding borrowings under the Entergy Arkansas credit facility as of March 31, 2006.
In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which are outstanding as of March 31, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. The proceeds from this issuance were used in the second quarter of 2006 to redeem all $10 million of Entergy Arkansas' $100 par value 7.32% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.80% Series Preferred Stock, all $20 million of Entergy Arkansas' $100 par value 7.40% Series Preferred Stock, all $15 million of Entergy Arkansas' $100 par value 7.88% Series Preferred Stock, and all $15 million of Entergy Arkansas' $25 par value $1.96 Series Preferred Stock.
Entergy Arkansas' receivables from or (payables to) the money pool were as follows:
March 31,2005
December 31,2004
$24,577
($27,346)
$28,252
$23,561
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.
System Agreement Proceedings
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - System Agreement Litigation" for an update regarding the proceeding at FERC involving the System Agreement.
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Federal Regulation - Independent Coordinator of Transmission" for an update regarding Entergy's ICT proposal.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.
ENTERGY GULF STATES, INC.
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which hit Entergy Gulf States' service territory in the Texas and Louisiana jurisdictions in August and September 2005. The storms resulted in power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations. Following is an update to the discussion in the Form 10-K.
As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy Gulf States is currently preparing applications to seek CDBG funding. In March 2006 Entergy Gulf States provided a justification statement to state and local officials in Louisiana. The statement, which will be reviewed by the Louisiana Recovery Authority, includes the estimated costs of Hurricanes Katrina and Rita damage in the Louis iana jurisdiction. The statement includes justification for a request for $164 million in CDBG funding attributable to the Louisiana portion of Entergy Gulf States' business.
Net income increased $21.7 million primarily due to higher net revenue and higher other income, significantly offset by higher operation and maintenance expenses, higher interest charges, and a higher effective income tax rate.
$241.7
19.8
Base revenues
15.1
7.1
4.7
6.6
$295.0
The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction.
Base revenues increased primarily due to formula rate plan and Perryville increases in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider which began in December 2005 in the Texas jurisdiction and the transition to competition rider which began in March 2006 in the Texas jurisdiction.
The volume/weather variance is primarily due to increased usage during the unbilled sales period. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K and Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues. The increase was partially offset by a decrease in usage of 361 GWh in the residential and industrial sectors.
The net wholesale revenue variance is primarily due to increased volume and higher margins on sales to municipal and co-op customers.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to an increase in fuel cost recovery revenues due to higher fuel rates.
Fuel and purchased power expenses increased primarily due to an increase in the market prices of natural gas and purchased power and an increase in deferred fuel expense.
Other operation and maintenance expenses increased primarily due to:
Taxes and other income taxes increased primarily due to higher Louisiana franchise taxes primarily due to higher fuel recovery revenues as discussed above.
Interest and other charges increased primarily due to the increase in long-term debt outstanding as a result of the funding of the storm restoration costs resulting from Hurricanes Katrina and Rita.
The effective income tax rates for the first quarters of 2006 and 2005 were 27.6% and 19.6%, respectively. The difference in the effective income tax rate for the first quarter of 2006 versus the federal statutory rate of 35% is primarily due to book and tax differences related to the allowance for funds used during construction and utility plant items, the amortization of investment tax credits, and flow-through book and tax timing differences. The difference in the effective income tax rate for the first quarter of 2005 versus the federal statutory rate of 35% 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.
Cash flows for the three months ended March 31, 2006 and 2005 were as follows:
$25,373
$6,974
138,424
112,365
(153,109)
(62,556)
1,845
(51,310)
Net decrease in cash and cash equivalents
(12,840)
(1,501)
$12,533
$5,473
Cash flow from operations increased $26.1 million in the first quarter of 2006 compared to the first quarter of 2005 primarily due to the timing of collections of receivables from customers.
In the first quarter 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $23 million of the refund to Entergy Gulf States.
Net cash used in investing activities increased $90.6 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to an increase in construction expenditures of $139.4 million due to storm-related projects, partially offset by money pool activity.
Financing activities provided cash of $1.8 million for the first quarter of 2006 compared to using cash of $51.3 million for the first quarter of 2005 primarily due to money pool activity.
Entergy Gulf States' capitalization is balanced between equity and debt, as shown in the following table
51.2%
51.4%
0.3%
51.3%
51.7%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States' financial condition.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Gulf States' uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Gulf States' receivables from or (payables to) the money pool were as follows:
($5,124)
$64,011
($19,630)
($59,720)
Entergy Gulf States' short-term indebtedness, including its money pool borrowings, is limited to $350 million by a FERC order. See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
In February 2006, Entergy Gulf States established a $25 million line of credit. The line of credit allows Entergy Gulf States to borrow money and to issue letters of credit. $1.4 million in letters of credit were issued under the facility at March 31, 2006, and no borrowings were outstanding. The line of credit terminates in February 2011.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of transition to retail competition, state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, state and local rate regulatory risk, industrial, commercial, and wholesale customers, market and credit risks, nuclear matters, environmental risks, and litigation risks. Following are updates to the information disclosed in the Form 10-K.
Transition to Retail Competition
Jurisdictional Separation Plan
See the Form 10-K for a discussion of business and jurisdictional separation plans concerning Entergy Gulf States. In January 2006, the LPSC directed that Entergy Gulf States file a complete jurisdictional separation plan as soon as possible. Therefore, on April 26, 2006, Entergy Gulf States filed its plan for jurisdictional separation with the LPSC and requested that it grant approval no later than September 30, 2006. The plan provides for Entergy Gulf States to be separated into two vertically integrated utilities, one subject solely to the retail jurisdiction of the LPSC and the other subject solely to the retail jurisdictional of the PUCT. The plan also provides that the Texas utility should own all the distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, and undivided ownership shares of Entergy Gulf States' 70% interest in Nelson 6 and 42% interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana. The Louisiana utility would own all of the remaining assets currently owned by Entergy Gulf States. The Texas utility would purchase from the Louisiana utility pursuant to a life-of-the unit purchase power agreement (PPA) a share of capacity and energy of River Bend. Each separated utility also would purchase pursuant to a PPA a share of capacity and energy of the gas-fired generating plants owned by the other utility. The PPAs associated with the gas-fired generating plants would terminate when retail open access commences in the Texas utility's service territory. Until that time, each utility will participate in the System Agreement and the Entergy System generation will continue to be dispatched in the same manner as before the jurisdictional separation. Under the provisions of the System Agreement, the Texas utility will terminate its participation in the System Agreement, except for the aspects related to transmission equalization, when Texas implements retail open access for Entergy Gulf States. The plan also provides that the operation of the generating plants will not change as a result of the jurisdictional separation. A hearing is currently scheduled for August 2006, but as a result of Entergy Gulf States' April 26, 2006 filing, the procedural schedule and hearing date may change. Approvals of the FERC and the NRC may also be required for certain matters before any implementation of the jurisdictional separation of Entergy Gulf States. Although formal approval of the PUCT is not required for implementation of the jurisdictional separation, Entergy Gulf States will seek input from the PUCT and continue to keep it informed of the status of the proceedings.
As discussed in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement in principle on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14 .5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The settlement agreement has been filed and is expected to be considered by the PUCT in May 2006.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States' accounting for nuclear decommissioning costs, the application of SFAS 71, unbilled revenue, and qualified pension and other postretirement benefits. Following is an update to that discussion.
Effective January 1, 2006, the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.
ENTERGY LOUISIANA HOLDINGS, INC. AND ENTERGY LOUISIANA, LLC
See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which caused catastrophic damage to Entergy Louisiana's service territory in August and September 2005, including the effect of extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory. Following is an update to the discussion in the Form 10-K.
As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy Louisiana is currently preparing an application to seek CDBG funding. In March 2006, Entergy Louisiana provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, includes the estimated costs of Hurricanes Katrina and Rita damage. The statement includes justification for a request for $472 million in CDBG funding.
Net income for the three months ended March 31, 2006 for Entergy Louisiana, LLC differs from the net income for the three months ended March 31, 2006 for Entergy Louisiana Holdings, Inc. and Subsidiaries almost entirely due to income tax expense. Because income before income taxes differs by an immaterial amount, the discussion below applies to both Entergy Louisiana, LLC and Entergy Louisiana Holdings, except where specifically noted.
$184.6
6.3
5.5
Price applied to unbilled sales
3.4
Storm cost recovery
2.1
(21.5)
7.2
$187.6
The net wholesale revenue variance is primarily due to the sale of 75% of Perryville generation to Entergy Gulf States pursuant to a long-term purchased power agreement.
The rate refund provisions variance is primarily due to provisions recorded in the first quarter of 2005 as a result of the LPSC staff and Entergy Louisiana proposed settlement in March 2005, which settlement was approved by the LPSC in the second quarter of 2005.
The price applied to unbilled sales variance is due to a decrease in the fuel cost component included in the price applied to unbilled sales in 2005. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.
The storm cost recovery variance is due to the LPSC order for the interim recovery of storm costs. Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - State and Local Rate Regulation" in the Form 10-K for a discussion of Entergy Louisiana's filing with the LPSC regarding storm cost recovery.
The volume/weather variance is due to a decrease in usage in all sectors primarily due to load losses caused by Hurricane Katrina and the effect of less favorable weather in 2006.
Gross operating revenues increased primarily due to:
The increase was offset by the volume/weather variance discussed above.
Fuel and purchased power expenses increased primarily due to:
Other operation and maintenance expenses decreased primarily due to:
The decrease was partially offset by the following:
Depreciation and amortization expenses decreased primarily due to a change in the depreciation rate for Waterford 3 as approved by the LPSC effective April 2005 and a revision of estimated depreciable lives involving certain intangible assets.
Preferred stock dividend requirements increased due to the issuance of $100 million of preferred membership interests by Entergy Louisiana, LLC on December 31, 2005.
The effective income tax rates for the first quarter of 2006 for Entergy Louisiana Holdings, Inc. and Subsidiaries and Entergy Louisiana, LLC were 54.6% and 39.9%, respectively. The difference in the effective income tax rate for the first quarter 2006 for Entergy Louisiana Holdings versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant, a federal tax reserve adjustment, and state income taxes, partially offset by book and tax differences related to the allowance for funds used during construction and the amortization of investment tax credits. The difference in the effective income tax rate for the first quarter 2006 for Entergy Louisiana, LLC versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant, partially offset by book and tax differences related to the allowance for funds used during construction and the amortization of investment tax credi ts.
The effective income tax rate for the first quarter of 2005 for Entergy Louisiana Holdings, Inc. and Subsidiaries and Entergy Louisiana, LLC was 32.1%. 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.
Because cash and cash equivalents at the end of period and cash flow provided by operating activities for the three months ended March 31, 2006 for Entergy Louisiana, LLC differ by an immaterial amount from the table below, the discussion below applies to both Entergy Louisiana, LLC and Entergy Louisiana Holdings, except where specifically noted.
Cash flows for the first quarters of 2006 and 2005 for Entergy Louisiana Holdings were as follows:
$107,285
$146,049
192,480
71,644
(218,837)
(45,534)
(72,932)
(3,478)
(99,289)
22,632
$7,996
$168,681
Cash flow from operations increased $120.8 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to timing of collections of receivables from customers, partially offset by decreased recovery of deferred fuel.
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $102 million of the refund to Entergy Louisiana Holdings.
The increases were offset by decreased spending on certain fossil and nuclear projects.
The increase of $69.5 million in net cash used for financing activities in the first quarter of 2006 compared to the first quarter of 2005 is primarily due to:
Entergy Louisiana's capitalization is balanced between equity and debt, as shown in the following table. The decrease in debt to capital for Entergy Louisiana, LLC is primarily due to an increase in members' equity due to additional equity from its parent because of a revision in the estimate of the tax liabilities allocated to Entergy Louisiana Holdings in the merger-by-division that created Entergy Louisiana, LLC.
Entergy Louisiana Holdings
49.2%
48.4%
48.5%
0.2%
2.2%
49.4%
50.6%
48.7%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' or members' equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana's financial condition.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Louisiana's uses and sources of capital.
Entergy Louisiana's receivables from or (payables to) the money pool were as follows:
March 31, 2006
December 31, 2005
March 31, 2005
($38,871)
($68,677)
$29,378
$40,549
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool.
In April 2006, Entergy Louisiana's $85 million credit facility expired and has not been renewed at this time. Entergy Louisiana's $15 million credit facility will expire in May 2006. Entergy Louisiana does not intend to renew that facility when it expires.
Entergy Louisiana Holdings Preferred Stock Redemption
As discussed in the Form 10-K, Entergy Louisiana Holdings expected to redeem or repurchase and retire its preferred stock within three to nine months of the effective date of the merger-by-division, and thereafter amend its charter to eliminate authority to issue preferred stock. Entergy Louisiana Holdings now expects to redeem the preferred stock before the end of the second quarter 2006.
Any redemption of preferred stock by Entergy Louisiana Holdings will be made at the following respective redemption prices as provided in the Entergy Louisiana Holdings amended and restated articles of incorporation:
Series of Entergy Louisiana Holdings Preferred Stock
Redemption Price Per Share
4.96% Preferred Stock, Cumulative, $100.00 par value
$104.25
4.16% Preferred Stock, Cumulative, $100.00 par value
$104.21
4.44% Preferred Stock, Cumulative, $100.00 par value
$104.06
5.16% Preferred Stock, Cumulative, $100.00 par value
$104.18
5.40% Preferred Stock, Cumulative, $100.00 par value
$103.00
6.44% Preferred Stock, Cumulative, $100.00 par value
$102.92
7.84% Preferred Stock, Cumulative, $100.00 par value
$103.78
7.36% Preferred Stock, Cumulative, $100.00 par value
$103.36
8% Preferred Stock, Cumulative, $25.00 par value
$ 25.00
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, utility restructuring, market and credit risks, nuclear matters, environmental risks, and litigation risks.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana's accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement costs. Following is an update to that discussion.
Effective January 1, 2006, Entergy Louisiana reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in its unbilled revenue calculation, which is in accordance with regulatory treatment.
ENTERGY MISSISSIPPI, INC.
See the Form 10-K for a discussion of the effects of Hurricane Katrina, which hit Entergy Mississippi's service territory in August 2005 causing power outages and significant infrastructure damage to Entergy Mississippi's distribution and transmission systems. See State and Local Rate Regulation below for an update on activity directed towards recovery of Entergy Mississippi's storm restoration costs.
Net income decreased $3.9 million for the first quarter of 2006 compared to the first quarter 2005 primarily due to increased taxes other than income taxes, increased interest expense, and decreased net revenue, partially offset by decreased depreciation and amortization expense and lower effective income tax rate.
Net revenue, which is Entergy Mississippi's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory (credits) or charges. Following is an analysis of the change in net revenue comparing the first quarter of 2006 to the first quarter of 2005.
$91.5
Deferral of Attala costs
7.9
Fuel expenses recovered in base rates
(3.6)
Reserve equalization
(2.2)
(3.3)
$90.3
The deferral of Attala costs variance is primarily due to the under-recovery of Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.
Fuel expenses recovered in base rates decreased net revenue primarily due to increases in fuel procurement and storage-related costs.
The reserve equalization variance is primarily due to changes in the Entergy System generation mix compared to the same period in 2005 and a revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges
Fuel and purchased power expenses increased primarily due to the over-recovery of fuel and purchased power costs coupled with an increase in the market price of oil and purchased power.
Taxes other than income taxes increased $3.8 million primarily due to higher assessed values for ad valorem tax purposes and higher franchise taxes in 2006.
Interest expense increased primarily due to additional long-term debt issued to finance the Attala power plant purchase.
The effective income tax rates for the first quarters of 2006 and 2005 were 0.4% and 29.6%, respectively. The difference in the effective tax rate for the first quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to the allowance for funds used during construction, amortization of investment tax credits, and book and tax differences related to utility plant items. The difference in the effective tax rate for the first quarter of 2005 versus the federal statutory rate of 35% is primarily due to amortization of investment tax credits and book and tax differences related to the allowance for funds used during construction, partially offset by state income taxes and tax differences related to utility plant items.
Cash flows for the first quarters of 2006 and 2005 were as follows:
$4,523
$80,396
60,292
32,573
(135,611)
(30,545)
80,199
(6,342)
4,880
(4,314)
$9,403
$76,082
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $66 million of the refund to Entergy Mississippi.
Net cash used in investing activities increased $105.1 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the purchase of the 480 MW Attala power plant for $88 million in January 2006 and also due to storm-related spending.
Net cash provided by financing activities increased $86.5 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to the net issuance of $99 million of long-term debt during 2006 and a decrease of $5.5 million in common stock dividends paid, partially offset by a decrease in money pool payables of $18.3 million.
Entergy Mississippi's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage as of March 31, 2006 is primarily due to the issuance of $100 million of First Mortgage Bonds in January 2006.
55.7%
52.6%
55.9%
52.7%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi's financial condition.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy Mississippi's uses and sources of capital. Following are updates to the information presented in the Form 10-K.
See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYIS - Liquidity and Capital Resources - Uses of Capital" which sets forth the amounts of Entergy Mississippi's planned construction and other capital investments for 2006 through 2008. In January 2006, Entergy Mississippi purchased for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company. Entergy Mississippi plans to invest approximately $20 million in facility upgrades at the Attala plant plus $3 million in other costs, bringing the total capital cost of the project to approximately $111 million. In November 2005, the MPSC issued an order approving the acquisition of the Attala plant. In December 2005, the MPSC issued an order approving the investment cost recovery through the power management rider and limited the recovery through the rider to a period that begins with the closing date of the purchase and ends the earlier of the date costs are incorporated into base rates or December 31, 2006. The planned construction and other capital investments line includes the majority of the estimated cost of the Attala acquisition as a 2006 capital commitment.
Entergy Mississippi's receivables from or (payables to) the money pool were as follows:
($65,732)
($84,066)
$13,111
$21,584
As discussed in the Form 10-K, Entergy Mississippi has a credit facility in the amount of $25 million that expires in May 2006. Borrowings on the credit facility may be secured by a security interest in Entergy Mississippi's receivables. Entergy Mississippi expects to renew its credit facility prior to expiration.
In January 2006, Entergy Mississippi issued $100 million of 5.92% Series of First Mortgage Bonds due February 2016. Entergy Mississippi used the proceeds to purchase the Attala power plant and to repay short-term indebtedness.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of, state and local rate regulation, federal regulation and proceedings and the Energy Policy Act of 2005, and market and credit risks. The following are updates to the information provided in the Form 10-K.
As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005. In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as secur itization). Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding. The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding Community Development Block Grant funds and securitization. A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi's accounting for unbilled revenue and pension and other retirement costs.
ENTERGY NEW ORLEANS, INC. (Debtor-in-possession)
See the Form 10-K for a discussion of the effects of Hurricane Katrina, which in August 2005 caused catastrophic damage to Entergy New Orleans' service territory, including the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area. Following is an update to the discussion in the Form 10-K.
As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy New Orleans is currently preparing an application to seek CDBG funding. In March 2006 Entergy New Orleans provided a justification statement to state and local officials. The statement, which will be reviewed by the Louisiana Recovery Authority, includes all the estimated costs of Hurricane Katrina damage, as well as a lost customer b ase component intended to help offset the need for storm-related rate increases. The statement includes justification for a request for $718 million in CDBG funding.
In the first quarter 2006, Entergy New Orleans reduced its accrued accounts payable for storm restoration costs by $97.4 million, with corresponding reductions of $88.7 million in construction work in progress and $8.7 million in regulatory assets, based on a reassessment of the nature and timing of expected restoration and rebuilding costs and the obligations associated with restoring service. Although Entergy New Orleans reduced its accrual for restoration spending by these amounts, it continues to expect to incur the related costs, beginning in 2007, and Entergy New Orleans still expects its storm restoration and business continuity costs to total approximately $275 million.
See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following are updates to that discussion.
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.
In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006.
The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.
Net income decreased slightly in the first quarter 2006 compared to the first quarter 2005, with lower net revenue almost entirely offset by lower operation and maintenance expense, interest charges, and taxes other than income taxes.
Net revenue, which is Entergy New Orleans' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the first quarter of 2006 to the first quarter of 2005.
$52.1
(22.7)
Price applied to unbilled electric sales
(6.0)
Net gas revenue
(5.3)
25.2
(3.0)
$40.3
The volume/weather variance is due to a decrease in electricity usage in the service territory caused by customer losses following Hurricane Katrina. Billed retail electricity usage decreased a total of 583 GWh compared to the first quarter of 2005, a decline of 45%.
The price applied to unbilled electric sales variance is due to a decrease in the fuel cost component of the price applied to unbilled sales. The decrease in the fuel cost component is due to a decrease in the average cost of generation due to a change in the generation mix from natural gas to solid fuel resources. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K and Note 1 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.
The net gas revenue variance is due to a decrease in gas usage in the service territory caused by customer losses following Hurricane Katrina, partially offset by a revised estimate of deferred fuel costs.
The net wholesale revenue variance is due to an increase in energy available for sales for resale due to the decrease in retail usage caused by customer losses following Hurricane Katrina. The increased revenue includes the sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in Entergy New Orleans' retail customer demand caused by Hurricane Katrina and provide revenue support for the costs of Entergy New Orleans' share of Grand Gulf.
Other operation and maintenance expenses decreased primarily due to shifts in costs from normal operations and maintenance work to storm restoration work as a result of Hurricane Katrina.
Taxes other than income taxes decreased primarily due to lower franchise taxes in 2006 due to lower revenues.
Interest and other charges decreased primarily due to the cessation of interest accruals on the first mortgage bonds as a result of the bankruptcy filing, partially offset by interest accrued on the DIP credit facility.
The effective income tax rates for the first quarters of 2006 and 2005 were 37.5% and 38.1%, respectively.
Preferred Dividends
No preferred dividends were declared during the first quarter of 2006. Due to its bankruptcy, Entergy New Orleans did not pay the preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006.
Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding. As discussed more fully in the Form 10-K, if dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors. If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group. If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement.
Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.
Debtor-in-Possession Credit Facility
See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility. Following is an update to that discussion.
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility primarily using the income tax refund discussed below in "Operating Activities," and as of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility. Management currently expects the bankruptcy court-authorized funding level to be sufficient to fund Entergy New Orleans' expected level of operations throug h 2006.
$48,056
$7,954
30,729
63
(43,240)
(8,546)
(10,000)
3,056
(22,511)
(5,427)
$25,545
$2,527
Net cash provided by operating activities increased $30.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to improved timing of collection of receivables, improved collection of deferred fuel costs, and a decrease in interest paid.
In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006, Entergy Corporation distributed $71 million of the refund to Entergy New Orleans. As discussed above, Entergy New Orleans used the income tax refund to repay a portion of the borrowings outstanding under the DIP credit facility.
Net cash used in investing activities increased $34.7 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to capital expenditure activity related to Hurricane Katrina.
Financing activities used $10 million of cash for the first quarter of 2006 because of the net repayment in 2006 of $10 million of previous borrowings under the DIP credit facility. Financing activities provided $3.1 million of cash for the first quarter of 2005 primarily due to money pool borrowing.
Entergy New Orleans' capitalization is shown in the following table.
64.9%
66.4%
Debt consists of notes payable and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy New Orleans' uses and sources of capital. The following are updates to the Form 10-K.
Entergy New Orleans' receivables from or (payables to) the money pool were as follows:
December 31, 2004
($35,558)
($3,897)
$1,413
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a description of the money pool. Entergy New Orleans remains a participant in the money pool, but Entergy New Orleans has not made, and does not expect to make, any additional borrowings from the money pool while it is in bankruptcy proceedings. The money pool borrowings reflected on Entergy New Orleans' Balance Sheet as of March 31, 2006 are classified as a pre-petition obligation subject to compromise.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, federal regulation and proceedings, the Energy Policy Act of 2005, market and credit risks, environmental risks, and litigation risks. Following are updates to the discussion in the Form 10-K.
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.
SYSTEM ENERGY RESOURCES, INC.
System Energy's principal asset consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy's only source of operating revenues. Net income increased by $4.5 million for first quarter of 2006 compared to the first quarter of 2005. The increase is primarily due to higher interest income earned on money pool and temporary cash investments.
$75,704
$216,355
59,065
57,136
107,623
12,471
(57,089)
(55,613)
109,599
13,994
$185,303
$230,349
Cash flow from operations increased $1.9 million for the first quarter of 2006 compared to the first quarter of 2005 primarily due to an increase of $4.5 million in net income, partially offset by an increase of $2.6 million in interest payments.
The increase of $95.2 million in net cash provided by investing activities for the first quarter of 2006 compared to the first quarter of 2005 was primarily due to money pool activity. Partially offsetting the increase in cash provided was an increase in construction expenditures primarily resulting from capital spending on dry fuel storage.
The decrease of $1.5 million in net cash used in financing activities for the first quarter of 2006 compared to the first quarter of 2005 was primarily due to an increase of $7.3 million in common stock dividends, partially offset by a decrease of $5.8 million in the January 2006 principal payment made on the Grand Gulf sale-leaseback compared to the January 2005 principal payment.
System Energy's capitalization is balanced between equity and debt, as shown in the following table.
44.6%
49.0%
5.7%
50.3%
51.1%
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder's equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy's financial condition.
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources" in the Form 10-K for a discussion of System Energy's uses and sources of capital. The following is an update to the Form 10-K.
System Energy's receivables from the money pool were as follows:
$155,495
$277,287
$40,965
$61,592
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.
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.
ENTERGY ARKANSAS, ENTERGY GULF STATES, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS (DEBTOR-IN-POSSESSION), AND SYSTEM ENERGY
NOTES TO RESPECTIVE FINANCIAL STATEMENTS(Unaudited)
Entergy New Orleans Bankruptcy (Entergy New Orleans)
Nuclear Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy Arkansas', Entergy Gulf States', Entergy Louisiana's, and System Energy's nuclear power plants.
Non-Nuclear Property Insurance (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited for any one occurrence will be reduced to $500 million.
Nuclear Decommissioning and Other Asset Retirement Costs (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and System Energy)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information on nuclear decommissioning and other retirement costs.
CashPoint Bankruptcy (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
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)
See Note 8 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding asbestos and hazardous material litigation at Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
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.
In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities of Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006, the LPSC accepted the LPSC Staff's audit report finding that the prices paid for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and Entergy Gulf States acted reasonably and prudently in response to an extremely difficult environment.
Unbilled Revenue and Deferred Fuel Costs (Entergy Gulf States and Entergy Louisiana)
See Note 2 to the domestic utility companies and System Energy financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utility companies. The following are updates to the Form 10-K.
Filings with the PUCT and Texas Cities (Entergy Gulf States)
Retail Rates - Electric (Entergy Gulf States)
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
NOTE 3. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT
The short-term borrowings of the domestic utility companies (other than Entergy New Orleans) and System Energy are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008. In addition to borrowing from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC authorized limits. The following are the FERC-authorized limits for short-term borrowings effective February 2006 and the outstanding short-term borrowings from the money pool for the domestic utility companies (other than Entergy New Orleans) and System Energy as of March 31, 2006:
Authorized
$250
$350
$5.1
$38.9
$175
$65.7
$200
Under a savings provision in PUHCA 2005, which repealed PUHCA 1935, Entergy New Orleans may continue to be a participant in the money pool to the extent authorized by its SEC PUHCA 1935 order. However, Entergy New Orleans has not, and does not expect to make, any additional money pool borrowings while it is in bankruptcy proceedings. Entergy New Orleans had $35.6 million in borrowings outstanding from the money pool as of its bankruptcy filing date, September 23, 2005. The money pool borrowings reflected on Entergy New Orleans' Balance Sheet as of March 31, 2006 are classified as a pre-petition obligation subject to compromise.
The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets. In July 2005, Entergy New Orleans granted the lender a security interest in its customer accounts receivables to secure its borrowings under its facility.
Entergy New Orleans Debtor-in-Possession Credit Facility
See Note 4 to the domestic utility companies and System Energy financial statements in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, and as of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility.
The interest rate on borrowings under the DIP credit agreement will be the average interest rate of borrowings outstanding under Entergy Corporation's $2 billion revolving credit facility, which is currently approximately 5.1% per annum.
Long-term Debt
NOTE 4. PREFERRED STOCK
(Entergy Arkansas)
(Entergy New Orleans)
Due to its bankruptcy, Entergy New Orleans did not pay its preferred stock dividends due October 1, 2005; January 1, 2006; or April 1, 2006. Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock ("4.75% Preferred") issued and outstanding. As discussed more fully in Note 6 to the domestic utility companies and System Energy financial statements in the Form 10-K, if dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors. If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group. If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agre ement.
NOTE 5. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS
The domestic utility companies' and System Energy's qualified pension cost, including amounts capitalized, for the first quarters of 2006 and 2005, included the following components:
System
Arkansas
Gulf States
Louisiana
Mississippi
New Orleans
Service cost - benefits earned
during the period
$3,626
$2,993
$2,182
$1,077
$501
$1,031
Interest cost on projected
benefit obligation
9,915
7,914
6,052
3,252
1,282
1,604
(9,834)
(10,176)
(7,114)
(3,683)
(884)
(1,775)
415
309
141
128
12
2,438
640
1,509
725
509
167
Net pension cost
$6,560
$1,680
$2,770
$1,499
$1,464
$1,039
$3,329
$2,704
$1,957
$1,005
$436
$944
9,115
7,235
5,525
2,998
1,148
1,413
(9,009)
(9,709)
(6,666)
(3,566)
(731)
(1,324)
(69)
378
163
57
17
1,613
1,213
730
527
151
229
$5,463
$1,821
$1,709
$1,092
$1,061
$1,210
The domestic utility companies recognized the following pension cost for their non-qualified pension plans in the first quarters of 2006 and 2005:
Non-Qualified Pension Cost First Quarter 2006
$113
$220
$5
$36
$54
Non-Qualified Pension Cost First Quarter 2005
$101
$296
$6
$37
The domestic utility companies' and System Energy's other postretirement benefit cost, including amounts
$1,337
$1,254
$854
$419
$232
$414
2,844
2,747
1,856
944
856
407
(1,797)
(1,489)
(709)
(611)
(421)
205
416
2
(408)
(24)
(137)
(301)
1,671
1,002
893
644
343
207
$3,852
$3,665
$3,675
$1,249
$1,246
$308
$1,157
$1,634
$689
$363
$192
$415
2,589
2,924
1,673
833
789
394
(1,637)
(1,366)
(669)
(579)
(387)
947
435
(173)
(46)
(139)
1,276
770
691
471
211
146
$3,417
$4,909
$3,166
$1,040
$1,058
$433
The domestic utility companies and System Energy expect to contribute the following to pension plans in 2006. A portion of these contributions were planned to be made in 2005, but were delayed until January 2006 in accordance with the Katrina Emergency Tax Relief Act. For further information on pension funding refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.
Expected 2006 pension contributions disclosed in Form 10-K
$114,544
$22,102
$54,048
$16,357
$ -
$13,037
Pension contributions made through April 2006
$34,171
$11,132
$11,514
$5,179
$7,614
Remaining estimated pension contributions to be made in 2006
$80,373
$10,970
$42,534
$11,178
$5,423
Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2005 Accumulated Postretirement Benefit Obligation (APBO) and the first quarters 2006 and 2005 other postretirement benefit cost for the domestic utility companies and System Energy as follows:
Reduction in 12/31/2005 APBO
($42,337)
($36,740)
($23,640)
($14,407)
($11,206)
($5,972)
Reduction in first quarter 2006
other postretirement benefit cost
($1,562)
($1,332)
($865)
($512)
($376)
($268)
Reduction in first quarter 2005
($1,446)
($1,269)
($790)
($476)
($350)
($245)
For further information on the Medicare Act refer to Note 10 to the domestic utility companies and System Energy's financial statements in the Form 10-K.
NOTE 6. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING
See Note 14 to the domestic utility companies and System Energy financial statements in the Form 10-K
As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million debtor-in-possession (DIP) credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal.
Certain pre-petition liabilities have been classified as liabilities subject to compromise in Entergy New Orleans' Balance Sheet as of March 31, 2006 and December 31, 2005. The following table summarizes the components of liabilities subject to compromise as of March 31, 2006 and December 31, 2005:
Accounts payable - Associated companies
$55,660
$46,815
Accounts payable - Other
25,000
Interest accrued
1,473
Accumulated provisions
5,785
5,770
Long-term debt
229,863
229,859
Total Liabilities Subject to Compromise
$317,781
$308,917
Payment terms for the amount classified as subject to compromise will be established in connection with a plan of reorganization.
The accompanying financial statements have been prepared on the basis that Entergy New Orleans will continue as a going concern. Entergy New Orleans' filing for protection under Chapter 11 of the United States Bankruptcy Code as a result of the liquidity issues caused by Hurricane Katrina give rise to substantial doubt regarding Entergy New Orleans' ability to continue as a going concern for a reasonable period of time, primarily because of the loss of control inherent in the bankruptcy process. The financial statements do not include any adjustments that might result from the outcome of this uncertainty including adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary if Entergy New Orleans is unable to continue as a going concern. The financial statements also do not attempt to reflect liabilities at the priority or status of any claims that the holders of such liabilities wil l have.
Entergy continues to work with the federal, state, and local authorities to resolve the bankruptcy in a manner that allows Entergy New Orleans' customers to be served by a financially viable entity as required by law. Key factors that will influence the timing and outcome of the Entergy New Orleans bankruptcy include:
In the opinion of the management of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana Holdings, Entergy Louisiana, LLC, 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.
Disclosure Controls and Procedures
PART II. OTHER INFORMATION
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.
Texas Power Price Lawsuit
See "Texas Power Price Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class apparently of the Texas retail customers of Entergy Gulf States who were billed and paid for electric power from January 1, 1994 to the present. In April 2006, the Court of Appeals denied a motion for rehearing of the decision to remand the case to the district court. Entergy intends to file a petition for review with the Texas Supreme Court.
Entergy New Orleans Rate of Return Lawsuit
See "Entergy New Orleans Rate of Return Lawsuit" in Part I, Item 1 of the Form 10-K for a discussion of the lawsuit filed by a group of residential and business ratepayers against Entergy New Orleans in state court in Orleans Parish purportedly on behalf of all ratepayers in New Orleans. In accordance with the procedural schedule, the evidentiary record and post-hearing briefs of the parties were submitted to the City Council in March 2006. On April 20, 2006, the City Council unanimously approved a resolution dismissing with prejudice the plaintiffs' claims.
Additionally, in the Entergy New Orleans bankruptcy proceeding, the complaint filed by the named plaintiffs in the Entergy New Orleans rate of return lawsuit, together with the named plaintiffs in the Entergy New Orleans fuel clause lawsuit, asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans rate of return lawsuit and the Entergy New Orleans fuel clause lawsuit, and alternatively, that the automatic stay be lifted to permit the movants to pursue the same relief in state court, was dismissed on April 26, 2006. Proofs of Claim were subsequently filed by the plaintiffs in the Entergy New Orleans rate of return lawsuit and by the plaintiffs in the Entergy New Orleans fuel adjustment clause litigation relating to both the City Council and class action proceedings. Objections to the Proofs of Claim are due o n May 11, 2006. The plaintiffs in the Entergy New Orleans fuel adjustment clause litigation have also filed for certification of the class. A hearing in the bankruptcy court on class certification is scheduled for July 31, 2006.
Environmental Regulation and Proceedings
On April 19, 2006, an environmental advocacy organization served a notice of intent to bring an environmental citizen's suit pursuant to the federal Resource Conservation and Recovery Act (RCRA) against Entergy. Notice of suit is required by RCRA sixty days before actual filing. The suit, if filed, will allege that Entergy violated an EPA regulation by failing formally to report a discovered release of radioactive material into the environment at Indian Point. These allegations relate to the ongoing site investigation of radionuclides found in groundwater wells at the site. It is expected that the environmental advocacy organization will ask the court to require Entergy formally to notify EPA of the site condition, will seek to have EPA formally involved in the ongoing site investigation and any required remediation, will seek attorney's fees under the statute, and may seek to have the judge impose statutory penalties. Entergy continues to investigate the matter. P>
There have been no material changes to the risk factors discussed in "PART I, Item 1A, Risk Factors" in the Form 10-K.
Issuer Purchases of Equity Securities
In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to its employees that may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. See Note 7 to the consolidated financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. Entergy's management has been authorized to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans, and this authorization does not have an expiration date. In August 2004, Entergy announced a program under which Entergy Corporation will repurchase up to $1.5 billion of its common stock. The program extended originally through the end of 2006, but, due to the effects of Hurricanes Katrina and Rita, the program was suspended, and the Board has authorized the extension of the program through 2008. This repurchase program is incremental to the existing authority to repurchase shares to fund the exercise of employee stock options. The amount of repurchases 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.
Earnings Ratios (Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
The domestic utility companies and System Energy have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
Ratios of Earnings to Fixed Charges
Twelve Months Ended
December 31,
March 31,
2001
2002
2003
2004
3.29
2.79
3.17
3.37
3.75
3.81
2.36
2.49
1.51
3.04
3.34
3.48
2.76
3.14
3.93
3.60
3.50
2.14
2.48
3.06
3.41
3.16
2.88
1.73
1.22
2.12
3.25
3.66
3.95
3.85
3.96
Ratios of Earnings to Combined Fixed Chargesand Preferred Dividends/Distributions
2.99
2.53
2.98
2.21
2.40
1.45
2.90
3.18
3.32
2.51
2.86
3.46
3.09
3.63
1.96
2.27
2.77
3.07
2.83
2.62
1.59
3.31
1.12
1.15
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.
Earnings for the twelve months ended December 31, 2002, for Entergy New Orleans were not adequate to cover fixed charges and combined fixed charges and preferred dividends by $0.7 million and $3.4 million, respectively.
Item 6. Exhibits *
**
3(a)
Amended and Restated Articles of Incorporation of Entergy Arkansas, as amended, effective March 22, 2006 (3(ii) to Form 8-K dated March 28, 2006 in 1-10764).
4(a)
Seventy-fourth Supplemental Indenture, dated as of February 1, 2006, to Entergy Gulf States' Indenture of Mortgage, dated as of September 1, 1926.
31(a) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
31(b) -
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 Louisiana Holdings, Inc.
31(f) -
31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana, LLC.
31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
31(j) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
31(k) -
31(l) -
31(m) -
31(n) -
31(o) -
31(p) -
31(q) -
32(a) -
Section 1350 Certification for Entergy Corporation.
32(b) -
32(c) -
Section 1350 Certification for Entergy Arkansas.
32(d) -
Section 1350 Certification for Entergy Gulf States.
32(e) -
Section 1350 Certification for Entergy Louisiana Holdings, Inc.
32(f) -
32(g) -
Section 1350 Certification for Entergy Louisiana, LLC.
32(h) -
Section 1350 Certification for Entergy Mississippi.
32(i) -
Section 1350 Certification for Entergy New Orleans.
32(j) -
Section 1350 Certification for System Energy.
32(k) -
32(l) -
32(m) -
32(n) -
32(o) -
32(p) -
32(q) -
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 Holdings, Inc.'s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
99(d) -
Entergy Louisiana, LLC's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
99(e) -
Entergy Mississippi's Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
99(f) -
Entergy New Orleans' Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
99(g) -
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, 2006, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being filed with this report on Form 10-Q for the quarter ended March 31, 2006.
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 CORPORATIONENTERGY ARKANSAS, INC.ENTERGY GULF STATES, INC.ENTERGY LOUISIANA HOLDINGS, INC.ENTERGY LOUISIANA, LLCENTERGY MISSISSIPPI, INC.ENTERGY NEW ORLEANS, INC.SYSTEM ENERGY RESOURCES, INC.
/s/ Nathan E.. Langston Nathan E. LangstonSenior Vice President and Chief Accounting Officer(For each Registrant and for each asPrincipal Accounting Officer)
Date: May 9, 2006